G.R. No.

146595

June 20, 2003

CARLO A. TAN, petitioner,

vs.
KAAKBAY FINANCE CORPORATION, DENNIS S. LAZARO and ROLDAN
M. NOYNAY, respondents.
RESOLUTION
QUISUMBING, J.:
Petitioner seeks the review and reversal of the decision of the Court of Appeals, dated
August 22, 2000 in CA-G.R. SP No. 58379,1 which affirmed the orders of the
Regional Trial Court (RTC), Branch 37, Calamba, Laguna, dated February 8, 2000
and March 29, 2000 in Civil Case No. 2881-2000-C entitled "Carlo A. Tan v. Kaakbay
Finance Corporation, Dennis S. Lazaro and Roldan M. Noynay"2 for declaration of
nullity of the Promissory Note purportedly attached to the Real Estate Mortgage, the
usurious and unlawful or exorbitant and unconscionable rates of interest and fees
therein, and the Deed of Sale Under Pacto de Retro. Likewise, assailed is the appellate
courts resolution3 dated December 20, 2000, denying petitioners motion for
reconsideration.
The facts, as culled from the records, are as follows:
In the latter part of 1995, petitioner Carlo 4 A. Tan applied for and was granted a loan
of four million pesos (P4,000,000.00) by private respondent Kaakbay Finance
Corporation (Kaakbay), as represented by its president, private respondent Dennis S.
Lazaro. As collateral, a real estate mortgage 5 on petitioner Tans parcel of land with
the improvements therein all covered by Transfer Certificate Title No. T2071256 located along Rizal St., Calamba, Laguna was executed. Petitioner alleged
that the stipulated interest was 12% per annum until fully paid, which amount
however, was not stated in the mortgage when he signed it on November 16, 1995.
The amount loaned was released to him in two installments of P2,500,000.00
and P1,500,000.00 on November 23, 1995 and December 23, 1995, respectively.
As of November 22, 1996, petitioner failed to pay his obligation. He claimed that
Kaakbay never furnished him a copy of the real estate mortgage; that, according to
Kaakbay, his obligation had now reached P5,570,000.00 because the actual interest

was 0.3925% for a period of less than one year instead of the agreed-upon interest of
12% per annum; and that he was made to issue two postdated checks to guarantee his
obligation, namely: UCPB Check No. CBA 052985 in the amount of P5,570,000.00
postdated to November 5, 1996; and UCPB Check No. CBA 095215 in the amount
of P6,175,000.00 postdated to January 31, 1997.7
Petitioner further alleged that he negotiated with Kaakbay for a further extension of
time to pay his obligation, which the latter agreed to. It was agreed that petitioner and
Kaakbay would sign, execute, and acknowledge a Deed of Sale Under Pacto de
Retro upon the expiration of a two-year period starting January 8, 1998 to January 8,
2000. Petitioner was then given a blank Deed of Sale Under Pacto de Retro on
January 8, 1998 which he signed.8 His suspicions that Kaakbay was charging him
usurious rates of interest were confirmed when he obtained a Statement of Account
stating that his obligation had now reached P13,333,750.00.9
On October 21, 1999, petitioner learned of the existence of an accomplished Deed of
Sale Under Pacto de Retro, which appeared that the same was signed by him and his
wife Maria Rosario Delmo Tan, on one hand, and private respondent Lazaro on the
other, and was allegedly notarized by private respondent Atty. Roldan M. Noynay on
February 5, 1998,10 when in truth and in fact, he, his wife, and their witness Charito
Morales did not sign it on said date, nor did they execute it before Atty. Noynay or
any other notary public on said date.
On January 5, 2000, petitioner filed a complaint for Declaration of Nullity, Invalidity
and Unenforceability or Annulment of the Promissory Notes purportedly attached to
the Real Estate Mortgage dated November 16, 1995, the usurious and void rates of
interest and other fees therein appearing, and the Deed of Sale Under Pacto De
Retro purportedly dated February 5, 1998, and damages, with prayer for Preliminary
Injunction and/or Temporary Restraining Order against respondents Kaakbay Finance
Corporation, Dennis S. Lazaro and Roldan M. Noynay,11 with the RTC Calamba,
Laguna, and docketed as Civil Case No. 2881-2000-C. The complaint essentially
prayed that herein petitioners obligation to Kaakbay Finance Corporation in the
amount of P4,000,000.00 be subject to interest of only 12% per annum from
November 23, 1995; that the promissory notes attached to his Real Estate Mortgage
dated November 16, 1995 be declared null and void; that the Deed of Sale
Under Pacto de Retro dated February 5, 1998 be declared unenforceable; and that

respondents pay moral and exemplary damages in the amount of P200,000.00

andP50,000.00, respectively, as well as attorneys fees.
On the same date, petitioner filed a Notice of Lis Pendens with the Registry of Deeds
of Calamba, Laguna, which was annotated on TCT No. 207125. 12
On January 17, 2000, respondents, through their counsel, Atty. Roldan M. Noynay,
filed their Consolidated Answer With Compulsory Counterclaim And Opposition To
Temporary Restraining Order (TRO) and Preliminary Injunction. 13
During the hearing of petitioners application for the issuance of a TRO, the parties
agreed in open court that petitioner would withdraw his application for a TRO, while
respondents in turn would hold in abeyance the registration of the Deed of Sale
Under Pacto de Retro until the case was terminated. The trial court issued an order to
that effect, dated January 17, 2000.14
Later, the law firm of Ortega, Del Castillo, Bacorro, Odulio, Calma, and Carbonell
entered its appearance as counsel for respondents. 15 Said counsel requested for an
extension of time to file an Answer, and also moved for the withdrawal of the
Consolidated Answer 16 filed by Atty. Noynay insofar as respondents Kaakbay and
Lazaro are concerned.17Respondents also filed a Supplemental Opposition To The
Prayer For Preliminary Injunction Or To Temporary Injunction. 18
On February 3, 2000, respondents, through the new counsel, filed their Answer with
Counterclaim,19 praying that petitioner pay them four million pesos (P4,000,000.00)
representing the principal amount of the loan, nine million three hundred thirty three
thousand seven hundred fifty pesos (P9,333,750.00) representing the compounded
monthly interest and annual penalty interest, two hundred fifty thousand pesos
(P250,000.00) as litigation expenses, and five hundred thousand pesos (P500,000.00)
as attorneys fees.
In addition, respondents filed a Motion for Admission of Counterclaim Without
Payment of Fees, on the ground that their counterclaim is compulsory in nature, hence
it may be admitted without payment of fees. 20
On February 21, 2000, petitioner filed an Urgent Motion to Expunge Motions and
Pleadings Filed by Defendants Kaakbay Finance Corporation and Dennis S. Lazaro,
Particularly Their Answer with Counterclaim and Motion for Admission of

Counterclaim both Dated February 3, 2000 and/or Comment/Opposition (To Said

Defendants Manifestation and Supplemental Opposition to their Prayer for
Preliminary Injunction and to Temporary Injunction Dated January 24, 2000 and
February 3, 2000 Respectively.)21 In this motion, petitioner pointed out that the
respondents were being represented by their counsel, the law firm of Ortega, Del
Castillo, Bacorro, Odulio, Calma, and Carbonell without stating if said law firm is in
collaboration with or in substitution of their previous counsel, respondent Atty.
Roldan M. Noynay. Petitioner argued that the procedure laid down in the rules
concerning the change or substitution of counsel of a party litigant had not been
properly complied with by the respondents, and thus the motions filed by the said law
firm should be expunged. In addition, petitioner argued that respondents Answer with
Counterclaim should not be admitted, as it partook of the nature of a permissive
counterclaim, which required the payment of the prescribed filing fees; and since the
fees were not paid, the lower court did not acquire jurisdiction over said Answer.
In its order of February 8, 2000, the trial court granted respondents motion for
admission of counterclaim without payment of fees. 22
Petitioner then filed a "Supplemental Motion by Way of Motion for Reconsideration"
but this was denied.
Petitioner seasonably appealed to the Court of Appeals where he maintained that the
trial court committed grave abuse of discretion in admitting the answer with
counterclaim, which contains a permissive counterclaim the correct filing fees of
which have not been paid by respondents Kaakbay and Lazaro to the trial court. Thus,
petitioner insisted that the trial court had not acquired jurisdiction over the said
answer with counterclaim. Alternatively, petitioner urged that said answer be
expunged from the record of the case a quo.
On August 22, 2000, the appellate court promulgated its decision, decreeing as
follows:
WHEREFORE, the instant petition is DENIED for lack of merit, and
accordingly, DISMISSED.23
Petitioner then moved for reconsideration, but the appellate court denied it in the
resolution dated December 20, 2000.

Hence, this instant petition, where petitioner now contends that the Court of Appeals
committed the following errors, in:
(a) ITS HOLDING THAT "XXX THE LOWER COURT DID NOT COMMIT
GRAVE ABUSE OF DISCRETION IN DECLARING THE
COUNTERCLAIM OF PRIVATE RESPONDENTS KAAKBAY FINANCE
CORPORATION AND DENNIS S. LAZARO AS COMPULSORY,
REQUIRING NO PAYMENT OF LEGAL FEES XXX" WHEN EVEN THE
YULIENCO VS. COURT OF APPEALS CASE (G.R. NO. 131692, JUNE 10,
1999, 308 SCRA 206) IT CITED IN ITS DECISION FAVORABLY
SUPPORTS THE ASSERTION OF PETITIONER THAT THE
COUNTERCLAIM IN RESPONDENTS ANSWER IN THE CASE A QUO IS
A PERMISSIVE COUNTERCLAIM.
(b) ITS FAILURE TO RULE IN THE ASSAILED DECISION THAT HON.
JUDGE JUANITA T. GUERRERO HAS ACTED WITHOUT OR IN EXCESS
OF JURISDICTION, OR WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ISSUING
THE ORDERS OF FEBRUARY 8, 2000 AND MARCH 29, 2000
CONSIDERING THAT THE COLLECTION OF THE TOTAL AMOUNT OF
P14,083,750.00 REPRESENTING UNPAID LOAN AND ACCRUED
INTEREST THEREIN BY WAY OF COUNTERCLAIM IS COMPULSORY
AND THAT THE ANSWER MAY BE ADMITTED WITHOUT NECESSITY
OF PAYING THE DOCKET FEES.
(c) ITS FAILURE TO DECLARE IN THE ASSAILED DECISION THAT
THE MOTION FOR ADMISSION OF COUNTERCLAIM WITHOUT
PAYMENT OF FEES IS A MERE SCRAP OF PAPER AND VIOLATIVE OF
SECTIONS 4, 5 AND 6, RULE 15 OF THE 1997 RULES OF CIVIL
PROCEDURE.24
The basic issue for resolution in this case is whether the counterclaim of respondents
is compulsory or permissive in nature.
Petitioner assails the Court of Appeals for affirming the trial courts order that the
counterclaim of respondents is compulsory in nature, thus requiring no payment of
legal fees. Petitioner contends that his complaint against the respondents is predicated

on the unauthorized application of usurious, unconscionable and exorbitant rates of

interest and other fees by respondents Kaakbay and Lazaro to petitioners loan
without the latters knowledge, as well as the approval and the falsification of the
promissory note supposed to be attached to the Real Estate Mortgage and the Deed of
Sale Under Pacto de Retro.
According to petitioner, he did not attempt to prevent the foreclosure of the mortgage
because what he questions is the validity of the promissory note and the void rates of
interest. He insists that these were falsified. He likewise assails the genuineness of the
deed of sale in dispute. Since the evidence to be presented by the respondents to
support the genuineness and due execution of the questioned promissory note and the
Deed of Sale Under Pacto de Retro as a ground for the specific performance thereof,
is not the same as the evidence to be presented by the petitioner as plaintiff in the case
below to support his claim of fraud employed by respondents, petitioner asserts the
counterclaim cannot be deemed compulsory. He adds that since the respondents
demand the payment of the loan and the interests pursuant to the contract of loan,
completely inconsistent with his claim that subject documents were a nullity, what
respondents had filed is not a compulsory counterclaim.
For their part, respondents contend that their counterclaims are for payment of the
unpaid loan of the petitioner in the amount of P4,000,000.00, the compounded interest
with annual penalty equivalent to P9,333,750.00, litigation expenses of P250,000 and
attorneys fees of P500,000. The respondents say these are all compulsory and not
permissive counterclaims. Petitioner admitted in his complaint his indebtedness to
respondent Kaakbay Finance Corporation in the amount of P4,000,000.00 and his
liability for interest at the rate of 12% per annum only. These admissions arise out of,
or are necessarily connected with, or have a logical relation to the transaction or
occurrence forming the subject matter of the petitioners claim. Consequently,
respondents conclude that the trial court did not err in ruling that payment of the
docket fees is no longer necessary as their counterclaims are compulsory in nature.
In Intestate Estate of Dalisay v. Hon. Marasigan,25 we held that a counterclaim is
compulsory where: (1) it arises out of, or is necessarily connected with the transaction
or occurrence that is the subject matter of the opposing partys claim; (2) it does not
require the presence of third parties of whom the court cannot acquire jurisdiction;
and (3) the trial court has jurisdiction to entertain the claim. To determine whether a
counterclaim is compulsory or not, we have devised the following tests: (1) Are the

issues of fact or law raised by the claim and the counterclaim largely the same? (2)
Would res judicata bar a subsequent suit on defendants claims absent the compulsory
counterclaim rule? (3) Will substantially the same evidence support or refute
plaintiffs claim as well as the defendants counterclaim? and (4) Is there any logical
relation between the claim and the counterclaim? 26
In Quintanilla v. Court of Appeals, we said a "compelling test of compulsoriness" is
whether there is "a logical relationship between the claim and counterclaim, that is,
where conducting separate trials of the respective claims of the parties would entail a
substantial duplication of effort and time by the parties and the court." 27
Tested against the abovementioned standards, we agree with the appellate courts view
that respondents counterclaims are compulsory in nature. Petitioners complaint was
for declaration of nullity, invalidity or annulment of the promissory notes purportedly
attached to the Real Estate Mortgage dated November 16, 1995 and the usurious and
void interest rates appearing therein and the Deed of Sale Under Pacto De Retro.
Respondents counterclaim was for the payment of the principal amount of the loan,
compounded monthly interest and annual penalty interest arising out of the nonpayment of the principal loan, litigation expenses and attorneys fees. There is no
dispute as to the principal obligation ofP4,000,000, but there is a dispute as to the rate
and amount of interest. Petitioner insists that the amount of interest is only 12% yearly
until fully paid, while respondents insist on 3.5% monthly. Also, respondents allege
that petitioner owes them P9,333,750.00 representing the compounded monthly
interest and annual penalty, which is disputed by petitioner. Petitioner further seeks
the nullification of the Deed of Sale Under Pacto de Retro for being falsified, while
respondents aver the deed is valid. It thus appears that the evidence required to prove
petitioners claims is similar or identical to that needed to establish respondents
demands for the payment of unpaid loan from petitioner such as amount of interest
rates. In other words, petitioners claim is so related logically to respondents
counterclaim, such that conducting separate trials for the claim and the counterclaim
would result in the substantial duplication of the time and effort of the court and the
parties. Clearly, this is the situation contemplated under the "compelling test of
compulsoriness." The counterclaims of respondents herein are obviously compulsory,
not permissive. As aptly held by the Court of Appeals, the issues of fact and law raised
by both the claim and counterclaim are largely the same, with a logical relation,
considering that the two claims arose out of the same circumstances requiring

substantially the same evidence. Any decision the trial court will make in favor of
petitioner will necessarily impinge on the claim of respondents, and vice versa. In this
light, considering that the counterclaims of respondents are compulsory in nature,
payment of docket fees is not required. The CA did not err in holding that the trial
court had acquired jurisdiction on the matter.28
WHEREFORE, the petition is hereby DENIED for lack of merit, and the assailed
decision of the Court of Appeals dated August 22, 2000 and its resolution dated
December 20, 2000, in CA-G.R. SP No. 58379, are AFFIRMED. No pronouncement
as to costs.
SO ORDERED.

G.R. No. 138822

January 23, 2001

EVANGELINE ALDAY, petitioner,

vs.
FGU INSURANCE CORPORATION, respondent.
GONZAGA-REYES, J.:
On 5 May 1989, respondent FGU Insurance Corporation filed a complaint with the Regional Trial
Court of Makati1alleging that petitioner Evangeline K. Alday owed it P114,650.76, representing
unliquidated cash advances, unremitted costs of premiums and other charges incurred by petitioner
in the course of her work as an insurance agent for respondent. 2 Respondent also prayed for
exemplary damages, attorney's fees, and costs of suit. 3Petitioner filed her answer and by way of
counterclaim, asserted her right for the payment of P104,893.45, representing direct commissions,
profit commissions and contingent bonuses earned from 1 July 1986 to 7 December 1986, and for
accumulated premium reserves amounting to P500,000.00. In addition, petitioner prayed for
attorney's fees, litigation expenses, moral damages and exemplary damages for the allegedly
unfounded action filed by respondent.4 On 23 August 1989, respondent filed a "Motion to Strike Out
Answer With Compulsory Counterclaim And To Declare Defendant In Default" because petitioner's
answer was allegedly filed out of time.5However, the trial court denied the motion on 25 August 1989
and similarly rejected respondent's motion for reconsideration on 12 March 1990. 6 A few weeks later,
on 11 April 1990, respondent filed a motion to dismiss petitioner's counterclaim, contending that the
trial court never acquired jurisdiction over the same because of the non-payment of docket fees by
petitoner.7 In response, petitioner asked the trial court to declare her counterclaim as exempt from
payment of docket fees since it is compulsory and that respondent be declared in default for having
failed to answer such counterclaim.8
In its 18 September 1990 Order, the trial court9 granted respondent's motion to dismiss petitioner's
counterclaim and consequently, denied petitioner's motion. The court found petitioner's counterclaim

to be merely permissive in nature and held that petitioner's failure to pay docket fees prevented the
court from acquiring jurisdiction over the same.10 The trial court similar denied petitioner's motion for
reconsideration on 28 February 1991.
1wphi1.nt

On 23 December 1998, the Court of Appeals11 sustained the trial court, finding that petitioner's own
admissions, as contained in her answer, show that her counterclaim is merely permissive. The
relevant portion of the appellate court's decision12 is quoted herewith Contrary to the protestations of appellant, mere reading of the allegations in the answer a
quo will readily show that her counterclaim can in no way be compulsory. Take note of the
following numbered paragraphs in her answer:
"(14) That, indeed, FGU's cause of action which is not supported by any document
other than the self-serving 'Statement of Account' dated March 28, 1988 x x x
(15) That it should be noted that the cause of action of FGU is not the enforcement of
the Special Agent's Contract but the alleged 'cash accountabilities which are not
based on written agreement x x x.
x

(19) x x x A careful analysis of FGU's three-page complaint will show that its cause of
action is not for specific performance or enforcement of the Special Agent's Contract
rather, it is for the payment of the alleged cash accountabilities incurred by defendant
during the period form [sic] 1975 to 1986 which claim is executory and has not been
ratified. It is the established rule that unenforceable contracts, like this purported
money claim of FGU, cannot be sued upon or enforced unless ratified, thus it is as if
they have no effect. x x x."
To support the heading "Compulsory Counterclaim" in her answer and give the impression
that the counterclaim is compulsory appellant alleged that "FGU has unjustifiably failed to
remit to defendant despite repeated demands in gross violation of their Special Agent's
Contract x x x." The reference to said contract was included purposely to mislead. While on
one hand appellant alleged that appellee's cause of action had nothing to do with the Special
Agent's Contract, on the other hand, she claim that FGU violated said contract which gives
rise of [sic] her cause of action. Clearly, appellant's cash accountabilities cannot be the
offshoot of appellee's alleged violation of the aforesaid contract.
On 19 May 1999, the appellate court denied petitioner's motion for reconsideration, 13 giving rise to
the present petition.
Before going into the substantive issues, the Court shall first dispose of some procedural matters
raised by the parties. Petitioner claims that respondent is estopped from questioning her nonpayment of docket fees because it did not raise this particular issue when it filed its motion - the
"Motion to Strike out Answer With Compulsory Counterclaim And To Declare Defendant In Default" with the trial court; rather, it was only nine months after receiving petitioner's answer that respondent

assailed the trial court's lack of jurisdiction over petitioner's counterclaims based on the latter's
failure to pay docket fees.14 Petitioner's position is unmeritorious. Estoppel by laches arises from the
negligence or omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned or declined to assert it. 15 In the case at bar,
respondent cannot be considered as estopped from assailing the trial court's jurisdiction over
petitioner's counterclaim since this issue was raised by respondent with the trial court itself - the
body where the action is pending - even before the presentation of any evidence by the parties and
definitely, way before any judgment could be rendered by the trial court.
Meanwhile, respondent questions the jurisdiction of the Court of Appeals over the appeal filed by
petitioner from the 18 September 1990 and 28 February 1991 orders of the trial court. It is significant
to note that this objection to the appellate court's jurisdiction is raised for the first time before this
Court; respondent never having raised this issue before the appellate court. Although the lack of
jurisdiction of a court may be raised at any stage of the action, a party may be estopped from raising
such questions if he has actively taken part in the very proceedings which he questions, belatedly
objecting to the court's jurisdiction in the event that the judgment or order subsequently rendered is
adverse to him.16 In this case, respondent actively took part in the proceedings before the Court of
Appeals by filing its appellee's brief with the same.17 Its participation, when taken together with its
failure to object to the appellate court's jurisdiction during the entire duration of the proceedings
before such court, demonstrates a willingness to abide by the resolution of the case by such tribunal
and accordingly, respondent is now most decidedly estopped from objecting to the Court of Appeals'
assumption of jurisdiction over petitioner's appeal. 18
The basic issue for resolution in this case is whether or not the counterclaim of petitioner is
compulsory or permissive in nature. A compulsory counterclaim is one which, being cognizable by
the regular courts of justice, arises out of or is connected with the transaction or occurrence
constituting the subject matter of the opposing party's claim and does not require for its adjudication
the presence of third parties of whom the court cannot acquire jurisdiction. 19
In Valencia v. Court of Appeals,20 this Court capsulized the criteria or tests that may be used in
determining whether a counterclaim is compulsory or permissive, summarized as follows:
1. Are the issues of fact and law raised by the claim and counterclaim largely the same?
2. Would res judicata bar a subsequent suit on defendant's claim absent the compulsory
counterclaim rule?
3. Will substantially the same evidence support or refute plaintiff's claim as well s defendant's
counterclaim?
4. Is there any logical relation between the claim and the counterclaim?
Another test, applied in the more recent case of Quintanilla v. Court of Appeals,21 is the "compelling
test of compulsoriness" which requires "a logical relationship between the claim and counterclaim,
that is, where conducting separate trials of the respective claims of the parties would entail a
substantial duplication of effort and time by the parties and the court."

As contained in her answer, petitioner's counterclaims are as follows:

(20) That defendant incorporates and repleads by reference all the foregoing allegations as
may be material to her Counterclaim against FGU.
(21) That FGU is liable to pay the following just, valid and legitimate claims of defendant:
(a) the sum of at least P104,893.45 plus maximum interest thereon representing,
among others, direct commissions, profit commissions and contingent bonuses
legally due to defendant; and
(b) the minimum amount of P500,000.00 plus the maximum allowable interest
representing defendant's accumulated premium reserve for 1985 and previous years,
which FGU has unjustifiably failed to remit to defendant despite repeated demands in gross
violation of their Special Agent's Contract and in contravention of the principle of law that
"every person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith."
(22) That as a result of the filing of this patently baseless, malicious and unjustified
Complaint, and FGU's unlawful, illegal and vindictive termination of their Special Agent's
Contract, defendant was unnecessarily dragged into this litigation and to defense [sic] her
side and assert her rights and claims against FGU, she was compelled to hire the services of
counsel with whom she agreed to pay the amount of P30,000.00 as and for attorney's fees
and stands to incur litigation expenses in the amount estimated to at least P20,000.00 and
for which FGU should be assessed and made liable to pay defendant.
(23) That considering further the malicious and unwarranted action of defendant in filing this
grossly unfounded action, defendant has suffered and continues to suffer from serious
anxiety, mental anguish, fright and humiliation. In addition to this, defendant's name, good
reputation and business standing in the insurance business as well as in the community
have been besmirched and for which FGU should be adjudged and made liable to pay moral
damages to defendant in the amount of P300,000.00 as minimum.
(24) That in order to discourage the filing of groundless and malicious suits like FGU's
Complaint, and by way of serving [as] an example for the public good, FGU should be
penalized and assessed exemplary damages in the sum of P100,000.00 or such amount as
the Honorable Court may deem warranted under the circumstances.22
Tested against the abovementioned standards, petitioner's counterclaim for commissions, bonuses,
and accumulated premium reserves is merely permissive. The evidence required to prove
petitioner's claims differs from that needed to establish respondent's demands for the recovery of
cash accountabilities from petitioner, such as cash advances and costs of premiums. The recovery
of respondent's claims is not contingent or dependent upon establishing petitioner's counterclaim,
such that conducting separate trials will not result in the substantial duplication of the time and effort
of the court and the parties. One would search the records in vain for a logical connection between

the parties' claims. This conclusion is further reinforced by petitioner's own admissions since she
declared in her answer that respondent's cause of action, unlike her own, was not based upon the
Special Agent's Contract.23 However, petitioner's claims for damages, allegedly suffered as a result of
the filing by respondent of its complaint, are compulsory.24
There is no need for need for petitioner to pay docket fees for her compulsory counterclaim. 25 On the
other hand, in order for the trial court to acquire jurisdiction over her permissive counterclaim,
petitioner is bound to pay the prescribed docket fees.26 The rule on the payment of filing fees has
been laid down by the Court in the case ofSun Insurance Office, Ltd. V. Hon. Maximiano Asuncion271. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment
of the prescribed docket fee, that vests a trial court with jurisdiction over the subject-matter or
nature of the action. Where the filing of the initiatory pleading is not accompanied by
payment of the docket fee, the court may allow payment of the fee within a reasonable time
but in no case beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed
therefor is paid. The court may allow payment of said fee within a reasonable time but also in
no case beyond its applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate
pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a
claim not specified in the pleading, or if specified the same has been left for determination by
the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be
the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and
assess and collect the additional fee.
The above mentioned ruling in Sun Insurance has been reiterated in the recent case of Susan v.
Court of Appeals.28 In Suson, the Court explained that although the payment of the prescribed docket
fees is a jurisdictional requirement, its non-payment does not result in the automatic dismissal of the
case provided the docket fees are paid within the applicable prescriptive or reglementary period.
Coming now to the case at bar, it has not been alleged by respondent and there is nothing in the
records to show that petitioner has attempted to evade the payment of the proper docket fees for her
permissive counterclaim. As a matter of fact, after respondent filed its motion to dismiss petitioner's
counterclaim based on her failure to pay docket fees, petitioner immediately filed a motion with the
trial court, asking it to declare her counterclaim as compulsory in nature and therefore exempt from
docket fees and, in addition, to declare that respondent was in default for its failure to answer her
counterclaim.29 However, the trial court dismissed petitioner's counterclaim. Pursuant to this Court's
ruling in Sun Insurance, the trial court should have instead given petitioner a reasonable time, but in
no case beyond the applicable prescriptive or reglementary period, to pay the filing fees for her
permissive counterclaim.
Petitioner asserts that the trial court should have declared respondent in default for having failed to
answer her counterclaim.30 Insofar as the permissive counterclaim of petitioner is concerned, there is
obviously no need to file an answer until petitioner has paid the prescribed docket fees for only then

shall the court acquire jurisdiction over such claim.31 Meanwhile, the compulsory counterclaim of
petitioner for damages based on the filing by respondent of an allegedly unfounded and malicious
suit need not be answered since it is inseparable from the claims of respondent. If respondent were
to answer the compulsory counterclaim of petitioner, it would merely result in the former pleading the
same facts raised in its complaint.32
WHEREFORE, the assailed Decision of the Court of Appeals promulgated on 23 December 1998
and its 19 May 1999 Resolution are hereby MODIFIED. The compulsory counterclaim of petitioner
for damages filed in Civil Case No. 89-3816 is ordered REINSTATED. Meanwhile, the Regional Trial
Court of Makati (Branch 134) is ordered to require petitioner to pay the prescribed docket fees for
her permissive counterclaim (direct commissions, profit commissions, contingent bonuses and
accumulated premium reserves), after ascertaining that the applicable prescriptive period has not yet
set in.33
SO ORDERED.

1wphi1.nt

ALICE A.I. SANDEJAS,

ROSITA A.I. CUSI,
PATRICIA A.I. SANDEJAS and
BENJAMIN A.I. ESPIRITU,
Petitioners,
- versus -

G.R. No. 155033

Present:
YNARES-SANTIAGO,
Chairperson,
AUSTRIA-MARTINEZ,
CARPIO MORALES,
CHICO-NAZARIO, and
NACHURA, JJ.

SPS. ARTURO IGNACIO, JR.

and EVELYN IGNACIO,
Promulgated:
Respondents.
December 19, 2007
x------------------------------------------------x

DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules
of Court assailing the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No.
62404 promulgated on August 27, 2002, which affirmed with modification the

Decision of the Regional Trial Court (RTC) of Pasig City, Branch 158, in Civil
Case No. 65146 dated December 18, 1998.
The facts of the case, as summarized by the RTC, are as follows:
It appears from the plaintiffs' [petitioners] evidence that Arturo
[respondent] is the elder brother of Alice [petitioner] and Rosita
[petitioner], Benjamin [petitioner] and Patricia [petitioner] are Arturo's
nephew and niece. Arturo and his wife Evelyn [respondent] are residents
of the United States. In October 1993, Arturo leased from Dr. Borja a
condominium unit identified as Unit 28-C Gilmore Townhomes located
at Granada St., Quezon City. The lease was for the benefit of Benjamin
who is the occupant of the unit. The rentals were paid by Ignacio. The
term of the lease is for one (1) year and will expire on October 15, 1994.
It appears that Arturo was intending to renew the lease contract. As he
had to leave for the U.S., Arturo drew up a check, UCPB Check No.
GRH-560239 and wrote on it the name of the payee, Dr. Manuel Borja,
but left blank the date and amount. He signed the check. The check was
intended as payment for the renewal of the lease. The date and the
amount were left blank because Arturo does not know when it will be
renewed and the new rate of the lease. The check was left with Arturo's
sister-in-law, who was instructed to deliver or give it to Benjamin.
The check later came to the possession of Alice who felt that Arturo
cheated their sister in the amount of three million pesos
(P3,000,000.00). She believed that Arturo and Rosita had a joint and/or
money market placement in the amount of P3 million with the UCPB
branch at Ortigas Ave., San Juan and that Ignacio preterminated the
placement and ran away with it, which rightfully belonged to
Rosita. Alice then inquired from UCPB Greenhills branch if Arturo still
has an account with them. On getting a confirmation, she together with
Rosita drew up a scheme to recover the P3 million from
Arturo. Alice filled up the date of the check with March 17, 1995 and the
amount with three million only. Alice got her driver, Kudera, to stand as
the payee of the check, Dr. Borja. Alice and Rosita came to
SBC[2] Greenhills Branch together with a man (Kudera) who[m] they
introduced as Dr. Borja to the then Assistant Cashier Luis. After
introducing the said man as Dr. Borja, Rosita, Alice and the man who
was later identified as Kudera opened a Joint Savings Account No. 271410554-7. As initial deposit for the Joint Savings Account, Alice, Rosita
and Kudera deposited the check. No ID card was required of

Mr. Kudera because it is an internal policy of the bank that when a

valued client opens an account, an identification card is no longer
required (TSN, April 21, 1997, pp. 15-16). SBC also allowed the check
to be deposited without the endorsement of the impostor Kudera. SBC
officials stamped on the dorsal portion of the check endorsement/lack of
endorsement guaranteed and sent the check for clearing to the Philippine
Clearing House Corporation.
On 21 March 1995, after the check had already been cleared by the
drawer bank UCPB, Rosita withdrew P1 million from Joint Savings
Account and deposited said amount to the current account of Alice with
SBC Greenhills Branch. On the same date, Alice caused the transfer of
P2 million from the Joint Savings Account to two (2) Investment
Savings Account[s] in the names of Alice, Rosita and/or Patricia. ...
On April 4, 1995, a day after Evelyn and Atty. Sanz inquired about the
identity of the persons and the circumstances surrounding the deposit
and withdrawal of the check, the three million pesos in the two
investment savings account[s] and in the current account just opened
with SBC were withdrawn by Alice and Rosita. [3]

On June 18, 1995, Arturo Ignacio, Jr. and Evelyn Ignacio (respondents) filed a
verified complaint for recovery of a sum of money and damages against Security
Bank and Trust Company (SBTC) and its officers, namely: Rene Colin D. Gray,
Manager; and Sonia Ortiz-Luis, Cashier. The complaint also impleaded herein
petitioner Benjamin A.I. Espiritu (Benjamin), a John Doe, representing himself as
Manuel N. Borja; and a Jane Doe.
On November
7,
1995,
the
complaint
was
amended
by
additionally impleading herein petitioners Alice A.I. Sandejas (Alice), Rosita
A.I. Cusi (Rosita) and Patricia A.I.Sandejas (Patricia) as defendants who filed their
respective answers and counterclaims.
After trial, the RTC rendered judgment dated December 18, 1998 with the
following dispositive portion:
WHEREFORE, in view of the foregoing, judgment is rendered in favor
of plaintiffs as against defendants Security Bank and Trust Co., Rene
Colin Gray, Sonia Ortiz Luis, Alice A.I. Sandejasand Rosita A.I. Cusi,

ordering them to pay jointly and severally the plaintiffs the following
amounts:
(1) P3,000,000.00 plus legal interest on it from March 17, 1995 until the
entire amount is fully paid;
(2) P500,000.00 as moral damages;
(3) P200,000.00 as exemplary damages;
(4) P300,000.00 as attorney's fees; plus
(5) the cost of suit.
In turn, plaintiffs are directed to pay Benjamin A.I. Espiritu the amount
of P100,000.00 as moral damages, P50,000.00 as exemplary damages
and another P50,000.00 as attorney's fees.
The counterclaims of Patricia A.I. Sandejas are dismissed.
SO ORDERED.[4]
Both parties appealed the RTC Decision to the CA.

On August 14, 1999, during the pendency of the appeal with the CA, herein
respondent Arturo Ignacio, Jr. (Arturo) died.[5]
On August 27, 2002, the CA promulgated the presently assailed Decision,
disposing as follows:
WHEREFORE, in view of the foregoing, the assailed decision of the
trial court is hereby AFFIRMED with the MODIFICATION that the
judgment shall read as follows:
The defendants-appellants Security Bank and Trust Company, Rene
Colin D. Gray, Sonia Ortiz-Luis, Alice A.I. Sandejas, and Rosita
A.I. Cusi, are hereby ordered to jointly and severally pay the plaintiffs
the following amounts:
1. P3,000,000.00 plus legal interest computed from March 17, 1995 until
the entire amount is fully paid;
2. P200,000.00 as moral damages;
3. P100,000.00 as exemplary damages;
4. P50,000.00 as attorney's fees; plus
5. the costs of suit.

The award of moral damages, exemplary damages, and attorney's fees in

favor of Benjamin Espiritu is DELETED.
SO ORDERED.[6]

Petitioners and SBTC, together with Gray and Ortiz-Luis, filed their respective
petitions for review before this Court.
However, the petition filed by SBTC, Gray and Ortiz-Luis, docketed as G.R. No.
155038, was denied in a Resolution[7] issued by this Court on November 20, 2002,
for their failure to properly verify the petition, submit a valid certification of nonforum shopping, and attach to the petition the duplicate original or certified true
copyof the assailed CA Decision. Said
Resolution became final and executory on April 9, 2003.[8]
On the other hand, the instant petition was given due course. Petitioners
enumerated the following grounds in support of their petition:
I. THE COURT OF APPEALS HAD DECIDED A QUESTION OF
SUBSTANCE NOT HERETOFORE DECIDED BY THIS COURT
AND/OR HAD DECIDED IT IN A WAYPROBABLY NOT IN
ACCORD WITH EQUITY, THE LAW AND THE APPLICABLE
DECISIONS OF THIS COURT, SUCH AS:
(a) IN NOT HOLDING THAT AS BETWEEN SIBLINGS, THE
AGGRIEVED SIBLING HAS THE RIGHT TO TAKE MEASURES OR
STEPS TO PROTECT HIS OWN INTEREST OR PROPERTY
RIGHTS FROM AN ACT OF THE GUILTY SIBLING;
(b) IN NOT HOLDING THAT THE ACT OF ROSITA AND ALICE IN
FILLING OUT THE BLANK PORTIONS OF THE CHECK TO
RECOVER WHAT ARTURO, JR. TOOK FROM AND DUE ROSITA,
DID NOT GIVE RISE TO AN ACTIONABLE TORT;
(c) IN NOT HOLDING THAT THE CRIMINAL ACT OF ARTURO,
JR. IN SUBMITTING AN AFFIDAVIT OF LOSS OF THE
CERTIFICATE OF TIME DEPOSIT FORP3,000,000 THAT
RIGHTFULLY BELONGED TO ROSITA JUST TO BE ABLE TO

PRE-TERMINATE THE TIME DEPOSIT AND GET ITS FACE

VALUE, WHEN HE KNEW IT WAS NOT LOST BUT IN FACT
INTACT AND IN THE POSSESSION OF ROSITA, IS A DISHONEST
AND REPREHENSIBLE ACT THAT JUSTIFIED ROSITA AND
ALICE IN TAKING MEANS TO REGAIN THE MONEY AND TO
DENY ARTURO, JR. ANY RIGHT TO RECOVER THE SAID
AMOUNT AS WELL AS TO AN AWARD OF DAMAGES;
(d) IN NOT HOLDING THAT THE CRIMINAL ACT OF ARTURO,
JR. IN SUBMITTING AN AFFIDAVIT OF LOSS OF THE OWNER'S
COPY OF THE TITLE IN MORAYTA AND IN TESTIFYING IN
COURT AS TO SUCH, WHEN THAT IS NOT THE TRUTH AS HE
KNEW THAT THE ORIGINAL OWNER'S COPY OF THE TITLE
WAS WITH ROSITA, IS ANOTHER DISHONEST AND
REPREHENSIBLE ACT THAT SHOULD NOT HAVE ENTITLED
HIM TO ANY AWARD OF DAMAGES; AND
(e) IN NOT APPLYING THE RULE ON PARI DELICTO UNDER
ART. 1412 OF THE CIVIL CODE.
II. THE COURT OF APPEALS HAD DEPARTED FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS WHEN IT FAILED TO
RESOLVE IN THE APPEAL THE COUNTERCLAIM OF ROSITA
AGAINST ARTURO, JR. FOR THE RECOVERY OF THE AMOUNTS
LEGALLY HERS THAT SHOULD JUSTIFY ALICE'S BEING
ABSOLVED FROM ANY LIABILITY FOR USING THE CHECK IN
RECOVERING THE AMOUNT RIGHTFULLY BELONGING TO
ROSITA;
III. THE COURT OF APPEALS HAD DEPARTED FROM THE
USUAL COURSE OF JUDICIAL PROCEEDINGS WHEN IT
REVERSED THE TRIAL COURT'S FINDING THAT RESPONDENT
WAS GUILTY OF BAD FAITH AND MALICE THAT ENTITLED
PETITIONER BENJAMIN A.I. ESPIRITU TO THE AWARD OF
DAMAGES NOTWITHSTANDING THAT THERE WAS AMPLE
EVIDENCE SHOWN THAT SUCH BAD FAITH AND MALICE WAS
MADE AS A LEVERAGE TO COMPEL ARTURO'S SIBLINGS TO
RETURN TO HIM THE P3,000,000 WHICH WAS NOT HIS; and,
IV. THE COURT OF APPEALS HAD DECIDED THE CASE NOT IN
ACCORD WITH LAW WHEN IT DELETED THE AWARD OF

DAMAGES TO PETITIONER ESPIRITU AND IN NOT HAVING

RULED THAT HE WAS ENTITLED TO A HIGHER AWARD OF
DAMAGES CONSIDERING THE CIRCUMSTANCES OF THE CASE
AS WELL AS IN NOT HAVING RULED THAT PATRICIA WAS
ENTITLED TO AN AWARD OF DAMAGES.[9]

Petitioners argue that the CA overlooked and ignored vital pieces of evidence
showing that the encashment of the subject check was not fraudulent and, on the
contrary, was justified under the circumstances; and that such encashment did not
amount to an actionable tort and that it merely called for the application of the civil
law rule on pari delicto.
In support of these arguments, petitioners contend that the principal adversaries in
the present case are full blooded siblings; that the law recognizes the solidarity
offamily which is why it is made a condition that earnest efforts towards a
compromise be exerted before one family member can institute a suit against the
other; that even if Arturo previously defrauded Rosita and deprived her of her
lawful share in the sale of her property, petitioners Rosita and Alice did not
precipitately file suit against him and instead took extra-legal measures to protect
Rosita's property rights and at the same time preserve the solidarity of their family
and save it from public embarrassment. Petitioners also aver that Rosita's and
Alice's act of encashing the subject check is not fraudulent because they did not
have any unlawful intent and that they merely took from Arturo what rightfully
belonged to Rosita. Petitioners contend that even granting that the act of Rosita and
Alice amounted to an actionable tort, they could not be adjudged liable to return
the amount to respondents or to pay damages in their favor, because the civil law
rule on pari delicto dictates that, when both parties are at fault, neither of them
could expect positive relief from courts of justice and, instead, are left in the state
where they were at the time of the filing of the case.
Petitioners also contend that the CA erred in failing to award damages to Patricia
even if the appellate court sustained the trial court's finding that she was not a party
to the fraudulent acts committed by Rosita and Alice. Petitioners argue that even if
Patricia did not bother to know the details of the cases against her and left
everything to her mother, she did not even know the nature of the case against her,
or her superiors in the bank where she worked did not know whether she was the

plaintiff or defendant, these were not reasons to deny her award of damages. The
fact remains that she had been maliciously dragged into the case, and that the suit
had adversely affected her work and caused her mental worries and anguish,
besmirched reputation, embarrassment and humiliation.
As to Benjamin, petitioners aver that the CA also erred in deleting the award of
damages and attorney's fees in his favor. Petitioners assert that the trial court found
that Benjamin suffered mental anguish, wounded feelings and moral shock as a
result of the filing of the present case. Citing the credentials and social standing of
Benjamin, petitioners claim that the award of damages and attorney's fees in his
favor should be increased.
Lastly, petitioners contend that the award of damages and attorney's fees to
respondents should be deleted for their failure to establish malice or bad faith on
the part of petitioners Alice and Rosita in recovering the P3,000,000.00 which
Arturo took from Rosita; and that it is Rosita who is entitled to damages and
attorney's fees for Arturo's failure and refusal to give her share in the sale of her
property in Morayta.
In their Memorandum, respondents simply contend that the issues raised by
petitioners are factual in nature and that the settled rule is that questions of fact are
not subject to review by the Supreme Court in a petition for review
on certiorari under Rule 45 of the Rules of Court. While there are exceptions to
this rule, respondents assert that petitioners failed to show that the instant case falls
under any of these exceptions.
The Courts Ruling
The Court finds the petition bereft of merit. There is no compelling reason for the
Court to disturb the findings of facts of the lower courts.
The trial court's findings are as follows: (1) Rosita failed to establish that there is
an agreement between her and Arturo that the latter will give her one-third of the
proceeds of the sale of the Morayta property; (2) petitioners were not able to
establish by clear and sufficient evidence that the P3,000,000.00 which they took
from Arturo when they encashed the subject check was part of the proceeds of the

sale of the Morayta property; (3) Rosita's counterclaim is permissive and she failed
to pay the full docket and filing fees for her counterclaim.[10]
Petitioners challenge the findings of the RTC and insist that they should not be
held liable for encashing the subject check because Arturo defrauded Rosita and
that he committed deceitful acts which deprived her of her rightful share in the sale
of her building in Morayta; that the amount of P3,000,000.00 represented by the
check which they encashed formed part of the proceeds of the said sale; that Alice
and Rosita were merely moved by their desire to recover from Arturo, Rosita's
supposed share in the sale of her property.
However, the Court agrees with respondents that only questions of law are
entertained in petitions for review on certiorari under Rule 45 of the Rules of
Court.[11] The trial courts findings of fact, which the Court of Appeals affirmed, are
generally binding and conclusive upon this court.[12] There are recognized
exceptions to this rule, among which are: (1) the conclusion is grounded on
speculations, surmises or conjectures; (2) the inference is manifestly mistaken,
absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is
based on a misapprehension of facts; (5) the findings of facts are conflicting; (6)
there is no citation of specific evidence on which the factual findings are based; (7)
the finding of absence of facts is contradicted by the presence of evidence on
record; (8) the findings of the CA are contrary to the findings of the trial court; (9)
the CA manifestly overlooked certain relevant and undisputed facts that, if
properly considered, would justify a different conclusion; (10) the findings of the
CA are beyond the issues of the case; and (11) such findings are contrary to the
admissions of both parties.[13] In the instant case, petitioners failed to demonstrate
that their petition falls under any one of the above exceptions.
Petitioners' assignments of errors boil down to the basic issue of whether or not
Alice and Rosita are justified in encashing the subject check given the factual
circumstances established in the present case.
Petitioners' posture is not sanctioned by law. If they truly believe that Arturo took
advantage of and violated the rights of Rosita, petitioners should have sought
redress from the courts and should not have simply taken the law into their own
hands. Our laws are replete with specific remedies designed to provide relief for

the violation of one's rights. In the instant case, Rosita could have immediately
filed an action for the nullification of the sale of the building she owns in light of
petitioners' claim that the document bearing her conformity to the sale of the said
building was taken by Arturo from her without her knowledge and consent. Or, in
the alternative, as the CA correctly held, she could have brought a suit for the
collection of a sum of money to recover her share in the sale of her property
in Morayta. In a civilized society such as ours, the rule of law should always
prevail. To allow otherwise would be productive of nothing but mischief, chaos
and anarchy. As a lawyer, who has sworn to uphold the rule of law, Rosita should
know better. She must go to court for relief.
It is true that Article 151 of the Family Code requires that earnest efforts towards a
compromise be made before family members can institute suits against each
other.However, nothing in the law sanctions or allows the commission of or resort
to any extra-legal or illegal measure or remedy in order for family members to
avoid the filing of suits against another family member for the enforcement or
protection of their respective rights.
Petitioners invoke the rule of pari delicto to support their contention that
respondents do not deserve any relief from the courts.
The principle of pari delicto provides that when two parties are equally at fault, the
law leaves them as they are and denies recovery by either one of them. [14] Indeed,
one who seeks equity and justice must come to court with clean hands. [15] However,
in the present case, petitioners were not able to establish that respondents are also
at fault. Thus, the principle of pari delicto cannot apply.
In any case, the application of the pari delicto principle is not absolute, as there are
exceptions to its application.[16] One of these exceptions is where the application of
the pari delicto rule would violate well-established public policy.[17] The prevention
of lawlessness and the maintenance of peace and order are established public
policies. In the instant case, to deny respondents relief on the ground
of pari delicto would put a premium on the illegal act of petitioners in taking from
respondents what the former claim to be rightfully theirs.

Petitioners also question the trial court's ruling that their counterclaim is
permissive. This Court has laid down the following tests to determine whether a
counterclaim is compulsory or not, to wit: (1) Are the issues of fact or law raised
by the claim and the counterclaim largely the same? (2) Would res judicata bar a
subsequent suit on defendants claims, absent the compulsory counterclaim rule?
(3) Will substantially the same evidence support or refute plaintiffs claim as well as
the defendants counterclaim? and (4) Is there any logical relation between the
claim and the counterclaim, such that the conduct of separate trials of the
respective claims of the parties would entail a substantial duplication of effort and
time by the parties and the court?[18]
Tested against the above-mentioned criteria, this Court agrees with the view of the
RTC that Rosita's counterclaim for the recovery of her alleged share in the sale of
theMorayta property is permissive in nature. The evidence needed to prove
respondents' claim to recover the amount of P3,000,000.00 from petitioners is
different from that required to establish Rosita's demands for the recovery of her
alleged share in the sale of the subject Morayta property. The recovery of
respondents' claim is not contingent or dependent upon the establishment of
Rosita's counterclaim such that conducting separate trials will not result in the
substantial duplication of the time and effort of the court and the parties.
In Sun Insurance Office, Ltd., (SIOL) v. Asuncion,[19] this Court laid down the rules
on the payment of filing fees, to wit:
1. It is not simply the filing of the complaint or appropriate initiatory
pleading, but the payment of the prescribed docket fee, that vests a trial
court with jurisdiction over the subject-matter or nature of the action.
Where the filing of the initiatory pleading is not accompanied by
payment of the docket fee, the court may allow payment of the fee
within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims
and similar pleadings, which shall not be considered filed until and
unless the filing fee prescribed therefor is paid. The court may allow
payment of said fee within a reasonable time but also in no case beyond
its applicable prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of
the appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading,
or if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It
shall be the responsibility of the Clerk of Court or his duly authorized
deputy to enforce said lien and assess and collect the additional fee. [20]

In order for the trial court to acquire jurisdiction over her permissive counterclaim,
Rosita is bound to pay the prescribed docket fees. [21] Since it is not disputed that
Rosita never paid the docket and filing fees, the RTC did not acquire jurisdiction
over her permissive counterclaim. Nonetheless, the trial court ruled on the merits
of Rosita's permissive counterclaim by dismissing the same on the ground that she
failed to establish that there is a sharing agreement between her and Arturo with
respect to the proceeds of the sale of the subject Morayta property and that the
amount of P3,000,000.00 represented by the check which Rosita and
Alice encashed formed part of the proceeds of the said sale.
It is settled that any decision rendered without jurisdiction is a total nullity and
may be struck down at any time, even on appeal before this Court.[22]
In the present case, considering that the trial court did not acquire jurisdiction over
the permissive counterclaim of Rosita, any proceeding taken up by the trial court
and any ruling or judgment rendered in relation to such counterclaim is considered
null and void. In effect, Rosita may file a separate action against Arturo for
recovery of a sum of money.
However, Rosita's claims for damages and attorney's fees are compulsory as they
necessarily arise as a result of the filing by respondents of their complaint. Being
compulsory in nature, payment of docket fees is not required. [23] Nonetheless, since
petitioners are found to be liable to return to respondents the amount
ofP3,000,000.00 as well as to pay moral and exemplary damages and attorney's
fees, it necessarily follows that Rosita's counterclaim for damages and attorney's
fees should be dismissed as correctly done by the RTC and affirmed by the CA.

As to Patricia's entitlement to damages, this Court has held that while no proof of
pecuniary loss is necessary in order that moral damages may be awarded, the
amount of indemnity being left to the discretion of the court, it is nevertheless
essential that the claimant should satisfactorily show the existence of the factual
basis of damages and its causal connection to defendants acts. [24] This is so because
moral damages, though incapable of pecuniary estimation, are in the category of an
award designed to compensate the claimant for actual injury suffered and not to
impose a penalty on the wrongdoer.[25] Moreover, additional facts must be pleaded
and proven to warrant the grant of moral damages under the Civil Code, these
being, social humiliation, wounded feelings, grave anxiety, etc. that resulted from
the act being complained of.[26] In the present case, both the RTC and the CA were
not convinced that Patricia is entitled to damages. Quoting the RTC, the CA held
thus:
With respect to Patricia, she did not even bother to know the details of
the case against her, she left everything to the hands of her mother Alice.
Her attitude towards the case appears weird, she being a banker who
seems so concerned of her reputation.
Aside from the parties to this case, her immediate superiors in the BPI
knew that she is involved in a case. They did not however know whether
she is the plaintiff or the defendant in the case. Further, they did not
know the nature of the case that she is involved in. It appears that
Patricia has not suffered any of the injuries enumerated in Article 2217
of the Civil Code, thus, she is not entitled to moral damages and
attorney's fees.[27]

This Court finds no cogent reason to depart from the above-quoted findings as
Patricia failed to satisfactorily show the existence of the factual basis for granting
her moral damages and the causal connection of such fact to the act of respondents
in filing a complaint against her.
In addition, and with respect to Benjamin, the Court agrees with the CA that in the
absence of a wrongful act or omission, or of fraud or bad faith, moral damages
cannot be awarded.[28] The adverse result of an action does not per se make the
action wrongful, or the party liable for it. [29] One may err, but error alone is not a
ground for granting such damages.[30] In the absence of malice and bad faith, the

mental anguish suffered by a person for having been made a party in a civil case is
not the kind of anxiety which would warrant the award of moral damages.[31]
A resort to judicial processes is not, per se, evidence of ill will upon which a claim
for damages may be based.[32]
In China Banking Corporation v. Court of Appeals,[33] this Court held:
Settled in our jurisprudence is the rule that moral damages cannot be
recovered from a person who has filed a complaint against another in
good faith, or without malice or bad faith (Philippine National Bank v.
Court of Appeals, 159 SCRA 433 [1988]; R & B Surety and Insurance v.
Intermediate Appellate Court, 129 SCRA 736 [1984]). If damage results
from
the
filing
of
the
complaint,
it
is damnum absque injuria (Ilocos Norte Electrical Company v. Court of
Appeals, 179 SCRA 5 [1989]).[34]

In the present case, the Court agrees with the RTC and the CA that petitioners
failed to establish that respondents were moved by bad faith or malice
in impleadingPatricia and Benjamin. Hence, Patricia and Benjamin are not entitled
to damages.
The Court sustains the award of moral and exemplary damages as well as
attorney's fees in favor of respondents.
As to moral damages, Article 20 of the Civil Code provides that every person who,
contrary to law, willfully or negligently causes damage to another, shall indemnify
the latter for the same. In addition, Article 2219 (10) of the Civil Code provides
that moral damages may be recovered in acts or actions referred to in Articles 21,
26, 27, 28, 29, 30, 32, 34 and 35 of the same Code. More particularly, Article 21 of
the said Code provides that any person who willfully causes loss or injury to
another in a manner that is contrary to morals, good customs, or public policy shall
compensate the latter for the damage. In the present case, the act of Alice and
Rosita in fraudulently encashing the subject check to the prejudice of respondents
is certainly a violation of law as well as of the public policy that no one should put
the law into his own hands. As to SBTC and its officers, their negligence is so
gross as to amount to a willfull injury to respondents. The banking system has

become an indispensable institution in the modern world and plays a vital role in
the economic life of every civilized society.[35] Whether as mere passive entities for
the safe-keeping and saving of money or as active instruments of business and
commerce, banks have attained a ubiquitous presence among the people, who have
come to regard them with respect and even gratitude and most of all, confidence.
[36]
For this reason, banks should guard against injury attributable to negligence or
bad faith on its part.[37]
There is no hard-and-fast rule in the determination of what would be a fair amount
of moral damages since each case must be governed by its own peculiar facts.
[38]
The yardstick should be that it is not palpably and scandalously excessive.
[39]
Moreover, the social standing of the aggrieved party is essential to the
determination of the proper amount of the award.[40] Otherwise, the goal of
enabling him to obtain means, diversions, or amusements to restore him to
the status quo ante would not be achieved.[41] In the present case, the Court finds
no cogent reason to modify the amount of moral damages granted by the CA.
Likewise, the Court finds no compelling reason to disturb the modifications made
by the CA on the award of exemplary damages and attorney's fees.
Under Article 2229 of the Civil Code, exemplary or corrective damages are
imposed by way of example or correction for the public good, in addition to moral,
temperate, liquidated, or compensatory damages. In the instant case, the award of
exemplary damages in favor of respondents is in order for the purpose of deterring
those who intend to enforce their rights by taking measures or remedies which are
not in accord with law and public policy. On the part of respondent bank, the
public relies on a bank's sworn profession of diligence and meticulousness in
giving irreproachable service.[42] Hence, the level of meticulousness must be
maintained at all times by the banking sector.[43] In the present case the award of
exemplary damages is justified by the brazen acts of petitioners Rosita and Alice in
violating the law coupled with the gross negligence committed by respondent bank
and its officers in allowing the subject check to be deposited which later paved the
way for its encashment.
As to attorney's fees, Article 2208 of the same Code provides, among others, that
attorney's fees may be recovered when exemplary damages are awarded or when

the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest.
WHEREFORE, the instant petition is DENIED. The Decision of the Court of
Appeals dated August 27, 2002 in CA-G.R. CV No. 62404 is AFFIRMED.
Costs against the petitioners.
SO ORDERED.
KOREA TECHNOLOGIES CO., G.R. No. 143581
LTD.,
Petitioner,
Present:
- versus - QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
HON. ALBERTO A. LERMA, in TINGA, and
his capacity as Presiding Judge of VELASCO, JR., JJ.
Branch 256 of Regional Trial
Court of Muntinlupa City, and
PACIFIC GENERAL STEEL Promulgated:
MANUFACTURING
CORPORATION,
Respondents. January 7, 2008
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
In our jurisdiction, the policy is to favor alternative methods of resolving disputes,
particularly in civil and commercial disputes. Arbitration along with mediation,
conciliation, and negotiation, being inexpensive, speedy and less hostile methods
have long been favored by this Court. The petition before us puts at issue an
arbitration clause in a contract mutually agreed upon by the parties stipulating that

they would submit themselves to arbitration in a foreign country. Regrettably,

instead of hastening the resolution of their dispute, the parties wittingly or
unwittingly prolonged the controversy.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation
which is engaged in the supply and installation of Liquefied Petroleum Gas (LPG)
Cylinder manufacturing plants, while private respondent Pacific General Steel
Manufacturing Corp. (PGSMC) is a domestic corporation.
On March 5, 1997, PGSMC and KOGIES executed a Contract [1] whereby
KOGIES would set up an LPG Cylinder Manufacturing Plant in
Carmona, Cavite.The contract was executed in the Philippines. On April 7, 1997,
the parties executed, in Korea, an Amendment for Contract No. KLP-970301
dated March 5, 1997[2]amending the terms of payment. The contract and its
amendment stipulated that KOGIES will ship the machinery and facilities
necessary for manufacturing LPG cylinders for which PGSMC would pay USD
1,224,000. KOGIES would install and initiate the operation of the plant for which
PGSMC bound itself to pay USD 306,000 upon the plants production of the 11-kg.
LPG cylinder samples. Thus, the total contract price amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of Lease [3] with Worth
Properties, Inc. (Worth) for use of Worths 5,079-square meter property with a
4,032-square meter warehouse building to house the LPG manufacturing
plant. The monthly rental was PhP 322,560 commencing on January 1, 1998 with a
10% annual increment clause. Subsequently, the machineries, equipment, and
facilities for the manufacture of LPG cylinders were shipped, delivered, and
installed in the Carmona plant. PGSMC paid KOGIES USD 1,224,000.
However, gleaned from the Certificate[4] executed by the parties on January
22, 1998, after the installation of the plant, the initial operation could not be
conducted as PGSMC encountered financial difficulties affecting the supply of
materials, thus forcing the parties to agree that KOGIES would be deemed to have
completely complied with the terms and conditions of the March 5, 1997 contract.
For the remaining balance of USD306,000 for the installation and initial
operation of the plant, PGSMC issued two postdated checks: (1) BPI Check No.

0316412 dated January 30, 1998 for PhP 4,500,000; and (2) BPI Check No.
0316413 dated March 30, 1998 for PhP 4,500,000.[5]
When KOGIES deposited the checks, these were dishonored for the
reason PAYMENT STOPPED. Thus, on May 8, 1998, KOGIES sent a demand
letter[6] to PGSMC threatening criminal action for violation of Batas Pambansa
Blg. 22 in case of nonpayment. On the same date, the wife of PGSMCs President
faxed a letter dated May 7, 1998 to KOGIES President who was then staying at
a Makati City hotel. She complained that not only did KOGIES deliver a different
brand of hydraulic press from that agreed upon but it had not delivered several
equipment parts already paid for.
On May 14, 1998, PGSMC replied that the two checks it issued KOGIES
were fully funded but the payments were stopped for reasons previously made
known to KOGIES.[7]
On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling
their Contract dated March 5, 1997 on the ground that KOGIES had altered the
quantity and lowered the quality of the machineries and equipment it delivered to
PGSMC, and that PGSMC would dismantle and transfer the machineries,
equipment, and facilities installed in the Carmona plant. Five days later, PGSMC
filed before the Office of the Public Prosecutor an Affidavit-Complaint
for Estafa docketed as I.S. No. 98-03813 against Mr. Dae Hyun Kang, President of
KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC
could not unilaterally rescind their contract nor dismantle and transfer the
machineries and equipment on mere imagined violations by KOGIES. It also
insisted that their disputes should be settled by arbitration as agreed upon in Article
15, the arbitration clause of their contract.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of
its June 1, 1998 letter threatening that the machineries, equipment, and facilities
installed in the plant would be dismantled and transferred on July 4, 1998. Thus,
on July 1, 1998, KOGIES instituted an Application for Arbitration before the

Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15

of the Contract as amended.
On July 3, 1998, KOGIES filed a Complaint for Specific Performance,
docketed as Civil Case No. 98-117[8] against PGSMC before the Muntinlupa City
Regional Trial Court (RTC). The RTC granted a temporary restraining order (TRO)
on July 4, 1998, which was subsequently extended until July 22, 1998. In its
complaint, KOGIES alleged that PGSMC had initially admitted that the checks
that were stopped were not funded but later on claimed that it stopped payment of
the checks for the reason that their value was not received as the former allegedly
breached their contract by altering the quantity and lowering the quality of the
machinery and equipment installed in the plant and failed to make the plant
operational although it earlier certified to the contrary as shown in a January 22,
1998 Certificate.Likewise, KOGIES averred that PGSMC violated Art. 15 of their
Contract, as amended, by unilaterally rescinding the contract without resorting to
arbitration. KOGIES also asked that PGSMC be restrained from dismantling and
transferring the machinery and equipment installed in the plant which the latter
threatened to do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that
KOGIES was not entitled to the TRO since Art. 15, the arbitration clause, was null
and void for being against public policy as it ousts the local courts of jurisdiction
over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with Compulsory
Counterclaim[9] asserting that it had the full right to dismantle and transfer the
machineries and equipment because it had paid for them in full as stipulated in the
contract; that KOGIES was not entitled to the PhP 9,000,000 covered by the
checks for failing to completely install and make the plant operational; and that
KOGIES was liable for damages amounting to PhP 4,500,000 for altering the
quantity and lowering the quality of the machineries and equipment. Moreover,
PGSMC averred that it has already paid PhP 2,257,920 in rent (covering January to
July 1998) to Worth and it was not willing to further shoulder the cost of renting
the premises of the plant considering that the LPG cylinder manufacturing plant
never became operational.

After the parties submitted their Memoranda, on July 23, 1998, the RTC
issued an Order denying the application for a writ of preliminary injunction,
reasoning that PGSMC had paid KOGIES USD 1,224,000, the value of the
machineries and equipment as shown in the contract such that KOGIES no longer
had proprietary rights over them. And finally, the RTC held that Art. 15 of the
Contract as amended was invalid as it tended to oust the trial court or any other
court jurisdiction over any dispute that may arise between the parties. KOGIES
prayer for an injunctive writ was denied.[10] The dispositive portion of the Order
stated:
WHEREFORE, in view of the foregoing consideration, this Court
believes and so holds that no cogent reason exists for this Court to grant
the writ of preliminary injunction to restrain and refrain defendant from
dismantling the machineries and facilities at the lot and building of
Worth Properties, Incorporated at Carmona, Cavite and transfer the same
to another site: and therefore denies plaintiffs application for a writ of
preliminary injunction.

On July 29, 1998, KOGIES filed its Reply to Answer and Answer to
Counterclaim.[11] KOGIES denied it had altered the quantity and lowered the
quality of the machinery, equipment, and facilities it delivered to the plant. It
claimed that it had performed all the undertakings under the contract and had
already produced certified samples of LPG cylinders. It averred that whatever was
unfinished was PGSMCs fault since it failed to procure raw materials due to lack
of funds. KOGIES, relying onChung Fu Industries (Phils.), Inc. v. Court of
Appeals,[12] insisted that the arbitration clause was without question valid.
After KOGIES filed a Supplemental Memorandum with Motion to
Dismiss[13] answering PGSMCs memorandum of July 22, 1998 and seeking
dismissal of PGSMCs counterclaims, KOGIES, on August 4, 1998, filed its Motion
for Reconsideration[14] of the July 23, 1998 Order denying its application for
an injunctive writ claiming that the contract was not merely for machinery and
facilities worth USD 1,224,000 but was for the sale of an LPG manufacturing plant
consisting of supply of all the machinery and facilities and transfer of technology

for a total contract price of USD 1,530,000 such that the dismantling and transfer
of the machinery and facilities would result in the dismantling and transfer of the
very plant itself to the great prejudice of KOGIES as the still unpaid owner/seller
of the plant. Moreover, KOGIES points out that the arbitration clause under Art. 15
of the Contract as amended was a valid arbitration stipulation under Art. 2044 of
the Civil Code and as held by this Court in Chung Fu Industries (Phils.), Inc.[15]
In the meantime, PGSMC filed a Motion for Inspection of Things [16] to
determine whether there was indeed alteration of the quantity and lowering of
quality of the machineries and equipment, and whether these were properly
installed. KOGIES opposed the motion positing that the queries and issues raised
in the motion for inspection fell under the coverage of the arbitration clause in their
contract.
On September 21, 1998, the trial court issued an Order (1) granting
PGSMCs motion for inspection; (2) denying KOGIES motion for reconsideration
of the July 23, 1998 RTC Order; and (3) denying KOGIES motion to dismiss
PGSMCs compulsory counterclaims as these counterclaims fell within the
requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for
Reconsideration[17] of the September 21, 1998 RTC Order granting inspection of
the plant and denying dismissal of PGSMCs compulsory counterclaims.
Ten days after, on October 12, 1998, without waiting for the resolution of its
October 2, 1998 urgent motion for reconsideration, KOGIES filed before the Court
of Appeals (CA) a petition for certiorari[18] docketed as CA-G.R. SP No. 49249,
seeking annulment of the July 23, 1998 and September 21, 1998 RTC Orders and
praying for the issuance of writs of prohibition, mandamus, and preliminary
injunction to enjoin the RTC and PGSMC from inspecting, dismantling, and
transferring the machineries and equipment in the Carmona plant, and to direct the
RTC to enforce the specific agreement on arbitration to resolve the dispute.
In the meantime, on October 19, 1998, the RTC denied KOGIES urgent
motion for reconsideration and directed the Branch Sheriff to proceed with the
inspection of the machineries and equipment in the plant on October 28, 1998.[19]

Thereafter, KOGIES filed a Supplement to the Petition [20] in CA-G.R. SP

No. 49249 informing the CA about the October 19, 1998 RTC Order. It also
reiterated its prayer for the issuance of the writs of prohibition, mandamus and
preliminary injunction which was not acted upon by the CA. KOGIES asserted that
the Branch Sheriff did not have the technical expertise to ascertain whether or not
the machineries and equipment conformed to the specifications in the contract and
were properly installed.
On November 11, 1998, the Branch Sheriff filed his Sheriffs
Report[21] finding that the enumerated machineries and equipment were not fully
and properly installed.
The Court of Appeals affirmed the trial court and declared
the arbitration clause against public policy
On May 30, 2000, the CA rendered the assailed Decision[22] affirming the
RTC Orders and dismissing the petition for certiorari filed by KOGIES. The CA
found that the RTC did not gravely abuse its discretion in issuing the assailed July
23, 1998 and September 21, 1998 Orders. Moreover, the CA reasoned that
KOGIES contention that the total contract price for USD 1,530,000 was for the
whole plant and had not been fully paid was contrary to the finding of the RTC that
PGSMC fully paid the price of USD 1,224,000, which was for all the machineries
and equipment. According to the CA, this determination by the RTC was a factual
finding beyond the ambit of a petition for certiorari.
On the issue of the validity of the arbitration clause, the CA agreed with the
lower court that an arbitration clause which provided for a final determination of
the legal rights of the parties to the contract by arbitration was against public
policy.
On the issue of nonpayment of docket fees and non-attachment of a
certificate of non-forum shopping by PGSMC, the CA held that the counterclaims
of PGSMC were compulsory ones and payment of docket fees was not required

since the Answer with counterclaim was not an initiatory pleading. For the same
reason, the CA said a certificate of non-forum shopping was also not required.
Furthermore, the CA held that the petition for certiorari had been filed
prematurely since KOGIES did not wait for the resolution of its urgent motion for
reconsideration of the September 21, 1998 RTC Order which was the plain, speedy,
and adequate remedy available. According to the CA, the RTC must be given the
opportunity to correct any alleged error it has committed, and that since the
assailed orders were interlocutory, these cannot be the subject of a petition for
certiorari.
Hence, we have this Petition for Review on Certiorari under Rule 45.
The Issues
Petitioner posits that the appellate court committed the following errors:
a. PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE
MACHINERY AND FACILITIES AS A QUESTION OF FACT
BEYOND THE AMBIT OF A PETITION FOR CERTIORARI
INTENDED ONLY FOR CORRECTION OF ERRORS OF
JURISDICTION OR GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION,
AND CONCLUDING THAT THE TRIAL COURTS FINDING ON
THE SAME QUESTION WAS IMPROPERLY RAISED IN THE
PETITION BELOW;
b. DECLARING AS NULL AND VOID THE ARBITRATION
CLAUSE IN ARTICLE 15 OF THE CONTRACT BETWEEN THE
PARTIES FOR BEING CONTRARY TO PUBLIC POLICY AND FOR
OUSTING THE COURTS OF JURISDICTION;
c.
DECREEING PRIVATE RESPONDENTS COUNTERCLAIMS
TO BE ALL COMPULSORY NOT NECESSITATING PAYMENT OF
DOCKET FEES AND CERTIFICATION OF NON-FORUM
SHOPPING;
d.
RULING
THAT
THE
PETITION
WAS
FILED
PREMATURELY WITHOUT WAITING FOR THE RESOLUTION OF
THE MOTION FOR RECONSIDERATION OF THE ORDER DATED

SEPTEMBER 21, 1998 OR WITHOUT GIVING THE TRIAL COURT

AN OPPORTUNITY TO CORRECT ITSELF;
e.
PROCLAIMING THE TWO ORDERS DATED JULY 23
AND SEPTEMBER 21, 1998 NOT TO BE PROPER SUBJECTS OF
CERTIORARI AND PROHIBITION FOR BEING INTERLOCUTORY
IN NATURE;
f.
NOT GRANTING THE RELIEFS AND REMEDIES PRAYED
FOR IN HE (SIC) PETITION AND, INSTEAD, DISMISSING THE
SAME FOR ALLEGEDLY WITHOUT MERIT.[23]

The Courts Ruling

The petition is partly meritorious.
Before we delve into the substantive issues, we shall first tackle the
procedural issues.
The rules on the payment of docket fees for counterclaims
and cross claims were amended effective August 16, 2004
KOGIES strongly argues that when PGSMC filed the counterclaims, it
should have paid docket fees and filed a certificate of non-forum shopping, and
that its failure to do so was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of PGSMC were incorporated
in its Answer with Compulsory Counterclaim dated July 17, 1998 in accordance
with Section 8 of Rule 11, 1997 Revised Rules of Civil Procedure, the rule that
was effective at the time the Answer with Counterclaim was filed. Sec. 8
on existing counterclaim or cross-claim states, A compulsory counterclaim or a
cross-claim that a defending party has at the time he files his answer shall be
contained therein.

On July 17, 1998, at the time PGSMC filed its Answer incorporating its
counterclaims against KOGIES, it was not liable to pay filing fees for said
counterclaims being compulsory in nature. We stress, however, that
effective August 16, 2004 under Sec. 7, Rule 141, as amended by A.M. No. 04-204-SC, docket fees are now required to be paid in compulsory counterclaim or
cross-claims.
As to the failure to submit a certificate of forum shopping, PGSMCs Answer
is not an initiatory pleading which requires a certification against forum shopping
under Sec. 5[24] of Rule 7, 1997 Revised Rules of Civil Procedure. It is a responsive
pleading, hence, the courts a quo did not commit reversible error in denying
KOGIES motion to dismiss PGSMCs compulsory counterclaims.
Interlocutory orders proper subject of certiorari
Citing Gamboa v. Cruz,[25] the CA also pronounced that certiorari and
Prohibition are neither the remedies to question the propriety of an interlocutory
order
of
the
trial
court.[26] The
CA
erred
on
its
reliance
on Gamboa. Gamboa involved the denial of a motion to acquit in a criminal case
which was not assailable in an action for certiorari since the denial of a motion to
quash required the accused to plead and to continue with the trial, and whatever
objections the accused had in his motion to quash can then be used as part of his
defense and subsequently can be raised as errors on his appeal if the judgment of
the trial court is adverse to him. The general rule is that interlocutory orders cannot
be challenged by an appeal.[27] Thus, in Yamaoka v. Pescarich Manufacturing
Corporation, we held:
The proper remedy in such cases is an ordinary appeal from an
adverse judgment on the merits, incorporating in said appeal the grounds
for assailing the interlocutory orders. Allowing appeals from
interlocutory orders would result in the sorry spectacle of a case being
subject of a counterproductive ping-pong to and from the appellate court
as often as a trial court is perceived to have made an error in any of its
interlocutory rulings. However, where the assailed interlocutory order
was issued with grave abuse of discretion or patently erroneous and the
remedy of appeal would not afford adequate and expeditious relief, the
Court allows certiorari as a mode of redress.[28]

Also, appeals from interlocutory orders would open the floodgates to endless
occasions for dilatory motions. Thus, where the interlocutory order was issued
without or in excess of jurisdiction or with grave abuse of discretion, the remedy is
certiorari.[29]
The alleged grave abuse of discretion of the respondent court equivalent to
lack of jurisdiction in the issuance of the two assailed orders coupled with the fact
that there is no plain, speedy, and adequate remedy in the ordinary course of law
amply provides the basis for allowing the resort to a petition for certiorari under
Rule 65.
Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum shopping in filing the
petition for certiorari. Note that KOGIES motion for reconsideration of the July 23,
1998 RTC Order which denied the issuance of the injunctive writ had already been
denied. Thus, KOGIES only remedy was to assail the RTCs interlocutory order via
a petition for certiorari under Rule 65.
While the October 2, 1998 motion for reconsideration of KOGIES of the
September 21, 1998 RTC Order relating to the inspection of things, and the
allowance of the compulsory counterclaims has not yet been resolved, the
circumstances in this case would allow an exception to the rule that before
certiorari may be availed of, the petitioner must have filed a motion for
reconsideration and said motion should have been first resolved by the court a
quo. The reason behind the rule is to enable the lower court, in the first instance, to
pass upon and correct its mistakes without the intervention of the higher court.[30]
The September 21, 1998 RTC Order directing the branch sheriff to inspect
the plant, equipment, and facilities when he is not competent and knowledgeable
on said matters is evidently flawed and devoid of any legal support. Moreover,
there is an urgent necessity to resolve the issue on the dismantling of the facilities
and any further delay would prejudice the interests of KOGIES. Indeed, there is
real and imminent threat of irreparable destruction or substantial damage to

KOGIES equipment and machineries. We find the resort to certiorari based on the
gravely abusive orders of the trial court sans the ruling on the October 2,
1998 motion for reconsideration to be proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15 of the Contract, the
arbitration clause. It provides:
Article 15. Arbitration.All disputes, controversies, or differences
which may arise between the parties, out of or in relation to or in
connection with this Contract or for the breach thereof, shall finally be
settled by arbitration in Seoul, Korea in accordance with the Commercial
Arbitration Rules of the Korean Commercial Arbitration Board. The
award rendered by the arbitration(s) shall be final and binding upon
both parties concerned. (Emphasis supplied.)

Petitioner claims the RTC and the CA erred in ruling that the arbitration
clause is null and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law of the place where the
contract is made governs. Lex loci contractus. The contract in this case was
perfected here in the Philippines. Therefore, our laws ought to
govern. Nonetheless, Art. 2044 of the Civil Code sanctions the validity of mutually
agreed arbitral clause or the finality and binding effect of an arbitral award. Art.
2044 provides, Any stipulation that the arbitrators award or decision shall be
final, is valid, without prejudice to Articles 2038, 2039 and 2040. (Emphasis
supplied.)
Arts. 2038,[31] 2039,[32] and 2040[33] abovecited refer to instances where a
compromise or an arbitral award, as applied to Art. 2044 pursuant to Art. 2043,
[34]
may be voided, rescinded, or annulled, but these would not denigrate the finality
of the arbitral award.

The arbitration clause was mutually and voluntarily agreed upon by the
parties. It has not been shown to be contrary to any law, or against morals, good
customs, public order, or public policy. There has been no showing that the parties
have not dealt with each other on equal footing. We find no reason why the
arbitration clause should not be respected and complied with by both
parties. In Gonzales v. Climax Mining Ltd.,[35] we held that submission to
arbitration is a contract and that a clause in a contract providing that all matters in
dispute between the parties shall be referred to arbitration is a contract. [36] Again
in Del Monte Corporation-USA v. Court of Appeals, we likewise ruled that [t]he
provision to submit to arbitration any dispute arising therefrom and the relationship
of the parties is part of that contract and is itself a contract.[37]
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the arbitration must be done
in Seoul, Korea in accordance with the Commercial Arbitration Rules of the
KCAB, and that the arbitral award is final and binding, is not contrary to public
policy. This Court has sanctioned the validity of arbitration clauses in a catena of
cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan Ysmael and Co., Inc.,
[38]
this Court had occasion to rule that an arbitration clause to resolve differences
and breaches of mutually agreed contractual terms is valid. In BF Corporation v.
Court of Appeals, we held that [i]n this jurisdiction, arbitration has been held valid
and constitutional.Even before the approval on June 19, 1953 of Republic Act No.
876, this Court has countenanced the settlement of disputes through
arbitration. Republic Act No. 876 was adopted to supplement the New Civil Codes
provisions on arbitration.[39] And in LM Power Engineering Corporation v. Capitol
Industrial Construction Groups, Inc., we declared that:
Being an inexpensive, speedy and amicable method of settling
disputes, arbitrationalong with mediation, conciliation and negotiationis
encouraged by the Supreme Court. Aside from unclogging judicial
dockets, arbitration also hastens the resolution of disputes, especially of
the commercial kind. It is thus regarded as the wave of the future in
international civil and commercial disputes. Brushing aside a contractual
agreement calling for arbitration between the parties would be a step
backward.

Consistent with the above-mentioned policy of encouraging

alternative dispute resolution methods, courts should liberally construe
arbitration clauses. Provided such clause is susceptible of an
interpretation that covers the asserted dispute, an order to arbitrate
should be granted. Any doubt should be resolved in favor of arbitration.
[40]

Having said that the instant arbitration clause is not against public policy, we
come to the question on what governs an arbitration clause specifying that in case
of any dispute arising from the contract, an arbitral panel will be constituted in a
foreign country and the arbitration rules of the foreign country would govern and
its award shall be final and binding.
RA 9285 incorporated the UNCITRAL Model law
to which we are a signatory
For domestic arbitration proceedings, we have particular agencies to
arbitrate disputes arising from contractual relations. In case a foreign arbitral body
is chosen by the parties, the arbitration rules of our domestic arbitration bodies
would not be applied. As signatory to the Arbitration Rules of the UNCITRAL
Model Law on International Commercial Arbitration[41] of the United Nations
Commission on International Trade Law (UNCITRAL) in the New York
Convention on June 21, 1985, the Philippines committed itself to be bound by the
Model Law. We have even incorporated the Model Law in Republic Act No. (RA)
9285, otherwise known as theAlternative Dispute Resolution Act of
2004 entitled An Act to Institutionalize the Use of an Alternative Dispute
Resolution System in the Philippines and to Establish the Office for Alternative
Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004. Secs.
19 and 20 of Chapter 4 of the Model Law are the pertinent provisions:
CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATION
SEC. 19. Adoption of the Model Law on International
Commercial Arbitration.International commercial arbitration shall be
governed by the Model Law on International Commercial Arbitration
(the Model Law) adopted by the United Nations Commission on

International Trade Law on June 21, 1985 (United Nations Document

A/40/17) and recommended for enactment by the General Assembly in
Resolution No. 40/72 approved on December 11, 1985, copy of which is
hereto attached as Appendix A.
SEC. 20. Interpretation of Model Law.In interpreting the Model
Law, regard shall be had to its international origin and to the need for
uniformity in its interpretation and resort may be made to the travaux
preparatories and the report of the Secretary General of the United
Nations Commission on International Trade Law dated March 25, 1985
entitled, International Commercial Arbitration: Analytical Commentary
on Draft Trade identified by reference number A/CN. 9/264.

