RULE 60

[G.R. No. 111080. April 5, 2000]

JOSE S. OROSA and MARTHA P. OROSA, petitioners, vs. HON. COURT
OF APPEALS, FCP CREDIT CORPORATION, respondents.francis
DECISION
YNARES_SANTIAGO, J.:
On December 6, 1984, private respondent FCP Credit Corporation filed a
complaint for replevin and damages in the Regional Trial Court of Manila
against petitioner Jose S. Orosa and one John Doe to recover possession of a
1983 Ford Laser 1.5 Sedan with Motor and Serial No. SUNKBT-14584. The
complaint alleged that on September 28, 1983, petitioner purchased the
subject motor vehicle on installment from Fiesta Motor Sales Corporation. He
executed and delivered to Fiesta Motor Sales Corp. a promissory note in the
sum of P133,824.00 payable in monthly installments. To secure payment,
petitioner executed a chattel mortgage over the subject motor vehicle in favor
of Fiesta Motor Sales Corp. On September 28, 1983, Fiesta Motor Sales
assigned the promissory note and chattel mortgage to private respondent
FCP Credit Corporation. The complaint further alleged that petitioner failed to
pay part of the installment which fell due on July 28, 1984 as well as three (3)
consecutive installments which fell due on August 28, September 28, and
October 28, 1984. Consequently, private respondent FCP Credit Corporation
demanded from petitioner payment of the entire outstanding balance of the
obligation amounting to P106,154.48 with accrued interest and to surrender
the vehicle which petitioner was allegedly detaining. ella
[1]

[2]

After trial, the lower court dismissed private respondent's complaint in a

Decision dated March 25, 1988, the decretal portion of which reads:
WHEREFORE, judgment is rendered for the defendant, and
against the plaintiff:
1) Dismissing the complaint for lack of merit;

2) Declaring that the plaintiff was not entitled to the Writ of

Replevin, issued on January 7,1985, and is now liable to the
defendant for actual damages under the Replevin bond it filed; nigel
3) On defendant's counter-claim, ordering the plaintiff to pay the
defendant the sum of P400,000.00 as moral damages,
P100,000.00 as exemplary damages, and P50,000.00 as, and for,
attorney's fees;
4) Ordering the plaintiff to return to the defendant the subject 1983
Ford Laser Sedan, with Motor or Serial No. SUNKBT-l4584, or its
equivalent, in kind or value, in cash, as of this date, and to pay the
costs.
SO ORDERED. iska
The trial court ruled that private respondent FCP had no reason to file the
present action since petitioner already paid the installments for the months of
July to November 1984, which are the sole bases of the complaint. The lower
court declared that private respondent was not entitled to the writ of replevin,
and was liable to petitioner for actual damages under the replevin bond it filed.
[3]

Ruling on petitioner's counterclaim, the trial court stated that there was no
legal or factual basis for the writ of replevin and that its enforcement by the
sheriff was "highly irregular, and unlawful, done, as it was, under shades of
extortion, threats and force." The trial court ordered private respondent to pay
the sum of P400,000.00 as moral damages; P100,000.00 as exemplary
damages and P50,000.00 as attorney's fees. Private respondent was also
ordered to return to petitioner the 1983 Ford Laser 1.5 Sedan, or its
equivalent, in kind or value in cash, as of date of judgment and to pay the
costs of the suit. rodoflo
[4]

[5]

On June 7, 1988, a "Supplemental Decision" was rendered by the trial court

ordering private respondent's surety, Stronghold Insurance Co., Inc. to jointly
and severally [with private respondent] return to petitioner the 1983 Ford
Laser 1.5 Sedan or its equivalent in kind or in cash and to pay the damages

specified in the main decision to the extent of the value of the replevin bond in
the amount of P210,000.00.
[6]

The surety company filed with the Court of Appeals a petition for certiorari to
annul the Order of the trial court denying its motion for partial reconsideration,
as well as the Supplemental Decision. On the other hand, private respondent
appealed the decision of the RTC Manila to the Court of Appeals.
The surety company's petition for certiorari, docketed as CA-G.R. SP No.
14938, was dismissed by the Court of Appeals' First Division which upheld the
trial court's order of execution pending appeal. On November 6, 1989, this
Court affirmed the Court of Appeals decision, but deleted the order for the
issuance of a writ of execution pending appeal.
[7]

[8]

Meanwhile, in private respondent's appeal, the Court of Appeals' Eighth

Division partially affirmed the ruling of the trial court, in a Decision dated April
19, 1993, the dispositive portion of which reads:
[9]

WHEREFORE, the Decision of 25 March 1988 of the Regional

Trial Court, Branch 3, Manila is hereby AFFIRMED with the
following modifications: brando
(1) The award of moral damages, exemplary damages and
attorney's fees is DELETED;
(2) The order directing plaintiff-appellant FCP Credit Corporation
to return to defendant-appellee Jose S. Orosa the subject 1983
Ford Laser Sedan, with Motor and Serial No. SUNKBT-14584, its
equivalent, in kind or value in cash, as of 25 March 1988, and to
pay the costs is DELETED; and;
(3) Plaintiff-appellant FCP Credit Corporation is ordered to pay
defendant-appellee Jose S. Orosa the amount equivalent to the
value of the fourteen (14) monthly installments made by the latter
to the former on the subject motor vehicle, with interest from the
time of filing of the complaint or from 6 December 1984.
No costs. micks

SO ORDERED.
Hence, this petition for review, on the following assignments of error:

[10]

(1) The Hon. Court of Appeals (former Eighth Division) acted

without or in excess of jurisdiction when it reversed a final
decision dated September 9, 1988, of a co-equal division of the
Hon. Court of Appeals (Special First Division) promulgated in CA
G.R. No. 14938, and which was sustained by the Hon. Supreme
Court in a final decision promulgated in G.R. No. 84979 dated
November 6, 1989 which cases have the same causes of action,
same set of facts, the same parties and the same relief. novero
(2) The Hon. Court of Appeals (former Eighth Division) acted with
grave abuse of discretion and authority when it considered causes
of actions not allege in the complaint and which were raised for
the first time on appeal in deciding this case.
(3) The Hon. Court of Appeals (former Eighth Division) committed
serious error in applying the case of Filinvest Credit Corporation
vs. Ivans Mendez, 152 SCRA 598, as basis in deciding this case
when said case has a different set of facts from this case.
In its first assignment of error, petitioner alleges that the Eighth Division of the
Court of Appeals had no jurisdiction to review the present case since the First
Division of the Court of Appeals already passed upon the law and the facts of
the same. Petitioner alleges that the present appeal involves the same causes
of action, same parties, same facts and same relief involved in the decision
rendered by the First Division and affirmed by this Court in G.R. No. 84979.
[11]

Petitioner's argument is untenable. Jurisdiction is simply the power or

authority to hear a case. The appellate jurisdiction of the Court of Appeals to
review decisions and orders of lower courts is conferred by Batas Pambansa
Blg. 129. More importantly, petitioner cannot now assail the Court of Appeals'
jurisdiction after having actively participated in the appeal and after praying for
affirmative relief.
[12]

Neither can petitioner argue that res judicata bars the determination of the
present case. The two cases involve different subject matters, parties and
seek different reliefs. decision
The petition docketed as CA-G.R. SP No. 14938 was for certiorari with
injunction, brought by Stronghold Insurance Company, Inc. alleging that there
was grave abuse of discretion when the trial court adjudged it liable for
damages without due process, in violation of Rule 60, Section 10 in relation to
Rule 57, Section 20, of the Rules of Court. The surety also questioned the
propriety of the writ of execution issued by the trial court pending appeal.
[13]

On the other hand, CA-G.R. CV No. 25929 was filed by petitioner Orosa
under Rule 45 of the Revised Rules of Court raising alleged errors of law on
the part of the trial court. The subject of the appeal was the main decision,
while the subject of the petition in CA-G.R. SP No. 14938 was the
Supplemental Decision.
We agree with the Court of Appeals that:

[14]