While RA 9285 was passed only in 2004, it nonetheless applies in the instant
case since it is a procedural law which has a retroactive effect. Likewise, KOGIES
filed its application for arbitration before the KCAB on July 1, 1998 and it is still
pending because no arbitral award has yet been rendered. Thus, RA 9285 is
applicable to the instant case. Well-settled is the rule that procedural laws are
construed to be applicable to actions pending and undetermined at the time of their
passage, and are deemed retroactive in that sense and to that extent. As a general
rule, the retroactive application of procedural laws does not violate any personal
rights because no vested right has yet attached nor arisen from them.[42]
Among the pertinent features of RA 9285 applying and incorporating the
UNCITRAL Model Law are the following:
(1) The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction over disputes that are
properly the subject of arbitration pursuant to an arbitration clause, and mandates
the referral to arbitration in such cases, thus:
SEC. 24. Referral to Arbitration.A court before which an action is
brought in a matter which is the subject matter of an arbitration
agreement shall, if at least one party so requests not later than the pretrial conference, or upon the request of both parties thereafter, refer the

parties to arbitration unless it finds that the arbitration agreement is null

and void, inoperative or incapable of being performed.

(2) Foreign arbitral awards must be confirmed by the RTC

Foreign arbitral awards while mutually stipulated by the parties in the
arbitration clause to be final and binding are not immediately enforceable or cannot
be implemented immediately. Sec. 35[43] of the UNCITRAL Model Law stipulates
the requirement for the arbitral award to be recognized by a competent court for
enforcement, which court under Sec. 36 of the UNCITRAL Model Law may refuse
recognition or enforcement on the grounds provided for. RA 9285 incorporated
these provisos to Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus:
SEC. 42. Application of the New York Convention.The New York
Convention shall govern the recognition and enforcement of arbitral
awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be
filed with the Regional Trial Court in accordance with the rules of
procedure to be promulgated by the Supreme Court. Said procedural
rules shall provide that the party relying on the award or applying for its
enforcement shall file with the court the original or authenticated copy of
the award and the arbitration agreement. If the award or agreement is not
made in any of the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign
arbitration award was made in party to the New York Convention.
xxxx
SEC. 43. Recognition and Enforcement of Foreign Arbitral
Awards Not Covered by the New York Convention.The recognition and
enforcement of foreign arbitral awards not covered by the New York
Convention shall be done in accordance with procedural rules to be
promulgated by the Supreme Court. The Court may, on grounds of

comity and reciprocity, recognize and enforce a non-convention award as

a convention award.
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.A foreign
arbitral award when confirmed by a court of a foreign country, shall be
recognized and enforced as a foreign arbitral award and not as a
judgment of a foreign court.
A foreign arbitral award, when confirmed by the Regional Trial
Court, shall be enforced in the same manner as final and executory
decisions of courts of law of the Philippines
xxxx
SEC. 47. Venue and Jurisdiction.Proceedings for recognition and
enforcement of an arbitration agreement or for vacations, setting aside,
correction or modification of an arbitral award, and any application with
a court for arbitration assistance and supervision shall be deemed as
special proceedings and shall be filed with the Regional Trial Court (i)
where arbitration proceedings are conducted; (ii) where the asset to be
attached or levied upon, or the act to be enjoined is located; (iii) where
any of the parties to the dispute resides or has his place of business; or
(iv) in the National Judicial Capital Region, at the option of the
applicant.
SEC. 48. Notice of Proceeding to Parties.In a special proceeding
for recognition and enforcement of an arbitral award, the Court shall
send notice to the parties at their address of record in the arbitration, or if
any part cannot be served notice at such address, at such partys last
known address. The notice shall be sent al least fifteen (15) days before
the date set for the initial hearing of the application.

It is now clear that foreign arbitral awards when confirmed by the RTC are
deemed not as a judgment of a foreign court but as a foreign arbitral award, and
when confirmed, are enforced as final and executory decisions of our courts of law.
Thus, it can be gleaned that the concept of a final and binding arbitral award
is similar to judgments or awards given by some of our quasi-judicial bodies, like
the National Labor Relations Commission and Mines Adjudication Board, whose

final judgments are stipulated to be final and binding, but not immediately
executory in the sense that they may still be judicially reviewed, upon the instance
of any party. Therefore, the final foreign arbitral awards are similarly situated in
that they need first to be confirmed by the RTC.
(3) The RTC has jurisdiction to review foreign arbitral awards
Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC
with specific authority and jurisdiction to set aside, reject, or vacate a foreign
arbitral award on grounds provided under Art. 34(2) of the UNCITRAL Model
Law. Secs. 42 and 45 provide:
SEC. 42. Application of the New York Convention.The New York
Convention shall govern the recognition and enforcement of arbitral
awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be
filed with the Regional Trial Court in accordance with the rules of
procedure to be promulgated by the Supreme Court. Said procedural
rules shall provide that the party relying on the award or applying for its
enforcement shall file with the court the original or authenticated copy of
the award and the arbitration agreement. If the award or agreement is not
made in any of the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign
arbitration award was made is party to the New York Convention.
If the application for rejection or suspension of enforcement of an
award has been made, the Regional Trial Court may, if it considers it
proper, vacate its decision and may also, on the application of the party
claiming recognition or enforcement of the award, order the party to
provide appropriate security.
xxxx
SEC. 45. Rejection of a Foreign Arbitral Award.A party to a
foreign arbitration proceeding may oppose an application for recognition
and enforcement of the arbitral award in accordance with the procedures
and rules to be promulgated by the Supreme Court only on those grounds

enumerated under Article V of the New York Convention. Any other

ground raised shall be disregarded by the Regional Trial Court.

Thus, while the RTC does not have jurisdiction over disputes governed by
arbitration mutually agreed upon by the parties, still the foreign arbitral award is
subject to judicial review by the RTC which can set aside, reject, or vacate it. In
this sense, what this Court held in Chung Fu Industries (Phils.), Inc. relied upon by
KOGIES is applicable insofar as the foreign arbitral awards, while final and
binding, do not oust courts of jurisdiction since these arbitral awards are not
absolute and without exceptions as they are still judicially reviewable. Chapter 7 of
RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are
subject to judicial review on specific grounds provided for.
(4) Grounds for judicial review different in domestic and foreign arbitral
awards
The differences between a final arbitral award from an international or
foreign arbitral tribunal and an award given by a local arbitral tribunal are the
specific grounds or conditions that vest jurisdiction over our courts to review the
awards.
For foreign or international arbitral awards which must first be confirmed by
the RTC, the grounds for setting aside, rejecting or vacating the award by the RTC
are provided under Art. 34(2) of the UNCITRAL Model Law.
For final domestic arbitral awards, which also need confirmation by the RTC
pursuant to Sec. 23 of RA 876[44] and shall be recognized as final and executory
decisions of the RTC,[45] they may only be assailed before the RTC and vacated on
the grounds provided under Sec. 25 of RA 876.[46]
(5) RTC decision of assailed foreign arbitral award appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of
an aggrieved party in cases where the RTC sets aside, rejects, vacates, modifies, or
corrects an arbitral award, thus:

SEC. 46. Appeal from Court Decision or Arbitral Awards.A

decision of the Regional Trial Court confirming, vacating, setting aside,
modifying or correcting an arbitral award may be appealed to the Court
of Appeals in accordance with the rules and procedure to be promulgated
by the Supreme Court.
The losing party who appeals from the judgment of the court
confirming an arbitral award shall be required by the appellate court to
post a counterbond executed in favor of the prevailing party equal to the
amount of the award in accordance with the rules to be promulgated by
the Supreme Court.

Thereafter, the CA decision may further be appealed or reviewed before this

Court through a petition for review under Rule 45 of the Rules of Court.
PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285, PGSMC must submit to
the foreign arbitration as it bound itself through the subject contract. While it may
have misgivings on the foreign arbitration done in Korea by the KCAB, it has
available remedies under RA 9285. Its interests are duly protected by the law
which requires that the arbitral award that may be rendered by KCAB must be
confirmed here by the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its contention that an
arbitration clause, stipulating that the arbitral award is final and binding, does not
oust our courts of jurisdiction as the international arbitral award, the award of
which is not absolute and without exceptions, is still judicially reviewable under
certain conditions provided for by the UNCITRAL Model Law on ICA as applied
and incorporated in RA 9285.
Finally, it must be noted that there is nothing in the subject Contract which
provides that the parties may dispense with the arbitration clause.
Unilateral rescission improper and illegal

Having ruled that the arbitration clause of the subject contract is valid and
binding on the parties, and not contrary to public policy; consequently, being
bound to the contract of arbitration, a party may not unilaterally rescind or
terminate the contract for whatever cause without first resorting to arbitration.
What this Court held in University of the Philippines v. De Los
Angeles[47] and reiterated in succeeding cases,[48] that the act of treating a contract as
rescinded on account of infractions by the other contracting party is valid albeit
provisional as it can be judicially assailed, is not applicable to the instant case on
account of a valid stipulation on arbitration. Where an arbitration clause in a
contract is availing, neither of the parties can unilaterally treat the contract as
rescinded since whatever infractions or breaches by a party or differences arising
from the contract must be brought first and resolved by arbitration, and not through
an extrajudicial rescission or judicial action.
The issues arising from the contract between PGSMC and KOGIES on
whether the equipment and machineries delivered and installed were properly
installed and operational in the plant in Carmona, Cavite; the ownership of
equipment and payment of the contract price; and whether there was substantial
compliance by KOGIES in the production of the samples, given the alleged fact
that PGSMC could not supply the raw materials required to produce the sample
LPG cylinders, are matters proper for arbitration. Indeed, we note that on July 1,
1998, KOGIES instituted an Application for Arbitration before the KCAB
in Seoul, Korea pursuant to Art. 15 of the Contract as amended. Thus, it is
incumbent upon PGSMC to abide by its commitment to arbitrate.
Corollarily, the trial court gravely abused its discretion in granting PGSMCs
Motion for Inspection of Things on September 21, 1998, as the subject matter of
the motion is under the primary jurisdiction of the mutually agreed arbitral body,
the KCAB in Korea.
In addition, whatever findings and conclusions made by the RTC Branch
Sheriff from the inspection made on October 28, 1998, as ordered by the trial court
on October 19, 1998, is of no worth as said Sheriff is not technically competent to
ascertain the actual status of the equipment and machineries as installed in the
plant.

For these reasons, the September 21, 1998 and October 19, 1998 RTC
Orders pertaining to the grant of the inspection of the equipment and machineries
have to be recalled and nullified.
Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue petitioner raised on whether the
total contract price of USD 1,530,000 was for the whole plant and its installation is
beyond the ambit of a Petition for Certiorari.
Petitioners position is untenable.
It is settled that questions of fact cannot be raised in an original action for
certiorari.[49] Whether or not there was full payment for the machineries and
equipment and installation is indeed a factual issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of discretion is the order of the
RTC in resolving the issue on the ownership of the plant when it is the arbitral
body (KCAB) and not the RTC which has jurisdiction and authority over the said
issue. The RTCs determination of such factual issue constitutes grave abuse of
discretion and must be reversed and set aside.

RTC has interim jurisdiction to protect the rights of the parties

Anent the July 23, 1998 Order denying the issuance of the injunctive writ
paving the way for PGSMC to dismantle and transfer the equipment and
machineries, we find it to be in order considering the factual milieu of the instant
case.
Firstly, while the issue of the proper installation of the equipment and
machineries might well be under the primary jurisdiction of the arbitral body to
decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear and grant
interim measures to protect vested rights of the parties. Sec. 28 pertinently
provides:

SEC. 28. Grant of interim Measure of Protection.(a) It is not

incompatible with an arbitration agreement for a party to request,
before constitution of the tribunal, from a Court to grant such
measure. After constitution of the arbitral tribunal and during arbitral
proceedings, a request for an interim measure of protection, or
modification thereof, may be made with the arbitral or to the extent that
the arbitral tribunal has no power to act or is unable to act
effectivity, the request may be made with the Court. The arbitral
tribunal is deemed constituted when the sole arbitrator or the third
arbitrator, who has been nominated, has accepted the nomination and
written communication of said nomination and acceptance has been
received by the party making the request.
(b) The following rules on interim or provisional relief shall be
observed:
Any party may request that provisional relief be granted against
the adverse party.
Such relief may be granted:
(i) to prevent irreparable loss or injury;
(ii) to provide security for the performance of any obligation;
(iii) to produce or preserve any evidence; or
(iv) to compel any other appropriate act or omission.
(c) The order granting provisional relief may be conditioned upon
the provision of security or any act or omission specified in the order.
(d) Interim or provisional relief is requested by written application
transmitted by reasonable means to the Court or arbitral tribunal as the
case may be and the party against whom the relief is sought, describing
in appropriate detail the precise relief, the party against whom the relief
is requested, the grounds for the relief, and the evidence supporting the
request.
(e) The order shall be binding upon the parties.

(f) Either party may apply with the Court for assistance in
implementing or enforcing an interim measure ordered by an arbitral
tribunal.
(g) A party who does not comply with the order shall be liable for
all damages resulting from noncompliance, including all expenses, and
reasonable attorney's fees, paid in obtaining the orders judicial
enforcement. (Emphasis ours.)

Art. 17(2) of the UNCITRAL Model Law on ICA defines an interim

measure of protection as:
Article 17. Power of arbitral tribunal to order interim measures
xxx xxx xxx
(2) An interim measure is any temporary measure, whether in the form
of an award or in another form, by which, at any time prior to the
issuance of the award by which the dispute is finally decided, the arbitral
tribunal orders a party to:
(a) Maintain or restore the status quo pending determination of the
dispute;
(b) Take action that would prevent, or refrain from taking action that is
likely to cause, current or imminent harm or prejudice to the arbitral
process itself;
(c) Provide a means of preserving assets out of which a subsequent
award may be satisfied; or
(d) Preserve evidence that may be relevant and material to the resolution
of the dispute.

Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and
jurisdiction to issue interim measures:
Article 17 J. Court-ordered interim measures

A court shall have the same power of issuing an interim measure

in relation to arbitration proceedings, irrespective of whether their place
is in the territory of this State, as it has in relation to proceedings in
courts. The court shall exercise such power in accordance with its own
procedures in consideration of the specific features of international
arbitration.

In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro

Corporation, we were explicit that even the pendency of an arbitral proceeding
does not foreclose resort to the courts for provisional reliefs. We explicated this
way:
As a fundamental point, the pendency of arbitral proceedings does not
foreclose resort to the courts for provisional reliefs. The Rules of the
ICC, which governs the parties arbitral dispute, allows the application of
a party to a judicial authority for interim or conservatory
measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The
Arbitration Law) recognizes the rights of any party to petition the court
to take measures to safeguard and/or conserve any matter which is the
subject of the dispute in arbitration. In addition, R.A. 9285, otherwise
known as the Alternative Dispute Resolution Act of 2004, allows the
filing of provisional or interim measures with the regular courts
whenever the arbitral tribunal has no power to act or to act effectively.[50]

It is thus beyond cavil that the RTC has authority and jurisdiction to grant
interim measures of protection.
Secondly, considering that the equipment and machineries are in the
possession of PGSMC, it has the right to protect and preserve the equipment and
machineries in the best way it can. Considering that the LPG plant was nonoperational, PGSMC has the right to dismantle and transfer the equipment and
machineries either for their protection and preservation or for the better way to
make good use of them which is ineluctably within the management discretion of
PGSMC.

Thirdly, and of greater import is the reason that maintaining the equipment
and machineries in Worths property is not to the best interest of PGSMC due to the
prohibitive rent while the LPG plant as set-up is not operational. PGSMC was
losing PhP322,560 as monthly rentals or PhP3.87M for 1998 alone without
considering the 10% annual rent increment in maintaining the plant.
Fourthly, and corollarily, while the KCAB can rule on motions or petitions
relating to the preservation or transfer of the equipment and machineries as an
interim measure, yet on hindsight, the July 23, 1998 Order of the RTC allowing the
transfer of the equipment and machineries given the non-recognition by the lower
courts of the arbitral clause, has accorded an interim measure of protection to
PGSMC which would otherwise been irreparably damaged.
Fifth, KOGIES is not unjustly prejudiced as it has already been
paid a substantial amount based on the contract. Moreover, KOGIES is amply
protected by the arbitral action it has instituted before the KCAB, the award of
which can be enforced in our jurisdiction through the RTC. Besides, by our
decision, PGSMC is compelled to submit to arbitration pursuant to the valid
arbitration clause of its contract with KOGIES.
PGSMC to preserve the subject equipment and machineries
Finally, while PGSMC may have been granted the right to dismantle and
transfer the subject equipment and machineries, it does not have the right to
convey or dispose of the same considering the pending arbitral proceedings to
settle the differences of the parties. PGSMC therefore must preserve and maintain
the subject equipment and machineries with the diligence of a good father of a
family[51] until final resolution of the arbitral proceedings and enforcement of the
award, if any.

WHEREFORE, this petition is PARTLY GRANTED, in that:

(1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249
is REVERSED and SET ASIDE;

(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case
No. 98-117 are REVERSED and SET ASIDE;
(3) The parties are hereby ORDERED to submit themselves to the
arbitration of their dispute and differences arising from the subject Contract before
the KCAB; and
(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment
and machineries, if it had not done so, and ORDERED to preserve and maintain
them until the finality of whatever arbitral award is given in the arbitration
proceedings.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 129227. May 30, 2000
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioners, vs. THE HON. COURT OF
APPEALS, and CALVIN & ELSA ARCILLA, respondents.
DECISION
GONZAGA_REYES, J.:
Before us is a Petition for Review on Certiorari of the Decision of the Court of Appeals 1 in CA-G.R.
CV No. 45891 entitled CALVIN S. ARCILLA and ELSA B. ARCILLA vs. BANCO FILIPINO SAVINGS
and MORTGAGE BANK, ET. AL. which affirmed the decision of the Regional Trial Court (RTC),
Branch 33, Manila ordering BANCO FILIPINO to pay CALVIN and ELSA ARCILLA the amount of
P126,139.00 with interest thereon at 12% per annum from the filing of the complaint.
The undisputed facts as found by the Court of Appeals are as follows:
"Elsa Arcilla and her husband, Calvin Arcilla, the Appellees in the present recourse, secured, on
three (3) occasions, loans from the Banco Filipino Savings and Mortgage Bank, the Appellant in the
present recourse, in the total amount of P107,946.00 as evidenced by "Promissory Note" executed
by the Appellees in favor of the Appellant. To secure the payment of said loans, the Appellees
executed "Real Estate Mortgages" in favor of the Appellants over their parcels of land located in BFParaaque, covered by Transfer Certificate of Title Nos. 444645, 450406, 450407 and 455410 of the
Registry of Deeds of Paraaque (Annexes "B" to "B-2", Amended Complaint). Under said deeds, the

Appellant may increase the rate of interest, on said loans, within the limits allowed by law, as
Appellants Board of Directors may prescribe for its borrowers. At that time, under the Usury Law, Act
2655, as amended, the maximum rate of interest for loans secured by real estate mortgages was
12% per annum. On January 10, 1975, the Appellees and the Appellant executed a "Deed of
Consolidation and Amendment of Real Estate Mortgage" whereby the aforementioned loans of the
Appellees and the "Real Estate Mortgage" executed by them as security for the payment of said
loans were consolidated (pages 33-35, Record). Likewise, under said deed, the loan of the
Appellees from the Appellant was increased to P188,000.00. The Appellees executed a "Promissory
Note", dated January 15, 1975, whereby they bound and obliged themselves, jointly and severally, to
pay the Appellant the aforesaid amount of P188,000.00 with interest at the rate of 12% per annum,
in nineteen (19) years from date thereof, in stated installments of P2,096.93 a month (page 32,
Records).
On January 2, 1976, the Central Bank of the Philippines issued Central Bank Circular No. 494,
quoted infra, as follows:
x x x
3. The maximum rate of interest, including commissions, premiums, fees and other charges on
loans with maturity of more than seven hundred thirty (730) days, by banking institutions, including
thrift banks, or by financial intermediaries authorized to engage in quasi-banking functions shall be
nineteen percent (19%) per annum.
x x x
7. Except as provided in this Circular and Circular No. 493, loans or renewals thereof shall continue
to be governed by the Usury Law, as amended. (idem, supra)
In the meantime, the Skyline Builders, Inc., through its President, Appellee Calvin Arcilla, secured
loans from the Bank of the Philippine Islands in the total amount of P450,000.00. To insure payment
of the aforesaid loan, the FGU Insurance Corporation, issued PG Bond No. 1003 for the amount of
P225,000.00 (pages 434-436, Records) in favor of the Bank of the Philippine Islands. Skyline
Buildings, Inc., and the Appellees executed an "Agreement of Counter-Guaranty with Mortgage" in
favor of the FGU Insurance Corporation covering the aforesaid parcels of land to assure payment of
any amount that the insurance company may pay on account of said loans (pages 429-436,
Records). The mortgage was annotated as Entry No. 58009 at the dorsal portion of Appellees titles.
After October 30, 1978, the Appellant prepared and issued a "Statement of Account" to the
Appellees on their loan account to the effect that, as of October 30, 1978, the balance of their loan
account, inclusive of interests, computed at 17% per annum, amounted to 284,490.75 (page 555,
Records). It turned out that the Appellant unilaterally increased the rate of interest on the loan
account of the Appellees from 12% per annum, as covenanted in the "Real Estate Mortgage" and
"Deed of Consolidated and Amended Real Estate Mortgage" to 17% per annum on the authority of
the aforequoted Central Bank Circular.

The Appellees failed to pay their monthly amortizations to Appellant. The latter forthwith filed, on
April 3, 1979, a petition, with the Provincial Sheriff, for the extrajudicial foreclosure of Appellees
"Real Esate Mortgage" in favor of the Appellant for the amount of P342,798.00 inclusive of the 17%
per annum which purportedly was the totality of Appellees account with the Appellant on their loans.
The Appellant was the purchaser of the property at public auction for the aforesaid amount of
P324,798.00. On May 25, 1979, the Sheriff executed a "Certificate of Sale" over the aforesaid
properties in favor of the Appellant for the aforesaid amount (pages 37-38, Records).
The Appellant filed a "Petition for a Writ of Possession" with the Regional Trial Court entitled "Banco
Filipino Savings and Mortgage Bank vs. Elsa Arcilla, et al., LRC Case No. P-7757-P". On February
28, 1980, the Court rendered a Decision granting the Petition of the Appellant. The Appellees
appealed to the Court of Appeals but the latter Court, on June 29, 1985, promulgated a Decision
affirming the Decision of the Regional Trial Court (pages 190-198, Records).
In the meantime, the FGU Insurance Corporation, Inc., redeemed the aforesaid properties from the
Appellant by paying to the latter the amount of P389,289.41 inclusive of interest computed at 17%
per annum. The Appellant and FGU Insurance Corp., Inc., executed, on May 27, 1980, a "Deed of
Redemption" (pages 126-129, Records).
On September 2, 1985, the Appellees filed a complaint in the Court a quo for the "Annulment of the
Loan Contracts, Foreclose Sale with Prohibition and Injunction, Etc." entitled "Calvin Arcilla, et al. vs.
Banco Filipino Savings and Mortgage Bank, et al." (pages 1-38, Records).
The Appellees averred, in their complaint, inter alia, that the loan contracts and mortgages between
the Appellees and the Appellant were null and void because: (a) the interests, charges, etc., were
deducted in advance from the face value of the "Promissory Notes" executed by the Appellees; and
(b) the rate of interests charged by the Appellant were usurious. The Appellees prayed that judgment
be rendered in their favor as follows:
"x x x
WHEREFORE, it is respectfully prayed
a) Pending hearing on the prayer for the issuance of the Writ of Preliminary Injunction, a restraining
order be immediately issued against the defendants or anyone acting in their behalf from enforcing
the writ of possession issued against the plaintiffs;
b) After notice and hearing, a writ of preliminary injunction be issued against the defendants,
particularly defendants FGU Insurance Corporation and the City Sheriff of Pasay City, MM, or any of
his deputies or anyone acting in their behalf from enforcing the writ of possession;
c) After trial
1) To make the injunction permanent;
2) Declare the loan contracts null and void;

3) Declare the extrajudicial foreclosure null and void;

4) Ordering the defendants to pay the plaintiffs the sums of P100,000.00 as moral damages;
P50,000.00 as attorney fees; and, costs of suit.
PLAINTIFFS further pray for such other reliefs and remedies just and equitable in the premises."
(pages 88-89, Records)
In its Answer to the Complaint, the Appellant averred that the interests charged by it on Appellees
loan accounts and that the said loan contracts and mortgages were lawful. The Appellant further
averred that the Appellees action had already prescribed.
In the interim, the Supreme Court promulgated its Decision in the precedent - setting case of "Banco
Filipino Savings and Mortgage Bank vs. Hon. Miguel Navarro, et al., 152 SCRA 346" where it
declared that Central Bank Circular No. 494 was not the "law" envisaged in the mortgage deeds of
borrowers of the Bank; that the escalation clause incorporated in said deeds giving authority to the
Appellant to increase the rate of interests without the corresponding deescalation clause should not
be given effect because of its one-sidedness in favor of the Appellant; that the aforesaid Central
Bank Circular did not apply to loans secured by real estate mortgages, and that, therefore, the
Appellant cannot rely said Circular as authority for it to unilaterally increase the rate of interests on
loans secured by Real Estate Mortgages.
In the meantime, the FGU Insurance Corp., Inc., filed a "Motion for Substitution" with the Regional
Trial Court, in LRC Case No. Pq-7757-P praying that it be substituted as the Petitioner in said case
(pages 354-356, Records). The Appellees were served with a copy of said motion and filed their
Opposition thereto. However, on November 10, 1987, the Regional Trial Court rendered a Decision
granting the motion of FGU Insurance Company (page 369, Records)
On December 3, 1987, the Appellees filed a Motion, with the Court a quo, for leave to file an
"Amended Complaint" to implead FGU Insurance Corporation as party defendant (pages 83-129,
Records). The Court granted said motion and admitted Appellees Amended Complaint.
After the requisite pre-trial, the Court a quo issued a Pre-Trial Order which defined, inter alia,
Appellees action against the Appellant, and the latters defenses, to wit:
"x x x
On the part of the defendants Banco Filipino Savings to simplify the case, it seeks to declare as null
and void plaintiffs loan contract with Banco Filipino obtained in May 1974, on the ground that the
interest agreed in the contract was usurious. Plaintiffs also seek to declare as null and void the
foreclosure of their mortgage by Banco Filipino on the ground that the loan with the said mortgagee
foreclosure maybe validly done.
DEFENSES
1. Prescription

2. Laches
3. Estoppel" (page 496, Records)
In the meantime, the Appellees and FGU Insurance Corporation entered into and forged a
"Compromise Agreement." The Court a quo promulgated a Decision, dated April 3, 1991, based on
said "Compromise Agreement." Under the "Compromise Agreement", the Appellees bound and
obliged themselves, jointly and severally, to pay to FGU Insurance Corporation the amount of
P1,964,117.00 in three (3) equal installments and that:
"x x x
6. Upon faithful compliance by plaintiffs Calvin S. Arcilla and Elsa B. Arcilla with their Agreement,
defendant FGU Insurance Corporation shall renounce in their favor all its rights, interests and claims
to the four (4) parcels of land mentioned in paragraph No. 4 of this Compromise Agreement, together
with all the improvements thereon, and plaintiffs Calvin S. Arcilla and Elsa B. Arcilla shall be
subrogated to all such rights, interests and claims. In addition, defendant FGU Insurance
Corporation shall execute in favor of plaintiffs Calvin S. Arcilla and Elsa B. Arcilla a deed of
cancellation of the real estate mortgage constituted in its favor on the above-mentioned four (4)
parcels of land, together with all the improvements thereon. All documentary stamps and expenses
for registration of the said deed of cancellation of mortgage shall be for the account of plaintiffs
Calvin S. Arcilla and Elsa B. Arcilla.
7. Subject to the provisions of paragraph No. 4 of this Compromise Agreement, the execution of this
Compromise Agreement shall be without prejudice to the prosecution of the claims of plaintiffs Calvin
S. Arcilla and Elsa B. Arcilla. (pages 543-544, Records)
Thereafter, the Appellees and the Appellant agreed, upon the prodding of the Court a quo, that the
only issue to be resolved by the Court a quo was, whether or not the Appellees were entitled to the
refund, under the Decision of the Supreme Court in "Banco Filipino Savings and Mortgage Bank vs.
Hon. Miguel Navarro, et al.," supra. On November 8, 1991, the Appellees filed a "Motion for
Summary Judgment" appending thereto, inter alia, the Affidavit of Appellee Calvin S. Arcilla and the
appendages thereof (pages 550-555, Records). Appellant filed its Opposition but did not append any
affidavit to said Opposition. On March 26, 1993, the Court a quo promulgated a Decision, the
decretal portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
against defendant Banco Filipino ordering defendant Banco Filipino to pay spouses Calvin S. Arcilla
and Elsa B. Arcilla the sum of P126,139.00 with interest thereon at 12% per annum reckoned from
the filing of the complaint.
SO ORDERED. (pages 584-585, Records)"2
Petitioner appealed to the Court of Appeals, which affirmed the decision of the RTC the dispositive
portion of which reads:

"IN THE LIGHT OF ALL THE FOREGOING, the assailed Decision is AFFIRMED. Appellants appeal
is DISMISSED. With costs against the Appellant.
SO ORDERED."3
Their Motion for Reconsideration4 was denied hence this petition where the petitioner assigns the
following errors:
"I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THE CAUSE OF
ACTION OF THE PRIVATE RESPONDENTS ACCRUED ON OCTOBER 30, 1978, AND
THEREFORE THE FILING OF THEIR COMPLAINT FOR ANNULMENT OF THEIR LOAN
CONTRACTS WITH THE PETITIONER IN 1985 WAS NOT YET BARRED BY PRESCRIPTION.
II. THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THE MATERIAL
ALLEGATIONS OF THE PRIVATE RESPONDENTS COMPLAINT WERE SUFFICIENT TO
WARRANT THE RELIEFS GRANTED TO THEM BY THE LOWER COURT, PATICULARLY THE
REFUND OF P126,139.00 REPRESENTING ALLEGED EXCESS INTEREST PAID ON THEIR
LOAN.
III. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE
RESPONDENTS WERE ENTITLED TO THE SAID REFUND OF P126,139.00 CLAIMED BY
THEM."5
The petitioner maintains that the complaint filed by herein private respondents was an action for
Annulment of Loan Contracts, foreclosure sale with prohibition and injunction. It is contended that
these causes of action accrued on the date of the execution of the promissory note and deed of
mortgage on January 15, 1975 and not October 30, 1978 as found by the Court of Appeals. Thus,
private respondents cause of action has already prescribed inasmuch as the case was filed on
September 2, 1985 or more than ten years thereafter. Petitioner further contends that private
respondents cannot rely on the ruling in the case of Banco Filipino Savings & Mortgage Bank vs.
Navarro6 considering that they were not parties to said case. Petitioner also maintains that the order
of the lower court, which was affirmed by the Court of Appeals ordering the petitioner to refund the
excess interest paid by private respondents in the amount of P126,318.00 was without any legal
basis since private respondents never raised the issue of interest nor prayed for any relief with
respect thereto. Moreover, the private respondents never paid said amount to the petitioner. While
the amount was included in the bid price of the bank when it bought the mortgaged properties during
the public auction, said bid price did not prejudice the private respondents because when the private
respondents repurchased the properties, the amount they paid was different and independent of the
redemption price of the bank. Besides, the agreement between the private respondents and FGU
Insurance Corporation was one of sale and not redemption. Thus, any amount paid by the private
respondents to FGU was voluntarily entered into by them and was not a consequence of the
foreclosure of the mortgage properties.
Conversely, private respondents allege that their action has not prescribed considering that
prescription begins to run from the day the action may be brought; the date their right of action
accrued. It is their contention that the period of prescription of their action should commence to run

from October 30, 1978 when the petitioner unilaterally increased the rate of interest on private
respondents loan to 17% per annum. Thus, when private respondents filed their action against the
petitioner on September 2, 1985 or almost eight years thereafter, their action had not yet prescribed.
Moreover, private respondents aver that they are entitled to the refund inasmuch as the escalation
clause incorporated in the loan contracts do not have a corresponding de-escalation clause and is
therefore illegal.
The appeal is unmeritorious.
There are only two issues, which must be resolved in the present appeal. First, has the action of the
private respondents prescribed; and second, are the respondents entitled to the refund of the
alleged interest overpayments.
Petitioners claim that the action of the private respondents has prescribed is bereft of merit. Under
Article 1150 of the Civil Code, the time for prescription of all kinds of actions, when there is no
special provision which ordains otherwise, shall be counted from the day they may be brought. Thus,
the period of prescription of any cause of action is reckoned only from the date the cause of action
accrued.7 And a cause of action arises when that which should have been done is not done, or that
which should not have been done is done.8 The period should not be made to retroact to the date of
the execution of the contract on January 15, 1975 as claimed by the petitioner for at that time, there
would be no way for the respondents to know of the violation of their rights. 9 The Court of Appeals
therefore correctly found that respondents cause of action accrued on October 30, 1978, the date
they received the statement of account showing the increased rate of interest, for it was only from
that moment that they discovered the petitioners unilateral increase thereof. We quote with approval
the pertinent portions of the Court of Appeals decision as follows:
"It is the legal possibility of bringing the action that determines the starting point for the computation
of the period of prescription (Constancia C. Telentino vs. Court of Appeals, et al., 162 SCRA 66). In
fine, the ten-year prescriptive period is to be reckoned from the accrual of Appellees right of action,
not necessarily on the very date of the execution of the contracts subject of the action (Naga
Telepone Co. Inc. vs. Court of Appeals, et al., 230 SCRA 351). A partys right of action accrues only
when the confluence of the following elements is established:
"xxx: a) a right in favor of the plaintiff by whatever means and under whatever law it arises or is
created; b) an obligation on the part of defendant to respect such right; and c) an act or omission on
the part of such defendant violative of the right of the plaintiff (Cole vs. Vda. de Gregorio, 116 SCRA
670 [1982]; Mathay vs. Consolidated Bank & Trust Co., 58 SCRA 559 [1974]; Vda. de Enriquez vs.
Dela Cruz, 54 SCRA 1 [1973]. It is only when the last element occurs or takes place that it can be
said in law that a cause of action has arisen (Cole vs. Vda. De Gregorio, supra)" (Maria U. Espaol
vs. Chairman, etc., et al.,, 137 SCRA 314, page 318)
More, the aggrieved must have either actual or presumptive knowledge of the violation, by the guilty
party of his rights either by an act or omission. The question that now comes to the fore is when the
Appellees became precisely aware of the unilateral increase, by the Appellant, of the rate of interest
on their loan account to 17% per annum. As can be ascertained from the records, the Appellees
discovered or should have discovered, for the first time, the unilateral increase by the Appellant of

the rate of interest to 17% per annum when they received the "Statement of Account" of the
Appellant as of October 30, 1978. Hence, it was only then that the prescriptive period for the
Appellees to institute their action in the Court a quo commenced. Since the Appellees filed their
complaint in the Court a quo on September 2, 1985, the same was seasonably filed within the tenyear prescriptive period."10
Anent the second issue as to whether the respondents are entitled to recover the alleged
overpayments of interest, we find that they are despite the absence of any prayer therefor. This
Court has ruled that it is the material allegations of fact in the complaint, not the legal conclusion
made therein or the prayer that determines the relief to which the plaintiff is entitled. 11 It is the
allegations of the pleading which determine the nature of the action and the Court shall grant relief
warranted by the allegations and the proof even if no such relief is prayed for.12 Thus, even if the
complaint seeks the declaration of nullity of the contract, the Court of Appeals correctly ruled that the
factual allegations contained therein ultimately seek the return of the excess interests paid.
The amended complaint13 of herein private respondents specifically allege that the contracts of loan
entered into by them and the petitioner were contrary to and signed in violation of the Usury
Law14 and consequentially pray that said contracts be declared null and void. The amended
complaint reads:
"6. The aforementioned loans granted by defendant Banco Filipino to the plaintiffs as stated on the
face of the promissory note and real estate mortgage (Annexes "B" to "D", inclusive) were not
actually received by the plaintiffs because interests, charges, etc. were deducted in advance from
the face value of the loans not in accordance with the contracts;
7. Even the loan contracts (Annexes "B" to "D", inclusive) required by defendant Banco Filipino to be
signed by the plaintiffs were contrary to and in violation of the then Usury Law, as amended;
8. Assuming arguendo that the loan contracts between plaintiffs and defendant Banco Filipino are
valid, the extra-judicial foreclosure of the properties of the plaintiffs on May 24, 1979 was null and
void for having been conducted in clear violation of the law (Act 3135), namely: a) lack of roper
notice to the plaintiffs; b) lack of proper publication and posting as required by law; c) the alleged
sale was conducted at the place other than that prescribed by law, among others;
9. On May 27, 1990, defendant Banco Filipino purportedly executed in favor of defendant FGU
Insurance Corporation a Deed of Redemption over the foreclosed properties of the plaintiffs, again,
without notice to the latter, as evidenced by the said Deed of Redemption, copy of which is hereto
attached and marked as Annex "F".
10. The Deed of Redemption (Annex "F") is clearly null and void for having been executed in
violation of Rule 39, Rules of Court, and other related provisions of the Rules of Court." 15
The loan contracts with real estate mortgage entered into by and between the petitioner and
respondent stated that the petitioner may increase the interest on said loans, within the limits
allowed by law, as petitioners Board of Directors may prescribe for its borrowers. At the time the
contracts were entered into, said escalation clause was valid.16 It was only pursuant to P.D. No. 1684

which became effective March 17, 1980 wherein to be valid, escalation clauses should provide: 1.)
that there can be an increase in interest if increased by law or by the Monetary Board; and 2.) in
order for such stipulation to be valid, it must include a provision for the reduction of the stipulated
interest in the event that the maximum rate of interest is reduced by law or by the Monetary Board. 17
Given the validity of the escalation clause, could the petitioner increase the stipulated interest
pursuant to the Central Bank Circular 494 from 12% to 17%.
We rule that it may not.
The escalation clause in the loan contracts reads as follows:
"xxx g) The rate of interest charged on the obligation secured by this mortgage, as well as the
interest on the amount which may have been advanced by the Mortgagee in accordance with
paragraph (b) and (d) hereof, shall be subject, during the terms of this contract, to such an increase,
within the limits allowed by law, as the Board of Directors of the Mortgagee may prescribe for its
debtors; xxx" (emphasis supplied)18
In Banco Filipino Savings & Mortgage Bank vs. Navarro,19 which involved a similar escalation
clause20, we ruled that Central Bank Circular 494, although it has the force and effect of law, is not a
law and is not the law contemplated by the parties which authorizes the petitioner to unilaterally raise
the interest rate of the loan.21Consequently, the reliance by the petitioner on Central Bank Circular
494 to unilaterally raise the interest rates on the loan in question was without any legal basis.
Petitioners argument that the Banco Filipino case cannot be applied to the present case since the
respondents were not intervenors therein is flawed. Only the judgment in said case cannot bind the
respondents as they were not parties thereto, however, the doctrine enunciated therein is a judicial
decision and forms part of the legal system of the land. 22 It forms a precedent, which must be
adhered to under the doctrine of stare decisis.23 Thus, even if the respondents were not parties to the
above-mentioned case, the doctrine enunciated therein may be applied to the present case.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 45891 is AFFIRMED and the
instant petition is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.

[G.R. No. 131214. July 27, 2000.]

BA SAVINGS BANK, Petitioner, v. ROGER T. SIA, TACIANA U. SIA and JOHN DOE,Respondents.
DECISION

PANGANIBAN, J.:

The certificate of non-forum shopping required by Supreme Court Circular 28-91 may be signed, for and on
behalf of a corporation, by a specifically authorized lawyer who has personal knowledge of the facts required
to be disclosed in such document. Unlike natural persons, corporations may perform physical actions only
through properly delegated individuals; namely, its officers and/or agents.
chanrob1es virtua1 1aw 1ibrary

The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the August 6,
1997 Resolution 1 of the Court of Appeals (CA) in CA-GR SP No. 43209. 2
Also challenged by petitioner is the October 24, 1997 CA Resolution 3 denying its Motion for
Reconsideration.
The Facts
On August 6, 1997, the Court of Appeals issued a Resolution denying due course to a Petition
forCertiorari filed by BA Savings Bank, on the ground that "the Certification on anti-forum shopping
incorporated in the petition was signed not by the duly authorized representative of the petitioner, as
required under Supreme Court Circular No. 28-91, but by its counsel, in contravention of said circular . . ."

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library

A Motion for Reconsideration was subsequently filed by the petitioner, attached to which was a BA Savings
Bank Corporate Secretarys Certificate, 4 dated August 14, 1997. The Certificate that the petitioners Board
of Directors approved a Resolution on May 21, 1996, authorizing the petitioners lawyers to represent it in
any action or proceeding before any court, tribunal or agency; and to sign, execute and deliver the
Certificate of Non-forum Shopping, among others.
On October 24, 1997, the Motion for Reconsideration was denied by the Court of Appeals on the ground that
Supreme Court Revised Circular No. 28-91 "requires that it is the petitioner, not the counsel, who must
certify under oath to all of the facts and undertakings required therein."
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Hence, this appeal. 5

Issue
In its Memorandum, petitioner submits the following issues for the consideration of the Court:

jgc:chanrobles.com .ph

"I Whether or not petitioner-corporations lawyers are authorized to execute and sign the certificate of nonforum shopping. . .
"II Whether or not the certification of petitioners authorized lawyers will bind the corporation.
"III Whether or not the certification by petitioner corporations lawyers is in compliance with the
requirements on non-forum shopping." 6
Simply stated, the main issue is whether Supreme Court Revised Circular No. 28-91 allows a corporation to
authorize its counsel to execute a certificate of non-forum shopping for and on its behalf.
The Courts Ruling
The Petition is meritorious.
Main Issue:

chanrob1es virtual 1aw library

Authority of Counsel
A corporation, such as the petitioner, has no powers except those expressly conferred on it by the

Corporation Code and those that are implied by or are incidental to its existence. In turn, a corporation
exercises said powers through its board of directors and/or its duly authorized officers and agents. Physical
acts, like the signing of documents, can be performed only by natural persons duly authorized for the
purpose by corporate bylaws or by a specific act of the board of directors. "All acts within the powers of a
corporation may be performed by agents of its selection; and, except so far as limitations or restrictions
which may be imposed by special charter, by-law, or statutory provisions, the same general principles of law
which govern the relation of agency for a natural person govern the officer or agent of a corporation, of
whatever status or rank, in respect to his power to act for the corporation; and agents once appointed, or
members acting in their stead, are subject to the same rules, liabilities and incapacities as are agents of
individuals and private persons." 7
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In the present case, the corporations board of directors issued a Resolution specifically authorizing its
lawyers "to act as their agents in any action or proceeding before the Supreme Court, the Court of Appeals,
or any other tribunal or agency[;] and to sign, execute and deliver in connection therewith the necessary
pleadings, motions, verification, affidavit of merit, certificate of non-forum shopping and other instruments
necessary for such action and proceeding." The Resolution was sufficient to vest such persons with the
authority to bind the corporation and was specific enough as to the acts they were empowered to do.
In the case of natural persons, Circular 28-91 requires the parties themselves to sign the certificate of nonforum shopping. However, such requirement cannot be imposed on artificial persons, like corporations, for
the simple reason that they cannot personally do the task themselves. As already stated, corporations act
only through their officers and duly authorized agents. In fact, physical actions, like the signing and the
delivery of documents, may be performed, on behalf of the corporate entity, only by specifically authorized
individuals.
chanrob1es virtua1 1aw 1ibrary

It is noteworthy that the Circular does not require corporate officers to sign the certificate. More important,
there is no prohibition on against authorizing agents to do so.
In fact, not only was BA Savings Bank authorized to name an agent to sign the certificate; it also exercised
its appointing authority reasonably well. For who else knows of the circumstances required in the Certificate
but its own retained counsel. Its regular officers, like its board chairman and president, may not even know
the details required therein.
Consistent with this rationale, the Court en banc in Robern Development Corporation v. Judge Jesus Quitain
8 has allowed even an acting regional counsel of the National Power Corporation to sign, among; others, the
certificate of non-forum shopping required by Circular 28-91. The Court held that the counsel was "in the
best position to verify the truthfulness and the correctness of the allegations in the Complaint" and "to know
and to certify if an action . . . had already been filed and pending with the courts." 9
Circular 28-91 was prescribed by the Supreme Court to prohibit and penalize the evils of forum shopping.
We see no circumvention of this rationale if the certificate was signed by the corporations specifically
authorized counsel, who had personal knowledge of the matters required in the Circular. In Bernardo v.
NLRC, 10 we explained that a literal interpretation of the Circular should be avoided, if doing so would
subvert its very rationale. Said the Court:
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". . . Indeed, while the requirement as to certificate of non-forum shopping is mandatory, nonetheless the
requirements must not be interpreted too literally and thus defeat the objective of preventing the
undesirable practice of forum-shopping."
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Finally, we stress that technical rules of procedure should be used to promote, not frustrate, justice. 11
While the swift unclogging of court dockets is a laudable objective, the granting of substantial justice is an
even more urgent ideal.
WHEREFORE, the Petition is GRANTED and the appealed Resolution is REVERSED and SET ASIDE. The case
is REMANDED to the Court of Appeals, which is directed to continue the proceedings in CA-GR SP No. 43209
with all deliberate speed. No costs.
SO ORDERED.

GENEROSO A. JUABAN
and FRANCIS M. ZOSA,

G.R. No. 170049

Petitioners,
Present:

YNARES-SANTIAGO, J.,

- versus -

Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
RENE ESPINA and CEBU
DISCOVERY
BAY
PROPERTIES, INC.,
Respondents.

NACHURA, and
REYES, JJ.

Promulgated:

March 14, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of

the Rules of Court filed by the late Generoso A. Juaban (Juaban),
now substituted by his heirs, and Francis M. Zosa (Zosa), assailing
the Decision[1] dated 31 January 2005 of the Court of Appeals in
CA-G.R. CV No. 60721, wherein the appellate court (1) made
permanent the Writ of Preliminary Injunction it had earlier issued,
enjoining petitioners from exercising rights of ownership over Lots
No. 6720-C-2 and 6720-B-2, respectively, covered by Transfer
Certificates of Title (TCTs) No. 36425 and No. 36426 of the
Registry of Deeds of Lapu-Lapu City; (2) set aside the Decision of
the Lapu-Lapu City Regional Trial Court (RTC), Branch 54, in Civil
Case No. 4871-L which ordered the dismissal of the case; and (3)
directed the RTC to undertake further proceedings in Civil Case
No. 4871-L insofar as the issue of damages was concerned.

The present Petition stems from the proceedings in Civil

Case No. 4871-L before the Lapu-Lapu City RTC, Branch 54, but is
still directly related to two other cases, particularly, Civil Case No.
2309-L before the Lapu-Lapu RTC, Branch 27, and (2) A.M. No, P02-1580 before this Court, which we cannot simply overlook.The
direct antecedent of the present petition, Civil Case No. 4871-L
before the Lapu-Lapu City RTC, Branch 54, is the last of the three
cases we are presenting hereunder:

CASE No. 1: Bancale v. Paras,

Civil Case No. 2309-L, LapuLapu City RTC, Branch 27

The Heirs of Conrado Bancale filed before the Lapu-Lapu City

RTC, Branch 27, a case for the recovery of the properties subject

of the present Petition against a certain Eva Paras and other

persons, which was docketed as Civil Case No. 2309-L. On 22
January 1996, petitioners Juaban and Zosa entered their
appearance as counsels for the Heirs of Bancale.

The Heirs of Bancale later entered into a 31 January

1997 Agreement to Sell and to Buy with respondent Rene Espina
(Espina), paragraph 5 of which states:
That after the title is transferred to their names, the First Party
[Heirs of Bancale] will execute an absolute deed of sale in favor of the
second party [herein respondent Rene Espina] or whoever will be
designated by him as the vendee for the consideration mentioned in
paragraph 2 hereof. The amount of P2,000,000.00 advanced by the
Second Party shall form part of said consideration. [2]

In accordance with said Agreement, respondent Espina paid

petitioners P2,000,000.00 as an advance on the purchase price
for the subject properties for the benefit of the Heirs of
Bancale. Respondent Espina then designated the other
respondent in this case, Cebu Bay Discovery Properties, Inc.
(CDPI), as the vendee of the said properties.

Later, on 1 September 1997, respondents learned that

petitioners, counsels Juaban and Zosa, had filed on 26 August
1997, at around 1:10 p.m., a Motion to fix their attorneys fees in
Civil Case No. 2309-L. They also learned that the Lapu-Lapu City
RTC, Branch 27, had issued an Order on the very same date of 26
August 1997, at around 2:20 p.m., granting the motion and fixing
petitioners attorneys fees in the amount of P9,000,000.00. The
Heirs of Bancale filed a Motion for Reconsideration, but the same
was denied in an Order dated 22 September 1997. The Heirs of
Bancale received a copy of the Order denying their Motion for
Reconsideration on 9 October 1997, after which they filed a

Notice of Appeal dated 15 October 1997. However, without

waiting for the expiration of the period to appeal of the Heirs of
Bancale, the Lapu-Lapu City RTC, Branch 27, issued on 10 October
1997 an Order, which states:
Considering that the Order of this Court dated 26 August
1997 has already become final and executory, not having been
appealed, the motion for execution is hereby GRANTED.

Let a Writ of Execution issue to satisfy the Order dated August

26, 1997 to enforce the same fixing the attorneys fees.

Sheriff Juan A. Gato of this Branch is hereby directed to

implement the Writ.[3]

The
Heirs
of
Bancale
filed
another
Motion
for
Reconsideration, this time, of the 10 October 1997 Order. Without
directly ruling on this Motion, the Lapu-Lapu City RTC, Branch 27,
issued on 14 October 1997 a Writ of Execution directing Sheriff
Juan A. Gato (Gato) to satisfy the judgment for attorneys fees in
the amount ofP9,000,000.00 in favor of petitioners.

On 23 October 1997, Sheriff Gato served notice that the

rights, shares, interests and participation of the Heirs of Bancale
in the subject properties were being levied on execution to satisfy
the Writ of Execution dated 14 October 1997. This was done
despite the fact that the Writ of Execution issued by the trial court
specifically directed that the attorneys fees were to be taken from
the money due from the buyer to the sellers under the agreement
to buy and sell. Thereafter, Sheriff Gato issued a Notice of Sale on
Execution dated 24 October 1997, announcing that the subject
properties were to be sold at a public auction on 28 November
1997 at2:00 p.m.

On 18 November 1997, respondents filed a Third Party Claim

with the office of Sheriff Gato. On motion of petitioners, the LapuLapu City RTC, Branch 27 fixed the sheriffs indemnity bond
at P500,000.00.

On 28 November 1997, the subject properties were sold at

public auction to petitioners for P9,000,000.00. The sale was
registered on 3 December 1997.

On 1 December 1998, the Lapu-Lapu City RTC, Branch 27,

under a new presiding judge, issued an Order resolving the
Motions of the Heirs of Bancale seeking reconsideration of the
previous Orders of the same court dated 22 September
1997 and 10 October 1997, and disposing thus:
WHEREFORE, in view of the foregoing premises, this Court
hereby sets aside the order issued in this case on October 10, 1997
which considered as final and executory the August 26, 1997 order
and, in its stead, hereby gives due course to the appeal filed by the
[Heirs of Bancale] from the order issued in this case on September 22,
1997, which in effect is an appeal from the said August 26, 1997 order.
[4]

This 1 December 1998 Order is currently on appeal with the

Nineteenth Division of the Court of Appeals, where it is docketed
as CA- G.R. CEB CV No. 61696.The Court of Appeals Resolutions
granting due course to said appeal were elevated via a Petition
for Certiorari, docketed as G.R. No. 156011, still pending before
this Court.

On 27 January 1999, petitioners wrote a letter to Sheriff Gato

requesting him to execute a final deed of sale in their favor since
no redemption of the subject properties was made. Sheriff Gato,

in a letter dated 4 February 1999, answered that he no longer had

any authority to issue the final deed of sale by virtue of the 1
December 1998 Order of the Lapu-Lapu City RTC, Branch
27. Nonetheless, in direct contravention of the contents of his
letter, Sheriff Gato still transmitted to petitioners the final Deed of
Conveyance without the approval of the trial court.

CASE No. 2: Espina v. Gato,

A.M. No. P-02-1580, Supreme
Court

The second case is an administrative complaint filed against

Sheriff Gato by respondents, for allegedly acting with manifest
bias and partiality in Civil Case No. 2309-L while it was still
pending with the Lapu-Lapu City RTC, Branch 27. On 9 April 2003,
this Court, speaking through Associate Justice Adolfo Azcuna,
held:
Firstly, the haste with which respondent levied upon the plaintiffs
property is unexplained. Furthermore, despite a third-party claim filed
by complainant Espina for CDPI on November 18, 1997, the property
was sold at public auction to Attys. Juaban and Zosa on November 28,
1997. It is true that sheriffs are responsible for the prompt service and
implementation of writs and other orders issued by the court. They
cannot afford to be inefficient in the work assigned to them. However,
prompt service and efficiency should not be reasons to compromise the
integrity of the court and the proper administration of justice. By the
very nature of their duties, sheriffs perform a very sensitive function in
the dispensation of justice. Thus, their conduct must, at all times, be
above suspicion.

Secondly, as stated earlier, the trial court ordered in the writ of

execution that the P9 million to be paid to Attys. Juaban and Zosa as
attorneys fees be taken from the money due from the buyer to the
sellers under the agreement to buy and sell. Nevertheless, respondent
levied upon the aforementioned property in blatant disregard of this

order. It is a well-settled rule that the duty of a sheriff is merely

ministerial. When a writ is placed in the hands of the sheriff, it is his
ministerial duty to proceed to execute in accordance with the terms of
its mandate.

Thirdly, when Attys. Juaban and Zosa requested respondent to

issue a Final Deed of Conveyance to them, respondent already knew
that he no longer had authority to issue the same.He had already been
appraised of the fact that a subsequent order, dated December 1, 1998,
set aside the orders that were the basis of the writ of execution. This
was admitted by him in his letter to Attys. Juaban and Zosa. Despite this
knowledge, he still issued a final deed of sale in favor of the said
lawyers without the approval of the court.

From all these facts, it is clear that respondent showed manifest

partiality in favor of Attys. Juaban and Zosa, giving them unwarranted
benefit, advantage and preference and that, with evident bad faith, he
caused undue injury to complainants. Respondent thereby failed to
comply with the strict standards required of public officers and
employees.

WHEREFORE, respondent Sheriff Juan Gato is found GUILTY of

grave abuse of official functions and manifest partiality amounting to
grave misconduct and conduct prejudicial to the administration of
justice, and is hereby SUSPENDED FROM SERVICE FOR THREE (3)
MONTHS WITHOUT PAY, with the warning that repetition in the future of
the same or similar misconduct will be dealt with more severely. [5]

CASE No. 3: Espina v. Gato,

Civil Case No. 4871-L, LapuLapu City RTC, Branch 54

On 28 November 1997, respondents filed a complaint for

injunction and damages with an application for the issuance of a
temporary restraining order to enjoin, at whatever stage, the sale
in a public auction of the subject properties by Sheriff Gato. Said
complaint was docketed as Civil Case No. 4871-L before the LapuLapu City RTC, Branch 54. Respondents claim that they were, as
of the institution of said case, unaware that the subject properties
had already been sold at a public auction.

On 19 December 1997, petitioners filed a Motion to Dismiss,

which was granted by the Lapu-Lapu City RTC, Branch 54, in an
Order dated 30 July 1998. On 2 September 1998, respondents
filed a Notice of Appeal, which was given due course by the LapuLapu City RTC, Branch 54, in an Order dated 7 September 1998.

Respondents appeal before the Court of Appeals was

docketed as CA-G.R. CV No. 60721. Respondents filed therein an
Urgent Motion for Issuance of a Temporary Restraining Order and
Writ of Preliminary Injunction dated 19 October 1998. On 26
November 1998, the Court of Appeals issued a Resolution
granting respondents application for the issuance of a temporary
restraining order, restraining Sheriff Gato from consolidating
ownership over the subject properties in favor of petitioners.

On 1 December 1998, respondents filed an Urgent

Manifestation/Motion dated 1 December 1998 wherein they
tendered the amount of P10,962,347.20 as payment for the
redemption price of the subject properties, on the condition that if

the application for preliminary injunction was denied or if the case

is finally resolved in favor of petitioners, the said amount shall be
considered as valid tender of the redemption price of the subject
properties retroacting to the date of the filing of the
Manifestation/Motion. In a comment dated 17 December 1998,
petitioners interposed no objection to the deposit of said amount,
but excepted to respondents claim that the tender would stop the
running of interest on the redemption price.

On 15 June 1999, the Court of Appeals issued a Resolution

stating that respondents application for a writ of preliminary
injunction to enjoin Sheriff Gato from consolidating ownership
over the subject properties in favor of petitioners had been
rendered moot in view of the 1 December 1998 Order by the
Lapu-Lapu City RTC, Branch 27, in Civil Case No. 2309-L setting
aside its Order dated 10 October 1997 and giving due course to
respondents appeal therein.

In the meantime, petitioners were able to acquire the

Definite Deed of Sale of the subject properties from Sheriff
Gato. Hence, respondents filed a Motion for Clarification and/or
Reconsideration to Cite [Petitioners] in Contempt. Petitioners,
however, proceeded to register the Definite Deed of Sale issued
by Sheriff Gato with the Register of Deeds in Lapu-Lapu City.

In a Resolution dated 30 September 1999, the Court of

Appeals granted respondents application for a writ of preliminary
injunction and enjoined petitioners from exercising rights of
ownership over the subject properties, such as alienating or
encumbering the same.

On 31 January 2005, the Court of Appeals rendered the

assailed Decision, the dispositive portion of which reads:

WHEREFORE, the Order dated July 30 1998 issued by the

Regional Trial Court, Branch 54, Lapu-Lapu City, in Civil Case No. 4871L dismissing the complaint, is hereby REVERSED and SET ASIDE.

The Writ of Preliminary Injunction issued pursuant to the Courts

resolution promulgated on September 30, 1999, subject to the
conditionalities therein, is hereby made PERMANENT.

The Regional Trial Court, Branch 54, Lapu-Lapu City is directed to

undertake further proceedings in Civil Case No. 4871-L sofar as the
issue on damages is concerned.

Costs against appellees.[6]

Petitioners Motion for Reconsideration of the foregoing

decision was denied in a Resolution dated 20 September
2005. Hence, the present recourse, wherein petitioners bring forth
the following issues for this Courts consideration:
1.

Whether or not Rene Espina had a cause of

action to file the Injunction and Damages Case
against petitioners;

2.

Whether or not the trial court acquired

jurisdiction over the complaint and over CDPI in
said case;

3.

Whether or not only questions of law were raised

in respondents appeal, which allegedly required
the Court of Appeals to dismiss said appeal;

4.

Whether or not the Court of Appeals erred in

taking cognizance of the records in another case
which were not offered and admitted as evidence
as basis for its findings of facts;

5.

Whether or not the Court of Appeals erred in

issuing a permanent injunction against petitioners
considering that there was allegedly no prayer in
the complaint therefor.

We find no merit in the present Petition.

Authority of Rene Espina to File

the Case and the Jurisdiction of
the RTC

Only respondent Espina signed the Verification and Certification of

Non-Forum Shopping attached to the complaint in the third case,
Civil Case No. 4178-L, before the Lapu-Lapu City RTC, Branch 54;
and apart from him, there was no signatory of the Verification and
Certification of Non-Forum Shopping on behalf of respondent

CDPI. Petitioners claim that the complaint should have been

dismissed by the trial court since (1) respondent Espina had no
more personal interest in the case, having assigned his rights to
the subject properties to respondent CDPI; and (2) there was no
authority or board resolution authorizing respondent Espina to file
the complaint on behalf of his co-respondent CDPI.

Sec. 2, Rule 3 of the Rules of Court requires that parties to a

civil case must be real parties in interest, to wit:

SEC. 2. Parties in interest.A real party in interest is the party who

stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. Unless otherwise authorized by
law or these Rules, every action must be prosecuted or defended in the
name of the real party in interest.

We quote with approval the following ruling of the Court of

Appeals on the issue of respondent Espinas personality to
institute Civil Case No. 4178-L:
The personality of appellant Rene Espina to sue in his personal
capacity finds basis in the Agreement to Sell and to Buy. It is readily
apparent in the Agreement that he has been designated as the Second
Party, in his personal capacity, and not as agent or representative of a
corporate entity. On the other hand, the Deed of Sale which was
subsequently
executed,
is
based
on
the
aforesaid
Agreement. Therefore, there is no gainsaying that appellant Rene
Espina has a personal interest in the case. [7]

Respondents right to the subject properties is based on

the 31 January 1997 Agreement to Sell and to Buy executed
between the Heirs of Bancale and respondent Espina. Hence, the

said Agreement is the very source of the right, the violation of

which constituted the cause of action in respondents complaint
for injunction before the court a quo. It was respondent Espina
who entered into the Agreement, and his rights as a party to the
said contract were not extinguished just because he designated
his co-respondent CDPI as vendee of the subject properties,
pursuant to the authority given to him in paragraph 5
thereof. Among respondent Espinas rights as a party to the
Agreement is his right to the full realization of the purpose of the
contract, which in this case, would be the transfer of the
ownership of the subject properties from the Heirs of Bancale
either to him or to his designated vendee. The public auction sale
of the subject properties to petitioners would not only prevent the
intended transfer of ownership under the Agreement, but would
also render inutile respondent Espinas designation of respondent
CPDI as a vendee. Moreover, it was undisputed that respondent
Espina advanced P2,000.000 to the Heirs of Bancale, which
formed part of the consideration for the ensuing sale of the
subject properties. There was no proof that respondent Espina
had already been reimbursed for the said amount. Having paid
part of the purchase price for the subject properties, then
respondent Espina has an interest therein.

Having been established as a real party in interest,

respondent Espina has not only the personality to file the
complaint in Civil Case No. 4178-L, but also the authority to sign
the certification against forum shopping as a plaintiff therein. We
held in Mendigorin v. Cabantog,[8] Escorpizo v. University of
Baguio[9] and Condo Suite Club Travel, Inc. v. National Labor
Relations Commission[10] that the certification against forum
shopping must be signed by the plaintif or any of the principal
parties and not by counsel.[11] We have also held in Cua v. Vargas,
[12]
that:
The general rule is that the certificate of non-forum shopping
must be signed by all the plaintiffs or petitioners in a case and the
signature of only one of them is insufficient. Nevertheless, the rules on

forum shopping, which were designed to promote and facilitate the

orderly administration of justice, should not be interpreted with such
absolute literalness as to subvert their own ultimate and legitimate
objective. Strict compliance with the provisions regarding the certificate
of non-forum shopping merely underscores its mandatory nature in that
the certification cannot be altogether dispensed with or its
requirements completely disregarded. Under justifiable circumstances,
the Court has relaxed the rule requiring the submission of such
certification considering that although it is obligatory, it is not
jurisdictional.

Thus, when all the petitioners share a common interest and

invoke a common cause of action or defense, the signature of only one
of them in the certification against forum shopping substantially
complies with the rules.

In Bases Conversion and Development Authority v. Uy,[13] we

held:

Signature of a principal party sufficient for verification and

certification

Anent the assailed verification and certification of non-forum

shopping, it is shown that it substantially complied with the
requirements of the Rules. Dismissal of appeals that is purely on
technical grounds is frowned upon. While only petitioner Ramon P.
Ereneta signed the verification and certification of non-forum shopping
such is not fatal to the instant petition. In Calo, we agreed with
petitioners that the signature of only one petitioner in the verification
and certification of non-forum shopping satisfies the requirement under
Section 2, Rule 42 of the Revised Rules on Civil Procedure.
In Calo,
we relied on Condo Suite Club Travel, Inc., v. NLRCwhere we ruled that
the certification of non-forum shopping may be signed not only by the
petitioners but also any of the principal parties. In the instant case, Mr.
Ramon P. Erenta, a member of the Investment Committee of the

Heritage Park Management Corporation, is a principal party in the

instant case having been impleaded in Civil Case No. 99-0425 pending
in the RTC.

More so, in Calo, we also cited Cavile, et al. v. Heirs of Clarita

Cavile, et. al.where we held that there was substantial compliance with
the Rules when only petitioner Thomas George Cavile, Sr. signed in
behalf of all the other petitioners of the certificate of non-forum
shopping as the petitioners, being relatives and co-owners of the
properties in dispute, shared a common interest in them, had a
common defense in the complaint for partition, and filed the petition as
a collective, raising only one argument to defend their rights over the
properties in question. We reasoned that there was sufficient basis for
Cavile, Sr., to speak for and in behalf of his co-petitioners, stating that
they had not filed any action or claim involving the same issues in
another court or tribunal, nor was there other pending action or claim
in another court or tribunal involving the same issues. In the same
vein, this is also true in the instant case where petitioners have filed
their petition as a collective, sharing a common interest and having a
common single defense.

Thus, the certificate against forum shopping is not rendered

invalid by the absence of the signature of an authorized official of
respondent CDPI. The signature of respondent Espina as one of
the plaintiffs therein suffices.

Furthermore, the allegation concerning the defect in the

Certificate against Forum Shopping was raised for the first time
on appeal. The Motion to Dismiss filed by petitioners was based
only on the following grounds:
I - That the claim or demand set forth in the plaintiffs pleading has
been paid, waived, abandoned, or otherwise extinguished;

II - That there is another cause of action pending between the parties

for the same cause;

III - That plaintiff Rene Espina has no legal capacity to sue. [14]

The grounds alleged by petitioners and ruled upon by the

trial court are thus (1) extinguishment, (2) litis pendentia, and (3)
lack of legal capacity to sue on the part of Rene Espina. Of these
grounds, only litis pendentia is related to the present allegation of
petitioners concerning the defect in the Certification against
Forum Shopping. Forum shopping exists where the elements
of litis pendentia are present or where a final judgment in one
case will amount to res judicata in the other.However, forum
shopping as a ground for the dismissal of actions is
distinct and separate from the failure to submit a proper
Certificate against Forum Shopping. One need not be held
liable for forum shopping for his complaint to be dismissed on the
ground of an absence or a defect in the Certificate against Forum
Shopping. Conversely, one can be liable for forum shopping
regardless of the presence or absence of a Certification against
Forum Shopping. The presence of a Certification in such a case
would only have the effect of making the person committing
forum shopping additionally liable for perjury. Thus, we held
in Spouses Melo v. Court of Appeals[15]:

Indeed, compliance with the certification against forum shopping

is separate from, and independent of, the avoidance of forum shopping
itself. Thus, there is a difference in the treatment - in terms of
imposable sanctions - between failure to comply with the certification
requirement and violation of the prohibition against forum shopping. x
x x.

There being no allegation of a defect in the Certification

against Forum Shopping on the part of respondents, neither the
RTC nor the Court of Appeals was able to rule thereon. Both courts
only ruled on the issue concerning litis pendentia, on which the
Court of Appeals correctly held that:
Litis pendentia is not present in this case vis--vis Civil Case No.
2309-L. The requisites of litis pendentia are: (a) identity of parties, or
at least such parties who represent the same interest in both actions;
(b) identity of rights asserted and relief prayed for, the relief being
founded on the same facts; (c) identity with respect to the two (2)
preceding particulars in the two (2) cases is such that any judgment
that may be rendered in the present case, regardless of which party is
successful, would amount to res judicata in another case.

The appellants herein are not parties in Civil Case No. 2309L. There is no identity of rights asserted and reliefs prayed for. Civil
Case No. 2309 is for recovery of ownership and possession; while the
instant case is for injunction and damages. The judgment in one will
not be a bar to the other case. These cases were conjoined only
because of the incident in Civil Case No. 2309-L, i.e. the fixing of the
attorneys fees and the subsequent execution on the subject properties
which were, in the meantime, sold to and purchased by the appellants
pursuant to an Agreement to Sell and to Buy.

Appellees charge that appellants are guilty of forum shopping is

without legal basis. It has been held that where the elements
of litis pendentia are not present or where final judgment in one will
not amount to res judicata in the other, there is no forum shopping. [16]

Propriety of the Mode of Appeal

Petitioners also claim that since only questions of law were

raised in respondents appeal to the Court of Appeals, the proper
remedy should have been a Petition for Review filed directly with
this Court under Rule 45 of the Rules of Court.

Petitioners cite the Assignment of Errors raised by

respondents before the Court of Appeals in CA-G.R. CV No. 60721:
ASSIGNMENT OF ERRORS

I. The court a quo erred in dismissing the complaint on the ground of

litis pendentia.

II. The court a quo erred in dismissing the complaint on the ground that
the appellant Rene Espina has no legal capacity to sue.

III. The court a quo should have issued a temporary restraining order,
and after due hearing should have issued an injunction to enjoin
appellee Sheriff Gato from erroneously levying on and selling at public
auction the Subject Property to satisfy the Writ of Execution dated 14
October 1997 issued by the Trial Court in Civil Case No. 2309-L.

Petitioners contend that since no evidence was presented by

the parties in the lower court, the complaint having been
dismissed on the timely motion by the petitioners, the appeal of
the dismissal of the complaint required no determination by the
appellate court of the probative value of the evidence presented
by the parties.

The Court of Appeals addressed this issue, thus:

Appellees [Juaban and Espina] contend that since the

assignment of errors raises only questions of law, the proper course of
action is a Petition for Review direct to the Supreme Court in
accordance with Rule 45, Revised Rules of Court. The appellees unduly
limit themselves to the assignment of errors in the appeal and close
their eyes to the glaring fact that, from the narration of facts above,
certain acts taken by RTC Br. 27 before then Presiding Judge Risos,
which are immoral, devious, and patently illegal, has constrained the
Court to take a second look at the circumstances which gave rise to
the instant appeal. As succinctly observed by the Court in its
Resolution on appellants prayer for the issuance of a writ of preliminary
injunction,

However, inspite full knowledge that the appeal has

been given due course and that therefore there is no more
basis for further action on the execution sale, appellees
Zosa and Juaban caused the consolidation of ownership
and the issuance of new titles in their names. Said
appellees are even aware that the redemption money for
the properties in the sum of P10,962,347.20 has been
deposited with this Court by the appellants. In fact,
appellees when asked to comment on the deposit,
manifested that they have no objection to the deposit
although they disagreed that interest or the redemption
price would stop running.

It
is
therefore
without
legal
basis
that
notwithstanding those circumstances, the appellees, upon
expiration of the temporary restraining order issued by
this Court, immediately asked for the execution of a deed
of sale in their favor since no redemption has been made
and managed to obtain titles in their names. Such
consolidation of ownership is patently erroneous as the
decision granting them attorneys fees is not yet final and
executory and is in fact the subject of appeal in this Court
under CA-GR CV No. 61696.[17]

[18]

We have held in Microsoft Corporation v. Maxicorp, Inc.

and Morales v. Skills International Company,[19] that:
The distinction between questions of law and questions of fact is
settled. A question of law exists when the doubt or difference centers
on what the law is on a certain state of facts. A question of fact exists if
the doubt centers on the truth or falsity of the alleged facts. Though
this delineation seems simple, determining the true nature and extent
of the distinction is sometime problematic. For example, it is incorrect
to presume that all cases where the facts are not in dispute
automatically involve purely questions of law.

There is a question of law if the issue raised is capable of being

resolved without need of reviewing the probative value of the
evidence. The resolution of the issue must rest solely on what the law
provides on a given set of circumstances. Once it is clear that the issue
invites a review of the evidence presented, the question posed is one
of fact. If the query requires a re-evaluation of the credibility of
witnesses, or the existence or relevance of surrounding circumstances
and their relation to each other, the issue in that query is factual.

In the fairly recent case of First Bancorp Inc. v. Court of

Appeals,[20] we discussed the implications of the allegation by a
party of the lack of jurisdiction of the Court of Appeals based on
the ground that the appeal was based solely on questions of law:
If the aggrieved party appeals by writ of error under Rule 41 of
the Rules of Court to the CA and it turns out, from the brief of
appellant, that only questions of law are raised, the appeal shall be
dismissed:

Sec. 2. Dismissal of improper appeal to the Court of

Appeals. An appeal under Rule 41 taken from the Regional
Trial Court to the Court of Appeals raising only questions of
law shall be dismissed, issues purely of law not being

reviewable by said court. Similarly, an appeal by notice of

appeal instead of by petition for review from the appellate
judgment of a Regional Trial Court shall be dismissed.

An appeal erroneously taken to the Court of

Appeals shall not be transferred to the appropriate court
but shall be dismissed outright.

The nature of the issues to be raised on appeal can be gleaned

from the appellants notice of appeal filed in the trial court and in his or
her brief as appellant in the appellate court.

The provision relied upon by respondent, Section 15, Rule 44 of

the Rules of Court, reads:
Sec. 15. Questions that may be raised on appeal.
Whether or not the appellant has filed a motion for new
trial in the court below, he may include in his assignment
of errors any question of law or fact that has been raised
in the court below and which is within the issues framed
by the parties.

This rule, however, does not relate to the nature of the issues
that may be raised on appeal by the aggrieved party, whether issues
of fact or issues of law, or the mode of appeal of the aggrieved party
from a final order or resolution of the trial court in the exercise of its
original jurisdiction; it merely provides the nature of the issues
appellant may include in his assignment of error incorporated in his
Brief as appellant. It may happen that the appellant may have raised
in the trial court errors of fact or law or both, and need not include all
said issues in his appeal in the appellate court. The appellant has the
right to choose which issues of law he or she may raise in the CA in
addition to factual issues already raised.

A question of fact exists when a doubt or difference arises as to

the truth or falsity of alleged facts. If the query requires a reevaluation
of the credibility of witnesses or the existence or relevance of

surrounding circumstances and their relation to each other, the issue in

that query is factual. On the other hand, there is a question of law
when the doubt or difference arises as to what the law is on certain
state of facts and which does not call for an existence of the probative
value of the evidence presented by the parties-litigants. In a case
involving a question of law, the resolution of the issue rests solely on
what the law provides on the given set of circumstances. Ordinarily,
the determination of whether an appeal involves only
questions of law or both questions of law and fact is best left
to the appellate court. All doubts as to the correctness of the
conclusions of the appellate court will be resolved in favor of
the CA unless it commits an error or commits a grave abuse of
discretion.

In case of doubt, therefore, the determination of the Court of

Appeals of whether an appeal involves only questions of law or
both questions of law and fact shall be affirmed. As explained by
the Court of Appeals, it was only after the appellate courts
painstaking review of the facts surrounding the dispute that the
immoral, devious and patently illegal acts which attended the
transfer of the subject properties to petitioners were brought to
light. This Court finds no error or grave abuse of discretion on the
part of the Court of Appeals in making the aforesaid finding. No
less than this Court, in the second case, A.M. No. P-02-1580,
found that Sheriff Gato showed manifest partiality in favor of
Attys. Juaban and Zosa, giving them unwarranted benefit,
advantage and preference and that, with evident bad faith, he
caused undue injury to complainants [Espina and CDPI].
[21]
Irrefragably, respondents appeal before the Court of Appeals
involved not only questions of law, because for the determination
thereof, the appellate court was first called upon to make its own
findings of facts which were significant to its complete and
judicious resolution of the appeal.

Taking Cognizance of Records

in Another Case

Petitioners claim that the Court of Appeals, in resolving

CA-G.R. CV No. 60721, the appeal of the dismissal of Civil Case
No. 4178-L by Lapu-Lapu City RTC, Branch 54, erred in taking
cognizance of the records in another case as basis for its
findings of facts. According to petitioners, the Court of Appeals
based its findings of facts on the records of the first case, Civil
Case No. 2309-L, pending before another Branch (Branch 27) of
the RTC of Lapu-Lapu City.
In Bongato v. Malvar,[22] we held:

Second, as a general rule, courts do not take judicial notice of the

evidence presented in other proceedings, even if these have been tried
or are pending in the same court or before the same judge. There are
exceptions to this rule. Ordinarily, an appellate court cannot refer to the
record in another case to ascertain a fact not shown in the record of the
case before it, yet, it has been held that it may consult decisions in
other proceedings, in order to look for the law that is determinative of
or applicable to the case under review. In some instances, courts
have also taken judicial notice of proceedings in other cases
that are closely connected to the matter in controversy. These
cases may be so closely interwoven, or so clearly
interdependent, as to invoke a rule of judicial notice.

We find that the circumstances in Case No. 1 (Civil Case

No. 2309-L) are too closely interwoven and so clearly
interdependent with those in Case No. 3 (Civil Case No. 4178L). Petitioners and respondents are claiming the very same
subject properties. Case No. 3, the case at bar, calls for a

determination of who has the superior right to the subject

properties, petitioners or respondents. Petitioners are the ones
who actually rely on Case No. 1 because their right to the
subject properties is rooted in the proceedings therein. It
should be recalled that they served as the counsels of the Heirs
of Bacale in Case No. 1; they had the subject properties sold at
a public auction to satisfy the award in their favor of attorneys
fees; and they were the successful bidders at the
auction. Petitioners cannot insist on their right to the subject
properties, yet prevent the Court of Appeals from looking into
the basis or source of said right, as well as the circumstances
surrounding their acquisition of the same. They cannot invoke
orders, rulings or findings of the trial court in Case No. 1 which
are supportive of their right to the subject properties but
suppress those which are damaging.
Even assuming for the sake of argument that the
proceedings in Case No. 1 cannot be stated in our narration of
facts on the ground that said proceedings have not yet been
terminated, there is certainly nothing that prevents us from
consulting Case No. 2 (A.M. No. P-02-1580) wherein Sheriff Gato
was suspended by this Court for acting with grave abuse of
official functions and manifest partiality amounting to grave
misconduct and conduct prejudicial to the administration of
justice in selling to petitioners the subject properties at a public
auction despite respondents third-party claim. It bears to
emphasize that Case No. 2 has already been decided with finality
by this Court.

Lack of Prayer for the Issuance

of a Permanent Injunction

Petitioners argue that the respondents did not make any

allegation in their Complaint that they were the owners of the
disputed properties and there was no prayer in their Complaint for
the issuance of a permanent injunction against petitioners
prohibiting them from exercising acts of ownership.