The decisions of the Court of Appeals in CA-G.R. SP No. 14938

and the Supreme Court in G.R. No. 84979 did not pass on the
merits of this case. It merely ruled on the issues of whether
the surety, Stronghold Insurance Co., Inc., can be held jointly
and solidarily liable with plaintiff-appellant and whether
execution pending appeal is proper under the facts and
circumstances of this case. Consequently, this Court is
not marinellaestopped from reviewing the conclusions reached by the
court a quo.(underscoring ours)
In its second assigned error, petitioner posits that the Court of Appeals
committed grave abuse of discretion when it considered causes of actions
which were raised for the first time on appeal.
[15]

True, private respondent submitted issues to the Court of Appeals which were
not raised in the original complaint. Private respondent belatedly pointed out
that:
[16]

1.1. It is pertinent to note that Defendant-Appellee

has waived prior notice and demand in order to be rendered in
default, as in fact the Promissory Note expressly stipulates that
the monthly installments shall be paid on the date they fall
due, without need of prior notice or demand. alonzo
1.2. Said Promissory Note likewise expressly stipulates that a late
payment charge of 2% per month shall be added on each unpaid
installment from maturity thereof until fully paid.
1.3. Of equal significance is the Acceleration Clause in the
Promissory Note which states that if default be made in the
payment of any of the installments or late payment charges
thereon when the same became due and payable, the total
principal sum then remaining unpaid, together with the agreed
late payment charges thereon, shall at once become due and
payable.
Private respondent argued that based on the provisions of the Promissory
Note itself, petitioner incurred in default since, even though there was actual
payment of the installments which fell due on July 28, 1984, as well as the
three installments on August 28 to October 28, 1984, the payments were all
late and irregular. Private respondent also argued that petitioner assigned
the subject car to his daughter without the written consent of the obligee, and
hence, violated the terms of the chattel mortgage. Meritorious as these
arguments are, they come too late in the day. Basic is the rule that matters not
raised in the complaint cannot be raised for the first time on appeal. calr
[17]

[18]

Contrary to petitioner's accusation, the Court of Appeals restricted the

determination of the case to matters alleged in the complaint and raised
during trial. Citing jurisprudence, the Court of Appeals held that "it would be
offensive to the basic rule of fair play, justice and due process" if it considered
issue raised for the first time on appeal.
[19]

[20]

[21]

The Court of Appeals' statement that "under the terms and conditions of the
chattel mortgage, defendant-appellee Jose S. Orosa was already in default,"
was made only to justify the deletion of the trial court's award of moral,

exemplary damages and attorney's fees, in consonance with its finding that
private respondent was motivated by a sincere belief that it had sufficient
basis an acted in good faith when it filed the claim. jojo
[22]

We now come to the matter of moral damages. Petitioner insists that he

suffered untold embarrassment when the complaint was filed against him.
According to petitioner, the car subject of this case was being used by his
daughter, married to Jose Concepcion III, a scion of a prominent family.
Petitioner laments that he assigned the car to his daughter so that she could
"approximate without equaling the status of her in-laws." This being the case,
petitioner experienced anguish and unquantifiable humiliation when he had to
face his daughter's wealthy in-laws to explain the "why and the whats of the
subject case." Petitioner further insists that an award of moral damages is
especially justified since he is no ordinary man, but a businessman of high
social standing, a graduate of De La Salle University and belongs to a well
known family of bankers.
[23]

We must deny the claim. The law clearly states that one may only recover
moral damages if they are the proximate result of the other party's wrongful
act or omission. Two elements are required. First, the act or omission must
be the proximate result of the physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation and similar injury. Second, the act must be wrongful. manikan
[24]

Petitioner maintains that embarrassment resulted when he had to explain the

suit to his daughter's in-laws. However, that could have been avoided had he
not assigned the car to his daughter and had he been faithful and prompt in
paying the installments required. Petitioner brought the situation upon himself
and cannot now complain that private respondent is liable for the mental
anguish and humiliation he suffered.
Furthermore, we agree with the appellate court that when private respondent
brought the complaint, it did so only to exercise a legal right, believing that it
had a meritorious cause of action clearly borne out by a mere perusal of the
promissory note and chattel mortgage. To constitute malicious prosecution,
there must be proof that the prosecution was prompted by a sinister design to
vex and humiliate a person, and that it was initiated deliberately, knowing that

the charges were false and groundless. Such was not the case when the
instant complaint was filed. The rule has always been that moral damages
cannot be recovered from a person who has filed a complaint against another
in good faith. The law always presumes good faith such that any person who
seeks to be awarded damages due to acts of another has the burden of
proving that the latter acted in bad faith or with ill motive. juris
[25]

[26]

[27]

Anent the award of exemplary damages, jurisprudence provides that where a

party is not entitled to actual or moral damages, an award of exemplary
damages is likewise baseless.
[28]

In the matter of attorney's fees, petitioner avers that to prosecute and defend
this case in the lower court and in the appellate court, he incurred expenses
amounting to P50,000.00, and as such, attorney's fees should be granted.
We deny the claim. No premium should be placed on the right to litigate and
not every winning party is entitled to an automatic grant of attorney's fees.
The party must show that he falls under one of the instances enumerated in
Article 2208 of the Civil Code. This, petitioner failed to do. Furthermore,
where the award of moral and exemplary damages is eliminated, so must the
award for attorney's fees be deleted.
[29]

[30]

[31]

[32]

We also agree with the Court of Appeals that the trial court erred when it
ordered private respondent to return the subject car or its equivalent
considering that petitioner had not yet fully paid the purchase price. Verily, to
sustain the trial court's decision would amount to unjust enrichment. The Court
of Appeals was correct when it instead ordered private respondent to return,
not the car itself, but only the amount equivalent to the fourteen installments
actually paid with interest. criminal
[33]

WHEREFORE, above premises considered, the petition is DENIED, and the

Court of Appeals' Decision of April 19, 1993 and its Resolution of July 22,
1993 are AFFIRMED in toto.
No costs.
SO ORDERED.

SMART COMMUNICATIONS, INC.,

Petitioner,

G.R. No. 148132

- versus REGINA M. ASTORGA,

Respondent.
x---------------------------------------------------x
SMART COMMUNICATIONS, INC.,
Petitioner,

G.R. No. 151079

- versus REGINA M. ASTORGA,

Respondent.
x---------------------------------------------------x
REGINA M. ASTORGA,
Petitioner,

G.R. No. 151372

Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CORONA,*
NACHURA, and
REYES, JJ.

- versus -

SMART COMMUNICATIONS, INC. and

ANN MARGARET V. SANTIAGO,
Respondents.

Promulgated:
____________________

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

For the resolution of the Court are three consolidated petitions for review
on certiorari under Rule 45 of the Rules of Court. G.R. No. 148132 assails
the February 28, 2000Decision[1] and the May 7, 2001 Resolution[2] of the Court of
Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question
the June 11, 2001 Decision[3]and the December 18, 2001 Resolution[4] in CA-G.R.
SP. No. 57065.
Regina M. Astorga (Astorga) was employed by respondent Smart
Communications, Incorporated (SMART) on May 8, 1997 as District Sales
Manager of the Corporate Sales Marketing Group/ Fixed Services Division
(CSMG/FSD). She was receiving a monthly salary of P33,650.00. As District Sales
Manager, Astorga enjoyed additional benefits, namely, annual performance
incentive equivalent to 30% of her annual gross salary, a group life and
hospitalization insurance coverage, and a car plan in the amount ofP455,000.00.[5]
In February 1998, SMART launched an organizational realignment to
achieve more efficient operations. This was made known to the employees
on February 27, 1998.[6]Part of the reorganization was the outsourcing of the
marketing and sales force. Thus, SMART entered into a joint venture agreement
with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated
(SNMI). Since SNMI was formed to do the sales and marketing work, SMART
abolished the CSMG/FSD, Astorgas division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG
personnel who would be recommended by SMART. SMART then conducted a
performance evaluation of CSMG personnel and those who garnered the highest
ratings were favorably recommended to SNMI. Astorga landed last in the
performance evaluation, thus, she was not recommended by SMART. SMART,
nonetheless, offered her a supervisory position in the Customer Care Department,
but she refused the offer because the position carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for
work. But on March 3, 1998, SMART issued a memorandum advising Astorga of

the termination of her employment on ground of redundancy, effective April 3,

1998. Astorga received it on March 16, 1998.[7]
The termination of her employment prompted Astorga to file a
Complaint[8] for illegal dismissal, non-payment of salaries and other benefits with
prayer for moral and exemplary damages against SMART and Ann Margaret V.
Santiago (Santiago). She claimed that abolishing CSMG and, consequently,
terminating her employment was illegal for it violated her right to security of
tenure. She also posited that it was illegal for an employer, like SMART, to
contract out services which will displace the employees, especially if the contractor
is an in-house agency.[9]
SMART responded that there was valid termination. It argued that Astorga
was dismissed by reason of redundancy, which is an authorized cause for
termination of employment, and the dismissal was effected in accordance with the
requirements of the Labor Code. The redundancy of Astorgas position was the
result of the abolition of CSMG and the creation of a specialized and more
technically equipped SNMI, which is a valid and legitimate exercise of
management prerogative.[10]
In the meantime, on May 18, 1998, SMART sent a letter to Astorga
demanding that she pay the current market value of the Honda Civic Sedan which
was given to her under the companys car plan program, or to surrender the same to
the company for proper disposition.[11] Astorga, however, failed and refused to do
either, thus prompting SMART to file a suit for replevin with the Regional Trial
Court of Makati (RTC) on August 10, 1998. The case was docketed as Civil Case
No. 98-1936 and was raffled to Branch 57.[12]
Astorga moved to dismiss the complaint on grounds of (i) lack of
jurisdiction; (ii) failure to state a cause of action; (iii) litis pendentia; and (iv)
forum-shopping. Astorga posited that the regular courts have no jurisdiction over
the complaint because the subject thereof pertains to a benefit arising from an
employment contract; hence, jurisdiction over the same is vested in the labor
tribunal and not in regular courts.[13]

Pending resolution of Astorgas motion to dismiss the replevin case, the

Labor Arbiter rendered a Decision[14] dated August 20, 1998, declaring Astorgas
dismissal from employment illegal. While recognizing SMARTs right to abolish
any of its departments, the Labor Arbiter held that such right should be exercised in
good faith and for causes beyond its control. The Arbiter found the abolition of
CSMG done neither in good faith nor for causes beyond the control of SMART,
but a ploy to terminate Astorgas employment. The Arbiter also ruled that
contracting out the functions performed by Astorga to an in-house agency like
SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the
Labor Code.
Accordingly, the Labor Arbiter ordered:
WHEREFORE, judgment is hereby rendered declaring the
dismissal of [Astorga] to be illegal and unjust. [SMART and Santiago]
are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a substantially
equivalent position, without loss of seniority rights and other privileges,
with full backwages, inclusive of allowances and other benefits from the
time of [her] dismissal to the date of reinstatement, which computed as
of this date, are as follows:
(a) Astorga
BACKWAGES; (P33,650.00 x 4 months) = P134,600.00
UNPAID SALARIES (February 15, 1998April 3, 1998
February 15-28, 1998 = P 16,823.00
March 1-31, [1998] = P 33,650.00
April 1-3, 1998 = P 3,882.69
CAR MAINTENANCE ALLOWANCE
(P2,000.00 x 4) = P 8,000.00
FUEL ALLOWANCE (300 liters/mo. x
4 mos. at P12.04/liter) = P 14,457.83
TOTAL = P211,415.52
xxxx

3. Jointly and severally pay moral damages in the amount

of P500,000.00 x x x and exemplary damages in the amount
of P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as attorneys
fees.
SO ORDERED.[15]

Subsequently, on March 29, 1999, the RTC issued an Order[16] denying

Astorgas motion to dismiss the replevin case. In so ruling, the RTC ratiocinated
that:
Assessing the [submission] of the parties, the Court finds no merit
in the motion to dismiss.
As correctly pointed out, this case is to enforce a right of
possession over a company car assigned to the defendant under a car
plan privilege arrangement. The car is registered in the name of the
plaintiff. Recovery thereof via replevin suit is allowed by Rule 60 of the
1997 Rules of Civil Procedure, which is undoubtedly within the
jurisdiction of the Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the company
car and despite demand, defendant refused to return said car. This is
clearly sufficient statement of plaintiffs cause of action.
Neither is there forum shopping. The element of litis penden[t]ia
does not appear to exist because the judgment in the labor dispute will
not constitute res judicata to bar the filing of this case.
WHEREFORE, the Motion to Dismiss is hereby denied for lack
of merit.
SO ORDERED.[17]

Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.
[18]

Astorga elevated the denial of her motion via certiorari to the CA, which, in
its February 28, 2000 Decision,[19] reversed the RTC ruling. Granting the petition
and, consequently, dismissing the replevin case, the CA held that the case is
intertwined with Astorgas complaint for illegal dismissal; thus, it is the labor
tribunal that has rightful jurisdiction over the complaint. SMARTs motion for
reconsideration having been denied,[20] it elevated the case to this Court, now
docketed as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor
Arbiter in the illegal dismissal case to the National Labor Relations Commission
(NLRC). In itsSeptember 27, 1999 Decision,[21] the NLRC sustained Astorgas
dismissal. Reversing the Labor Arbiter, the NLRC declared the abolition of CSMG
and the creation of SNMI to do the sales and marketing services for SMART a
valid organizational action. It overruled the Labor Arbiters ruling that SNMI is an
in-house agency, holding that it lacked legal basis. It also declared that contracting,
subcontracting and streamlining of operations for the purpose of increasing
efficiency are allowed under the law. The NLRC further found erroneous the Labor
Arbiters disquisition that redundancy to be valid must be impelled by economic
reasons, and upheld the redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby
reversed and set aside. [Astorga] is further ordered to immediately return
the company vehicle assigned to her. [Smart andSantiago] are hereby
ordered to pay the final wages of [Astorga] after [she] had submitted the
required supporting papers therefor.
SO ORDERED.[22]

Astorga filed a motion for reconsideration, but the NLRC denied it

on December 21, 1999.[23]
Astorga then went to the CA via certiorari. On June 11, 2001, the CA
rendered a Decision[24] affirming with modification the resolutions of the NLRC. In

gist, the CA agreed with the NLRC that the reorganization undertaken by SMART
resulting in the abolition of CSMG was a legitimate exercise of management
prerogative. It rejected Astorgas posturing that her non-absorption into SNMI was
tainted with bad faith. However, the CA found that SMART failed to comply with
the mandatory one-month notice prior to the intended termination. Accordingly,
the CA imposed a penalty equivalent to Astorgas one-month salary for this noncompliance. The CA also set aside the NLRCs order for the return of the company
vehicle holding that this issue is not essentially a labor concern, but is civil in
nature, and thus, within the competence of the regular court to decide. It added that
the matter had not been fully ventilated before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought partial
reconsideration, of the Decision. On December 18, 2001, the CA resolved the
motions, viz.:
WHEREFORE, [Astorgas] motion for reconsideration is hereby PARTIALLY
GRANTED. [Smart] is hereby ordered to pay [Astorga] her backwages from 15
February 1998 to 06 November 1998. [Smarts] motion for reconsideration is
outrightly DENIED.
SO ORDERED.[25]

Astorga and SMART came to us with their respective petitions for review
assailing the CA ruling, docketed as G.R Nos. 151079 and 151372. On February
27, 2002, this Court ordered the consolidation of these petitions with G.R. No.
148132.[26]
In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE
VALIDITY OF ASTORGAS DISMISSAL DESPITE THE FACT THAT
HER DISMISSAL WAS EFFECTED IN CLEAR VIOLATION OF THE
CONSTITUTIONAL RIGHT TO SECURITY OF TENURE,
CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR
HER DISMISSAL.