An inspection of respondents Complaint, however, reveals

that petitioners actually alleged ownership of the property in
dispute:
The defendants are doing, threatening, and/or attempting to
conduct the said public auction sale which is in violation of the rights of
the plaintiffs, as the property sought to be sold now belong to the
plaintifs, and not of Concordia Bancale et. al., and this tends to render
whatever favorable judgment the Honorable Court may grant to the
plaintiffs ineffectual.[23]

As regards the alleged lack of prayer for the court to issue a

permanent injunction prohibiting petitioners from exercising acts
of ownership, it is necessary to examine the actual Prayer made
by the respondents in their Complaint, which reads:
WHEREFORE, plaintiffs most respectfully pray this Honorable
Court, that upon filing of this complaint, a temporary restraining order
be issued enjoining defendants from proceeding with the auction sale,
or at whatever stage it is, of Lot 6720-C-2 of the subdivision plan Psd07-05-012144, containing an area of 13,677 sq. meters and covered by
Transfer Certificate of Title No. 36425 and Lot No. 6720-B-2 of the same
subdivision plan, containing an area of 4,560 sq. meters and covered
by Transfer Certificate of Title No. 36426, all located at Lapulapu City,
and upon notice to all the concerned, to issue the writ of preliminary
injunction for the same purpose;

After trial on the merits to make the injunction permanent, and to

order the defendants, jointly and severally:

1. To reimburse the plaintiffs, jointly and severally the sum

of P35,000,000.00 representing the purchase price of the properties,
subject matter of this case, which were already paid by the plaintiffs to
the Bancales;

2. To pay the plaintiffs the sum of P5,000,000.00 for moral

damages;

3. To reimburse plaintiffs the sum of P20,000.00 for attorneys

fees, plus the sum of P2,000.00 per court appearance, and the sum
of P20,000.00 for litigation expenses;

Plaintiffs further pray for such orders as may be just, appropriate

and equitable under the premises.[24]

We hold that the issuance by the Court of Appeals of a

permanent injunction prohibiting petitioners from exercising acts
of ownership is included in respondents prayer for such orders as
may be just and equitable under the circumstances. Such a
prayer in the complaint justifies the grant of a relief not otherwise
specifically prayed for.[25] More importantly, we have ruled that it
is the allegations in the pleading which determine the nature of
the action and the Court shall grant relief warranted by the
allegations and proof even if no such relief is prayed for. [26] It is
the material allegations of the fact in the complaint, not the legal
conclusions made in the prayer, that determine the relief to which
the plaintiff is entitled.[27] If respondents were seeking to enjoin
the sale of the subject properties, in effect, to prevent the transfer
of ownership of the subject properties to others, then such prayer
must be deemed to logically and reasonably include the prayer to

enjoin others from exercising rights of ownership over the subject

properties, for if the ownership of the subject properties are not
transferred to any one else, then no one else has the right to
exercise the rights appurtenant thereto.

WHEREFORE, the Petition is DENIED. The Decision

dated 31 January 2005 of the Court of Appeals in CA-G.R. CV No.
60721 is AFFIRMED. Costs against petitioners.

SO ORDERED.

G.R. No. 135042 September 23, 1999

ROBERN DEVELOPMENT CORPORATION, petitioner,
vs.
JUDGE JESUS V. QUITAIN, Regional Trial Court of Davao City, Br. 15; and NATIONAL POWER
CORPORATION, respondents,

PANGANIBAN, J.:
Expropriation proceedings are governed by revised Rule 67 of the 1997 Rules of Civil Procedure
which took effect on July 1, 1997. Previous doctrines inconsistent with this Rule are deemed
reversed or modified. Specifically, (1) an answer, not a motion to dismiss, is the responsive pleading
to a complaint in eminent domain; (2) the trial court may issue a writ of possession once the plaintiff
deposits an amount equivalent to the assessed value of the property, pursuant to Section 2 of said
Rule, without need of a hearing to determine the provisional sum to be deposited; and (3) a final
order of expropriation may not be issued prior to a full hearing and resolution of the objections and
defenses of the property owner.
The Case
Before us is a Petition under Rule 45, challenging the Decision of the Court of Appeals 1 promulgated
February 27, 1998 and its Resolution promulgated July 23, 1998 in CA-GR SP-46002, which (1)
dismissed the action for certiorari and preliminary injunction filed by Robern Development Corporation
("Robern" for brevity); and (2) effectively affirmed the Orders (dated August 13, 1997; September 11,
1997; and November 5, 1997) and the Writ of Possession (dated September 19, 1997), all issued by the
Regional Trial Court of Davao City in Civil Case No. 25356-97.

The assailed Decision disposed as follows:

IN VIEW OF ALL THE FOREGOING, the instant petition is ordered DISMISSED.

Costs against the petitioner.
In its assailed Resolution, the Court of Appeals denied reconsideration in this manner:

There being no compelling reason to modify, reverse or reconsider the Decision

rendered in the case dated February 27, 1998[;] the Motion for Reconsideration
posted by petitioner on March 23, 1998 isDENIED, it appearing further that the
arguments raised therein were already considered and passed upon in the aforesaid
Decision.
The Facts
The following facts are undisputed.
1. Robern is the registered owner of a parcel of land with an area of about 17,746.50 square meters,
which the National Power Corporation ("NPC" for brevity) is seeking to expropriate. The property
forms part of a proposed low-cost housing project in Inawayan, Binugao, Toril, Davao City.
2. On June 6, 1997, NPC filed a Complaint for Eminent Domain against Robern. 4 Instead of filing an
answer, petitioner countered with a Motion to Dismiss, 5 alleging (a) that the Complaint suffered a
jurisdictional defect for not showing that the action bore the approval of the NPC board of directors; (b)
that Nemesio S. Caete, who signed the verification and certification in the Complaint, was not the
president, the general manager or an officer specifically authorized under the NPC charter (RA 6395); (c)
that the choice of property to be expropriated was improper, as it had already been intended for use in a
low-cost housing project, a public purpose within the contemplation of law; and the choice was also
arbitrary, as there were similar properties available within the area.
1wphi1.nt

3. Before this Motion could be resolved, NPC filed a Motion for the Issuance of Writ of Possession
based on Presidential Decree No. 42. On July 9, 1997, NPC deposited P6,121.20 at the Philippine
National Bank, Davao Branch, as evidenced by PNB Savings Account No. 385-560728-9. 6
4. In its Order of August 13, 1997, the trial court denied petitioner's Motion to Dismiss in this wise:
This refers to the motion to dismiss. The issues raised are matters that should be
dealt with during the trial proper. Suffice it to say that [NPC] has the privilege as a
utility to use the power of eminent domain.
The motion is denied for lack of merit. The pre-trial conference shall be on August 27,
1997 at 2:30 P.M. 7
5. On September 2, 1997, petitioner filed a Motion for Reconsideration, pointing out that (a) the
issues raised in the Motion to Dismiss could be resolved without trial, as they could be readily
appreciated on the face of the Complaint itself vis--vis the applicable provisions of law on the

matter; and (b) the grounds relied upon for dismissing the Complaint did not require
evidence aliunde.
6. On September 11, 1997, the trial court denied the Motion. as follows:
The . . . motion [of the petitioner] for reconsideration is denied for lack
of merit. Finding the . . . motion [of NPC] to be meritorious[,] let a writ
of possession issue. 8
7. On September 22, 1997, petitioner filed a Motion for Reconsideration of the Order of September
11, 1997, arguing among others that Section 15-A of RA 6395 was virtually "amended" when Caete
was allowed to verify and sign the certificate of non-forum shopping in regard to the Complaint for
expropriation filed by NPC.
8. Without awaiting the outcome of the Motion for Reconsideration, NPC filed a Motion to Implement
the Writ of Possession.
9. On September 19, 1997, in spite of petitioner's opposition, the trial court issued a Writ of
Possession as follows:
WHEREAS, the applicant National Power Corporation in the above-titled case has
presented to this Court a petition praying for the issuance of a Writ of Possession of
the affected property of the . . . Robern Development Corporation, described
hereinbelow, as follows:
TCT No. Total Area in Area Affected in
Square Meter Square Meter
T-251558
(T-141754) 11,469.00 3,393.00
T-251559
(T-141755) 10,000.00 2,124.00
T-251556
(T-14152) 30,000.00 3,402.00
T-251555 45,000.00 8,827.50

TOTAL 97,371.00 17,746.50 Total

affected area
WHEREAS, on September 11, 1997 the court issued an Order granting the issuance
of a Writ of Possession in favor of the . . . National Power Corporation for the
immediate possession and control of the parcels of land owned by the [petitioner] as
aforestated for the construction Mantanao-New-Loon 138 KV Transmission Line
Project to be undertaken by the petitioner affecting 17,746.50 sq. m. of the 97,371.00
sq. meters as shown above.
NOW THEREFORE, you are hereby commanded to place [NPC] in possession and
control of the affected property consisting 17,746.50 [s]quare [m]eters of the total
area of 97,371.00 square meters described above and to eject therefrom all adverse
occupants, Robern Development Corporation and [all other] persons . . . claiming
under it. 9
10. On November 5, 1997, before counsel for the petitioner received any order from the trial court
directing the implementation of the Writ of Possession, NPC occupied the disputed property.
11. In a Petition for Certiorari before the Court of Appeals (CA), Robern assailed the Writ on the
following grounds: (a) patent on the face of the complaint were its jurisdictional defect, prematurity
and noncompliance with RA 6395; and (b) the issuance of the Writ of Possession was irregular,
arbitrary and unconstitutional, as the trial court had yet to fix the "appropriate value for purposes of
taking or entering upon the property to be expropriated."
Ruling of the Court of Appeals
The Court of Appeals upheld the trial court on the following grounds.
First, the verification and certification of the Complaint by someone other than the president or the
general manager of NPC was not a fatal jurisdictional defect. It was enough to allege that the
expropriating body had the right of eminent domain. The issues of whether the expropriation was
properly authorized by the board of directors and whether Caete's verification and certification of
the Complaint was likewise authorized were evidentiary and could be ruled upon only after the
reception of evidence.
Second, whether the disputed property could still be expropriated even if it had already been
intended to be used in a low-cost housing project and whether the choice of that lot was arbitrary
and erroneous, given the availability of similar properties in the area, were factual issues that would
entail presentation of evidence by both parties.
Third, the allegation in the Complaint that NPC sought to acquire an easement of right-of-way
through the disputed property did not preclude its expropriation. Section 3-A of the NPC charter
allowed the power company to acquire an easement of right-of-way or even the land itself if the
servitude would injure the land.

Fourth, the issuance of the Writ of Possession was proper in view of NPC's compliance with Section
2, Rule 67 of the 1997 Rules of Civil Procedure, by depositing with the Philippine National Bank an
amount equivalent to the assessed value of the disputed property.
Fifth, certiorari was not the proper remedy, as the Order sustaining the right to expropriate the
property was not final and could still be appealed by the aggrieved party. The availability of appeal
ruled out certiorari.
Hence, this Petition. 10
The Issues
In their Memorandum, 11 petitioner raises the following issues: 12
I WHETHER OR NOT THE QUESTIONED ORDER OF THE RESPONDENT JUDGE
DATED SEPTEMBER 11, 1997 DIRECTING THE ISSUANCE OF A WRIT OF
POSSESSION IS UNCONSTITUTIONAL, HIGHLY IRREGULAR, ARBITRARY, AND
DESPOTIC.
II WHETHER OR NOT THE COMPLAINT FILED IN THE INSTANT CASE IS
DISMISSIBLE ON ITS FACE FOR LACK OF JURISDICTION, BEING FLAWED
WITH PREMATURITY, AND VIOLATIVE OF RA 6395.
III WHETHER OR NOT THE COURT OF APPEALS MADE A FINDING NOT BORNE
OUT BY THE COMPLAINT, THUS IT EXCEEDED ITS JURISDICTION AMOUNTING
TO LACK OF JURISDICTION.
IV WHETHER OR NOT THE CHOICE OF THE PROPERTY TO BE
EXPROPRIATED IS ARBITRARY.
Simply stated, the petition raises the following issues:
1. Were there valid grounds to dismiss the Complaint?
2. Was the Writ of Possession validly issued, considering that the trial court had not conducted any
hearing on the amount to be deposited?
This Court's Ruling
The Court of Appeals was correct in its rulings, but in the interest of substantial justice, the petitioner
should be given an opportunity to file its answer.
First Issue:
Grounds for Dismissal

Jurisdiction
Petitioner contends that the trial court did not acquire jurisdiction over the case because, first, Atty.
Caete who signed the verification and certification of non-forum shopping was neither the president
nor the general manager of NPC; and second, under Section 15-A of RA 6395, only the NPC chief
legal counsel, under the supervision of the Office of the Solicitor General is authorized to handle
legal matters affecting the government power corporation. On the other hand, NPC argues that
Caete, as its regional legal counsel in Mindanao, is authorized to prepare the Complaint on its
behalf.
We find the disputed verification and certification to be sufficient in form. Verification is intended to
assure that the allegations therein have been prepared in good faith or are true and correct, not
mere speculations. 13 Generally, lack of verification is merely a formal defect that is neither jurisdictional
nor fatal. Its absence does not divest the trial court of
jurisdiction. 14 The trial court may order the correction of the pleading or act on the unverified pleading, if
the attending circumstances are such that strict compliance with the rule may be dispensed with in order
to serve the ends of justice.
The certificate of non-forum shopping directs the "plaintiff or principal party" to attest under oath that
(1) no action or claim involving the same issues have been filed or commenced in any court, tribunal
or quasi-judicial agency and that, to the best of the plaintiff's knowledge, no such other action or
claim is pending; (2) if there is such other pending action or claim, a complete statement of its
present status shall be made; and (3) if it should be learned that the same or a similar action or claim
has been filed or is pending, the plaintiff shall report this fact to the court where the complaint or
initiatory pleading was filed. 15 This rule is rooted in the principle that a party-litigant shall not be allowed
to pursue simultaneous remedies in different forums, as this practice is detrimental to orderly judicial
procedure. 16Administrative Circular No. 04-94, which came before the 1997 Rules of Court, is deemed
mandatory but not jurisdictional, as jurisdiction over the subject or nature of the action is conferred by
law. 17
In this case, the questioned verification stated that Atty. Caete was the acting regional legal counsel
of NPC at the Mindanao Regional Center in Iligan City. He was not merely a retained lawyer, but an
NPC in-house counsel and officer, whose basic function was to prepare legal pleadings and to
represent NPC-Mindanao in legal cases. As regional legal counsel for the Mindanao area, he was
the officer who was in the best position to verify the truthfulness and the correctness of the
allegations in the Complaint for expropriation in Davao City. As internal legal counsel, he was also in
the best position to know and to certify if an action for expropriation had already been filed and
pending with the courts.
Besides, Atty. Caete was not the only signatory to the Complaint; he was joined by Comie P.
Doromal, OIC-assistant general counsel; and Catherine J. Pablo both of the NPC Litigation &
Land and Land Rights Department. They all signed on behalf of the solicitor general in accordance
with the NPC charter. 18 Their signatures prove that the NPC general counsel and the solicitor general
approved the filing of the Complaint for expropriation. Clearly then, the CA did not err in holding that the
Complaint was not dismissible on its face, simply because the person who had signed the verification and
certification of non-forum shopping was not the president or the general manager of NPC.

Legal Standing and

Condition Precedent
Next, petitioner asserts that NPC had no legal standing to file the expropriation case, because the
Complaint did not allege that its board of directors had authorized its filing. It added that under
Section 6, RA 6395, only the board was vested with the corporate power to sue and be sued.
The National Power Corporation explains that, like other corporate officers and employees whose
functions are defined by the board, Atty. Caete is authorized to file the expropriation case. Even if
he is not the general counsel, he has residual authority to prepare, verify and certify the Complaint
for expropriation.
We rule for the private respondent. Rule 67, Section 1 of the Rules of Court, provides:
Sec. 1. The complaint. The right of eminent domain shall be exercised by the filing
of a verified complaint which shall state with certainty the right and purpose of
expropriation, describe the real or personal property sought to be expropriated, and
join as defendants all persons owning or claiming to own, or occupying, any part
thereof or interest therein, showing, so far as practicable, the separate interest of
each defendant. . . . . .
The foregoing Rule does not require that the Complaint be expressly approved by the board of
directors of a corporation. In any event, such authorization is a factual issue that can be threshed out
during the trial. As held by the appellate court, "the issue of whether or not the expropriation
proceedings [were] authorized by the Board of Directors or that those who signed the complaint
[were] authorized representatives are evidentiary in character determinable only in [the] trial proper."
Prematurity of the Complaint
The same ruling applies to the argument alleging prematurity of the Complaint. Petitioner's
insistence that NPC must secure the approval of the provincial board and the municipal council is
unfounded. Section 3(j), RA 6395, merely requires that the Complaint be filed in the same manner as
an expropriation case of the national, the provincial or the municipal government. At bottom, all that
is needed is compliance with Rule 67 of the Rules of Court and the prevailing jurisprudence on
expropriation.
Defenses and Objections
Petitioner avers that the Complaint should be dismissed, because the subject property was already
committed to be used in a low-cost housing project. Besides, there were other available properties in
the area. Finally, the Complaint allegedly sought only an easement of a right-of-way, not essentially
an expropriation.
We disagree. Petitioner's argument in this case is premised on the old rule. Before the 1997
amendment, Section 3 of Rule 67 allowed a defendant "in lieu of an answer, [to] present in a single

motion to dismiss or for other appropriate relief, all of his objections and defenses to the right of the
plaintiff to take his property . . . ." A motion to dismiss was not governed by Rule 15 which covered
ordinary motions. Such motion was the required responsive pleading that took the place of an
answer and put in issue the plaintiffs right to expropriate the defendant's property. 19 Any relevant and
material fact could be raised as a defense in a condemnation proceeding, such as that which tended to
show that (1) the exercise of the power to condemn was unauthorized, or (2) there was cause for not
taking defendant's property for the purpose alleged in the petition, or (3) the purpose for the taking was
not public in character. 20
This old rule found basis in the constitutional provisions on the exercise of the power of eminent
domain, which were deemed to be for the protection of the individual property owner against the
aggressions of the government.21 Under the old rule, the hearing of the motion and the presentation of
evidence followed.
However, Rule 67 of the 1997 Rules of Civil Procedure no longer requires such extraordinary motion
to dismiss. Instead it provides:
Sec. 3. Defenses and objections. . . . .
If a defendant has any objection to the filing of or the allegations in the complaint, or
any objection or defense to the taking of his property, he shall serve his answer
within the time stated in the summons. The answer shall specifically designate or
identify the property in which he claims to have an interest, state the nature and
extent of the interest claimed, and adduce all his objections and defenses to the
taking of his property. . . . . .
In his book on remedial law, Justice Florenz D. Regalado writes that the old Rule was a "bit
confusing as the previous holdings under that former provision also allowed the filing of another
motion to dismiss, as that is understood in Rule 16, to raise additionally the preliminary objections
authorized by that Rule." Further, an answer, which is now required, gives more leeway. First, even if
it still applies the omnibus motion rule, it allows amendments to be made within ten days from its
filing. 22 Second, the failure to file an answer does not produce all the disastrous consequences of default
in ordinary civil actions, because the defendant may still present evidence as to just compensation. 23
When petitioner filed its Motion to Dismiss, the 1997 Rules of Civil Procedure had already taken
effect. Statutes regulating procedure in the courts are applicable to actions pending and
undetermined at the time those statutes were passed. 24 New court rules apply to proceedings that take
place after the date of their effectivity. 25 On April 8, 1997, the Court en banc issued a Resolution in Bar
Matter No. 803, declaring that the revisions in the Rules of Court were to become effective on July 1,
1997.
Accordingly, Rule 16, Section 1 of the Rules of Court, does not consider as grounds for a motion to
dismiss the allotment of the disputed land for another public purpose or the petition for a mere
easement of right-of-way in the complaint for expropriation. The grounds for dismissal are exclusive
to those specifically mentioned in Section 1, Rule 16 of the Rules of Court, and an action can be
dismissed only on a ground authorized by this provision. 26

To be exact, the issues raised by the petitioner are affirmative defenses that should be alleged in an
answer, since they require presentation of evidence aliunde. 27 Section 3 of Rule 67 provides that "if a
defendant has any objection to the filing of or the allegations in the complaint, or any objection or defense
to the taking of his property," he should include them in his answer. Naturally, these issues will have to be
fully ventilated in a full-blown trial and hearing. It would be precipitate to dismiss the Complaint on such
grounds as claimed by the petitioner. Dismissal of an action upon a motion to dismiss constitutes a denial
of due process if, from a consideration of the pleadings, it appears that there are issues that cannot be
decided without a trial of the case on the
merits. 28
Inasmuch as the 1997 Rules had just taken effect when this case arose, we believe that in the
interest of substantial justice, the petitioner should be given an opportunity to file its answer to the
Complaint for expropriation in accordance with Section 3, Rule 67 of the 1997 Rules of Civil
Procedure.
Order of Condemnation
The Court will now tackle the validity of the trial court's assailed Order of August 13, 1997, which
Respondent Court affirmed in this wise:
. . . . The denial of Robern's Motion to Dismiss [is tantamount] to a confirmation or a
determination of the authority of NPC to exercise the power of eminent domain and
the propriety of its exercise in the context of the facts involved in the case. Under
Section 4 of the present Rule 67, 1997 Rules, supra, an order sustaining the right to
expropriate the property is a final one and may be appealed by any aggrieved party
(Municipality of Bian v. Garcia, 180 SCRA 576 [1989]). . . . . . 29
We clarify. Founded on common necessity and interest, eminent domain is the inherent right of the
stare (and of those entities to which the power has been lawfully delegated) to condemn private
property to public use upon payment of just compensation. It may appear to be harsh and
encompassing, but judicial review limits the exercise of eminent domain to the following areas of
concern: (1) the adequacy of the compensation, (2) the necessity of the taking, and (3) the publicuse character of the purpose of the taking. 30
If there are objections and defenses that require the presentation of evidence and the hearing of
arguments, the trial court should not immediately issue an order of expropriation. This is clearly
implied in Section 4 of Rule 67, which mandates that "[i]f the objections to and the defenses against
the right of the plaintiff to expropriate the property are overruled, or when no party appears to defend
as required by this Rule, the court may issue an order of expropriation declaring that the plaintiff has
a lawful right to take the property sought to be expropriated, for the public use or purpose described
in the complaint. . . . ."
The Court of Appeals ruled that there were issues that required presentation of evidence during the
trial proper; namely, whether the expropriation proceeding was authorized by the NPC board of
directors, whether the property to be expropriated was already devoted to public use, and whether
the choice of the property was arbitrary and erroneous in view of the other properties available in the
area. The necessity of the taking and the public character of the purpose of the expropriation were

still in issue and pending resolution by the trial court. To these we add the issue of whether the
"taking" of the disputed property would require only an easement of right-of-way or would perpetually
deprive Robern of its proprietary rights. Therefore, the trial court should not have issued the assailed
Order of Expropriation which foreclosed any further objection to the NPC's right to expropriate and to
the public purpose of the expropriation, leaving the matter of just compensation as the only
remaining substantial issue.
The nullity of the Order was glaring. While the trial court correctly denied the Motion to Dismiss, as
the issues raised by the petitioner should be dealt with during the trial proper, it nonetheless ruled
that NPC had "the privilege as a [public] utility to use the power of eminent domain."
Second Issue
Requisite of a Writ of Possession
Petitioner objects to the issuance of the Writ of Possession for being "highly irregular, arbitrary and
despotic," because the Motion to Dismiss was yet to be resolved. It stresses that there was no
hearing on the correct amount of just compensation for the taking of the disputed property, as
required in Panes v. Visayas State College of Agriculture. 31 We cannot uphold this contention.
There is no prohibition against a procedure whereby immediate possession of the land involved in
expropriation proceedings may be taken, provided always that due provision is made to secure the
prompt adjudication and payment of just compensation to the owners. 32 However, the requirements
for authorizing immediate entry in expropriation proceedings have changed.
To start with, in Manila Railroad Company v. Paredes, 33 the Court held that the railway corporation had
the right to enter and possess the land involved in condemnation proceedings under Section 1, Act No.
1592, 34 immediately upon the filing of a deposit fixed by order of the court.
The Rules of Court of 1964 35 sanctioned this procedure as follows:
Sec. 2. Entry of plaintiff upon depositing value with National or Provincial Treasurer.
Upon the filing of the complaint or at any time thereafter the plaintiff shall have the
right to take or enter upon the possession of the real or personal property involved if
he deposits with the National or Provincial Treasurer its value, as provisionally and
promptly ascertained and fixed by the court having jurisdiction of the proceedings, to
be held by such treasurer subject to the orders and final disposition of the court. . . . .
. (emphasis ours.)
Subsequently, former President Ferdinand E. Marcos signed into law Presidential Decree No. 42 and
its companion decrees, which removed the court's discretion in determining the amount of the
provisional value of the land to be expropriated and fixed the provisional deposit at its assessed
value for taxation purposes. Hearings was not required; only notice to the owner of the property
sought to be condemned.
1wphi1.nt

On the issue of the immediate possession, PD 42 (Authorizing The Plaintiff In Eminent Domain
Proceedings To Take Possession Of The Property Involved Upon Depositing The Assessed Value,
For Purposes of Taxation) provided:
WHEREAS, the existing procedure for the exercise of the right of eminent domain is
not expeditious enough to enable the plaintiff to take or enter upon the possession of
the real property involved as soon as possible, when needed for public purposes;
xxx xxx xxx
. . . [T]hat, upon filing in the proper court of the complaint in eminent domain
proceedings or at anytime thereafter, and after due notice to the defendant, plaintiff
shall have the right to take or enter upon the possession of the real property involved
if he deposits with the Philippine National Bank, . . . an amount equivalent to the
assessed value of the property for purposes of taxation, to be held by said bank
subject to the orders and final disposition of the court.
The provisions of Rule 67 of the Rules of Court and of any other existing law contrary
to or inconsistent herewith are hereby repealed.
Paragraph 3 of PD No. 1224 (Defining The Policy On The Expropriation Of Private Property for
Socialized Housing Upon Payment Of Just Compensation) also authorized immediate takeover of
the property in this manner:
3. Upon the filing of the petition for expropriation and the deposit of the amount of
just compensation as provided for herein, the Government, or its authorized agency
or entity, shall immediately have possession, control and disposition of the real
property and the improvements thereon even pending resolution of the issues that
may be raised whether before the Court of First Instance or the higher courts.
Where the "taking" was for "socialized housing," Section 3, PD 1259 (Amending Paragraphs 1, 2,
And 3 Of PD No. 1224 Further Defining The Policy On The Expropriation Of Private Property For
Socialized Housing Upon Payment Of Just Compensation), amending the above-quoted paragraph,
provided:
Upon the filing of the petition for expropriation and the deposit of the amount of the
just compensation provided for in Section 2 hereof, the Government, or its authorized
agency or entity, shall immediately have possession, control and disposition of the
real property and the improvements thereon even pending resolution of the issues
that may be raised whether before the Court of First Instance, Court of Agrarian
Relations or the higher courts.
Similarly, Section 1, PD No. 1313 (Further Amending Paragraph 3 Of Presidential Decree No. 1224
As Amended By Presidential Decree No. 1259, Defining The Policy On The Expropriation Of Private
Property For Socialized Housing Upon Payment Of Just Compensation), amending paragraph 3 of
PD 1224, decreed:

Upon the filing of the petition for expropriation and the deposit in the Philippine
National Bank at its main office or any of its branches of the amount equivalent to ten
percent (10%) of the just compensation provided for in Section 2 of Presidential
Decree No. 1259, the government, or its authorized agency or entity, shall
immediately have possession, control and disposition of the real property and the
improvements thereon with the power of demolition, if necessary, even pending
resolution of the issues that may be raised whether before the Court of First
Instance, Court of Agrarian Relations, or the higher Courts.
In this connection, we also quote Section 7 of PD No. 1517 (Proclaiming Urban Land Reform In The
Philippines And Providing For The Implementing Machinery Thereof), which reads:
xxx xxx xxx
Upon the filing of the petition for expropriation and the deposit in the Philippine
National Bank at its main office or any of its branches of the amount equivalent to ten
per cent (10%) of the declared assessment value in 1975, the Government, or its
authorized agency or entity shall immediately have possession, control and
disposition of the real property and the improvements thereon with the power of
demolition, if necessary, even pending resolution of the issues that may be raised
whether before the Court of First Instance, Court of Agrarian Relations, or the higher
Courts.
Finally, PD 1533 (Establishing A Uniform Basis For Determining Just Compensation And The Amount
Of Deposit For Immediate Possession Of The Property Involved In Eminent Domain Proceedings)
mandated the deposit of only ten percent (10%) of the assessed value of the private property being
sought to be expropriated, after fixing the just compensation for it at a value not exceeding that
declared by the owner or determined by the assessor, whichever is lower. Section 2 thereof reads:
Sec. 2. Upon the filing of the petition for expropriation and the deposit in the
Philippine National Bank at its main office or any of its branches of an amount
equivalent to ten per cent (10%) of the amount of compensation provided in Section
1 hereof, the government or its authorized instrumentality agency or entity shall be
entitled to immediate possession, control and disposition of the real property and the
improvements thereon, including the power of demolition if necessary,
notwithstanding the pendency of the issues before the courts.
Accordingly, in San Diego v. Valdellon, 36 Municipality of Daet v. Court of Appeals, 37 and Haguisan
v. Emilia, 38 the Court reversed itself and ruled that Section 2, Rule 67 of the 1964 Rules, was repealed by
Presidential Decree No. 42. The judicial duty of ascertaining and fixing the provisional value of the
property was done away with, because the hearing on the matter had not been "expeditious enough to
enable the plaintiff to take possession of the property involved as soon as possible, when needed for
public purpose." 39
In Daet, the Court clarified that the provisional value of the land did not necessarily represent the
true and correct one but only tentatively served as the basis for immediate occupancy by the

condemnor. The just compensation for the property continued to be based on its current and fair
market value, not on its assessed value which constituted only a percentage of its current fair market
value.
However, these rulings were abandoned in Export Processing Zone Authority v. Dulay, 40 because
"[t]he method of ascertaining just compensation under the aforecited decrees constitute[d] impermissible
encroachment on judicial prerogatives. It tend[ed] to render this Court inutile in a matter which under the
Constitution [was] reserved to it for final determination." The Court added:
We return to older and more sound precedents. This Court has the duty to formulate
guiding and controlling constitutional principles, precepts, doctrines, or rules.
(See Salonga v. Cruz Pano, supra).
The determination of "just compensation" in eminent domain cases is a judicial
function. The executive department or the legislature may make the initial
determinations but when a party claims a violation of the guarantee in the Bill of
Rights that private property may not be taken for public use without just
compensation, no statute, decree, or executive order can mandate that its own
determination shall prevail over the court's findings. Much less can the courts be
precluded from looking into the "just-ness" of the decreed compensation.
In Province of Camarines Sur v. Court of Appeals, 41 the Court reaffirmed the unconstitutionality of the
presidential decrees that fixed the just compensation in an expropriation case at the value given to the
condemned property either by the owners or by the assessor, whichever was lower.
More precisely, Panes v. Visayas State College of Agriculture 42 ruled that the judicial determination of
just compensation included the determination of the provisional deposit. In that case, the Court
invalidated the Writ of Possession because of lack of hearing on the provisional deposit, as required
under then Section 2 of Rule 67, pre-1997 Rules. In the light of the declared unconstitutionality of PD
Nos. 76, 1533 and 42, insofar as they sanctioned executive determination of just compensation, any right
to immediate possession of the property must be firmly grounded on valid compliance with Section 2 of
Rule 67, pre-1997 Rules; that is, the value of the subject property, as provisionally and promptly
ascertained and fixed by the court that has jurisdiction over the proceedings, must be deposited with the
national or the provincial treasurer.43
However, the 1997 Rules of Civil Procedure revised Section 2 of Rule 67 and clearly reverted to
the San Diego,Daet and Haguisan rulings. Section 2 now reads:
Sec. 2. Entry of plaintiff upon depositing value with government depositary. Upon
the filing of the complaint or at any time thereafter and after due notice to the
defendant, the plaintiff shall have the right to take or enter upon the possession of
the real property involved if he deposits with the authorized government depositary
an amount equivalent to the assessed value of the property for purposes of
taxation to be held by such bank subject to the orders of the court. . . . .
xxx xxx xxx

After such deposit is made the court shall order the sheriff or other proper officer to
forthwith place the plaintiff in possession of the property involved and promptly
submit a report thereof to the court with service of copies to the parties. [Emphasis
ours.]
In the present case, although the Complaint for expropriation was filed on June 6, 1997, the Motion
for the Issuance of the Writ of Possession was filed on July 28, 1997; thus, the issuance of the Writ
is covered by the 1997 Rules. As earlier stated, procedural rules are given immediate effect and are
applicable to actions pending and undetermined at the time they are passed; new court rules apply
to proceedings that take place after the date of their effectivity. 44 Therefore, Section 2, Rule 67 of the
1997 Rules of Civil Procedure, is the prevailing and governing law in this case. 45
With the revision of the Rules, the trial court's issuance of the Writ of Possession becomes
ministerial, once the provisional compensation mentioned in the 1997 Rule is deposited. Thus, in the
instant case the trial court did not commit grave abuse of discretion when it granted the NPC's
Motion for the issuance of the Writ, despite the absence of hearing on the amount of the provisional
deposit.
The Court nonetheless hastens to add that PD 1533 is not being revived.
Under Section 2, Rule 67 of the 1997 Rules, the provisional deposit should be in an amount
equivalent to the full assessed value of the property to be condemned, not merely ten percent of it.
Therefore, the provisional deposit of NPC is insufficient. Since it seeks to expropriate portions, not
the whole, of four parcels of land owned by Robern, the provisional deposit should be computed on
the basis of the Tax Declarations of the property: 46
TCT No. Total Area Area Affected Assessed Provisional
in Sq. M. in Sq. M. Value Deposit
T-251558
(T-141754) 11,469.00 3,393.00 P4,250.00 P1,257.32
T-251559
(T-141755) 10,000.00 2,124.00 8,960.00 1,903.10
T-251556
(T-14152) 30,000.00 3,402.00 18,910.00 2,144.39
T-251555 45,000.00 8,827.50 18,450.00 3,619.28

TOTAL 97,371.00 17,746.50 P8,924.09

Hence, the amount of the provisional deposit should be increased in order to conform to the
requirement that it should be equivalent to the assessed value of the property. In the interest of
justice, NPC should in the meantime pay Robern reasonable rental, to be fixed by the trial court in its
final decision, for the use and occupation of the disputed property from the date of entry until the
deposit of the full assessed value of the property, as mandated by Rule 67.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in CA-GR SP-46002
are AFFIRMED with the following MODIFICATIONS: (1) petitioner is granted a period of ten days
from the finality of this Decision within which to file its answer, in accordance with Rule 67 of the
1997 Rules of Court; (2) NPC shall deposit, also within ten days from the finality if this Decision, the
full amount required under the aforecited Rule; and (3) the trial court shall, in its final decision, fix the
rental for the use and the occupation of the disputed property, from the date of NPC's entry until its
deposit of the full amount required under the 1997 Rules. No costs.
1wphi1.nt

SO ORDERED.

[G.R. No. 127064. August 31, 1999]

FIVE

STAR
BUS
COMPANY
INC.,
and
IGNACIO
TORRES, petitioners, vs. COURT OF APPEALS, JUDGE JAIME F.
BAUTISTA, RTC-Br. 75, Valenzuela, Metro Manila and SAMUEL
KING SAGARAL II, respondents.
DECISION

BELLOSILLO, J.:

The threshold issue in this petition for review on certiorari is whether the Court of Appeals
can summarily dismiss a petition on the ground that the certification on non-forum shopping
required by Supreme Court Circular No. 28-91 was signed by counsel and not by petitioners
themselves.
On 9 November 1991, at around 11:00 oclock in the evening, along the MacArthur Highway
in Valenzuela, Metro Manila, the Suzuki Supercarry Mini-Van driven by private respondent
Samuel King Sagaral II collided with a passenger bus owned and operated by petitioner Five Star
Bus Company and driven by co-petitioner Ignacio Torres.[1]
On 1 April 1992 private respondent Sagaral filed a civil action for damages against
petitioners and the case was assigned to Branch 171 of the Valenzuela Regional Trial Court and
docketed as Civil Case No. 3812-V-92.

When amicable settlement failed, trial ensued with private respondent Sagaral (plaintiff in
the court a quo) initially presenting his evidence. Several years passed and on 26 December 1996
Sagaral finally rested his case.[2] On 12 March 1996 the trial court ordered petitioners herein
(defendants in the court a quo) to present their evidence on 25 April 1996 and 9 May 1996.[3]
The presentation of evidence by petitioners was snagged by several postponements. The first
was when Presiding Judge Adriano R. Osorio reset the 25 April 1996 hearing to 9 May 1996 as
he had to go on forced vacation leave from 23 April 1996 to 25 April 1996. [4] But during the 9
May 1996 hearing, petitioner Ignacio Torres failed to appear prompting the lower court to cancel
the hearing. According to petitioners, Torres was then detained in jail due to a separate pending
criminal case filed against him by Sagaral before Br. 172 of the RTC of Valenzuela. Petitioners
further explained that Torres could not post bail earlier for his provisional liberty since no notice
was sent to him regarding the criminal complaint.[5]
On 4 June 1996 Judge Osorio ordered the civil case to be unloaded in view of his courts
designation as a permanent special court to exclusively try heinous crimes under RA 7659.[6] On
17 June 1996 the case was re-raffled to Br. 75 of the same RTC, this time under Judge Jaime F.
Bautista who immediately scheduled a hearing for the initial presentation of petitioners' evidence
on 8 August 1996.[7]Nonetheless on 9 July 1996 petitioners filed a motion to reset the hearing
scheduled on 8 August 1996 to 15 August 1996 citing as reason their counsels conflict of
schedule.[8]
It seemed however that even prior to the scheduled hearing of 8 August 1996, former
Presiding Judge Osorio had already set a hearing for 2 July 1996 and 16 July 1996. But instead
of conducting a hearing on said dates, Judge Bautista issued an order on 2 July 1996, thus -

It appearing from the records that this case had been previously set by Branch 171
today and July 16, 1996 and considering the Urgent Motion to Reset filed by the
defendants thru counsel, the hearing set for today is hereby cancelled and is reset to
July 16, 1996 as previously scheduled and August 8, 1996 both at 8:30 a.m. x x x x [9]
When the case was called for hearing on 16 July 1996, counsel for petitioners was not
present. In fact he arrived twenty (20) minutes late. Thus, upon motion of respondent Sagaral,
the trial court issued the disputed Order-

There being no certainty as to what time defendants counsel would be in court, and
upon manifestation of plaintiffs counsel that lawyer should be aware of his time x x x
as prayed for, the defendants right to present their evidence is deemed waived and the
case is now submitted for decision x x x x (underscoring supplied).[10]

Petitioners forthwith filed a motion for reconsideration of the above-mentioned Order

arguing that the right to be heard was a basic tenet guaranteed by the Constitution which the
courts could not impinge upon in the absence of any justifying reason to do so. They also blamed
the heavy traffic for their lawyer's tardiness.
To simplify the proceedings due to the various motions filed by petitioners, Judge Bautista
cancelled the 8 August 1996 hearing and reset it to 20 August 1996. He also set for hearing
petitioner's motion for reconsideration on 20 August 1996.[11]
However, as if trying to test the patience of the trial court, petitioners once again filed on 5
August 1996 an Urgent Motion to Reset the 20 August 1996 hearing. Their counsel pleaded that
he could not make it on such date because he had previously committed himself to appear before
the Antipolo Regional Trial Court. He prayed that the hearing be moved to 2 September 1996.[12]
The hearing set for 20 August 1996 was cancelled [13] and the trial court on that day issued
instead its Order denying petitioners' motion for reconsideration of its Order dated 16 July 1996
which considered the case submitted for resolution. The lower court noted that the case had been
pending for more than four (4) years and it had always been at the "mercy" of petitioners when it
acted favorably on their motions. There would be no end to this litigation if the court would give
due course to this motion.[14]
Undeterred, petitioners sought recourse in the Court of Appeals through a petition
for certiorari. But in the assailed Resolution dated 23 September 1996 the appellate court
summarily dismissed their petition on the ground that the affidavit of non-forum shopping was
signed and executed by counsel for petitioners and not by petitioners themselves, or one of them,
as required by Circular No. 28-91 of the Supreme Court.[15]
Petitioners moved for reconsideration which the Court of Appeals rejected in its Resolution
of 31 October 1996.[16] Petitioners are now before us contending that the appellate court erred in
affirming the Order of the trial court dated 16 July 1996 and in dismissing their petition for noncompliance with the requirement of Circular No. 28-91. They pray that the appellate court
remand the case to the court of origin for further proceedings.
Circular No. 28-91, which took effect on 1 April 1994, provides inter alia:

(1) (I)n every petition filed with the Supreme Court or the Court of Appeals, the
petitioner, aside from complying with the pertinent provisions of the Rules of Court
and existing circulars, must certify under oath all of the following facts or
undertakings x x x x;

(2) Any violation of this revised Circular will entail the following sanctions: (a) it
shall be a cause for the summary dismissal of the multiple petitions or complaints; x x
x x (underscoring supplied).
Circular No. 28-91 has its roots in the rule that a party-litigant shall not be allowed to pursue
simultaneous remedies in two (2) different fora, for such practice works havoc upon orderly
judicial procedure. Forum shopping has been characterized as an act of malpractice that is
prohibited and condemned as trifling with the courts and abusing their processes. It constitutes
improper conduct which tends to degrade the administration of justice. It has also been aptly
described as deplorable because it adds to the congestion of the already heavily burdened dockets
of the courts.[17]
Nonetheless, we are not unmindful of this Courts ruling in Gabionza v. Court of Appeals,
Loyola v. Court of Appeals,[19] and Kavinta v. Castillo, Jr.[20] that substantial compliance with
Circular No. 28-91 is sufficient:
[18]

It is scarcely necessary to add that Circular No. 28-91 must be so interpreted and
applied to achieve the purposes projected by the Supreme Court when it promulgated
that circular. Circular No. 28-91 was designed to serve as an instrument to promote
and facilitate the orderly administration of justice and should not be interpreted with
such absolute literalness as to subvert its own ultimate and legitimate objective or the
goal of all rules of procedure which is to achieve substantial justice as expeditiously
as possible.
The fact that the Circular requires that it be strictly complied with merely underscores
its mandatory nature in that it cannot be dispensed with or its requirements altogether
disregarded, but it does not thereby interdict substantial compliance with its
provisions under justifiable circumstances.
In the instant case, we cannot apply the "substantial compliance" rule to petitioners and be as
liberal minded. For one thing, counsel for petitioners gave a rather frail excuse for his noncompliance, i.e., oversight and haste in ensuring that the petition would be filed at the earliest
possible time for the protection of his clients interests thereby overlooking the aforesaid circular.
[21]

In Ortiz v. Court of Appeals[22] which involves a similar set of facts, we ruled -

(I)t should be recalled that Revised Circular No. 28-91 provides that the party must
certify under oath that he has not commenced any other action or proceeding

involving the same issues in the Supreme Court, the Court of Appeals, or different
Divisions thereof, or any other tribunal or agency, and that to the best of his
knowledge, no such action or proceeding is pending in the Supreme Court x x x x
Petitioners admit that their lawyer x x x signed the Certification on Non-Forum
Shopping. Allegedly, Atty. Paulite has personal knowledge that the Ortizes had not
commenced any other action or proceeding involving the same parties and causes of
action. Petitioners now assert that their lawyers signature must be accepted as
substantial compliance with the requirements of the Circular.
Regrettably, we find that substantial compliance will not suffice in a matter involving
strict observance as provided for in Circular No. 28-91. The attestation contained in
the certification on non-forum shopping requires personal knowledge by the party
who executed the same. To merit the Courts consideration, petitioners here must show
reasonable cause for failure to personally sign the certification. The petitioners must
convince the court that the outright dismissal of the petition would defeat the
administration of justice. However, the petitioners did not give any explanation to
warrant their exemption from the strict application of the rule utter disregard of the
rules cannot justly be rationalized by harking on the policy of liberal construction x x
xx
Finally, petitioners argue that the delay in the proceedings in the court below was not
entirely their fault "as various circumstances and incidents beyond (their) control contributed to
the delay."[23]
Contrary to petitionerss assertions, their failure to present their evidence was their own
undoing. A review of the records shows that the trial court had scheduled a total of six (6)
hearing dates for the presentation of their evidence. These were 25 April 1996, 9 May 1996, 2
July 1996, 16 July 1996, 8 August 1996 and 20 August 1996. Five (5) of these trial dates were
cancelled at the instance of petitioners. They themselves admitted that the 9 May 1996 hearing
was postponed when Isagani Torres failed to appear in court because he was then
incarcerated. Likewise, through a motion petitioners were able to have the hearing on 2 July
1996 moved to 16 July 1996. However on said date petitioners counsel failed to appear on time,
thus prompting the trial court to declare petitioners right to present evidence as waived. As to the
8 August 1996 hearing, they moved to have the same reset, citing as reason the conflict of
schedule of their counsel. And when the trial court granted the motion and transferred the
hearing to 20 August 1996, petitioners once again submitted a motion praying that the hearing be
reset to 2 September 1996. From these repeated resettings, it can be gleaned that the delay in the
proceedings was largely, if not mainly, due to petitioners.

We also do not miss the fact that petitioners were represented by a law firm which meant
that any of its members could lawfully act as their counsel during the trial. As such petitioners
frequent motions to reset hearings by reason of their counsels unavailability should be cautiously
considered to make sure that these were not mere dilatory tactics. As observed by the lower
court, a perusal of the records shows that the case has been pending for a long period of time,
with the court often accommodating petitioners. Thus there could be no grave abuse of discretion
when the trial court finally ordered petitioners right to present evidence as waived to put an end
to their foot dragging. Indeed, it is never too often to say that justice delayed is justice denied.
WHEREFORE, there being no reversible error committed by the Court of Appeals, the
petition for review on certiorari is DENIED and the assailed Resolution of 23 September 1996
summarily dismissing the petition for certiorari and the Resolution of 31 October 1996 denying
reconsideration are AFFIRMED. Consequently, the Regional Trial Court of Valenzuela, Metro
Manila, is DIRECTED forthwith to render its decision in Civil Case No. 3812-V-92 without
delay. Costs against petitioners.
SO ORDERED.

[G.R. No. 110086. July 19, 1999]

PARAMOUNT INSURANCE CORPORATION, petitioner, vs. COURT OF
APPEALS and DAGUPAN ELECTRIC CORPORATION, respondents.
DECISION
YNARES-SANTIAGO, J.:

Before this Court is a petition for review on certiorari assailing the Decision of the Court of
Appeals dated April 30, 1993 in CA-G.R. CV No. 11970 which dismissed petitioner Paramount
Insurance Corporations (PARAMOUNT) appeal, thereby affirming the decision of the court a
quo finding petitioner liable on its injunction bond.
McAdore Finance and Investment, Inc. (McADORE) was the owner and operator of the
McAdore International Palace Hotel in Dagupan City. Private respondent Dagupan Electric
Corporation (DECORP), on the other hand, was the grantee of a franchise to operate and
maintain electric services in the province of Pangasinan, including Dagupan City.
On February 2, 1978, McADORE and DECORP entered into a contract whereby DECORP
shall provide electric power to McADOREs Hotel. During the term of their contract for power

service, DECORP noticed discrepancies between the actual monthly billings and the estimated
monthly billings of McADORE. Upon inspection, it was discovered that the terminal in the
transformers connected to the meter had been interchanged resulting in the slow rotation of the
meter. Consequently, DECORP issued a corrected bill but McADORE refused to pay. As a result
of McADOREs failure and continued refusal to pay the corrected electric bills, DECORP
disconnected power supply to the hotel on November 27, 1978.
Aggrieved, McADORE commenced a suit against DECORP for damages with prayer for a
writ of preliminary injunction. McADORE posted injunction bonds from several sureties, one of
which was herein petitioner PARAMOUNT, which issued an injunction bond on July 7, 1980
with a face amount of P500,000.00. Accordingly, a writ of preliminary injunction was issued
wherein DECORP was ordered to continue supplying electric power to the hotel and restrained
from further disconnecting it.
After due hearing, the Regional Trial Court of Quezon City, Branch 106, rendered judgment
in favor of DECORP, the dispositive portion of which reads:

WHEREFORE, there being preponderance of evidence, the court hereby dismisses the
amended complaint. Further, the court rescinds the service contract between the
parties, and orders McAdore to pay Decorp the following:
1. Actual damages consisting of total arrearages for electric services rendered from February
1978 to January 1983, in the sum of P3,834,489.62, plus interest at the legal rate, computed
from the date of demand until full payment;
2. Moral damages in the sum of P600,000.00;
3. Exemplary damages in the sum of P400,000.00;
4. Attorneys fees in the sum of P100,000.00; and
5. Costs of the suit.

While this case was under litigation, the court issued a number of restraining orders or
injunctions. During these incidents, McAdore filed the following bonds: Policy No.
8022709 by Paramount Insurance Corporation for P500,000.00; No. 00007 and No.
00008 by Sentinel Insurance Company, Inc. for P100,000.00 and P50,000.00; and No.
1213 by the Travelers Multi-Indemnity Corporation for P225,000.00.

Pursuant to the dispositive portion of this decision, the court holds that these bonding
companies are jointly and severally liable with McAdore, to the extent of the value of
their bonds, to pay the damages adjudged to Decorp.
Send this decision to: plaintiffs counsel Atty. Pagapong; defendants counsel Atty. Vera
Cruz; and to each of the bondsman.
It is so ordered.[1]
McADORE did not appeal the above decision. PARAMOUNT, however, appealed to the
Court of Appeals assigning the following errors, to wit:
I. APPELLANT SURETY WAS NOT GRANTED DUE PROCESS NOR GIVEN ITS DAY IN
COURT.
II. APPELLANTS SURETY BOND, BEING AN INJUNCTION OR TEMPORARY
RESTRAINING ORDER BOND, THE MANDATORY PROCEDURE IN SEC. 20, RULE
57, IN RELATION TO SEC. 9, RULE 58, RULES OF COURT WAS NOT OBSERVED IN
THIS CASE;
III. NO EVIDENCE NOR PROOF HAD BEEN PRESENTED TO SHOW THAT HEREIN
APPELLANT SURETY BOND SHOULD BE HELD LIABLE FOR TOTAL DAMAGES
AS ADJUDGED IN THE CHALLENGED DECISION.[2]

In essence, PARAMOUNT contended that it was not given its day in court because it was
not notified by DECORP of its intention to present evidence of damages against its injunction
bond, as mandated by Sec. 9 of Rule 58, in relation to Sec. 20 of Rule 57 of the Revised Rules of
Court.
The Court of Appeals was not convinced with petitioners contentions. On April 30, 1993, it
affirmed the decision of the trial court.
In the instant petition, PARAMOUNT seeks to reverse and set aside the decision of the
Court of Appeals on the following assignment of errors:

FIRSTLY, THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT

NOTICE TO PETITIONER AND ITS PRESENCE THROUGH COUNSEL IN ONE
HEARING WHERE NO EVIDENCE IN SUPPORT OF THE DAMAGES
GUARANTEED BY PETITIONERS BOND RENDERS THE NEED FOR
ANOTHER HEARING ON THAT MATTER A SUPERFLUITY.

SECONDLY, THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING

THE DECISION OF THE COURT A QUO THAT PETITIONER IS JOINTLY AND
SEVERALLY LIABLE WITH McADORE TO THE EXTENT OF ITS BOND,
WHICH DECISION IS NOT SUPPORTED BY THE EVIDENCE.[3]
PARAMOUNT asserts that (t)he bone of contention in the instant case is the matter of
evidence (or lack thereof) presented by private respondent during the hearing of the case a quo,
notice (or lack thereof) to the surety relative to the proceedings before the court a quo during
which said evidence was presented, as well as the actual proceedings themselves.
[4]
PARAMOUNT further asseverates that no evidence relative to damages suffered by private
respondent as a result of the injunction was ever presented, or that if any such evidence was
presented, the same was done without notice to petitioner and in violation of its right to due
process.[5] Moreover, petitioner maintains that the injunction bond was issued and approved
sometime in April 1980 to guarantee actual and material damages as may be sustained and duly
proved by private respondent. Thus, it can only cover the period prospectively from the date of
its issuance and does not retroact to the date of the initial controversy.
In its Comment, DECORP claims that PARAMOUNT participated in the proceedings and
was given its day in court. This is evidenced by the Notice of Hearing dated February 26, 1985
addressed to the three sureties. In fact, at the hearing on March 22, 1985, PARAMOUNT was in
attendance represented by Atty. Nonito Q. Cordero. Likewise, PARAMOUNT was notified of the
next hearing scheduled for April 26, 1985. DECORP further stressed that the hearing on April
26, 1985 proceeded as scheduled without any comment, objection, opposition or reservation
from PARAMOUNT.
The core issue to be resolved here is whether or not petitioner Paramount Insurance
Corporation was denied due process when the trial court found the injunction bond it issued in
favor of McADORE liable to DECORP. Stated otherwise, was there sufficient evidence to
establish the liability of the petitioner on its injunction bond?
The petition is devoid of merit.
Petitioners submissions necessitates going into the nature of an injunction as well as over the
procedure in claiming, ascertaining and awarding damages upon the injunction bond.
Injunction is an extraordinary remedy calculated to preserve the status quo of things and to
prevent actual or threatened acts violative of the rules of equity and good conscience as would
consequently afford an injured party a cause of action resulting from the failure of the law to
provide for an adequate or complete relief. [6] A preliminary injunction is an order granted at any
stage of an action or proceeding prior to the judgment or final order, requiring a party or a court,
agency or a person to refrain from a particular act or acts. It may also require the performance of

a particular act or acts, in which case it shall be known as a preliminary mandatory injunction.
[7]
Its sole purpose is not to correct a wrong of the past, in the sense of redress for injury already
sustained, but to prevent further injury.[8]
A preliminary injunction or temporary restraining order may be granted only when, among
others, the applicant, unless exempted by the court, files with the court where the action or
proceeding is pending, a bond executed to the party or person enjoined, in an amount to be fixed
by the court, to the effect that the applicant will pay such party or person all damages which he
may sustain by reason of the injunction or temporary restraining order if the court should finally
decide that the applicant was not entitled thereto. Upon approval of the requisite bond, a writ of
preliminary injunction shall be issued.[9] At the trial, the amount of damages to be awarded to
either party, upon the bond of the adverse party, shall be claimed, ascertained, and awarded under
the same procedure prescribed in Section 20 of Rule 57.[10]
Rule 57, Section 20, of the 1997 Rules of Civil Procedure, which is similarly applicable to
preliminary injunction, pertinently provides:

Sec. 20. Claim for damages on account of improper, irregular or excessive

attachment. - An application for damages on account of improper, irregular or
excessive attachment must be filed before the trial or before appeal is perfected or
before the judgment becomes executory, with due notice to the attaching obligee or
his surety or sureties, setting forth the facts showing his right to damages and the
amount thereof. Such damages may be awarded only after proper hearing and shall be
included in the judgment on the main case.
If the judgment of the appellate court be favorable to the party against whom the
attachment was issued, he must claim damages sustained during the pendency of the
appeal by filing an application in the appellate court with notice to the party in whose
favor the attachment was issued or his surety or sureties, before the judgment of the
appellate court becomes executory. The appellate court may allow the application to
be heard and decided by the trial court.
Nothing herein contained shall prevent the party against whom the attachment was
issued from recovering in the same action the damages awarded to him from any
property of the attaching obligee not exempt from execution should the bond or
deposit given by the latter be insufficient or fail to fully satisfy the award. (mutatis
mutandis)

The above rule comes into play when the plaintiff-applicant for injunction fails to sustain his
action, and the defendant is thereby granted the right to proceed against the bond posted by the
former. In the case at bench, the trial court dismissed McADOREs action for damages with
prayer for writ of preliminary injunction and eventually adjudged the payment of actual, moral,
and exemplary damages against plaintiff-applicant. Consequently, private respondent DECORP
can proceed against the injunction bond posted by plaintiff-applicant to recover the damages
occasioned by the issuance by the trial court of the writ of injunction.
In order for the injunction bond to become answerable for the above-described damages, the
following requisites must concur:[11]
1. The application for damages must be filed in the same case where the bond was issued;
2. Such application for damages must be filed before the entry of judgment; and
3. After hearing with notice to the surety.

The records of this case reveal that during its pendency in the trial court, DECORP filed its
Answer raising compulsory counterclaims for rescission of contract, moral damages, exemplary
damages, attorneys fees and litigation expenses.[12] During the trial, Atty. Nonito Cordero
appeared[13] as counsel for petitioner. PARAMOUNT as well as the other sureties were properly
notified of the hearing and given their day in court. Specifically, notice was sent to Atty. Cordero
of the hearing on April 27, 1985, which was set for the purpose of determining the liability of the
sureties. The counterclaims for damages of DECORP were proven at the trial and yet
PARAMOUNT did not exert any effort to controvert the evidence presented by DECORP. Given
these circumstances, PARAMOUNT cannot hide under the cloak of non-liability on its
injunction bond on the mere expediency that it was deprived of due process. It bears stressing
that what the law abhors is not the absence of previous notice but rather the absolute lack of
opportunity to ventilate a partys side.[14] In other words, petitioner cannot successfully invoke
denial of due process where it was given the chance to be heard. As aptly held by the Court of
Appeals,viz.:

The records of the case disclose that during the trial of the case, PARAMOUNT was
present and represented by its counsel Atty. Nonito Q. Cordero as shown in the trial
courts order dated March 22, 1985 (Annex A of Appellees Brief). In the said order,
PARAMOUNT was duly notified of the next hearing which was scheduled on April
26, 1985. Evidently, PARAMOUNT was well-apprised of the next hearing and it
cannot feign lack of notice. Having been given an opportunity to be heard during the
main hearing for the matter of damages, PARAMOUNT therefore, cannot bewail that
it was not given an opportunity to be heard upon denial of its motion to cancel its

injunction bond. Of what use, therefore, is there to conduct another hearing when the
issue of damages has been the subject of the main action of which PARAMOUNT had
been duly notified? A new notice and hearing prescribed by Sec. 20, Rule 57, is
therefore a repetition and a superfluity.
Moreover, PARAMOUNT has only itself to blame when it did not make any
opposition or objection during the hearing for the reception of DECORPs
evidence. Having manifested its desire to cancel its bond, it should have asked for a
deferment of hearing on DECORPs evidence but PARAMOUNT did not do anything
of this sort. Only when an adverse judgment was rendered by the trial court against its
principal McAdore did it whimper a denial of procedural due process. [15]
On the same point, PARAMOUNT argues that contrary to the ruling of the Court of
Appeals, there is a need for a separate hearing for the purpose of presenting evidence on the
alleged damages claimed by DECORP on petitioners injunction bond. PARAMOUNT contends
that a separate hearing is needed as no evidence dealing with DECORPs claim for damages on
petitioners bond was presented during the hearing wherein petitioners counsel attended nor in the
next hearing wherein petitioner was notified but failed to attend. Since no hearing was held for
the purpose of establishing its liability on the injunction bond, PARAMOUNT concludes that it
is released from its obligation as surety.
Contrary to petitioners thesis, it is neither mandatory nor fatal that there should be
a separate hearing in order that damages upon the bond can be claimed, ascertained and awarded,
as can be gleaned from a cursory reading of the provisions of Rule 57, Section 20. This Court
agrees with the appellate courts ruling that:

Jurisprudential findings laid down the doctrine that a final adjudication that the
applicant is not entitled to the injunction does not suffice to make the surety liable. It
is necessary, in addition, that the surety be accorded due process, that is, that it be
given an opportunity to be heard on the question of its solidary liability for damages
arising from a wrongful injunction order. Withal, the fact that the matter of damages
was among the issues tried during the hearings on the merits will not render
unnecessary or superfluous a summary hearing to determine the extent of a suretys
liability unless of course, the surety had been impleaded as a party, or otherwise
earlier notified and given opportunity to be present and ventilate its side on the
matter during the trial.
The exception under the doctrinal ruling abovenoted is extant in the case at bar.[16]

What is necessary only is for the attaching party and his surety or sureties to be duly notified
and given the opportunity to be heard. In the case at bench, this Court accords due respect to the
factual finding of the Court of Appeals that PARAMOUNT was present and represented by its
counsel Atty. Nonito Q. Cordero as shown in the trial courts order dated March 22, 1985 x x x.[17]
As stated, PARAMOUNT also argues that assuming it is liable on its injunction bond, its
liability should be limited only to the amount of damages accruing from the time the injunction
bond was issued until the termination of the case, and not from the time the suit was
commenced. In short, it claims that the injunction bond is prospective and not retroactive in
application.
This Court does not agree. Rule 58, Section 4(b), provides that a bond is executed in favor
of the party enjoined to answer for all damages which he may sustain by reason of the
injunction. This Court already had occasion to rule on this matter in Mendoza v. Cruz,[18] where it
held that (t)he injunction bond is intended as a security for damages in case it is finally decided
that the injunction ought not to have been granted. It is designed to cover all damages which the
party enjoined can possibly suffer. Its principal purpose is to protect the enjoined party
against loss or damage by reason of an injunction. No distinction was made as to when the
damages should have been incurred.
Moreover, when petitioner issued its injunction bond in favor of DECORP, it was done with
the full knowledge of the relevant facts obtaining in the controversy between DECORP and
McADORE. At the time the injunction bond was issued, DECORP was already claiming arrears
in electric bills and damages from McADORE.
It bears stressing that McADORE was found liable to pay actual damages, moral damages,
exemplary damages, attorneys fees and costs of the suit. To argue therefore that PARAMOUNT
is only liable on its injunction bond from the time of its issuance and not from the time the suit
was commenced is preposterous if not absurd. Indeed, it would be impossible to determine the
reckoning point when moral damages, exemplary damages, attorneys fees and costs of the suit
were supposed to have been incurred. Consequently, it can be safely deduced that the bond
answers for any and all damages arising from the injunction, regardless of whether it was
sustained before or after the filing of the injunction bond.
PARAMOUNT further maintains that it is liable to pay actual damages only. [19] However,
Rule 58, Section 4(b), clearly provides that the injunction bond is answerable for all damages.
The bond insures with all practicable certainty that the defendant may sustain no ultimate loss in
the event that the injunction could finally be dissolved. Consequently, the bond may obligate the
bondsmen to account to the defendant in the injunction suit for all: (1) such damages; (2) costs
and damages; (3) costs, damages and reasonable attorneys fees as shall be incurred or sustained
by the person enjoined in case it is determined that the injunction was wrongfully issued. [20] Thus,

PARAMOUNT is liable, jointly and severally, for actual damages, moral damages, exemplary
damages, attorneys fees and costs of the suit, to the extent of the amount of the bond.
Be that as it may, a scrutiny of petitioners Indemnity Agreement [21] with McADORE shows
that the former agreed to become surety for the stated amount in favor of Dagupan Electric Corp.
It should be noted that McADORE was already in arrears starting from June 1979 [22] up to the
time it entered into an Indemnity Agreement with PARAMOUNT on July 17, 1980.
It may not be amiss to point out that by the contract of suretyship, it is not for the obligee to
see to it that the principal pays the debt or fulfills the contract, but for the surety to see to it that
the principal pay or perform.[23] The purpose of the injunction bond is to protect the defendant
against loss or damage by reason of the injunction in case the court finally decides that the
plaintiff was not entitled to it, and the bond is usually conditioned accordingly. Thus, the
bondsmen are obligated to account to the defendant in the injunction suit for all damages, or
costs and reasonable counsels fees, incurred or sustained by the latter in case it is determined that
the injunction was wrongfully issued.[24]
The posting of a bond in connection with a preliminary injunction (or attachment under Rule
57, or receivership under Rule 59, or seizure or delivery of personal property under Rule 60)
does not operate to relieve the party obtaining an injunction from any and all responsibility for
the damages that the writ may thereby cause. It merely gives additional protection to the party
against whom the injunction is directed. It gives the latter a right of recourse against either the
applicant or his surety, or against both.[25] In the same manner, when petitioner PARAMOUNT
issued the bond in favor of its principal, it undertook to assume all the damages that may be
suffered after finding that the principal is not entitled to the relief being sought.
WHEREFORE, based on the foregoing, the instant petition is DENIED. The decision of
the Court of Appeals dated April 30, 1993 in CA-G.R. CV No. 11970 is AFFIRMED. With costs.
SO ORDERED.

[G.R. No. 139283. November 15 , 2000]

ALLEN LEROY HAMILTON, petitioner, vs. DAVID LEVY and FE
QUITANGON, respondents.
DECISION
YNARES-SANTIAGO, J.:

The instant petition for review seeks to set aside the April 16, 1999 Decision of the
Court of Appeals in CA-G.R. SP No. 48299 which ordered the Regional Trial Court of
Angeles City, Branch 57, to dismiss Civil Case No. 8696. Also challenged is the June
30, 1999 Resolution of the Court of Appeals denying petitioners Motion for
Reconsideration.
[1]

[2]

The case commenced on June 30, 1997 with the filing by petitioner of a complaint
for sum of money and damages, with prayer for preliminary attachment against
respondents and one Pablo de Borja with the Regional Trial Court of Angeles,
Pampanga.
On July 14, 1997, the trial court issued an Order for the issuance of a writ of
preliminary attachment. The Writ of Preliminary Attachment was issued on July 15,
1997. On the strength of said Writ, the court sheriff levied on a Cherokee 180 Piper
aircraft, allegedly owned by respondent David Levy. The corresponding Sheriffs Return,
dated November 11, 1997, manifested that the sheriff (1) personally served summons
and a copy of the writ of preliminary attachment to respondents, through Mercita S.
Reyes and Ramon Araneta, secretaries of W.E.L. Phils., Inc., at Subic Bay Freeport
Zone, Olongapo City, the address of respondents stated in the complaint; and (2) levied
on the aforementioned aircraft on October 30, 1997.
On December 3, 1997, Ramon Araneta filed an Affidavit of Third-Party Claim
asserting ownership of the levied aircraft by virtue of a sale from W.E.L. Phils., Inc.,
represented by respondent Levy, on June 19, 1997.
Meanwhile, on November 17, 1997, petitioner filed a Motion to Declare Defendants
in Default for failure to file any responsive pleading within the reglementary period. This
was granted by the trial court in its Order dated February 20, 1998. Accordingly,
petitioner proceeded with the presentation of evidence ex parte at a hearing held on
April 3, 1998.
[3]

Prior to the presentation of evidence, however, or on March 26, 1998, respondents

counsel filed a Special Appearance to Question the Jurisdiction of the trial court. When
no action was made on the Special Appearance, respondents filed a Petition for
Certiorari with the Court of Appeals on July 16, 1998.
While the petition for certiorari was pending before the Court of Appeals,
proceedings before the trial court continued with the filing by petitioner of Formal Offer
of Exhibits and Motion for Leave to Sell Attached Property Pending Entry of
Judgment. According to petitioner, the levied aircraft was just sitting idly in the hangar,
deteriorating, depreciating and accumulating rust. To this, respondents filed a

Supplemental Manifestation, informing the trial court of a pending case for Replevin
and/or Annulment of the Writ of Preliminary Attachment filed by the alleged vendee of
the aircraft, Ramon Araneta, before Branch 72 of the Olongapo Regional Trial Court.
On April 16, 1999, the Court of Appeals issued the assailed Decision granting the
Petition and ordering the dismissal of Civil Case No. 8696 without prejudice, on its
finding that summons was not validly served upon respondents, hence, the trial court
never assumed jurisdiction over their persons. With the denial of the Motion for
Reconsideration on June 30, 1999, petitioner now comes to this Court with the following
assignment of errors
1

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN GRANTING
THE RESPONDENTS PETITION FOR CERTIORARI THAT WAS FILED
BEYOND THE SIXTY (60) DAY-PRESCRIBED PERIOD.
2

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION FOR NOT
OBSERVING THE REQUIREMENTS OF PLAIN, SPEEDY AND ADEQUATE
REMEDY IN THE ORDINARY COURSE OF LAW BEFORE GRANTING THE
RESPONDENTS PETITION FOR CERTIORARI.
3

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN GRANTING
THE RESPONDENTS PETITION FOR CERTIORARI EVEN IF THE
CERTIFICATION AGAINST NON-FORUM SHOPPING WAS EXECUTED BY
ONE WHO WAS NOT A PARTY TO THE CASE.
4

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DISMISSING CIVIL CASE
NO. 8696 EVEN IF THE RESPONDENTS, PARTICULARLY DAVID LEVY, HAVE
ACTUAL KNOWLEDGE OF THE FILING OF THE SAID CIVIL CASE NO. 8696.
[4]

In support of the first assigned error, petitioner points out that the assailed February
20, 1998 Order of the trial court was received by respondents on March 23, 1998 while
the Petition for Certiorari was filed only four (4) months thereafter, or on July 16,
1998. Under Rule 65, Section 4 of the 1997 Rules of Civil Procedure, petitions for
certiorari should be filed within sixty (60) days from notice of the assailed Order. In the
case at bar, respondents point out that they were no longer holding office at the address
where summons and the questioned Order were served. Precisely, the issue in the
instant Petition is the propriety of the service of summons made upon respondents at
said address. If summons is found to have been improperly served, then the 60-day
reglementary period did not commence to run upon service of the questioned Order at
that address.
Petitioner next argues that the Court of Appeals should not have given due course
to the Petition for Certiorari filed by respondents, in view of the failure of respondents to
file the required Motion for Reconsideration before the trial court. Petitioner claims that
the relief of certiorari was premature since respondents could have still filed a Motion to
Lift Order of Default.
We disagree. Had respondents filed either a Motion for Reconsideration or Motion
to Lift Order of Default, there was a danger that they might be deemed to have
voluntarily submitted their persons to the jurisdiction of the court, when it was precisely
said jurisdiction that they were questioning. Besides, the rule that a motion for
reconsideration is required before the filing of a petition for certiorari admits of
exceptions, among which is where the controverted act is patently illegal or was
performed without jurisdiction or in excess of jurisdiction. Again, what is being assailed
in this case is the lack of jurisdiction of the trial court over the persons of the
respondents, due to improper service of summons.
[5]

Petitioner maintains that respondents had voluntarily submitted to the jurisdiction of

the trial court when they filed the Supplemental Manifestation to the effect that Ramon
Araneta, the alleged vendee of the aircraft levied upon, had filed a complaint before
Branch 72 of the Olongapo Regional Trial Court for Replevin and/or Annulment of the
Writ of Preliminary Attachment issued by the court a quo in Civil Case No.
8696. According to petitioner, the Supplemental Manifestation was actually an
opposition to the Motion for Leave to Sell Attached Property they filed with the trial
court.
The records show, however, that respondents filed the Supplemental Motion on
August 7, 1998, almost a month after they filed the petition for certiorari before the Court
of Appeals. It was preceded by a Special Appearance to Question the Jurisdiction of this
Honorable Court, dated March 26, 1998, and by a Manifestation, dated August 5, 1998,
[6]

informing the trial court of the pendency of the petition for certiorari assailing the courts
jurisdiction over their persons. In other words, when the Supplemental Motion was filed,
it was made clear that respondents were questioning and continuing to question the
jurisdiction of the trial court. At any rate, the Supplemental Manifestation did not seek
any direct affirmative relief from the trial court.
[7]

Petitioner also alleges that the certification on non-forum shopping attached to

respondents Petition was prepared not by respondents but by one Teresita Torres, who
was not a party to the suit either before the trial court or the certiorari proceedings in the
Court of Appeals.
Rule 7, Section 5 of the 1997 Rules of Civil Procedure clearly provides that the
certification must be executed by the principal party, which in this case are respondents
David Levy and Fe Quitangon. This is so because the attestation contained in the
certification on non-forum shopping requires personal knowledge by the party
executing. To merit the Courts consideration, respondents must show good reasons for
failure of the proper party to personally sign the certification. They must convince the
court that the outright dismissal of the petition would defeat the administration of justice.
In the case at bar, respondents explained that they were both abroad when the
petition for certiorari was filed with the Court of Appeals. This is reasonable cause to
exempt them from compliance with the requirement that they personally execute the
certification. Moreover, to dismiss their petition for certiorari on this sole ground would
deny them the opportunity to question the lack of jurisdiction of the trial court over their
persons.
[8]

[9]

Finally, we come to the main issue of this petition, which is whether or not summons
was properly served upon respondents.
Pertinent is Rule 14 of the 1997 Rules of Civil Procedure, particularly Sections 6
and 7, which respectively provide as follows --

SEC. 6. Service in person on defendant. Whenever practicable, the summons

shall be served by handing a copy thereof to the defendant in person, or, if he
refuses to receive and sign for it, by tendering it to him.
SEC. 7. Substituted service. If, for justifiable causes, the defendant cannot be
served within a reasonable time as provided in the preceding section, service
may be effected (a) by leaving copies of the summons at the defendants
residence with some person of suitable age and discretion then residing

therein, or (b) by leaving the copies at defendants office or regular place of

business with some competent person in charge thereof.
These modes of service should be strictly followed in order that the court may
acquire jurisdiction over the person. It is only when a defendant cannot be served
personally within a reasonable time that substituted service may be made.
[10]

The Sheriffs Return reads

RESPECTFULLY RETURNED to the Honorable Court of origin the herein

attached original copy of the Writ of Preliminary Attachment as well as the
original of the Summons issued on July 15, 1997 in the above-entitled case,
duly served/partially implemented.
On September 5, 1997, the undersigned personally effected the service of the
copies of the summons and the Writ of Preliminary Attachment upon the
defendants, thru the Secretaries at their Office (W.E.L. Phil., Inc.) by the
names of Mercita S. Reyes and Ramon Araneta.
x x x x x x x x x.

[11]

A perusal of the aforementioned Return clearly shows that there was no reason why
personal service could not be effected. The impossibility of prompt, personal service
should be shown by stating in the proof of service that efforts were made to serve the
defendant personally and that said efforts failed, hence the resort to substituted
service. The pertinent facts and circumstances attendant to the service of summons
must be stated in the proof of service or Officers Return; otherwise, any substituted
service made in lieu of personal service cannot be upheld. This is necessary because
substituted service is in derogation of the usual method of service. It is a method
extraordinary in character and hence may be used only as prescribed and in the
circumstances authorized by statute. Here, no such explanation was made. Failure to
faithfully, strictly, and fully comply with the requirements of substituted service renders
said service ineffective.
[12]

[13]

[14]

In this connection, we issued Administrative Circular No. 59 on November 19,

1989 to stress the importance of strict compliance with the requisites for a valid
substituted service.
[15]

Petitioners insistence that we accord the presumption of regularity in the service of

summons on respondents must likewise fail. The presumption of regularity finds no

application in the case at bar. There must be, at the very least, compliance with the
procedure outlined in the policy. This is especially true in the instant case where the
duty to be performed has a direct bearing on the acquisition of jurisdiction of the trial
court over the persons of the respondents.
[16]

All told, we find no reason to set aside the Decision challenged, which ordered the
dismissal of Civil Case No. 8696 without prejudice on the ground of improper service of
summons.
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals in CAG.R. SP No. 48299 is AFFIRMED in toto.
SO ORDERED.

REPUBLIC OF THE PHILIPPINES, G.R. No. 149576

represented by the Land
Registration Authority,
Petitioner, Present:
PUNO, J., Chairman,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ.

KENRICK DEVELOPMENT
CORPORATION,
Respondent. Promulgated:

August 8, 2006

x------------------------------------------x

DECISION
CORONA, J.:

The Republic of the Philippines assails the May 31, 2001

decision[1] and August 20, 2001 resolution of the Court of Appeals
in CA-G.R. SP No. 52948 in this petition for review under Rule 45 of
the Rules of Court.

This case stemmed from the construction by respondent Kenrick

Development Corporation of a concrete perimeter fence around
some parcels of land located behind the Civil Aviation Training
Center of the Air Transportation Office (ATO) in 1996. As a result,
the ATO was dispossessed of some 30,228 square meters of prime
land. Respondent justified its action with a claim of ownership over
the property. It presented Transfer Certificate of Title (TCT) Nos.
135604, 135605 and 135606 issued in its name and which

allegedly originated from TCT No. 17508 registered in the name of

one Alfonso Concepcion.

ATO verified the authenticity of respondents titles with the

Land Registration Authority (LRA). On May 17, 1996, Atty. Jose
Loriega, head of the Land Title Verification Task Force of the LRA,
submitted his report. The Registrar of Deeds of Pasay City had no
record of TCT No. 17508 and its ascendant title, TCT No. 5450. The
land allegedly covered by respondents titles was also found to be
within Villamor Air Base (headquarters of the Philippine Air Force)
in Pasay City.

By virtue of the report, the Office of the Solicitor General

(OSG), on September 3, 1996, filed a complaint for revocation,
annulment and cancellation of certificates of title in behalf of the
Republic of the Philippines (as represented by the LRA) against
respondent and Alfonso Concepcion. It was raffled to Branch 114 of
the Regional Trial Court of Pasay City where it was docketed as Civil
Case No. 96-1144.

On December 5, 1996, respondent filed its answer which was

purportedly signed by Atty. Onofre Garlitos, Jr. as counsel for
respondent.

Since Alfonso Concepcion could not be located and served with

summons, the trial court ordered the issuance of an alias summons
by publication against him on February 19, 1997.

The case was thereafter punctuated by various incidents

relative

to

modes

of

discovery,

pre-trial,

postponements

or

continuances, motions to dismiss, motions to declare defendants in

default and other procedural matters.

During the pendency of the case, the Senate Blue Ribbon

Committee and Committee on Justice and Human Rights conducted
a hearing in aid of legislation on the matter of land registration and
titling. In particular, the legislative investigation looked into the
issuance of fake titles and focused on how respondent was able to
acquire TCT Nos. 135604, 135605 and 135606.
During the congressional hearing held on November 26, 1998,
one of those summoned was Atty. Garlitos, respondents former
counsel. He testified that he prepared respondents answer and
transmitted an unsigned draft to respondents president, Mr. Victor
Ong. The signature appearing above his name was not his. He
authorized no one to sign in his behalf either. And he did not know
who finally signed it.
With Atty. Garlitos revelation, the Republic promptly filed an
urgent motion on December 3, 1998 to declare respondent in

default,[2] predicated on its failure to file a valid answer. The

Republic argued that, since the person who signed the answer was
neither authorized by Atty. Garlitos nor even known to him, the
answer was effectively an unsigned pleading. Pursuant to Section 3,
Rule 7 of the Rules of Court,[3] it was a mere scrap of paper and
produced no legal effect.
On February 19, 1999, the trial court issued a resolution
granting the Republics motion.[4] It found respondents answer to be
sham and false and intended to defeat the purpose of the rules. The
trial court ordered the answer stricken from the records, declared
respondent in default and allowed the Republic to present its
evidence ex parte.

The Republic presented its evidence ex parte, after which it

rested its case and formally offered its evidence.

Meanwhile, respondent sought reconsideration of the February

19, 1999 resolution but the trial court denied it.

Aggrieved, respondent elevated the matter to the Court of

Appeals via a petition for certiorari [5] seeking to set aside the
February 19, 1999 resolution of the trial court. Respondent
contended that the trial court erred in declaring it in default for
failure to file a valid and timely answer.

On May 31, 2001, the Court of Appeals rendered the assailed

decision. It found Atty. Garlitos statements in the legislative hearing
to be unreliable since they were not subjected to cross-examination.
The appellate court also scrutinized Atty. Garlitos acts after the
filing of the answer[6] and concluded that he assented to the signing
of the answer by somebody in his stead. This supposedly cured
whatever defect the answer may have had. Hence, the appellate
court granted respondents petition for certiorari. It directed the
lifting of the order of default against respondent and ordered the
trial court to proceed to trial with dispatch. The Republic moved for
reconsideration but it was denied. Thus, this petition.

Did the Court of Appeals err in reversing the trial courts order
which declared respondent in default for its failure to file a valid
answer? Yes, it did.

A party may, by his words or conduct, voluntarily adopt or ratify

anothers statement.[7] Where it appears that a party clearly and
unambiguously assented to or adopted the statements of another,
evidence of those statements is admissible against him. [8] This is the
essence of the principle of adoptive admission.
An adoptive admission is a partys reaction to a statement or action
by another person when it is reasonable to treat the partys reaction

as an admission of something stated or implied by the other person.

[9]

By adoptive admission, a third persons statement becomes the

admission of the party embracing or espousing it. Adoptive

admission may occur when a party:

(a) expressly agrees to or concurs in an oral statement made

by another;[10]
(b) hears a statement and later on essentially repeats it; [11]
(c) utters an acceptance or builds upon the assertion of
another;[12]
(d) replies by way of rebuttal to some specific points raised by
another but ignores further points which he or she has
heard the other make[13] or
(e) reads and signs a written statement made by another. [14]

Here, respondent accepted the pronouncements of Atty.

Garlitos and built its case on them. At no instance did it ever deny
or contradict its former counsels statements. It went to great
lengths

to

explain

Atty.

Garlitos

testimony

as

well

as

its

implications, as follows:

1. While Atty. Garlitos denied signing the answer, the fact was
that the answer was signed. Hence, the pleading could

not be considered invalid for being an unsigned pleading.

The fact that the person who signed it was neither known
to Atty. Garlitos nor specifically authorized by him was
immaterial. The important thing was that the answer
bore a signature.
2. While the Rules of Court requires that a pleading must be
signed by the party or his counsel, it does not prohibit a
counsel from giving a general authority for any person to
sign the answer for him which was what Atty. Garlitos
did. The person who actually signed the pleading was of
no moment as long as counsel knew that it would be
signed by another. This was similar to addressing an
authorization letter to whom it may concern such that
any person could act on it even if he or she was not
known beforehand.
3. Atty. Garlitos testified that he prepared the answer; he
never disowned its contents and he resumed acting as
counsel for respondent subsequent to its filing. These
circumstances show that Atty. Garlitos conformed to or
ratified the signing of the answer by another.

Respondent repeated these statements of Atty. Garlitos in its

motion for reconsideration of the trial courts February 19, 1999

resolution. And again in the petition it filed in the Court of Appeals

as well as in the comment[15] and memorandum it submitted to this
Court.

Evidently,

respondent

completely

adopted

Atty.

Garlitos

statements as its own. Respondents adoptive admission constituted

a judicial admission which was conclusive on it.

Contrary to respondents position, a signed pleading is one

that is signed either by the party himself or his counsel. Section 3,
Rule 7 is clear on this matter. It requires that a pleading must
be signed by the party or counsel representing him.

Therefore, only the signature of either the party himself or his

counsel operates to validly convert a pleading from one that is
unsigned to one that is signed.

Counsels authority and duty to sign a pleading are personal to

him. He may not delegate it to just any person.

The signature of counsel constitutes an assurance by him that

he has read the pleading; that, to the best of his knowledge,
information and belief, there is a good ground to support it; and

that it is not interposed for delay. [16] Under the Rules of Court, it is
counsel alone, by affixing his signature, who can certify to these
matters.

The preparation and signing of a pleading constitute legal

work involving practice of law which is reserved exclusively for the
members of the legal profession. Counsel may delegate the signing
of a pleading to another lawyer[17] but cannot do so
in favor of one who is not. The Code of Professional Responsibility
provides:

Rule 9.01 A lawyer shall not delegate to any unqualified

person the performance of any task which by law may only be
performed by a member of the Bar in good standing.

Moreover, a signature by agents of a lawyer amounts to signing by

unqualified persons,[18] something the law strongly proscribes.

Therefore, the blanket authority respondent claims Atty.

Garlitos entrusted to just anyone was void. Any act taken pursuant
to that authority was likewise void. There was no way it could have
been cured or ratified by Atty. Garlitos subsequent acts.

Moreover, the transcript of the November 26, 1998 Senate

hearing shows that Atty. Garlitos consented to the signing of the
answer by another as long as it conformed to his draft. We give no
value whatsoever to such self-serving statement.

No doubt, Atty. Garlitos could not have validly given blanket

authority for just anyone to sign the answer. The trial court
correctly ruled that respondents answer was invalid and of no legal
effect as it was an unsigned pleading. Respondent was properly
declared in default and the Republic was rightly allowed to present
evidence ex parte.

Respondent insists on the liberal application of the rules. It

maintains that even if it were true that its answer was supposedly
an unsigned pleading, the defect was a mere technicality that could
be set aside.

Procedural requirements which have often been disparagingly

labeled as mere technicalities have their own valid raison d etrein
the orderly administration of justice. To summarily brush them
aside may result in arbitrariness and injustice.[19]

The Courts pronouncement in Garbo v. Court of Appeals[20] is

relevant:

Procedural rules are [tools] designed to facilitate the

adjudication of cases. Courts and litigants alike are thus
[enjoined] to abide strictly by the rules. And while the Court, in
some instances, allows a relaxation in the application of the
rules, this, we stress, was never intended to forge a bastion for
erring litigants to violate the rules with impunity. The liberality in
the interpretation and application of the rules applies only in
proper cases and under justifiable causes and circumstances.
While it is true that litigation is not a game of technicalities, it is
equally true that every case must be prosecuted in accordance
with the prescribed procedure to insure an orderly and speedy
administration of justice.

Like all rules, procedural rules should be followed except only when,
for the most persuasive of reasons, they may be relaxed to relieve a
litigant of an injustice not commensurate with the degree of his
thoughtlessness in not complying with the prescribed procedure.
[21]

In this case, respondent failed to show any persuasive reason

why it should be exempted from strictly abiding by the rules.

As a final note, the Court cannot close its eyes to the acts
committed by Atty. Garlitos in violation of the ethics of the legal

profession. Thus, he should be made to account for his possible

misconduct.
WHEREFORE, the petition is hereby GRANTED. The May 31,
2001 decision and August 20, 2001 resolution of the Court of
Appeals

in

CA-G.R.

SP

No.

52948

are REVERSED and SET

ASIDE and the February 19, 1999 resolution of the Regional Trial
Court of Pasay City, Branch 114 declaring respondent in default is
hereby REINSTATED.

Let a copy of this decision be furnished the Commission on Bar

Discipline of the Integrated Bar of the Philippines for the
commencement of disbarment proceedings against Atty. Onofre
Garlitos, Jr. for his possible unprofessional conduct not befitting his
position as an officer of the court.
SO ORDERED.

PRINCE
TRANSPORT,
INC. and MR. RENATO CLAROS,
Petitioners,

G.R. No. 167291

Present:

CARPIO, J., Chairperson,

NACHURA,
- versus -

PERALTA,
ABAD, and
_____________,** JJ.
DIOSDADO
GARCIA,
LUISITO
GARCIA,
RODANTE
ROMERO,
REX BARTOLOME, FELICIANO
GASCO,
JR.,
DANILO
ROJO,
EDGAR
SANFUEGO,
AMADO
GALANTO,
EUTIQUIO
LUGTU,
JOEL
GRAMATICA,
MIEL
CERVANTES,
TERESITA
CABANES, ROE DELA CRUZ,
RICHELO
BALIDOY,
VILMA
PORRAS, MIGUELITO SALCEDO,
CRISTINA
GARCIA,
MARIO
NAZARENO,
DINDO
TORRES,
ESMAEL
RAMBOYONG,
*
ROBETO MANO,
ROGELIO
BAGAWISAN, ARIEL SNACHEZ,
ESTAQULO VILLAREAL, NELSON
MONTERO,
GLORIA
ORANTE,
HARRY
TOCA,
PABLITO
MACASAET
and
RONALD
GARCITA

Promulgated:

January 12, 2011

Respondents.
x----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule

45 of the Rules of Court praying for the annulment of the
Decision[1] and Resolution[2] of the Court of Appeals (CA)
dated December 20, 2004 and February 24, 2005, respectively, in
CA-G.R. SP No. 80953. The assailed Decision reversed and set
aside the Resolutions dated May 30, 2003 [3] and September 26,
2003[4] of the National Labor Relations Commission (NLRC) in CA
No. 029059-01, while the disputed Resolution denied petitioners'
Motion for Reconsideration.

The present petition arose from various complaints filed by herein

respondents charging petitioners with illegal dismissal, unfair
labor practice and illegal deductions and praying for the award of
premium pay for holiday and rest day, holiday pay, service leave
pay, 13th month pay, moral and exemplary damages and
attorney's fees.

Respondents alleged in their respective position papers and other

related pleadings that they were employees of Prince Transport,
Inc. (PTI), a company engaged in the business of transporting
passengers by land; respondents were hired either as drivers,
conductors, mechanics or inspectors, except for respondent
Diosdado Garcia (Garcia), who was assigned as Operations
Manager; in addition to their regular monthly income,
respondents also received commissions equivalent to 8 to 10% of
their wages; sometime in October 1997, the said commissions
were reduced to 7 to 9%; this led respondents and other
employees of PTI to hold a series of meetings to discuss the
protection of their interests as employees; these meetings led

petitioner Renato Claros, who is the president of PTI, to suspect

that respondents are about to form a union; he made known to
Garcia his objection to the formation of a union; in December
1997, PTI employees requested for a cash advance, but the same
was denied by management which resulted in demoralization on
the employees' ranks; later, PTI acceded to the request of some,
but not all, of the employees; the foregoing circumstances led
respondents to form a union for their mutual aid and protection;
in order to block the continued formation of the union, PTI caused
the transfer of all union members and sympathizers to one of its
sub-companies, Lubas Transport (Lubas); despite such transfer,
the schedule of drivers and conductors, as well as their company
identification cards, were issued by PTI; the daily time records,
tickets and reports of the respondents were also filed at the PTI
office; and, all claims for salaries were transacted at the same
office; later, the business of Lubas deteriorated because of the
refusal of PTI to maintain and repair the units being used therein,
which resulted in the virtual stoppage of its operations and
respondents' loss of employment.
Petitioners, on the other hand, denied the material allegations of
the complaints contending that herein respondents were no
longer their employees, since they all transferred to Lubas at their
own request; petitioners have nothing to do with the
management and operations of Lubas as well as the control and
supervision of the latter's employees; petitioners were not aware
of the existence of any union in their company and came to know
of the same only in June 1998 when they were served a copy of
the summons in the petition for certification election filed by the
union; that before the union was registered on April 15, 1998, the
complaint subject of the present petition was already filed; that
the real motive in the filing of the complaints was because PTI
asked respondents to vacate the bunkhouse where they
(respondents) and their respective families were staying because
PTI wanted to renovate the same.

Subsequently,
consolidated.

the

complaints

filed

by

respondents

were

On October 25, 2000, the Labor Arbiter rendered a Decision, [5] the
dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered:

1. Dismissing the complaints for Unfair Labor

Practice, non-payment of holiday pay and holiday
premium, service incentive leave pay and 13th month pay;
Dismissing the complaint of Edgardo Belda for
refund of boundary-hulog;
2. Dismissing the complaint for illegal dismissal
against the respondents Prince Transport, Inc. and/or
Prince
Transport
Phils.
Corporation,
Roberto
Buenaventura, Rory Bayona, Ailee Avenue, Nerissa Uy,
Mario Feranil and Peter Buentiempo;

3. Declaring that the complainants named below

are illegally dismissed by Lubas Transport; ordering said
Lubas Transport to pay backwages and separation pay in
lieu of reinstatement in the following amount:

Complainants Backwages Separation Pay

(1) Diosdado Garcia P222,348.70 P79,456.00
(2) Feliciano Gasco, Jr. 203,350.00 54,600.00
(3) Pablito Macasaet 145,250.00 13,000.00
(4) Esmael Ramboyong 221,500.00 30,000.00
(5) Joel Gramatica 221,500.00 60,000.00
(6) Amado Galanto 130,725.00 29,250.00
(7) Miel Cervantes 265,800.00 60,000.00
(8) Roberto Mano 221,500.00 50,000.00
(9) Roe dela Cruz 265,800.00 60,000.00
(10) Richelo Balidoy 130,725.00 29,250.00
(11) Vilma Porras 221,500.00 70,000.00
(12) Miguelito Salcedo 265,800.00 60,000.00
(13) Cristina Garcia 130,725.00 35,100.00
(14) Luisito Garcia 145,250.00 19,500.00
(15) Rogelio Bagawisan 265,800.00 60,000.00
(16) Rodante H. Romero 221,500.00 60,000.00
(17) Dindo Torres 265,800.00 50,000.00
(18) Edgar Sanfuego 221,500.00 40,000.00
(19) Ronald Gacita 221,500.00 40,000.00

(20) Harry Toca 174,300.00 23,400.00

(21) Amado Galanto 130,725.00 17,550.00
(22) Teresita Cabaes 130,725.00 17,550.00
(23) Rex Bartolome 301,500.00 30,000.00
(24) Mario Nazareno 221,500.00 30,000.00
(25) Eustaquio Villareal 145,250.00 19,500.00
(26) Ariel Sanchez 265,800.00 60,000.00
(27) Gloria Orante 263,100.00 60,000.00
(28) Nelson Montero 264,600.00 60,000.00
(29) Rizal Beato 295,000.00 40,000.00
(30) Eutiquio Lugtu 354,000.00 48,000.00
(31) Warlito Dickensomn 295,000.00 40,000.00
(32) Edgardo Belda 354,000.00 84,000.00
(33) Tita Go 295,000.00 70,000.00
(34) Alex Lodor 295,000.00 50,000.00
(35) Glenda Arguilles 295,000.00 40,000.00
(36) Erwin Luces 354,000.00 48,000.00
(37) Jesse Celle 354,000.00 48,000.00
(38) Roy Adorable 295,000.00 40,000.00
(39) Marlon Bangcoro 295,000.00 40,000.00

(40)Edgardo Bangcoro 354,000.00 36,000.00

4. Ordering Lubas Transport to pay attorney's fees

equivalent to ten (10%) of the total monetary award; and

6. Ordering the dismissal of the claim for moral and

exemplary damages for lack merit.
SO ORDERED.[6]

The Labor Arbiter ruled that petitioners are not guilty of unfair
labor practice in the absence of evidence to show that they
violated respondents right to self-organization. The Labor Arbiter
also held that Lubas is the respondents employer and that it
(Lubas) is an entity which is separate, distinct and independent
from PTI. Nonetheless, the Labor Arbiter found that Lubas is guilty
of illegally dismissing respondents from their employment.

Respondents filed a Partial Appeal with the NLRC praying, among

others, that PTI should also be held equally liable as Lubas.

In a Resolution dated May 30, 2003, the NLRC modified the

Decision of the Labor Arbiter and disposed as follows:

WHEREFORE, premises considered, the appeal is

hereby PARTIALLY GRANTED. Accordingly, the Decision
appealed from is SUSTAINED subject to the modification
that Complainant-Appellant Edgardo Belda deserves
refund
of
his
boundary-hulog
in
the
amount
of P446,862.00; and that Complainants-Appellants Danilo
Rojo and Danilo Laurel should be included in the
computation of Complainants-Appellants claim as follows:

Complainants Backwages Separation Pay

41. Danilo Rojo P355,560.00 P48,000.00
42. Danilo Laurel P357,960.00 P72,000.00

As regards all other aspects, the Decision appealed from

is SUSTAINED.

SO ORDERED.[7]

Respondents filed a Motion for Reconsideration, but the NLRC

denied it in its Resolution[8] dated September 26, 2003.

Respondents then filed a special civil action for certiorari with the
CA assailing the Decision and Resolution of the NLRC.

On December 20, 2004, the CA rendered the herein assailed

Decision which granted respondents' petition. The CA ruled that
petitioners are guilty of unfair labor practice; that Lubas is a mere
instrumentality, agent conduit or adjunct of PTI; and that
petitioners act of transferring respondents employment to Lubas
is indicative of their intent to frustrate the efforts of respondents
to organize themselves into a union. Accordingly, the CA disposed
of the case as follows:

WHEREFORE, the Petition for Certiorari is hereby

GRANTED. Accordingly, the subject decision is hereby
REVERSED and SET ASIDE and another one ENTERED
finding the respondents guilty of unfair labor practice and
ordering them to reinstate the petitioners to their former
positions without loss of seniority rights and with full
backwages.

With respect to the portion ordering the inclusion of

Danilo Rojo and Danilo Laurel in the computation of
petitioner's claim for backwages and with respect to the
portion ordering the refund of Edgardo Belda's boundaryhulog in the amount of P446,862.00, the NLRC decision is
affirmed and maintained.

SO ORDERED.[9]

Petitioners filed a Motion for Reconsideration, but the CA denied

it via its Resolution[10] dated February 24, 2005.

Hence, the instant petition for review on certiorari based on the

following grounds:

A
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN GIVING DUE COURSE TO THE
RESPONDENTS' PETITION FOR CERTIORARI

1. THE COURT OF APPEALS SHOULD HAVE

RESPECTED THE FINDINGS OF THE LABOR ARBITER
AND AFFIRMED BY THE NLRC

2. ONLY ONE PETITIONER EXECUTED AND VERIFIED

THE PETITION
3. THE COURT OF APPEALS SHOULD NOT HAVE
GIVEN DUE COURSE TO THE PETITION WITH
RESPECT TO RESPONDENTS REX BARTOLOME,
FELICIANO GASCO, DANILO ROJO, EUTIQUIO LUGTU,
AND NELSON MONTERO AS THEY FAILED TO FILE AN
APPEAL TO THE NLRC

THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING

THAT PETITIONERS PRINCE TRANSPORT, INC. AND MR.
RENATO CLAROS AND LUBAS TRANSPORT ARE ONE AND
THE SAME CORPORATION AND THUS, LIABLE IN
SOLIDUM TO RESPONDENTS.

C
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN ORDERING THE REINSTATEMENT OF
RESPONDENTS TO THEIR PREVIOUS POSITION WHEN IT IS
NOT ONE OF THE ISSUES RAISED IN RESPONDENTS'
PETITION FOR CERTIORARI.[11]

Petitioners assert that factual findings of agencies exercising

quasi-judicial functions like the NLRC are accorded not only
respect but even finality; that the CA should have outrightly
dismissed
the
petition
filed
before
it
because
in certiorari proceedings under Rule 65 of the Rules of Court it is
not within the province of the CA to evaluate the sufficiency of
evidence upon which the NLRC based its determination, the
inquiry being limited essentially to whether or not said tribunal
has acted without or in excess of its jurisdiction or with grave
abuse of discretion. Petitioners assert that the CA can only pass
upon the factual findings of the NLRC if they are not supported by

evidence on record, or if the impugned judgment is based on

misapprehension of facts which circumstances are not present in
this case. Petitioners also emphasize that the NLRC and the Labor
Arbiter concurred in their factual findings which were based on
substantial evidence and, therefore, should have been accorded
great weight and respect by the CA.

Respondents, on the other hand, aver that the CA neither

exceeded its jurisdiction nor committed error in re-evaluating the
NLRCs factual findings since such findings are not in accord with
the evidence on record and the applicable law or jurisprudence.

The Court agrees with respondents.

The power of the CA to review NLRC decisions via a petition

for certiorari under Rule 65 of the Rules of Court has been settled
as early as this Courts decision in St. Martin Funeral Homes
v. NLRC.[12] In said case, the Court held that the proper vehicle for
such review is a special civil action for certiorari under Rule 65 of
the said Rules, and that the case should be filed with the CA in
strict observance of the doctrine of hierarchy of courts. Moreover,
it is already settled that under Section 9 of Batas Pambansa Blg.
129, as amended by Republic Act No. 7902, the CA pursuant to
the exercise of its original jurisdiction over petitions
for certiorari is specifically given the power to pass upon the
evidence, if and when necessary, to resolve factual issues.
[13]
Section 9 clearly states:

xxxx

The Court of Appeals shall have the power to try cases

and conduct hearings, receive evidence and perform any
and all acts necessary to resolve factual issues raised in
cases falling within its original and appellate jurisdiction,
including the power to grant and conduct new trials or
further proceedings. x x x

However, equally settled is the rule that factual findings of labor

officials, who are deemed to have acquired expertise in matters
within their jurisdiction, are generally accorded not only respect
but even finality by the courts when supported by substantial
evidence, i.e., the amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.
[14]
But these findings are not infallible. When there is a showing
that they were arrived at arbitrarily or in disregard of the
evidence on record, they may be examined by the courts.
[15]
The CA can grant the petition for certiorari if it finds that the
NLRC, in its assailed decision or resolution, made a factual finding
not supported by substantial evidence. [16] It is within the
jurisdiction of the CA, whose jurisdiction over labor cases has
been expanded to review the findings of the NLRC.[17]

In this case, the NLRC sustained the factual findings of the Labor
Arbiter. Thus, these findings are generally binding on the
appellate court, unless there was a showing that they were
arrived at arbitrarily or in disregard of the evidence on record. In
respondents' petition for certiorari with the CA, these factual
findings were reexamined and reversed by the appellate court on

the ground that they were not in accord with credible evidence
presented in this case. To determine if the CA's reexamination of
factual findings and reversal of the NLRC decision are proper and
with sufficient basis, it is incumbent upon this Court to make its
own evaluation of the evidence on record. [18]

After a thorough review of the records at hand, the Court finds

that the CA did not commit error in arriving at its own findings and
conclusions for reasons to be discussed hereunder.

Firstly, petitioners posit that the petition filed with the CA is fatally
defective, because the attached verification and certificate
against forum shopping was signed only by respondent Garcia.

The Court does not agree.

While the general rule is that the certificate of non-forum

shopping must be signed by all the plaintiffs in a case and the
signature of only one of them is insufficient, the Court has
stressed that the rules on forum shopping, which were designed
to promote and facilitate the orderly administration of justice,
should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective. [19] Strict
compliance with the provision regarding the certificate of nonforum shopping underscores its mandatory nature in that the
certification cannot be altogether dispensed with or its
requirements completely disregarded.[20] It does not, however,
prohibit substantial compliance therewith under justifiable

circumstances, considering especially

obligatory, it is not jurisdictional. [21]

that

although

it

is

In a number of cases, the Court has consistently held that when

all the petitioners share a common interest and invoke a common
cause of action or defense, the signature of only one of them in
the certification against forum shopping substantially complies
with the rules.[22] In the present case, there is no question that
respondents share a common interest and invoke a common
cause of action. Hence, the signature of respondent Garcia is a
sufficient compliance with the rule governing certificates of nonforum shopping. In the first place, some of the respondents
actually executed a Special Power of Attorney authorizing Garcia
as their attorney-in-fact in filing a petition for certiorari with the
CA.[23]

The Court, likewise, does not agree with petitioners' argument

that the CA should not have given due course to the petition filed
before it with respect to some of the respondents, considering
that these respondents did not sign the verification attached to
the Memorandum of Partial Appeal earlier filed with the NLRC.
Petitioners assert that the decision of the Labor Arbiter has
become final and executory with respect to these respondents
and, as a consequence, they are barred from filing a petition
for certiorari with the CA.

With respect to the absence of some of the workers signatures in

the verification, the verification requirement is deemed
substantially complied with when some of the parties who
undoubtedly have sufficient knowledge and belief to swear to the
truth of the allegations in the petition had signed the same. Such

verification is deemed a sufficient assurance that the matters

alleged in the petition have been made in good faith or are true
and correct, and not merely speculative. Moreover, respondents'
Partial Appeal shows that the appeal stipulated as complainantsappellants Rizal Beato, et al., meaning that there were more than
one appellant who were all workers of petitioners.

In any case, the settled rule is that a pleading which is required

by the Rules of Court to be verified, may be given due course
even without a verification if the circumstances warrant the
suspension of the rules in the interest of justice. [24] Indeed, the
absence of a verification is not jurisdictional, but only a formal
defect, which does not of itself justify a court in refusing to allow
and act on a case.[25] Hence, the failure of some of the
respondents to sign the verification attached to their
Memorandum of Appeal filed with the NLRC is not fatal to their
cause of action.

Petitioners also contend that the CA erred in applying the doctrine

of piercing the corporate veil with respect to Lubas, because the
said doctrine is applicable only to corporations and Lubas is not a
corporation but a single proprietorship; that Lubas had been
found by the Labor Arbiter and the NLRC to have a personality
which is separate and distinct from that of PTI; that PTI had no
hand in the management and operation as well as control and
supervision of the employees of Lubas.

The Court is not persuaded.

On the contrary, the Court agrees with the CA that Lubas is a

mere agent, conduit or adjunct of PTI. A settled formulation of
the doctrine of piercing the corporate veil is that when two
business enterprises are owned, conducted and controlled by the
same parties, both law and equity will, when necessary to protect
the rights of third parties, disregard the legal fiction that these
two entities are distinct and treat them as identical or as one and
the same.[26] In the present case, it may be true that Lubas is a
single proprietorship and not a corporation. However, petitioners
attempt to isolate themselves from and hide behind the
supposed separate and distinct personality of Lubas so as to
evade their liabilities is precisely what the classical doctrine of
piercing the veil of corporate entity seeks to prevent and remedy.

Thus, the Court agrees with the observations of the CA, to wit:

As correctly pointed out by petitioners, if Lubas were truly

a separate entity, how come that it was Prince Transport
who made the decision to transfer its employees to the
former? Besides, Prince Transport never regarded Lubas
Transport as a separate entity. In the aforesaid letter, it
referred to said entity as Lubas operations. Moreover, in
said letter, it did not transfer the employees; it assigned
them. Lastly, the existing funds and 201 file of the
employees were turned over not to a new company but a
new management.[27]

The Court also agrees with respondents that if Lubas is indeed an

entity separate and independent from PTI why is it that the latter
decides which employees shall work in the former?

What is telling is the fact that in a memorandum issued by PTI,

dated January 22, 1998, petitioner company admitted that Lubas
is one of its sub-companies.[28] In addition, PTI, in its letters to its
employees who were transferred to Lubas, referred to the latter
as its New City Operations Bus.[29]

Moreover, petitioners failed to refute the contention of

respondents that despite the latters transfer to Lubas of their
daily time records, reports, daily income remittances of
conductors, schedule of drivers and conductors were all made,
performed, filed and kept at the office of PTI. In fact, respondents
identification cards bear the name of PTI.

It may not be amiss to point out at this juncture that in two

separate illegal dismissal cases involving different groups of
employees transferred by PTI to other companies, the Labor
Arbiter handling the cases found that these companies and PTI
are one and the same entity; thus, making them solidarily liable
for the payment of backwages and other money claims awarded
to the complainants therein.[30]

Petitioners likewise aver that the CA erred and committed grave

abuse of discretion when it ordered petitioners to reinstate
respondents to their former positions, considering that the issue
of reinstatement was never brought up before it and respondents
never questioned the award of separation pay to them.

The Court is not persuaded.

It is clear from the complaints filed by respondents that they are

seeking reinstatement.[31]

In any case, Section 2 (c), Rule 7 of the Rules of Court provides

that a pleading shall specify the relief sought, but may add a
general prayer for such further or other reliefs as may be deemed
just and equitable. Under this rule, a court can grant the relief
warranted by the allegation and the proof even if it is not
specifically sought by the injured party; the inclusion of a general
prayer may justify the grant of a remedy different from or
together with the specific remedy sought, if the facts alleged in
the complaint and the evidence introduced so warrant. [32]

Moreover, in BPI Family Bank v. Buenaventura, [33] this Court ruled

that the general prayer is broad enough to justify extension of a
remedy different from or together with the specific remedy
sought. Even without the prayer for a specific remedy, proper
relief may be granted by the court if the facts alleged in the
complaint and the evidence introduced so warrant. The court shall
grant relief warranted by the allegations and the proof even if no
such relief is prayed for. The prayer in the complaint for other
reliefs equitable and just in the premises justifies the grant of a
relief not otherwise specifically prayed for. [34] In the instant case,
aside from their specific prayer for reinstatement, respondents, in
their separate complaints, prayed for such reliefs which are
deemed just and equitable.

As to whether petitioners are guilty of unfair labor practice, the

Court finds no cogent reason to depart from the findings of the CA

that respondents transfer of work assignments to Lubas was

designed by petitioners as a subterfuge to foil the formers right to
organize themselves into a union. Under Article 248 (a) and (e) of
the Labor Code, an employer is guilty of unfair labor practice if it
interferes with, restrains or coerces its employees in the exercise
of their right to self-organization or if it discriminates in regard to
wages, hours of work and other terms and conditions of
employment in order to encourage or discourage membership in
any labor organization.

Indeed, evidence of petitioners' unfair labor practice is shown by

the established fact that, after respondents' transfer to Lubas,
petitioners left them high and dry insofar as the operations of
Lubas was concerned. The Court finds no error in the findings and
conclusion of the CA that petitioners withheld the necessary
financial and logistic support such as spare parts, and repair and
maintenance of the transferred buses until only two units
remained in running condition. This left respondents virtually
jobless.

WHEREFORE, the instant petition is DENIED. The assailed

Decision and Resolution of the Court of Appeals, dated December
20, 2004 and February 24, 2005, respectively, in CA-G.R. SP No.
80953, are AFFIRMED.

SO ORDERED.

[G.R. NO. 151413 : February 13, 2008]

CAGAYAN VALLEY DRUG CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE, Respondent.

DECISION
VELASCO, JR., J.:
The Case
This Petition for Review under Rule 45 of the Rules of Court seeks the recall of the August 31, 2000
Resolution1 of the Court of Appeals (CA) in CA-G.R. SP No. 59778, which dismissed petitioner Cagayan
Valley Drug Corporation's Petition for Review of the April 26, 2000 Decision 2 of the Court of Tax Appeals
(CTA) in C.T.A. Case No. 5581 on the ground of defective verification and certification against forum
shopping.
The Facts
Petitioner, a corporation duly organized and existing under Philippine laws, is a duly licensed retailer of
medicine and other pharmaceutical products. It operates two drugstores, one in Tuguegarao, Cagayan, and
the other in Roxas, Isabela, under the name and style of "Mercury Drug."
Petitioner alleged that in 1995, it granted 20% sales discounts to qualified senior citizens on purchases of
medicine pursuant to Republic Act No. (RA) 74323 and its implementing rules and regulations.
In compliance with Revenue Regulation No. (RR) 2-94, petitioner treated the 20% sales discounts granted to
qualified senior citizens in 1995 as deductions from the gross sales in order to arrive at the net sales,
instead of treating them as tax credit as provided by Section 4 of RA 7432.
On December 27, 1996, however, petitioner filed with the Bureau of Internal Revenue (BIR) a claim for tax
refund/tax credit of the full amount of the 20% sales discount it granted to senior citizens for the year 1995,
allegedly totaling to PhP 123,083 in accordance with Sec. 4 of RA 7432.
The BIR's inaction on petitioner's claim for refund/tax credit compelled petitioner to file on March 18, 1998 a
Petition for Review before the CTA docketed as C.T.A. Case No. 5581 in order to forestall the two-year
prescriptive period provided under Sec. 2304 of the 1977 Tax Code, as amended. Thereafter, on March 31,
2000, petitioner amended its Petition for Review .
The Ruling of the Court of Tax Appeals
On April 26, 2000, the CTA rendered a Decision dismissing the Petition for Review for lack of merit. 5
The CTA sustained petitioner's contention that pursuant to Sec. 4 of RA 7432, the 20% sales discounts
petitioner extended to qualified senior citizens in 1995 should be treated as tax credit and not as deductions
from the gross sales as erroneously interpreted in RR 2-94. The CTA reiterated its consistent holdings that
RR 2-94 is an invalid administrative interpretation of the law it purports to implement as it contravenes and
does not conform to the standards RA 7432 prescribes.
Notwithstanding petitioner's entitlement to a tax credit from the 20% sales discounts it extended to qualified
senior citizens in 1995, the CTA nonetheless dismissed petitioner's action for refund or tax credit on account
of petitioner's net loss in 1995. First, the CTA rejected the refund as it is clear that RA 7432 only grants the
20% sales discounts extended to qualified senior citizens as tax credit and not as tax refund. Second, in
rejecting the tax credit, the CTA reasoned that while petitioner may be qualified for a tax credit, it cannot be
so extended to petitioner on account of its net loss in 1995.

The CTA ratiocinated that on matters of tax credit claim, the government applies the amount determined to
be reimbursable after proper verification against any sum that may be due and collectible from the taxpayer.
However, if no tax has been paid or if no amount is due and collectible from the taxpayer, then a tax credit is
unavailing. Moreover, it held that before allowing recovery for claims for a refund or tax credit, it must first
be established that there was an actual collection and receipt by the government of the tax sought to be
recovered. In the instant case, the CTA found that petitioner did not pay any tax by virtue of its net loss
position in 1995.
Petitioner's Motion for Reconsideration was likewise denied through the appellate tax court's June 30, 2000
Resolution.6
The Ruling of the Court of Appeals
Aggrieved, petitioner elevated the matter before the CA, docketed as CA-G.R. SP No. 59778. On August 31,
2000, the CA issued the assailed Resolution7 dismissing the petition on procedural grounds. The CA held that
the person who signed the verification and certification of absence of forum shopping, a certain Jacinto J.
Concepcion, President of petitioner, failed to adduce proof that he was duly authorized by the board of
directors to do so.
As far as the CA was concerned, the main issue was whether or not the verification and certification of nonforum shopping signed by the President of petitioner is sufficient compliance with Secs. 4 and 5, Rule 7 of
the 1997 Rules of Civil Procedure.
The verification and certification in question reads:
I, JACINTO J. CONCEPCION, of legal age with office address at 2 nd Floor, Mercury Drug Corporation, No. 7
Mercury Ave, Bagumbayan, Quezon City, under oath, hereby state that:
1. I am the President of Cagayan Valley Drug Corporation, Petitioner in the above-entitled case and am duly
authorized to sign this Verification and Certification of Absence of Forum Shopping by the Board of Director.
xxx
The CA found no sufficient proof to show that Concepcion was duly authorized by the Board of Directors of
petitioner. The appellate court anchored its disposition on our ruling in Premium Marble Resources, Inc. v.
Court of Appeals (Premium), that "[i]n the absence of an authority from the Board of Directors, no person,
not even the officers of the corporation, can validly bind the corporation." 8
Hence, we have this petition.
The Issues
Petitioner raises two issues: first, whether petitioner's president can sign the subject verification and
certification sans the approval of its Board of Directors. And second, whether the CTA committed reversible
error in denying and dismissing petitioner's action for refund or tax credit in C.T.A. Case No. 5581.
The Court's Ruling
The petition is meritorious.
Premium not applicable

As regards the first issue, we find the CA to have erroneously relied on Premium. In said case, the issue
tackled was not on whether the president of Premium Marble Resources, Inc. was authorized to sign the
verification and certification against forum shopping, but rather on which of the two sets of officers, both
claiming to be the legal board of directors of Premium, have the authority to file the suit for and in behalf of
the company. The factual antecedents and issues in Premium are not on all fours with the instant case and
is, therefore, not applicable.
With respect to an individual litigant, there is no question that litigants must sign the sworn verification and
certification unless they execute a power of attorney authorizing another person to sign it. With respect to a
juridical person, Sec. 4, Rule 7 on verification and Sec. 5, Rule 7 on certification against forum shopping are
silent as to who the authorized signatory should be. Said rules do not indicate if the submission of a board
resolution authorizing the officer or representative is necessary.
Corporate powers exercised through board of directors
It must be borne in mind that Sec. 23, in relation to Sec. 25 of the Corporation Code, clearly enunciates that
all corporate powers are exercised, all business conducted, and all properties controlled by the board of
directors. A corporation has a separate and distinct personality from its directors and officers and can only
exercise its corporate powers through the board of directors. Thus, it is clear that an individual corporate
officer cannot solely exercise any corporate power pertaining to the corporation without authority from the
board of directors. This has been our constant holding in cases instituted by a corporation.
In a slew of cases, however, we have recognized the authority of some corporate officers to sign the
verification and certification against forum shopping. In Mactan-Cebu International Airport Authority v. CA,
we recognized the authority of a general manager or acting general manager to sign the verification and
certificate against forum shopping;9 in Pfizer v. Galan, we upheld the validity of a verification signed by an
"employment specialist" who had not even presented any proof of her authority to represent the
company;10 in Novelty Philippines, Inc., v. CA, we ruled that a personnel officer who signed the petition but
did not attach the authority from the company is authorized to sign the verification and non-forum shopping
certificate;11 and in Lepanto Consolidated Mining Company v. WMC Resources International Pty. Ltd.
(Lepanto), we ruled that the Chairperson of the Board and President of the Company can sign the
verification and certificate against non-forum shopping even without the submission of the board's
authorization.12
In sum, we have held that the following officials or employees of the company can sign the verification and
certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the
President of a corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and
(5) an Employment Specialist in a labor case.
While the above cases do not provide a complete listing of authorized signatories to the verification and
certification required by the rules, the determination of the sufficiency of the authority was done on a case
to case basis. The rationale applied in the foregoing cases is to justify the authority of corporate officers or
representatives of the corporation to sign the verification or certificate against forum shopping, being "in a
position to verify the truthfulness and correctness of the allegations in the petition." 13
Authority from board of directors required
In Philippine Airlines v. Flight Attendants and Stewards Association of the Philippines, we ruled that only
individuals vested with authority by a valid board resolution may sign the certificate of non-forum shopping
on behalf of a corporation. The action can be dismissed if the certification was submitted unaccompanied by
proof of the signatory's authority.14 We believe that appending the board resolution to the complaint or
petition is the better procedure to obviate any question on the authority of the signatory to the verification
and certification. The required submission of the board resolution is grounded on the basic precept that

corporate powers are exercised by the board of directors,15 and not solely by an officer of the corporation.
Hence, the power to sue and be sued in any court or quasi-judicial tribunal is necessarily lodged with the
said board.
There is substantial compliance with Rule 7, Secs. 4 and 5
In the case at bar, we so hold that petitioner substantially complied with Secs. 4 and 5, Rule 7 of the 1997
Revised Rules on Civil Procedure. First, the requisite board resolution has been submitted albeit belatedly by
petitioner. Second, we apply our ruling in Lepanto with the rationale that the President of petitioner is in a
position to verify the truthfulness and correctness of the allegations in the petition.Third, the President of
petitioner has signed the complaint before the CTA at the inception of this judicial claim for refund or tax
credit.
Consequently, the petition in CA-G.R. SP No. 59778 ought to be reinstated. However, in view of the
enactment of RA 9282 which made the decisions of the CTA appealable to this Court, we will directly resolve
the second issue which is a purely legal one.
Petitioner entitled to tax credit
The pith of the dispute between petitioner and respondent is whether petitioner is entitled to a tax refund or
tax credit of 20% sales discount granted to senior citizens under RA 7432 or whether the discount should be
treated as a deduction from gross income.
This issue is not new, as the Court has resolved several cases involving the very same issue.
InCommissioner of Internal Revenue v. Central Luzon Drug Corporation (Central Luzon),16 we held that
private drug companies are entitled to a tax credit for the 20% sales discounts they granted to qualified
senior citizens under RA 7432 and nullified Secs. 2.i and 4 of RR 2-94. In Bicolandia Drug Corporation
(formerly Elmas Drug Corporation) v. Commissioner of Internal Revenue,17 we ruled that petitioner therein is
entitled to a tax credit of the "cost" or the full 20% sales discounts it granted pursuant to RA 7432. In the
related case of Commissioner of Internal Revenue v. Bicolandia Drug Corporation,18 we likewise ruled that
respondent drug company was entitled to a tax credit, and we struck down RR 2-94 to be null and void for
failing to conform with the law it sought to implement.
A perusal of the April 26, 2000 CTA Decision shows that the appellate tax court correctly ruled that the 20%
sales discounts petitioner granted to qualified senior citizens should be deducted from petitioner's income
tax due and not from petitioner's gross sales as erroneously provided in RR 2-94. However, the CTA erred in
denying the tax credit to petitioner on the ground that petitioner had suffered net loss in 1995, and ruling
that the tax credit is unavailing.
Net loss in a taxable year does not preclude grant of tax credit
It is true that petitioner did not pay any tax in 1995 since it suffered a net loss for that taxable year. This
fact, however, without more, does not preclude petitioner from availing of its statutory right to a tax credit
for the 20% sales discounts it granted to qualified senior citizens. The law then applicable on this point is
clear and without any qualification. Sec. 4 (a) of RA 7432 pertinently provides:
Sec. 4. Privileges for the Senior citizens. The senior citizens shall be entitled to the following:
a) the grant of twenty percent (20%) discount from all establishments relative to utilization of transportation
services, hotels and similar lodging establishments, restaurants and recreation centers and purchase of
medicines anywhere in the country:Provided, That private establishments may claim the cost as tax
credit. (Emphasis ours.)

The fact that petitioner suffered a net loss in 1995 will not make the tax credit due to petitioner unavailable.
This is the core issue resolved in Central Luzon, where we ruled that the net loss for a taxable year does not
bar the grant of the tax credit to a taxpayer pursuant to RA 7432 and that prior tax payments are not
required for such grant. We explained:
Although this tax credit benefit is available, it need not be used by losing ventures, since there is no tax
liability that calls for its application. Neither can it be reduced to nil by the quick yet callow stroke of an
administrative pen, simply because no reduction of taxes can instantly be effected. By its nature, the tax
credit may still be deducted from a future, not a present, tax liability, without which it does not have any
use. x x x
xxx
While a tax liability is essential to the availment or use of any tax credit, prior tax payments are not. On the
contrary, for the existence or grant solely of such credit, neither a tax liability nor a prior tax payment is
needed. The Tax Code is in fact replete with provisions granting or allowing tax credits, even though no
taxes have been previously paid.19
It is thus clear that petitioner is entitled to a tax credit for the full 20% sales discounts it extended to
qualified senior citizens for taxable year 1995. Considering that the CTA has not disallowed the PhP 123,083
sales discounts petitioner claimed before the BIR and CTA, we are constrained to grant them as tax credit in
favor of petitioner.
Consequently, petitioner's appeal before the CA in CA-G.R. SP No. 59778 must be granted, and, necessarily,
the April 26, 2000 CTA Decision in C.T.A. Case No. 5581 reversed and set aside.
WHEREFORE, the petition is GRANTED. The August 31, 2000 CA Resolution in CA-G.R. SP No. 59778
is ANNULLED AND SET ASIDE. The April 26, 2000 CTA Decision in C.T.A. Case No. 5581 dismissing
petitioner's claim for tax credit is accordingly REVERSED AND SET ASIDE. The Commissioner of Internal
Revenue is ORDERED to issue a Tax Credit Certificate in the name of petitioner in the amount of PhP
123,083. No costs.
SO ORDERED.

G.R. No. 167571

November 25, 2008

LUIS PANAGUITON, JR., petitioner

vs.
DEPARTMENT OF JUSTICE, RAMON C. TONGSON and RODRIGO G.
CAWILI, respondents.
DECISION
TINGA, J.:

This is a Petition for Review1 of the resolutions of the Court of Appeals dated
29 October 2004 and 21 March 2005 in CA G.R. SP No. 87119, which
dismissed Luis Panaguiton, Jr.'s (petitioner's) petition for certiorari and his
subsequent motion for reconsideration.2
The facts, as culled from the records, follow.
In 1992, Rodrigo Cawili (Cawili) borrowed various sums of money amounting
to P1,979,459.00 from petitioner. On 8 January 1993, Cawili and his business
associate, Ramon C. Tongson (Tongson), jointly issued in favor of petitioner
three (3) checks in payment of the said loans. Significantly, all three (3)
checks bore the signatures of both Cawili and Tongson. Upon presentment for
payment on 18 March 1993, the checks were dishonored, either for
insufficiency of funds or by the closure of the account. Petitioner made formal
demands to pay the amounts of the checks upon Cawili on 23 May 1995 and
upon Tongson on 26 June 1995, but to no avail.3
On 24 August 1995, petitioner filed a complaint against Cawili and
Tongson4 for violating Batas Pambansa Bilang 22 (B.P. Blg. 22)5 before the
Quezon City Prosecutor's Office. During the preliminary investigation, only
Tongson appeared and filed his counter-affidavit.6 Tongson claimed that he
had been unjustly included as party-respondent in the case since petitioner
had lent money to Cawili in the latter's personal capacity. Moreover, like
petitioner, he had lent various sums to Cawili and in appreciation of his
services, he was
offered to be an officer of Roma Oil Corporation. He averred that he was not
Cawili's business associate; in fact, he himself had filed several criminal cases
against Cawili for violation of B.P. Blg. 22. Tongson denied that he had issued
the bounced checks and pointed out that his signatures on the said checks
had been falsified.
To counter these allegations, petitioner presented several documents showing
Tongson's signatures, which were purportedly the same as the those
appearing on the checks.7 He also showed a copy of an affidavit of adverse
claim wherein Tongson himself had claimed to be Cawili's business
associate.8

In a resolution dated 6 December 1995,9 City Prosecutor III Eliodoro V. Lara

found probable cause only against Cawili and dismissed the charges against
Tongson. Petitioner filed a partial appeal before the Department of Justice
(DOJ) even while the case against Cawili was filed before the proper court. In
a letter-resolution dated 11 July 1997,10 after finding that it was possible for
Tongson to co-sign the bounced checks and that he had deliberately altered
his signature in the pleadings submitted during the preliminary investigation,
Chief State Prosecutor Jovencito R. Zuo directed the City Prosecutor of
Quezon City to conduct a reinvestigation of the case against Tongson and to
refer the questioned signatures to the National Bureau of Investigation (NBI).
Tongson moved for the reconsideration of the resolution, but his motion was
denied for lack of merit.
On 15 March 1999, Assistant City Prosecutor Ma. Lelibet S. Sampaga (ACP
Sampaga) dismissed the complaint against Tongson without referring the
matter to the NBI per the Chief State Prosecutor's resolution. In her
resolution,11 ACP Sampaga held that the case had already prescribed
pursuant to Act No. 3326, as amended,12 which provides that violations
penalized by B.P. Blg. 22 shall prescribe after four (4) years. In this case, the
four (4)-year period started on the date the checks were dishonored, or on 20
January 1993 and 18 March 1993. The filing of the complaint before the
Quezon City Prosecutor on 24 August 1995 did not interrupt the running of the
prescriptive period, as the law contemplates judicial, and not administrative
proceedings. Thus, considering that from 1993 to 1998, more than four (4)
years had already elapsed and no information had as yet been filed against
Tongson, the alleged violation of B.P. Blg. 22 imputed to him had already
prescribed.13 Moreover, ACP Sampaga stated that the order of the Chief State
Prosecutor to refer the matter to the NBI could no longer be sanctioned under
Section 3, Rule 112 of the Rules of Criminal Procedure because the initiative
should come from petitioner himself and not the investigating
prosecutor.14 Finally, ACP Sampaga found that Tongson had no dealings with
petitioner.15
Petitioner appealed to the DOJ. But the DOJ, through Undersecretary Manuel
A.J. Teehankee, dismissed the same, stating that the offense had already
prescribed pursuant to Act No. 3326.16Petitioner filed a motion for

reconsideration of the DOJ resolution. On 3 April 2003,17 the DOJ, this time
through then Undersecretary Ma. Merceditas N. Gutierrez, ruled in his favor
and declared that the offense had not prescribed and that the filing of the
complaint with the prosecutor's office interrupted the running of the
prescriptive period citing Ingco v. Sandiganbayan.18 Thus, the Office of the
City Prosecutor of Quezon City was directed to file three (3) separate
informations against Tongson for violation of B.P. Blg. 22.19 On 8 July 2003,
the City Prosecutor's Office filed an information20 charging petitioner with three
(3) counts of violation of B.P. Blg. 22.21
However, in a resolution dated 9 August 2004,22 the DOJ, presumably acting
on a motion for reconsideration filed by Tongson, ruled that the subject offense
had already prescribed and ordered "the withdrawal of the three (3)
informations for violation of B.P. Blg. 22" against Tongson. In justifying its
sudden turnabout, the DOJ explained that Act No. 3326 applies to violations of
special acts that do not provide for a prescriptive period for the offenses
thereunder. Since B.P. Blg. 22, as a special act, does not provide for the
prescription of the offense it defines and punishes, Act No. 3326 applies to it,
and not Art. 90 of the Revised Penal Code which governs the prescription of
offenses penalized thereunder.23The DOJ also cited the case of Zaldivia v.
Reyes, Jr.,24 wherein the Supreme Court ruled that the proceedings referred to
in Act No. 3326, as amended, are judicial proceedings, and not the one before
the prosecutor's office.
Petitioner thus filed a petition for certiorari25 before the Court of Appeals
assailing the 9 August 2004 resolution of the DOJ. The petition was dismissed
by the Court of Appeals in view of petitioner's failure to attach a proper
verification and certification of non-forum
shopping. The Court of Appeals also noted that the 3 April 2003 resolution of
the DOJ attached to the petition is a mere photocopy.26 Petitioner moved for
the reconsideration of the appellate court's resolution, attaching to said motion
an amended Verification/Certification of Non-Forum Shopping.27Still, the Court
of Appeals denied petitioner's motion, stating that subsequent compliance with
the formal requirements would not per se warrant a reconsideration of its
resolution. Besides, the Court of Appeals added, the petition is patently

without merit and the questions raised therein are too unsubstantial to require
consideration.28
In the instant petition, petitioner claims that the Court of Appeals committed
grave error in dismissing his petition on technical grounds and in ruling that
the petition before it was patently without merit and the questions are too
unsubstantial to require consideration.
The DOJ, in its comment,29 states that the Court of Appeals did not err in
dismissing the petition for non-compliance with the Rules of Court. It also
reiterates that the filing of a complaint with the Office of the City Prosecutor of
Quezon City does not interrupt the running of the prescriptive period for
violation of B.P. Blg. 22. It argues that under B.P. Blg. 22, a special law which
does not provide for its own prescriptive period, offenses prescribe in four (4)
years in accordance with Act No. 3326.
Cawili and Tongson submitted their comment, arguing that the Court of
Appeals did not err in dismissing the petition for certiorari. They claim that the
offense of violation of B.P. Blg. 22 has already prescribed per Act No. 3326. In
addition, they claim that the long delay, attributable to petitioner and the State,
violated their constitutional right to speedy disposition of cases.30
The petition is meritorious.
First on the technical issues.
Petitioner submits that the verification attached to his petition before the Court
of Appeals substantially complies with the rules, the verification being
intended simply to secure an assurance that the allegations in the pleading
are true and correct and not a product of the imagination or a matter of
speculation. He points out that this Court has held in a number of cases that a
deficiency in the verification can be excused or dispensed with, the defect
being neither jurisdictional nor always fatal. 31
Indeed, the verification is merely a formal requirement intended to secure an
assurance that matters which are alleged are true and correctthe court may
simply order the correction of unverified pleadings or act on them and waive

strict compliance with the rules in order that the ends of justice may be
served,32 as in the instant case. In the case at bar, we find that by attaching
the pertinent verification to his motion for reconsideration, petitioner
sufficiently complied with the verification requirement.
Petitioner also submits that the Court of Appeals erred in dismissing the
petition on the ground that there was failure to attach a certified true copy or
duplicate original of the 3 April 2003 resolution of the DOJ. We agree. A plain
reading of the petition before the
Court of Appeals shows that it seeks the annulment of the DOJ resolution
dated 9 August 2004,33 a certified true copy of which was attached as Annex
"A."34 Obviously, the Court of Appeals committed a grievous mistake.
Now, on the substantive aspects.
Petitioner assails the DOJ's reliance on Zaldivia v. Reyes,35 a case involving
the violation of a municipal ordinance, in declaring that the prescriptive period
is tolled only upon filing of the information in court. According to petitioner,
what is applicable in this case is Ingco v. Sandiganbayan,36 wherein this Court
ruled that the filing of the complaint with the fiscal's office for preliminary
investigation suspends the running of the prescriptive period. Petitioner also
notes that the Ingco case similarly involved the violation of a special law,
Republic Act (R.A.) No. 3019, otherwise known as the Anti-Graft and Corrupt
Practices Act, petitioner notes.37 He argues that sustaining the DOJ's and the
Court of Appeals' pronouncements would result in grave injustice to him since
the delays in the present case were clearly beyond his control.38
There is no question that Act No. 3326, appropriately entitled An Act to
Establish Prescription for Violations of Special Acts and Municipal Ordinances
and to Provide When Prescription Shall Begin,is the law applicable to offenses
under special laws which do not provide their own prescriptive periods. The
pertinent provisions read:
Section 1. Violations penalized by special acts shall, unless otherwise
provided in such acts, prescribe in accordance with the following rules:

(a) x x x; (b) after four years for those punished by imprisonment for
more than one month, but less than two years; (c) x x x
Sec. 2. Prescription shall begin to run from the day of the commission of
the violation of the law, and if the same be not known at the time, from
the discovery thereof and the institution of judicial proceedings for its
investigation and punishment.
The prescription shall be interrupted when proceedings are instituted
against the guilty person, and shall begin to run again if the proceedings
are dismissed for reasons not constituting jeopardy.
We agree that Act. No. 3326 applies to offenses under B.P. Blg. 22. An
offense under B.P. Blg. 22 merits the penalty of imprisonment of not less
than thirty (30) days but not more than one year or by a fine, hence,
under Act No. 3326, a violation of B.P. Blg. 22 prescribes in four (4)
years from the commission of the offense or, if the same be not known
at the time, from the discovery thereof. Nevertheless, we cannot uphold
the position that only the filing of a case in court can toll the running of
the prescriptive period.
It must be pointed out that when Act No. 3326 was passed on 4 December
1926, preliminary investigation of criminal offenses was conducted by justices
of the peace, thus, the phraseology in the law, "institution of judicial
proceedings for its investigation and punishment,"39 and the prevailing rule at
the time was that once a complaint is filed with the justice of the peace for
preliminary investigation, the prescription of the offense is halted.40
The historical perspective on the application of Act No. 3326 is
illuminating.41 Act No. 3226 was approved on 4 December 1926 at a time
when the function of conducting the preliminary investigation of criminal
offenses was vested in the justices of the peace. Thus, the prevailing rule at
the time, as shown in the cases of U.S. v. Lazada42 and People v. Joson,43 is
that the prescription of the offense is tolled once a complaint is filed with the
justice of the peace for preliminary investigation inasmuch as the filing of the
complaint signifies the

institution of the criminal proceedings against the accused.44 These cases

were followed by our declaration in People v. Parao and Parao45 that the first
step taken in the investigation or examination of offenses partakes the nature
of a judicial proceeding which suspends the prescription of the
offense.46Subsequently, in People v. Olarte,47 we held that the filing of the
complaint in the Municipal Court, even if it be merely for purposes of
preliminary examination or investigation, should, and does, interrupt the
period of prescription of the criminal responsibility, even if the court where the
complaint or information is filed cannot try the case on the merits. In addition,
even if the court where the complaint or information is filed may only proceed
to investigate the case, its actuations already represent the initial step of the
proceedings against the offender,48 and hence, the prescriptive period should
be interrupted.
In Ingco v. Sandiganbayan49 and Sanrio Company Limited v. Lim,50 which
involved violations of the Anti-Graft and Corrupt Practices Act (R.A. No. 3019)
and the Intellectual Property Code (R.A. No. 8293), which are both special
laws, the Court ruled that the
prescriptive period is interrupted by the institution of proceedings for
preliminary investigation against the accused. In the more recent case of
Securities and Exchange Commission v. Interport Resources Corporation, et
al.,51 the Court ruled that the nature and purpose of the investigation
conducted by the Securities and Exchange Commission on violations of the
Revised Securities Act,52 another special law, is equivalent to the preliminary
investigation conducted by the DOJ in criminal cases, and thus effectively
interrupts the prescriptive period.
The following disquisition in the Interport Resources case53 is instructive, thus:
While it may be observed that the term "judicial proceedings" in Sec. 2
of Act No. 3326 appears before "investigation and punishment" in the
old law, with the subsequent change in set-up whereby the investigation
of the charge for purposes of prosecution has become the exclusive
function of the executive branch, the term "proceedings" should now be
understood either executive or judicial in character: executive when it
involves the investigation phase and judicial when it refers to the trial

and judgment stage. With this clarification, any kind of investigative

proceeding instituted against the guilty person which may ultimately
lead to his prosecution should be sufficient to toll prescription.54
Indeed, to rule otherwise would deprive the injured party the right to obtain
vindication on account of delays that are not under his control.55 A clear
example would be this case, wherein petitioner filed his complaint-affidavit on
24 August 1995, well within the four (4)-year prescriptive period. He likewise
timely filed his appeals and his motions for reconsideration on the dismissal of
the charges against
Tongson. He went through the proper channels, within the prescribed periods.
However, from the time petitioner filed his complaint-affidavit with the Office of
the City Prosecutor (24 August 1995) up to the time the DOJ issued the
assailed resolution, an aggregate period of nine (9) years had elapsed.
Clearly, the delay was beyond petitioner's control. After all, he had already
initiated the active prosecution of the case as early as 24 August 1995, only to
suffer setbacks because of the DOJ's flip-flopping resolutions and its
misapplication of Act No. 3326. Aggrieved parties, especially those who do not
sleep on their rights and actively pursue their causes, should not be allowed to
suffer unnecessarily further simply because of circumstances beyond their
control, like the accused's delaying tactics or the delay and inefficiency of the
investigating agencies.
We rule and so hold that the offense has not yet prescribed. Petitioner 's filing
of his complaint-affidavit before the Office of the City Prosecutor on 24 August
1995 signified the commencement of the proceedings for the prosecution of
the accused and thus effectively interrupted the prescriptive period for the
offenses they had been charged under B.P. Blg. 22. Moreover, since there is a
definite finding of probable cause, with the debunking of the claim of
prescription there is no longer any impediment to the filing of the information
against petitioner.
WHEREFORE, the petition is GRANTED. The resolutions of the Court of
Appeals dated 29 October 2004 and 21 March 2005 are REVERSED and
SET ASIDE. The resolution of the Department of Justice dated 9 August 2004

is also ANNULLED and SET ASIDE. The Department of Justice is ORDERED

to REFILE the information against the petitioner.
No costs.
SO ORDERED.
[G.R. No. 131214. July 27, 2000.]
BA SAVINGS BANK, Petitioner, v. ROGER T. SIA, TACIANA U. SIA and JOHN DOE,Respondents.
DECISION

PANGANIBAN, J.:

The certificate of non-forum shopping required by Supreme Court Circular 28-91 may be signed, for and on
behalf of a corporation, by a specifically authorized lawyer who has personal knowledge of the facts required
to be disclosed in such document. Unlike natural persons, corporations may perform physical actions only
through properly delegated individuals; namely, its officers and/or agents.
chanrob1es virtua1 1aw 1ibrary

The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the August 6,
1997 Resolution 1 of the Court of Appeals (CA) in CA-GR SP No. 43209. 2
Also challenged by petitioner is the October 24, 1997 CA Resolution 3 denying its Motion for
Reconsideration.
The Facts
On August 6, 1997, the Court of Appeals issued a Resolution denying due course to a Petition
forCertiorari filed by BA Savings Bank, on the ground that "the Certification on anti-forum shopping
incorporated in the petition was signed not by the duly authorized representative of the petitioner, as
required under Supreme Court Circular No. 28-91, but by its counsel, in contravention of said circular . . ."

cralaw virtua1aw

library

A Motion for Reconsideration was subsequently filed by the petitioner, attached to which was a BA Savings
Bank Corporate Secretarys Certificate, 4 dated August 14, 1997. The Certificate that the petitioners Board
of Directors approved a Resolution on May 21, 1996, authorizing the petitioners lawyers to represent it in
any action or proceeding before any court, tribunal or agency; and to sign, execute and deliver the
Certificate of Non-forum Shopping, among others.
On October 24, 1997, the Motion for Reconsideration was denied by the Court of Appeals on the ground that
Supreme Court Revised Circular No. 28-91 "requires that it is the petitioner, not the counsel, who must
certify under oath to all of the facts and undertakings required therein."
cralaw virtua1aw library

Hence, this appeal. 5

Issue
In its Memorandum, petitioner submits the following issues for the consideration of the Court:

jgc:chanrobles.com .ph

"I Whether or not petitioner-corporations lawyers are authorized to execute and sign the certificate of nonforum shopping. . .

"II Whether or not the certification of petitioners authorized lawyers will bind the corporation.
"III Whether or not the certification by petitioner corporations lawyers is in compliance with the
requirements on non-forum shopping." 6
Simply stated, the main issue is whether Supreme Court Revised Circular No. 28-91 allows a corporation to
authorize its counsel to execute a certificate of non-forum shopping for and on its behalf.
The Courts Ruling
The Petition is meritorious.
Main Issue:

chanrob1es virtual 1aw library

Authority of Counsel
A corporation, such as the petitioner, has no powers except those expressly conferred on it by the
Corporation Code and those that are implied by or are incidental to its existence. In turn, a corporation
exercises said powers through its board of directors and/or its duly authorized officers and agents. Physical
acts, like the signing of documents, can be performed only by natural persons duly authorized for the
purpose by corporate bylaws or by a specific act of the board of directors. "All acts within the powers of a
corporation may be performed by agents of its selection; and, except so far as limitations or restrictions
which may be imposed by special charter, by-law, or statutory provisions, the same general principles of law
which govern the relation of agency for a natural person govern the officer or agent of a corporation, of
whatever status or rank, in respect to his power to act for the corporation; and agents once appointed, or
members acting in their stead, are subject to the same rules, liabilities and incapacities as are agents of
individuals and private persons." 7
chanrob1es virtua1 1aw 1ibrary

In the present case, the corporations board of directors issued a Resolution specifically authorizing its
lawyers "to act as their agents in any action or proceeding before the Supreme Court, the Court of Appeals,
or any other tribunal or agency[;] and to sign, execute and deliver in connection therewith the necessary
pleadings, motions, verification, affidavit of merit, certificate of non-forum shopping and other instruments
necessary for such action and proceeding." The Resolution was sufficient to vest such persons with the
authority to bind the corporation and was specific enough as to the acts they were empowered to do.
In the case of natural persons, Circular 28-91 requires the parties themselves to sign the certificate of nonforum shopping. However, such requirement cannot be imposed on artificial persons, like corporations, for
the simple reason that they cannot personally do the task themselves. As already stated, corporations act
only through their officers and duly authorized agents. In fact, physical actions, like the signing and the
delivery of documents, may be performed, on behalf of the corporate entity, only by specifically authorized
individuals.
chanrob1es virtua1 1aw 1ibrary

It is noteworthy that the Circular does not require corporate officers to sign the certificate. More important,
there is no prohibition on against authorizing agents to do so.
In fact, not only was BA Savings Bank authorized to name an agent to sign the certificate; it also exercised
its appointing authority reasonably well. For who else knows of the circumstances required in the Certificate
but its own retained counsel. Its regular officers, like its board chairman and president, may not even know
the details required therein.
Consistent with this rationale, the Court en banc in Robern Development Corporation v. Judge Jesus Quitain
8 has allowed even an acting regional counsel of the National Power Corporation to sign, among; others, the
certificate of non-forum shopping required by Circular 28-91. The Court held that the counsel was "in the
best position to verify the truthfulness and the correctness of the allegations in the Complaint" and "to know
and to certify if an action . . . had already been filed and pending with the courts." 9
Circular 28-91 was prescribed by the Supreme Court to prohibit and penalize the evils of forum shopping.
We see no circumvention of this rationale if the certificate was signed by the corporations specifically
authorized counsel, who had personal knowledge of the matters required in the Circular. In Bernardo v.
NLRC, 10 we explained that a literal interpretation of the Circular should be avoided, if doing so would

subvert its very rationale. Said the Court:

jgc:chanroble s.com.ph

". . . Indeed, while the requirement as to certificate of non-forum shopping is mandatory, nonetheless the
requirements must not be interpreted too literally and thus defeat the objective of preventing the
undesirable practice of forum-shopping."
chanrob1es virtua1 1aw 1ibrary

Finally, we stress that technical rules of procedure should be used to promote, not frustrate, justice. 11
While the swift unclogging of court dockets is a laudable objective, the granting of substantial justice is an
even more urgent ideal.
WHEREFORE, the Petition is GRANTED and the appealed Resolution is REVERSED and SET ASIDE. The case
is REMANDED to the Court of Appeals, which is directed to continue the proceedings in CA-GR SP No. 43209
with all deliberate speed. No costs.
SO ORDERED.

[G.R. No. 127064. August 31, 1999]

FIVE

STAR
BUS
COMPANY
INC.,
and
IGNACIO
TORRES, petitioners, vs. COURT OF APPEALS, JUDGE JAIME F.
BAUTISTA, RTC-Br. 75, Valenzuela, Metro Manila and SAMUEL
KING SAGARAL II, respondents.
DECISION

BELLOSILLO, J.:

The threshold issue in this petition for review on certiorari is whether the Court of Appeals
can summarily dismiss a petition on the ground that the certification on non-forum shopping
required by Supreme Court Circular No. 28-91 was signed by counsel and not by petitioners
themselves.
On 9 November 1991, at around 11:00 oclock in the evening, along the MacArthur Highway
in Valenzuela, Metro Manila, the Suzuki Supercarry Mini-Van driven by private respondent
Samuel King Sagaral II collided with a passenger bus owned and operated by petitioner Five Star
Bus Company and driven by co-petitioner Ignacio Torres.[1]
On 1 April 1992 private respondent Sagaral filed a civil action for damages against
petitioners and the case was assigned to Branch 171 of the Valenzuela Regional Trial Court and
docketed as Civil Case No. 3812-V-92.
When amicable settlement failed, trial ensued with private respondent Sagaral (plaintiff in
the court a quo) initially presenting his evidence. Several years passed and on 26 December 1996
Sagaral finally rested his case.[2] On 12 March 1996 the trial court ordered petitioners herein
(defendants in the court a quo) to present their evidence on 25 April 1996 and 9 May 1996.[3]

The presentation of evidence by petitioners was snagged by several postponements. The first
was when Presiding Judge Adriano R. Osorio reset the 25 April 1996 hearing to 9 May 1996 as
he had to go on forced vacation leave from 23 April 1996 to 25 April 1996. [4] But during the 9
May 1996 hearing, petitioner Ignacio Torres failed to appear prompting the lower court to cancel
the hearing. According to petitioners, Torres was then detained in jail due to a separate pending
criminal case filed against him by Sagaral before Br. 172 of the RTC of Valenzuela. Petitioners
further explained that Torres could not post bail earlier for his provisional liberty since no notice
was sent to him regarding the criminal complaint.[5]
On 4 June 1996 Judge Osorio ordered the civil case to be unloaded in view of his courts
designation as a permanent special court to exclusively try heinous crimes under RA 7659.[6] On
17 June 1996 the case was re-raffled to Br. 75 of the same RTC, this time under Judge Jaime F.
Bautista who immediately scheduled a hearing for the initial presentation of petitioners' evidence
on 8 August 1996.[7]Nonetheless on 9 July 1996 petitioners filed a motion to reset the hearing
scheduled on 8 August 1996 to 15 August 1996 citing as reason their counsels conflict of
schedule.[8]
It seemed however that even prior to the scheduled hearing of 8 August 1996, former
Presiding Judge Osorio had already set a hearing for 2 July 1996 and 16 July 1996. But instead
of conducting a hearing on said dates, Judge Bautista issued an order on 2 July 1996, thus -

It appearing from the records that this case had been previously set by Branch 171
today and July 16, 1996 and considering the Urgent Motion to Reset filed by the
defendants thru counsel, the hearing set for today is hereby cancelled and is reset to
July 16, 1996 as previously scheduled and August 8, 1996 both at 8:30 a.m. x x x x [9]
When the case was called for hearing on 16 July 1996, counsel for petitioners was not
present. In fact he arrived twenty (20) minutes late. Thus, upon motion of respondent Sagaral,
the trial court issued the disputed Order-

There being no certainty as to what time defendants counsel would be in court, and
upon manifestation of plaintiffs counsel that lawyer should be aware of his time x x x
as prayed for, the defendants right to present their evidence is deemed waived and the
case is now submitted for decision x x x x (underscoring supplied).[10]
Petitioners forthwith filed a motion for reconsideration of the above-mentioned Order
arguing that the right to be heard was a basic tenet guaranteed by the Constitution which the
courts could not impinge upon in the absence of any justifying reason to do so. They also blamed
the heavy traffic for their lawyer's tardiness.

To simplify the proceedings due to the various motions filed by petitioners, Judge Bautista
cancelled the 8 August 1996 hearing and reset it to 20 August 1996. He also set for hearing
petitioner's motion for reconsideration on 20 August 1996.[11]
However, as if trying to test the patience of the trial court, petitioners once again filed on 5
August 1996 an Urgent Motion to Reset the 20 August 1996 hearing. Their counsel pleaded that
he could not make it on such date because he had previously committed himself to appear before
the Antipolo Regional Trial Court. He prayed that the hearing be moved to 2 September 1996.[12]
The hearing set for 20 August 1996 was cancelled [13] and the trial court on that day issued
instead its Order denying petitioners' motion for reconsideration of its Order dated 16 July 1996
which considered the case submitted for resolution. The lower court noted that the case had been
pending for more than four (4) years and it had always been at the "mercy" of petitioners when it
acted favorably on their motions. There would be no end to this litigation if the court would give
due course to this motion.[14]
Undeterred, petitioners sought recourse in the Court of Appeals through a petition
for certiorari. But in the assailed Resolution dated 23 September 1996 the appellate court
summarily dismissed their petition on the ground that the affidavit of non-forum shopping was
signed and executed by counsel for petitioners and not by petitioners themselves, or one of them,
as required by Circular No. 28-91 of the Supreme Court.[15]
Petitioners moved for reconsideration which the Court of Appeals rejected in its Resolution
of 31 October 1996.[16] Petitioners are now before us contending that the appellate court erred in
affirming the Order of the trial court dated 16 July 1996 and in dismissing their petition for noncompliance with the requirement of Circular No. 28-91. They pray that the appellate court
remand the case to the court of origin for further proceedings.
Circular No. 28-91, which took effect on 1 April 1994, provides inter alia:

(1) (I)n every petition filed with the Supreme Court or the Court of Appeals, the
petitioner, aside from complying with the pertinent provisions of the Rules of Court
and existing circulars, must certify under oath all of the following facts or
undertakings x x x x;
(2) Any violation of this revised Circular will entail the following sanctions: (a) it
shall be a cause for the summary dismissal of the multiple petitions or complaints; x x
x x (underscoring supplied).
Circular No. 28-91 has its roots in the rule that a party-litigant shall not be allowed to pursue
simultaneous remedies in two (2) different fora, for such practice works havoc upon orderly

judicial procedure. Forum shopping has been characterized as an act of malpractice that is
prohibited and condemned as trifling with the courts and abusing their processes. It constitutes
improper conduct which tends to degrade the administration of justice. It has also been aptly
described as deplorable because it adds to the congestion of the already heavily burdened dockets
of the courts.[17]
Nonetheless, we are not unmindful of this Courts ruling in Gabionza v. Court of Appeals,
Loyola v. Court of Appeals,[19] and Kavinta v. Castillo, Jr.[20] that substantial compliance with
Circular No. 28-91 is sufficient:
[18]

It is scarcely necessary to add that Circular No. 28-91 must be so interpreted and
applied to achieve the purposes projected by the Supreme Court when it promulgated
that circular. Circular No. 28-91 was designed to serve as an instrument to promote
and facilitate the orderly administration of justice and should not be interpreted with
such absolute literalness as to subvert its own ultimate and legitimate objective or the
goal of all rules of procedure which is to achieve substantial justice as expeditiously
as possible.
The fact that the Circular requires that it be strictly complied with merely underscores
its mandatory nature in that it cannot be dispensed with or its requirements altogether
disregarded, but it does not thereby interdict substantial compliance with its
provisions under justifiable circumstances.
In the instant case, we cannot apply the "substantial compliance" rule to petitioners and be as
liberal minded. For one thing, counsel for petitioners gave a rather frail excuse for his noncompliance, i.e., oversight and haste in ensuring that the petition would be filed at the earliest
possible time for the protection of his clients interests thereby overlooking the aforesaid circular.
[21]

In Ortiz v. Court of Appeals[22] which involves a similar set of facts, we ruled -

(I)t should be recalled that Revised Circular No. 28-91 provides that the party must
certify under oath that he has not commenced any other action or proceeding
involving the same issues in the Supreme Court, the Court of Appeals, or different
Divisions thereof, or any other tribunal or agency, and that to the best of his
knowledge, no such action or proceeding is pending in the Supreme Court x x x x
Petitioners admit that their lawyer x x x signed the Certification on Non-Forum
Shopping. Allegedly, Atty. Paulite has personal knowledge that the Ortizes had not

commenced any other action or proceeding involving the same parties and causes of
action. Petitioners now assert that their lawyers signature must be accepted as
substantial compliance with the requirements of the Circular.
Regrettably, we find that substantial compliance will not suffice in a matter involving
strict observance as provided for in Circular No. 28-91. The attestation contained in
the certification on non-forum shopping requires personal knowledge by the party
who executed the same. To merit the Courts consideration, petitioners here must show
reasonable cause for failure to personally sign the certification. The petitioners must
convince the court that the outright dismissal of the petition would defeat the
administration of justice. However, the petitioners did not give any explanation to
warrant their exemption from the strict application of the rule utter disregard of the
rules cannot justly be rationalized by harking on the policy of liberal construction x x
xx
Finally, petitioners argue that the delay in the proceedings in the court below was not
entirely their fault "as various circumstances and incidents beyond (their) control contributed to
the delay."[23]
Contrary to petitionerss assertions, their failure to present their evidence was their own
undoing. A review of the records shows that the trial court had scheduled a total of six (6)
hearing dates for the presentation of their evidence. These were 25 April 1996, 9 May 1996, 2
July 1996, 16 July 1996, 8 August 1996 and 20 August 1996. Five (5) of these trial dates were
cancelled at the instance of petitioners. They themselves admitted that the 9 May 1996 hearing
was postponed when Isagani Torres failed to appear in court because he was then
incarcerated. Likewise, through a motion petitioners were able to have the hearing on 2 July
1996 moved to 16 July 1996. However on said date petitioners counsel failed to appear on time,
thus prompting the trial court to declare petitioners right to present evidence as waived. As to the
8 August 1996 hearing, they moved to have the same reset, citing as reason the conflict of
schedule of their counsel. And when the trial court granted the motion and transferred the
hearing to 20 August 1996, petitioners once again submitted a motion praying that the hearing be
reset to 2 September 1996. From these repeated resettings, it can be gleaned that the delay in the
proceedings was largely, if not mainly, due to petitioners.
We also do not miss the fact that petitioners were represented by a law firm which meant
that any of its members could lawfully act as their counsel during the trial. As such petitioners
frequent motions to reset hearings by reason of their counsels unavailability should be cautiously
considered to make sure that these were not mere dilatory tactics. As observed by the lower
court, a perusal of the records shows that the case has been pending for a long period of time,

with the court often accommodating petitioners. Thus there could be no grave abuse of discretion
when the trial court finally ordered petitioners right to present evidence as waived to put an end
to their foot dragging. Indeed, it is never too often to say that justice delayed is justice denied.
WHEREFORE, there being no reversible error committed by the Court of Appeals, the
petition for review on certiorari is DENIED and the assailed Resolution of 23 September 1996
summarily dismissing the petition for certiorari and the Resolution of 31 October 1996 denying
reconsideration are AFFIRMED. Consequently, the Regional Trial Court of Valenzuela, Metro
Manila, is DIRECTED forthwith to render its decision in Civil Case No. 3812-V-92 without
delay. Costs against petitioners.
SO ORDERED.

[G.R. No. 143016. August 30, 2000]

MR. & MRS. RONNIE DAR, MR. & MRS. RANDY ANGELES, MR.
& MRS. JOY CONSTANTINO and MR. & MRS. LIBERTY
CRUZ,petitioners, vs. HON. ROSE MARIE ALONZOLEGASTO, in her capacity as the Presiding Judge in the
Metropolitan Trial Court of Metro Manila, Branch 41,
Quezon City and NENITA CO BAUTISTA represented by
VICTORIO A. BAUTISTA, respondents.
DECISION
KAPUNAN, J.:
If the petitioners are husband and wife and only one of them signs the
petition (for review on certiorari and mandamus), is the petition dismissible for
violation of the Rule on Certification of Non-Forum Shopping requiring all
petitioners to certify it under oath? This is the sole issue raised by petitioners
Mr. and Mrs. Ronnie Dar, Mr. and Mrs. Randy Angeles, Mr. and Mrs. Joy
Constantino, and Mr. and Mrs. Liberty Cruz.
In a resolution, dated January 25, 2000, the Court of Appeals ruled in the
affirmative. Said
court
dismissed
petitioners
petition
for
review
on certiorari and mandamusfor failure to comply with the Rule on Certification of
Non-Forum Shopping after finding that the petition "was signed only by Ronnie
[1]

Dar, Randy Angeles, Joy Constantino, and Liberty Cruz, without authority
attached thereto to sign for and in behalf of their co-petitioners." In other
words, while petitioners Ronnie Dar, Randy Angeles, Joy Constantino and
Liberty Cruz signed the Certification of Non-Forum Shopping, their respective
spouses did not sign the same.
[2]

It appears from the records that herein private respondent Nenita Co

Bautista filed a case for unlawful detainer against herein petitioners in the
Metropolitan Trial Court, Quezon City. They were sued as Mr. and Mrs. in the
said case. Petitioners now contend that since what is involved in the instant
case is their common rights and interest to abode under the the system of
absolute community of property, either of the spouses can sign the petition.
[3]

[4]

We find merit in the petition.

Administrative Circular No. 04-94 issued by the Supreme Court on February
8, 1994 provides, among others:

Revised Circular No. 28-91, dated February 8, 1994 applies to and governs
the filing of petitions in the Supreme Court and the Court of Appeals and is
intended to prevent the multiple filing of petitions or complaints involving the
same issues in other tribunals or agencies as a form of forum shopping.
Complementary thereto and for the same purpose, the following requirements,
in addition to those in pertinent provisions of the Rules of Court and existing
circulars, shall be strictly complied with in the filing of complaints, petitions,
applications or other initiatory pleadings in all courts and agencies other than
the Supreme Court and the Court of Appeals and shall be subject to the same
sanctions provided hereunder.
1. The plaintiff, petitioner, applicant or principal party seeking relief in the
complaint, petition, application or other initiatory pleading shall certify under
oath in such original pleading, or in a sworn certification annexed thereto and
simultaneously filed therewith, to the truth of the following facts and
undertakings: (a) he has not theretofore commenced any other action or
proceeding involving the same issues in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no
such action or proceedings is pending in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; (c) if there is any such action or

proceeding which is either pending or may have been terminated, he must

state the status thereof; and (d) if he should thereafter learn that a similar
action or proceedings has been filed or is pending before the Supreme Court,
the Court of Appeals or any other tribunal or agency, he undertakes to report
that fact within five (5) days therefrom to the court or agency wherein the
original pleading and sworn certification contemplated herein have been filed.
The complaint and other initiatory pleadings referred to and subject of this
Circular are the original civil complaint, counter-claim, cross-claim, third
(fourth, etc.) party complaint, or complaint-in-intervention, petition, or
application wherein a party asserts his claim for relief.
xxx
With respect to the contents of the certification which the pleader may
prepare, the rule of substantial compliance may be availed of. While this section
requires that it be strictly complied with, it merely underscores its mandatory
nature in that it cannot be altogether dispensed with or its requirements
completely disregarded but it does not thereby prevent substantial compliance
on this aspect of its provisions under justifiable circumstances. Circular No. 2891 was designed to serve as an instrument to promote and facilitate the orderly
administration of justice and should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objective or the goal of
all rules of procedure - which is to achieve substantial justice as expeditiously
as possible.
[5]

[6]

In the instant case, the Court of Appeals should have taken into
consideration the fact that the petitioners were sued jointly, or as Mr. and Mrs.
over a property in which they have a common interest. Such being the case, the
signing of one of them in the certification substantially complies with the rule on
certification of non-forum shopping.
WHEREFORE, the resolutions of the Court of Appeals, dated January 25,
2000 and April 24, 2000, are hereby REVERSED and SET ASIDE. The case is
hereby REMANDED to the Court of Appeals for proper disposition.
SO ORDERED.

G.R. No. 117186 June 29, 1995

ALAN M. LOYOLA, petitioner,

vs.
COURT OF APPEALS, THE HON. JUDGE MARIA CARILLO ZALDIVAR in her capacity as the
Presiding Judge of the RTC, Kalibo, Branch 6; THE HON. EDUARDO R. AVELINO, in his
capacity as the presiding Judge of the MCTC, Macato-Tangalan, and ANICETO FERNANDEZ
III, respondents.