II
SMARTS REFUSAL TO REINSTATE ASTORGA DURING THE
PENDENCY OF THE APPEAL AS REQUIRED BY ARTICLE 223 OF
THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES
DURING THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT
THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER
THE COMPLAINT FOR RECOVERY OF A CAR WHICH ASTORGA
ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.[27]

On the other hand, Smart in its Memoranda raises the following issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY
NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION
OF THE HONORABLE SUPREME COURT AND HAS SO FAR
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF
THE POWER OF SUPERVISION WHEN IT RULED THAT SMART
DID NOT COMPLY WITH THE NOTICE REQUIREMENTS PRIOR
TO TERMINATING ASTORGA ON THE GROUND OF
REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND
THE DEPARTMENT OF LABOR AND EMPLOYMENT ARE
SUBSTANTIAL
COMPLIANCE
WITH
THE
NOTICE
REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS.
NATIONAL
LABOR
RELATIONS
COMMISSION
FINDS

APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN

THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT
ALL.[28]
IV
WHETHER THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY
NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS
SO FAR DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED
THAT THE REGIONAL TRIAL COURT DOES NOT HAVE
JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED
BY SMART TO RECOVER ITS OWN COMPANY VEHICLE FROM
A FORMER EMPLOYEE WHO WAS LEGALLY DISMISSED.
V
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED
TO APPRECIATE THAT THE SUBJECT OF THE REPLEVIN CASE
IS NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT
SIMPLY THE RECOVERY OF A COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED
TO APPRECIATE THAT ASTORGA CAN NO LONGER BE
CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE
LABOR CODE.[29]

The Court shall first deal with the propriety of dismissing the replevin case
filed with the RTC of Makati City allegedly for lack of jurisdiction, which is the
issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to repossession
of goods or chattels may recover those goods or chattels from one who has
wrongfully distrained or taken, or who wrongfully detains such goods or

chattels. It is designed to permit one having right to possession to recover property

in specie from one who has wrongfully taken or detained the property.[30] The term
may refer either to the action itself, for the recovery of personalty, or to the
provisional remedy traditionally associated with it, by which possession of the
property may be obtained by the plaintiff and retained during the pendency of the
action.[31]
That the action commenced by SMART against Astorga in the RTC of
Makati City was one for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of
jurisdiction, the CA made the following disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga] by
[Smart] as part of the employment package. We doubt that [SMART]
would extend [to Astorga] the same car plan privilege were it not for her
employment as district sales manager of the company. Furthermore,
there is no civil contract for a loan between [Astorga] and
[Smart]. Consequently, We find that the car plan privilege is a benefit
arising out of employer-employee relationship. Thus, the claim for such
falls squarely within the original and exclusive jurisdiction of the labor
arbiters and the NLRC.[32]

We do not agree. Contrary to the CAs ratiocination, the RTC rightfully

assumed jurisdiction over the suit and acted well within its discretion in denying
Astorgas motion to dismiss. SMARTs demand for payment of the market value of
the car or, in the alternative, the surrender of the car, is not a labor, but a civil,
dispute. It involves the relationship of debtor and creditor rather than employeeemployer relations.[33] As such, the dispute falls within the jurisdiction of the
regular courts.
In Basaya, Jr. v. Militante,[34] this Court, in upholding the jurisdiction of the
RTC over the replevin suit, explained:
Replevin is a possessory action, the gist of which is the right of
possession in the plaintiff. The primary relief sought therein is the return

of the property in specie wrongfully detained by another person. It is an

ordinary statutory proceeding to adjudicate rights to the title or
possession of personal property. The question of whether or not a party
has the right of possession over the property involved and if so, whether
or not the adverse party has wrongfully taken and detained said property
as to require its return to plaintiff, is outside the pale of competence of a
labor tribunal and beyond the field of specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in the
Replevin Case. The respective issues raised in each forum can be
resolved independently on the other. In fact in 18 November 1986, the
NLRC in the case before it had issued an Injunctive Writ enjoining the
petitioners from blocking the free ingress and egress to the Vessel and
ordering the petitioners to disembark and vacate. That aspect of the
controversy is properly settled under the Labor Code. So also with
petitioners right to picket. But the determination of the question of who
has the better right to take possession of the Vessel and whether
petitioners can deprive the Charterer, as the legal possessor of the Vessel,
of that right to possess in addressed to the competence of Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but
defining avenues of jurisdiction as laid down by pertinent laws.

The CA, therefore, committed reversible error when it overturned the RTC ruling
and ordered the dismissal of the replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorgas
dismissal.
Astorga was terminated due to redundancy, which is one of the authorized
causes for the dismissal of an employee. The nature of redundancy as an
authorized cause for dismissal is explained in the leading case of Wiltshire File
Co., Inc. v. National Labor Relations Commission,[35] viz:
x x x redundancy in an employers personnel force necessarily or even
ordinarily refers to duplication of work. That no other person was
holding the same position that private respondent held prior to

termination of his services does not show that his position had not
become redundant. Indeed, in any well organized business enterprise, it
would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that redundancy, for
purposes of the Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual requirements
of the enterprise. Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the enterprise.

The characterization of an employees services as superfluous or no longer

necessary and, therefore, properly terminable, is an exercise of business judgment
on the part of the employer. The wisdom and soundness of such characterization or
decision is not subject to discretionary review provided, of course, that a violation
of law or arbitrary or malicious action is not shown.[36]
Astorga claims that the termination of her employment was illegal and
tainted with bad faith. She asserts that the reorganization was done in order to get
rid of her. But except for her barefaced allegation, no convincing evidence was
offered to prove it. This Court finds it extremely difficult to believe that SMART
would enter into a joint venture agreement with NTT, form SNMI and abolish
CSMG/FSD simply for the sole purpose of easing out a particular employee, such
as Astorga. Moreover, Astorga never denied that SMART offered her a supervisory
position in the Customer Care Department, but she refused the offer because the
position carried a lower salary rank and rate. If indeed SMART simply wanted to
get rid of her, it would not have offered her a position in any department in the
enterprise.
Astorga also states that the justification advanced by SMART is not true
because there was no compelling economic reason for redundancy. But contrary to
her claim, an employer is not precluded from adopting a new policy conducive to a
more economical and effective management even if it is not experiencing
economic reverses. Neither does the law require that the employer should suffer

financial losses before he can terminate the services of the employee on the ground
of redundancy. [37]
We agree with the CA that the organizational realignment introduced by
SMART, which culminated in the abolition of CSMG/FSD and termination of
Astorgas employment was an honest effort to make SMARTs sales and marketing
departments more efficient and competitive. As the CA had taken pains to
elucidate:
x x x a careful and assiduous review of the records will yield no other
conclusion than that the reorganization undertaken by SMART is for no
purpose other than its declared objective as a labor and cost savings
device. Indeed, this Court finds no fault in SMARTs decision to
outsource the corporate sales market to SNMI in order to attain greater
productivity. [Astorga] belonged to the Sales Marketing Group under the
Fixed Services Division (CSMG/FSD), a distinct sales force of SMART
in charge of selling SMARTs telecommunications services to the
corporate market. SMART, to ensure it can respond quickly, efficiently
and flexibly to its customers requirement, abolished CSMG/FSD and
shortly thereafter assigned its functions to newly-created SNMI
Multimedia Incorporated, a joint venture company of SMART and NTT
of Japan, for the reason that CSMG/FSD does not have the necessary
technical expertise required for the value added services. By transferring
the duties of CSMG/FSD to SNMI, SMART has created a more
competent and specialized organization to perform the work required for
corporate accounts. It is also relieved SMART of all administrative costs
management, time and money-needed in maintaining the
CSMG/FSD. The determination to outsource the duties of the
CSMG/FSD to SNMI was, to Our mind, a sound business judgment
based on relevant criteria and is therefore a legitimate exercise of
management prerogative.

Indeed, out of our concern for those lesser circumstanced in life, this Court
has inclined towards the worker and upheld his cause in most of his conflicts with
his employer.This favored treatment is consonant with the social justice policy of
the Constitution. But while tilting the scales of justice in favor of workers, the
fundamental law also guarantees the right of the employer to reasonable returns for
his investment.[38] In this light, we must acknowledge the prerogative of the

employer to adopt such measures as will promote greater efficiency, reduce

overhead costs and enhance prospects of economic gains, albeit always within the
framework of existing laws. Accordingly, we sustain the reorganization and
redundancy program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the
mandated one (1) month notice prior to termination. The record is clear that
Astorga received the notice of termination only on March 16, 1998[39] or less than a
month prior to its effectivity on April 3, 1998. Likewise, the Department of Labor
and Employment was notified of the redundancy program only on March 6, 1998.
[40]

Article 283 of the Labor Code clearly provides:

Art. 283. Closure of establishment and reduction of personnel. The
employer may also terminate the employment of any employee due to
the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on
the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof x x x.