DAVIDE, JR., J.:

After the issues were joined with the filing of the comments on the petition, we resolved to decide
this case on the merits in view of the novel issue presented, namely, whether the public respondent
Court of Appeals committed a reversible error in dismissing the petitioner's petition for review and in
upholding (a) the order of the 4th Municipal Circuit Trial Court (MCTC) of Macato-Tangalan, Aklan, of
30 May 1994 denying the petitioner's motion to dismiss Election Protest Case No. 94-02 based on a
claim that it was not accompanied by a certification of non-forum shopping required in Administrative
Circular No. 04-94 of this Court, and (b) the decision of Branch 6 of the Regional Trial Court (RTC) of
Kalibo, Aklan, of 13 June 1994, denying the petitioner's petition for certiorari andmandamus the
order of the MCTC.
It appears that in the barangay election of 9 May 1994, the Board of petitioner was proclaimed on 10
May 1994 by the Barangay Board of Canvassers as the duly elected Punong Barangay of barangay
Poblacion of the Municipality of Tangalan, Aklan.
On 18 May 1994, private respondent Aniceto Fernandez III, the defeated candidate for Punong
Barangay, filed with the 4th MCTC of Macato-Tangalan an election protest against the petitioner
which was docketed as Election protest Case No. 94-02. On that same date, respondent Judge
Eduardo R. Avelino of the said court issued an order directing the issuance of summons to the
petitioner, directing the latter to answer the petition within five days from receipt thereof, and setting
the hearings of the case for 25 May to 31 May 1994. The protest was not accompanied by a
certification of non-forum shopping required under Administrative Circular No. 04-94 of this Court
which took effect on 1 April 1994. However, the following day or on 19 May 1994, in compliance with
the said circular, the private respondent submitted to the MCTC his certification of non-forum
shopping.
On 25 May 1994, the petitioner filed a motion to dismiss the protest for the private respondent's
failure to strictly comply with Administrative Circular No. 04-94. He claims that the filing of the
certification on 19 May 1994 was merely the private respondent's desperate attempt to cure the
jurisdictional flaw of his petition.
On 30 May 1994, the MCTC issued an order denying the motion to dismiss and, in support of the
denial, it reasoned thus:
The issues to be resolved are the following:

(a) Is Administrative Circular No. 04-94, a substantive law or merely a

procedural law that governs pleading, practice or procedure?
(b) If it is a procedural Law, it is strictly construed in accordance with
its terminology or it may be given a Literal interpretation to give effect
to its spirit and purpose?
(c) Is it applicable to election protest for barangay offices where
public interests are involved?
In pursuance to the provisions of the Constitution, the Supreme Court promulgated
the Rules of Court as a uniform rule governing pleading, practice and procedure in all
courts of the Philippines. In the exercise of said power and authority, the Supreme
Court issued several amendatory rules, one of which is Administrative Circular No.
04-94. Being a procedural law, the requirements of said circular is not jurisdictional in
character.
Rule 1, Sec. 2 of the Revised Rules of Court provides:
These rules shall be liberally construed in order to promote their
object and to assist the parties in obtaining just, speedy, and
inexpensive determination of every action and proceeding.
A perusal of the record shows that protestant Aniceto D. Fernandez, III submitted the
required affidavit of Non-Forum Shopping on May 19, 1994, a day after the filing of
his petition. Although the affidavit in question was not simultaneously filed with his
petition, the Court considers the same as substantial compliance.
If we look into the spirit and purpose of Administrative Circular No. 04-94, it was
apparently intended to curtail the pernicious practice of forum shopping, which was
considered as one of the factors that caused backlog in the court dockets.
Obviously, a protestant in an election protest for barangay office cannot conduct
forum shopping in any other courts because the Omnibus Election Code confers the
exclusive and original jurisdiction to try the same to the Municipal Trial Court.
Election contest involves public interest. It imposed upon the court the imperative
duty to ascertain by all means within its command, the real candidate who was
chosen by the electorate. It has been postulated as a fundamental principle in
election cases, that technicalities or procedural barriers should not be allowed to
stand if the same would tend to defeat, rather than promote, the interest of justice.
Rule 143 of the Revised Rules of Court states:
These rules shall not apply to land registration, cadastral and election
cases, naturalization and insolvency proceedings, and other cases,

not herein provided for, except by analogy or in a suppletory

character and whenever practicable and convenient.
If the Court believes that the application of Administrative Circular No. 04-94 in its
suppletory character is impracticable and inconvenient under the circumstances, the
same may not be strictly applied to election cases.
By legislative fiat the trial of election cases shall be conducted in a summary manner
without the cumbersome procedure prescribed for ordinary litigations in order that its
results may be determined in the shortest time possible.
Contesting the denial of his motion to dismiss, the petitioner filed with Branch 6 of the RTC of Aklan
a petition forcertiorari and mandamus with damages and attorney's fees. The case was docketed as
Special Civil Action No. 4828. He prayed therein that a temporary restraining order be issued
enjoining respondent Judge Avelino from proceeding with the hearing, revision, and recount in the
election protest case. He also prayed that, after hearing, Judge Avelino be directed to dismiss the
election protest and that the private respondent be ordered to pay to the petitioner actual damages,
attorney's fees, and litigation expenses.
In a decision rendered on 13 June 1994, the RTC of Aklan, per Judge Maria Carillo Zaldivar, denied
the petition for lack of merit. Regarding the submission of the certification of non-forum shopping a
day after the filing of the protest, it held that "amendments and/or supplements to a complaint is a
matter of right before the Answer is filed."
It further ruled that Administrative Circular No. 04-94 does not apply to election cases which are
covered by a special law; in any event, the circular is suppletory to the Rules of Court, and Section
2, Rule 1 of the latter provides that the rules shall be liberally construed in order to promote their
object and to assist the parties in obtaining a just, speedy, and inexpensive determination of every
action and proceeding.
Finally, it opined that since the MCTC in this case is a single sala court, the private respondent
cannot go elsewhere but to such court; besides, Administrative Circular No. 04-94 is a formal
procedural requirement which could be cured before the actual trial is conducted and that since the
certification of non-forum shopping was filed within a reasonable time before the petitioner filed his
answer, the Circular was substantially petitioner filed his answer, the Circular was substantially
complied with.
His motion to reconsider the decision having been denied by the RTC, the petitioner filed with the
Court of Appeals a petition for review, docketed as CA-G.R. SP No. 34695, to set aside the denial
order of the MCTC and the decision of the RTC.
In its decision of 22 August 1994, the Court of Appeals dismissed the petition because no error was
committed by the MCTC and RTC. It agreed with the said courts that there was substantial
compliance with Administrative Circular No. 04-94. It further stated:

Moreover, while we believe that the Non-Forum Certification is

essential under the circular, same is not jurisdictional but only a
formal requirement, non-compliance therewith shall cause the
dismissal of the action. It is also mandatory but at the same time
curable, specially so when timely or seasonably complied with.
Failing in his bid to obtain a reconsideration of the decision, the petitioner instituted the instant
petition for review.
The core issues for our determination are (1) whether Administrative Circular No. 04-94 is mandatory
and jurisdictional; and (2) whether it is applicable in election cases.
I.
By the clear language of the second sanction imposed by Administrative Circular No. 04-94, to wit:
2. Any violation of this Circular shall be a cause for the dismissal of the Complaint,
petition, application or other initiatory pleading, upon motion and after hearing.
However any clearly willful and deliberate forum shopping by any party and his
counsel through the filing of multiple complaints or other initiatory pleadings to obtain
favorable action shall be a ground for summary dismissal thereof and shall constitute
direct contempt of court. Furthermore, the submission of a false certification or noncompliance with the undertakings therein, as provided in Paragraph 1 hereof, shall
constitute indirect contempt of court, without prejudice to disciplinary proceedings
against the counsel and the filing of a criminal action against the guilty party.
it is evident that the Circular is mandatory.
It is not, however, jurisdictional. Jurisdiction over the subject or nature of the action is conferred by
law. 1 Otherwise stated, there is lack of jurisdiction over the nature of the action where the type of action is
reposed by law in certain other courts. 2
Substantial compliance with the Circular is sufficient. This Circular expanded or broadened the
applicability of Circular No. 28-91 of this Court. 3 In Gabionza vs. Court of Appeals, 4 this Court held that
substantial compliance therewith is sufficient for:
It is scarcely necessary to add that Circular No. 28-91 must be so interpreted and
applied as to achieve the purposes projected by the Supreme Court when it
promulgated that Circular. Circular No. 28-91 was designed to serve as an
instrument to promote and facilitate the orderly administration of justice and should
not be interpreted with such absolute literalness as to subvert its own ultimate and
legitimate objective or the goal of all rules of procedure which is to achieve
substantial justice as expeditiously as possible.
In this case, it is a fact that the certification of non-forum shopping was filed by the private
respondent on 19 May 1994, a day after he filed his election protest. Since the proclamation of the

results of the election was made by the barangay board of canvassers on 10 May 1994, the private
respondent, pursuant to Section 9 of R.A. 6679, 5had ten days therefrom or until 20 May 1994 within
which to file an election protest. The filing of the certification was therefore still within the period for filing
an election protest. Accordingly, although the certification was not filed simultaneously with the initiatory
pleading, its filing within the reglementary period was a substantial compliance with Administrative
Circular No. 04-94.
The fact that the Circular requires that it be strictly complied with merely underscores its mandatory
nature in that it cannot be dispensed with or its requirements altogether disregarded, but it does not
thereby interdict substantial compliance with its provisions under justifiable circumstances.
II.
We do not agree with the MCTC that Administrative Circular No. 04-94 is not applicable to election
cases because it is merely amendatory of the Rules of Court and the latter, pursuant to Rule 143
thereof, is not applicable to election cases. There is nothing in the Circular that indicates that it does
not apply to election cases. On the contrary, it expressly provides that the requirements therein,
which are in addition to those in pertinent provisions of the Rules of Court and existing circulars,
"shall be strictly complied with in the filing of complaints, petitions, applications or other initiatory
pleadings in all courts and agencies other than the Supreme Court and the Court of Appeals." Ubi
lex non distinguit, nec nos distinguere debemus.
Nor are we persuaded by its ruling that considering that the MCTC has after all the original and
exclusive jurisdiction over the election protest, the certification was unnecessary since the private
respondent could not have filed the case anywhere else. The argument fails to consider the
possibility of a party availing, rightly or wrongly, of other legal remedies; or of filing the same election
protest in more than one MTC, despite the erroneous venues; or of even being unaware of the
original exclusive jurisdiction of the MTC over such election protests and filing one of the protests in
the RTC by mistake.
WHEREFORE, the instant petition is DENIED and the Municipal Circuit Trial Court of MacatoTangalan, Aklan, is directed to proceed with dispatch in the hearing and resolution of Election Protest
Case No. 94-02. This decision is immediately executory.
Costs against the petitioner.
SO ORDERED.

[G. R. No. 155875 April 3, 2003]

AGAPITO CRUZ FIEL, AVELINO QUIMSON REYES and ROY CONALES

BONBON, petitioners, vs. KRIS SECURITY SYSTEMS, INC.,

NATIONAL LABOR RELATIONS COMMISSION and the COURT

OF APPEALS, respondents.
DECISION
VITUG, J.:

Before the Court is a petition for review on certiorari which seeks the
nullification of the resolution of the Court of Appeals, dated 16 April 2002, as
well as its reiterative resolution of 29 October 2002, dismissing the case
brought to it by petitioners for non-compliance with the requirements of
Section 5, Rule 7, of the 1997 Rules of Civil Procedure.
Petitioners were employed by private respondent Kris Security Systems,
Inc., as security guards and were assigned posts at Dunkin Donut, lmus
Central Kitchen Department, in lmus, Cavite. On different dates in October
1998, private respondent terminated the services of petitioners. On 13
October 1998, petitioners filed a complaint for illegal dismissal before the
Regional Arbitrating Branch of the National Labor Relations Commission
(NLRC). Private respondent contended that it did not dismiss petitioners but
that they were pulled out from their assignments due to the request of the
client.
The Labor Arbiter rendered his decision on 30 June 2000; he concluded:
WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered
declaring that herein complainants have indeed been constructively dismissed from
their employment. Accordingly, respondent Kris Security Systems, Inc. is hereby
directed to reinstate said complainants to their former position(s) without loss of
seniority rights and to pay them their full backwages as follows:
Full Backwages
1) Agapito C. Fiel P139,799.66
2) Avelino Q. Reyes P139,799.66
3) Roy C.Bonbon P137,583.16

4) Diomedes Uray P139,128.00

The other monetary claims are hereby DISMISSED for lack of merit.

[1]

Private respondent appealed the decision of the Labor Arbiter to the NLRC
which, on 08 August 2001, set aside the questioned decision of the Labor
Arbiter, it held:
WHEREFORE, the appealed decision dated 30 June 2000 is SET ASIDE. The
complaints for illegal dismissal are dismissed for being without merit.
[2]

Petitioners motion for reconsideration was denied by the NLRC in its

resolution of 28 November 2001.
Petitioners forthwith filed a petition for certiorari under Rule 65 with the
Court of Appeals. In a resolution, dated 16 April 2002, the appellate court
dismissed the petition on the ground that it violated Section 5, Rule 7, of the
1997 Rules of Civil Procedure because only three of the four petitioners
signed the mandatory verification and certification of non-forum shopping.
Petitioners motion for reconsideration was denied by the Court of Appeals in
its resolution of 29 October 2002.
The instant petition raises the issue of:
Whether or not the Court of Appeals acted correctly and in the interest of substantial
justice when it dismissed a petition for certiorari under Rule 65 of the Rules of Court
on the mere technicality that said petition was signed, certified and verified by only
three (3) out of four (4) named petitioners (all of whom claim to have been illegally
dismissed by their employer) considering the following circumstances:
(a) The ruling in the case of Loquias, et al. vs. Office of the Ombudsman (338 SCRA
62) where only 1 out of 5 petitioners signed the certification of their petition is not
properly applicable to the present case where 3 out of 4 petitioners signed the
verification of their petition.
(b) The later ruling in DAR vs. Alonzo-Legasto (339 SCRA 306), (where the petition
was signed by only one of each of the four (4) couples) that the requirement of a
certification of non-forum shopping should not be interpreted with such absolute

literalness as to subvert the goal of achieving substantial justice supplanted or

modified the earlier strict ruling in Loquias vs. Office of the Ombudsman (338 SCRA
62).
(c) In St. Michael Academy vs. NLRC (292 SCRA 478) it was ruled that technical
rules of pleading are not enforced strictly in labor cases especially where they will
defeat the substantive rights of employees and in De Ysasi Ill vs. NLRC (231 SCRA
173), it was declared that courts must heed the underlying policy in the labor code
relaxing the application of technical rules of procedure in labor cases.
(d) The three (3) petitioners who signed the petition filed with the Court of Appeals
are differently situated from the fourth (4th) named petitioner who failed and omitted
to sign the petition; consequently, such failure and omission by the fourth (4th)
petitioner should not prejudice the three (3) other petitioners who are without fault.
(e) The failure or omission to delete from the petition filed with the Court of Appeals
the name of Diomedes Uray (the 4th named petitioner who failed or omitted to sign
the petition) was an excusable oversight or lapse by petitioners attorneys pro bono.
(f) Giving due course to the petition only insofar as the three (3) petitioners who
signed the petition are concerned but dismissing the petition only insofar as the fourth
(4th) petitioner who failed or omitted to sign the petition is concerned would be a fair,
reasonable and equitable disposition of the petition filed with the Court of Appeals.
(g) An outright dismissal of the petition on a procedural or technical omission (not
attributable to the three (3) petitioners who signed the petition filed with the Court of
Appeals) would deprive petitioners of their right to be heard on the merits of their
petition which calls for the rectification of acts of grave abuse of discretion by the
NLRC.
[3]

In its brief comment, dated 09 January 2003, respondent company prays for
the denial of the petition and an affirmance of the action taken by the Court of
Appeals.
The Court grants the petition.
The greater interest of justice would be served if the petition
for certiorari filed by petitioners before the Court of Appeals is adjudicated on

its merits with respect to the three petitioners who have signed the verification
and certification on non-forum shopping, namely, Agapito C. Piel, Avelino Q.
Reyes and Roy C. Bonbon, than to make them all pay for the failure of their
co-petitioner Diomedes Uray to observe his own compliance with the rules.
The three petitioners who have faithfully observed the rules mandated in
Section 5, Rule 7, of the 1997 Rules of Civil Procedure, by signing the
requisite verification and certification on non-forum shopping, should not be
unduly prejudiced by the fault of their co-petitioner who apparently has lost
interest in pursuing his case.
Once again, we must stress that the technical rules of procedure should
be used to promote, not frustrate, the cause of justice. While the swift
unclogging of court dockets is a laudable aim, the just resolution of cases on
their merits, however, cannot be sacrificed merely in order to achieve that
objective. Rules of procedure are tools designed not to thwart but to facilitate
the attainment of justice; thus, their strict and rigid application may, for good
and deserving reasons, have to give way to, and be subordinated by, the need
to aptly dispense substantial justice in the normal course.
[4]

[5]

WHEREFORE, the petition is GRANTED. The assailed resolutions of the

Court of Appeals, dated 16 April 2002 and 29 October 2002, are SET ASIDE.
The case is REMANDED to the Court of Appeals for adjudication on the
merits of the petition before it.
SO ORDERED.

G.R. No. 125671

January 28, 2000

CONDO SUITE CLUB TRAVEL, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (Third Division) and FLORENCIO
LALO, respondents.
QUISUMBING, J.:
This special civil action for certiorari assails the decision of public respondent dated January 29,
1996 in NLRC NCR Case 09-06751-94, and its resolution dated June 28, 1996, which denied
petitioner's motion for reconsideration.

The records show that private respondent was first employed by Sunette Realty Development
Corporation as "housekeeper" with a monthly compensation of P8,000.00. After two months, private
respondent signed a new employment contract with petitioner, Condo Suite Club Travel Inc., under
the same terms of employment. Both firms belong to ARCON Group of Companies, run by the same
management and board of directors.
In July 1992, private respondent's salary was reduced to P6,000.00 because of adverse business
conditions. Expectedly, private respondent complained with the management. To placate him, private
respondent's salary was adjusted to P6,500.00. Private respondent was receiving such salary until
his dismissal although he was then already performing the duties and responsibilities of a front desk
supervisor in petitioner's hotel. Aside from his employment with petitioner, private respondent owned
a car-for-hire, which he regularly rented to a certain Joselito Landrigan at the rate of P400.00 a day.
Landrigan, in turn, operated the car as a taxi with himself as driver.
1wphi1.nt

On August 15, 1994, Landringan approached Editha Mariano, front desk clerk at petitioner's hotel.
He requested Mariano that his alleged collectible from a certain In Hu, a Korean guest in the hotel,
be included in the hotel bill of said guest. He claimed that Mr. Hu owed him P2,000.00 for two-day
rental of private respondent's car. Acceding to Landrigan's request, Mariano entered the amount in
the statement of account of the guest to make the total billing of P16,710.00. Upon checking-out
from the hotel, Mr. Hu paid his bill through his credit card. As he was in a hurry, he left without
verifying his statement of account. This incident is reflected in the handwritten account of Mariano
dated September 23, 1994, herein below quoted:
I was the front desk clerk on duty when Mr. In Hu Rm. 2002 checked-out on August 15, 1994.
Before he checked-out Lito (driver) approached me and told me that a Korean from Room
2002 hired him for two days. He told me to charged (sic) him (the guest) P2,000.00.
I entered P2,000.00 to his Statement of Account and inform him of the total. He was so much
in a hurry that he didn't get the latest Statement of Account for P16,710.00. I gave him the
Card Holder's Copy and Company's Receipt for the same amount.1
While in Korea, Mr. Hu noticed the discrepancy between the statement of account issued by
petitioner and the charge slip of his credit card. Thus, on coming back to the Philippines, he dropped
by at petitioner's hotel and complained about the overbilling. The report of Allan Padua dated
September 13, 1994, regarding the incident states:
Last August 8, 1994, Mr. In Hu checked in at Rm. 2002. He stayed for seven (7) days. He
was so in a hurry when he checked out on August 15, 1994. He was charged thru his Visa
card the amount of P16,710.00 without noticing that the written amount on his Statement of
Account is only P14,710.00. He only noticed the discrepancy when he reached Korea.
Yesterday, September 12, 1994 in the morning, he came to the Front Desk and was
complaining. I approached him and he showed me his charge slip and Statement of Account.
Both seem not to tally. I made an investigation and found out that Front Desk personnel
made a big mistake by charging him P2,000.00 higher than his actual bill in his (Mr. Hu)
Statement of Account which is only P14,710.00.

Upon further investigation, I found out that the P2,000.00 in contention was entered as a
transportation account which the guest denied because he (Mr. Hu) paid for his own
transportation from the airport to [the] Condo Suite.
This incident resulted to Mr. Hu's transfer to the competitor, Suite Shine. 2
In response to the abovequoted report, private respondent averred that although Padua's report did
not mention him as the one responsible for the overbilling, he had to explain his side being the front
desk supervisor and owner of the car involved in the controversy. He pointed out that the statement
of account referred to by Mr. Hu was given a day before he checked out and did not reflect the latest
charges, hence, the total billing shown amounted only to P14,710.00. Private respondent related that
on his last day at the hotel, Mr. Hu was informed of his total account amounting to P16,710.00 which
the latter acknowledged by signing and accepting the corresponding receipt. He recalled that Mr. Hu
was indeed in a hurry so that the Korean did not get his latest statement of account which by then
reflected the additional P2,000.00 and making the total charges P16,710.00. 3
In the investigation that ensued, it was shown that there was really no car accommodation as
claimed by Landringan. In his handwritten statement dated September 16, 1994, Landrigan admitted
that he approached Mariano at the front desk and demanded payment for Mr. Hu's alleged
transportation expense. He also claimed to have received the amount P2,000.00 through a check
issued by petitioner on August 17, 1994 or two days after Mr. Hu left for Korea. However, he
asserted that he returned the said amount on September 16, 1994, in order not to tarnish the image
of petitioner hotel.4
Eventually, petitioner's staff confirmed the error in the billing of Mr. Hu. Upon return of the P2,000.00
by Landrigan, petitioner refunded the amount to the Korean.
On September 26, 1994, petitioner terminated the services of private respondent on the ground of
loss of confidence for the latter's malicious intent to defraud a guest of the hotel. 5
On September 14, 1994, before his dismissal, private respondent filed a complaint for diminution of
salary before the Arbitration Branch of NLRC. Subsequently, after having been dismissed, private
respondent amended aforesaid complaint and included the charge of illegal dismissal from
employment. During the arbitration proceedings, petitioner offered to reinstate private respondent
which the latter rejected. Thereafter, the labor arbiter, in a decision dated July 6, 1995, dismissed
said complaint for diminution of salary and illegal dismissal for lack of merit.
On appeal, public respondent NLRC affirmed the order dismissing the complaint for diminution of
salary, but modified the decision of the labor arbiter as regards illegal dismissal. It held that the
overbilling incident is the singular handiwork of Landrigan as there is no evidence linking private
respondent with the anomaly. It also ordered the reinstatement of private respondent with
backwages but only up to the time when the offer of reinstatement was made on January 31, 1995. It
disposed of the case as follows:

WHEREFORE, premises considered, the respondents are hereby ordered to reinstate herein
complainants with backwages in the amount of P26,866.64. Accordingly, the dismissal of the
complaint for diminution of salary is affirmed.
The appealed Decision is thus accordingly modified.
SO ORDERED.6
Its motion for reconsideration having been denied, petitioner filed the present petition. It seeks to
annul the decision of public respondent ordering the reinstatement of private respondent. However,
petitioner does not state the grounds relied upon for said annulment. We note that petitioner imputes
neither lack or excess of jurisdiction, nor grave abuse of discretion, on the part of public respondent
in rendering the assailed judgment.
Resort to a special civil action for certiorari under Rule 65 of the Rules of Court is limited to the
resolution of jurisdictional issues, that is, lack or excess of jurisdiction and grave abuse of discretion
amounting to lack of jurisdiction.7 The respondent acts without jurisdiction if he does not have the
legal power to determine the case. There is excess of jurisdiction where the respondent, being
clothed with the power to determine the case, oversteps his authority as determined by law. And
there is grave abuse of discretion where the respondent acts in a capricious, whimsical, arbitrary or
despotic manner in the exercise of his judgment as to be said to be equivalent to lack of
jurisdiction.8 Since petitioner neither assails the jurisdiction of public respondent nor attributes grave
abuse of discretion on part of the labor tribunal, this petition must fail.
Besides, petitioner did not comply with the rule on certification against forum shopping. The
certification in this petition was improperly executed by the external legal counsel of petitioner. For a
certification of non-forum shopping must be by the petitioner, or any of the principal parties and not
by counsel unless clothed with a special power of attorney to do so. This procedural lapse on the
part of petitioner is also a cause for the dismissal of this action.9
Even if the abovementioned procedural defects were to be set aside, the petition would still not
prosper. Public respondent cannot be faulted for grave abuse of discretion. For we find its assailed
judgment supported by factual and legal bases.
In its memorandum petitioner raises the following queries:
1. Whether there were just causes to terminate the private respondent?
2. Whether the reinstatement order by the Hon. NLRC is legal and proper?
3. Whether the award of backwages in the amount of P26,866.64 by the Hon. NLRC is legal
and proper?10
Simply stated, the proper issue now for resolution is whether or not public respondent committed
grave abuse of jurisdiction in modifying the decision of the labor arbiter and in ordering the
reinstatement of private respondent.

The fundamental guarantee of security of tenure dictates that no worker shall be dismissed except
for just and authorized cause provided by law, and after due process. The just and authorized
causes are enumerated under Articles 282, 283 and 284 of the Labor Code. The due process
requirement of notice and hearing is set-out in Article 277 (b) of the said Code.
As provided for in the Labor Code: "ART. 282. Termination by employer. An employer may
terminate an employment for any of the following causes: . . . (c) Fraud or willful breach by the
employee of the trust reposed in him by his employer or duly authorized representative. . . . " But it
must be stressed that loss of confidence as a just cause for termination of employment is premised
by the fact that an employee concerned holds a position of trust and confidence. This situation holds
where a person is entrusted with confidence on delicate matters, such as the custody, handling, or
care and protection of the employer's property. In the case of supervisory personnel occupying
positions of responsibility, this Court has repeatedly held that loss of trust and confidence justifies
termination.11
Termination of an employment on this ground does not require proof beyond reasonable doubt of the
employee's misconduct. It is sufficient that there is some basis for the loss of trust or that the
employer has reasonable ground to believe that the employee is responsible for the misconduct
which renders him unworthy of the trust and confidence demanded by his position. 12
The Court, however, has repeatedly stressed that the right of an employer to dismiss employees on
account of loss of trust and confidence must not be exercised arbitrarily. Just cause must be shown,
so as not to render the employee's constitutional right to security of tenure nugatory. Besides, for
loss of confidence to be a valid ground for dismissal, the basis thereof must arise from particular
proven facts. In other words, this ground must be founded on facts established by the employer who
must clearly and convincingly prove by substantial evidence the facts and incidents upon which loss
of confidence in the employee may be fairly made to rest; otherwise the dismissal will be rendered
illegal.13
In the instant case, petitioner failed to prove by ample evidence that private respondent intended to
defraud Mr. Hu, as herein explained. Hence, there is no basis for petitioner to claim it lost the trust
and confidence it had reposed upon private respondent. Noteworthy are the following circumstances
that favor private respondent's innocence:
First. Mariano admitted in her written statement that she was the one responsible for entering the
amount of P2,000.00 in Mr. Hu's statement of account. Nowhere in her written statement did she
declare that private respondent directed her to make such entry. Further, petitioner failed to refute
Mariano's declaration that the statement of account which she gave to Mr. Hu reflected only the total
charges due up to August 14, 1994, albeit he actually checked out of the hotel on August 15, 1994.
This shows that the billing reflected on August 14, 1994 statement was not yet complete as the
P2,000.00 outstanding account of Mr. Hu had yet to be incorporated therein.
Second. Landrigan, in his written statement admitted that he approached Mariano and he demanded
payment of the transportation fee due him because he was previously hired by Mr. Hu's group for
two days. Private respondent had nothing to do with Landrigan's demand for such payment.
Landrigan believed in good faith that Mr. Hu actually owed him P2,000.00 when he served as driver

for two days. That Landrigan returned the amount to petitioner did not in any way prove private
respondent's wrongdoing.
Furthermore, the second statutory requirement for a valid dismissal stipulates notice and hearing.
Before an employee can be dismissed, the employer must furnish the worker with two notices: (1)
notice which apprises the employee of the particular acts or omissions for which dismissal is sought
and (2) subsequent notice which informs the employee of the employer's decision to dismiss him.
The twin requirements of notice and hearing constitute essential elements of the statutory process,
and neither of these elements can be eliminated without running afoul of the procedural mandate. 14
In this case, the evidence on record is devoid of any indication that petitioner complied with the
requirements of due process prior to termination, as shown in the following discussion.
First. Petitioner did not notify private respondent of the particular acts or omissions for which he was
dismissed. The incident report prepared by Mr. Padua is not the notice contemplated by law. Such
report merely narrates the complaint aired by Mr. Hu against the front desk personnel. And, nowhere
in said incident report did petitioner pinpoint private respondent as the person responsible for
overcharging. In fact, it was only upon service of termination order that private respondent realized
that the complaint of Mr. Hu was directed at him.
Second. Private respondent was not afforded his right to be heard. The hearing affords the
employee an opportunity to answer the charge against him and to defend himself personally or with
the help of a representative before dismissal is effected. Private respondent's reply letter addressed
to Mr. Padua does not satisfy the requirement of ample opportunity to be heard. The said reply letter
was written by private respondent in his capacity as front desk supervisor in order to shed light on
the events that transpired involving Mariano and Landrigan. Private respondent was not then aware
that the complaint was directed at him. Moreover, as there was no investigation conducted by
petitioner, private respondent was not afforded an opportunity to confront Landrigan, Mariano or Mr.
Hu.
In sum, there is no valid and just cause in terminating the employment of private respondent. With
the finding that private respondent was illegally dismissed, he is entitled to reinstatement without
loss of seniority rights and other privileges and to his full backwages inclusive of allowances, and to
other benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.15
Hence, aside from reinstatement, private respondent here is entitled to full backwages. However, the
backwages awarded by public respondent was inadequate compensation for his travail. Public
respondent limited private respondent's backwages from the date of his dismissal and up to the time
when petitioner allegedly offered to reinstate private reinstatement. It explained that the failure of
private respondent to work, after the supposed offer was made, can no longer be attributed to the
fault of petitioner. This, in our view, does not suffice to provide complete relief to the painful socioeconomic dislocation of the employee and his family.
As previously stated, an employee who is unjustly dismissed is entitled to his full backwages
computed from the time his compensation was withheld from him up to the time of his reinstatement.

Mere offer to reinstate a dismissed employee, given the circumstances in this case, is not enough. If
petitioner were sincere in its intention to reinstate private respondent, petitioner should have at the
very least reinstated him in its payroll right away. We are thus constrained to conclude that private
respondent should be paid by petitioner not only the sum of P26,866.64 awarded by the NLRC, but
the petitioner should be held liable for the entire amount of backwages due the private respondent
from the day he was illegally dismissed up to the date of his reinstatement. Only then could
observance of labor laws be promoted and social justice upheld.
WHEREFORE, the instant petition is DISMISSED. The assailed DECISION of NLRC is AFFIRMED
with the MODIFICATION that petitioner is hereby ordered not only to reinstate private respondent to
his position but also to pay his full backwages from the day of his illegal dismissal until his actual
reinstatement. Public respondent NLRC is hereby directed to make the computation of said full
backwages including allowances and other benefits owing to the private respondent, and inform
soonest all parties as well as this Court accordingly, within thirty days after receipt of this decision.
Costs against petitioner.
1wphi1.nt

SO ORDERED.

GENEROSO A. JUABAN
and FRANCIS M. ZOSA,

G.R. No. 170049

Petitioners,
Present:

- versus -

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,

RENE ESPINA and CEBU

DISCOVERY
BAY
PROPERTIES, INC.,

NACHURA, and
REYES, JJ.

Respondents.

Promulgated:

March 14, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of

the Rules of Court filed by the late Generoso A. Juaban (Juaban),
now substituted by his heirs, and Francis M. Zosa (Zosa), assailing
the Decision[1] dated 31 January 2005 of the Court of Appeals in
CA-G.R. CV No. 60721, wherein the appellate court (1) made
permanent the Writ of Preliminary Injunction it had earlier issued,
enjoining petitioners from exercising rights of ownership over Lots
No. 6720-C-2 and 6720-B-2, respectively, covered by Transfer
Certificates of Title (TCTs) No. 36425 and No. 36426 of the
Registry of Deeds of Lapu-Lapu City; (2) set aside the Decision of
the Lapu-Lapu City Regional Trial Court (RTC), Branch 54, in Civil
Case No. 4871-L which ordered the dismissal of the case; and (3)
directed the RTC to undertake further proceedings in Civil Case
No. 4871-L insofar as the issue of damages was concerned.

The present Petition stems from the proceedings in Civil

Case No. 4871-L before the Lapu-Lapu City RTC, Branch 54, but is

still directly related to two other cases, particularly, Civil Case No.
2309-L before the Lapu-Lapu RTC, Branch 27, and (2) A.M. No, P02-1580 before this Court, which we cannot simply overlook.The
direct antecedent of the present petition, Civil Case No. 4871-L
before the Lapu-Lapu City RTC, Branch 54, is the last of the three
cases we are presenting hereunder:

CASE No. 1: Bancale v. Paras,

Civil Case No. 2309-L, LapuLapu City RTC, Branch 27

The Heirs of Conrado Bancale filed before the Lapu-Lapu City

RTC, Branch 27, a case for the recovery of the properties subject
of the present Petition against a certain Eva Paras and other
persons, which was docketed as Civil Case No. 2309-L. On 22
January 1996, petitioners Juaban and Zosa entered their
appearance as counsels for the Heirs of Bancale.

The Heirs of Bancale later entered into a 31 January

1997 Agreement to Sell and to Buy with respondent Rene Espina
(Espina), paragraph 5 of which states:
That after the title is transferred to their names, the First Party
[Heirs of Bancale] will execute an absolute deed of sale in favor of the
second party [herein respondent Rene Espina] or whoever will be
designated by him as the vendee for the consideration mentioned in
paragraph 2 hereof. The amount of P2,000,000.00 advanced by the
Second Party shall form part of said consideration. [2]

In accordance with said Agreement, respondent Espina paid

petitioners P2,000,000.00 as an advance on the purchase price
for the subject properties for the benefit of the Heirs of
Bancale. Respondent Espina then designated the other
respondent in this case, Cebu Bay Discovery Properties, Inc.
(CDPI), as the vendee of the said properties.

Later, on 1 September 1997, respondents learned that

petitioners, counsels Juaban and Zosa, had filed on 26 August
1997, at around 1:10 p.m., a Motion to fix their attorneys fees in
Civil Case No. 2309-L. They also learned that the Lapu-Lapu City
RTC, Branch 27, had issued an Order on the very same date of 26
August 1997, at around 2:20 p.m., granting the motion and fixing
petitioners attorneys fees in the amount of P9,000,000.00. The
Heirs of Bancale filed a Motion for Reconsideration, but the same
was denied in an Order dated 22 September 1997. The Heirs of
Bancale received a copy of the Order denying their Motion for
Reconsideration on 9 October 1997, after which they filed a
Notice of Appeal dated 15 October 1997. However, without
waiting for the expiration of the period to appeal of the Heirs of
Bancale, the Lapu-Lapu City RTC, Branch 27, issued on 10 October
1997 an Order, which states:
Considering that the Order of this Court dated 26 August
1997 has already become final and executory, not having been
appealed, the motion for execution is hereby GRANTED.

Let a Writ of Execution issue to satisfy the Order dated August

26, 1997 to enforce the same fixing the attorneys fees.

Sheriff Juan A. Gato of this Branch is hereby directed to

implement the Writ.[3]

The
Heirs
of
Bancale
filed
another
Motion
for
Reconsideration, this time, of the 10 October 1997 Order. Without
directly ruling on this Motion, the Lapu-Lapu City RTC, Branch 27,
issued on 14 October 1997 a Writ of Execution directing Sheriff
Juan A. Gato (Gato) to satisfy the judgment for attorneys fees in
the amount ofP9,000,000.00 in favor of petitioners.

On 23 October 1997, Sheriff Gato served notice that the

rights, shares, interests and participation of the Heirs of Bancale
in the subject properties were being levied on execution to satisfy
the Writ of Execution dated 14 October 1997. This was done
despite the fact that the Writ of Execution issued by the trial court
specifically directed that the attorneys fees were to be taken from
the money due from the buyer to the sellers under the agreement
to buy and sell. Thereafter, Sheriff Gato issued a Notice of Sale on
Execution dated 24 October 1997, announcing that the subject
properties were to be sold at a public auction on 28 November
1997 at2:00 p.m.

On 18 November 1997, respondents filed a Third Party Claim

with the office of Sheriff Gato. On motion of petitioners, the LapuLapu City RTC, Branch 27 fixed the sheriffs indemnity bond
at P500,000.00.

On 28 November 1997, the subject properties were sold at

public auction to petitioners for P9,000,000.00. The sale was
registered on 3 December 1997.

On 1 December 1998, the Lapu-Lapu City RTC, Branch 27,

under a new presiding judge, issued an Order resolving the
Motions of the Heirs of Bancale seeking reconsideration of the
previous Orders of the same court dated 22 September
1997 and 10 October 1997, and disposing thus:

WHEREFORE, in view of the foregoing premises, this Court

hereby sets aside the order issued in this case on October 10, 1997
which considered as final and executory the August 26, 1997 order
and, in its stead, hereby gives due course to the appeal filed by the
[Heirs of Bancale] from the order issued in this case on September 22,
1997, which in effect is an appeal from the said August 26, 1997 order.
[4]

This 1 December 1998 Order is currently on appeal with the

Nineteenth Division of the Court of Appeals, where it is docketed
as CA- G.R. CEB CV No. 61696.The Court of Appeals Resolutions
granting due course to said appeal were elevated via a Petition
for Certiorari, docketed as G.R. No. 156011, still pending before
this Court.

On 27 January 1999, petitioners wrote a letter to Sheriff Gato

requesting him to execute a final deed of sale in their favor since
no redemption of the subject properties was made. Sheriff Gato,
in a letter dated 4 February 1999, answered that he no longer had
any authority to issue the final deed of sale by virtue of the 1
December 1998 Order of the Lapu-Lapu City RTC, Branch
27. Nonetheless, in direct contravention of the contents of his
letter, Sheriff Gato still transmitted to petitioners the final Deed of
Conveyance without the approval of the trial court.

CASE No. 2: Espina v. Gato,

A.M. No. P-02-1580, Supreme
Court

The second case is an administrative complaint filed against

Sheriff Gato by respondents, for allegedly acting with manifest
bias and partiality in Civil Case No. 2309-L while it was still
pending with the Lapu-Lapu City RTC, Branch 27. On 9 April 2003,

this Court, speaking through Associate Justice Adolfo Azcuna,

held:
Firstly, the haste with which respondent levied upon the plaintiffs
property is unexplained. Furthermore, despite a third-party claim filed
by complainant Espina for CDPI on November 18, 1997, the property
was sold at public auction to Attys. Juaban and Zosa on November 28,
1997. It is true that sheriffs are responsible for the prompt service and
implementation of writs and other orders issued by the court. They
cannot afford to be inefficient in the work assigned to them. However,
prompt service and efficiency should not be reasons to compromise the
integrity of the court and the proper administration of justice. By the
very nature of their duties, sheriffs perform a very sensitive function in
the dispensation of justice. Thus, their conduct must, at all times, be
above suspicion.

Secondly, as stated earlier, the trial court ordered in the writ of

execution that the P9 million to be paid to Attys. Juaban and Zosa as
attorneys fees be taken from the money due from the buyer to the
sellers under the agreement to buy and sell. Nevertheless, respondent
levied upon the aforementioned property in blatant disregard of this
order. It is a well-settled rule that the duty of a sheriff is merely
ministerial. When a writ is placed in the hands of the sheriff, it is his
ministerial duty to proceed to execute in accordance with the terms of
its mandate.

Thirdly, when Attys. Juaban and Zosa requested respondent to

issue a Final Deed of Conveyance to them, respondent already knew
that he no longer had authority to issue the same.He had already been
appraised of the fact that a subsequent order, dated December 1, 1998,
set aside the orders that were the basis of the writ of execution. This
was admitted by him in his letter to Attys. Juaban and Zosa. Despite this
knowledge, he still issued a final deed of sale in favor of the said
lawyers without the approval of the court.

From all these facts, it is clear that respondent showed manifest

partiality in favor of Attys. Juaban and Zosa, giving them unwarranted
benefit, advantage and preference and that, with evident bad faith, he

caused undue injury to complainants. Respondent thereby failed to

comply with the strict standards required of public officers and
employees.

WHEREFORE, respondent Sheriff Juan Gato is found GUILTY of

grave abuse of official functions and manifest partiality amounting to
grave misconduct and conduct prejudicial to the administration of
justice, and is hereby SUSPENDED FROM SERVICE FOR THREE (3)
MONTHS WITHOUT PAY, with the warning that repetition in the future of
the same or similar misconduct will be dealt with more severely. [5]

CASE No. 3: Espina v. Gato,

Civil Case No. 4871-L, LapuLapu City RTC, Branch 54

On 28 November 1997, respondents filed a complaint for

injunction and damages with an application for the issuance of a
temporary restraining order to enjoin, at whatever stage, the sale
in a public auction of the subject properties by Sheriff Gato. Said
complaint was docketed as Civil Case No. 4871-L before the LapuLapu City RTC, Branch 54. Respondents claim that they were, as
of the institution of said case, unaware that the subject properties
had already been sold at a public auction.

On 19 December 1997, petitioners filed a Motion to Dismiss,

which was granted by the Lapu-Lapu City RTC, Branch 54, in an

Order dated 30 July 1998. On 2 September 1998, respondents

filed a Notice of Appeal, which was given due course by the LapuLapu City RTC, Branch 54, in an Order dated 7 September 1998.

Respondents appeal before the Court of Appeals was

docketed as CA-G.R. CV No. 60721. Respondents filed therein an
Urgent Motion for Issuance of a Temporary Restraining Order and
Writ of Preliminary Injunction dated 19 October 1998. On 26
November 1998, the Court of Appeals issued a Resolution
granting respondents application for the issuance of a temporary
restraining order, restraining Sheriff Gato from consolidating
ownership over the subject properties in favor of petitioners.

On 1 December 1998, respondents filed an Urgent

Manifestation/Motion dated 1 December 1998 wherein they
tendered the amount of P10,962,347.20 as payment for the
redemption price of the subject properties, on the condition that if
the application for preliminary injunction was denied or if the case
is finally resolved in favor of petitioners, the said amount shall be
considered as valid tender of the redemption price of the subject
properties retroacting to the date of the filing of the
Manifestation/Motion. In a comment dated 17 December 1998,
petitioners interposed no objection to the deposit of said amount,
but excepted to respondents claim that the tender would stop the
running of interest on the redemption price.

On 15 June 1999, the Court of Appeals issued a Resolution

stating that respondents application for a writ of preliminary
injunction to enjoin Sheriff Gato from consolidating ownership
over the subject properties in favor of petitioners had been
rendered moot in view of the 1 December 1998 Order by the
Lapu-Lapu City RTC, Branch 27, in Civil Case No. 2309-L setting
aside its Order dated 10 October 1997 and giving due course to
respondents appeal therein.

In the meantime, petitioners were able to acquire the

Definite Deed of Sale of the subject properties from Sheriff
Gato. Hence, respondents filed a Motion for Clarification and/or
Reconsideration to Cite [Petitioners] in Contempt. Petitioners,
however, proceeded to register the Definite Deed of Sale issued
by Sheriff Gato with the Register of Deeds in Lapu-Lapu City.

In a Resolution dated 30 September 1999, the Court of

Appeals granted respondents application for a writ of preliminary
injunction and enjoined petitioners from exercising rights of
ownership over the subject properties, such as alienating or
encumbering the same.

On 31 January 2005, the Court of Appeals rendered the

assailed Decision, the dispositive portion of which reads:
WHEREFORE, the Order dated July 30 1998 issued by the
Regional Trial Court, Branch 54, Lapu-Lapu City, in Civil Case No. 4871L dismissing the complaint, is hereby REVERSED and SET ASIDE.

The Writ of Preliminary Injunction issued pursuant to the Courts

resolution promulgated on September 30, 1999, subject to the
conditionalities therein, is hereby made PERMANENT.

The Regional Trial Court, Branch 54, Lapu-Lapu City is directed to

undertake further proceedings in Civil Case No. 4871-L sofar as the
issue on damages is concerned.

Costs against appellees.[6]

Petitioners Motion for Reconsideration of the foregoing

decision was denied in a Resolution dated 20 September
2005. Hence, the present recourse, wherein petitioners bring forth
the following issues for this Courts consideration:
1.

Whether or not Rene Espina had a cause of

action to file the Injunction and Damages Case
against petitioners;

2.

Whether or not the trial court acquired

jurisdiction over the complaint and over CDPI in
said case;

3.

Whether or not only questions of law were raised

in respondents appeal, which allegedly required
the Court of Appeals to dismiss said appeal;

4.

Whether or not the Court of Appeals erred in

taking cognizance of the records in another case
which were not offered and admitted as evidence
as basis for its findings of facts;

5.

Whether or not the Court of Appeals erred in

issuing a permanent injunction against petitioners
considering that there was allegedly no prayer in
the complaint therefor.

We find no merit in the present Petition.

Authority of Rene Espina to File

the Case and the Jurisdiction of
the RTC

Only respondent Espina signed the Verification and Certification of

Non-Forum Shopping attached to the complaint in the third case,
Civil Case No. 4178-L, before the Lapu-Lapu City RTC, Branch 54;
and apart from him, there was no signatory of the Verification and
Certification of Non-Forum Shopping on behalf of respondent
CDPI. Petitioners claim that the complaint should have been
dismissed by the trial court since (1) respondent Espina had no
more personal interest in the case, having assigned his rights to
the subject properties to respondent CDPI; and (2) there was no
authority or board resolution authorizing respondent Espina to file
the complaint on behalf of his co-respondent CDPI.

Sec. 2, Rule 3 of the Rules of Court requires that parties to a

civil case must be real parties in interest, to wit:

SEC. 2. Parties in interest.A real party in interest is the party who

stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. Unless otherwise authorized by
law or these Rules, every action must be prosecuted or defended in the
name of the real party in interest.

We quote with approval the following ruling of the Court of

Appeals on the issue of respondent Espinas personality to
institute Civil Case No. 4178-L:
The personality of appellant Rene Espina to sue in his personal
capacity finds basis in the Agreement to Sell and to Buy. It is readily
apparent in the Agreement that he has been designated as the Second
Party, in his personal capacity, and not as agent or representative of a
corporate entity. On the other hand, the Deed of Sale which was
subsequently
executed,
is
based
on
the
aforesaid
Agreement. Therefore, there is no gainsaying that appellant Rene
Espina has a personal interest in the case. [7]

Respondents right to the subject properties is based on

the 31 January 1997 Agreement to Sell and to Buy executed
between the Heirs of Bancale and respondent Espina. Hence, the
said Agreement is the very source of the right, the violation of
which constituted the cause of action in respondents complaint
for injunction before the court a quo. It was respondent Espina
who entered into the Agreement, and his rights as a party to the
said contract were not extinguished just because he designated
his co-respondent CDPI as vendee of the subject properties,
pursuant to the authority given to him in paragraph 5
thereof. Among respondent Espinas rights as a party to the
Agreement is his right to the full realization of the purpose of the
contract, which in this case, would be the transfer of the
ownership of the subject properties from the Heirs of Bancale
either to him or to his designated vendee. The public auction sale
of the subject properties to petitioners would not only prevent the
intended transfer of ownership under the Agreement, but would
also render inutile respondent Espinas designation of respondent
CPDI as a vendee. Moreover, it was undisputed that respondent
Espina advanced P2,000.000 to the Heirs of Bancale, which
formed part of the consideration for the ensuing sale of the
subject properties. There was no proof that respondent Espina
had already been reimbursed for the said amount. Having paid

part of the purchase price for the subject properties, then

respondent Espina has an interest therein.

Having been established as a real party in interest,

respondent Espina has not only the personality to file the
complaint in Civil Case No. 4178-L, but also the authority to sign
the certification against forum shopping as a plaintiff therein. We
held in Mendigorin v. Cabantog,[8] Escorpizo v. University of
Baguio[9] and Condo Suite Club Travel, Inc. v. National Labor
Relations Commission[10] that the certification against forum
shopping must be signed by the plaintif or any of the principal
parties and not by counsel.[11] We have also held in Cua v. Vargas,
[12]
that:
The general rule is that the certificate of non-forum shopping
must be signed by all the plaintiffs or petitioners in a case and the
signature of only one of them is insufficient. Nevertheless, the rules on
forum shopping, which were designed to promote and facilitate the
orderly administration of justice, should not be interpreted with such
absolute literalness as to subvert their own ultimate and legitimate
objective. Strict compliance with the provisions regarding the certificate
of non-forum shopping merely underscores its mandatory nature in that
the certification cannot be altogether dispensed with or its
requirements completely disregarded. Under justifiable circumstances,
the Court has relaxed the rule requiring the submission of such
certification considering that although it is obligatory, it is not
jurisdictional.

Thus, when all the petitioners share a common interest and

invoke a common cause of action or defense, the signature of only one
of them in the certification against forum shopping substantially
complies with the rules.

In Bases Conversion and Development Authority v. Uy,[13] we

held:

Signature of a principal party sufficient for verification and

certification

Anent the assailed verification and certification of non-forum

shopping, it is shown that it substantially complied with the
requirements of the Rules. Dismissal of appeals that is purely on
technical grounds is frowned upon. While only petitioner Ramon P.
Ereneta signed the verification and certification of non-forum shopping
such is not fatal to the instant petition. In Calo, we agreed with
petitioners that the signature of only one petitioner in the verification
and certification of non-forum shopping satisfies the requirement under
Section 2, Rule 42 of the Revised Rules on Civil Procedure.
In Calo,
we relied on Condo Suite Club Travel, Inc., v. NLRCwhere we ruled that
the certification of non-forum shopping may be signed not only by the
petitioners but also any of the principal parties. In the instant case, Mr.
Ramon P. Erenta, a member of the Investment Committee of the
Heritage Park Management Corporation, is a principal party in the
instant case having been impleaded in Civil Case No. 99-0425 pending
in the RTC.

More so, in Calo, we also cited Cavile, et al. v. Heirs of Clarita

Cavile, et. al.where we held that there was substantial compliance with
the Rules when only petitioner Thomas George Cavile, Sr. signed in
behalf of all the other petitioners of the certificate of non-forum
shopping as the petitioners, being relatives and co-owners of the
properties in dispute, shared a common interest in them, had a
common defense in the complaint for partition, and filed the petition as
a collective, raising only one argument to defend their rights over the
properties in question. We reasoned that there was sufficient basis for
Cavile, Sr., to speak for and in behalf of his co-petitioners, stating that
they had not filed any action or claim involving the same issues in
another court or tribunal, nor was there other pending action or claim
in another court or tribunal involving the same issues. In the same
vein, this is also true in the instant case where petitioners have filed
their petition as a collective, sharing a common interest and having a
common single defense.

Thus, the certificate against forum shopping is not rendered

invalid by the absence of the signature of an authorized official of
respondent CDPI. The signature of respondent Espina as one of
the plaintiffs therein suffices.

Furthermore, the allegation concerning the defect in the

Certificate against Forum Shopping was raised for the first time
on appeal. The Motion to Dismiss filed by petitioners was based
only on the following grounds:
I - That the claim or demand set forth in the plaintiffs pleading has
been paid, waived, abandoned, or otherwise extinguished;

II - That there is another cause of action pending between the parties

for the same cause;

III - That plaintiff Rene Espina has no legal capacity to sue. [14]

The grounds alleged by petitioners and ruled upon by the

trial court are thus (1) extinguishment, (2) litis pendentia, and (3)
lack of legal capacity to sue on the part of Rene Espina. Of these
grounds, only litis pendentia is related to the present allegation of
petitioners concerning the defect in the Certification against
Forum Shopping. Forum shopping exists where the elements
of litis pendentia are present or where a final judgment in one
case will amount to res judicata in the other.However, forum
shopping as a ground for the dismissal of actions is
distinct and separate from the failure to submit a proper
Certificate against Forum Shopping. One need not be held

liable for forum shopping for his complaint to be dismissed on the

ground of an absence or a defect in the Certificate against Forum
Shopping. Conversely, one can be liable for forum shopping
regardless of the presence or absence of a Certification against
Forum Shopping. The presence of a Certification in such a case
would only have the effect of making the person committing
forum shopping additionally liable for perjury. Thus, we held
in Spouses Melo v. Court of Appeals[15]:

Indeed, compliance with the certification against forum shopping

is separate from, and independent of, the avoidance of forum shopping
itself. Thus, there is a difference in the treatment - in terms of
imposable sanctions - between failure to comply with the certification
requirement and violation of the prohibition against forum shopping. x
x x.

There being no allegation of a defect in the Certification

against Forum Shopping on the part of respondents, neither the
RTC nor the Court of Appeals was able to rule thereon. Both courts
only ruled on the issue concerning litis pendentia, on which the
Court of Appeals correctly held that:
Litis pendentia is not present in this case vis--vis Civil Case No.
2309-L. The requisites of litis pendentia are: (a) identity of parties, or
at least such parties who represent the same interest in both actions;
(b) identity of rights asserted and relief prayed for, the relief being
founded on the same facts; (c) identity with respect to the two (2)
preceding particulars in the two (2) cases is such that any judgment
that may be rendered in the present case, regardless of which party is
successful, would amount to res judicata in another case.

The appellants herein are not parties in Civil Case No. 2309L. There is no identity of rights asserted and reliefs prayed for. Civil
Case No. 2309 is for recovery of ownership and possession; while the
instant case is for injunction and damages. The judgment in one will

not be a bar to the other case. These cases were conjoined only
because of the incident in Civil Case No. 2309-L, i.e. the fixing of the
attorneys fees and the subsequent execution on the subject properties
which were, in the meantime, sold to and purchased by the appellants
pursuant to an Agreement to Sell and to Buy.

Appellees charge that appellants are guilty of forum shopping is

without legal basis. It has been held that where the elements
of litis pendentia are not present or where final judgment in one will
not amount to res judicata in the other, there is no forum shopping. [16]

Propriety of the Mode of Appeal

Petitioners also claim that since only questions of law were

raised in respondents appeal to the Court of Appeals, the proper
remedy should have been a Petition for Review filed directly with
this Court under Rule 45 of the Rules of Court.

Petitioners cite the Assignment of Errors raised by

respondents before the Court of Appeals in CA-G.R. CV No. 60721:
ASSIGNMENT OF ERRORS

I. The court a quo erred in dismissing the complaint on the ground of

litis pendentia.

II. The court a quo erred in dismissing the complaint on the ground that
the appellant Rene Espina has no legal capacity to sue.

III. The court a quo should have issued a temporary restraining order,
and after due hearing should have issued an injunction to enjoin
appellee Sheriff Gato from erroneously levying on and selling at public
auction the Subject Property to satisfy the Writ of Execution dated 14
October 1997 issued by the Trial Court in Civil Case No. 2309-L.

Petitioners contend that since no evidence was presented by

the parties in the lower court, the complaint having been
dismissed on the timely motion by the petitioners, the appeal of
the dismissal of the complaint required no determination by the
appellate court of the probative value of the evidence presented
by the parties.

The Court of Appeals addressed this issue, thus:

Appellees [Juaban and Espina] contend that since the
assignment of errors raises only questions of law, the proper course of
action is a Petition for Review direct to the Supreme Court in
accordance with Rule 45, Revised Rules of Court. The appellees unduly
limit themselves to the assignment of errors in the appeal and close
their eyes to the glaring fact that, from the narration of facts above,
certain acts taken by RTC Br. 27 before then Presiding Judge Risos,
which are immoral, devious, and patently illegal, has constrained the
Court to take a second look at the circumstances which gave rise to
the instant appeal. As succinctly observed by the Court in its
Resolution on appellants prayer for the issuance of a writ of preliminary
injunction,

However, inspite full knowledge that the appeal has

been given due course and that therefore there is no more
basis for further action on the execution sale, appellees
Zosa and Juaban caused the consolidation of ownership
and the issuance of new titles in their names. Said
appellees are even aware that the redemption money for
the properties in the sum of P10,962,347.20 has been
deposited with this Court by the appellants. In fact,

appellees when asked to comment on the deposit,

manifested that they have no objection to the deposit
although they disagreed that interest or the redemption
price would stop running.

It
is
therefore
without
legal
basis
that
notwithstanding those circumstances, the appellees, upon
expiration of the temporary restraining order issued by
this Court, immediately asked for the execution of a deed
of sale in their favor since no redemption has been made
and managed to obtain titles in their names. Such
consolidation of ownership is patently erroneous as the
decision granting them attorneys fees is not yet final and
executory and is in fact the subject of appeal in this Court
under CA-GR CV No. 61696.[17]

[18]

We have held in Microsoft Corporation v. Maxicorp, Inc.

and Morales v. Skills International Company,[19] that:
The distinction between questions of law and questions of fact is
settled. A question of law exists when the doubt or difference centers
on what the law is on a certain state of facts. A question of fact exists if
the doubt centers on the truth or falsity of the alleged facts. Though
this delineation seems simple, determining the true nature and extent
of the distinction is sometime problematic. For example, it is incorrect
to presume that all cases where the facts are not in dispute
automatically involve purely questions of law.

There is a question of law if the issue raised is capable of being

resolved without need of reviewing the probative value of the
evidence. The resolution of the issue must rest solely on what the law
provides on a given set of circumstances. Once it is clear that the issue
invites a review of the evidence presented, the question posed is one
of fact. If the query requires a re-evaluation of the credibility of
witnesses, or the existence or relevance of surrounding circumstances
and their relation to each other, the issue in that query is factual.

In the fairly recent case of First Bancorp Inc. v. Court of

Appeals,[20] we discussed the implications of the allegation by a
party of the lack of jurisdiction of the Court of Appeals based on
the ground that the appeal was based solely on questions of law:
If the aggrieved party appeals by writ of error under Rule 41 of
the Rules of Court to the CA and it turns out, from the brief of
appellant, that only questions of law are raised, the appeal shall be
dismissed:

Sec. 2. Dismissal of improper appeal to the Court of

Appeals. An appeal under Rule 41 taken from the Regional
Trial Court to the Court of Appeals raising only questions of
law shall be dismissed, issues purely of law not being
reviewable by said court. Similarly, an appeal by notice of
appeal instead of by petition for review from the appellate
judgment of a Regional Trial Court shall be dismissed.

An appeal erroneously taken to the Court of

Appeals shall not be transferred to the appropriate court
but shall be dismissed outright.

The nature of the issues to be raised on appeal can be gleaned

from the appellants notice of appeal filed in the trial court and in his or
her brief as appellant in the appellate court.

The provision relied upon by respondent, Section 15, Rule 44 of

the Rules of Court, reads:
Sec. 15. Questions that may be raised on appeal.
Whether or not the appellant has filed a motion for new
trial in the court below, he may include in his assignment
of errors any question of law or fact that has been raised

in the court below and which is within the issues framed

by the parties.

This rule, however, does not relate to the nature of the issues
that may be raised on appeal by the aggrieved party, whether issues
of fact or issues of law, or the mode of appeal of the aggrieved party
from a final order or resolution of the trial court in the exercise of its
original jurisdiction; it merely provides the nature of the issues
appellant may include in his assignment of error incorporated in his
Brief as appellant. It may happen that the appellant may have raised
in the trial court errors of fact or law or both, and need not include all
said issues in his appeal in the appellate court. The appellant has the
right to choose which issues of law he or she may raise in the CA in
addition to factual issues already raised.

A question of fact exists when a doubt or difference arises as to

the truth or falsity of alleged facts. If the query requires a reevaluation
of the credibility of witnesses or the existence or relevance of
surrounding circumstances and their relation to each other, the issue in
that query is factual. On the other hand, there is a question of law
when the doubt or difference arises as to what the law is on certain
state of facts and which does not call for an existence of the probative
value of the evidence presented by the parties-litigants. In a case
involving a question of law, the resolution of the issue rests solely on
what the law provides on the given set of circumstances. Ordinarily,
the determination of whether an appeal involves only
questions of law or both questions of law and fact is best left
to the appellate court. All doubts as to the correctness of the
conclusions of the appellate court will be resolved in favor of
the CA unless it commits an error or commits a grave abuse of
discretion.

In case of doubt, therefore, the determination of the Court of

Appeals of whether an appeal involves only questions of law or
both questions of law and fact shall be affirmed. As explained by
the Court of Appeals, it was only after the appellate courts
painstaking review of the facts surrounding the dispute that the

immoral, devious and patently illegal acts which attended the

transfer of the subject properties to petitioners were brought to
light. This Court finds no error or grave abuse of discretion on the
part of the Court of Appeals in making the aforesaid finding. No
less than this Court, in the second case, A.M. No. P-02-1580,
found that Sheriff Gato showed manifest partiality in favor of
Attys. Juaban and Zosa, giving them unwarranted benefit,
advantage and preference and that, with evident bad faith, he
caused undue injury to complainants [Espina and CDPI].
[21]
Irrefragably, respondents appeal before the Court of Appeals
involved not only questions of law, because for the determination
thereof, the appellate court was first called upon to make its own
findings of facts which were significant to its complete and
judicious resolution of the appeal.

Taking Cognizance of Records

in Another Case

Petitioners claim that the Court of Appeals, in resolving

CA-G.R. CV No. 60721, the appeal of the dismissal of Civil Case
No. 4178-L by Lapu-Lapu City RTC, Branch 54, erred in taking
cognizance of the records in another case as basis for its
findings of facts. According to petitioners, the Court of Appeals
based its findings of facts on the records of the first case, Civil
Case No. 2309-L, pending before another Branch (Branch 27) of
the RTC of Lapu-Lapu City.
In Bongato v. Malvar,[22] we held:

Second, as a general rule, courts do not take judicial notice of the

evidence presented in other proceedings, even if these have been tried

or are pending in the same court or before the same judge. There are
exceptions to this rule. Ordinarily, an appellate court cannot refer to the
record in another case to ascertain a fact not shown in the record of the
case before it, yet, it has been held that it may consult decisions in
other proceedings, in order to look for the law that is determinative of
or applicable to the case under review. In some instances, courts
have also taken judicial notice of proceedings in other cases
that are closely connected to the matter in controversy. These
cases may be so closely interwoven, or so clearly
interdependent, as to invoke a rule of judicial notice.

We find that the circumstances in Case No. 1 (Civil Case

No. 2309-L) are too closely interwoven and so clearly
interdependent with those in Case No. 3 (Civil Case No. 4178L). Petitioners and respondents are claiming the very same
subject properties. Case No. 3, the case at bar, calls for a
determination of who has the superior right to the subject
properties, petitioners or respondents. Petitioners are the ones
who actually rely on Case No. 1 because their right to the
subject properties is rooted in the proceedings therein. It
should be recalled that they served as the counsels of the Heirs
of Bacale in Case No. 1; they had the subject properties sold at
a public auction to satisfy the award in their favor of attorneys
fees; and they were the successful bidders at the
auction. Petitioners cannot insist on their right to the subject
properties, yet prevent the Court of Appeals from looking into
the basis or source of said right, as well as the circumstances
surrounding their acquisition of the same. They cannot invoke
orders, rulings or findings of the trial court in Case No. 1 which
are supportive of their right to the subject properties but
suppress those which are damaging.

Even assuming for the sake of argument that the

proceedings in Case No. 1 cannot be stated in our narration of
facts on the ground that said proceedings have not yet been
terminated, there is certainly nothing that prevents us from
consulting Case No. 2 (A.M. No. P-02-1580) wherein Sheriff Gato
was suspended by this Court for acting with grave abuse of
official functions and manifest partiality amounting to grave
misconduct and conduct prejudicial to the administration of
justice in selling to petitioners the subject properties at a public
auction despite respondents third-party claim. It bears to
emphasize that Case No. 2 has already been decided with finality
by this Court.

Lack of Prayer for the Issuance

of a Permanent Injunction

Petitioners argue that the respondents did not make any

allegation in their Complaint that they were the owners of the
disputed properties and there was no prayer in their Complaint for
the issuance of a permanent injunction against petitioners
prohibiting them from exercising acts of ownership.

An inspection of respondents Complaint, however, reveals

that petitioners actually alleged ownership of the property in
dispute:
The defendants are doing, threatening, and/or attempting to
conduct the said public auction sale which is in violation of the rights of
the plaintiffs, as the property sought to be sold now belong to the
plaintifs, and not of Concordia Bancale et. al., and this tends to render
whatever favorable judgment the Honorable Court may grant to the
plaintiffs ineffectual.[23]

As regards the alleged lack of prayer for the court to issue a

permanent injunction prohibiting petitioners from exercising acts
of ownership, it is necessary to examine the actual Prayer made
by the respondents in their Complaint, which reads:
WHEREFORE, plaintiffs most respectfully pray this Honorable
Court, that upon filing of this complaint, a temporary restraining order
be issued enjoining defendants from proceeding with the auction sale,
or at whatever stage it is, of Lot 6720-C-2 of the subdivision plan Psd07-05-012144, containing an area of 13,677 sq. meters and covered by
Transfer Certificate of Title No. 36425 and Lot No. 6720-B-2 of the same
subdivision plan, containing an area of 4,560 sq. meters and covered
by Transfer Certificate of Title No. 36426, all located at Lapulapu City,
and upon notice to all the concerned, to issue the writ of preliminary
injunction for the same purpose;

After trial on the merits to make the injunction permanent, and to

order the defendants, jointly and severally:

1. To reimburse the plaintiffs, jointly and severally the sum

of P35,000,000.00 representing the purchase price of the properties,
subject matter of this case, which were already paid by the plaintiffs to
the Bancales;

2. To pay the plaintiffs the sum of P5,000,000.00 for moral

damages;

3. To reimburse plaintiffs the sum of P20,000.00 for attorneys

fees, plus the sum of P2,000.00 per court appearance, and the sum
of P20,000.00 for litigation expenses;

Plaintiffs further pray for such orders as may be just, appropriate

and equitable under the premises.[24]

We hold that the issuance by the Court of Appeals of a

permanent injunction prohibiting petitioners from exercising acts
of ownership is included in respondents prayer for such orders as
may be just and equitable under the circumstances. Such a
prayer in the complaint justifies the grant of a relief not otherwise
specifically prayed for.[25] More importantly, we have ruled that it
is the allegations in the pleading which determine the nature of
the action and the Court shall grant relief warranted by the
allegations and proof even if no such relief is prayed for. [26] It is
the material allegations of the fact in the complaint, not the legal
conclusions made in the prayer, that determine the relief to which
the plaintiff is entitled.[27] If respondents were seeking to enjoin
the sale of the subject properties, in effect, to prevent the transfer
of ownership of the subject properties to others, then such prayer
must be deemed to logically and reasonably include the prayer to
enjoin others from exercising rights of ownership over the subject
properties, for if the ownership of the subject properties are not
transferred to any one else, then no one else has the right to
exercise the rights appurtenant thereto.

WHEREFORE, the Petition is DENIED. The Decision

dated 31 January 2005 of the Court of Appeals in CA-G.R. CV No.
60721 is AFFIRMED. Costs against petitioners.

SO ORDERED.

G.R. No. 165849

December 10, 2007

GILBERT G. GUY, Petitioner,

vs.

THE COURT OF APPEALS (8th DIVISION), NORTHERN ISLANDS CO., INCORPORATED,

SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and EMILIA TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170185
IGNACIO AND IGNACIO LAW OFFICES, Petitioner,
vs.
THE COURT OF APPEALS (7th DIVISION), NORTHERN ISLANDS CO., INCORPORATED,
SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and EMILIA A.
TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170186
SMARTNET PHILIPPINES, Petitioner,
vs.
THE COURT OF APPEALS (7th DIVISION), NORTHERN ISLANDS CO., INCORPORATED,
SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and EMILIA A.
TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 171066
LINCOLN CONTINENTAL DEVELOPMENT CO., INC., Petitioner,
vs.
NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY, GERALDINE G. GUY, GRACE G.
CHEU, GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 176650
LINCOLN CONTINENTAL DEVELOPMENT COMPANY, INC., Petitioner,
vs.
NORTHERN ISLANDS CO., INCORPORATED, SIMNY G. GUY, GERALDINE G. GUY, GRACE G.
CHEU, GLADYS G. YAO, and EMILIA A. TABUGADIR, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:

Before us are five (5) consolidated cases which stemmed from Civil Case No. 04-109444 filed with
the Regional Trial Court (RTC), Branch 24, Manila, subsequently re-raffled to Branch 46 1 and
eventually to Branch 25.2
The instant controversies arose from a family dispute. Gilbert Guy is the son of Francisco and Simny
Guy. Geraldine, Gladys and Grace are his sisters. The family feud involves the ownership and
control of 20,160 shares of stock of Northern Islands Co., Inc. (Northern Islands) engaged in the
manufacture, distribution, and sales of various home appliances bearing the "3-D" trademark.
Simny and her daughters Geraldine, Gladys and Grace, as well as Northern Islands and Emilia
Tabugadir, have been impleaded as respondents in the above-entitled cases. Northern Islands is a
family-owned corporation organized in 1957 by spouses Francisco and respondent Simny Guy. In
November 1986, they incorporated Lincoln Continental Development Corporation, Inc. (Lincoln
Continental) as a holding company of the 50% shares of stock of Northern Islands in trust for their
three (3) daughters, respondents Geraldine, Gladys and Grace. Sometime in December 1986, upon
instruction of spouses Guy, Atty. Andres Gatmaitan, president of Lincoln Continental, indorsed in
blank Stock Certificate No. 132 (covering 8,400 shares) and Stock Certificate No. 133 (covering
11,760 shares) and delivered them to Simny.
In 1984, spouses Guy found that their son Gilbert has been disposing of the assets of their
corporations without authority. In order to protect the assets of Northern Islands, Simny surrendered
Stock Certificate Nos. 132 and 133 to Emilia Tabugadir, an officer of Northern Islands. The 20,160
shares covered by the two Stock Certificates were then registered in the names of respondent
sisters, thus enabling them to assume an active role in the management of Northern Islands.
On January 27, 2004, during a special meeting of the stockholders of Northern Islands, Simny was
elected President; Grace as Vice-President for Finance; Geraldine as Corporate Treasurer; and
Gladys as Corporate Secretary. Gilbert retained his position as Executive Vice President. This
development started the warfare between Gilbert and his sisters.
On March 18, 2004, Lincoln Continental filed with the RTC, Branch 24, Manila a Complaint for
Annulment of the Transfer of Shares of Stock against respondents, docketed as Civil Case No. 04109444. The complaint basically alleges that Lincoln Continental owns 20,160 shares of stock of
Northern Islands; and that respondents, in order to oust Gilbert from the management of Northern
Islands, falsely transferred the said shares of stock in respondent sisters names. Lincoln Continental
then prayed for an award of damages and that the management of Northern Islands be restored to
Gilbert. Lincoln also prayed for the issuance of a temporary restraining order (TRO) and a writ of
preliminary mandatory injunction to prohibit respondents from exercising any right of ownership over
the shares.
On June 16, 2004, Lincoln Continental filed a Motion to Inhibit the Presiding Judge of Branch 24,
RTC, Manila on the ground of partiality. In an Order dated June 22, 2004, the presiding judge
granted the motion and inhibited himself from further hearing Civil Case No. 04-109444. It was then
re-raffled to Branch 46 of the same court.

On July 12, 2004, Branch 46 set the continuation of the hearing on Lincoln Continentals application
for a TRO.
On July 13, 2004, respondents filed with the Court of Appeals a Petition
for Certiorari and Mandamus, docketed as CA-G.R. SP No. 85069, raffled off to the Tenth Division.
Respondents alleged that the presiding judge of Branch 24, in issuing the Order dated June 22,
2004 inhibiting himself from further hearing Civil Case No. 04-109444, and the presiding judge of
Branch 46, in issuing the Order dated July 12, 2004 setting the continuation of hearing on Lincoln
Continentals application for a TRO, acted with grave abuse of discretion tantamount to lack or
excess of jurisdiction.
Meanwhile, on July 15, 2004, the trial court issued the TRO prayed for by Lincoln Continental
directing respondents to restore to Gilbert the shares of stock under controversy. In the same Order,
the trial court set the hearing of Lincoln Continentals application for a writ of preliminary injunction
on July 19, 20, and 22, 2004.
On July 16, 2004, the Court of Appeals (Tenth Division) issued a TRO enjoining Branch 46, RTC,
Manila from enforcing, maintaining, or giving effect to its Order of July 12, 2004 setting the hearing of
Lincoln Continentals application for a TRO.
Despite the TRO, the trial court proceeded to hear Lincoln Continentals application for a writ of
preliminary injunction. This prompted respondents to file in the same CA-G.R. SP No. 85069 a
Supplemental Petition forCertiorari, Prohibition, and Mandamus seeking to set aside the Orders of
the trial court setting the hearing and actually hearing Lincoln Continentals application for a writ of
preliminary injunction. They prayed for a TRO and a writ of preliminary injunction to enjoin the trial
court (Branch 46) from further hearing Civil Case No. 04-109444.
On September 17, 2004, the TRO issued by the Court of Appeals (Tenth Division) in CA-G.R. SP No.
85069 expired.
On September 20, 2004, Gilbert filed a Motion for Leave to Intervene and Motion to Admit
Complaint-in-Intervention in Civil Case No. 04-109444. In its Order dated October 4, 2004, the trial
court granted the motions.
Meantime, on October 13, 2004, the trial court issued the writ of preliminary mandatory injunction
prayed for by Lincoln Continental in Civil Case No. 04-109444.
On October 20, 2004, the Court of Appeals (Tenth Division) denied respondents application for
injunctive relief since the trial court had already issued a writ of preliminary injunction in favor of
Lincoln Continental. Consequently, on October 22, 2004, respondents filed with the Tenth Division a
Motion to Withdraw Petition and Supplemental Petition in CA-G.R. SP No. 85069.
On October 26, 2004, respondents filed a new Petition for Certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 87104, raffled off to the Eighth Division. They prayed that the TRO and
writ of preliminary injunction issued by the RTC, Branch 46, Manila be nullified and that an injunctive

relief be issued restoring to them the management of Northern Islands. They alleged that Gilbert has
been dissipating the assets of the corporation for his personal gain.
On October 28, 2004, the Court of Appeals Eighth Division issued a TRO enjoining the
implementation of the writ of preliminary injunction dated October 13, 2004 issued by the trial court
in Civil Case No. 04-109444; and directing Lincoln Continental to turn over the assets and records of
Northern Islands to respondents.
On November 2, 2004, respondents filed with the appellate court (Eighth Division) an
Urgent Omnibus Motion praying for the issuance of a break-open Order to implement its TRO.
On November 4, 2004, the Eighth Division issued a Resolution granting respondents motion.
Pursuant to this Resolution, respondents entered the Northern Islands premises at No. 3 Mercury
Avenue, Libis, Quezon City.
On November 18, 2004, Gilbert filed with this Court a petition for certiorari, docketed as G.R. No.
165849, alleging that the Court of Appeals (Eighth Division), in granting an injunctive relief in favor of
respondents, committed grave abuse of discretion tantamount to lack or in excess of jurisdiction. The
petition also alleges that respondents resorted to forum shopping.
Meanwhile, on December 16, 2004, Smartnet Philippines, Inc. (Smartnet) filed with the Metropolitan
Trial Court (MeTC), Branch 35, Quezon City a complaint for forcible entry against respondents,
docketed as Civil Case No. 35-33937. The complaint alleges that in entering the Northern Islands
premises, respondents took possession of the area being occupied by Smartnet and barred its
officers and employees from occupying the same.
Likewise on December 16, 2004, Ignacio and Ignacio Law Offices also filed with Branch 37, same
court, a complaint for forcible entry against respondents, docketed as Civil Case No. 34106. It
alleges that respondents forcibly occupied its office space when they took over the premises of
Northern Islands.
On December 22, 2004, the Eighth Division issued the writ of preliminary injunction prayed for by
respondents in CA-G.R. SP No. 87104.
Subsequently, the presiding judge of the RTC, Branch 46, Manila retired. Civil Case No. 04-109444
was then re-raffled to Branch 25.
On January 20, 2005, respondents filed with the Eighth Division of the appellate court a
Supplemental Petition forCertiorari with Urgent Motion for a Writ of Preliminary Injunction to Include
Supervening Events. Named as additional respondents were 3-D Industries, Judge Celso D. Lavia,
Presiding Judge, RTC, Branch 71, Pasig City and Sheriff Cresencio Rabello, Jr. This supplemental
petition alleges that Gilbert, in an attempt to circumvent the injunctive writ issued by the Eighth
Division of the appellate court, filed with the RTC, Branch 71, Pasig City a complaint for replevin on
behalf of 3-D Industries, to enable it to take possession of the assets and records of Northern
Islands. The complaint was docketed as Civil Case No. 70220. On January 18, 2005, the RTC
issued the writ of replevin in favor of 3-D Industries.

On April 15, 2005, respondents filed with the Eighth Division a Second Supplemental Petition
for Certiorari and Prohibition with Urgent Motion for the Issuance of an Expanded Writ of Preliminary
Injunction. Impleaded therein as additional respondents were Ignacio and Ignacio Law Offices,
Smartnet, Judge Maria Theresa De Guzman, Presiding Judge, MeTC, Branch 35, Quezon City,
Judge Augustus C. Diaz, Presiding Judge, MeTC, Branch 37, Quezon City, Sun Fire Trading
Incorporated, Zolt Corporation, Cellprime Distribution Corporation, Goodgold Realty and
Development Corporation, John Does and John Doe Corporations. Respondents alleged in the main
that the new corporations impleaded are alter egos of Gilbert; and that the filing of the forcible entry
cases with the MeTC was intended to thwart the execution of the writ of preliminary injunction dated
December 22, 2004 issued by the Court of Appeals (Eighth Division) in CA-G.R. SP No. 87104.
1awphil

On April 26, 2005, the Eighth Division issued a Resolution admitting respondents new pleading. On
August 19, 2005, the Eighth Division (now Seventh Division) rendered its Decision in CA-G.R. SP
No. 87104, the dispositive portion of which reads:
WHEREFORE, premises considered, the petition is hereby GRANTED and the October 13, 2004
Order and the October 13, 2004 Writ of Preliminary Mandatory Injunction issued by Branch 46 of the
Regional Trial Court of Manila are hereby REVERSED and SET ASIDE. The December 17, 2004
Order and Writ of Preliminary Injunction issued by this Court of Appeals are hereby MADE
PERMANENT against all respondents herein.
SO ORDERED.
Meanwhile, in a Decision3 dated September 19, 2005, the RTC, Branch 25, Manila dismissed the
complaint filed by Lincoln Continental and the complaint-in-intervention of Gilbert in Civil Case No.
04-109444, thus:
WHEREFORE, in view of the foregoing, the Complaint and the Complaint-in-Intervention are hereby
DISMISSED. Plaintiff and plaintiff-intervenor are hereby ordered to jointly and severally pay
defendants the following:
(a) Moral damages in the amount of Php2,000,000.00 each for defendants Simny Guy,
Geraldine Guy, Grace Guy-Cheu and Gladys Yao;
(b) Moral damages in the amount of Php200,000.00 for defendant Emilia Tabugadir;
(c) Exemplary damages in the amount of Php2,000,000.00 each for defendants Simny Guy,
Geraldine Guy, Grace Guy-Cheu, and Gladys Yao;
(d) Exemplary damages in the amount of Php200,000.00 for defendant Emilia Tabugadir;
(e) Attorneys fees in the amount of Php2,000.000.00; and
(f) Costs of suit.
SO ORDERED.

The trial court held that Civil Case No. 04-109444 is a baseless and an unwarranted suit among
family members; that based on the evidence, Gilbert was only entrusted to hold the disputed shares
of stock in his name for the benefit of the other family members; and that it was only when Gilbert
started to dispose of the assets of the familys corporations without their knowledge that respondent
sisters caused the registration of the shares in their respective names.
Both Lincoln Continental and Gilbert timely appealed the RTC Decision to the Court of Appeals,
docketed therein as CA-G.R. CV No. 85937.
On September 15, 2005, 3-D Industries, Inc. filed a petition for certiorari, prohibition,
and mandamus with this Court assailing the Decision of the Court of Appeals in CA-G.R. SP No.
87104 setting aside the writ of preliminary injunction issued by the RTC, Branch 46. The petition was
docketed as G.R. No. 169462 and raffled off to the Third Division of this Court.
On October 3, 2005, the Third Division of this Court issued a Resolution 4 dismissing the petition of 3D Industries in G.R. No. 169462. 3-D Industries timely filed its motion for reconsideration but this
was denied by this Court in its Resolution5 dated December 14, 2005.
Meanwhile, on October 10, 2005, Gilbert, petitioner in G.R. No. 165849 for certiorari, filed with this
Court a Supplemental Petition for Certiorari, Prohibition, and Mandamus with Urgent Application for
a Writ of Preliminary Mandatory Injunction challenging the Decision of the Court of Appeals (Seventh
Division), dated August 19, 2005, in CA-G.R. SP No. 87104. This Decision set aside the Order dated
October 13, 2004 of the RTC, Branch 46 granting the writ of preliminary injunction in favor of Lincoln
Continental.
On November 8, 2005, Ignacio and Ignacio Law Offices and Smartnet filed with this Court their
petitions forcertiorari, docketed as G.R. Nos. 170185 and 170186, respectively.
On February 27, 2006, Lincoln Continental filed with this Court a petition for review
on certiorari challenging the Decision of the Court of Appeals (Seventh Division) in CA-G.R. CV No.
85937, docketed as G.R. No. 171066.
On March 20, 2006, we ordered the consolidation of G.R. No. 171066 with G.R. Nos. 165849,
170185, and 170186.
In the meantime, in a Decision dated November 27, 2006 in CA-G.R. CV No. 85937, the Court of
Appeals (Special Second Division) affirmed the Decision in Civil Case No. 04-109444 of the RTC
(Branch 25) dismissing Lincoln Continentals complaint and Gilberts complaint-in-intervention, thus:
WHEREFORE, the appeals are dismissed and the assailed decision AFFIRMED with modifications
that plaintiff and plaintiff-intervenor are ordered to pay each of the defendants-appellees Simny Guy,
Geraldine Guy, Grace Guy-Cheu and Gladys Yao moral damages of P500,000.00, exemplary
damages of P100,000.00 and attorneys fees ofP500,000.00.
SO ORDERED.

Lincoln Continental and Gilbert filed their respective motions for reconsideration, but they were
denied in a Resolution promulgated on February 12, 2007.
Lincoln Continental then filed with this Court a petition for review on certiorari assailing the Decision
of the Court of Appeals (Former Special Second Division) in CA-G.R. CV No. 85937. This petition
was docketed as G.R. No. 176650 and raffled off to the Third Division of this Court.
In our Resolution dated June 6, 2007, we ordered G.R. No. 176650 consolidated with G.R. Nos.
165849, 170185, 170186, and 171066.
THE ISSUES
In G.R. Nos. 165849 and 171066, petitioners Gilbert and Lincoln Continental raise the following
issues: (1) whether respondents are guilty of forum shopping; and (2) whether they are entitled to
the injunctive relief granted in CA-G.R. SP No. 87104.
In G.R. Nos. 170185 and 170186, the pivotal issue is whether the Court of Appeals committed grave
abuse of discretion amounting to lack or excess of jurisdiction in ruling that petitioners Ignacio and
Ignacio Law Offices and Smartnet are also covered by its Resolution granting the writ of preliminary
injunction in favor of respondents.
In G.R. No. 176650, the core issue is whether the Court of Appeals (Special Second Division) erred
in affirming the Decision of the RTC, Branch 25, Manila dated September 19, 2005 dismissing the
complaint of Lincoln Continental and the complaint-in-intervention of Gilbert in Civil Case No. 04109444.
THE COURTS RULING
A. G.R. Nos. 165849 and 171066
On the question of forum shopping, petitioners Gilbert and Lincoln Continental contend that the acts
of respondents in filing a petition for certiorari and mandamus in CA-G.R. SP No. 85069 and
withdrawing the same and their subsequent filing of a petition for certiorari in CA-G.R. SP No. 87104
constitute forum shopping; that respondents withdrew their petition in CA-G.R. SP No. 85069 after
the Tenth Division issued a Resolution dated October 20, 2004 denying their application for a writ of
preliminary injunction; that they then filed an identical petition in CA-G.R. SP No. 87104 seeking the
same relief alleged in their petition in CA-G.R. SP No. 85069; and that by taking cognizance of the
petition in CA-G.R. SP No. 87104, instead of dismissing it outright on the ground of forum shopping,
the Court of Appeals committed grave abuse of discretion tantamount to lack or excess of
jurisdiction.
A party is guilty of forum shopping when he repetitively avails of several judicial remedies in different
courts, simultaneously or successively, all substantially founded on the same transactions and the
same essential facts and circumstances, and all raising substantially the same issues either pending
in, or already resolved adversely by some other court.6 It is prohibited by Section 5, Rule 7 of the
1997 Rules of Civil Procedure, as amended, which provides:

SECTION 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 other claim involving the same issues in any court, tribunal, or quasi-judicial
agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if
there is such other pending action or claim, a complete statement of the present status thereof; and
(c) if he should thereafter learn that the same or similar action has been filed or is pending, he shall
report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and 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.
Forum shopping is condemned because it unnecessarily burdens our courts with heavy caseloads,
unduly taxes the manpower and financial resources of the judiciary and trifles with and mocks
judicial processes, thereby affecting the efficient administration of justice. 7 The primary evil sought to
be proscribed by the prohibition against forum shopping is, however, the possibility of conflicting
decisions being rendered by the different courts and/or administrative agencies upon the same
issues.8
Forum shopping may only exist where the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in the other.9 Litis pendentia as a ground for
dismissing a civil action is that situation wherein another action is pending between the same parties
for the same cause of action, such that the second action is unnecessary and vexatious. The
elements of litis pendentia are as follows: (a) identity of parties, or at least such as representing the
same interest in both actions; (b) identity of rights asserted and the relief prayed for, the relief being
founded on the same facts; and (c) the identity of the two cases such that judgment in one,
regardless of which party is successful, would amount to res judicata in the other.10 From the
foregoing, it is clear that sans litis pendentia or res judicata, there can be no forum shopping.
While the first element of litis pendentia identity of parties is present in both CA-G.R. SP No.
85069 and CA-G.R. SP No. 87104, however, the second element, does not exist. The petitioners in
CA-G.R. SP No. 85069 prayed that the following Orders be set aside:
(1) the Order of inhibition dated June 22, 2004 issued by the presiding judge of the RTC of
Manila, Branch 24; and
(2) the Order dated July 12, 2004 issued by Branch 46 setting Gilberts application for
preliminary injunction for hearing.

In their petition in CA-G.R. SP No. 87104, respondents prayed for the annulment of the writ of
preliminary injunction issued by the RTC, Branch 46 after the expiration of the TRO issued by the
Tenth Division of the Court of Appeals. Evidently, this relief is not identical with the relief sought by
respondents in CA-G.R. SP No. 85069. Clearly, the second element of litis pendentia the identity of
reliefs sought - is lacking in the two petitions filed by respondents with the appellate court. Thus, we
rule that no grave abuse of discretion amounting to lack or excess of jurisdiction may be attributed to
the Court of Appeals (Eighth Division) for giving due course to respondents petition in CA-G.R. SP
No. 87104.
On the second issue, Section 3, Rule 58 of the 1997 Rules of Civil Procedure, as amended provides:
SECTION 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 act 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.
For a party to be entitled to an injunctive writ, he must show that there exists a right to be protected
and that the acts against which the injunction is directed are violative of this right. 11 In granting the
respondents application for injunctive relief and making the injunction permanent, the Court of
Appeals (Seventh Division) found that they have shown their clear and established right to the
disputed 20,160 shares of stock because: (1) they have physical possession of the two stock
certificates equivalent to the said number of shares; (2) Lincoln Continental is a mere trustee of the
Guy family; and (3) respondents constitute a majority of the board of directors of Northern Islands,
and accordingly have management and control of the company at the inception of Civil Case No. 94109444. The appellate court then ruled that the trial court committed grave abuse of discretion in
issuing a writ of preliminary mandatory injunction in favor of Guy. The writ actually reduced the
membership of Northern Islands board to just one member - Gilbert Guy. Moreover, he failed to
establish by clear and convincing evidence his ownership of the shares of stock in question. The
Court of Appeals then held there was an urgent necessity to issue an injunctive writ in order to
prevent serious damage to the rights of respondents and Northern Islands.
We thus find no reason to depart from the findings of the Court of Appeals. Indeed, we cannot
discern any taint of grave abuse of discretion on its part in issuing the assailed writ of preliminary
injunction and making the injunction permanent.
B. G.R. Nos. 170185 & 170186

Ignacio and Ignacio Law Offices and Smartnet, petitioners, claim that the Court of Appeals never
acquired jurisdiction over their respective persons as they were not served with summons, either by
the MeTC or by the appellate court in CA-G.R. SP No. 87104. Thus, they submit that the Court of
Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction when it
included them in the coverage of its injunctive writ.
Jurisdiction is the power or capacity given by the law to a court or tribunal to entertain, hear, and
determine certain controversies.12 Jurisdiction over the subject matter of a case is conferred by law.
Section 9 (1) of Batas Pambansa Blg. 129,13 as amended, provides:
SEC. 9. Jurisdiction. The Court of Appeals shall exercise:
(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo
warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction.
Rule 46 of the 1997 Rules of Civil Procedure, as amended, governs all cases originally filed
with the Court of Appeals. The following provisions of the Rule state:
SEC. 2. To what actions applicable. This Rule shall apply to original actions
for certiorari, prohibition, mandamusand quo warranto.
Except as otherwise provided, the actions for annulment of judgment shall be governed by Rule 47,
for certiorari, prohibition, and mandamus by Rule 65, and for quo warranto by Rule 66.
xxx
SEC. 4. Jurisdiction over person of respondent, how acquired. The court shall acquire jurisdiction
over the person of the respondent by the service on him of its order or resolution indicating its initial
action on the petition or by his voluntary submission to such jurisdiction.
SEC. 5. Action by the court. The court may dismiss the petition outright with specific reasons for
such dismissal or require the respondent to file a comment on the same within ten (10) days from
notice. Only pleadings required by the court shall be allowed. All other pleadings and papers may be
filed only with leave of court.
It is thus clear that in cases covered by Rule 46, the Court of Appeals acquires jurisdiction over the
persons of the respondents by the service upon them of its order or resolution indicating its initial
action on the petitions or by their voluntary submission to such jurisdiction. 14 The reason for this is
that, aside from the fact that no summons or other coercive process is served on respondents, their
response to the petitions will depend on the initial action of the court thereon. Under Section 5, the
court may dismiss the petitions outright, hence, no reaction is expected from respondents and under
the policy adopted by Rule 46, they are not deemed to have been brought within the courts
jurisdiction until after service on them of the dismissal order or resolution. 15

Records show that on April 27, 2005, petitioners in these two forcible entry cases, were served
copies of the Resolution of the Court of Appeals (Seventh Division) dated April 26, 2005 in CA-G.R.
SP No. 87104.16 The Resolution states:
Private respondents SMARTNET PHILIPPINES, INC., IGNACIO & IGNACIO LAW OFFICE,
SUNFIRE TRADING, INC., ZOLT CORPORATION, CELLPRIME DISTRIBUTION CORPO.,
GOODGOLD REALTY & DEVELOPMENT CORP., are hereby DIRECTED to file CONSOLIDATED
COMMENT on the original Petition for Certiorari, the First Supplemental Petition for Certiorari, and
the Second Supplemental Petition for Certiorari (not a Motion to Dismiss) within ten (10) days from
receipt of a copy of the original, first and second Petitions for Certiorari. 17
Pursuant to Rule 46, the Court of Appeals validly acquired jurisdiction over the persons of Ignacio
and Ignacio Law Offices and Smartnet upon being served with the above Resolution.
But neither of the parties bothered to file the required comment. Their allegation that they have been
deprived of due process is definitely without merit. We have consistently held that when a party was
afforded an opportunity to participate in the proceedings but failed to do so, he cannot complain of
deprivation of due process for by such failure, he is deemed to have waived or forfeited his right to
be heard without violating the constitutional guarantee.18
On the question of whether the Court of Appeals could amend its Resolution directing the issuance
of a writ of preliminary injunction so as to include petitioners, suffice to state that having acquired
jurisdiction over their persons, the appellate court could do so pursuant to Section 5 (g), Rule 135 of
the Revised Rules of Court, thus:
SEC. 5. Inherent powers of courts. Every court shall have power:
xxx
(g) To amend and control its process and orders so as to make them conformable to law and justice.
In Villanueva v. CFI of Oriental Mindoro19 and Eternal Gardens Memorial Parks Corp. v. Intermediate
Appellate Court,20 we held that under this Rule, a court has inherent power to amend its judgment so
as to make it conformable to the law applicable, provided that said judgment has not yet acquired
finality, as in these cases.
C. G.R. No. 176650
The fundamental issue is who owns the disputed shares of stock in Northern Islands.
We remind petitioner Lincoln Continental that what it filed with this Court is a petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended. It is a rule in this
jurisdiction that in petitions for review under Rule 45, only questions or errors of law may be
raised.21 There is a question of law when the doubt or controversy concerns the correct application of
law or jurisprudence to a certain set of facts, or when the issue does not call for an examination of
the probative value of the evidence presented. There is a question of fact when the doubt arises as

to the truth or falsehood of facts or when there is a need to calibrate the whole evidence considering
mainly the credibility of the witnesses, the existence and relevancy of specific surrounding
circumstances, as well as their relation to each other and to the whole, and the probability of the
situation.22Obviously, the issue raised by the instant petition for review on certiorari, involves a factual
matter, hence, is outside the domain of this Court. However, in the interest of justice and in order to
settle this controversy once and for all, a ruling from this Court is imperative.
One thing is clear. It was established before the trial court, affirmed by the Court of Appeals,
that Lincoln Continental held the disputed shares of stock of Northern Islands merely in trust
for the Guy sisters. In fact, the evidence proffered by Lincoln Continental itself supports this
conclusion. It bears emphasis that this factual finding by the trial court was affirmed by the Court of
Appeals, being supported by evidence, and is, therefore, final and conclusive upon this Court.
Article 1440 of the Civil Code provides that:
ART. 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed
as regards property for the benefit of another person is known as the trustee; and the person for
whose benefit the trust has been created is referred to as the beneficiary.
In the early case of Gayondato v. Treasurer of the Philippine Islands,23 this Court defines trust, in its
technical sense, as "a right of property, real or personal, held by one party for the benefit of another."
Differently stated, a trust is "a fiduciary relationship with respect to property, subjecting the person
holding the same to the obligation of dealing with the property for the benefit of another person." 24
Both Lincoln Continental and Gilbert claim that the latter holds legal title to the shares in question.
But record shows that there is no evidence to support their claim. Rather, the evidence on
record clearly indicates that the stock certificates representing the contested shares are in
respondents possession. Significantly, there is no proof to support his allegation that the transfer of
the shares of stock to respondent sisters is fraudulent. As aptly held by the Court of Appeals, fraud is
never presumed but must be established by clear and convincing evidence. 25 Gilbert failed to
discharge this burden. We, agree with the Court of Appeals that respondent sisters own the shares
of stocks, Gilbert being their mere trustee. Verily, we find no reversible error in the challenged
Decision of the Court of Appeals (Special Second Division) in CA-G.R. CV No. 85937.
WHEREFORE, we DISMISS the petitions in G.R. Nos. 165849, 170185, 170186 and 176650;
and DENY the petitions in G.R. Nos. 171066 and 176650. The Resolutions of the Court of Appeals
(Eighth Division), dated October 28, 2004 and November 4, 2004, as well as the Decision dated
October 10, 2005 of the Court of Appeals (Seventh Division) in CA-G.R. SP No. 87104
are AFFIRMED. We likewise AFFIRM IN TOTO the Decision of the Court of Appeals (Special
Second Division), dated November 27, 2006 in CA-G.R. CV No. 85937. Costs against petitioners.
SO ORDERED.

G.R. No. 128099

December 20, 2006

FELIX CAMITAN, FRANCISCO CAMITAN, SEVERO CAMITAN and VICTORIA

CAMITAN, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and THE FIDELITY INVESTMENT
CORPORATION, respondents

DECISION

TINGA, J.:
On 13 December 1967, the spouses Mateo Camitan and Lorenza Alcazar (spouses Camitan) sold to
Fidelity Investment Corporation (respondent) a parcel of land covered by Transfer Certificate of Title
(TCT) No. T-(11982)T-3188 located in Barangay Maunong, Calamba, Laguna. Upon the execution of
the Deed of Absolute Sale, the spouses Camitan delivered to respondent corporation (respondent)
the owners duplicate certificate of title (Owners Copy). From then on, respondent has been paying
the real estate taxes due on the property and has remained in actual physical possession thereof. 1
On 29 December 1993, after the death of the spouses Camitan, without the knowledge of
respondent, the heirs of the spouses-petitioners herein - filed a petition for the issuance of a new
Owners Copy,2 However, it appears that respondent was not given notice of such proceedings. The
trial court issued an order of general default.3 After anex parte presentation of evidence by the
petitioners, the trial court granted the petition and directed the Register of Deeds of Laguna to issue
a new Owners Copy, while at the same time declaring void the first Owners Copy, per its Order
dated 08 March 1995.4
When respondent learned of the petition and order for the first time in March 1995, it caused the
annotation of a notice of sale on the title of the property. Thereafter, on 26 April 1995, it filed a Notice
of Adverse Claim with the Register of Deeds of Calamba, Laguna.5
In a Petition6 for annulment of judgment and cancellation of title before the Court of Appeals,
respondent argued that the Order dated 08 March 1995 is null and void, having been issued by the
trial court without jurisdiction since the Owners Copy of TCT No. T-(11982)T-3188 exists and has
been in its possession, and not lost as petitioners alleged. Moreover, it claimed that petitioners have
no standing to file the petition, not being the registered owners of the property, nor persons in
interest, since all the rights and interest of the spouses Camitan had already been transferred to
respondent upon the sale of the property. Respondent further accused petitioners of perjury;
intentionally suppressing from the trial court the fact that they were not in possession of the property;
and not serving notice on respondent despite knowledge that it was in actual possession of the
property.7
The Court of Appeals granted the petition and ordered the annulment of the impugned Order.8 It
found that the Owners Copy is in the possession of respondent since 1967. Thus, petitioners do not
own the property, nor do they have any interest thereon that could have been the subject of
succession. Moreover, the Court of Appeals found that petitioners committed perjury in executing
their Joint Affidavit of Loss in support of their petition before the trial court as they made it appear
that the Owners Copy was still in the possession of the spouses Camitan, when in fact, as early as

1967, the same had already been given to respondent. Finally, citing Demetriou v. Court of
Appeals9 the Court of Appeals concluded that the trial court could not have acquired jurisdiction over
the petition because the Owners
Copy was never lost in the first place.10 Petitioners sought reconsideration of the Resolution, but the
motion was denied for lack of merit.11
Petitioners now claim that they have no knowledge of the purported sale and that they were not
aware of any claim whatsoever over the property in question for over twenty-seven-(27) years,
stressing that property is still registered, declared for taxation, and realty taxes paid thereon in the
name of the spouses Camitan.12 They argue that the Court of Appeals erred in finding that the
Owners Copy was not lost but was in fact in the possession of respondent since there was no
documentary proof to support such conclusion. According to petitioners, respondent was not able to
present even a photocopy of the Owners Copy to prove its possession thereof since 1967 and thus
the Court of Appeals did not acquire jurisdiction over the petition for annulment. 13
Petitioners add that respondent is guilty of estoppel and laches in asserting its alleged rights over
the property. The unexplained concealment for a long time of its possession of the purported deed of
absolute sale and Owners Copy, and its non-registration of the deed in its name run counter to the
natural course of things and are devoid of credence.14
Lastly, petitioners allege that the property in question could be a portion of the land surrendered to
the Presidential Commission on Good Government (PCGG) as part of the ill-gotten wealth of former
President Ferdinand Marcos, and that the sole purpose of respondents concealment of the deed of
absolute sale is to prevent sequestration thereof. 15
On the other hand, respondent argues that its non-registration of title does not affect its ownership of
the property because by the execution of the deed of absolute sale, the spouses Camitan had
effectively divested themselves of all the rights, title and interest over the property. Moreover, save
for their bare allegations, petitioners have not been able to rebut the presumptive authenticity of the
deed of absolute sale. Lastly, respondent posits that there is no basis for the allegation that the
property in question is part of the former Presidents ill-gotten wealth.16
Anent the claim that it failed to attach even a photocopy of the Owners Copy, respondent claims that
there is no rule which requires that the such document should be included in a petition for annulment
of judgment. Besides, petitioners never disputed respondents possession of the title, but in fact
merely categorized such possession as one in bad faith. More importantly, the argument that
respondents should have attached the Owners Copy of the title was raised for the first time in
petitioners motion for reconsideration of this Courts resolution dated 18 June 1997 dismissing the
instant petition.17 Finally, respondent maintains that petitioners are estopped from questioning the
jurisdiction of the Court of Appeals since they actively participated in the proceedings therein. 18
In a nutshell, the petition presents a very simple question: Whether the Court of Appeals erred when
it ordered the annulment of the 08 March 1995 Order of the trial court which directed the Register of
Deeds to issue a second Owners Copy of the title.
The Court of Appeals did not. The petition must be denied.
Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases as
where there is no available or other adequate remedy.19 An action for annulment of judgment is
grounded only on two justifications: (1) extrinsic fraud; and (2) lack of jurisdiction or denial of due

process. The purpose of such action is to have the final and executory judgment set aside so that
there will be a renewal of litigation.20
The annulment of the Order dated 08 March 1995 was premised on the lack of jurisdiction of the trial
court, apparently brought about by the fact that, as found by the Court of Appeals, the duplicate
certificate of the title was not lost nor destroyed, but has remained in the possession of respondent
which purchased the real property from the spouses Camitan in 1967. The Court finds no reason to
disturb the finding of the appellate court.
The petition for issuance of the new Owners Copy before the trial court was filed pursuant to
Presidential Decree No. 1529, otherwise known as the "Property Registration Decree," Section No.
109 of which provides:
SEC. 109. Notice and replacement of lost duplicate certificate.In case of loss or theft of an
owners duplicate certificate of title, due notice under oath shall be sent by the owner or by
someone in his behalf to the Register of Deeds of the province or city where the land lies as
soon as the loss or theft is discovered. If a duplicate certificate is lost or destroyed, or cannot
be produced by a person applying for the entry of a new certificate to him or for the
registration of any instrument, a sworn statement of the fact of such loss or destruction may
be filed by the registered owner or other person in interest and registered.
Upon the petition of the registered owner or other person in interest, the court may, after
notice and due hearing, direct the issuance of a new duplicate certificate, which shall contain
a memorandum of the fact that it is issued in place of the lost duplicate certificate, but shall in
all respects be entitled to like faith and credit as the original duplicate, and shall thereafter be
regarded as such for all purposes of this decree.
Thus, before a duplicate certificate of title can be replaced, the petitioner under the foregoing
provision must establish that the duplicate certificate was lost or destroyed. This Court has
consistently held that a trial court does not acquire jurisdiction over a petition for the issuance of a
new owners duplicate certificate of title, if the original is in fact not lost but is in the possession of an
alleged buyer.21 In other words, the fact of loss of the duplicate certificate is jurisdictional.
Petitioners question the Court of Appeals Resolution, claiming that respondent failed to attach to its
petition for annulment of judgment of the Owners Copy itself, or even a photocopy thereof. Thus,
they argue there was no proof that respondent has been in possession of the duplicate certificate.
That being the situation, the trial court validly acquired jurisdiction over their petition for issuance of a
new Owners Copy, petitioners conclude.
Respondent, so it appears, did not attach to its petition for annulment of judgment the Owners Copy
of the title. This lapse, however, does not suffice as basis to set aside the questioned resolutions of
the Court of Appeals.
A review of the records of the case shows that petitioners never questioned respondents possession
of the Owners Copy, its actual and physical possession and occupation of the property, as well as its
payment of real estate taxes due on the property.
In its petition for annulment before the Court of Appeals, respondent alleged that:
4. On December 13, 1967, the spouses Camitan sold the Property to petitioner, as
documented by a "Deed of Absolute Sale" dated 13 December 1967, a copy of which is

attached hereto as annex "C". Pursuant to the said Deed of Absolute Sale, petitioner paid the
purchase price in full.
5. Upon the execution of the Deed of Absolute Sale, the vendors delivered to petitioner the
owners duplicate copy of the Title, which Title has since been in the possession of petitioner.
Also, since 1967 and to this day, petitioner has been in actual physical possession and
continuous occupation of the above-described Property. Moreover, petitioner has been the
one paying the real estate taxes due on the Property.22
While for its part, respondent treated the allegations perfunctorily in this wise in its Comment:
SPECIFIC DENIALS
xxxx
2. Private respondents deny specifically paragraphs 4 and 5 of the said petition for lack of
knowledge and information sufficient to form a belief as to the truth of falsity of the
allegations contained therein and as heretofore substantiated.23
The relevant provisions of the Rules of Court are Sections 10 and 11, Rule 8, which read:
SEC. 10. Specific denial. A defendant must specify each material allegation of fact
the truth of which he does not admit and, whenever practicable, shall set forth the
substance of the matters upon which he relies to support his denial. Where a defendant
desires to deny only a part of an averment, he shall specify so much of it as is true and
material and shall deny only the remainder. Where a defendant is without knowledge or
information sufficient to form a belief as to the truth of a material averment made in the
complaint, he shall so state, and this shall have the effect of a denial. (Emphasis supplied)
SEC.11. Allegation not specifically denied deemed admitted. Material averment in the
complaint, other than those as to the amount of unliquidated damages, shall be deemed
admitted when not specifically denied. Allegations of usury in a complaint to recover
usurious interest are deemed admitted if not denied under oath. (Emphasis supplied)
Although petitioners put their unmistakably sparse denial of respondents allegations relative to the
execution of the deed of sale in its favor and its possession of the Owners Copy under the heading
"SPECIFIC DENIALS" and anteceding it with the adverb "specifically, the same cannot function as
an operative denial within the purview of the Rules. A denial is not specific simply because it is so
qualified by the defendant. A general denial does not become specific by the use of the word
"specifically." When the matters of whether the defendant alleges having no knowledge or
information sufficient to form a belief, are plainly and necessarily within the defendants knowledge,
his alleged ignorance or lack of information
will not be considered as a specific denial.24 In one case, it was held that when a respondent makes
a "specific denial" of a material allegation of the petition without setting forth the substance of the
matters relied upon to support its general denial, when such matters were plainly within its
knowledge and the defendant could not logically pretend ignorance as to the same, said defendant
fails to properly tender an issue.25 Petitioners "specific denial" in this case is ineffective and amounts
to an admission pursuant to Rule 8, Sec. 11 of the Rules of Court.

Petitioners make an issue of the lack of material evidence to support the Court of Appeals
conclusion that the Owners Copy was not lost, because respondent failed to attach the said
Owners Copy or even a photocopy thereof. The argument is unavailing.
Firstly, there is no need of proof because of petitioners implied admission thereof.
Secondly, the matter should have been raised in the proceedings before the Court of Appeals and
not before this Court. Despite various opportunities, petitioners failed to do so before the Court of
Appeals. In fact, it was only in petitioners Motion for Reconsideration of our
Resolution dated 18 June 1997 dismissing their petition26 that they claimed that the Court of Appeals
committed "grave error tantamount to lack of jurisdiction thereof when it declared annulled the
contested Order x x x x for lack of material evidence to support that the said title was lost." 27 We
have consistently held that matters, theories or arguments not brought out in the original
proceedings cannot be considered on review or appeal where they are raised for the first time. 28
Finally, having actively participated in the proceedings before the Court of Appeals, petitioners can
no longer question its authority.29
Everything considered, the Court of Appeals was satisfied that the Owners Copy of the TCT No. (T11982) T-3188 is not lost, but rather, as admitted by petitioners, it has been in the possession of
another person. We find no reason to disturb the said finding.
Petitioners other claims, to wit: (i) respondent is guilty of estoppel and laches in asserting its rights
over the property; (ii) respondent is guilty of fraud and bad faith when it concealed the possession of
the deed of absolute sale of the property and the Owners Copy, and when it failed to register and
have the title of the property transferred to its name; and (iii) the property in question could be a part
of ill-gotten wealth surrendered to the PCGG, are immaterial and irrelevant to the case. Thus, there
is no need to dwell on them. The instant petition merely questions the propriety of the annulment
order on the ground of the trial courts lack of jurisdiction. Any other issues, such as the ownership of
the property, or the motives for the non-registration of the sale or the non-transfer of the title are
beyond the ambit of the petition. Besides, the determination of said issues necessitates a factual
inquiry which this Court does not perform in a petition for review.30
WHEREFORE, the petition is DENIED and the challenged resolution of the Court of Appeals is
AFFIRMED, with costs against petitioners.
SO ORDERED.
G.R. No. L-9531

May 14, 1958

WARNER BARNES and CO., LTD., plaintiff-appellee,

vs.
GUILLERMO C. REYES, ET AL., defendants-appellants.
Ozaeta, Lichauco and Picazo for appellee.
Mariano M. de Joya for appellants.
PARAS, C.J.:

The plaintiff-appellee filed against the defendants-appellants an action for foreclosure of mortgage
on August 20, 1954. The deed of mortgage sued upon was attached to the complaint as Annex "A".
After having been granted an extension, the appellants filed an answer on September 30, 1954,
alleging:
1. That they admit paragraph 1 of the complaint;
2. That the defendants are without knowledge or information sufficient to form a belief as to
the truth of the material averments of the remainder of the complaint; and
3. That they hereby reserve the right to present an amended answer with special defenses
and counterclaim.
As the appellants did not file any amended answer, the appellee moved on November 15, 1954 for
judgment on the pleadings on the ground that the answer failed to tender an issue. The lower court
granted appellee's motion in the order dated December 28, 1954 and thereafter (on December 29,
1954) rendered judgment in favor of the appellee. In granting the motion for judgment on the
pleadings, the lower court held "that the denial by the defendants of the material allegations of the
complaint under the guise of lack of knowledge is a general denial so as to entitle the plaintiff to
judgment on the pleadings."
In the present appeal taken by the defendants, the question raised is whether the allegation of want
of knowledge or information as to the truth of the material averments of the complaint amounts to a
mere general denial warranting judgment on the pleadings or is sufficient to tender a triable issue.
Section 7 of Rule 9 of the Rules of court, in allowing the defendant to controvert material averments
not within his knowledge or information, provides that "where the defendant is without knowledge or
information sufficient to form a belief as to the truth of material averment, he shall so state and this
shall have the effect of a denial. This form of denial was explained in one case as follows:
Just as the explicit denials of an answer should be either general or specific, so all denials of
knowledge or information sufficient to form a belief should refer either generally to all the
averments of the complain" thus intended to be denied, or specifically to such as are to be
denied by that particular form of plea. The would be so definite and certain in its allegation
that the pleaders' adversary should not be left in doubt as to what is admitted, what is
denied, and what is covered by denials of knowledge or information sufficient to form a
belief. Under this form of denial employed by the defendant, it would be difficult, if not
impossible to convict him of perjury if it should transpire that some of his denials of
knowledge, etc., were false, for he could meet the charge by saying that his denials referred
only to matters of which he had in fact no knowledge or information. (Kirachbaum
Eschmann, 98 NE 328, 329-330.).
This is a foreclosure suit. It is alleged that the severally indebted in the sum of P9,906.88, secured
by a mortgage. A copy of the mortgaged deed was attached and made a part of the complaint. There
are also allegations of partial payments, defaults in the payment of outstanding balance, and a
covenant to pay interest and attorney's fees. It is hard to believe that the appellants could not have

had knowledge or information as to the truth or falsity of any of said allegations. As a copy of the
deed of mortgage formed part of the complaint, it was easy for and within the power of the
appellants, for instance, to determine and so specifically allege in their answer whether or not they
had executed the alleged mortgage. The appellants could be aided in the matter by an inquiry or
verification as to its registration in the Registry of Deeds. "An unexplained denial of information and
belief of a matter of records, the means of information concerning which are within the control of the
pleader, on are readily accessible to him, is evasive and is insufficient to constitute an effective
denial. (41 Am. Juris., 399, citing Dahlstrom vs. Gemunder, 92, NE 106.)
It is noteworthy that the answer was filed after an extension granted by the lower court, and that
while a reservation was made to file an amended answer, no such pleading was presented. If these
show anything, it is that the appellants obviously did not have any defense or wanted to delay the
proceedings.
The form of denial adopted by the appellants, although allowed by the Rules of Court, must be
availed of with sincerity and in good faith,certainly neither for the purpose of confusing the adverse
party as to what allegations of the complaint are really put in issue nor for, the purpose of delay.
. . . no court will permit its process to be trifled with and its intelligence affronted by the offer
of pleadings which any reasoning person knows can not possibly be true. . . ."The general
rule that the Court is not bound to accept statements in pleadings which are, to the common
knowledge of all intelligent persons, untrue, applies just as well to the provisions of Rule
8(b), 28 U.S.C.A. following section 723c, as to pleadings under the, State statute." (Nieman
vs. Long, 51 F. Supp. 30, 31.)
This rule, specifically authorizing an answer that defendant has no knowledge or information
sufficient to form a belief his to the truth of an averment and giving such answer is not the
effect of a denial, does not apply where the fact as to which want of knowledge is asserted is
to the knowledge of the court as plainly and necessarily within the defendants knowledge
that his averment of ignorance must be palpably untrue. (Icle Plant Equipment Co. vs.
Martocello, D.C. Pa. 1941, 43 F. Supp. 281.)
Wherefore, the decision appealed from is hereby affirmed with costs against the appellants. So
ordered.

G.R. No. L-37309 March 30, 1982

RAMON AGTON, petitioner,
vs.
COURT OF APPEALS and SANTIAGO ANGAYAO, respondents.
FERNANDEZ, J.:p
This is a petition for certiorari to review and set aside the decision of the Court of Appeals in CA-G.R. No. 42635-R entitled "Santiago
Angayao, plaintiff-appellee versus Ramon Agton, defendant-appellant",

which affirmed the decision of the Court of First

Instance of Davao in Civil Case No. 5977 entitled "Santiago Angayao, Plaintiff-Appellee versus Ramon
Agton, Defendant-Appellant", the dispositive part of which reads:

WHEREFORE, judgment is hereby rendered directing the defendant to deliver to the

plaintiff three hectares of the land covered by Transfer Certificate of Title No. T-2528
of the Register of Deeds of Davao and to pay him P2,500.00 as attorney's fees, with
costs.
SO ORDERED.
Given in Davao City, this 2nd day of August, 1968.
(SGD VICENTE N. CUSI, JR. J u d g e 2
On April 5, 1968 Santiago Angayao filed a complaint for recovery of real property and damages
against Ramon Agton in the Court of First Instance of Davao, Branch I, docketed as Civil Case No.
5977. 3 The land sought to be recovered is a portion containing three (3) hectares being a portion of Lot
184 of the cadastral survey of Davao, located in Toril, City of Davao. 4 The trial court rendered judgment
ordering the defendant to deliver to the plaintiff the land sought to be recovered.
The defendant appealed to the Court of Appeals which affirmed the decision of the trial court.
The antecedent facts, as found by the Court of Appeals, are:
It appears that previous to the filing of this suit, a civil case was filed for and in behalf
of the herein plaintiff-appellee (while he was then a minor) on or about Oct. 10, 1951,
with the Court of First Instance of Davao for the recovery of possession of real
property with damages against the herein defendant-appellant Ramon Agton and
several others. The case involved a parcel of land known as Lot No. 786, Cadastral
102 of Davao City, situated in Baliok Davao City, and was docketed as Civil Case No.
726. An amicable settlement was entered into, among the terms of which appellant
obligated himself to deliver to the appellee a parcel of land, more particularly
described in paragraph 3 of the said amicable settlement, reflected in paragraph 5 of
the complaint in the instant case as follows:
That plaintiff hereby accepts three (3) hectares portion of the land in
question as a settlement in full of his claim against the Defendant,
and in consideration thereof hereby agrees to the complete
termination of this case.
Judgment was rendered in accordance with this amicable settlement, and
immediately thereafter, the defendant therein (appellant herein), pointed out to a
parcel of land situated in Toril, Davao, more particularly described in paragraph 8 of
the instant complaint as follows:

A parcel of land (Lot 184-A of the subdivision plan Psd-28181 being a

portion of Lot 184 of the cadastral survey of Davao, G.L.R.O. Cad.
Record No. 318), situated in the City of Davao. Bounded on the NE.
by Lot 180 of Davao Cad. and Lot 184-B of the subdivision plan; on
the SW by Provincial Road and on the NW. by Lot 182 of Davao; ...;
containing an area of Seventeen Thousand Eight Hundred Eleven
Square meters (I 7,81 1) more or less.
as the parcel of land subject of the said amicable settlement. The herein plaintiff
made demands for the delivery of the said parcel of land situated in Toril but the
defendant herein promised to deliver the said parcel of land to the appellee when the
latter attains the age of majority. On the occasion, the appellant, in fact, invited the
appellee to the premises of the land in question in order to be present in the survey
thereof for the segregation of that portion which was to be given to him. After said
survey, defendant told plaintiff to wait for a little while as the delivery of the land
would be made after the approval of the said survey. The defendant-appellant
continued making such promises in fraud of the appellee, taking undue advantage of
the latter's minority and ignorance, the appellee being an unlettered Bagobo Inspite
of repeated demands, no delivery of the said parcel of land was made, thus
prompting the appellee to file this case before the Court a quo. 5
As stated by the Court of Appeals, the main issue is whether the land promised to be delivered by
Ramon Agton to Santiago Angayao is the parcel of land described in paragraphs 5 and 6 of the
complaint or a parcel of land described in paragraph 8 thereof. 6
The petitioner, Ramon Agton, assigned the following errors allegedly committed by the Court of
Appeals:
I
RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER
HAS NOT SPECIFICALLY DENIED THE MATERIAL ALLEGATIONS OF FACTS
CONSTITUTING RESPONDENT ANGAYAO'S CAUSE OF ACTION IN THE
PRESENT CASE.
II
RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE
DECISION OF THE COURT OF FIRST INSTANCE OF DAVAO IN THE INSTANT
CASE. 7
Anent the first error assigned, the petitioner submits:
The trial court and the Court of Appeals erred in ruling that the answer of herein
petitioner Agton does not specifically deny the material allegations of the complaint

and, therefore, admits the same. "Paragraph 2 of petitioner Agton's answer entered
the following denial
2. That the defendant specifically denies the allegations in
paragraphs 7, 9, 10, 11, 12, 13, 14 and 15 of the complaint.
and then proceeded to aver the truth of the matters involved, in the following 'Special
& Affirmative Defenses'
Special and Affirmative Defenses
1. That all the foregoing allegations are hereby incorporated by reference to form part
of these affirmative and special defenses.
2. That since as alleged in paragraph 6 of the complaint 'the defendant in Civil Case
No. 726 did not own nor had any interest, right or participation in Lot No. 786, Cad.
102, or any portion thereof', the plaintiff herein and the plaintiff in Civil Case No. 726
had no cause of action in fact against the defendant in said Civil Case No. 726 so the
defendant could not have offered as he did not in fact offer, to the plaintiff, a portion
of 3 hectares of the land described in paragraph 8 of the complaint which was then
covered by Transfer Certificate of Title No. T-2528 in the name of the defendant, and
which parcel of land was not involved in Civil Case No. 726.
3. That in Civil Case No. 726 the defendant was actually a TRUSTEE of the heirs of
one CERILA BAGOBA with whose heirs the defendant was made a joint defendant.
4. That in the Amicable Settlement in Civil Case No.726,the plaintiff herein was
represented by his counsel, who then also represented the Guardian Ad Litem.
5. That the said Amicable Settlement was approved by this Honorable Court and as a
matter of fact a decision based thereon was rendered by this Honorable Court which
decision had long ago become final and executed.
6. That way back on July 8, 1953, the said Amicable Settlement was confirmed and
ratified by the plaintiff through his counsel when said counsel filed a 'PETITION FOR
DETACHMENT OF EXHIBIT paragraph 3 of which reads:
3. That said exhibit is needed for the survey of the portion of the land
alloted to the plaintiff.
7. That way back on November 26, 1962, the plaintiff confirmed and ratified the
termination of Civil Case No. 726 when he filed through counsel an 'EX-PARTE
MOTION TO WITHDRAW EXHIBITS' paragraph I of which reads:
1. That the above-entitled case has already been terminated as early
as 1952,

on which date of confirmation and ratification the plaintiff was more than 28 years
old, hence, this complaint states no cause of action against the defendant.
8. That the plaintiff became of the age of majority way back in 1954, hence, if at all
the plaintiff has a cause of action against the defendant, it should have been filed at
the latest, four years after 1954 or in 1958 to be exact.
9. That the present action assailing the validity of the Amicable Settlement in Civil
Case No. 726 has already prescribed. (pp, 1-13, R.A.)
It is significant to note from the above-quoted portions of the answer of petitioner
Agton, that the same tender issues. 8
It is to be noted that the allegations in the special and affirmative defenses refer to paragraphs 6 and
8 of the complaint which read:
6. That defendant Ramon Agton, who was also the defendant in Civil Case No. 726,
did not own nor had any interest, right or participation in Lot No. 786, Cad. 102, or in
any portion thereof, and he could not have possibly ceded or transferred a portion of
THREE (3) HECTARES of said Lot to plaintiff Santiago Angayao in consideration of
the amicable settlement (Annex "A") on February 28, 1952, as in fact, up to the
present date, no delivery of the portion mentioned in the amicable settlement has
been made by defendant Ramon Agton to plaintiff;
xxx xxx xxx
8. That plaintiff herein, on or about February 28, 1952, signed the document,
amicable settlement, without understanding fully the contents thereof, and when the
same was read, interpreted and explained to him by the defendant, plaintiff was
made to understand that the portion of 3 hectares mentioned in said amicable
settlement was a separate lot situated in the poblacion of Toril, Davao City, more
particularly described as follows:
A parcel of land (Lot 184-A of the subdivision plan Psd-28181 being a
portion of Lot 184 of the cadastral survey of Davao, G.L.R.O. Cad.
Record No. 318), situated in the City of Davao. Bounded on the NW...
by Lot 180 of Davao Cad. on the SE., by Lot 180 of Davao Cad. and
Lot 184-B of the subdivision plan; on the SW by the Provincial plan:
on the SW by the Provincial Road and on the NW. by Lot 182 of
Davao Cad. ...; containing an area of SEVENTEEN THOUSAND
EIGHT HUNDRED ELEVEN SQUARE METERS (17,811) more or
less. 9
The foregoing allegations are partly admitted and denied in paragraphs 4 and 5 of the answer which
allege:

4. That the defendant partly admits and partly denies the allegations in paragraph 6
of the complaint, the facts being as they are recited in the affirmative and special
defenses herein.
5. That the defendant specifically denies the allegations in paragraph 8 of the
complaint, the facts being as they are recited in the affirmative and special defenses
herein. 10
Paragraph 2 of the answer only generally denies paragraphs 7, 9, 10, 11, 12, 13, 14 and 15 of the
complaint which read:
7. That the true circumstance that transpired during the discussion of the settlement
in Civil Case No. 726 was that, Santiago Angayao, a minor and an uneducated
Bagobo and who was not assisted by his guardian ad litem in the discussion was
offered by defendant Ramon Agton, a portion of three (3) hectares in the poblacion of
Toril, Davao City, for and in consideration of the amicable settlement;
xxx xxx xxx
9. That in the afternoon of February 28, 1952, after the amicable settlement was
signed by Santiago Angayao, defendant Ramon Agton brought the plaintiff in
defendant's car to Toril, Davao City, and upon arriving thereat, defendant pointed to
the plaintiff the very portion of 3 hectares in the poblacion of Toril, Davao City,
particularly the property above-mentioned;
10. That defendant promised the plaintiff that the former would deliver the
possession of the said 3 hectares portion of his land to plaintiff upon plaintiff's
reaching the age of majority;
11. That for several instances, defendant had assured the plaintiff, a distant relative
of defendant, that possession of the 3 hectares of land in the Toril poblacion would
be delivered when plaintiff, upon reaching the age of majority, demanded on the
defendant the delivery of the parcel of land;
12. That defendant, in utter bad faith and in an inequitable act, after offering various
pre-texts, later on assured plaintiff that delivery of the land would finally be made by
him (defendant) after all his children are through with their studies;
13. That defendant is holding and possessing the abovementioned property in trust
for the benefit of plaintiff; that said property has not passed to the hands of any
purchaser for value and in good faith;
14. That sometime in September, 1962, defendant requested the plaintiff, who was
then in Baliok Davao City, to come to Toril poblacion, Davao City, in order to be
present in the survey of the land and the segregation of that portion to be given to
him; that upon plaintiff's arrival in Toril poblacion, he joined the defendant who was

with four other men with survey chains and poles and who were introduced by
defendant to plaintiff as the survey party; that plaintiff was with the defendant when
they were locating the concrete monuments marking the points of the land during the
said survey; and that after said survey, defendant again told plaintiff to wait for a little
time because the delivery of the land would be made after the approval of the survey;
15. That defendant has committed fraud taken undue advantage over plaintiff's
minority and ignorance when, in order that plaintiff would sign the amicable
settlement in Civil Case No. 726, defendant promised to cede in favor of plaintiff a
portion of 3 hectares of his land in the Toril poblacion and that, later on, when plaintiff
began demanding the fulfillment of the obligation, defendant acted inequitably by
leading the plaintiff to believe that delivery of the land would be made as promised. 11
The denial in paragraph 2 of the answer is not supported by the substance of the matters which the
defendant will reply upon to support his denial as required by Section 10, Rule 8, Revised Rules of
Court.
The petitioner's special and affirmative defenses do not controvert the allegations in paragraph 7, 9,
10, 11, 12, 13, 14 and 15 of the complaint. The allegations in the special and affirmative defenses
refer to paragraphs 6 and 8 of the complaint.
It is clear from the foregoing that paragraph 2 of the answer is not a specific denial. An answer which
merely "denies generally and specifically each and every allegation contained in each and every
paragraph of the complaint" is but a general denial. 12 A denial does not become specific merely
because it is qualified by that word. 13The effect is that the material allegations in paragraphs 7, 9, 10, 11,
12, 13, 14 and 15 of the complaint are deemed admitted. 14
The Court of Appeals did not commit the first error assigned.
The petitioner submits that the Court of Appeals erred in affirming the decision of the trial court and
sustaining "respondent Angayao's claim, in spite of clear evidence to the contrary, and the absence
of evidence to establish the fact that petitioner Agton obligated himself to deliver 3 hectares of the
Toril Lot (Lot No. 184- A), virtually ignoring the final decision between the parties in Civil Case No.
726 which constitutes res judicata." 15 The issue raised is factual.
The trial court ruled in favor of the plaintiff Santiago Angayao in view of the following:
The Court is convinced that the three hectares mentioned in the amicable settlement
have never been delivered to plaintiff Santiago Angayao. And as stated elsewhere in
this decision, the defendant is deemed to have admitted in his answer that he made
the plaintiff understand that the three hectares mentioned in the amicable settlement
are a portion of a lot situated in Toril, Davao City, Lot No. 184-A) of the subdivision
plan Psd-28181 being a portion of Lot 184 of the Cadastral Survey of Davao,
G.L.R.O. Cad. Record No. 318 covered by Transfer Certificate of Title No. T-2528 of
the Register of Deeds of Davao in the name of the defendant, which he promised to
deliver to the plaintiff but has not delivered up to now.

The defendant set up the defense that the action assailing the validity of the
amicable settlement had prescribed. But the above-entitled case is not an action for
annulment of the amicable settlement. It is an action for recovery of real property
which the defendant promised to deliver to the plaintiff and which action prescribes in
thirty years. The judgment in Civil Case No. 726 based on the amicable settlement
was novated by the promise of the defendant to deliver the three hectares covered
by Transfer Certificate of Title No. 2528 of the Register of Deeds of Davao in his
name. 16
The Court of Appeals found that the land promised by Ramon Agton to be delivered to Santiago
Angayao is the land described in paragraph 8 of the complaint because:
Regarding error 2, suffice it to say that enough testimonial evidence was introduced,
apart from that already judicially admitted by the appellant, that the land sought to be
recovered was not the same land mentioned in the amicable settlement in Civil Case
No. 726 but the parcel of land in the poblacion of Toril, Davao, which was described
in paragraph 8 of the appellee's complaint, as gleaned from the testimony of
Angayao, as follows:
Q Mr. Angayao, you alleged in your complaint and had been admitted
by the defendant in his answer, that you had been offered by the
defendant 3 hectares of his land in the, poblacion of Toril in
consideration of the settlement in Civil Case No. 726, how many
times did you make demands from the defendant for the delivery to
you of the three hectares which were in consideration of that
amicable settlement of Civil Case No. 726?
xxx xxx xxx
A Many times. (tsn.,p.16, 18). COURT:
Q Did you receive the land consisting of three hectares mentioned in
the amicable settlement?
A No, sir.
Q Did you receive the three hectares in the poblacion of Toril which
according to you defendant pointed to you to be the three hectares
mentioned in the document, in the amicable settlement?
A He just pointed it to me, but he did not give it to me. (tsn., p. 37)
Unfortunately, the foregoing testimony stands uncontradicted by the records. It
therefore follows that the allegations in paragraph 8 of the complaint have been
preponderantly proven. 17

The record shows that the findings of fact of the trial court and the Court of Appeals on the Identity of
the land which Ramon Agton promised to deliver to Santiago Angayao are supported by the
evidence. Said land has not been delivered by Ramon Agton to Santiago Angayao. There is no basis
for the Supreme Court to set aside said factual findings.
WHEREFORE, the petition for certiorari is denied and the decision of the Court of Appeals in CAG.R. No. 42635-R sought to be reviewed is hereby affirmed, without pronouncement as to costs.
SO ORDERED.

[G.R. No. 148376. March 31, 2005]

LEONARDO
ACABAL
and
RAMON
NICOLAS, petitioners,
vs. VILLANER ACABAL, EDUARDO ACABAL, SOLOMON
ACABAL, GRACE ACABAL, MELBA ACABAL, EVELYN ACABAL,
ARMIN
ACABAL,
RAMIL
ACABAL,
and
BYRON
ACABAL, respondents.
DECISION
CARPIO MORALES, J.:

Before this Court is a Petition for Review on Certiorari of the February 15,
2001 Decision of the Court of Appeals reversing that of the Regional Trial
Court (RTC) of Dumaguete City, Branch 35.
[1]

[2]

In dispute is the exact nature of the document which respondent Villaner

Acabal (Villaner) executed in favor of his godson-nephew-petitioner Leonardo
Acabal (Leonardo) on April 19, 1990.
[3]

Villaners parents, Alejandro Acabal and Felicidad Balasabas, owned a

parcel of land situated in Barrio Tanglad, Manjuyod, Negros Oriental,
containing an area of 18.15 hectares more or less, described in Tax
Declaration No. 15856. By a Deed of Absolute Sale dated July 6, 1971, his
parents transferred for P2,000.00 ownership of the said land to him, who was
then married to Justiniana Lipajan.
[4]

[5]

[6]

Sometime after the foregoing transfer, it appears that Villaner became a

widower.
Subsequently, he executed on April 19, 1990 a deed conveying the same
property in favor of Leonardo.
[7]

[8]

Villaner was later to claim that while the April 19, 1990 document he
executed now appears to be a Deed of Absolute Sale purportedly witnessed
by a Bais City trial court clerk Carmelo Cadalin and his wife Lacorte, what he
signed was a document captioned Lease Contract (modeled after a July
1976 lease agreement he had previously executed with previous lessee,
Maria Luisa Montenegro ) wherein he leased for 3 years the property to
Leonardo at P1,000.00 per hectare and which was witnessed by two women
employees of one Judge Villegas of Bais City.
[9]

[10]

[11]

[12]

Villaner thus filed on October 11, 1993 a complaint before the

Dumaguete RTC against Leonardo and Ramon Nicolas to whom Leonardo in
turn conveyed the property, for annulment of the deeds of sale.
[13]

At the witness stand, Villaner declared:

Q: It appears, Mr. Acabal, that you have signed a document of sale
with the defendant Leonardo Acabal on April 19, 1990, please tell
the court whether you have really agreed to sell this property to
the defendant on or before April 19, 1990?
A: We had some agreement but not about the selling of this property.
Q: What was your agreement with the defendant Leonardo Acabal?
A: Our agreement [was] that he will just rent.

[14]

xxx
Q: Now, please tell the court how were you able to sign this document
on April 19, 1990?
A: I do not know why I signed that, that is why I am puzzled.

Q: Why, did you not read the contents of this document?

A: I have not read that. I only happened to read the title of the
Lease Contract.
Q: And do you recall who were the witnesses of the document
which you signed in favor of Leonardo Acabal?
A: Employees of Judge Villegas of Bais City.
Q: Did you see them sign that document?
A: Yes, sir.
Q: These signatures appearing in this document marked as
Exhibit C for the plaintiff and Exhibit 1 for the defendant,
please examine over (sic) these signatures if these were the
signatures of these witnesses who signed this document?
A: These are not the signatures of the two women.
Q: And after signing this document on April 19, 1990, did you appear
before a notary public to have this notarized?
A: No, I went home to San Carlos.

[15]

xxx
Q: According to this document, you sell (sic) this property
at P10,000.00, did you sell this property to Leonardo Acabal?
A: No, sir.
Q: How about after April 19, 1990, did you receive this amount from
Leonardo Acabal?
A: No, sir.

[16]

xxx

Q: Now you said that on May 25, 1990, Leonardo Acabal did not pay
the amount that he promised to you, what did you do of (sic) his
refusal to pay that amount?
A: I went to Mr. [Carmelo] Mellie Cadalin because he was the one
who prepared the papers and to ask Leonardo Acabal why he
will not comply with our agreement.
Q: By the way, who is this Mellie Cadalin?
A: Mellie Cadalin is also working in the sala of Judge Villegas.
Q: Who requested Mellie Cadalin to prepare this document?
A: Maybe it was Leonardo Acabal.
Q: By the way, when for the first time did you talk to Leonardo Acabal
regarding your agreement to lease this property to him?
A: March 14, 1990, in San Carlos.
Q: And what document did you give to him in order that that
document will be prepared?
A: I have given (sic) some papers and contract of lease that I have
signed to (sic) Mrs. Montenegro. (Emphasis and underscoring
supplied)
[17]

xxx
Q: Now, Carmelo Cadalin [Mellie] also testified before this court that in
fact he identified the document marked as Exhibit C for the
plaintiff that what you executed on April 19, 1990 was a deed of
sale and not a contract of lease, what can you say to that
statement?
A: That is a lie.
Q: And whats the truth then?

A: What really (sic) I have signed was the document of lease contract.
Q: Now, can you explain to the Honorable Court why it so
happened that on April 19, you were able to sign a deed of
sale?
A: What I can see now is that perhaps those copies of the deed of
sale were placed by Mr. Cadalin under the documents which I
signed the lease contract. But why is it that it has already a
deed of sale when what I have signed was only the lease of
contract or the contract of lease.
Q: Now, Mr. Cadalin also stated before this court that he handed over
to you this Deed of Sale marked as Exhibit C and according to
him you read this document, what can you say to this statement?
A: Yes, there was a document that he gave me to read it (sic)but it was
a contract of lease.
Q: How sure are you that what you signed on April 19, 1990 was really
a contract of lease and not a contract of sale?
A: Because when I signed the contract of lease the witnesses that
witnessed my signing the document were the employees of
Judge Villegas and then I am now surprised why in the deed
of sale which I purportedly signed are witnessed by Carmelo
Cadalin and his wife Lacorte. (Emphasis and underscoring
supplied)
[18]

On the other hand, Leonardo asserts that what Villaner executed was a
Deed of Absolute Sale for a consideration of P10,000.00 which he had already
paid, and as he had become the absolute owner of the property, he validly
transferred it to Ramon Nicolas on May 19, 1990.
[19]

[20]

Carmelo Cadalin who admittedly prepared the deed of absolute sale and
who appears as a witness, along with his wife, to the execution of the
document corroborated Leonardos claim:

Q: Mr. Cadalin, do you know the plaintiff Villaner Acabal?

A: Yes, I know.

[21]

xxx
Q: And I would like to ask you Mr. witness why do you know
Villaner Acabal?
A: At the time that he went to our house together with Leonardo
Acabal he requested me to prepare a deed of sale as regards
to a sale of the property.
[22]

xxx
Q: And after they requested you to prepare a document of sale,
what did you do?
A: At first I refused to [do] it because I have so many works to
do, but then they insisted so I prepared the deed.
Q: After you prepared the document, what did you do?
A: After I prepared it I gave it to him so that he could read the
same.
Q: When you say him, whom do you refer to?
A: Villaner Acabal.
Q: And did Villaner Acabal read the document you prepared?
A: Yes, he read it.
Q: And after reading it what did Villaner Acabal do?
A: He signed the document.

Q: Showing to you a document which is marked Exhibit C for the

plaintiff and Exhibit 1 for the defendants, please tell the
Honorable Court what relation this document has to the
document which you described earlier?
COURT INTERPRETER:
Witness is confronted with the said document earlier marked as
Exhibit C for the prosecution and Exhibit 1 for the defense.
A: Yes, this is the one.

[23]

xxx
Q: Also stated in the document is the phrase Signed in the
presence of and there is a number and then two signatures,
could you please examine the document and say whether
these signatures are familiar to you?
A: Yes, number one is my signature and number 2 is the signature
of my wife as witness.
[24]

xxx
Q: After Villaner Acabal signed the document, what did Villaner Acabal
do?
A: He was given the payment by Leonardo Acabal.

[25]

xxx
Q: Aside from the document, deed of absolute sale, that you
mentioned earlier that you prepared for Villaner Acabal and
Leonardo Acabal, what other documents, if any, did you prepare
for them?
A: Affidavit of non-tenancy and aggregate area. (Emphasis and
underscoring supplied)
[26]

The complaint was later amended to implead Villaners eight children as

party plaintiffs, they being heirs of his deceased wife.
[27]

By Decision of August 8, 1996, the trial court found for the therein
defendants-herein petitioners Leonardo and Ramon Nicolas and accordingly
dismissed the complaint.
Villaner et al. thereupon brought the case on appeal to the Court of
Appeals which reversed the trial court, it holding that the Deed of Absolute
Sale executed by Villaner in favor of Leonardo was simulated and fictitious.
[28]

Hence, Leonardo and Ramon Nicolas present petition for review

on certiorari, anchored on the following assignments of error:
[29]

I.

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT

RULED THAT RESPONDENT VILLANER ACABAL WAS DECEIVED INTO
SIGNING THE DEED OF ABSOLUTE SALE WHEN THE LATTER
KNOWINGLY, FREELY AND VOLUNTARILY EXECUTED THE SAME IN
FAVOR OF PETITIONER LEONARDO ACABAL.
II.

THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE

CONSIDERATION OF THE DEED OF ABSOLUTE SALE IN THE AMOUNT
OF TEN THOUSAND PESOS (P10,0000.00) WAS UNUSUALLY LOW AND
INADEQUATE, ESPECIALLY TAKING INTO ACCOUNT THE LOCATION OF
THE SUBJECT PROPERTY.
III.

THE COURT OF APPEALS ERRED WHEN IT FAILED TO CONSIDER WHY

RESPONDENT
VILLANER
ACABAL
ONLY
QUESTIONED
THE
POSSESSION AND OWNERSHIP OF PETITIONER RAMON NICOLAS IN
COURT AFTER THE LATTER WAS IN OPEN, CONTINUOUS AND
PEACEFUL POSSESSION OF THE SUBJECT PROPERTY FOR ALMOST
THREE (3) YEARS.

IV.

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN LAW

WHEN IT FAILED TO DECLARE PETITIONER RAMON NICOLAS AS A
BUYER IN GOOD FAITH AS THE LATTER TOOK THE NECESSARY STEPS
AN ORDINARY AND PRUDENT MAN WOULD HAVE TAKEN BEFORE
BUYING THE QUESTIONED PROPERTY.
V.

THE COURT OF APPEALS ERRED IN RULING IN FAVOR OF

RESPONDENT VILLANER ACABAL WHEN THE LATTER DID NOT
PRESENT A SINGLE WITNESS TO TESTIFY ON THE ALLEGED
CONTRACT OF LEASE WHICH HE ALLEGEDLY SIGNED AND
WITNESSED BY THE EMPLOYEES OF JUDGE VILLEGAS.
VI.

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN LAW

WHEN IT RULED THAT RULE 8, SECTION 8 OF THE 1987 (sic) RULE (sic)
OF CIVIL PROCEDURE IS NOT APPLICABLE IN THE CASE AT BAR,
CONTRARY TO THE RULING OF THE LOWER COURT.
VII.

THE COURT OF APPEALS ERRED WHEN IT ORDERED PETITIONERS TO

PAY RESPONDENTS JOINTLY AND SEVERALLY BY WAY OF RENTAL THE
SUM OF P10,000.00 PER YEAR FROM 1990 UP TO THE TIME THEY
VACATE THE PREMISES.
[30]

Procedurally, petitioners contend that the Court of Appeals erred when it

failed to apply Section 8, Rule 8 of the Rules of Court, respondent Villaner
having failed to deny under oath the genuineness and due execution of the
April 19, 1990 Deed of Absolute Sale.
Petitioners contention does not persuade. The failure to deny the
genuineness and due execution of an actionable document does not preclude
a party from arguing against it by evidence of fraud, mistake, compromise,
payment, statute of limitations, estoppel, and want of consideration.
[31]

On the merits, this Court rules in petitioners favor.

It is a basic rule in evidence that the burden of proof lies on the party who
makes the allegations ei incumbit probatio, qui dicit, non qui negat; cum per
rerum naturam factum negantis probatio nulla sit. If he claims a right granted
by law, he must prove it by competent evidence, relying on the strength of his
own evidence and not upon the weakness of that of his opponent.
[32]

[33]

More specifically, allegations of a defect in or lack of valid consent to a

contract by reason of fraud or undue influence are never presumed but must
be established not by mere preponderance of evidence but by clear and
convincing evidence. For the circumstances evidencing fraud and
misrepresentation are as varied as the people who perpetrate it in each case,
assuming different shapes and forms and may be committed in as many
different ways.
[34]

[35]

In the case at bar, it was incumbent on the plaintiff-herein respondent

Villaner to prove that he was deceived into executing the Deed of Absolute
Sale. Except for his bare allegation that the transaction was one of lease, he
failed to adduce evidence in support thereof. His conjecture that perhaps
those copies of the deed of sale were placed by Mr. Cadalin under the
documents which I signed the contract of lease, must fail, for facts not
conjectures decide cases.
[36]

Attempting to seek corroboration of his account, Villaner presented Atty.

Vicente Real who notarized the document. While on direct examination, Atty.
Real virtually corroborated Villaners claim that he did not bring the document
to him for notarization, on cross-examination, Atty. Real conceded that it was
impossible to remember every person who would ask him to notarize
documents:
[37]

Q: And in the course of your notarization, can you remember each

and every face that come (sic) to you for notarization?
A: No, it is impossible.

Q: In the case of Villaner Acabal which you have his document

notarized (sic) in 1990, can you remember his face when he
came to you?
A: No.
Q: And can you also say, if a person who came to you having a
document to be notarized and if he will appear again after a
month, can you remember whether he was the one who came
to you?
A: Not so much because everyday there are many people who
appear with documents to be notarized,
Q: So, it is safe to say that if Villaner Acabal came to you on April
25 or rather April 16, 1990 andhave (sic) his document
notarized if he comes back in, say May 25, can you still
remember if he was the one who came to you?
A: I cannot be sure but at least, there are times I can remember
persons because he seems to be close to me already.
Q: Is this Villaner close to you?
A: Because he has been frequenting the house/asking for a copy of the
document.
Q: So, he became close to you after you notarized the document?
A: Yes. (Emphasis and underscoring supplied)
[38]

On Villaners claim that two women employees of Judge Villegas signed as

witnesses to the deed but that the signatures appearing thereon are not
those of said witnesses, the same must be discredited in light of his
unexplained failure to present such alleged women employee-witnesses.
[39]

[40]

In another vein, Villaner zeroes in on the purchase price of the

property P10,000.00 which to him was unusually low if the transaction were

one of sale. To substantiate his claim, Villaner presented Tax Declarations

covering the property for the years 1971, 1974, 1977, 1980, 1983,
1985, as well as a Declaration of Real Property executed in 1994.
[41]

[45]

[42]

[43]

[46]

[44]

[47]

It bears noting, however, that Villaner failed to present evidence on the fair
market value of the property as of April 19, 1990, the date of execution of the
disputed deed. Absent any evidence of the fair market value of a land as of
the time of its sale, it cannot be concluded that the price at which it was sold
was inadequate. Inadequacy of price must be proven because mere
speculation or conjecture has no place in our judicial system.
[48]

[49]

Victor Ragay, who was appointed by the trial court to conduct an ocular
inspection of the property and to investigate matters relative to the case,
gave an instructive report dated December 3, 1994, the pertinent portions
of which are hereby reproduced verbatim:
[50]

[51]

[52]

a) Only three (3) to four (4) hectares of the eighteen (18) were planted to
sugar cane, the rest was never cultivated;
b) the soil is reddish and somewhat sandy in composition;
c) the soil contains so much limestones (rocks consisting mainly of calcium
carbonate);
d) no part of the land in question is plain or flat, contrary to claim of the plaintiff
that almost 10 hectares of the land in question is plain or flat;
e) some areas, eastward of and adjacent of the land in question (mistakenly to
be owned by the defendant Nicolas) were planted to sugar cane by the
owners Kadusales;
f) the road going to the land in question (as claimed to be the road) is no
longer passable because it has been abandoned and not maintained by
anyone, thus it makes everything impossible for anybody to get and haul the
sugar cane from the area;
g) the Commissioner has discovered some stockpiles of abandoned
harvested sugar canes left to rot, along the side of the road, undelivered to the

milling site because of the difficulty in bringing up trucks to the scene of the
harvest;
h) the sugarcanes presently planted on the land in question at the time of the
ocular inspection were three (3) feet in height and their structural built was thin
or lean;
i) Most of the part of the 18 hectares is not planted or cultivated because the
same is too rocky and not suitable for planting to sugarcane.
[53]

Additionally, Ragay reported that one Anatolio Cabusog recently

purchased a 6-hectare property adjoining that of the subject property for
only P1,600.00 or P266.67 per hectare. Given that, had the 18-hectare
subject property been sold at about the same time, it would have fetched the
amount of P4,800.00, hence, the P10,000.00 purchase price appearing in
the questioned April 19, 1990 document is more than reasonable.
[54]

[55]

Even, however, on the assumption that the price of P10,000.00 was below
the fair market value of the property in 1990, mere inadequacy of the price per
se will not rule out the transaction as one of sale. For the price must
be grossly inadequate or shocking to the conscience such that the mind
revolts at it and such that a reasonable man would neither directly nor
indirectly be likely to consent to it.
[56]

Still in another vein, Villaner submits that Leonardos transfer of the

property to Nicolas in a span of one month for a profit of P30,000.00
conclusively reflects Leonardos fraudulent intent. This submission is a non
sequitur.
As for Villaners argument that the sale of the property to Leonardo and the
subsequent sale thereof to Nicolas are void for being violative of the retention
limits imposed by Republic Act No. 6657, otherwise known as the
Comprehensive Agrarian Reform Law, the same fails. The pertinent provisions
of said law read:
SECTION 6. Retention Limits. Except as otherwise provided in this Act, no
person may retain, directly or indirectly, any public or agricultural land, the size

of which may vary according to factors governing a viable family-sized farm,

such as commodity produced, terrain, infrastructure, and soil fertility as
determined by the Presidential Agrarian Reform Council (PARC) created
hereunder, but in no case shall retention by the landowner exceed five (5)
hectares. Three (3) hectares may be awarded to each child of the landowner,
subject to the following qualifications: (1) that he is at least fifteen (15) years
of age; and (2) that he is tilling the land or directly managing the
farm: Provided, That landowners whose lands have been covered by
Presidential Decree No. 27 shall be allowed to keep the areas originally
retained by them thereunder: Provided further, That original homestead
grantees or direct compulsory heirs who still own the original homestead at
the time of the approval of this Act shall retain the same areas as long as they
continue to cultivate said homestead.
[57]

xxx
Upon the effectivity of this Act, any sale, disposition, lease,
management, contract or transfer of possession of private lands
executed by the original landowner in violation of this Act shall be null
and void: Provided, however, that those executed prior to this Act shall be
valid only when registered with the Register of Deeds within a period of three
(3) months after the effectivity of this Act. Thereafter, all Registers of Deeds
shall inform the DAR within thirty (30) days of any transaction involving
agricultural lands in excess of five (5) hectares.
xxx
SECTION 70. Disposition of Private Agricultural Lands. The sale or disposition
of agricultural lands retained by a land owner as a consequence of Section 6
hereof shall be valid as long as the total landholdings that shall be owned by
the transferee thereof inclusive of the land to be acquired shall not exceed the
landholding ceilings provided for in this Act.
Any sale or disposition of agricultural lands after the effectivity of this
Act found to be contrary to the provisions hereof shall be null and void.

Transferees of agricultural lands shall furnish the appropriate Register of

Deeds and the BARC an affidavit attesting that his total landholdings as a
result of the said acquisition do not exceed the landholding ceiling. The
Register of Deeds shall not register the transfer of any agricultural land
without the submission of his sworn statement together with proof of service of
a copy thereof to the BARC. (Emphasis and underscoring supplied)
As the above-quoted provisions of the Comprehensive Agrarian Reform
Law show, only those private lands devoted to or suitable for agriculture are
covered by it. As priorly related, Victor Ragay, who was appointed by the trial
court to conduct an ocular inspection of the property, observed in his report
that only three (3) to four (4) hectares were planted with sugarcane while the
rest of the property was not suitable for planting as the soil was full of
limestone. He also remarked that the sugarcanes were only 3 feet in height
and very lean, whereas sugarcanes usually grow to a height of 3 to 6 meters
(about 8 to 20 feet) and have stems 2 to 5 centimeters (1-2 inches) thick.
[58]

[59]

[60]

[61]

It is thus gathered that the property was not suitable for agricultural
purposes. In any event, since the area devoted to the planting of sugarcane,
hence, suitable for agricultural purposes, comprises only 4 hectares at the
most, it is less than the maximum retention limit prescribed by law. There was
then no violation of the Comprehensive Agrarian Reform Law.
Even assuming that the disposition of the property by Villaner was contrary
to law, he would still have no remedy under the law as he and Leonardo were
in pari delicto, hence, he is not entitled to afirmative relief one who seeks
equity and justice must come to court with clean hands. In pari delicto potior
est conditio defendentis.
[62]

The proposition is universal that no action arises, in equity or at

law, from an illegal contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold or delivered,
or the money agreed to be paid, or damages for its violation. The rule has
sometimes been laid down as though it were equally universal, that where the
parties are in pari delicto, no affirmative relief of any kind will be given to one
against the other. (Emphasis and underscoring supplied)
[63]

The principle of pari delicto is grounded on two premises: first, that courts
should not lend their good offices to mediating disputes among wrongdoers;
and second, that denying judicial relief to an admitted wrongdoer is an
effective means of deterring illegality. This doctrine of ancient vintage is not a
principle of justice but one of policy as articulated in 1775 by Lord Mansfield
in Holman v. Johnson:
[64]

[65]

[66]

The objection, that a contract is immoral or illegal as between the plaintiff and
defendant, sounds at all times very ill in the mouth of the defendant. It is not
for his sake, however, that the objection is ever allowed; but it is founded in
general principles of policy, which the defendant has the advantage of,
contrary to the real justice, as between him and the plaintiff, by accident, if I
may so say. The principle of public policy is this; ex dolo malo non oritur actio.
No court will lend its aid to a man who founds his cause of action upon an
immoral or an illegal act. If, from the plaintiffs own stating or otherwise, the
cause of action appears to arise ex turpi causa, or the transgression of a
positive law of this country, there the court says he has no right to be assisted.
It is upon that ground the court goes; not for the sake of the defendant, but
because they will not lend their aid to such a plaintiff. So if the plaintiff and the
defendant were to change sides, and the defendant was to bring his action
against the plaintiff, the latter would then have the advantage of it; for where
both are equally in faultpotior est conditio defendentis.
[67]

[68]

[69]

Thus, to serve as both a sanction and as a deterrent, the law will not aid either
party to an illegal agreement and will leave them where it finds them.
The principle of pari delicto, however, is not absolute, admitting an
exception under Article 1416 of the Civil Code.
ART. 1416. When the agreement is not illegal per se but is merely prohibited,
and the prohibition by the law is designed for the protection of the plaintiff, he
may, if public policy is thereby enhanced, recover what he has paid or
delivered.
Under this article, recovery for what has been paid or delivered pursuant to an
inexistent contract is allowed only when the following requisites are met: (1)
the contract is not illegal per se but merely prohibited; (2) the prohibition is for

the protection of the plaintiffs; and (3) if public policy is enhanced thereby.
The exception is unavailing in the instant case, however, since the
prohibition is clearly not for the protection of the plaintiff-landowner but for the
beneficiary farmers.
[70]

[71]

In fine, Villaner is estopped from assailing and annulling his own deliberate
acts.
[72]

More. Villaner cannot feign ignorance of the law, nor claim that he acted in
good faith, let alone assert that he is less guilty than Leonardo. Under Article 3
of the Civil Code, ignorance of the law excuses no one from compliance
therewith.
And now, Villaners co-heirs claim that as co-owners of the property, the
Deed of Absolute Sale executed by Villaner in favor of Leonardo does not bind
them as they did not consent to such an undertaking. There is no question
that the property is conjugal. Article 160 of the Civil Code provides:
[73]

ART. 160. All property of the marriage is presumed to belong to the conjugal
partnership, unless it be proved that it pertains exclusively to the husband or
to the wife.
[74]

The presumption, this Court has held, applies to all properties acquired during
marriage. For the presumption to be invoked, therefore, the property must be
shown to have been acquired during the marriage.
[75]

In the case at bar, the property was acquired on July 6, 1971 during
Villaners marriage with Justiniana Lipajan. It cannot be seriously contended
that simply because the tax declarations covering the property was solely in
the name of Villaner it is his personal and exclusive property.
In Bucoy v. Paulino and Mendoza v. Reyes which both apply by
analogy, this Court held that registration alone of the properties in the name of
the husband does not destroy the conjugal nature of the properties. What is
material is the time when the land was acquired by Villaner, and that was
during the lawful existence of his marriage to Justiniana.
[76]

[77]

[78]

Since the property was acquired during the existence of the marriage of
Villaner and Justiniana, the presumption under Article 160 of the Civil Code is
that it is the couples conjugal property. The burden is on petitioners then to
prove that it is not. This they failed to do.
The property being conjugal, upon the death of Justiniana Lipajan, the
conjugal partnership was terminated. With the dissolution of the conjugal
partnership, Villaners interest in the conjugal partnership became actual and
vested with respect to an undivided one-half portion. Justiniana's rights to the
other half, in turn, vested upon her death to her heirs including Villaner who is
entitled to the same share as that of each of their eight legitimate children.
As a result then of the death of Justiniana, a regime of co-ownership arose
between Villaner and his co-heirs in relation to the property.
[79]

[80]

[81]

[82]

[83]

With respect to Justinianas one-half share in the conjugal partnership

which her heirs inherited, applying the provisions on the law of succession,
her eight children and Villaner each receives one-ninth (1/9) thereof. Having
inherited one-ninth (1/9) of his wifes share in the conjugal partnership or one
eighteenth (1/18) of the entire conjugal partnership and is himself already the
owner of one half (1/2) or nine-eighteenths (9/18), Villaners total interest
amounts to ten-eighteenths (10/18) or five-ninths (5/9).
[84]

While Villaner owns five-ninths (5/9) of the disputed property, he could not
claim title to any definite portion of the community property until its actual
partition by agreement or judicial decree. Prior to partition, all that he has is an
ideal or abstract quota or proportionate share in the property. Villaner,
however, as a co-owner of the property has the right to sell his undivided
share thereof. The Civil Code provides so:
[85]

ART. 493. Each co-owner shall have the full ownership of his part and of the
fruits and benefits pertaining thereto, and he may therefore alienate, assign or
mortgage it, and even substitute another person in its enjoyment, except when
personal rights are involved. But the effect of the alienation or the mortgage,
with respect to the co-owners, shall be limited to the portion which may be
allotted to him in the division upon the termination of the co-ownership.

Thus, every co-owner has absolute ownership of his undivided interest in the
co-owned property and is free to alienate, assign or mortgage his interest
except as to purely personal rights. While a co-owner has the right to freely
sell and dispose of his undivided interest, nevertheless, as a co-owner, he
cannot alienate the shares of his other co-owners nemo dat qui non habet.
[86]

Villaner, however, sold the entire property without obtaining the consent of
the other co-owners. Following the well-established principle that the binding
force of a contract must be recognized as far as it is legally possible to do
so quando res non valet ut ago, valeat quantum valere potest the disposition
affects only Villaners share pro indiviso, and the transferee gets only what
corresponds to his grantors share in the partition of the property owned in
common.
[87]

[88]

As early as 1923, this Court has ruled that even if a co-owner sells the whole
property as his, the sale will affect only his own share but not those of the
other co-owners who did not consent to the sale. This is because under the
aforementioned codal provision, the sale or other disposition affects only his
undivided share and the transferee gets only what would correspond to this
grantor in the partition of the thing owned in common. Consequently, by virtue
of the sales made by Rosalia and Gaudencio Bailon which are valid with
respect to their proportionate shares, and the subsequent transfers which
culminated in the sale to private respondent Celestino Afable, the said Afable
thereby became a co-owner of the disputed parcel of land as correctly held by
the lower court since the sales produced the effect of substituting the buyers
in the enjoyment thereof.
From the foregoing, it may be deduced that since a co-owner is entitled to sell
his undivided share, a sale of the entire property by one co-owner without the
consent of the other co-owners is not null and void. However, only the rights of
the co-owner-seller are transferred., thereby making the buyer a co-owner of
the property.
The proper action in cases like this is not for the nullification of the sale or the
recovery of possession of the thing owned in common from the third person
who substituted the co-owner or co-owners who alienated their shares, but

the DIVISION of the common property as if it continued to remain in the

possession of the co-owners who possessed and administered it.
[89]

Thus, it is now settled that the appropriate recourse of co-owners in cases

where their consent were not secured in a sale of the entire property as well
as in a sale merely of the undivided shares of some of the co-owners is an
action for PARTITION under Rule 69 of the Revised Rules of Court. Neither
recovery of possession nor restitution can be granted since the defendant
buyers are legitimate proprietors and possessors in joint ownership of the
common property claimed. (Italics in the original; citations omitted;
underscoring supplied)
[90]

This Court is not unmindful of its ruling in Cruz v. Leis where it held:
[91]

It is conceded that, as a rule, a co-owner such as Gertrudes could only

dispose of her share in the property owned in common. Article 493 of the Civil
Code provides:
xxx
Unfortunately for private respondents, however, the property was registered in
TCT No. 43100 solely in the name of Gertrudes Isidro, widow. Where a parcel
of land, forming part of the undistributed properties of the dissolved conjugal
partnership of gains, is sold by a widow to a purchaser who merely relied on
the face of the certificate of title thereto, issued solely in the name of the
widow, the purchaser acquires a valid title to the land even as against the
heirs of the deceased spouse. The rationale for this rule is that a person
dealing with registered land is not required to go behind the register to
determine the condition of the property. He is only charged with notice of the
burdens on the property which are noted on the face of the register or the
certificate of title. To require him to do more is to defeat one of the primary
objects of the Torrens system. (Citation omitted)
[92]

Cruz, however, is not applicable for the simple reason that in the case at bar
the property in dispute is unregistered. The issue of good faith or bad faith of a
buyer is relevant only where the subject of the sale is a registered land but not
where the property is an unregistered land. One who purchases an
[93]

unregistered land does so at his peril. Nicolas claim of having bought the
land in good faith is thus irrelevant.
[94]

[95]

WHEREFORE, the petition is GRANTED. The Court of Appeals February

15, 2001 Decision in CA-G.R. CV No. 56148 is REVERSED and SET ASIDE
and another is rendered declaring the sale in favor of petitioner Leonardo
Acabal and the subsequent sale in favor of petitioner Ramon Nicolas valid but
only insofar as five-ninths (5/9) of the subject property is concerned.
No pronouncement as to costs.
SO ORDERED.