SMARTs assertion that Astorga cannot complain of lack of notice because

the organizational realignment was made known to all the employees as early as
February 1998 fails to persuade. Astorgas actual knowledge of the reorganization
cannot replace the formal and written notice required by the law. In the written
notice, the employees are informed of the specific date of the termination, at least a
month prior to the effectivity of such termination, to give them sufficient time to
find other suitable employment or to make whatever arrangements are needed to
cushion the impact of termination. In this case, notwithstanding Astorgas
knowledge of the reorganization, she remained uncertain about the status of her
employment until SMART gave her formal notice of termination. But such notice
was received by Astorga barely two (2) weeks before the effective date of
termination, a period very much shorter than that required by law.

Be that as it may, this procedural infirmity would not render the termination
of Astorgas employment illegal. The validity of termination can exist
independently of the procedural infirmity of the dismissal. [41] In DAP Corporation
v. CA,[42] we found the dismissal of the employees therein valid and for authorized
cause even if the employer failed to comply with the notice requirement under
Article 283 of the Labor Code. This Court upheld the dismissal, but held the
employer liable for non-compliance with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining Astorgas
dismissal and at the same time, awarding indemnity for violation of Astorga's
statutory rights.
However, we find the need to modify, by increasing, the indemnity awarded
by the CA to Astorga, as a sanction on SMART for non-compliance with the onemonth mandatory notice requirement, in light of our ruling in Jaka Food
Processing Corporation v. Pacot,[43] viz.:
[I]f the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction to
be imposed upon him should be temperedbecause the dismissal process
was, in effect, initiated by an act imputable to the employee, and (2) if
the dismissal is based on an authorized cause under Article 283 but the
employer failed to comply with the notice requirement, the sanction
should be stiffer because the dismissal process was initiated by the
employers exercise of his management prerogative.

We deem it proper to increase the amount of the penalty on SMART to P50,000.00.

As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled
to separation pay equivalent to at least one (1) month salary or to at least one (1)
months pay for every year of service, whichever is higher. The records show that
Astorgas length of service is less than a year. She is, therefore, also entitled to
separation pay equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from February
15, 1998. This assertion was never rebutted by SMART in the proceedings a

quo. No proof of payment was presented by SMART to disprove the allegation. It

is settled that in labor cases, the burden of proving payment of monetary claims
rests
on
the
employer.[44]SMART failed
to
discharge
the onus
probandi. Accordingly, it must be held liable for Astorgas salary from February 15,
1998 until the effective date of her termination, on April 3, 1998.
However, the award of backwages to Astorga by the CA should be deleted
for lack of basis. Backwages is a relief given to an illegally dismissed
employee. Thus, before backwages may be granted, there must be a finding of
unjust or illegal dismissal from work. [45] The Labor Arbiter ruled that Astorga was
illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiters ruling
and categorically declared Astorgas dismissal valid. This ruling was affirmed by
the CA in its assailed Decision. Since Astorgas dismissal is for an authorized cause,
she is not entitled to backwages. The CAs award of backwages is totally
inconsistent with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No. 148132
is GRANTED. The February 28, 2000 Decision and the May 7, 2001 Resolution
of the Court of Appeals in CA-G.R. SP. No. 53831 are SET
ASIDE. The Regional Trial Court of Makati City, Branch 57 is DIRECTED to
proceed with the trial of Civil Case No. 98-1936 and render its Decision with
reasonable dispatch.
On the other hand, the petitions of SMART and Astorga docketed as G.R.
Nos. 151079 and 151372 are DENIED. The June 11, 2001 Decision and the
December 18, 2001 Resolution in CA-G.R. SP. No. 57065,
are AFFIRMED with MODIFICATION.
Astorga
is
declared
validly
dismissed. However, SMART is ordered to pay AstorgaP50,000.00 as indemnity
for its non-compliance with procedural due process, her separation pay equivalent
to one (1) month pay, and her salary from February 15, 1998 until the effective
date of her termination on April 3, 1998. The award of backwages
is DELETED for lack of basis.
SO ORDERED.
KENNETH HAO, Complainant,

A.M. No. P-07-2384

Present:
- versus -

ABE C. ANDRES, Sheriff IV,

Regional Trial Court, Branch
16,Davao City,
Respondent.

QUISUMBING, J., Chairperson,

TINGA,
REYES,
LEONARDO-DE CASTRO, and
BRION, JJ.
Promulgated:
June 18, 2008

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

RESOLUTION
QUISUMBING, J.:
Before us is an administrative complaint for gross neglect of duty, grave
abuse of authority (oppression) and violation of Republic Act No. 3019 [1] filed by
complainant Kenneth Hao against respondent Abe C. Andres, Sheriff IV of the
Regional Trial Court (RTC) of Davao City, Branch 16.
The antecedent facts are as follows:
Complainant Hao is one of the defendants in a civil case for replevin docketed as
Civil Case No. 31, 127-2005[2] entitled Zenaida Silver, doing trade and business
under the name and style ZHS Commercial v. Loreto Hao, Atty. Amado Cantos,
Kenneth Hao and John Does, pending before the RTC of Davao City, Branch 16.
On October 17, 2005, Judge Renato A. Fuentes[3] issued an Order of
Seizure[4] against 22 motor vehicles allegedly owned by the complainant. On the
strength of the said order, Andres was able to seize two of the subject motor
vehicles on October 17, 2005; four on October 18, 2005, and another three
on October 19, 2005, or a total of nine motor vehicles.[5]

In his Affidavit-Complaint[6] against Andres before the Office of the Court

Administrator (OCA), Hao alleged that Andres gave undue advantage
to Zenaida Silver in the implementation of the order and that Andres seized the
nine motor vehicles in an oppressive manner. Hao also averred that Andres was
accompanied by unidentified armed personnel on board a military vehicle which
was excessive since there were no resistance from them. Hao also discovered that
the compound where the seized motor vehicles were placed is actually owned by
Silver.[7]
On October 21, 2005, in view of the approval of the complainants counterreplevin bond, Judge Emmanuel C. Carpio[8] ordered Andres to immediately cease
and desist from further implementing the order of seizure, and to return the seized
motor vehicles including its accessories to their lawful owners.[9]
However, on October 24, 2005, eight of the nine seized motor vehicles were
reported missing. In his report,[10] Andres stated that he was shocked to find that the
motor vehicles were already missing when he inspected it on October 22, 2005. He
narrated that on October 21, 2005, PO3 Rodrigo Despe, one of the policemen
guarding the subject motor vehicles, reported to him that a certain Nonoy entered
the compound and caused the duplication of the vehicles keys.[11] But Andres
claimed the motor vehicles were still intact when he inspected it on October 21,
2005.
Subsequently, Hao reported that three of the carnapped vehicles were recovered by
the police.[12] He then accused Andres of conspiring and conniving with
Atty. OswaldoMacadangdang (Silvers counsel) and the policemen in
the carnapping of the motor vehicles. Hao also accused Andres of concealing the
depository receipts from them and pointed out that the depository receipts show
that Silver and Atty. Macadangdang were the ones who chose the policemen who
will guard the motor vehicles.
In his Comment[13] dated March 3, 2006, Andres vehemently denied violating Rep.
Act No. 3019 and committing gross neglect of duty.
Andres denied implementing the Order of Seizure in an oppressive manner. He said
he took the vehicles because they were the specific vehicles ordered to be seized