JOSELANO GUEVARRA,
Complainant,

versus

ATTY. JOSE EMMANUEL

EALA,
Respondent.

A.C. No. 7136

PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
GARCIA,
VELASCO, JR., and
NACHURA, JJ.
Promulgated:
August 1, 2007

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
PER CURIAM:
Joselano Guevarra (complainant) filed on March 4, 2002 a Complaint for
Disbarment[1] before the Integrated Bar of the Philippines (IBP) Committee on Bar

Discipline
(CBD)
against
Atty.
Jose
Emmanuel
M. Eala a.k.a. Noli Eala (respondent) for grossly immoral conduct and unmitigated
violation of the lawyers oath.
In his complaint, Guevarra gave the following account:
He first met respondent in January 2000 when his (complainants) thenfiancee Irene Moje (Irene) introduced respondent to him as her friend who was
married to Marianne (sometimes spelled Mary Ann) Tantoco with whom he had
three children.
After his marriage to Irene on October 7, 2000, complainant noticed that
from January to March 2001, Irene had been receiving from respondent cellphone
calls, as well as messages some of which read I love you, I miss you, or Meet you
at Megamall.
Complainant also noticed that Irene habitually went home very late at night
or early in the morning of the following day, and sometimes did not go home from
work. When he asked about her whereabouts, she replied that she slept at her
parents house in Binangonan, Rizal or she was busy with her work.
In February or March 2001, complainant saw Irene and respondent together
on two occasions. On the second occasion, he confronted them following which
Irene abandoned the conjugal house.
On April 22, 2001, complainant went uninvited to Irenes birthday
celebration at which he saw her and respondent celebrating with her family and
friends. Out of embarrassment, anger and humiliation, he left the venue
immediately. Following that incident, Irene went to the conjugal house and hauled
off all her personal belongings, pieces of furniture, and her share of the household
appliances.
Complainant later found, in the masters bedroom, a folded social card
bearing the words I Love You on its face, which card when unfolded contained a
handwritten letter dated October 7, 2000, the day of his wedding to Irene, reading:
My everdearest Irene,

By the time you open this, youll be moments away from walking down the
aisle. I will say a prayer for you that you may find meaning in what
youre about to do.
Sometimes I wonder why we ever met. Is it only for me to find fleeting
happiness but experience eternal pain? Is it only for us to find a true love
but then lose it again? Or is it because theres a bigger plan for the two of
us?
I hope that you have experienced true happiness with me. I have done
everything humanly possible to love you. And today, as you make your
vows . . . I make my own vow to YOU!
I will love you for the rest of my life. I loved you from the first time I laid eyes
on you, to the time we spent together, up to the final moments of your
single life. But more importantly, I will love you until the life in me is
gone and until we are together again.
Do not worry about me! I will be happy for you. I have enough memories of us
to last me a lifetime. Always remember though that in my heart, in my
mind and in my soul, YOU WILL ALWAYS
. . . AND THE WONDERFUL THINGS YOU DO!
BE MINE . . . . AND MINE ALONE, and I WILL ALWAYS BE
YOURS AND YOURS ALONE!
I LOVE YOU FOREVER, I LOVE YOU FOR ALWAYS. AS LONG AS
IM LIVING MY TWEETIE YOULL BE![2]
Eternally yours,
NOLI

Complainant soon saw respondents car and that of Irene constantly parked at
No. 71-B 11th Street, New Manila where, as he was to later learn sometime in April
2001, Irene was already residing. He also learned still later that when his friends
saw Irene on or about January 18, 2002 together with respondent during a concert,
she was pregnant.

In his ANSWER,[3] respondent admitted having sent the I LOVE YOU card
on which the above-quoted letter was handwritten.
On paragraph 14 of the COMPLAINT reading:
14. Respondent and Irene were even FLAUNTING THEIR
ADULTEROUS RELATIONSHIP as they attended social functions
together. For instance, in or about the third week of September 2001, the
couple attended the launch of the Wine All You Can promotion of French
wines, held at the Mega Strip of SM Megamall B
at Mandaluyong City. Their attendance was reported in Section B of
the Manila Standard issue of 24 September 2001, on page
21. Respondent and Irene were photographed together; their picture was
captioned: Irene with Sportscaster Noli Eala. A photocopy of the report
is attached as Annex C.[4] (Italics and emphasis in the original;
CAPITALIZATION of the phrase flaunting their adulterous relationship
supplied),

respondent, in his ANSWER, stated:

4.
Respondent specifically denies having ever flaunted an
adulterous relationship with Irene as alleged in paragraph 14 of the
Complaint, the truth of the matter being that their relationship
was low profile and known only to the immediate members of
their respective families, and that Respondent, as far as the general
public was concerned, was still known to be legally married to Mary
Anne Tantoco.[5] (Emphasis and underscoring supplied)
On paragraph 15 of the COMPLAINT reading:
15. Respondents adulterous conduct with the complainants wife and his
apparent abandoning or neglecting of his own family, demonstrate his
gross moral depravity, making him morally unfit to keep his membership
in the bar. He flaunted his aversion to the institution of marriage, calling
it a piece of paper. Morally reprehensible was his writing the love letter
to complainants bride on the very day of her wedding, vowing to
continue his love for her until we are together again, as now they are.
[6]
(Underscoring supplied),

respondent stated in his ANSWER as follows:

5. Respondent specifically denies the allegations in paragraph 15
of the Complaint regarding his adulterous relationship and that his acts
demonstrate gross moral depravity thereby making him unfit to keep his
membership in the bar, the reason being that Respondents relationship
with Irene was not under scandalous circumstances and that as far as
his relationship with his own family:
5.1 Respondent has maintained a civil, cordial and peaceful
relationship with [his wife] Mary Anne as in fact they still
occasionally meet in public, even if Mary Anne is aware
ofRespondents special friendship with Irene.
xxxx
5.5 Respondent also denies that he has flaunted his aversion to
the institution of marriage by calling the institution of marriage a
mere piece of paper because his reference [in his above-quoted
handwritten letter to Irene] to the marriage between Complainant and
Irene as a piece of paper was merely with respect to the formality of
the marriage contract.[7](Emphasis and underscoring supplied)

Respondent admitted[8] paragraph 18 of the COMPLAINT reading:

18. The Rules of Court requires lawyers to support the
Constitution and obey the laws. The Constitution regards marriage as an
inviolable social institution and is the foundation of the family (Article
XV, Sec. 2).[9]

And on paragraph 19 of the COMPLAINT reading:

19. Respondents grossly immoral conduct runs afoul of the Constitution and
the laws he, as a lawyer, has been sworn to uphold. In pursuing
obsessively his illicit love for the complainants wife, he mocked the
institution of marriage, betrayed his own family, broke up the
complainants marriage, commits adultery with his wife, and degrades
the legal profession.[10] (Emphasis and underscoring supplied),

respondent, in his ANSWER, stated:

7. Respondent specifically denies the allegations in paragraph
19 of the Complaint, the reason being that under the circumstances the
acts of Respondent with respect to his purely personal and low
profile special relationship with Irene is neither under scandalous
circumstances nor tantamount to grossly immoral conduct as
would be a ground for disbarment pursuant to Rule 138, Section 27 of
the Rules of Court.[11] (Emphasis and underscoring supplied)

To respondents ANSWER, complainant filed a REPLY,[12] alleging that Irene

gave birth to a girl and Irene named respondent in the Certificate of Live Birth as
the girls father. Complainant attached to the REPLY, as Annex A, a copy of a
Certificate of Live Birth[13] bearing Irenes signature and naming respondent as the
father of her daughter Samantha Irene Louise Moje who was born on February 14,
2002 at St. Lukes Hospital.
Complainants REPLY merited a REJOINDER WITH MOTION TO
DISMISS[14] dated January 10, 2003 from respondent in which he denied having
personal knowledge of the Certificate of Live Birth attached to the complainants
Reply.[15] Respondent moved to dismiss the complaint due to the pendency of a
civil case filed by complainant for the annulment of his marriage to Irene, and a
criminal complaint for adultery against respondent and Irene which was pending
before the QuezonCity Prosecutors Office.
During the investigation before the IBP-CBD, complainants ComplaintAffidavit and REPLY to ANSWER were adopted as his testimony on direct
examination.[16] Respondents counsel did not cross-examine complainant.[17]
After investigation, IBP-CBD Investigating Commissioner Milagros V. San
Juan, in a 12-page REPORT AND RECOMMENDATION [18] dated October 26,
2004, found the charge against respondent sufficiently proven.

The Commissioner thus recommended[19] that respondent be disbarred for

violating Rule 1.01 of Canon 1 of the Code of Professional
Responsibilityreading:
Rule 1.01: A lawyer shall not engage in unlawful,
dishonest, immoral or deceitful conduct (Underscoring supplied),

and Rule 7.03 of Canon 7 of the same Code reading:

Rule 7.03: A lawyer shall not engage in conduct that adversely reflects on
his fitness to practice law, nor shall he, whether in public or private life, behave in
a scandalous manner to the discredit of the legal profession. (Underscoring
supplied)

The IBP Board of Governors, however, annulled and set aside the
Recommendation of the Investigating Commissioner and accordingly dismissed
the case for lack of merit, by Resolution dated January 28, 2006 briefly reading:
RESOLUTION NO. XVII-2006-06
CBD Case No. 02-936
Joselano C. Guevarra vs.
Atty. Jose Emmanuel M. Eala
a.k.a. Noli Eala
RESOLVED to ANNUL and SET ASIDE, as it is hereby ANNULLED
AND SET ASIDE, the Recommendation of the Investigating
Commissioner, and to APPROVE theDISMISSAL of the above-entitled
case for lack of merit.[20] (Italics and emphasis in the original)

Hence, the present petition[21] of complainant before this Court, filed

pursuant to Section 12 (c), Rule 139[22] of the Rules of Court.
The petition is impressed with merit.
Oddly enough, the IBP Board of Governors, in setting aside the
Recommendation of the Investigating Commissioner and dismissing the case for

lack of merit, gave no reason therefor as its above-quoted 33-word Resolution

shows.
Respondent contends, in his Comment[23] on the present petition of
complainant, that there is no evidence against him.[24] The contention fails. As the
IBP-CBD Investigating Commissioner observed:
While it may be true that the love letter dated October 7,
2000 (Exh. C) and the news item published in the Manila
Standard (Exh. D), even taken together do not sufficiently prove that
respondent is carrying on an adulterous relationship with
complainants wife, there are other pieces of evidence on record which
support the accusation of complainant against respondent.
It should be noted that in his Answer dated 17 October 2002,
respondent through counsel made the following statements to wit:
Respondent specifically denies having [ever] flaunted an adulterous
relationship with Irene as alleged in paragraph [14] of the Complaint,
the truth of the matter being [that] their relationship was low profile
and known only to immediate members of their respective
families . . . , and Respondent specifically denies the allegations in
paragraph 19 of the complaint, the reason being that under the
circumstances the acts of the respondents with respect to his purely
personal and low profile relationship with Irene is neither under
scandalous circumstances nor tantamount to grossly immoral
conduct . . .
These statements of respondent in his Answer are an
admission that there is indeed a special relationship between him
and complainants wife, Irene, [which] taken together with the
Certificate of Live Birth of Samantha Louise Irene Moje (Annex
H-1) sufficiently prove that there was indeed an illicit
relationship between respondent and Irene which resulted in the birth
of the child Samantha. In the Certificate of Live Birth of Samantha
it should be noted that complainants wife Irene supplied the
information that respondent was the father of the child. Given the
fact that the respondent admitted his special relationship with
Irene there is no reason to believe that Irene would lie or make any
misrepresentation regarding the paternity of the child. It should be
underscored that respondent has not categorically denied that he is

the father of Samantha Louise Irene Moje.[25] (Emphasis and

underscoring supplied)

Indeed, from respondents ANSWER, he does not deny carrying on an

adulterous relationship with Irene, adultery being defined under Art. 333 of the
Revised Penal Code as that committed by any married woman who shall have
sexual intercourse with a man not her husband and by the man who has carnal
knowledge of her, knowing her to be married, even if the marriage be subsequently
declared void.[26] (Italics supplied) What respondent denies is having flaunted such
relationship, he maintaining that it was low profile and known only to the
immediate members of their respective families.
In other words, respondents denial is a negative pregnant,
a denial pregnant with the admission of the substantial facts in the
pleading responded to which are not squarely denied. It was in effect an
admission of the averments it was directed at. Stated otherwise, a
negative pregnant is a form of negative expression which carries with it
in affirmation or at least an implication of some kind favorable to the
adverse party. It is a denial pregnant with an admission of the substantial
facts alleged in the pleading. Where a fact is alleged with qualifying or
modifying language and the words of the allegation as so qualified or
modified are literally denied, it has been held that the qualifying
circumstances alone are denied while the fact itself is admitted.
[27]
(Citations omitted; emphasis and underscoring supplied)

A negative pregnant too is respondents denial of having personal knowledge

of Irenes daughter Samantha Louise Irene Mojes Certificate of Live Birth. In said
certificate, Irene named respondent a lawyer, 38 years old as the childs father. And
the phrase NOT MARRIED is entered on the desired information on DATE AND
PLACE OF MARRIAGE. A comparison of the signature attributed to Irene in the
certificate[28] with her signature on the Marriage Certificate[29] shows that they were
affixed by one and the same person. Notatu dignum is that, as the Investigating
Commissioner noted, respondent never denied being the father of the child.

Franklin A. Ricafort, the records custodian of St. Lukes Medical Center, in

his January 29, 2003 Affidavit[30] which he identified at the witness stand, declared
that Irene gave the information in the Certificate of Live Birth that the childs father
is Jose Emmanuel Masacaet Eala, who was 38 years old and a lawyer.[31]
Without doubt, the adulterous relationship between respondent and Irene has
been sufficiently proven by more than clearly preponderant evidence that evidence
adduced by one party which is more conclusive and credible than that of the other
party and, therefore, has greater weight than the other [32] which is the quantum of
evidence needed in an administrative case against a lawyer.
Administrative cases against lawyers belong to a class of their
own. They are distinct from and they may proceed independently of civil
and criminal cases.
. . . of proof for these types of cases differ. In a criminal case,
proof beyond reasonable doubt is necessary; in an administrative case for
disbarment or suspension, clearly preponderant evidence is all that is
required.[33] (Emphasis supplied)

Respondent insists, however, that disbarment does not lie because his
relationship with Irene was not, under Section 27 of Rule 138 of the Revised Rules
of Court, reading:
SEC. 27. Disbarment or suspension of attorneys by Supreme Court,
grounds therefor. A member of the bar may be disbarred or suspended
from his office as attorney by the Supreme Court for any deceit,
malpractice, or other gross misconduct in such office, grossly immoral
conduct, or by reason of his conviction of a crime involving moral
turpitude, or for any violation of the oath which he is required to take
before admission to practice, or for a willful disobedience appearing as
an attorney for a party to a case without authority so to do. The practice
of soliciting cases at law for the purpose of gain, either personally or
through paid agents or brokers, constitutes malpractice.
The disbarment or suspension of a member of the Philippine Bar by a
competent court or other disciplinatory agency in a foreign jurisdiction
where he has also been admitted as an attorney is a ground for his

disbarment or suspension if the basis of such action includes any of the

acts hereinabove enumerated.
The judgment, resolution or order of the foreign court or disciplinary
agency shall be prima facie evidence of the ground for disbarment or
suspension (Emphasis and underscoring supplied),

under scandalous circumstances.[34]

The immediately-quoted Rule which provides the grounds for disbarment or
suspension uses the phrase grossly immoral conduct, not under scandalous
circumstances. Sexual intercourse under scandalous circumstances is, following
Article 334 of the Revised Penal Code reading:
ART. 334. Concubinage. - Any husband who shall keep a mistress
in the conjugal dwelling, or, shall have sexual intercourse, under
scandalous circumstances, with a woman who is not his wife, or shall
cohabit with her in any other place, shall be punished
by prision correccional in its minimum and medium periods.
x x x x,

an element of the crime of concubinage when a married man has sexual intercourse
with a woman elsewhere.

Whether a lawyers sexual congress with a woman not his wife or without the
benefit of marriage should be characterized as grossly immoral conduct depends on
the surrounding circumstances.[35] The case at bar involves a relationship between a
married lawyer and a married woman who is not his wife. It is immaterial whether
the affair was carried out discreetly. Apropos is the following pronouncement of
this Court in Vitug v. Rongcal:[36]
On the charge of immorality, respondent does not deny that he
had an extra-marital affair with complainant, albeit brief and discreet,
and which act is not so corrupt and false as to constitute a criminal act

or so unprincipled as to be reprehensible to a high degree in order to

merit disciplinary sanction. We disagree.
xxxx
While it has been held in disbarment cases that the mere fact of
sexual relations between two unmarried adults is not sufficient to
warrant administrative sanction for such illicit behavior, it is not so
with respect to betrayals of the marital vow of fidelity. Even if not
all forms of extra-marital relations are punishable under penal
law, sexual relations outside marriage is considered disgraceful and
immoral as it manifests deliberate disregard of the sanctity of
marriage and the marital vows protected by the Constitution and
affirmed by our laws.[37] (Emphasis and underscoring supplied)

And so is the pronouncement in Tucay v. Atty. Tucay:[38]

The Court need not delve into the question of whether or not
the respondent did contract a bigamous marriage . . . It is enough that
the records of this administrative case substantiate the findings of the
Investigating Commissioner, as well as the IBP Board of Governors,
i.e., that indeed respondent has been carrying on an illicit affair with
a married woman, a grossly immoral conduct and indicative of an
extremely low regard for the fundamental ethics of his
profession. This detestable behavior renders him regrettably unfit
and undeserving of the treasured honor and privileges which his
license confers upon him.[39] (Underscoring supplied)

Respondent in fact also violated the lawyers oath he took before admission
to practice law which goes:
I _________, having been permitted to continue in the practice of
law in the Philippines, do solemnly swear that I recognize the supreme
authority of the Republic of the Philippines; I will support its
Constitution and obey the laws as well as the legal orders of the duly
constituted authorities therein; I will do no falsehood, nor consent to the
doing of any in court; I will not wittingly or willingly promote or sue any
groundless, false or unlawful suit, nor give aid nor consent to the same; I
will delay no man for money or malice, and will conduct myself as a

lawyer according to the best of my knowledge and discretion with all

good fidelity as well as to the courts as to my clients; and I impose upon
myself this voluntary obligation without any mental reservation or
purpose of evasion. So help me God. (Underscoring supplied)

Respondent admittedly is aware of Section 2 of Article XV (The Family) of the

Constitution reading:
Section 2. Marriage, as an inviolable social institution, is the foundation
of the family and shall be protected by the State.

In this connection, the Family Code (Executive Order No. 209), which echoes this
constitutional provision, obligates the husband and the wife to live together,
observe mutual love, respect and fidelity, and render mutual help and support.[40]
Furthermore, respondent violated Rule 1.01 of Canon 1 of the Code of
Professional Responsibility which proscribes a lawyer from engaging in unlawful,
dishonest, immoral or deceitful conduct, and Rule 7.03 of Canon 7 of the same
Code which proscribes a lawyer from engaging in any conduct that adversely
reflects on his fitness to practice law.
Clutching at straws, respondent, during the pendency of the investigation of
the case before the IBP Commissioner, filed a Manifestation [41] on March 22, 2005
informing the IBP-CBD that complainants petition for nullity of his (complainants)
marriage to Irene had been granted by Branch 106 of the Quezon City Regional
Trial Court, and that the criminal complaint for adultery complainant filed against
respondent and Irene based on the same set of facts alleged in the instant case,
which was pending review before the Department of Justice (DOJ), on petition of
complainant, had been, on motion of complainant, withdrawn.
The Secretary of Justices Resolution of January 16, 2004 granting
complainants Motion to Withdraw Petition for Review reads:
Considering that the instant motion was filed before the final
resolution of the petition for review, we are inclined to grant the same

pursuant to Section 10 of Department Circular No. 70 dated July 3,

2000, which provides that notwithstanding the perfection of the appeal,
the petitioner may withdraw the same at any time before it is finally
resolved, in which case the appealed resolution shall stand as though
no appeal has been taken.[42] (Emphasis supplied by complainant)

That the marriage between complainant and Irene was subsequently declared
void ab initio is immaterial. The acts complained of took place before the marriage
was declared null and void.[43] As a lawyer, respondent should be aware that a man
and a woman deporting themselves as husband and wife are presumed, unless
proven otherwise, to have entered into a lawful contract of marriage. [44] In carrying
on an extra-marital affair with Irene prior to the judicial declaration that her
marriage with complainant was null and void, and despite respondent himself
being married, he showed disrespect for an institution held sacred by the law. And
he betrayed his unfitness to be a lawyer.
As for complainants withdrawal of his petition for review before the DOJ,
respondent glaringly omitted to state that before complainant filed his December
23, 2003 Motion to Withdraw his Petition for Review, the DOJ had already
promulgated a Resolution on September 22, 2003 reversing the dismissal by
the Quezon City Prosecutors Office of complainants complaint for adultery. In
reversing
the
City
Prosecutors
Resolution,
DOJ
Secretary
Simeon Datumanong held:
Parenthetically the totality of evidence adduced by complainant
would, in the fair estimation of the Department, sufficiently establish all
the elements of the offense of adultery on the part of both
respondents. Indeed, early on, respondent Moje conceded to complainant
that she was going out on dates with respondent Eala, and this she did
when complainant confronted her about Ealas frequent phone calls and
text
messages
to
her. Complainant
also
personally
witnessed Moje and Eala having
a
rendezvous
on
two
occasions. Respondent Eala never denied the fact that he knew Moje to
be married to complainant[.] In fact, he (Eala) himself was married to
another woman. Moreover, Mojes eventual abandonment of their
conjugal home, after complainant had once more confronted her
about Eala, only served to confirm the illicit relationship involving both

respondents. This becomes all the more apparent by Mojes subsequent

relocation in No. 71-B, 11th Street, New Manila, Quezon City, which was
a few blocks away from the church where she had exchange marital
vows with complainant.
It was in this place that the two lovers apparently
cohabited. Especially since Ealas vehicle and that of Mojes were always
seen there. Moje herself admits that she came to live in the said address
whereas Eala asserts that that was where he held office. The
happenstance
that
it
was
in
that
said
address
that Eala and Moje had decided to hold office for the firm that both had
formed smacks too much of a coincidence. For one, the said address
appears to be a residential house, for that was where Moje stayed all
throughout after her separation from complainant. It was both
respondents love nest, to put short; their illicit affair that was carried out
there bore fruit a few months later when Moje gave birth to a girl at the
nearby hospital of St. Lukes Medical Center. What finally militates
against the respondents is the indubitable fact that in the certificate of
birth of the girl, Moje furnished the information that Eala was the
father. This speaks all too eloquently of the unlawful and damning
nature of the adulterous acts of the respondents. Complainants
supposed illegal procurement of the birth certificate is most certainly
beside the point for both respondents Eala and Moje have not
denied, in any categorical manner, that Eala is the father of the child
Samantha Irene Louise Moje.[45] (Emphasis and underscoring supplied)

It bears emphasis that adultery is a private offense which cannot be

prosecuted de oficio and thus leaves the DOJ no choice but to grant complainants
motion to withdraw his petition for review. But even if respondent and Irene were
to be acquitted of adultery after trial, if the Information for adultery were filed in
court, the same would not have been a bar to the present administrative complaint.
Citing the ruling in Pangan v. Ramos,[46] viz:
x x x The acquittal of respondent Ramos [of] the criminal charge
is not a bar to these [administrative] proceedings. The standards of legal
profession are not satisfied by conduct which merely enables one to
escape the penalties of x x x criminal law. Moreover, this Court, in
disbarment proceedings is acting in an entirely different capacity from

that which courts assume in trying criminal case [47] (Italics in the
original),

this Court in Gatchalian Promotions Talents Pools, Inc. v. Atty. Naldoza,[48] held:
Administrative cases against lawyers belong to a class of their
own. They are distinct from and they may proceed independently of civil
and criminal cases.

WHEREFORE, the petition is GRANTED. Resolution No. XVII-2006-06

passed on January 28, 2006 by the Board of Governors of the Integrated Bar of
thePhilippines is ANNULLED and SET ASIDE.
Respondent, Atty. Jose Emmanuel M. Eala, is DISBARRED for grossly
immoral conduct, violation of his oath of office, and violation of Canon 1, Rule
1.01 and Canon 7, Rule 7.03 of the Code of Professional Responsibility.
Let a copy of this Decision, which is immediately executory, be made part of
the records of respondent in the Office of the Bar Confidant, Supreme Court of
thePhilippines. And let copies of the Decision be furnished the Integrated Bar of
the Philippines and circulated to all courts.
This Decision takes effect immediately.
SO ORDERED.
G.R. No. 151098

March 21, 2006

ERLINDA GAJUDO, FERNANDO GAJUDO, JR., ESTELITA GAJUDO, BALTAZAR GAJUDO and
DANILO ARAHAN CHUA, Petitioners,
vs.
TRADERS ROYAL BANK,1Respondent.
DECISION
PANGANIBAN, CJ:

The mere fact that a defendant is declared in default does not automatically result in the grant of the
prayers of the plaintiff. To win, the latter must still present the same quantum of evidence that would
be required if the defendant were still present. A party that defaults is not deprived of its rights,
except the right to be heard and to present evidence to the trial court. If the evidence presented does
not support a judgment for the plaintiff, the complaint should be dismissed, even if the defendant
may not have been heard or allowed to present any countervailing evidence.
The Case
Before us is a Petition for Review2 under Rule 45 of the Rules of Court, assailing the June 29, 2001
Decision3 and December 6, 2001 Resolution4 of the Court of Appeals (CA) in CA-GR CV No. 43889.
The CA disposed as follows:
"UPON THE VIEW WE TAKE OF THIS CASE, THUS, the partial judgment appealed from, must be,
as it hereby is, VACATED and SET ASIDE, and another one entered DISMISSING the complaint at
bench. Without costs."5
The assailed Resolution denied petitioners Motion for Reconsideration6 for lack of merit.
The Facts
The CA narrated the facts as follows:
"[Petitioners] filed a complaint before the Regional Trial Court of Quezon City, Branch 90, against
[respondent] Traders Royal Bank, the City Sheriff of Quezon City and the Register of Deeds of
Quezon City. Docketed thereat as Civil Case No. Q-41203, the complaint sought the annulment of
the extra-judicial foreclosure and auction sale made by [the] city sheriff of Quezon City of a parcel of
land covered by TCT No. 16711 of the Register of Deeds of Quezon City, the conventional
redemption thereof, and prayed for damages and the issuance of a writ of preliminary injunction.
"The complaint alleged that in mid 1977[, Petitioner] Danilo Chua obtained a loan from [respondent]
bank in the amount of P75,000.00 secured by a real estate mortgage over a parcel of land covered
by TCT No. 16711, and owned in common by the [petitioners]; that when the loan was not paid,
[respondent] bank commenced extra-judicial foreclosure proceedings on the property; that the
auction sale of the property was set on 10 June 1981, but was reset to 31 August 1981, on
[Petitioner Chuas] request, which, however, was made without the knowledge and conformity of the
other [petitioners]; that on the re-scheduled auction sale, [the] Sheriff of Quezon City sold the
property to the [respondent] bank, the highest bidder therein, for the sum of P24,911.30; that the
auction sale was tainted with irregularity because, amongst others, the bid price was shockingly or
unconscionably, low; that the other [petitioners] failed to redeem the property due to their lack of
knowledge of their right of redemption, and want of sufficient education; that, although the period of
redemption had long expired, [Petitioner] Chua offered to buy back, and [respondent] bank also
agreed to sell back, the foreclosed property, on the understanding that Chua would pay [respondent]
bank the amount of P40,135.53, representing the sum that the bank paid at the auction sale, plus
interest; that [Petitioner] Chua made an initial payment thereon in the amount of P4,000.00, covered
by Interbank Check No. 09173938, dated 16 February 1984, duly receipted by [respondent] bank;

that, in a sudden change of position, [respondent] bank wrote Chua, on 20 February 1984, asking
that he could repurchase the property, but based on the current market value thereof; and that
sometime later, or on 22 March 1984, [respondent] bank wrote Chua anew, requiring him to tender a
new offer to counter the offer made thereon by another buyer.
"Traversing [petitioners] complaint, [respondent] bank, upon 05 July 1984, filed its answer with
counterclaim, thereunder asserting that the foreclosure sale of the mortgaged property was done in
accordance with law; and that the bid price was neither unconscionable, nor shockingly low; that
[petitioners] slept on their rights when they failed to redeem the property within the one year
statutory period; and that [respondent] bank, in offering to sell the property to [Petitioner] Chua on
the basis of its current market price, was acting conformably with law, and with legitimate banking
practice and regulations.
"Pre-trial having been concluded, the parties entered upon trial, which dragged/lengthened to
several months due to postponements. Upon 11 June 1988, however, a big conflagration hit the City
Hall of Quezon City, which destroyed, amongst other things, the records of the case. After the
records were reconstituted, [petitioners] discovered that the foreclosed property was sold by
[respondent] bank to the Ceroferr Realty Corporation, and that the notice of lis pendens annotated
on the certificate of title of the foreclosed property, had already been cancelled. Accordingly,
[petitioners], with leave of court, amended their complaint, but the Trial Court dismissed the case
without prejudice due to [petitioners] failure to pay additional filing fees.
"So, upon 11 June 1990, [petitioners] re-filed the complaint with the same Court, whereat it was
docketed as Civil Case No. 90-5749, and assigned to Branch 98: the amended complaint
substantially reproduced the allegations of the original complaint. But [petitioners] this time
impleaded as additional defendants the Ceroferr Realty Corporation and/or Cesar Roque, and Lorna
Roque, and included an additional cause of action, to wit: that said new defendants conspired with
[respondent] bank in [canceling] the notice of lis pendens by falsifying a letter sent to and filed with
the office of the Register of Deeds of Quezon City, purportedly for the cancellation of said notice.
"Summons was served on [respondent] bank on 26 September 1990, per Sheriffs Return dated 08
October 1990. Supposing that all the defendants had filed their answer, [petitioners] filed, on 23
October 1991, a motion to set case for pre-trial, which motion was, however, denied by the Trial
Court in its Order of 25 October 1991, on the ground that [respondent] bank has not yet filed its
answer. On 13 November 1991[, petitioners] filed a motion for reconsideration, thereunder alleging
that they received by registered mail, on 19 October 1990, a copy of [respondent] banks answer
with counterclaim, dated 04 October 1990, which copy was attached to the motion. In its Order of 14
November 1991, the trial Court denied for lack of merit, the motion for reconsideration, therein
holding that the answer with counterclaim filed by [respondent] bank referred to another civil case
pending before Branch 90 of the same Court.
"For this reason, [petitioners] filed on 02 December 1991 a motion to declare [respondent] bank in
default, thereunder alleging that no answer has been filed despite the service of summons on it on
26 September 1990.

"On 13 December 1991, the Trial Court declared the motion submitted for resolution upon
submission by [petitioners] of proof of service of the motion on [respondent] bank.
"Thus, on 16 January 1992, upon proof that [petitioners] had indeed served [respondent] bank with a
copy of said motion, the Trial Court issued an Order of default against [respondent] bank.
"Upon 01 December 1992, on [petitioners] motion, they were by the Court allowed to present
evidence ex parte on 07 January 1993, insofar as [respondent] bank was concerned.
"Thereafter, or on 08 February 1993, the Trial Court rendered the new questioned partial decision. 7
"Aggrieved, [respondent] bank filed a motion to set aside [the] partial decision by default against
Traders Royal Bank and admit [respondent] Traders Royal Banks x x x Answer with counterclaim:
thereunder it averred, amongst others, that the erroneous filing of said answer was due to an honest
mistake of the typist and inadvertence of its counsel.
"The [trial court] thumbed down the motion in its Order of 26 July 1993." 8
Respondent bank appealed the Partial Decision9 to the CA. During the pendency of that appeal,
Ceroferr Realty Corporation and/or Cesar and/or Lorna Roque filed a Manifestation with
Motion10 asking the CA to discharge them as parties, because the case against them had already
been dismissed on the basis of their Compromise Agreement 11 with petitioners. On May 14, 1996,
the CA issued a Resolution12 granting Ceroferr et al.s Manifestation with Motion to discharge
movants as parties to the appeal. The Court, though, deferred resolution of the matters raised in the
Comment13 of respondent bank. The latter contended that the Partial Decision had been novated by
the Compromise Agreement, whose effect of res judicata had rendered that Decision functus officio.
Ruling of the Court of Appeals
The CA ruled in favor of respondent bank. Deemed, however, to have rested on shaky ground was
the latters "Motion to Set Aside Partial Decision by Default Against Traders Royal Bank and Admit
Defendant Traders Royal Banks Answer."14 The reasons offered by the bank for failing to file an
answer were considered by the appellate court to be "at once specious, shallow and sophistical and
can hardly be dignified as a mistake or excusable negligence, which ordinary prudence could not
have guarded against."15
In particular, the CA ruled that the erroneous docket number placed on the Answer filed before the
trial court was not an excusable negligence by the banks counsel. The latter had a bounden duty to
be scrupulously careful in reviewing pleadings. Also, there were several opportunities to discover
and rectify the mistake, but these were not taken. Moreover, the banks Motion to Set Aside the
Partial Decision and to Admit [the] Answer was not accompanied by an affidavit of merit. These
mistakes and the inexcusable negligence committed by respondents lawyer were binding on the
bank.
On the issue of whether petitioners had convincingly established their right to relief, the appellate
court held that there was no ground to invalidate the foreclosure sale of the mortgaged property.

First, under Section 3 of Act No. 3135, an extrajudicial foreclosure sale did not require personal
notice to the mortgagor. Second, there was no allegation or proof of noncompliance with the
publication requirement and the public posting of the notice of sale, provided under Act No. 3135, as
amended. Third, there was no showing of inadequacy of price as no competent evidence was
presented to show the real market value of the land sold or the readiness of another buyer to offer a
price higher than that at which the property had been sold.
Moreover, petitioners failed to prove that the bank had agreed to sell the property back to them. After
pointing out that the redemption period had long expired, respondents written communications to
Petitioner Chua only showed, at most, that the former had made a proposal for the latter to buy back
the property at the current market price; and that Petitioner Chua was requested to make an offer to
repurchase the property, because another buyer had already made an offer to buy it. On the other
hand, respondent noted that the Interbank check for P4,000 was for "deposit only." Thus, there was
no showing that the check had been issued to cover part of the repurchase price.
The appellate court also held that the Compromise Agreement had not resulted in the novation of the
Partial Decision, because the two were not incompatible. In fact, the bank was not even a party to
the Agreement. Petitioners recognition of Ceroferrs title to the mortgaged property was intended to
preclude future litigation against it.
Hence this Petition.16
Issues
In their Memorandum, petitioners raise the following issues:
"1. Whether or not the Respondent Court of Appeals erred in failing to apply the provisions of
Section 3, Rule 9 of the 1997 Rules of Civil Procedure [and in applying instead] the rule on
preponderance of evidence under Section 1, Rule 133 of the Rules of Court.
"2. Whether or not the respondent appellate court failed to apply the conventional redemption rule
provided for under Article 1601 of the New Civil Code.
"3. Whether or not this Honorable Court can exercise its judicial prerogative to evaluate the findings
of facts."17
The first issue is one of law and may be taken up by the Court without hindrance, pursuant to
Section 1 of Rule 45 of the Rules of Court.18 The second and the third issues, however, would entail
an evaluation of the factual findings of the appellate court, a function ordinarily not assumed by this
Court, unless in some excepted cases. The Court will thus rule on the first issue before addressing
the second and the third issues jointly.
The Courts Ruling
The Petition has no merit.

First Issue:
Quantum of Proof
Petitioners challenge the CA Decision for applying Section 3 of Rule 9 of the Rules of Court, rather
than Section 1 of Rule 133 of the same Rules. In essence, petitioners argue that the quantum of
evidence for judgments flowing from a default order under Section 3 of Rule 9 is not the same as
that provided for in Section 1 of Rule 133.
For ease of discussion, these two rules will be reproduced below, starting with Section 3 of Rule 9 of
the Rules of Court:
"Sec. 3. Default; declaration of. If the defending party fails to answer within the time allowed
therefor, the court shall, upon motion of the claiming party with notice to the defending party, and
proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to
render judgment granting the claimant such relief as his pleading may warrant, unless the court in its
discretion requires the claimant to submit evidence. Such reception of evidence may be delegated to
the clerk of court.
"(a) Effect of order of default. A party in default shall be entitled to notice of subsequent
proceedings but not to take part in the trial.
"(b) Relief from order of default. A party declared in default may at any time after notice
thereof and before judgment file a motion under oath to set aside the order of default upon
proper showing that his failure to answer was due to fraud, accident, mistake or excusable
negligence and that he has a meritorious defense. In such case, the order of default may be
set aside on such terms and conditions as the judge may impose in the interest of justice.
"(c) Effect of partial default. When a pleading asserting a claim states a common cause of
action against several defending parties, some of whom answer and the others fail to do so,
the court shall try the case against all upon the answers thus filed and render judgment upon
the evidence presented.
"(d) Extent of relief to be awarded. A judgment rendered against a party in default shall not
exceed the amount or be different in kind from that prayed for nor award unliquidated
damages.
"(e) Where no defaults allowed. If the defending party in an action for annulment or
declaration of nullity of marriage or for legal separation fails to answer, the court shall order
the prosecuting attorney to investigate whether or nor a collusion between the parties exists,
and if there is no collusion, to intervene for the State in order to see to it that the evidence
submitted is not fabricated."
We now quote Section 1 of Rule 133:
"SECTION 1. Preponderance of evidence, how determined. In civil cases, the party having the
burden of proof must establish his case by a preponderance of evidence. In determining where the

preponderance or superior weight of evidence on the issues involved lies, the court may consider all
the facts and circumstances of the case, the witnesses manner of testifying, their intelligence, their
means and opportunity of knowing the facts to which they are testifying, the nature of the facts to
which they testify, the probability or improbability of their testimony, their interest or want of interest,
and also their personal credibility so far as the same may legitimately appear upon the trial. The
court may also consider the number of witnesses, though the preponderance is not necessarily with
the greater number."
Between the two rules, there is no incompatibility that would preclude the application of either one of
them. To begin with, Section 3 of Rule 9 governs the procedure which the trial court is directed to
take when a defendant fails to file an answer. According to this provision, the court "shall proceed to
render judgment granting the claimant such relief as his pleading may warrant," subject to the courts
discretion on whether to require the presentation of evidence ex parte. The same provision also sets
down guidelines on the nature and extent of the relief that may be granted. In particular, the courts
judgment "shall not exceed the amount or be different in kind from that prayed for nor award
unliquidated damages."
As in other civil cases, basic is the rule that the party making allegations has the burden of proving
them by a preponderance of evidence.19 Moreover, parties must rely on the strength of their own
evidence, not upon the weakness of the defense offered by their opponent. 20 This principle holds
true, especially when the latter has had no opportunity to present evidence because of a default
order. Needless to say, the extent of the relief that may be granted can only be as much as has been
alleged and proved21 with preponderant evidence required under Section 1 of Rule 133.
Regarding judgments by default, it was explained in Pascua v. Florendo22 that complainants are not
automatically entitled to the relief prayed for, once the defendants are declared in default. Favorable
relief can be granted only after the court has ascertained that the relief is warranted by the evidence
offered and the facts proven by the presenting party. In Pascua, this Court ruled that "x x x it would
be meaningless to require presentation of evidence if every time the other party is declared in
default, a decision would automatically be rendered in favor of the non-defaulting party and exactly
according to the tenor of his prayer. This is not contemplated by the Rules nor is it sanctioned by the
due process clause."23
The import of a judgment by default was further clarified in Lim Tanhu v. Ramolete. 24 The following
disquisition is most instructive:
"Unequivocal, in the literal sense, as these provisions [referring to the subject of default then under
Rule 18 of the old Rules of Civil Procedure] are, they do not readily convey the full import of what
they contemplate. To begin with, contrary to the immediate notion that can be drawn from their
language, these provisions are not to be understood as meaning that default or the failure of the
defendant to answer should be interpreted as an admission by the said defendant that the plaintiffs
cause of action find support in the law or that plaintiff is entitled to the relief prayed for. x x x.
xxxxxxxxx

"Being declared in default does not constitute a waiver of rights except that of being heard and of
presenting evidence in the trial court. x x x.
"In other words, a defaulted defendant is not actually thrown out of court. While in a sense it may be
said that by defaulting he leaves himself at the mercy of the court, the rules see to it that any
judgment against him must be in accordance with law. The evidence to support the plaintiffs cause
is, of course, presented in his absence, but the court is not supposed to admit that which is basically
incompetent. Although the defendant would not be in a position to object, elementary justice requires
that only legal evidence should be considered against him. If the evidence presented should not be
sufficient to justify a judgment for the plaintiff, the complaint must be dismissed. And if an
unfavorable judgment should be justifiable, it cannot exceed in amount or be different in kind from
what is prayed for in the complaint."25
In sum, while petitioners were allowed to present evidence ex parte under Section 3 of Rule 9, they
were not excused from establishing their claims for damages by the required quantum of proof under
Section 1 of Rule 133. Stated differently, any advantage they may have gained from the ex parte
presentation of evidence does not lower the degree of proof required. Clearly then, there is no
incompatibility between the two rules.
Second and Third Issues:
Review of the Evidence
Petitioners urge this Court to depart from the general rule that the lower courts findings of fact are
not reviewable in a petition for review.26 In support of their plea, they cite the conflicting findings of
the trial and the appellate courts, as well as the alleged conjectures and surmises made by the CA in
arriving at its Decision.
Indeed, the differences between the findings of the two courts a quo, leading to entirely disparate
dispositions, is reason enough for this Court to review the evidence in this case. 27 Whether the CA
indulged in surmises and conjectures when it issued the assailed Decision will thus be determined.
At the outset, it behooves this Court to clarify the CAs impression that no evidence was presented in
the case which might have contributed to petitioners challenge to its Decision. The appellate courts
observation was based on the notation by the lower courts clerk of court that there were no separate
folders for exhibits and transcripts, because "there was no actual hearing conducted in this case." 28
True, there was no hearing conducted between petitioners and respondent, precisely because the
latter had been declared in default, and petitioners had therefore been ordered to present their
evidence ex parte. But the absence of a hearing did not mean that no evidence was presented. The
Partial Decision dated February 8, 1993, in fact clearly enumerated the pieces of evidence adduced
by petitioners during the ex parte presentation on January 7, 1993. The documentary evidence they
presented consisted of the following:
1. A copy of respondent banks Petition for the extrajudicial foreclosure and auction sale of
the mortgaged parcel of land29

2. The Certificate of Sale that was a consequence of the foreclosure sale30

3. A Statement of Account dated February 15, 1984, showing Petitioner Chuas outstanding
debt in the amount of P40,135.5331
4. A copy of the Interbank check dated February 16, 1984, in the amount of P4,00032
5. The Official Receipt issued by the bank acknowledging the check 33
6. The banks letter dated February 20, 1984, advising Petitioner Chua of the sale of the
property at an extrajudicial public auction; the lapse of the period of redemption; and an
invitation to purchase the property at its current market price 34
7. Another letter from the bank dated March 22, 1984, inviting Petitioner Chua to submit,
within five days, an offer to buy the same property, which another buyer had offered to buy 35
8. A copy of the Notice of Lis Pendens, the filing of which was done after that of the Amended
Complaint36
9. A copy of the title showing the inscription of the Notice of Lis Pendens37
10. A copy of the Absolute Deed of Sale to Cerrofer38
11. A copy of a letter dated August 29, 1986, made and signed by petitioners counsel,
requesting the cancellation of the Notice of Lis Pendens39
12. A copy of a page of the Memorandum of Encumbrance from TCT No. (314341) 7778/T3940
Having clarified this matter, we proceed to review the facts.
Petitioners do not deny that the one-year period for legal redemption had already lapsed when
respondent bank supposedly offered to sell the property in question. The records clearly show that
the Certificate of Sale following the extrajudicial public auction of the property was registered on
June 21, 1982, the date from which the legal redemption period was to be reckoned. 41 Petitioners
insist, though, that they had the right to repurchase the property through conventional redemption,
as provided under Article 1601 of the Civil Code, worded as follows:
"ART. 1601. Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other
stipulations which may have been agreed upon."
It is true that the one-year period of redemption provided in Act No. 3135, as amended -- the law
under which the property here was sold in a foreclosure sale -- is only directory and, as such can be
extended by agreement of the parties.42 However, it has also been held that for legal redemption to
be converted into conventional redemption, two requisites must be established: 1) voluntary

agreement of the parties to extend the redemption period; and 2) the debtors commitment to pay the
redemption price on a fixed date.43 Thus, assuming that an offer was made to Petitioner Chua to buy
back the property after the lapse of the period of legal redemption, petitioners needed to show that
the parties had agreed to extend the period, and that Petitioner Chua had committed to pay the
redemption price on a fixed date.
The letters sent by the bank to Petitioner Chua on February 20 and March 22, 1984, do not
convincingly show that the parties arrived at a firm agreement for the repurchase of the property.
What can be gleaned from the February 20 letter is that Petitioner Chua proposed to pay the
redemption price for the property, but that the bank refused to accede to his request, because the
one-year redemption period had already lapsed. 44 The bank, though, had offered to sell back the
property to him at the current market value. Indeed, an examination of his earlier letter of February
17, 1984, readily reveals that he expressed willingness to settle his account with the bank, but that
his "present financial situation precludes [him] from effecting an immediate settlement x x x." 45
On the other hand, the letter dated March 22, 1984, clearly states that "x x x the Bank rejected [his]
request to redeem said property due to [the] lapse of [the] one (1) year legal redemption
period."46 Nonetheless, he was "[invited] to submit an offer to buy the same property in five (5) days
from receipt [of the letter]."47 Petitioner Chua was also informed that the bank had received an offer
to purchase the foreclosed property. As to the P4,000 check enclosed in his proposal dated February
17, 1984, as a token of his good faith, he was advised that the amount was still outstanding in the
books of the bank and could be claimed by him if he thought the invitation was not feasible.
More important, there was no showing that petitioners had committed to pay the redemption price on
a fixed date. True, Petitioner Chua had attempted to establish a previous agreement to repurchase
the property for less than its fair market value. He had submitted in evidence a Statement of
Account48 dated February 15, 1984, showing a balance of P40,135.53; the Interbank check dated
February 16, 1984 , for P4,000, which was deposited to the account of respondent bank; 49 and the
Official Receipt for the check.50
Granting that these documents evinced an agreement, petitioners were still unable to establish a
firm commitment on their part to pay the redemption price on a fixed date. On the contrary, the
February 17 letter of Petitioner Chua to the bank clearly manifested that he was not capable of
paying the account immediately. For this reason, he proposed to pay in "three or four installments"
without a specification of dates for the payments, but with a plea for a reduction of the interest
charges. That proposal was rejected.
Indeed, other than the Interbank check marked "for deposit" by respondent bank, no other evidence
was presented to establish that petitioners had offered to pay the alleged redemption price
of P40,135.53 on a fixed date. For that matter, petitioners have not shown that they tendered
payment of the balance and/or consigned the payment to the court, in order to fulfill their part of the
purported agreement. These remedies are available to an aggrieved debtor under Article 1256 of the
Civil Code,51 when the creditor unjustly refuses to accept the payment of an obligation.
The next question that presents itself for resolution is the propriety of the CAs ruling vacating the
Partial Decision of the regional trial court (RTC) and dismissing the case. To recall, the RTC had

resolved to withhold a ruling on petitioners right to redeem conventionally and/or order the
reconveyance of the property in question, pending a determination of the validity of the sale to
Cerrofer Realty Corporation and Spouses Cesar and Lorna Roque. The trial court, however, granted
the prayer for damages against respondent bank. The RTC ruled as follows:
"The evidence presented by [petitioners] in so far as the cause of action against [respondent]
Traders Royal Bank is concerned are preponderant to support the claims of the [petitioners].
However, in view of the fact that the property subject matter of this case has already been conveyed
to defendant Cerrofer Realty Corporation thus the issue as to whether or not the said conveyance or
sale is valid is sill pending between the [petitioners] and [respondents] Cerrofer Realty Corporation
and Cesar Roque and Lorna Roque. Hence, this Court resolves to grant the prayer for damages
against Traders Royal Bank.
"The claims of the [petitioners] as against [respondent] Traders Royal Bank having been established
and proved by evidence, judgment is hereby rendered ordering [respondent] Traders Royal Bank to
pay [petitioners] actual damage or the market value of the land in question in the sum
of P500,000.00; the sum of P70,000.00 as compensatory damages; the sum of P200,000.00 to the
heirs of [petitioner] Danilo Chua; and attorneys fees in the sum of P30,000.00."52
In the light of the pending issue as to the validity of the sale of the property to the third parties
(Cerrofer Realty Corporation and Spouses Roque), the trial court properly withheld judgment on the
matter and thus left the prayer for damages as the sole issue for resolution.
To adjudge damages, paragraph (d) of Section 3 of Rule 9 of the Rules of Court provides that a
judgment against a party in default "shall not exceed the amount or be different in kind from that
prayed for nor award unliquidated damages." The proscription against the award of unliquidated
damages is significant, because it means that the damages to be awarded must be proved
convincingly, in accordance with the quantum of evidence required in civil cases.
Unfortunately for petitioners, the grant of damages was not sufficiently supported by the evidence for
the following reasons.
First, petitioners were not deprived of their property without cause. As correctly pointed out by the
CA, Act No. 3135, as amended, does not require personal notice to the mortgagor.53 In the present
case, there has been no allegation -- much less, proof -- of noncompliance with the requirement of
publication and public posting of the notice of sale, as required by ct No. 3135. Neither has there
been competent evidence to show that the price paid at the foreclosure sale was inadequate. 54 To be
sure, there was no ground to invalidate the sale.
Second, as previously stated, petitioners have not convincingly established their right to damages on
the basis of the purported agreement to repurchase. Without reiterating our prior discussion on this
point, we stress that entitlement to actual and compensatory damages must be proved even under
Section 3 of Rule 9 of the Rules of Court. The same is true with regard to awards for moral damages
and attorneys fees, which were also granted by the trial court.

In sum, petitioners have failed to convince this Court of the cogency of their position, notwithstanding
the advantage they enjoyed in presenting their evidence ex parte. Not in every case of default by the
defendant is the complainant entitled to win automatically.
WHEREFORE, this Petition is hereby DENIED and the assailed Decision and Resolution
AFFIRMED. Costs against petitioners.
SO ORDERED.
G.R. No. 160895

October 30, 2006

JOSE R. MARTINEZ, petitioner,

vs.
REPUBLIC OF THE PHILIPPINES, respondents.

DECISION

TINGA, J.:
The central issue presented in this Petition for Review is whether an order of general default issued
by a trial court in a land registration case bars the Republic of the Philippines, through the Office of
the Solicitor General, from interposing an appeal from the trial courts subsequent decision in favor
of the applicant.
The antecedent facts follow.
On 24 February 1999, petitioner Jose R. Martinez (Martinez) filed a petition for the registration in his
name of three (3) parcels of land included in the Cortes, Surigao del Sur Cadastre. The lots,
individually identified as Lot No. 464-A, Lot No. 464-B, and Lot No. 370, Cad No. 597, collectively
comprised around 3,700 square meters. Martinez alleged that he had purchased lots in 1952 from
his uncle, whose predecessors-in-interest were traceable up to the 1870s. It was claimed that
Martinez had remained in continuous possession of the lots; that the lots had remained
unencumbered; and that they became private property through prescription pursuant to Section
48(b) of Commonwealth Act No. 141. Martinez further claimed that he had been constrained to
initiate the proceedings because the Director of the Land Management Services had failed to do so
despite the completion of the cadastral survey of Cortes, Surigao del Sur.1
The case was docketed as Land Registration Case No. N-30 and raffled to the Regional Trial Court
(RTC) of Surigao del Sur, Branch 27. The Office of the Solicitor General (OSG) was furnished a copy
of the petition. The trial court set the case for hearing and directed the publication of the
corresponding Notice of Hearing in the Official Gazette. On 30 September 1999, the OSG, in behalf
of the Republic of the Philippines, opposed the petition on the grounds that appellees possession
was not in accordance with Section 48(b) of Commonwealth Act No. 141; that his muniments of title

were insufficient to prove bona-fide acquisition and possession of the subject parcels; and that the
properties formed part of the public domain and thus not susceptible to private appropriation. 2
Despite the opposition filed by the OSG, the RTC issued an order of general default, even against
the Republic of the Philippines, on 29 March 2000. This ensued when during the hearing of even
date, no party appeared before the Court to oppose Martinezs petition.3
Afterwards, the trial court proceeded to receive Martinezs oral and documentary evidence in support
of his petition. On 1 August 2000, the RTC rendered a Decision 4 concluding that Martinez and his
predecessors-in-interest had been for over 100 years in possession characterized as continuous,
open, public, and in the concept of an owner. The RTC thus decreed the registration of the three (3)
lots in the name of Martinez.
From this Decision, the OSG filed a Notice of Appeal dated 28 August 2000,5 which was approved by
the RTC. However, after the records had been transmitted to the Court of Appeals, the RTC received
a letter dated 21 February 20016 from the Land Registration Authority (LRA) stating that only Lot
Nos. 464-A and 464-B were referred to in the Notice of Hearing published in the Official Gazette; and
that Lot No. 370, Cad No. 597 had been deliberately omitted due to the lack of an approved survey
plan for that property. Accordingly, the LRA manifested that this lot should not have been adjudicated
to Martinez for lack of jurisdiction. This letter was referred by the RTC to the Court of Appeals for
appropriate action.7
On 10 October 2003, the Court of Appeals promulgated the assailed Decision, 8 reversing the RTC
and instead ordering the dismissal of the petition for registration. In light of the opposition filed by the
OSG, the appellate court found the evidence presented by Martinez as insufficient to support the
registration of the subject lots. The Court of Appeals concluded that the oral evidence presented by
Martinez merely consisted of general declarations of ownership, without alluding to specific acts of
ownership performed by him or his predecessors-in-interest. It likewise debunked the documentary
evidence presented by Martinez, adjudging the same as either inadmissible or ineffective to
establish proof of ownership.
No motion for reconsideration appears to have been filed with the Court of Appeals by Martinez, who
instead directly assailed its Decision before this Court through the present petition.
We cannot help but observe that the petition, eight (8) pages in all, was apparently prepared with all
deliberate effort to attain nothing more but the perfunctory. The arguments raised center almost
exclusively on the claim that the OSG no longer had personality to oppose the petition, or appeal its
allowance by the RTC, following the order of general default. Starkly put, "the [OSG] has no
personality to raise any issue at all under the circumstances pointed out hereinabove." 9 Otherwise, it
is content in alleging that "[Martinez] presented sufficient and persuasive proof to substantiate the
fact that his title to Lot Nos. 464-A and 464-B is worth the confirmation he seeks to be done in this
registration case";10 and that the RTC had since issued a new Order dated 1 September 2003,
confirming Martinezs title over Lot No. 370.
In its Comment dated 24 May 2004,11 the OSG raises several substantial points, including the fact
that it had duly opposed Martinezs application for registration before the RTC; that jurisprudence
and the Rules of Court acknowledge that a party in default is not precluded from appealing the
unfavorable judgment; that the RTC had no jurisdiction over Lot No. 370 since its technical
description was not published in the Official Gazette; and that as found by the Court of Appeals the
evidence presented by Martinez is insufficient for registering the lots in his name. 12 Despite an order
from the Court requiring him to file a Reply to the Comment, counsel for Martinez declined to do so,
explaining, among others, that "he felt he would only be taxing the collective patience of this [Court]

if he merely repeats x x x what petitioner had succinctly stated x x x on pages four (4) to seven (7) of
his said petition." Counsel for petitioner was accordingly fined by the Court. 13
The Courts patience is taxed less by redundant pleadings than by insubstantial arguments. The
inability of Martinez to offer an effective rebuttal to the arguments of the OSG further debilitates what
is an already weak petition.
The central question, as posed by Martinez, is whether the OSG could have still appealed the RTC
decision after it had been declared in default. The OSG argues that a party in default is not
precluded from filing an appeal, citingMetropolitan Bank & Trust Co. v. Court of Appeals,14 and
asserts that "[t]he Rules of Court expressly provides that a party who has been declared in default
may appeal from the judgment rendered against him." 15
There is error in that latter, unequivocal averment, though one which does not deter from the
ultimate correctness of the general postulate that a party declared in default is allowed to pose an
appeal. Elaboration is in order.
We note at the onset that the OSG does not impute before this Court that the RTC acted improperly
in declaring public respondent in default, even though an opposition had been filed to Martinezs
petition. Under Section 26 of Presidential Decree No. 1529, as amended, the order of default may be
issued "[i]f no person appears and answers within the time allowed." The RTC appears to have
issued the order of general default simply on the premise that no oppositor appeared before it on the
hearing of 29 March 2000. But it cannot be denied that the OSG had already duly filed its Opposition
to Martinezs petition long before the said hearing. As we held in Director of Lands v. Santiago:16
[The] opposition or answer, which is based on substantial grounds, having been formally
filed, it was improper for the respondent Judge taking cognizance of such registration case to
declare the oppositor in default simply because he failed to appear on the day set for the
initial healing. The pertinent provision of law which states: "If no person appears and
answers within the time allowed, the court may at once upon motion of the applicant, no
reason to the contrary appearing, order a general default to be recorded . . . ," cannot be
interpreted to mean that the court can just disregard the answer before it, which has long
been filed, for such an interpretation would be nothing less than illogical, unwarranted, and
unjust. Had the law intended that failure of the oppositor to appear on the date of the initial
hearing would be a ground for default despite his having filed an answer, it would have been
so stated in unmistakable terms, considering the serious consequences of an order of
default. Especially in this case where the greater public interest is involved as the land
sought to be registered is alleged to be public land, the respondent Judge should have
received the applicant's evidence and set another date for the reception of the oppositor's
evidence. The oppositor in the Court below and petitioner herein should have been accorded
ample opportunity to establish the government's claim.17
Strangely, the OSG did not challenge the propriety of the default order, whether in its appeal before
the Court of Appeals or in its petition before this Court. It would thus be improper for the Court to
make a pronouncement on the validity of the default order since the same has not been put into
issue. Nonetheless, we can, with comfort, proceed from same apparent premise of the OSG that the
default order was proper or regular.
The juridical utility of a declaration of default cannot be disputed. By forgoing the need for
adversarial proceedings, it affords the opportunity for the speedy resolution of cases even as it
penalizes parties who fail to give regard or obedience to the judicial processes.

The extent to which a party in default loses standing in court has been the subject of considerable
jurisprudential debate. Way back in 1920, in Velez v. Ramas,18 we declared that the defaulting
defendant "loses his standing in court, he not being entitled to the service of notices in the case, nor
to appear in the suit in any way. He cannot adduce evidence; nor can he be heard at the final
hearing."19 These restrictions were controversially expanded inLim Toco v. Go Fay,20 decided in 1948,
where a divided Court pronounced that a defendant in default had no right to appeal the judgment
rendered by the trial court, except where a motion to set aside the order of default had been filed.
This, despite the point raised by Justice Perfecto in dissent that there was no provision in the then
Rules of Court or any law "depriving a defaulted defendant of the right to be heard on appeal." 21
The enactment of the 1964 Rules of Court incontestably countermanded the Lim Toco ruling. Section
2, Rule 41 therein expressly stated that "[a] party who has been declared in default may likewise
appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no
petition for relief to set aside the order of default has been presented by him in accordance with Rule
38."22 By clearly specifying that the right to appeal was available even if no petition for relief to set
aside the order of default had been filed, the then fresh Rules clearly rendered the Lim Toco ruling
as moot.
Another provision in the 1964 Rules concerning the effect of an order of default acknowledged that
"a party declared in default shall not be entitled to notice of subsequent proceedings, nor to take part
in the trial."23Though it might be argued that appellate proceedings fall part of "the trial" since there is
no final termination of the case as of then, the clear intent of the 1964 Rules was to nonetheless
allow the defaulted defendant to file an appeal from the trial court decision. Indeed, jurisprudence
applying the 1964 Rules was unhesitant to affirm a defaulted defendants right to appeal, as
guaranteed under Section 2 of Rule 41, even as Lim Toco was not explicitly abandoned.
In the 1965 case of Antonio, et al. v. Jacinto,24 the Court acknowledged that the prior necessity of a
ruling setting aside the order of default "however, was changed by the Revised Rules of Court.
Under Rule 41, section 2, paragraph 3, a party who has been declared in default may likewise
appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no
petition for relief to set aside the order of default has been presented by him in accordance with Rule
38."25 It was further qualified in Matute v. Court of Appeals26 that the new availability of a defaulted
defendants right to appeal did not preclude "a defendant who has been illegally declared in default
from pursuing a more speedy and efficacious remedy, like a petition for certiorari to have the
judgment by default set aside as a nullity."27
In Tanhu v. Ramolete,28 the Court cited with approval the commentaries of Chief Justice Moran,
expressing the reformulated doctrine that following Lim Toco, a defaulted defendant "cannot adduce
evidence; nor can he be heard at the final hearing, although [under Section 2, Rule 41,] he may
appeal the judgment rendered against him on the merits."29
Thus, for around thirty-odd years, there was no cause to doubt that a defaulted defendant had the
right to appeal the adverse decision of the trial court even without seeking to set aside the order of
default. Then, in 1997, the Rules of Civil Procedure were amended, providing for a new Section 2,
Rule 41. The new provision reads:
SECTION 1. Subject of appeal.An appeal may be taken from a judgment or final order that
completely disposes of the case, or of a particular matter therein when declared by these
Rules to be appealable.
No appeal may be taken from:

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

(b) An order denying a petition for relief or any similar motion seeking relief from judgment;
(c) An interlocutory order;
(d) An order disallowing or dismissing an appeal;
(e) An order denying a motion to set aside a judgment by consent, confession or
compromise on the ground of fraud, mistake or duress, or any other ground vitiating consent;
(f) An order of execution;
(g) A judgment or final order for or against or one or more of several parties or in separate
claims, counterclaims, cross-claims and third-party complaints, while the main case is
pending, unless the court allows an appeal therefrom; and
(h) An order dismissing an action without prejudice.
In all the above instances where the judgment or final order is not appealable, the aggrieved
party may file an appropriate special civil action under Rule 65.
Evidently, the prior warrant that a defaulted defendant had the right to appeal was removed from
Section 2, Rule 41. On the other hand, Section 3 of Rule 9 of the 1997 Rules incorporated the
particular effects on the parties of an order of default:
Sec. 3. Default; declaration of.If the defending party fails to answer within the time allowed
therefor, the court shall, upon motion of the claiming party with notice to the defending party,
and proof of such failure, declare the defending party in default. Thereupon, the court shall
proceed to render judgment granting the claimant such relief as his pleading may warrant,
unless the court in its discretion requires the claimant to submit evidence. Such reception of
evidence may be delegated to the clerk of court.
(a) Effect of order of default.A party in default shall be entitled to notice of subsequent
proceedings but shall not take part in the trial.
(b) Relief from order of default.A party declared in default may any time after notice thereof
and before judgment file a motion under oath to set aside the order of default upon proper
showing that his failure to answer was due to fraud, accident, mistake or excusable
negligence and that he has a meritorious defense. In such case, the order of default may be
set aside on such terms and conditions as the judge may impose in the interest of justice.
(c) Effect of partial default.When a pleading asserting a claim states a common cause of
action against several defending parties, some of whom answer and the others fail to do so,
the court shall try the case against all upon the answers thus filed and render judgment upon
the evidence presented.
(d) Extent of relief to be awarded.A judgment rendered against a party in default shall not
exceed the amount or be different in kind from that prayed for nor award unliquidated
damages.

xxx
It cannot be escaped that the old provision expressly guaranteeing the right of a defendant declared
in default to appeal the adverse decision was not replicated in the 1997 Rules of Civil Procedure.
Should this be taken as a sign that under the 1997 Rules a defaulted defendant no longer has the
right to appeal the trial court decision, or that the Lim Toco doctrine has been reinstated?
If post-1997 jurisprudence and the published commentaries to the 1997 Rules were taken as an
indication, the answer should be in the negative. The right of a defaulted defendant to appeal
remains extant.
By 1997, the doctrinal rule concerning the remedies of a party declared in default had evolved into a
fairly comprehensive restatement as offered in Lina v. Court of Appeals:30
a) The defendant in default may, at any time after discovery thereof and before judgment, file
a motion, under oath, to set aside the order of default on the ground that his failure to answer
was due to fraud, accident, mistake or excusable neglect, and that he has meritorious
defenses; (Sec 3, Rule 18)
b) If the judgment has already been rendered when the defendant discovered the default, but
before the same has become final and executory, he may file a motion for new trial under
Section 1(a) of Rule 37;
c) If the defendant discovered the default after the judgment has become final and executory,
he may file a petition for relief under Section 2 of Rule 38; and
d) He may also appeal from the judgment rendered against him as contrary to the evidence
or to the law, even if no petition to set aside the order of default has been presented by him.
(Sec. 2, Rule 41)31
The fourth remedy, that of appeal, is anchored on Section 2, Rule 41 of the 1964 Rules. Yet even
after that provisions deletion under the 1997 Rules, the Court did not hesitate to expressly rely again
on the Lina doctrine, including the pronouncement that a defaulted defendant may appeal from the
judgment rendered against him. This can be seen in the cases of Indiana Aerospace University v.
Commission on Higher Education,32 Tan v. Dumarpa,33 and Crisologo v. Globe Telecom, Inc.34
Annotated textbooks on the 1997 Rules of Civil Procedure similarly acknowledge that even under
the new rules, a defaulted defendant retains the right to appeal as previously confirmed under the
old Section 2, Rule 41. In his textbook on Civil Procedure, Justice Francisco answers the question
"What are the remedies available to a defending party in default?" with a reiteration of
the Lina doctrine, including the remedy that a defaulted defendant "may also appeal from the
judgment rendered against him as contrary to the evidence or to the law, even if no petition to set
aside the order of default has been presented by him." 35 Justice Regalado also restates the Linarule
in his textbook on Civil Procedure, opining that the remedies enumerated therein, even if under the
former Rules of Procedure, "would hold true under the present amended Rules." 36 Former Court of
Appeals Justice Herrerra likewise reiterates the Lina doctrine, though with the caveat that an appeal
from an order denying a petition for relief from judgment was no longer appealable under Section 1,
Rule 41 of the 1997 Rules.37 Herrera further adds:
Section 2, paragraph [2] of the former Rule 41, which allows an appeal from a denial of a
petition for relief, was deleted from the present Rule, and confined appeals to cases from a

final judgment or final order that completely disposes of the case, or of a particular matter
therein, when declared by these rules to be appealable. A judgment by default may be
considered as one that completely disposes of the case.38
We are hard-pressed to find a published view that the enactment of the 1997 Rules of Civil
Procedure accordingly withdrew the right, previously granted under the 1964 Rules, of a defaulted
defendant to appeal the judgment by default against him. Neither is there any provision under the
1997 Rules which expressly denies the defaulted defendant such a right. If it is perplexing why the
1997 Rules deleted the previous authorization under the old Section 2, Rule 41 (on subject of
appeal), it is perhaps worth noting that its counterpart provision in the 1997 Rules, now Section 1,
Rule 41, is different in orientation even as it also covers "subject of appeal." Unlike in the old
provision, the bulk of the new provision is devoted to enumerating the various rulings from which no
appeal may be taken, and nowhere therein is a judgment by default included. A declaration therein
that a defaulted defendant may still appeal the judgment by default would have seemed out of place.
Yet even if it were to assume the doubtful proposition that this contested right of appeal finds no
anchor in the 1997 Rules, the doctrine still exists, applying the principle of stare decisis.
Jurisprudence applying the 1997 Rules has continued to acknowledge the Lina doctrine which
embodies this right to appeal as among the remedies of a defendant, and no argument in this
petition persuades the Court to rule otherwise.
In Rural Bank of Sta. Catalina v. Land Bank of the Philippines,39 the Court, through Justice Callejo,
Sr., again provided a comprehensive restatement of the remedies of the defending party declared in
default, which we adopt for purposes of this decision:
It bears stressing that a defending party declared in default loses his standing in court and
his right to adduce evidence and to present his defense. He, however, has the right to appeal
from the judgment by default and assail said judgment on the ground, inter alia, that the
amount of the judgment is excessive or is different in kind from that prayed for, or that the
plaintiff failed to prove the material allegations of his complaint, or that the decision is
contrary to law. Such party declared in default is proscribed from seeking a modification or
reversal of the assailed decision on the basis of the evidence submitted by him in the Court
of Appeals, for if it were otherwise, he would thereby be allowed to regain his right to adduce
evidence, a right which he lost in the trial court when he was declared in default, and which
he failed to have vacated. In this case, the petitioner sought the modification of the decision
of the trial court based on the evidence submitted by it only in the Court of Appeals. 40
If it cannot be made any clearer, we hold that a defendant party declared in default retains the right
to appeal from the judgment by default on the ground that the plaintiff failed to prove the material
allegations of the complaint, or that the decision is contrary to law, even without need of the prior
filing of a motion to set aside the order of default. We reaffirm that the Lim Toco doctrine, denying
such right to appeal unless the order of default has been set aside, was no longer controlling in this
jurisdiction upon the effectivity of the 1964 Rules of Court, and up to this day.
Turning to the other issues, we affirm the conclusion of the Court of Appeals that Martinez failed to
adduce the evidence needed to secure the registration of the subject lots in his name.
It should be noted that the OSG, in appealing the case to the Court of Appeals, did not introduce any
new evidence, but simply pointed to the insufficiency of the evidence presented by Martinez before
the trial court. The Court of Appeals was careful to point out that the case against Martinez was
established not by the OSGs evidence, but by petitioners own insufficient evidence. We adopt with
approval the following findings arrived at by the Court of Appeals, thus:

The burden of proof in land registration cases is incumbent on the applicant who must show
that he is the real and absolute owner in fee simple of the land applied for. Unless the
applicant succeeds in showing by clear and convincing evidence that the property involved
was acquired by him or his ancestors by any of the means provided for the proper
acquisition of public lands, the rule is settled that the property must be held to be a part of
the public domain. The applicant must, therefore, present competent and persuasive proof to
substantiate his claim. He may not rely on general statements, or mere conclusions of law
other than factual evidence of possession and title.
Considered in the light of the opposition filed by the Office of the Solicitor General, we find
the evidence adduced by appellee, on the whole, insufficient to support the registration of the
subject parcels in his name. To prove the provenance of the land, for one, all that appellee
proffered by way of oral evidence is the following cursory testimony during his direct
examination, viz:
xxxx
Q You mentioned that you are the owner of these three (3) parcels of land. How did you
begin the ownership of the same?
A I bought it from my uncles Julian Martinez and Juan Martinez.
xxxx
Q x x x x Who took possession of these parcels of land from then on?
A I took possession, sir
Q As owner?
A Yes, as owner.
Q Up to the present who is in possession as owner of these parcels of land?
A I took possession.
Q Before Julian Martinez and Juan Martinez sold these parcels of land before you took
possession who were the owners and in possession of these?
A Hilarion Martinez, the father of my predecessors-in-interest and also my grandfather.
xxxx
Court:
Q Of your own knowledge[,] where [sic] did your grandfather Hilarion Martinez acquire these
lands?
A According to my grandfather he bought that land from a certain Juan Casano in the year
1870s[,] I think.

xxxx
Q By the way[,] when did your grandfather Hilarion Martinez die?
A Either in 1920 or 1921.
Q Since you said your immediate predecessors-in-interest Julian Martinez and Juan
Martinez inherited the same from your grandfather. Can you say it the same that your
predecessors-in-interest were the owners and possessors of the same since 1921 up to the
time they sold the land to you in 1952?
A Yes, sir.
xxxx
In the dreary tradition of most land registration cases, appellee has apparently taken
the absence of representation for appellant at the hearing of his petition as license to
be perfunctory in the presentation of his evidence. Actual possession of land,
however, consists in the manifestation of acts of dominion over it of such a nature as
a party would naturally exercise over his own property. It is not enough for an
applicant to declare himself or his predecessors-in-interest the possessors and
owners of the land for which registration is sought. He must present specific acts of
ownership to substantiate the claim and cannot just offer general statements which
are mere conclusions of law requiring evidentiary support and substantiation.
The record shows that appellee did not fare any better with the documentary evidence he
adduced before the trial court. The October 20, 1952 Deed of Sale by which appellee
claims to have purchased the subject parcels from his uncle, Julian Martinez, was not
translated from the vernacular in which it was executed and, by said token, was
inadmissible in evidence. Having submitted a white print copy of the survey plan for
Lot Nos. 464-A and 464-B, appellee also submitted the tracing cloth plan for Lot No.
370 which does not, however, appear to be approved by the Director of Lands. In much
the same manner that the submission of the original tracing cloth plan is a mandatory
statutory requirement which cannot be waived, the rule is settled that a survey plan not
approved by the Director of Lands is not admissible in evidence. 41
These findings of the Court of Appeals, arrived at after a sufficiently extensive evaluation of the
evidence, stand in contrast to that contained in the RTC decision, encapsulated in a oneparagraph prcis of the factual allegations of Martinez concerning how he acquired possession of
the subject properties. The Court of Appeals, of course, is an appropriate trier of facts, and a
comparison between the findings of fact of the Court of Appeals and that of the RTC clearly
demonstrates that it was the appellate court which reached a more thorough and considered
evaluation of the evidence.
As correctly held by the Court of Appeals, the burden of proof expected of the petitioner in a land
registration case has not been matched in this case.
WHEREFORE, the petition is DISMISSED. Costs against petitioner.
SO ORDERED.

[G.R. No. 92735. June 8, 2000]

MONARCH INSURANCE CO., INC., TABACALERA INSURANCE CO., INC
and Hon. Judge AMANTE PURISIMA, petitioners, vs. COURT OF
APPEALS and ABOITIZ SHIPPING CORPORATION, respondents.
[G.R. No. 94867. June 8, 2000]
ALLIED GUARANTEE INSURANCE COMPANY, petitioner, vs. COURT OF
APPEALS, Presiding Judge, RTC Manila, Br. 24 and ABOITIZ SHIPPING
CORPORATION, respondents.
[G.R. No. 95578. June 8, 2000]
EQUITABLE INSURANCE CORPORATION, petitioner, vs. COURT OF
APPEALS, Former First Division Composed of Hon. Justices RODOLFO
NOCON, PEDRO RAMIREZ, and JESUS ELBINIAS and ABOITIZ
SHIPPING CORPORATION, respondents.
DECISION
DE LEON, JR., J.:
Before us are three consolidated petitions. G.R. No. 92735 is a petition for
review filed under Rule 45 of the Rules of Court assailing the decision of the
Court of Appeals dated March 29, 1990 in CA-G.R. SP. Case No. 17427 which
set aside the writ of execution issued by the lower court for the full
indemnification of the claims of the petitioners, Monarch Insurance Company
(hereafter "Monarch") and Tabacalera Insurance Company, Incorporated
(hereafter "Tabacalera") against private respondent, Aboitiz Shipping
Corporation (hereafter "Aboitiz") on the ground that the latter is entitled to the
benefit of the limited liability rule in maritime law; G.R. No. 94867 is a petition
for certiorari under Rule 65 of the Rules of Court to annul and set aside the
decision of the Court of Appeals dated August 15, 1990 in CA-G.R. SP No.
20844 which ordered the lower court to stay the execution of the judgment in
favor of the petitioner, Allied Guarantee Insurance Company (hereafter

"Allied") against Aboitiz insofar as it impairs the rights of the other claimants to
their pro-rata share in the insurance proceeds from the sinking of the M/V P.
Aboitiz, in accordance with the rule on limited liability; and G.R. No. 95578 is a
petition for review under Rule 45 of the Rules of Court seeking a reversal of
the decision of the Court of Appeals dated August 24, 1990 and its resolution
dated October 4, 1990 in C.A. G.R. Civil Case No. 15071 which modified the
judgment of the lower court by applying the hypothecary rule on limited liability
to limit the lower courts award of actual damages to petitioner Equitable
Insurance Corporation (hereafter "Equitable") to its pro-rata share in the
insurance proceeds from the sinking of the M/V P. Aboitiz.
All cases arose from the loss of cargoes of various shippers when the M/V P.
Aboitiz, a common carrier owned and operated by Aboitiz, sank on her voyage
from Hong Kong to Manila on October 31, 1980. Seeking indemnification for
the loss of their cargoes, the shippers, their successors-in-interest, and the
cargo insurers such as the instant petitioners filed separate suits against
Aboitiz before the Regional Trial Courts. The claims numbered one hundred
and ten (110) for the total amount of P41,230,115.00 which is almost thrice the
amount of insurance proceeds of P14,500,000.00 plus earned freight
of P500,000.00 according to Aboitiz. To this day, some of these claims,
including those of herein petitioners, have not yet been settled.
G.R. No. 92735.
Monarch and Tabacalera are insurance carriers of lost cargoes. They
indemnified the shippers and were consequently subrogated to their rights,
interests and actions against Aboitiz, the cargo carrier. Because Aboitiz
refused to compensate Monarch, it filed two complaints against Aboitiz,
docketed as Civil Cases Nos. 82-2767 and 82-2770. For its part, Tabacalera
also filed two complaints against the same defendant, docketed as Civil
Cases Nos. 82-2768 and 82-2769. As these four (4) cases had common
causes of action, they were consolidated and jointly tried.
[1]

[2]

In Civil Case No. 82-2767 where Monarch also named Malaysian International
Shipping Corporation and Litonjua Merchant Shipping Agency as Aboitizs codefendants, Monarch sought recovery of P29,719.88 representing the value of
three (3) pallets of glass tubing that sank with the M/V P. Aboitiz, plus

attorneys fees of not less than P5,000.00, litigation expenses, interest at the
legal rate on all these amounts, and cost of suit. Civil Case No. 82-2770 was
a complaint filed by Monarch against Aboitiz and co-defendants Compagnie
Maritime des Chargeurs Reunis and F.E. Zuellig (M), Inc. for the recovery of
P39,579.66 representing the value of one case of motor vehicle parts which
was lost when the M/V P. Aboitiz sank on her way to Manila, plus attorneys
fees of not less than P10, 000.00 and cost of suit.
[3]

[4]

Tabacalera sought against Franco Belgian Services, F. E. Zuellig and Aboitiz

in Civil Case No. 82-2768 the recovery of P284,218.00 corresponding to the
value of nine (9) cases of Renault spare parts, P213,207.00 for the value of
twenty-five (25) cases of door closers and P42,254.00 representing the value
of eighteen (18) cases of plastic spangle, plus attorneys fees of not less
than P50,000.00 and cost of suit. In Civil Case No. 82-2769, Tabacalera
claimed from Hong Kong Island Shipping Co., Ltd., Citadel Lines and Aboitiz
indemnification in the amount of P75,058.00 for the value of four (4) cartons of
motor vehicle parts that foundered with the M/V P. Aboitiz, plus attorneys fees
of not less thanP20,000.00 and cost of suit.
[5]

[6]

In its answer with counterclaim, Aboitiz rejected responsibility for the claims on
the ground that the sinking of its cargo vessel was due to force majeure or an
act of God. Aboitiz was subsequently declared as in default for its failure to
appear during the pre-trial. Its counsel filed a motion to set aside the order of
default with notice of his withdrawal as such counsel. Before the motion could
be acted upon, Judge Bienvenido Ejercito, the presiding judge of the trial
court, was promoted to the then Intermediate Appellate Court. The cases were
thus re-raffled to Branch VII of the RTC of Manila presided by Judge Amante
P. Purisima, the co-petitioner in G.R. No. 92735. Without resolving the
pending motion to set aside the order of default, the trial court set the cases
for hearing. However, since Aboitiz had repeatedly failed to appear in court,
the trial court denied the said motion and allowed Monarch and Tabacalera to
present evidence ex-parte.
[7]

[8]

Monarch and Tabacalera proffered in evidence the survey of Perfect Lambert,

a surveyor commissioned to investigate the possible cause of the sinking of
the cargo vessel. The survey established that on her voyage to Manila from
Hong Kong, the vessel did not encounter weather so inclement that Aboitiz

would be exculpated from liability for losses. In his note of protest, the master
of M/V P. Aboitiz described the wind force encountered by the vessel as from
ten (10) to fifteen (15) knots, a weather condition classified as typical and
moderate in the South China Sea at that particular time of the year. The
survey added that the seaworthiness of the vessel was in question especially
because the breaches of the hull and the serious flooding of two (2) cargo
holds occurred simultaneously in "seasonal weather."
[9]

In due course, the trial court rendered judgment against Aboitiz but the
complaint against all the other defendants was dismissed. Aboitiz was held
liable for the following: (a) in Civil Case No. 82-2767, P29,719.88 with legal
interest from the filing of the complaint until fully paid plus attorneys fees
of P30,000.00 and cost of suit; (b) in Civil Case No. 82-2768,P539,679.00 with
legal interest of 12% per annum from date of filing of the complaint until fully
paid, plus attorneys fees of P30,000.00, litigation expenses and cost of suit;
(c) in Civil Case No. 82-2769, P75,058.00 with legal interest of 12% per
annum from date of filing of the complaint until fully paid, plus P5,000.00
attorneys fees, litigation expenses and cost of suit, and (d) in Civil Case No.
82-2770, P39,579.66 with legal interest of 12% per annum from date of filing
of the complaint until fully paid, plus attorneys fees of P5,000.00, litigation
expenses and cost of suit.
Aboitiz filed a motion for reconsideration of the decision and/or for new trial to
lift the order of default. The court denied the motion on August 27, 1986.
Aboitiz appealed to the Court of Appeals but the appeal was dismissed for
its failure to file appellants brief. It subsequently filed an urgent motion for
reconsideration of the dismissal with prayer for the admission of its attached
appellants brief. The appellate court denied that motion for lack of merit in a
Resolution dated July 8, 1988.
[10]

[11]

Aboitiz thus filed a petition for review before this Court. Docketed as G.R. No.
84158, the petition was denied in the Resolution of October 10, 1988 for being
filed out of time. Aboitizs motion for the reconsideration of said Resolution was
similarly denied. Entry of judgment was made in the case.
[12]

[13]

Consequently, Monarch and Tabacalera moved for execution of judgment. The

trial court granted the motion on April 4, 1989 and issued separate writs of
[14]

execution. However, on April 12, 1989, Aboitiz, invoking the real and
hypothecary nature of liability in maritime law, filed an urgent motion to quash
the writs of execution. According to Aboitiz, since its liability is limited to the
value of the vessel which was insufficient to satisfy the aggregate claims of all
110 claimants, to indemnify Monarch and Tabacalera ahead of the other
claimants would be prejudicial to the latter. Monarch and Tabacalera opposed
the motion to quash.
[15]

[16]

On April 17, 1989, before the motion to quash could be heard, the sheriff
levied upon five (5) heavy equipment owned by Aboitiz for public auction sale.
At said sale, Monarch was the highest bidder for one (1) unit FL-151 Fork Lift
(big) and one (1) unit FL-25 Fork Lift (small). Tabacalera was also the highest
bidder for one (1) unit TCH TL-251 Hyster Container Lifter, one (1) unit Hyster
Top Lifter (out of order), and one (1) unit ER-353 Crane. The corresponding
certificates of sale were issued to Monarch and Tabacalera.
[17]

On April 18, 1989, the day before the hearing of the motion to quash, Aboitiz
filed a supplement to its motion, to add the fact that an auction sale had taken
place. On April 19, 1989, Judge Purisima issued an order denying the motion
to quash but freezing execution proceedings for ten (10) days to give Aboitiz
time to secure a restraining order from a higher court. Execution was
scheduled to resume to fully satisfy the judgment when the grace period shall
have lapsed without such restraining order having been obtained by Aboitiz.
[18]

Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition
with prayer for preliminary injunction and/or temporary restraining order under
CA-G.R. No. SP-17427. On March 29, 1990, the appellate court rendered a
Decision the dispositive portion of which reads:
[19]

"WHEREFORE, the writ of certiorari is hereby granted, annulling

the subject writs of execution, auction sale, certificates of sale,
and the assailed orders of respondent Judge dated April 4 and
April 19, 1989 insofar as the money value of those properties of
Aboitiz, levied on execution and sold at public auction, has
exceeded the pro-rata shares of Monarch and Tabacalera in the
insurance proceeds of Aboitiz in relation to the pro-rata shares of
the 106 other claimants.