after checking their engine and chassis numbers. Andres likewise denied that he was
accompanied by military personnel in the implementation of the order. He claimed
that he was merely escorted by policemen pursuant to the directive of Police Senior
Supt. Catalino S. Cuy, Chief of the Davao City Police Office. Andres also
maintained that no form of harassment or oppression was committed during the
implementation of the order, claiming that the presence of the policemen was only
for the purpose of preserving peace and order, considering there were 22 motor
vehicles specified in the Order of Seizure. Andres added that he exercised no
discretion in the selection of the policemen who assisted in the implementation of
the order, much less of those who will guard the seized motor vehicles.
Andres disputed the allegation that he neglected his duty to safeguard the seized
vehicles by pointing out that he placed all the motor vehicles under police
watch. He added that the policemen had control of the compound where the seized
motor vehicles were kept.
Andres likewise contended that after the unauthorized duplication of the
vehicles keys was reported to him, he immediately advised the policemen on duty
to watch the motor vehicles closely.[14] He negated the speculations that he was
involved in the disappearance of the seized motor vehicles as he claims to be the
one who reported the incident to the court and the police.
As to the allegation of undisclosed depository receipts, Andres maintained that he
never denied the existence of the depository receipts. He said the existence of the
depository receipts was immediately made known on the same day that the subject
motor vehicles were discovered missing. He even used the same in the filing of
the carnapping case against Silver and her co-conspirators.
Finally, Andres insisted that the guarding of properties under custodia legis by
policemen is not prohibited, but is even adopted by the court. Hence, he prays that
he be held not liable for the loss of the vehicles and that he be relieved of his duty
to return the vehicles.[15]
After the OCA recommended that the matter be investigated, we referred the case
to Executive Judge Renato A. Fuentes for investigation, report and
recommendation.[16]

In his Investigation Report[17] dated September 21, 2006, Judge Fuentes found
Andres guilty of serious negligence in the custody of the nine motor vehicles. He
recommended that Andres be suspended from office.
Judge Fuentes found numerous irregularities in the implementation of the writ
of replevin/order of seizure, to wit: (1) at the time of the implementation of the
writ, Andres knew that the vehicles to be seized were not in the names of any of
the parties to the case; (2) one vehicle was taken without the knowledge of its
owner, a certain Junard Escudero; (3) Andres allowed Atty. Macadangdang to get
a keymaster to duplicate the vehicles keys in order to take one motor vehicle; and
(4) Andres admitted that prior to the implementation of the writ of seizure, he
consulted Silver and Atty. Macadangdang regarding the implementation of the writ
and was accompanied by the latter in the course of the implementation. Judge
Fuentes observed that the motor vehicles were speedily seized without strictly
observing fairness and regularity in its implementation.[18]
Anent the safekeeping of the seized motor vehicles, Judge Fuentes pointed out
several instances where Andres lacked due diligence to wit: (1) the seized motor
vehicles were placed in a compound surrounded by an insufficiently locked seethrough fence; (2) three motor vehicles were left outside the compound; (3) Andres
turned over the key of the gate to the policemen guarding the motor vehicles; (4)
Andres does not even know the full name of the owner of the compound, who was
merely known to him as Gloria; (5) except for PO3 Despe and SPO4
Nelson Salcedo, the identities of the other policemen tapped to guard the
compound were unknown to Andres; (6) Andres also admitted that he only stayed
at least one hour each day from October 19-21, 2005 during his visits to the
compound; and (7) even after it was reported to him that a certain Nonoy entered
the compound and duplicated the keys of the motor vehicles, he did not exert his
best effort to look for that Nonoy and to confiscate the duplicated keys.[19]
Judge Fuentes also observed that Andres appeared to be more or less
accommodating to Silver and her counsel but hostile and uncooperative to the
complainant. He pointed out that Andres depended solely on Silver in the selection
of the policemen who would guard the seized motor vehicles. He added that even
the depository receipts were not turned over to the defendants/third-party claimants
in the replevin case but were in fact concealed from them. Andres also gave

inconsistent testimonies as to whether he has in his possession the depository

receipts.[20]
The OCA disagreed with the observations of Judge Fuentes. It recommended that
Andres be held liable only for simple neglect of duty and be suspended for one (1)
month and one (1) day.[21]
We adopt the recommendation of the investigating judge.
Being an officer of the court, Andres must be aware that there are well-defined
steps provided in the Rules of Court regarding the proper implementation of a writ
of replevinand/or an order of seizure. The Rules, likewise, is explicit on the duty of
the sheriff in its implementation. To recapitulate what should be common
knowledge to sheriffs, the pertinent provisions of Rule 60, of the Rules of Court
are quoted hereunder:
SEC. 4. Duty of the sheriff.Upon receiving such order, the sheriff must
serve a copy thereof on the adverse party, together with a copy of the
application, affidavit and bond, and must forthwith take the property,
if it be in the possession of the adverse party, or his agent, and retain
it in his custody. If the property or any part thereof be concealed in a
building or enclosure, the sheriff must demand its delivery, and if it be
not delivered, he must cause the building or enclosure to be broken open
and take the property into his possession. After the sheriff has taken
possession of the property as herein provided, he must keep it in a
secure place and shall be responsible for its delivery to the party
entitled thereto upon receiving his fees and necessary expenses for
taking and keeping the same. (Emphasis supplied.)
SEC. 6. Disposition of property by sheriff.If within five (5) days after
the taking of the property by the sheriff, the adverse party does not
object to the sufficiency of the bond, or of the surety or sureties thereon;
or if the adverse party so objects and the court affirms its approval of the
applicants bond or approves a new bond, or if the adverse party requires
the return of the property but his bond is objected to and found insufficient
and he does not forthwith file an approved bond, the property shall be
delivered to the applicant. If for any reason the property is not delivered to
the applicant, the sheriff must return it to the adverse party. (Emphasis
supplied.)

First, the rules provide that property seized under a writ of replevin is not to be
delivered immediately to the plaintiff.[22] In accordance with the said rules, Andres
should have waited no less than five days in order to give the complainant an
opportunity to object to the sufficiency of the bond or of the surety or sureties
thereon, or require the return of the seized motor vehicles by filing a counterbond. This, he failed to do.
Records show that Andres took possession of two of the subject motor
vehicles on October 17, 2005, four on October 18, 2005, and another three
on October 19, 2005.Simultaneously, as evidenced by the depository receipts,
on October 18, 2005, Silver received from Andres six of the seized motor vehicles,
and three more motor vehicles onOctober 19, 2005. Consequently, there is no
question that Silver was already in possession of the nine seized vehicles
immediately after seizure, or no more than three days after the taking of the
vehicles. Thus, Andres committed a clear violation of Section 6, Rule 60 of the
Rules of Court with regard to the proper disposal of the property.
It matters not that Silver was in possession of the seized vehicles merely for
safekeeping as stated in the depository receipts. The rule is clear that the property
seized should not be immediately delivered to the plaintiff, and the sheriff must
retain custody of the seized property for at least five days. [23] Hence, the act of
Andres in delivering the seized vehicles immediately after seizure to Silver for
whatever purpose, without observing the five-day requirement finds no legal
justification.
In Pardo v. Velasco,[24] this Court held that
Respondent as an officer of the Court is charged with certain
ministerial duties which must be performed faithfully to the letter. Every
provision in the Revised Rules of Court has a specific reason or
objective. In this case, the purpose of the five (5) days is to give a
chance to the defendant to object to the sufficiency of the bond or
the surety or sureties thereon or require the return of the property
by filing a counterbond.[25] (Emphasis supplied.)

In Sebastian v. Valino,[26] this Court reiterated that

Under the Revised Rules of Court, the property seized under a

writ of replevin is not to be delivered immediately to the
plaintiff. The sheriff must retain it in his custody for five days and he
shall return it to the defendant, if the latter, as in the instant case, requires
its return and files a counterbond.[27] (Emphasis supplied.)

Likewise, Andres claim that he had no knowledge that the compound is

owned by Silver fails to convince us. Regardless of who actually owns the
compound, the fact remains that Andres delivered the vehicles to Silver
prematurely. It violates the rule requiring him to safekeep the vehicles in his
custody.[28] The alleged lack of facility to store the seized vehicles is unacceptable
considering that he should have deposited the same in a bonded warehouse. If this
was not feasible, he should have sought prior authorization from the court issuing
the writ before delivering the vehicles to Silver.
Second, it must be stressed that from the moment an order of delivery
in replevin is executed by taking possession of the property specified therein, such
property is incustodia legis. As legal custodian, it is Andres duty to safekeep the
seized motor vehicles. Hence, when he passed his duty to safeguard the motor
vehicles to Silver, he committed a clear neglect of duty.
Third, we are appalled that even after PO3 Despe reported the unauthorized
duplication of the vehicles keys, Andres failed to take extra precautionary
measures to ensure the safety of the vehicles. It is obvious that the vehicles were
put at risk by the unauthorized duplication of the keys of the vehicles. Neither did
he immediately report the incident to the police or to the court. The loss of the
motor vehicles could have been prevented if Andres immediately asked the court
for an order to transfer the vehicles to another secured place as soon as he
discovered the unauthorized duplication. Under these circumstances, even an
ordinary prudent man would have exercised extra diligence. His warning to the
policemen to closely watch the vehicles was insufficient. Andres cannot toss back
to Silver or to the policemen the responsibility for the loss of the motor vehicles
since he remains chiefly responsible for their safekeeping as legal custodian
thereof. Indeed, Andres failure to take the necessary precaution and proper
monitoring of the vehicles to ensure its safety constitutes plain negligence.

Fourth, despite the cease and desist order, Andres failed to return the motor
vehicles to their lawful owners. Instead of returning the motor vehicles
immediately as directed, he opted to write Silver and demand that she put up an
indemnity bond to secure the third-party claims. Consequently, due to his delay, the
eventual loss of the motor vehicles rendered the order to return the seized vehicles
ineffectual to the prejudice of the complaining owners.
It must be stressed that as court custodian, it was Andres responsibility to
ensure that the motor vehicles were safely kept and that the same were readily
available upon order of the court or demand of the parties concerned. Specifically,
sheriffs, being ranking officers of the court and agents of the law, must discharge
their duties with great care and diligence. In serving and implementing court writs,
as well as processes and orders of the court, they cannot afford to err without
affecting adversely the proper dispensation of justice. Sheriffs play an important
role in the administration of justice and as agents of the law, high standards of
performance are expected of them.[29] Hence, his failure to return the motor
vehicles at the time when its return was still feasible constitutes another instance of
neglect of duty.
Fifth, as found by the OCA, we agree that Andres also disregarded the
provisions of Rule 141[30] of the Rules of Court with regard to payment of
expenses.
Under Section 9,[31] Rule 141 of the Rules of Court, the procedure for the
execution of writs and other processes are: First, the sheriff must make an estimate
of the expenses to be incurred by him; Second, he must obtain court approval for
such estimated expenses; Third, the approved estimated expenses shall be
deposited by the interested party with the Clerk of Court and ex officio sheriff;
Fourth, the Clerk of Court shall disburse the amount to the executing sheriff; and
Fifth, the executing sheriff shall liquidate his expenses within the same period for
rendering a return on the writ.
In this case, no estimate of sheriffs expenses was submitted to the court by
Andres. Without approval of the court, he also allowed Silver to pay directly to the
policemen the expenses for the safeguarding of the motor vehicles including their

meals.[32] Obviously, this practice departed from the accepted procedure provided
in the Rules of Court.
In view of the foregoing, there is no doubt that Andres failed to live up to the
standards required of his position. The number of instances that Andres strayed
from the regular course observed in the proper implementation of the orders of the
court cannot be countenanced. Thus, taking into account the numerous times he
was found negligent and careless of his duties coupled with his utter disregard of
legal procedures, he cannot be considered guilty merely of simple negligence. His
acts constitute gross negligence.
As we have previously ruled:
Gross negligence refers to negligence characterized by the want
of even slight care, acting or omitting to act in a situation where
there is a duty to act, not inadvertently but willfully and
intentionally, with a conscious indifference to consequences in so far
as other persons may be affected. It is the omission of that care
which even inattentive and thoughtless men never fail to take on
their own property.[33] (Emphasis supplied.)
Gross neglect, on the other hand, is such neglect from the gravity of
the case, or the frequency of instances, becomes so serious in its
character as to endanger or threaten the public welfare. The term
does not necessarily include willful neglect or intentional official
wrongdoing.[34] (Emphasis supplied.)

Good faith on the part of Andres, or lack of it, in proceeding to properly

execute his mandate would be of no moment, for he is chargeable with the
knowledge that being an officer of the court tasked therefor, it behooves him to
make due compliance. He is expected to live up to the exacting standards of his
office and his conduct must at all times be characterized by rectitude and
forthrightness, and so above suspicion and mistrust as well. [35] Thus, an act of gross
neglect resulting in loss of properties in custodia legisruins the confidence lodged
by the parties to a suit or the citizenry in our judicial process. Those responsible for
such act or omission cannot escape the disciplinary power of this Court.

Anent the allegation of grave abuse of authority (oppression), we likewise

agree with the observations of the investigating judge. Records show that Andres
started enforcing the writ of replevin/order of seizure on the same day that the
order of seizure was issued. He also admitted that he took the vehicles of persons
who are not parties to thereplevin case.[36] He further admitted that he took one
vehicle belonging to a certain Junard Escudero without the latters knowledge and
even caused the duplication of its keys in order that it may be taken by Andres.
[37]
Certainly, these are indications that Andres enforced the order of seizure with
undue haste and without giving the complainant prior notice or reasonable time to
deliver the motor vehicles. Hence, Andres is guilty of grave abuse of authority
(oppression).
When a writ is placed in the hands of a sheriff, it is his duty, in the absence
of any instructions to the contrary, to proceed with reasonable celerity and
promptness to execute it according to its mandate. However, the prompt
implementation of an order of seizure is called for only in instances where there is
no question regarding the right of the plaintiff to the property.[38] Where there is
such a question, the prudent recourse for Andres is to desist from executing the
order and convey the information to his judge and to the plaintiff.
True, sheriffs must comply with their mandated ministerial duty to implement
writs promptly and expeditiously, but equally true is the principle that sheriffs by the
nature of their functions must at all times conduct themselves with propriety and
decorum and act above suspicion. There must be no room for anyone to conjecture
that sheriffs and deputy sheriffs as officers of the court have conspired with any of the
parties to a case to obtain a favorable judgment or immediate execution. The sheriff is
at the front line as representative of the judiciary and by his act he may build or
destroy the institution.[39]
However, as to the charge of graft and corruption, it must be stressed that the
same is criminal in nature, thus, the resolution thereof cannot be threshed out in the
instant administrative proceeding. We also take note that there is a pending
criminal case for carnapping against Andres;[40] hence, with more reason that we
cannot rule on the allegation of graft and corruption as it may preempt the court in
its resolution of the said case.

We come to the matter of penalties. The imposable penalty for gross neglect
of duty is dismissal. While the penalty imposable for grave abuse of authority
(oppression) is suspension for six (6) months one (1) day to one (1) year.[41] Section
55, Rule IV, of the Uniform Rules on Administrative Cases in the Civil
Service provides that if the respondent is found guilty of two or more charges or
counts, the penalty to be imposed should be that corresponding to the most serious
charge or count and the rest shall be considered as aggravating circumstances.
In the instant case, the penalty for the more serious offense which is
dismissal should be imposed on Andres. However, following Sections 53[42] and 54,
[43]
Rule IV of the Uniform Rules on Administrative Cases in the Civil Service, we
have to consider that Andres is a first-time offender; hence, a lighter penalty than
dismissal from the service would suffice. Consequently, instead of imposing the
penalty of dismissal, the penalty of suspension from office for one (1) year without
pay is proper for gross neglect of duty, and another six (6) months should be added
for the aggravating circumstance of grave abuse of authority (oppression).
WHEREFORE, the Court finds Abe C. Andres,
of Davao City, Branch 16, GUILTY of gross neglect of duty
authority (oppression) and is SUSPENDED for one (1) year
without pay. He is also hereby WARNED that a repetition of
offenses in the future shall be dealt with more severely.
SO ORDERED.
G.R. No. 165895

June 5, 2009

TERLYNGRACE RIVERA, Petitioner,

vs.
FLORENCIO L. VARGAS, Respondent.
DECISION
NACHURA, J.:
What is the effect of a writ of replevin that has been improperly served?