"The writ of prohibition is also granted to enjoin respondent Judge,

Monarch and Tabacalera from proceeding further with execution
of the judgments in question insofar as the execution would
satisfy the claims of Monarch and Tabacalera in excess of their
pro-rata shares and in effect reduce the balance of the proceeds
for distribution to the other claimants to their prejudice.
"The question of whether or how much of the claims of Monarch
and Tabacalera against the insurance proceeds has already been
settled through the writ of execution and auction sale in question,
being factual issues, shall be threshed out before respondent
Judge.
"The writ of preliminary injunction issued in favor of Aboitiz, having
served its purpose, is hereby lifted. No pronouncement as to
costs.
"SO ORDERED."

[20]

Hence, the instant petition for review on certiorari where petitioners Monarch,
Tabacalera and Judge Purisima raise the following assignment of errors:
1.....The appellate court grievously erred in re-opening the
Purisima decisions, already final and executory, on the alleged
ground that the issue of real and hypothecary liability had not
been previously resolved by Purisima, the appellate court, and
this Hon. Supreme Court;
2.....The appellate court erred when it resolved that Aboitiz is
entitled to the limited real and hypothecary liability of a ship
owner, considering the facts on record and the law on the matter.
3.....The appellate court erred when it concluded that Aboitiz does
not have to present evidence to prove its entitlement to the limited
real and hypothecary liability.
4.....The appellate court erred in ignoring the case of "Aboitiz
Shipping Corporation v. CA and Allied Guaranty Insurance Co.,

Inc." (G.R. No. 88159), decided by this Honorable Supreme Court

as early as November 13, 1989, considering that said case, now
factual and executory, is in pari materia with the instant case.
5.....The appellate court erred in not concluding that irrespective
of whether Aboitiz is entitled to limited hypothecary liability or not,
there are enough funds to satisfy all the claimants.
6.....The appellate court erred when it concluded that Aboitiz had
made an "abandonment" as envisioned by Art. 587 of the Code of
Commerce.
7.....The appellate court erred when it concluded that other
claimants would suffer if Tabacalera and Monarch would be fully
paid.
8.....The appellate court erred in concluding that certiorari was the
proper remedy for Aboitiz.
[21]

G.R. NOS. 94867 & 95578

Allied as insurer-subrogee of consignee Peak Plastic and Metal Products
Limited, filed a complaint against Aboitiz for the recovery of P278,536.50
representing the value of 676 bags of PVC compound and 10 bags of ABS
plastic lost on board the M/V P. Aboitiz, with legal interest from the date of
filing of the complaint, plus attorneys fees, exemplary damages and costs.
Docketed as Civil Case No. 138643, the case was heard before the
Regional Trial Court of Manila, Branch XXIV, presided by Judge Sergio D.
Mabunay.
[22]

On the other hand, Equitable, as insurer-subrogee of consignee-assured Axel

Manufacturing Corporation, filed an amended complaint against Franco
Belgian Services, F.E. Zuellig, Inc. and Aboitiz for the recovery of P194,794.85
representing the value of 76 drums of synthetic organic tanning substances
and 1,000 kilograms of optical bleaching agents which were also lost on board
the M/V P. Aboitiz, with legal interest from the date of filing of the complaint,
plus 25% attorneys fees, exemplary damages, litigation expenses and costs

of suit. Docketed as Civil Case No. 138396, the complaint was assigned to
the Regional Trial Court of Manila, Branch VIII.
[23]

In its answer with counterclaim in the two cases, Aboitiz disclaimed

responsibility for the amounts being recovered, alleging that the loss was due
to a fortuitous event or an act of God. It prayed for the dismissal of the cases
and the payment of attorneys fees, litigation expenses plus costs of suit. It
similarly relied on the defenses of force mejeure, seaworthiness of the vessel
and exercise of due diligence in the carriage of goods as regards the crossclaim of its co-defendants.
[24]

In support of its position, Aboitiz presented the testimonies of Capt. Gerry N.

Racines, master mariner of the M/V P. Aboitiz, and Justo C. Iglesias, a
meteorologist of the Philippine Atmospheric Geophysical and Astronomical
Services Administration (PAGASA). The gist of the testimony of Capt. Racines
in the two cases follows:
The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of
October 29, 1980 after securing a departure clearance from the Hong Kong
Port Authority. The departure was delayed for two hours because he (Capt.
Racines) was observing the direction of the storm that crossed the Bicol
Region. He proceeded with the voyage only after being informed that the
storm had abated. At about 8:00 oclock in the morning of October 30, 1980,
after more than twelve (12) hours of navigation, the vessel suddenly
encountered rough seas with waves about fifteen to twenty-five feet high. He
ordered his chief engineer to check the cargo holds. The latter found that sea
water had entered cargo hold Nos. 1 and 2. He immediately directed that
water be pumped out by means of the vessels bilge pump, a device capable
of ejecting 180 gallons of water per minute. They were initially successful in
pumping out the water.
At 6:00 a.m. of October 31, 1980, however, Capt. Racines received a report
from his chief engineer that the water level in the cargo holds was rapidly
rising. He altered the vessels course and veered towards the northern tip of
Luzon to prevent the vessel from being continuously pummeled by the waves.
Despite diligent efforts of the officers and crew, however, the vessel, which
was approximately 250 miles away from the eye of the storm, began to list on

starboard side at 27 degrees. Capt. Racines and his crew were not able to
make as much headway as they wanted because by 12:00 noon of the same
day, the cargo holds were already flooded with sea water that rose from three
to twelve feet, disabling the bilge pump from containing the water.
The M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980 at latitude 18
degrees North, longitude 170 degrees East in the South China Sea in
between Hong Kong, the Philippines and Taiwan with the nearest land being
the northern tip of Luzon, around 270 miles from Cape Bojeador, Bangui,
Ilocos Norte. Responding to the captains distress call, the M/V Kapuas
(Capuas) manned by Capt. Virgilio Gonzales rescued the officers and crew of
the ill-fated M/V P. Aboitiz and brought them to Waileen, Taiwan where Capt.
Racines lodged his marine protest dated November 3, 1980.
Justo Iglesias, meteorologist of PAGASA and another witness of Aboitiz,
testified in both cases that during the inclusive dates of October 28-31, 1980,
a stormy weather condition prevailed within the Philippine area of
responsibility, particularly along the sea route from Hong Kong to Manila,
because of tropical depression "Yoning." PAGASA issued weather bulletins
from October 28-30, 1980 while the storm was still within Philippine territory.
No domestic bulletins were issued the following day when the storm which hit
Eastern Samar, Southern Quezon and Southern Tagalog provinces, had made
its exit to the South China Sea through Bataan.
[25]

Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo
were lost due to force majeure, relying mainly on the marine protest filed by
Capt. Racines as well as on the Beaufort Scale of Wind. In his marine protest
under oath, Capt. Racines affirmed that the wind force on October 29-30,
1980 was only ten (10) to fifteen (15) knots. Under the Beaufort Scale of
Wind, said wind velocity falls under scale No. 4 that describes the sea
condition as "moderate breeze," and "small waves becoming longer, fairly
frequent white horses."
[26]

To fortify its position, Equitable presented Rogelio T. Barboza who testified

that as claims supervisor and processor of Equitable, he recommended
payment to Axel Manufacturing Corporation as evidenced by the cash

voucher, return check and subrogation receipt. Barboza also presented a

letter of demand to Aboitiz which, however, the latter ignored.
[27]

On April 24, 1984, the trial court rendered a decision that disposed of Civil
Case No. 138643 as follows:
"WHEREFORE, judgment is hereby rendered ordering defendant
Aboitiz Shipping Company to pay plaintiff Allied Guarantee
Insurance Company, Inc. the sum ofP278,536.50, with legal
interest thereon from March 10, 1981, then date of the filing of the
complaint, until fully paid, plus P30,000.00 as attorneys fees, with
costs of suit.
"SO ORDERED."

[28]

A similar decision was arrived at in Civil Case No. 138396, the dispositive
portion of which reads:
"WHEREFORE, in view of the foregoing, this Court hereby
renders judgment in favor of plaintiff and against defendant Aboitiz
Shipping Corporation, to pay the sum of P194, 794. 85 with legal
rate of interest thereon from February 27, 1981 until fully paid;
attorneys fees of twenty-five (25%) percent of the total claim, plus
litigation expenses and costs of litigation.
SO ORDERED."

[29]

In Civil Case No. 138643, Aboitiz appealed to the Court of Appeals under CAG.R. CV No. 04121. On March 23, 1987, the Court of Appeals affirmed the
decision of the lower court. A motion for reconsideration of the said decision
was likewise denied by the Court of Appeals on May 3, 1989. Aggrieved,
Aboitiz then filed a petition for review with this Court docketed as G.R. No.
88159 which was denied for lack merit. Entry of judgment was made and the
lower courts decision in Civil Case No. 138643 became final and executory.
Allied prayed for the issuance of a writ of execution in the lower court which
was granted by the latter on April 4, 1990. To stay the execution of the
judgment of the lower court, Aboitiz filed a petition for certiorari and prohibition

with preliminary injunction with the Court of Appeals docketed as CA-G.R. SP

No. 20844. On August 15, 1990, the Court of Appeals rendered the assailed
decision, the dispositive portion of which reads as follows:
[30]

"WHEREFORE, the challenged order of the respondent Judge

dated April 4, 1990 granting the execution is hereby set aside. The
respondent Judge is further ordered to stay the execution of the
judgment insofar as it impairs the rights of the 100 other claimants
to the insurance proceeds including the rights of the petitioner to
pay more than the value of the vessel or the insurance proceeds
and to desist from executing the judgment insofar as it prejudices
the pro-rata share of all claimants to the insurance proceeds. No
pronouncement as to costs.
"SO ORDERED."

[31]

Hence, Allied filed the instant petition for certiorari, mandamus and injunction
with preliminary injunction and/or restraining order before this Court alleging
the following assignment of errors:
1.....Respondent Court of Appeals gravely erred in staying the
immediate execution of the judgment of the lower court as it has
no authority nor jurisdiction to directly or indirectly alter, modify,
amend, reverse or invalidate a final judgment as affirmed by the
Honorable Supreme Court in G.R. No. 88159.
2.....Respondent Court of Appeals with grave abuse of discretion
amounting to lack or excess of jurisdiction, brushed aside the
doctrine in G.R. No. 88159 which is now the law of the case and
observance of time honored principles of stare decisis, res
adjudicata and estoppel by judgment.
3.....Real and hypothecary rule under Articles 587, 590 and 837 of
the Code of Commerce which is the basis of the questioned
decision (Annex "C" hereof) is without application in the face of
the facts found by the lower court, sustained by the Court of

Appeals in CA-G.R. No. 04121 and affirmed in toto by the

Supreme Court in G.R. No. 88159.
4.....Certiorari as a special remedy is unavailing for private
respondent as there was no grave abuse of discretion nor lack or
excess of jurisdiction for Judge Mabunay to issue the order of
April 4, 1990 which was in accord with law and jurisprudence, nor
were there intervening facts and/or supervening events that will
justify respondent court to issue a writ of certiorari or a restraining
order on a final and executory judgment of the Honorable
Supreme Court.
[32]

From the decision of the trial court in Civil Case No. 138396 that favored
Equitable, Aboitiz likewise appealed to the Court of Appeals through CA-G.R.
CV No. 15071. On August 24, 1990, the Court of Appeals rendered the
Decision quoting extensively its Decision in CA-G.R. No. SP-17427 (now G.R.
No. 92735) and disposing of the appeal as follows:
"WHEREFORE, we hereby affirm the trial courts awards of actual
damages, attorney s fees and litigation expenses, with the
exception of legal interest, in favor of plaintiff-appellee Equitable
Insurance Corporation as subrogee of the consignee for the loss
of its shipment aboard the M/V `P. Aboitiz and against defendantappellant Aboitiz Shipping Corporation. However, the amount and
payment of those awards shall be subject to a determination of
the pro-rata share of said appellee in relation to the pro-rata
shares of the 109 other claimants, which determination shall be
made by the trial court. This case is therefore hereby ordered
remanded to the trial court which shall reopen the case and
receive evidence to determine appellees pro-rata share as
aforesaid. No pronouncement as to costs.
"SO ORDERED."

[33]

On September 12, 1990, Equitable moved to reconsider the Court of Appeals

Decision. The Court of Appeals denied the motion for reconsideration on

October 4, 1990. Consequently, Equitable filed with this Court a petition for
review alleging the following assignment of errors:
[34]

1.....Respondent Court of Appeals, with grave abuse of discretion

amounting to lack or excess of jurisdiction, erroneously brushed
aside the doctrine in G.R. No. 88159 which is now the law of the
case as held in G.R. No. 89757 involving the same and identical
set of facts and cause of action relative to the sinking of the M/V
`P. Aboitiz and observance of the time honored principles of stare
decisis, and estoppel by judgment.
2.....Real and hypothecary rule under Articles 587, 590 and 837 of
the Code of Commerce which is the basis of the assailed decision
and resolution is without application in the face of the facts found
by the trial court which conforms to the conclusion and finding of
facts arrived at in a similar and identical case involving the same
incident and parties similarly situated in G.R. No. 88159 already
declared as the `law of the case in a subsequent decision of this
Honorable Court in G.R. No. 89757 promulgated on August 6,
1990.
3.....Respondent Court of Appeals gravely erred in concluding that
limited liability rule applies in case of loss of cargoes when the law
itself does not distinguish; fault of the shipowner or privity thereto
constitutes one of the exceptions to the application of limited
liability under Article 587, 590 and 837 of the Code of Commerce,
Civil Code provisions on common carriers for breach of contract of
carriage prevails.
[35]

These three petitions in G.R. Nos. 92735, 94867 and 95578 were
consolidated in the Resolution of August 5, 1991 on the ground that the
petitioners "have identical causes of action against the same respondent and
similar reliefs are prayed for."
[36]

The threshold issue in these consolidated petitions is the applicability of the

limited liability rule in maritime law in favor of Aboitiz in order to stay the
execution of the judgments for full indemnification of the losses suffered by

the petitioners as a result of the sinking of the M/V P. Aboitiz. Before we can
address this issue, however, there are procedural matters that need to be
threshed out.
First. At the outset, the Court takes note of the fact that in G.R. No. 92735,
Judge Amante Purisima, whose decision in the Regional Trial Court is sought
to be upheld, is named as a co-petitioner. In Calderon v. Solicitor General,
where the petitioner in the special civil action
of certiorari and mandamus was also the judge whose order was being
assailed, the Court held that said judge had no standing to file the petition
because he was merely a nominal or formal party-respondent under Section 5
of Rule 65 of the Rules of Court. He should not appear as a party seeking the
reversal of a decision that is unfavorable to the action taken by him. The Court
there said:
[37]

"Judge Calderon should be reminded of the well-known doctrine

that a judge should detach himself from cases where his decision
is appealed to a higher court for review. The raison detre for such
doctrine is the fact that a judge is not an active combatant in such
proceeding and must leave the opposing parties to contend their
individual positions and for the appellate court to decide the
issues without his active participation. By filing this case,
petitioner in a way ceased to be judicial and has become
adversarial instead."
[38]

While the petition in G.R. No. 92735 does not expressly show whether or not
Judge Purisima himself is personally interested in the disposition of this
petition or he was just inadvertently named as petitioner by the real parties in
interest, the fact that Judge Purisima is named as petitioner has not escaped
this Courts notice. Judges and litigants should be reminded of the basic rule
that courts or individual judges are not supposed to be interested
"combatants" in any litigation they resolve.
Second. The petitioners contend that the inapplicability of the limited liability
rule to Aboitiz has already been decided on by no less than this Court in G.R.
No. 88159 as early as November 13, 1989 which was subsequently declared
as "law of the case" in G.R. No. 89757 on August 6, 1990. Herein petitioners

cite the aforementioned cases in support of their theory that the limited liability
rule based on the real and hypothecary nature of maritime law has no
application in the cases at bar.
The existence of what petitioners insist is already the "law of the case" on the
matter of limited liability is at best illusory. Petitioners are either deliberately
misleading this Court or profoundly confused. As elucidated in the case
of Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance
Corporation,
[39]

"An examination of the November 13, 1989 Resolution in G.R. No.

88159 (pp. 280-282, Rollo) shows that the same settles two
principal matters, first of which is that the doctrine of primary
administrative jurisdiction is not applicable therein; and second is
that a limitation of liability in said case would render inefficacious
the extraordinary diligence required by law of common carriers.
"It should be pointed out, however, that the limited liability
discussed in said case is not the same one now in issue at bar,
but an altogether different aspect. The limited liability settled in
G.R. No. 88159 is that which attaches to cargo by virtue of
stipulations in the Bill of Lading, popularly known as package
limitation clauses, which in that case was contained in Section 8
of the Bill of Lading and which limited the carriers liability to
US$500.00 for the cargo whose value was therein sought to be
recovered. Said resolution did not tackle the matter of the Limited
Liability Rule arising out of the real and hypothecary nature of
maritime law, which was not raised therein, and which is the
principal bone of contention in this case. While the matters
threshed out in G.R. No. 88159, particularly those dealing with the
issues on primary administrative jurisdiction and the package
liability limitation provided in the Bill of Lading are now settled and
should no longer be touched, the instant case raises a completely
different issue."
[40]

Third. Petitioners asseverate that the judgments of the lower courts, already
final and executory, cannot be directly or indirectly altered, modified,
amended, reversed or invalidated.
The rule that once a decision becomes final and executory, it is the ministerial
duty of the court to order its execution, is not an absolute one. We have
allowed the suspension of execution in cases of special and exceptional
nature when it becomes imperative in the higher interest of justice. The
unjust and inequitable effects upon various other claimants against Aboitiz
should we allow the execution of judgments for the full indemnification of
petitioners claims impel us to uphold the stay of execution as ordered by the
respondent Court of Appeals. We reiterate our pronouncement in Aboitiz
Shipping Corporation vs. General Accident Fire and Life Assurance
Corporation on this very same issue.
[41]

"This brings us to the primary question herein which is whether or

not respondent court erred in granting execution of the full
judgment award in Civil Case No. 14425 (G.R. No. 89757), thus
effectively denying the application of the limited liability
enunciated under the appropriate articles of the Code of
Commerce. x x x. Collaterally, determination of the question of
whether execution of judgments which have become final and
executory may be stayed is also an issue.
"We shall tackle the latter issue first. This Court has always been
consistent in its stand that the very purpose for its existence is to
see the accomplishment of the ends of justice. Consistent with
this view, a number of decisions have originated herefrom, the
tenor of which is that no procedural consideration is sancrosanct if
such shall result in the subverting of justice. The right to execution
after finality of a decision is certainly no exception to this. Thus,
in Cabrias v. Adil (135 SCRA 355 [1885]), this Court ruled that:
xxx............xxx............xxx
x x x every court having jurisdiction to render a particular
judgment has inherent power to enforce it, and to exercise

equitable control over such enforcement. The court has

authority to inquire whether its judgment has been
executed, and will remove obstructions to the enforcement
thereof. Such authority extends not only to such orders and
such writs as may be necessary to prevent an improper
enforcement of the judgment. If a judgment is sought to be
perverted and made a medium of consummating a wrong
the court on proper application can prevent it."
[42]

Fourth. Petitioners in G.R. No. 92735 aver that it was error for the respondent
Court of Appeals to allow Aboitiz the benefit of the limited liability rule despite
its failure to present evidence to prove its entitlement thereto in the court
below. Petitioners Monarch and Tabacalera remind this Court that from the
inception of G.R. No. 92735 in the lower court and all the way to the Supreme
Court, Aboitiz had not presented an iota of evidence to exculpate itself from
the charge of negligence for the simple reason that it was declared as in
default.
[43]

It is true that for having been declared in default, Aboitiz was precluded from
presenting evidence to prove its defenses in the court a quo. We cannot,
however, agree with petitioners that this circumstance prevents the
respondent Court of Appeals from taking cognizance of Aboitiz defenses on
appeal.
It should be noted that Aboitiz was declared as in default not for its failure to
file an answer but for its absence during pre-trial and the trial proper. In Aboitiz
answer with counterclaim, it claimed that the sinking of the M/V P. Aboitiz was
due to an act of God or unforeseen event and that the said ship had been
seaworthy and fit for the voyage. Aboitiz also alleged that it exercised the due
diligence required by law, and that considering the real and hypothecary
nature of maritime trade, the sinking justified the extinguishment of its liability
for the lost shipment.
[44]

A judgment of default does not imply a waiver of rights except that of being
heard and presenting evidence in defendants favor. It does not imply
admission by the defendant of the facts and causes of action of the plaintiff,
because the codal section requires the latter to adduce evidence in support
[45]

of his allegations as an indispensable condition before final judgment could be

given in his favor. Nor could it be interpreted as an admission by the
defendant that the plaintiffs causes of action find support in the law or that the
latter is entitled to the relief prayed for. This is especially true with respect to
a defendant who had filed his answer but had been subsequently declared in
default for failing to appear at the trial since he has had an opportunity to
traverse, via his answer, the material averments contained in the complaint.
Such defendant has a better standing than a defendant who has neither
answered nor appeared at trial. The former should be allowed to reiterate all
affirmative defenses pleaded in his answer before the Court of Appeals.
Likewise, the Court of Appeals may review the correctness of the evaluation of
the plaintiffs evidence by the lower court.
[46]

[47]

It should also be pointed out that Aboitiz is not raising the issue of its
entitlement to the limited liability rule for the first time on appeal thus, the
respondent Court of Appeals may properly rule on the same.
However, whether or not the respondent Court of Appeals erred in finding,
upon review, that Aboitiz is entitled to the benefit of the limited liability rule is
an altogether different matter which shall be discussed below.
Rule on Limited Liability. The petitioners assert in common that the vessel M/V
P. Aboitiz did not sink by reason of force majeure but because of its
unseaworthiness and the concurrent fault and/or negligence of Aboitiz, the
captain and its crew, thereby barring Aboitiz from availing of the benefit of the
limited liability rule.
The principle of limited liability is enunciated in the following provisions of the
Code of Commerce:
Art. 587. The shipagent shall also be civilly liable for the
indemnities in favor of third persons which may arise from the
conduct of the captain in the care of goods which he loaded on
the vessel; but he may exempt himself therefrom by abandoning
the vessel with all the equipments and the freight it may have
earned during the voyage.

Art. 590. The co-owners of a vessel shall be civilly liable in the

proportion of their interests in the common fund for the results of
the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from his liability by the
abandonment, before a notary, of the part of the vessel belonging
to him.
Art. 837. The civil liability incurred by shipowners in the case
prescribed in this section, shall be understood as limited to the
value of the vessel with all its appurtenances and the freightage
served during the voyage.
Article 837 applies the principle of limited liability in cases of collision, hence,
Arts. 587 and 590 embody the universal principle of limited liability in all
cases. In Yangco v. Laserna, this Court elucidated on the import of Art. 587
as follows:
[48]

"The provision accords a shipowner or agent the right of

abandonment; and by necessary implication, his liability is
confined to that which he is entitled as of right to abandon-the
vessel with all her equipments and the freight it may have earned
during the voyage. It is true that the article appears to deal only
with the limited liability of the shipowners or agents for damages
arising from the misconduct of the captain in the care of the goods
which the vessel carries, but this is a mere deficiency of language
and in no way indicates the true extent of such liability. The
consensus of authorities is to the effect that notwithstanding the
language of the aforequoted provision, the benefit of limited
liability therein provided for, applies in all cases wherein the
shipowner or agent may properly be held liable for the negligent
or illicit acts of the captain."
[49]

"No vessel, no liability," expresses in a nutshell the limited liability rule. The
shipowners or agents liability is merely co-extensive with his interest in the
vessel such that a total loss thereof results in its extinction. The total
destruction of the vessel extinguishes maritime liens because there is no

longer any res to which it can attach. This doctrine is based on the real and
hypothecary nature of maritime law which has its origin in the prevailing
conditions of the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils. To offset against these adverse
conditions and to encourage shipbuilding and maritime commerce it was
deemed necessary to confine the liability of the owner or agent arising from
the operation of a ship to the vessel, equipment, and freight, or insurance, if
any.
[50]

[51]

Contrary to the petitioners theory that the limited liability rule has been
rendered obsolete by the advances in modern technology which considerably
lessen the risks involved in maritime trade, this Court continues to apply the
said rule in appropriate cases. This is not to say, however, that the limited
liability rule is without exceptions, namely: (1) where the injury or death to a
passenger is due either to the fault of the shipowner, or to the concurring
negligence of the shipowner and the captain; (2) where the vessel is insured;
and (3) in workmens compensation claims.
[52]

[53]

We have categorically stated that Article 587 speaks only of situations where
the fault or negligence is committed solely by the captain. In cases where the
ship owner is likewise to be blamed, Article 587 does not apply. Such a
situation will be covered by the provisions of the Civil Code on common
carriers.
[54]

A finding that a fortuitous event was the sole cause of the loss of the M/V P.
Aboitiz would absolve Aboitiz from any and all liability pursuant to Article
1734(1) of the Civil Code which provides in part that common carriers are
responsible for the loss, destruction, or deterioration of the goods they carry,
unless the same is due to flood, storm, earthquake, lightning, or other natural
disaster or calamity. On the other hand, a finding that the M/V P. Aboitiz sank
by reason of fault and/or negligence of Aboitiz, the ship captain and crew of
the M/V P. Aboitiz would render inapplicable the rule on limited liability. These
issues are therefore ultimately questions of fact which have been subject of
conflicting determinations by the trial courts, the Court of Appeals and even
this Court.

In Civil Cases Nos. 82-2767-82-2770 (now G.R. No. 92735), after receiving
Monarchs and Tabacaleras evidence, the trial court found that the complete
loss of the shipment on board the M/V P. Aboitiz when it sank was neither due
to a fortuitous event nor a storm or natural cause. For Aboitiz failure to present
controverting evidence, the trial court also upheld petitioners allegation that
the M/V P. Aboitiz was unseaworthy. However, on appeal, respondent Court
of Appeals exculpated Aboitiz from fault or negligence and ruled that:
[55]

"x x x, even if she (M/V P. Aboitiz) was found to be unseaworthy,

this fault (distinguished from civil liability) cannot be laid on the
shipowners door. Such fault was directly attributable to the
captain. This is so, because under Art. 612 of the Code of
Commerce, among the inherent duties of a captain, are to
examine the vessel before sailing and to comply with the laws on
navigation." ;
[56]

and that:
"x x x although the shipowner may be held civilly liable for the
captains fault x x x having abandoned the vessel in question,
even if the vessel was unseaworthy due to the captains fault,
Aboitiz is still entitled to the benefit under the rule of limited liability
accorded to shipowners by the Code of Commerce."
[57]

Civil Case No. 138396 (now G.R. No. 95578) was similarly resolved by the
trial court, which found that the sinking of the M/V P. Aboitiz was not due to an
act of God or force majeure. It added that the evidence presented by the
petitioner Equitable demonstrated the negligence of Aboitiz Shipping
Corporation in the management and operation of its vessel M/V P. Aboitiz.
[58]

However, Aboitiz appeal was favorably acted upon by the respondent Court of
Appeals which reiterated its ruling in G.R. No. 92735 that the unseaworthiness
of the M/V P. Aboitiz was not a fault directly attributable to Aboitiz but to the
captain, and that Aboitiz is entitled to the benefit of the limited liability rule for
having abandoned its ship.
[59]

Finally, in Civil Case No. 138643 (now G.R. No. 94867), the trial court held
that the M/V P. Aboitiz was not lost due to a fortuitous event or force majeure,
and that Aboitiz had failed to satisfactorily establish that it had observed
extraordinary diligence in the vigilance over the goods transported by it.
[60]

In CA-G.R. CV No. 04121, the Court of Appeals initially ruled against Aboitiz
and found that the sinking of the vessel was due to its unseaworthiness and
the failure of its crew and master to exercise extraordinary diligence.
Subsequently, however, Aboitiz petition before the Court of Appeals,
docketed as CA-G.R. SP No. 20844 (now G.R. No. 94867) to annul and set
aside the order of execution issued by the lower court was resolved in favor of
Aboitiz. The Court of Appeals brushed aside the issue of Aboitiz negligence
and/or fault and proceeded to allow the application of the limited liability rule
"to accomplish the aims of justice." It elaborated thus: "To execute the
judgment in this case would prejudice the substantial right of other claimants
who have filed suits to claim their cargoes that was lost in the vessel that sank
and also against the petitioner to be ordered to pay more than what the law
requires."
[61]

[62]

[63]

It should be pointed out that the issue of whether or not the M/V P. Aboitiz
sank by reason of force majeure is not a novel one for that question has
already been the subject of conflicting pronouncements by the Supreme
Court. In Aboitiz Shipping Corporation v. Court of Appeals, this Court
approved the findings of the trial court and the appellate court that the sinking
of the M/V P. Aboitiz was not due to the waves caused by tropical storm
"Yoning" but due to the fault and negligence of Aboitiz, its master and crew.
On the other hand, in the later case of Country Bankers Insurance
Corporation v. Court of Appeals, this Court issued a Resolution on August
28, 1991 denying the petition for review on the ground that the Court of
Appeals committed no reversible error, thereby affirming and adopting as its
own, the findings of the Court of Appeals that force majeure had caused the
M/V P. Aboitiz to founder.
[64]

[65]

[66]

In view of these conflicting pronouncements, we find that now is the opportune

time to settle once and for all the issue of whether or not force majeure had
indeed caused the M/V P. Aboitiz to sink. After reviewing the records of the

instant cases, we categorically state that by the facts on record, the M/V P.
Aboitiz did not go under water because of the storm "Yoning."
It is true that as testified by Justo Iglesias, meteorologist of Pag-Asa, during
the inclusive dates of October 28-31, 1980, a stormy weather condition
prevailed within the Philippine area of responsibility, particularly along the sea
route from Hong Kong to Manila, because of tropical depression "Yoning".
But even Aboitiz own evidence in the form of the marine protest filed by
Captain Racines affirmed that the wind force when the M/V P. Aboitiz
foundered on October 31, 1980 was only ten (10) to fifteen (15) knots which,
under the Beaufort Scale of Wind, falls within scale No. 4 that describes the
wind velocity as "moderate breeze," and characterizes the waves as "small x x
x becoming longer, fairly frequent white horses." Captain Racines also
testified in open court that the ill-fated M/V P. Aboitiz was two hundred (200)
miles away from storm "Yoning" when it sank.
[67]

[68]

[69]

The issue of negligence on the part of Aboitiz, and the captain and crew of the
M/V P. Aboitiz has also been subject of conflicting rulings by this Court. In
G.R. No. 100373, Country Bankers Insurance Corporation v. Court of Appeals,
this Court found no error in the findings of the Court of Appeals that the M/V P.
Aboitiz sank by reason of force majeure, and that there was no negligence on
the part of its officers and crew. In direct contradiction is this Courts
categorical declaration in Aboitiz Shipping Corporation v. Court of Appeals,
to wit:
[70]

"The trial court and the appellate court found that the sinking of
the M/V P. Aboitiz was not due to the waves caused by tropical
storm "Yoning" but due to the fault and negligence of petitioner, its
master and crew. The court reproduces with approval said
findings x x x."
[71]

However, in the subsequent case of Aboitiz Shipping Corporation v. General

Accident Fire and Life Assurance Corporation, Ltd., this Court exculpated
Aboitiz from fault and/or negligence while holding that the unseaworthiness of
the M/V P. Aboitiz was only attributable to the negligence of its captain and
crew. Thus,
[72]

"On this point, it should be stressed that unseaworthiness is not a

fault that can be laid squarely on petitioners lap, absent a factual
basis for such conclusion. The unseaworthiness found in some
cases where the same has been ruled to exist is directly
attributable to the vessels crew and captain, more so on the part
of the latter since Article 612 of the Code of Commerce provides
that among the inherent duties of a captain is to examine a vessel
before sailing and to comply with the laws of navigation. Such a
construction would also put matters to rest relative to the decision
of the Board of Marine Inquiry. While the conclusion therein
exonerating the captain and crew of the vessel was not sustained
for lack of basis, the finding therein contained to the effect that the
vessel was seaworthy deserves merit. Despite appearances, it is
not totally incompatible with the findings of the trial court and the
Court of Appeals, whose finding of "unseaworthiness" clearly did
not pertain to the structural condition of the vessel which is the
basis of the BMIs findings, but to the condition it was in at the
time of the sinking, which condition was a result of the acts of the
captain and the crew."
[73]

It therefore becomes incumbent upon this Court to answer with finality the
nagging question of whether or not it was the concurrent fault and/or
negligence of Aboitiz and the captain and crew of the ill-fated vessel that had
caused it to go under water.
Guided by our previous pronouncements and illuminated by the evidence now
on record, we reiterate our findings in Aboitiz Shipping Corporation v. General
Accident Fire and Life Assurance Corporation, Ltd. , that the unseaworthiness
of the M/V P. Aboitiz had caused it to founder. We, however, take exception to
the pronouncement therein that said unseaworthiness could not be attributed
to the ship owner but only to the negligent acts of the captain and crew of the
M/V P. Aboitiz. On the matter of Aboitiz negligence, we adhere to our ruling
in Aboitiz Shipping Corporation v. Court of Appeals, that found Aboitiz, and
the captain and crew of the M/V P. Aboitiz to have been concurrently
negligent.
[74]

[75]

During the trial of Civil Case Nos. 82-2767-82-2770 (now G.R. No. 92735),
petitioners Monarch and Tabacalera presented a survey from Perfect Lambert,
a surveyor based in Hong Kong that conducted an investigation on the
possible cause of the sinking of the vessel. The said survey established that
the cause of the sinking of the vessel was the leakage of water into the M/V P.
Aboitiz which probably started in the forward part of the No. 1 hull, although
no explanation was proffered as to why the No. 2 hull was likewise flooded.
Perfect Lambert surmised that the flooding was due to a leakage in the shell
plating or a defect in the water tight bulk head between the Nos. 1 and 2 holds
which allowed the water entering hull No.1 to pass through hull No. 2. The
surveyor concluded that whatever the cause of the leakage of water into these
hulls, the seaworthiness of the vessel was definitely in question because the
breaches of the hulls and serious flooding of the two cargo holds occurred
simultaneously in seasonal weather.
[76]

We agree with the uniform finding of the lower courts that Aboitiz had failed to
prove that it observed the extraordinary diligence required of it as a common
carrier. We therefore reiterate our pronouncement in Aboitiz Corporation v.
Court of Appeals on the issue of Aboitiz liability in the sinking of its vessel, to
wit:
[77]

"In accordance with Article 1732 of the Civil Code, the defendant
common carrier from the nature of its business and for reasons of
public policy, is bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by it according to all circumstances of the case. While
the goods are in the possession of the carrier, it is but fair that it
exercise extraordinary diligence in protecting them from loss or
damage, and if loss occurs, the law presumes that it was due to
the carriers fault or negligence; that is necessary to protect the
interest of the shipper which is at the mercy of the carrier x x x. In
the case at bar, the defendant failed to prove hat the loss of the
subject cargo was not due to its fault or negligence."
[78]

The failure of Aboitiz to present sufficient evidence to exculpate itself from

fault and/or negligence in the sinking of its vessel in the face of the foregoing
expert testimony constrains us to hold that Aboitiz was concurrently at fault

and/or negligent with the ship captain and crew of the M/V P. Aboitiz. This is in
accordance with the rule that in cases involving the limited liability of
shipowners, the initial burden of proof of negligence or unseaworthiness rests
on the claimants. However, once the vessel owner or any party asserts the
right to limit its liability, the burden of proof as to lack of privity or knowledge
on its part with respect to the matter of negligence or unseaworthiness is
shifted to it. This burden, Aboitiz had unfortunately failed to discharge. That
Aboitiz failed to discharge the burden of proving that the unseaworthiness of
its vessel was not due to its fault and/or negligence should not however mean
that the limited liability rule will not be applied to the present cases. The
peculiar circumstances here demand that there should be no strict adherence
to procedural rules on evidence lest the just claims of shippers/insurers be
frustrated. The rule on limited liability should be applied in accordance with the
latest ruling in Aboitiz Shipping Corporation v. General Accident Fire and Life
Assurance Corporation, Ltd., promulgated on January 21, 1993, that
claimants be treated as "creditors in an insolvent corporation whose assets
are not enough to satisfy the totality of claims against it." To do so, the Court
set out in that case the procedural guidelines:
[79]

[80]

[81]

"In the instant case, there is, therefore, a need to collate all claims
preparatory to their satisfaction from the insurance proceeds on
the vessel M/V P. Aboitiz and its pending freightage at the time of
its loss. No claimant can be given precedence over the others by
the simple expedience of having completed its action earlier than
the rest. Thus, execution of judgment in earlier completed cases,
even those already final and executory must be stayed pending
completion of all cases occasioned by the subject sinking. Then
and only then can all such claims be simultaneously settled, either
completely or pro-rata should the insurance proceeds and
freightage be not enough to satisfy all claims.
"x x x............x x x............x x x.
" In fairness to the claimants, and as a matter of equity, the total
proceeds of the insurance and pending freightage should now be
deposited in trust. Moreover, petitioner should institute the
necessary limitation and distribution action before the proper

admiralty court within 15 days from finality of this decision, and

thereafter deposit with it the proceeds from the insurance
company and pending freightage in order to safeguard the same
pending final resolution of all incidents, for final pro-rating and
settlement thereof." (Underscoring supplied.)
[82]

There is no record that Aboitiz has instituted such action or that it has
deposited in trust the insurance proceeds and freightage earned. The
pendency of the instant cases before the Court is not a reason for Aboitiz to
disregard the aforementioned order of the Court. In fact, had Aboitiz complied
therewith, even these cases could have been terminated earlier. We are
inclined to believe that instead of filing the suit as directed by this Court,
Aboitiz tolerated the situation of several claimants waiting to get hold of its
insurance proceeds, which, if correctly handled must have multiplied in
amount by now. By its failure to abide by the order of this Court, it had caused
more damage to the claimants over and above that which they have endured
as a direct consequence of the sinking of the M/V P. Aboitiz. It was obvious
that from among the many cases filed against it over the years, Aboitiz was
waiting for a judgment that might prove favorable to it, in blatant violation of
the basic provisions of the Civil Code on abuse of rights.
Well aware of the 110 claimants against it, Aboitiz preferred to litigate the
claims singly rather than exert effort towards the consolidation of all claims.
Consequently, courts have arrived at conflicting decisions while claimants
waited over the years for a resolution of any of the cases that would lead to
the eventual resolution of the rest. Aboitiz failed to give the claimants their due
and to observe honesty and good faith in the exercise of its rights.
[83]

Aboitiz blatant disregard of the order of this Court in Aboitiz Shipping

Corporation v. General Accident Fire and Life Assurance Corporation, Ltd.
cannot be anything but willful on its part. An act is considered willful if it is
done with knowledge of its injurious effect; it is not required that the act be
done purposely to produce the injury. Aboitiz is well aware that by not
instituting the said suit, it caused the delay in the resolution of all claims
against it. Having willfully caused loss or injury to the petitioners in a manner
that is contrary to morals, good customs or public policy, Aboitiz is liable for
damages to the latter.
[84]

[85]

[86]

Thus, for its contumacious act of defying the order of this Court to file the
appropriate action to consolidate all claims for settlement, Aboitiz must be
held liable for moral damages which may be awarded in appropriate cases
under the Chapter on human relations of the Civil Code (Articles 19 to 36).

[87]

On account of Aboitiz refusal to satisfy petitioners claims in accordance with

the directive of the Court in Aboitiz Shipping Corporation v. General Accident
Fire and Life Assurance Corporation, Ltd., it acted in gross and evident bad
faith. Accordingly, pursuant to Article 2208 of the Civil Code, petitioners
should be granted attorneys fees.
[88]

WHEREFORE, the petitions in G.R. Nos. 92735, 94867, and 95578 are
DENIED. The decisions of the Court of Appeals in CA-G.R. No. SP-17427
dated March 29, 1990, CA-G.R. SP No. 20844 dated August 15, 1990, and
CA-G.R. CV No. 15071 dated August 24, 1990 are AFFIRMED with the
MODIFICATION that respondent Aboitiz Shipping Corporation is ordered to
pay each of the respective petitioners the amounts of P100,000.00 as moral
damages and P50,000.00 as attorneys fees, and treble the cost of suit.
Respondent Aboitiz Shipping Corporation is further directed to comply with the
Order promulgated by this Court on January 21, 1993 in Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance Corporation,
Ltd., G.R. No. 100446, January 21, 1993, to (a) institute the necessary
limitation and distribution action before the proper Regional Trial Court, acting
as admiralty court, within fifteen (15) days from the finality of this decision, and
(b) thereafter to deposit with the said court the insurance proceeds from the
loss of the vessel, M/V P. Aboitiz, and the freightage earned in order to
safeguard the same pending final resolution of all incidents relative to the final
pro-rating thereof and to the settlement of all claims.
SO ORDERED.

G.R. No. 148154

December 17, 2007

REPUBLIC OF THE PHILIPPINES, represented by the Presidential Commission on Good

Government (PCGG), petitioner,
vs.

SANDIGANBAYAN (Second Division) and FERDINAND R. MARCOS, JR. (as executor of the
estate of FERDINAND E. MARCOS), respondents.
RESOLUTION
QUISUMBING, J.:
The propriety of filing and granting of a motion for a bill of particulars filed for the estate of a
defaulting and deceased defendant is the main issue in this saga of the protracted legal battle
between the Philippine government and the Marcoses on alleged ill-gotten wealth.
This special civil action for certiorari1 assails two resolutions of the Sandiganbayan ("anti-graft court"
or "court") issued during the preliminary legal skirmishes in this 20-year case: 2 (1) the January 31,
2000 Resolution3 which granted the motion for a bill of particulars filed by executor Ferdinand R.
Marcos, Jr. (respondent) on behalf of his father's estate and (2) the March 27, 2001
Resolution4 which denied the government's motion for reconsideration.
From the records, the antecedent and pertinent facts in this case are as follows:
The administration of then President Corazon C. Aquino successively sued former President
Ferdinand E. Marcos and former First Lady Imelda Romualdez-Marcos (Mrs. Marcos), and their
alleged cronies or dummies before the anti-graft court to recover the alleged ill-gotten wealth that
they amassed during the former president's 20-year rule. Roman A. Cruz, Jr. (Cruz), then president
and general manager of the Government Service Insurance System (GSIS); president of the
Philippine Airlines (PAL); chairman and president of the Hotel Enterprises of the Philippines, Inc.,
owner of Hyatt Regency Manila; chairman and president of Manila Hotel Corporation; and chairman
of the Commercial Bank of Manila (CBM), is the alleged crony in this case.
On July 21, 1987, the Presidential Commission on Good Government (PCGG), through the Office of
the Solicitor General, filed a Complaint5 for reconveyance, reversion, accounting, restitution and
damages alleging that Cruz and the Marcoses stole public assets and invested them in several
institutions here and abroad. Specifically, Cruz allegedly purchased, in connivance with the
Marcoses, assets whose values are disproportionate to their legal income, to wit: two residential lots
and two condominiums in Baguio City; a residential building in Makati; a parcel of land and six
condominium units in California, USA; and a residential land in Metro Manila. The PCGG also
prayed for the payment of moral damages of P50 billion and exemplary damages of P1 billion.
On September 18, 1987, Cruz filed an Omnibus Motion to Dismiss, strike out averments in the
complaint, and for a bill of particulars.6
On April 18, 1988, the court ordered that alias summonses be served on the Marcoses who were
then in exile in Hawaii.7 The court likewise admitted the PCGG's Expanded Complaint8 dated April
25, 1988, then denied Cruz's omnibus motion on July 28, 1988 after finding that the expanded
complaint sufficiently states causes of action and that the matters alleged are specific enough to
allow Cruz to prepare a responsive pleading and for trial.9 On September 15, 1988, Cruz filed his
answer ad cautelam.10

On November 10, 1988, the alias summonses on the Marcoses were served at 2338 Makiki Heights,
Honolulu, Hawaii.11 The Marcoses, however, failed to file an answer and were accordingly declared
in default by the anti-graft court on April 6, 1989.12 In Imelda R. Marcos, et al. v. Garchitorena, et
al.,13 this Court upheld the validity of the Marcoses' default status for failure to file an answer within
60 days from November 10, 1988 when the alias summonses were validly served in their house
address in Hawaii.
On September 29, 1989, former President Marcos died in Hawaii. He was substituted by his estate,
represented by Mrs. Marcos and their three children, upon the motion of the PCGG. 14
On July 13, 1992, Mrs. Marcos filed a Motion to Set Aside Order of Default, 15 which was granted by
the anti-graft court on October 28, 1992.16 In Republic v. Sandiganbayan,17 this Court affirmed the
resolution of the anti-graft court, ruling that Mrs. Marcos had a meritorious defense, and that failure
of a party to properly respond to various complaints brought about by the occurrence of
circumstances which ordinary prudence could not have guarded against, such as being barred from
returning to the Philippines, numerous civil and criminal suits in the United States, deteriorating
health of her husband, and the complexities of her legal battles, is considered as due to fraud,
accident and excusable negligence.18
On September 6, 1995, Mrs. Marcos filed her answer,19 arguing that the former President Marcos'
wealth is not ill-gotten and that the civil complaints and proceedings are void for denying them due
process. She also questioned the legality of the PCGG's acts and asked for P20 billion moral and
exemplary damages and P10 million attorney's fees.
On January 11, 1999, after pre-trial briefs had been filed by Cruz, the PCGG, and Mrs. Marcos, the
court directed former President Marcos' children to appear before it or it will proceed with pre-trial
and subsequent proceedings.20
On March 16, 1999, respondent filed a Motion for Leave to File a Responsive Pleading as executor
of his late father's estate.21 The PCGG opposed the motion, citing as ground the absence of a motion
to set aside the default order or any order lifting the default status of former President Marcos. 22
On May 28, 1999, the court granted respondent's motion:
xxxx
The Court concedes the plausibility of the stance taken by the Solicitor General that the
default Order binds the estate and the executor for they merely derived their right, if any,
from the decedent. Considering however the complexities of this case, and so that the case
as against the other defendants can proceed smoothly as the stage reached to date is only a
continuation of the pre-trial proceedings, the Court, in the interest of justice and conformably
with the discretion granted to it under Section 3 of Rule 9 of the Rules of Court hereby
accords affirmative relief to the prayer sought in the motion.

Accordingly, Ferdinand R. Marcos, Jr.[,] as executor of the [estate of] deceased defendant
Ferdinand E. Marcos[,] is granted a period of ten (10) days from receipt of this Resolution
within which to submit his Responsive Pleading.
x x x x23
Respondent asked for three extensions totaling 35 days to file an answer. The court granted the
motions and gave him until July 17, 1999 to file an answer. But instead of filing an answer,
respondent filed on July 16, 1999, a Motion For Bill of Particulars,24 praying for clearer statements of
the allegations which he called "mere conclusions of law, too vague and general to enable
defendants to intelligently answer."
The PCGG opposed the motion, arguing that the requested particulars were evidentiary matters; that
the motion was dilatory; and that it contravened the May 28, 1999 Resolution granting respondent's
Motion for Leave to File a Responsive Pleading.25
The anti-graft court, however, upheld respondent, explaining that the allegations against former
President Marcos were vague, general, and were mere conclusions of law. It pointed out that the
accusations did not specify the ultimate facts of former President Marcos' participation in Cruz's
alleged accumulation of ill-gotten wealth, effectively preventing respondent from intelligently
preparing an answer. It noted that this was not the first time the same issue was raised before it, and
stressed that this Court had consistently ruled in favor of the motions for bills of particulars of the
defendants in the other ill-gotten wealth cases involving the Marcoses.
The fallo of the assailed January 31, 2000 Resolution reads:
WHEREFORE, the defendant-movant's motion for bill of particulars is hereby GRANTED.
Accordingly, the plaintiff is hereby ordered to amend pars. 9 and Annex "A", 12 (a) to (e), and
19 in relation to par-3 of the PRAYER, of the Expanded Complaint, to allege the ultimate
facts indicating the nature, manner, period and extent of participation of Ferdinand E. Marcos
in the acts referred to therein, and the amount of damages to be proven during trial,
respectively, within fifteen (15) days from receipt of this resolution[.]
SO ORDERED.26
Not convinced by petitioner's Motion for Reconsideration,27 the court ruled in the assailed March 27,
2001 Resolution that the motion for a bill of particulars was not dilatory considering that the case
was only at its pre-trial stage and that Section 1,28 Rule 12 of the 1997 Rules of Civil Procedure
allows its filing.
In urging us to nullify now the subject resolutions, petitioner, through the PCGG, relies on two
grounds:
i.

The motion for bill of particulars contravenes section 3, rule 9 of the 1997 rules [OF] civil
procedure.
ii.
The motion for bill of particulars is patently dilatory and bereft of any basis. 29
Invoking Section 3,30 Rule 9 of the 1997 Rules of Civil Procedure, petitioner argues that since the
default order against former President Marcos has not been lifted by any court order, respondent
cannot file a motion for a bill of particulars. Petitioner stresses that respondent did not file a motion to
lift the default order as executor of his father's estate; thus, he and the estate cannot take part in the
trial.
Petitioner also contends that respondent was granted leave to file an answer to the expanded
complaint, not a motion for a bill of particulars. The anti-graft court should not have accepted the
motion for a bill of particulars after he had filed a motion for leave to file responsive pleading and
three successive motions for extension as the motion for a bill of particulars is dilatory. Petitioner
insists that respondent impliedly admitted that the complaint sufficiently averred factual matters with
definiteness to enable him to properly prepare a responsive pleading because he was able to
prepare a draft answer, as stated in his second and third motions for extension. Petitioner adds that
the factual matters in the expanded complaint are clear and sufficient as Mrs. Marcos and Cruz had
already filed their respective answers.
Petitioner also argues that if the assailed Resolutions are enforced, the People will suffer irreparable
damage because petitioner will be forced to prematurely divulge evidentiary matters, which is not a
function of a bill of particulars. Petitioner maintains that paragraph 12, subparagraphs a to e, 31 of the
expanded complaint "illustrate the essential acts pertaining to the conspirational acts" between Cruz
and former President Marcos. Petitioner argues that respondent erroneously took out of context the
phrase "unlawful concert" from the rest of the averments in the complaint.
Respondent, for his part, counters that this Court had compelled petitioner in several ill-gotten wealth
cases involving the same issues and parties to comply with the motions for bills of particulars filed by
other defendants on the ground that most, if not all, of the allegations in the similarly worded
complaints for the recovery of alleged ill-gotten wealth consisted of mere conclusions of law and
were too vague and general to enable the defendants to intelligently parry them.
Respondent adds that it is misleading for the Government to argue that the default order against his
father stands because the May 28, 1999 Resolution effectively lifted it; otherwise, he would not have
been called by the court to appear before it and allowed to file a responsive pleading. He stresses
that the May 28, 1999 Resolution remains effective for all intents and purposes because petitioner
did not file a motion for reconsideration.
Respondent likewise denies that his motion for a bill of particulars is dilatory as it is petitioner's
continued refusal to submit a bill of particulars which causes the delay and it is petitioner who is
"hedging, flip-flopping and delaying in its prosecution" of Civil Case No. 0006. His draft answer
turned out "not an intelligent" one due to the vagueness of the allegations. He claims that petitioner's

actions only mean one thing: it has no specific information or evidence to show his father's
participation in the acts of which petitioner complains.
In its Reply,32 petitioner adds that the acts imputed to former President Marcos were acts that Cruz
committed in conspiracy with the late dictator, and which Cruz could not have done without the
participation of the latter. Petitioner further argues that conspiracies need not be established by
direct evidence of the acts charged but by a number of indefinite acts, conditions and circumstances.
In a nutshell, the ultimate issue is: Did the court commit grave abuse of discretion amounting to lack
or excess of jurisdiction in granting respondent's motion for a bill of particulars as executor of former
President Marcos' estates considering that the deceased defendant was then a defaulting defendant
when the motion was filed?
We rule in the negative, and dismiss the instant petition for utter lack of merit.
Under the Rules of Court, a defending party may be declared in default, upon motion and notice, for
failure to file an answer within the allowable period. As a result, the defaulting party cannot take part
in the trial albeit he is entitled to notice of subsequent proceedings.33
The remedies against a default order are: (1) a motion to set aside the order of default at any time
after discovery thereof and before judgment on the ground that the defendant's failure to file an
answer was due to fraud, accident, mistake or excusable neglect and that the defendant has a
meritorious defense; (2) a motion for new trial within 15 days from receipt of judgment by default, if
judgment had already been rendered before the defendant discovered the default, but before said
judgment has become final and executory; (3) an appeal within 15 days from receipt of judgment by
default; (4) a petition for relief from judgment within 60 days from notice of judgment and within 6
months from entry thereof; and (5) a petition for certiorari in exceptional circumstances. 34
In this case, former President Marcos was declared in default for failure to file an answer. He died in
Hawaii as an exile while this case was pending, since he and his family fled to Hawaii in February
1986 during a people-power revolt in Metro Manila. His representatives failed to file a motion to lift
the order of default. Nevertheless, respondent, as executor of his father's estate, filed a motion for
leave to file a responsive pleading, three motions for extensions to file an answer, and a motion for
bill of particulars all of which were granted by the anti-graft court.
Given the existence of the default order then, what is the legal effect of the granting of the motions to
file a responsive pleading and bill of particulars? In our view, the effect is that the default order
against the former president is deemed lifted.
Considering that a motion for extension of time to plead is not a litigated motion but an ex parte one,
the granting of which is a matter addressed to the sound discretion of the court; that in some cases
we have allowed defendants to file their answers even after the time fixed for their presentation; that
we have set aside orders of default where defendants' failure to answer on time was excusable; that
the pendency of the motion for a bill of particulars interrupts the period to file a responsive pleading;
and considering that no real injury would result to the interests of petitioner with the granting of the
motion for a bill of particulars, the three motions for extensions of time to file an answer, and the

motion with leave to file a responsive pleading, the anti-graft court has validly clothed respondent
with the authority to represent his deceased father. The only objection to the action of said court
would be on a technicality. But on such flimsy foundation, it would be erroneous to sacrifice the
substantial rights of a litigant. Rules of procedure should be liberally construed to promote their
objective in assisting the parties obtain a just, speedy and inexpensive determination of their case. 35
While it is true that there was no positive act on the part of the court to lift the default order because
there was no motion nor order to that effect, the anti-graft court's act of granting respondent the
opportunity to file a responsive pleading meant the lifting of the default order on terms the court
deemed proper in the interest of justice. It was the operative act lifting the default order and thereby
reinstating the position of the original defendant whom respondent is representing, founded on the
court's discretionary power to set aside orders of default.
It is noteworthy that a motion to lift a default order requires no hearing; it need be under oath only
and accompanied by an affidavit of merits showing a meritorious defense. 36 And it can be filed "at
any time after notice thereof and before judgment." Thus, the act of the court in entertaining the
motions to file a responsive pleading during the pre-trial stage of the proceedings effectively meant
that respondent has acquired a locus standi in this case. That he filed a motion for a bill of particulars
instead of an answer does not pose an issue because he, as party defendant representing the
estate, is allowed to do so under the Rules of Court to be able to file an intelligent answer. It follows
that petitioner's filing of a bill of particulars in this case is merely a condition precedent to the filing of
an answer.
Indeed, failure to file a motion to lift a default order is not procedurally fatal as a defaulted party can
even avail of other remedies mentioned above.
As default judgments are frowned upon, we have been advising the courts below to be liberal in
setting aside default orders to give both parties every chance to present their case fairly without
resort to technicality.37 Judicial experience shows, however, that resort to motions for bills of
particulars is sometimes intended for delay or, even if not so intended, actually result in delay since
the reglementary period for filing a responsive pleading is suspended and the subsequent
proceedings are likewise set back in the meantime. As understood under Section 1 of Rule 12,
mentioned above, a motion for a bill of particulars must be filed within the reglementary period for
the filing of a responsive pleading to the pleading sought to be clarified. This contemplates pleadings
which arerequired by the Rules to be answered under pain of procedural sanctions, such as default
or implied admission of the facts not responded to.38
But as defaulted defendants are not actually thrown out of court because the Rules see to it that
judgments against them must be in accordance with the law and competent evidence, this Court
prefers that the lifting of default orders be effected before trial courts could receive plaintiffs'
evidence and render judgments. This is so since judgments by default may result in considerable
injustice to defendants, necessitating careful and liberal examination of the grounds in motions
seeking to set them aside. The inconvenience and complications associated with rectifying resultant
errors, if defendant justifies his omission to seasonably answer, far outweigh the gain in time and
dispatch of immediately trying the case.39 The fact that former President Marcos was in exile when

he was declared in default, and that he later died still in exile, makes the belated filing of his answer
in this case understandably excusable.
The anti-graft court required the Marcos siblings through its January 11, 1999 Order 40 to substitute
for their father without informing them that the latter was already declared in default. They were
unaware, therefore, that they had to immediately tackle the matter of default. Respondent, who
stands as the executor of their father's estate, could assume that everything was in order as far as
his standing in court was concerned. That his motion for leave to file a responsive pleading was
granted by the court gave him credible reason not to doubt the validity of his legal participation in this
case. Coupled with his intent to file an answer, once his motion for a bill of particulars is sufficiently
answered by petitioner, the circumstances abovementioned warrant the affirmation of the anti-graft
court's actions now being assailed.
As to the propriety of the granting of the motion for a bill of particulars, we find for respondent as the
allegations against former President Marcos appear obviously couched in general terms. They do
not cite the ultimate facts to show how the Marcoses acted "in unlawful concert" with Cruz in illegally
amassing assets, property and funds in amounts disproportionate to Cruz's lawful income, except
that the former President Marcos was the president at the time.
The pertinent allegations in the expanded complaint subject of the motion for a bill of particulars read
as follows:
11. Defendant Roman A. Cruz, Jr. served as public officer during the Marcos administration.
During his . . . incumbency as public officer, he acquired assets, funds and other property
grossly and manifestly disproportionate to his salaries, lawful income and income from
legitimately acquired property.
12. . . . Cruz, Jr., in blatant abuse of his position as Chairman and General Manager of the
Government Service Insurance System (GSIS), as President and Chairman of the Board of
Directors of the Philippine Airlines (PAL), and as Executive Officer of the Commercial Bank of
Manila, by himself and/or in unlawful concert with defendants Ferdinand E. Marcos and
Imelda R. Marcos, among others:
(a) purchased through Arconal N.V., a Netherland-Antilles Corporation, a lot and building
located at 212 Stockton St., San Francisco, California, for an amount much more than the
value of the property at the time of the sale to the gross and manifest disadvantageous (sic)
to plaintiff.
GSIS funds in the amount of $10,653,350.00 were used for the purchase when under the
right of first refusal by PAL contained in the lease agreement with Kevin Hsu and his wife, the
owners of the building, a much lower amount should have been paid.
For the purchase of the building, defendant Cruz allowed the intervention of Sylvia Lichauco
as broker despite the fact that the services of such broker were not necessary and even
contrary to existing policies of PAL to deal directly with the seller. The broker was paid the
amount of $300,000.00 resulting to the prejudice of GSIS and PAL.

(b) Converted and appropriated to . . . own use and benefit funds of the Commercial Bank of
Manila, of which he was Executive Officer at the time.
He caused the disbursement from the funds of the bank of among others, the amount
of P81,152.00 for personal services rendered to him by one Brenda Tuazon.
(c) Entered into an agency agreement on behalf of the Government Service Insurance
System with the Integral Factors Corporation (IFC), to solicit insurance, and effect
reinsurance on behalf of the GSIS, pursuant to which agreement, IFC effected a great part of
its reinsurance with INRE Corporation, which, was a non-insurance company registered in
London[,] with defendant . . . Cruz, Jr., as one of its directors.
IFC was allowed to service accounts emanating from government agencies like the Bureau
of Buildings, Philippine National Oil Corporation, National Power Corporation, Ministry of
Public Works and Highways which under the laws are required to insure with and deal
directly with the GSIS for their insurance needs. The intervention of IFC to service these
accounts caused the reduction of premium paid to GSIS as a portion thereof was paid to
IFC.
(d) Entered into an agreement with the Asiatic Integrated Corporation (AIC) whereby the
GSIS ceded, transferred, and conveyed property consisting of five (5) adjoining parcels of
land situated in Manila covered by Transfer Certificates of Title (TCT) Nos. 49853, 49854,
49855 and 49856 to AIC in exchange for AIC property known as the Pinugay Estate located
at Tanay, Rizal, covered by TCT No. 271378, under terms and conditions grossly and
manifestly disadvantageous to the government.
The appraised value of the GSIS parcels of land was P14,585,600.00 as of June 25, 1971
while the value of the Pinugay Estate was P2.00 per square meter or a total amount
of P15,219,264.00. But in the barter agreement, the Pinugay Estate was valued at P5.50 per
square meter or a total of P41,852,976.00, thus GSIS had to pay AIC P27,287,976.00, when
it was GSIS which was entitled to payment from AIC for its failure to pay the rentals of the
GSIS property then occupied by it.
(e) purchased three (4) (sic) additional Airbus 300 in an amount much more than the market
price at the time when PAL was in deep financial strain, to the gross and manifest
disadvantage of Plaintiff.
On October 29, 1979, defendant Cruz, as President and Chairman of the Board of Directors
of . . . (PAL) authorized the payment of non-refundable deposit of U.S. $200,000.00 even
before a meeting of the Board of Directors of PAL could deliberate and approve the
purchase.41
In his motion for a bill of particulars, respondent wanted clarification on the specific nature, manner
and extent of participation of his father in the acquisition of the assets cited above under Cruz;
particularly whether former President Marcos was a beneficial owner of these properties; and the
specific manner in which he acquired such beneficial control.

Also, respondent wanted to know the specific nature, manner, time and extent of support,
participation and collaboration of his father in (1) Cruz's alleged "blatant abuse" as GSIS president
and general manager, PAL president and chairman of the board, and executive officer of the CBM;
(2) the purchase of a lot and building in California using GSIS funds and Cruz's allowing Lichauco as
broker in the sale of the lot and building contrary to PAL policies; (3) Cruz's appropriating to himself
CBM funds; (4) Cruz's disbursement of P81,152 CBM funds for personal services rendered to him by
Tuazon; (5) Cruz's entering into an agency agreement for GSIS with IFC to solicit, insure, and effect
reinsurance of GSIS, as result of which IFC effected a great part of its reinsurance with INRE
Corporation, a London-registered non-insurance company, of which Cruz was one of the directors;
(6) Cruz's allowing IFC to service the accounts emanating from government agencies which were
required under the law to insure and deal directly with the GSIS for their insurance needs; (7) the
GSIS-AIC agreement wherein GSIS ceded and conveyed to AIC five parcels of land in Manila in
exchange for AIC's Pinugay Estate in Tanay, Rizal; (8) PAL's purchase of three Airbus 300 jets for a
higher price than the market price; and (9) if former President Marcos was connected in any way to
IFC and INRE Corporation. Respondent likewise asked, what is the specific amount of damages
demanded?
The 1991 Virata-Mapa Doctrine42 prescribes a motion for a bill of particulars, not a motion to dismiss,
as the remedy for perceived ambiguity or vagueness of a complaint for the recovery of ill-gotten
wealth,43 which was similarly worded as the complaint in this case. That doctrine provided protective
precedent in favor of respondent when he filed his motion for a bill of particulars.
While the allegations as to the alleged specific acts of Cruz were clear, they were vague and unclear
as to the acts of the Marcos couple who were allegedly "in unlawful concert with" the former. There
was no factual allegation in the original and expanded complaints on the collaboration of or on the
kind of support extended by former President Marcos to Cruz in the commission of the alleged
unlawful acts constituting the alleged plunder. All the allegations against the Marcoses, aside from
being maladroitly laid, were couched in general terms. The alleged acts, conditions and
circumstances that could show the conspiracy among the defendants were not particularized and
sufficiently set forth by petitioner.
That the late president's co-defendants were able to file their respective answers to the complaint
does not necessarily mean that his estate's executor will be able to file an equally intelligent answer,
since the answering defendants' defense might be personal to them.
In dismissing this petition, Tantuico, Jr. v. Republic44 also provides us a cogent jurisprudential guide.
There, the allegations against former President Marcos were also conclusions of law unsupported by
factual premises. The particulars prayed for in the motion for a bill of particulars were also not
evidentiary in nature. In that case, we ruled that the anti-graft court acted with grave abuse of
discretion amounting to lack or excess of jurisdiction in denying an alleged crony's motion for a bill of
particulars on a complaint with similar tenor and wordings as in the case at bar.
Likewise we have ruled in Virata v. Sandiganbayan45 (1993) that Tantuico's applicability to that case
was "ineluctable," and the propriety of the motion for a bill of particulars under Section 1, Rule 12 of
the Revised Rules of Court was beyond dispute.46

In 1996, in the similar case of Republic v. Sandiganbayan (Second Division),47 we also affirmed the
resolutions of the Sandiganbayan granting the motion for a bill of particulars of Marcos' alleged
crony, business tycoon Lucio Tan.48
Phrases like "in flagrant breach of public trust and of their fiduciary obligations as public officers with
grave and scandalous abuse of right and power and in brazen violation of the Constitution and laws,"
"unjust enrichment," "embarked upon a systematic plan to accumulate ill-gotten wealth," "arrogated
unto himself all powers of government," are easy and easy to read; they have potential media
quotability and they evoke passion with literary flair, not to mention that it was populist to flaunt those
statements in the late 1980s. But they are just that, accusations by generalization. Motherhood
statements they are, although now they might be a politically incorrect expression and an affront to
mothers everywhere, although they best describe the accusations against the Marcoses in the case
at bar.
In Justice Laurel's words, "the administration of justice is not a matter of guesswork." 49 The name of
the game is fair play, not foul play. We cannot allow a legal skirmish where, from the start, one of the
protagonists enters the arena with one arm tied to his back.50 We must stress anew that the
administration of justice entails a painstaking, not haphazard, preparation of pleadings.
The facile verbosity with which the legal counsel for the government flaunted the accusation of
excesses against the Marcoses in general terms must be soonest refurbished by a bill of particulars,
so that respondent can properly prepare an intelligent responsive pleading and so that trial in this
case will proceed as expeditiously as possible. To avoid a situation where its pleadings may be
found defective, thereby amounting to a failure to state a cause of action, petitioner for its part must
be given the opportunity to file a bill of particulars. Thus, we are hereby allowing it to supplement its
pleadings now, considering that amendments to pleadings are favored and liberally allowed
especially before trial.
Lastly, the allowance of the motion for a more definite statement rests with the sound discretion of
the court. As usual in matters of a discretionary nature, the ruling of the trial court will not be
reversed unless there has been a palpable abuse of discretion or a clearly erroneous order.51 This
Court has been liberal in giving the lower courts the widest latitude of discretion in setting aside
default orders justified under the right to due process principle. Plain justice demands and the law
requires no less that defendants must know what the complaint against them is all about. 52
What is important is that this case against the Marcoses and their alleged crony and dummy be
decided by the anti-graft court on the merits, not merely on some procedural faux pas. In the interest
of justice, we need to dispel the impression in the individual respondents' minds that they are being
railroaded out of their rights and properties without due process of law.
WHEREFORE, finding no grave abuse of discretion on the part of the Sandiganbayan in granting
respondent's Motion for Bill of Particulars, the petition is DISMISSED. The Resolutions of the
Sandiganbayan dated January 31, 2000 and March 27, 2001 in Civil Case No. 0006 are AFFIRMED.
Petitioner is ordered to prepare and file a bill of particulars containing the ultimate facts as prayed for
by respondent within twenty (20) days from notice.

SO ORDERED.
G.R. No. L-30683 May 31, 1977
CELESTINA GUMABAY, assisted by her husband, DIOSDADO MABBORANG, plaintiff-appellee,
vs.
JULIANA BARALIN, SANTIAGO BUNAGAN, LORETO BUNAGAN, BASILIO MAMBA, BALBINO
CATABAY, ARCADIO MAGGAY, LUPO GUIYAB and FRANCISCO CALIMARAN, defendantsappellants.
Ventura V. Perez & Pablo B. Bulan for appellants.
Teodoro B. Mallonga for appellee.

AQUINO, J.:
This is a litigation over a parcel of cornland with an area of seventeen thousand square meters
located at Barrio Tanuru, Enrile, Cagayan assessed in the name of Celestina Gumabay in the sum of
three hundred pesos according to Tax Declaration No. 17548-a dated August 24, 1956 (Exh. A). She
paid the realty taxes on the said lot for the years 1948 to 1956 (Exh. B and B-1).
On March 3, 1960 Celestina Gumabay sued Juliana Baralin, Santiago Bunagan, Loreto Bunagan,
Basilio Mamba, Balbino Catabay, Arcadio Maggay, Lupo Guiyab and Francisco Calimaran in the
Court of First Instance of Cagayan to recover possession of the said land.
She alleged that the defendants forcibly entered the land on August 5, 1959. She asked that, being
poor and without means to pay the docket fee, she be allowed to sue as a pauper litigant. The lower
court allowed her to sue in forma pauperis (11 Record on Appeal).
The defendants moved to dismiss the complaint on the ground that, inasmuch as it alleged a cause
of action for forcible entry, which occurred within one year before the complaint was filed, the Court
of First Instance had no jurisdiction over the case. it should be filed the proper inferior court (See. 1,
Rule 72, 1940 Rules of Court, now sec. 1, Rule 70; secs. 44 and 88, Judiciary Law; Art. 1147 [1],
Civil Code).
Without awaiting the resolution of that motion, Celestina Gumabay filed an amended complaint
wherein she alleged that the defendants claimed to be the owners of the land. She transformed her
forcible entry action into an action to quiet title. A copy of that amended complaint was personally
serve on defendants' counsel on March 23,1960 (28 Record on Appeal).
The lower court in its order of March 26, 1960 admitted the amended complaint, ordered the
defendants to answer it, and denied the motion to dismiss. However, a copy of that order was sent to
the defendants' counsel on March 31, 1960 only by ordinary, mail.

Celestina in her motion of May 26, 1960 asked that the defendants be declared in default for not
having answered her amended complaint.
The defendants opposed the motion. They denied having received a copy of the court's order
denying their motion to dismiss. They prayed that the plaintiff be ordered to served upon them the
amended complaint or that a period be fixed within which they should answer it.
The lower court in its order of June 4, 1960 denied plaintiff's motion and directed the defendants to
answer the amended complaint. A copy of that order was served on defendants' counsel by
registered mail on June 17, 1960 (32 Record on Appeal).
The defendants did not answer the amended complaint. At plaintiff's instance, the lower court in its
order of August 6, 1960 declared them in default and commissioned the clerk of court to receive
Celestina Gumabay's evidence.
At the ex parte hearing, Celestina testified that the land in question was donated to her by her father
at the time of her marriage; that her father had possessed that land since she was a child (she was
forty-eight years old in 1960 when she testified); that the land was cultivated by his tenants, Mateo
Luyun and the latter's two sons; that the land was planted to corn and tobacco; that on August 5,
1959 the defendants entered the land and harvested the corn crop over the opposition of her
tenants; that the defendants harvested five carts of corn and took four rolls of barbed wire, and that
the defendants persisted in working on the land.
The lower court in its decision declared Celestina Gumabay the owner of the land and ordered the
defendants to vacate it, restore its possession to her, and to pay her damages in the sum of P620
plus P250 as attorney's fees.
A copy of that decision was received by defendants' counsel on September 6, 1960. On October 5,
1960 defendants' counsel filed a petition for relief praying that the order of default and judgment by
default be set aside and that their answer be admitted. They explained that their failure to answer
the amended complaint was due to the mistake and neglect of their two lawyers.
They attached to their motion a copy of Tax Declaration No. 18252- a in the name of Lucio Barlin
(not a defendant herein) dated September 30, 1957 which refers to a parcel of land with an area of
twelve hectares located at Barrio Maddarulug, Enrile (the disputed land is located at Barrio Tanuru
and its area is only 1.76 hectares).
The lower court denied the petition for relief. The defendants appealed to the Court of Appeals. That
Court in its resolution of June 10, 1969 elevated the case to this Court because the appeal involves
only legal issues (CA-G. R. No. 29202-R).
The defendants contend that the lower court erred in not dismissing the original complaint, in
admitting the amended complaint, in assuming that it acquired jurisdiction over their persons on the
basis of the amended complaint even without service of new summons, in declaring them in default,
and in not granting them relief from the judgment by default.

Those contentions cannot sustained. The original complaint for forcible entry contained the basic
prayer "that the plaintiff be declared the absolute owner of the land in question". That relief was
retained in the amended complaint. The only difference between the original and amended
complaints is that the latter contained the additional allegation that the "defendants are now
asserting and claiming title and absolute ownership over the land in question which is adverse and
against the interest of the plaintiff".
The plaintiff explained that she had to amend her complaint in order that the "real matter in dispute",
which is "the question of ownership", may be "determined in a single proceeding, thereby avoiding
multiplicity of suits" (16 Record on Appeal).
We hold that the trial court's order admitting the amended complaints is in consonance with e object
of the Rules of Court to assist the parties in obtaining just, speedy and inexpensive determination of
every action and proceeding (Sec. 2, Rule 1).
To dismiss the original complaint and to require the plaintiff to file another action to quiet title would
have resulted in circuitour, dilatory and expensive proceeding which, in the case of pauper litigant
like Celestina Gumabay, should have been avoided, as it was a prudently avoided by the trial court.
For the same reasons, defendants' theory that new summons shoud have been issued for the
amended complaint is untenable. The trial court ahd already acquired jurisdiction over the person of
the defendants when they were served with summons on the basis of the original complaint and
when they appeared and filed a motion to dismiss.
They were personally served with a copy of the amended complaint. The trial court ordered them
two times to answer that complaint. Under those circumtances, there is no basis for defendants'
contention that the trial court should have oredered orf making of fetish of a technically. (See Ong
Peng vs. Custodio, 111 Phil. 382, 385; Republic vs. Ker & Co., Ltd., 64 O.G. 3761, 18 SCRA 207).
Defendants' two lawyers were given plenty to time to answer the amended complaint. Their failure to
answer was inexcusable. The answer attached to their petition for relief form judgment does not
contain any meritorious defense.
Therefore, to set aside the judgment by default and grant a new trial would be an Idle ceremony.
Ther is no probability that defendants; evidence would justify a reversal of the judgment by defauld.
(Vda. de Yulo vs. Chua Chuco, 87 Phil. 448. 449; Gonzalez vs. Amon, 98 Phil. 587; Miranda vs.
Legaspi, 92 Phil. 290; Baquiran vs Court of Appeals, 112 Phil. 764, 771).
WHERFORE, the lower court's judgment is affirmed with cost against the defendant-appellants.
SO ORDERED.