Sheriff IV, RTC

and grave abuse of
and six (6) months
the same or similar

This is the sole issue to be resolved in this petition for review on certiorari seeking to set aside the
Decision1 of the Court of Appeals (CA) dated November 18, 2003 in CA-G.R. SP No. 78529, as well
as its October 20, 2004 Resolution,2 denying the petition for certiorari filed by petitioner Terlyngrace
Rivera (Rivera).
The facts follow.
On February 24, 2003, respondent Florencio Vargas (Vargas) filed a complaint 3 against petitioner
and several John Does before Branch 02 of the Regional Trial Court (RTC) in Tuguegarao City,
Cagayan, for the recovery of a 150 T/H rock crushing plant located in Sariaya, Quezon. In his
complaint and affidavit,4 Vargas claims ownership of the said equipment, having purchased and
imported the same directly from Hyun Dae Trading Co., in Seoul, South Korea, in December
1993.5 The equipment was allegedly entrusted to petitioners husband, Jan T. Rivera, who died
sometime in late 2002, as caretaker of respondents construction aggregates business in Batangas.
According to Vargas, petitioner failed to return the said equipment after her husbands death despite
his repeated demands, thus forcing him to resort to court action. 6 The complaint was accompanied
by a prayer for the issuance of a writ of replevin and the necessary bond amounting
to P2,400,000.00.
Summons7 dated February 24, 2003 was served upon petitioner through her personal secretary on
April 28, 2003 at her residence in Paraaque City. Interestingly, however, the writ of replevin 8 was
served upon and signed by a certain Joseph Rejumo, the security guard on duty in petitioners
crushing plant in Sariaya, Quezon on April 29, 2003,9 contrary to the sheriffs return10 stating that the
writ was served upon Rivera.
On May 8, 2003, Rivera filed her answer, manifestation, and motion for the acceptance of
petitioners redelivery bond.11 In her answer, petitioner countered that the rock-crushing plant was
ceded in favor of her husband as his share following the dissolution of the partnership formed
between Jan Rivera and respondents wife, Iluminada Vargas (Iluminada), on May 28, 1998, while
the partnerships second rock-crushing plant in Cagayan was ceded in favor of Iluminada. 12 She
further averred that from the time that the partnership was dissolved sometime in 2000 until Jan
Riveras death in late 2002, it was petitioners husband who exercised ownership over the said
equipment without any disturbance from respondent. 13
On May 12, 2003, the RTC issued an Order14 disapproving petitioners redelivery bond application
for failure to comply with the requirements under Sections 5 and 6 of Rule 60 of the Rules of
Court.15 Without directly saying so, the RTC faulted petitioner for her failure to file the application for
redelivery bond within five (5) days from the date of seizure as provided in the Rules of Court.
Petitioner moved for reconsideration,16 but the same was also denied.17
Aggrieved, petitioner elevated the matter to the CA through a petition for certiorari under Rule 65.
This, too, was denied for lack of merit.18 Petitioner moved for reconsideration,19 but it was also
denied.20
Undaunted, petitioner now comes to us via this Rule 45 petition.

Petitioner argues that the RTC committed grave abuse of discretion in denying her counterbond on
the ground that it was filed out of time. She contends that the mandatory five-day period did not even
begin to run in this case due to the improper service of the writ of replevin, contrary to Section 4 of
Rule 60.21
We find the petition meritorious.
Replevin is one of the most ancient actions known to law, taking its name from the object of its
process.22 It originated in common law as a remedy against the wrongful exercise of the right of
distress for rent23 and, according to some authorities, could only be maintained in such a case. 24 But
by the weight of authority, the remedy is not and never was restricted to cases of wrongful distress in
the absence of any statutes relating to the subject, but is a proper remedy for any unlawful
taking.25 "Replevied," used in its technical sense, means delivered to the owner,26 while the words "to
replevy" means to recover possession by an action of replevin.27
Broadly understood in this jurisdiction, replevin is both a form of principal remedy and of provisional
relief. It may refer either to the action itself, i.e., to regain the possession of personal chattels being
wrongfully detained from the plaintiff by another, or to the provisional remedy that would allow the
plaintiff to retain the thing during the pendency of the action and to hold it pendente lite.28 The action
is primarily possessory in nature and generally determines nothing more than the right of
possession.29
The law presumes that every possessor is a possessor in good faith. 30 He is entitled to be respected
and protected in his possession31 as if he were the true owner thereof until a competent court rules
otherwise.32Before a final judgment, property cannot be seized unless by virtue of some provision of
law.33 The Rules of Court, under Rule 60, authorizes such seizure in cases of replevin. However, a
person seeking a remedy in an action for replevin must follow the course laid down in the statute,
since the remedy is penal in nature.34 When no attempt is made to comply with the provisions of the
law relating to seizure in this kind of action, the writ or order allowing the seizure is erroneous and
may be set aside on motion35 by the adverse party. Be it noted, however, that a motion to quash the
writ of replevin goes to the technical regularity of procedure, and not to the merits of the case 36 in the
principal action.
The process regarding the execution of the writ of replevin in Section 4 of Rule 60 is unambiguous:
the sheriff, upon receipt of the writ of replevin and prior to the taking of the property, must serve a
copy thereof to the adverse party (petitioner, in this case) together with the application, the affidavit
of merit, and the replevin bond.37The reasons are simple, i.e., to provide proper notice to the adverse
party that his property is being seized in accordance with the courts order upon application by the
other party, and ultimately to allow the adverse party to take the proper remedy consequent thereto.
Service of the writ upon the adverse party is mandatory in line with the constitutional guaranty on
procedural due process and as safeguard against unreasonable searches and seizures. 38 If the writ
was not served upon the adverse party but was instead merely handed to a person who is neither an
agent of the adverse party nor a person authorized to receive court processes on his behalf, the
service thereof is erroneous and is, therefore, invalid, running afoul of the statutory and constitutional
requirements. The service is likewise invalid if the writ of replevin was served without the required

documents. Under these circumstances, no right to seize and to detain the property shall pass, the
act of the sheriff being both unlawful and unconstitutional.
1avvphi1

In the case at bar, petitioner avers that the writ of replevin was served upon the security guard where
the rock-crushing plant to be seized was located.39 The signature of the receiving party indicates that
the writ was received on April 29, 2003 by a certain Joseph Rejumo, the guard on duty in a plant in
Sariaya, Quezon, where the property to be seized was located, and witnessed by Claudio Palatino,
respondents caretaker.40 The sheriffs return,41 however, peremptorily states that both the writ of
replevin and the summons were served upon Rivera. On May 8, 2003, or nine (9) days after the writ
was served on the security guard, petitioner filed an answer to the complaint accompanied by a
prayer for the approval of her redelivery bond. The RTC, however, denied the redelivery bond for
having been filed beyond the five-day mandatory period prescribed in Sections 5 and 6 of Rule
60.42 But since the writ was invalidly served, petitioner is correct in contending that there is no
reckoning point from which the mandatory five-day period shall commence to run.
The trial court is reminded that not only should the writ or order of replevin comply with all the
requirements as to matters of form or contents prescribed by the Rules of Court. 43 The writ must also
satisfy proper service in order to be valid and effective: i.e. it should be directed to the officer who is
authorized to serve it; and it should be served upon the person who not only has the possession or
custody of the property involved but who is also a party or agent of a party to the action.
Consequently, a trial court is deemed to have acted without or in excess of its jurisdiction with
respect to the ancillary action of replevin if it seizes and detains a personalty on the basis of a writ
that was improperly served, such as what happened in this case.
At the outset, petitioners proper remedy should have been to file a motion to quash the writ of
replevin or a motion to vacate the order of seizure. Nevertheless, petitioners filing of an application
for a redelivery bond, while not necessary, did not thereby waive her right to question the improper
service. It now becomes imperative for the trial court to restore the parties to their former positions
by returning the seized property to petitioner and by discharging the replevin bond filed by
respondent. The trial, with respect to the main action, shall continue. Respondent may, however, file
a new application for replevin should he choose to do so.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, as well as its
Resolution, in CA-G.R. SP No. 78529 is hereby SET ASIDE. The Regional Trial Court is hereby
ordered to restore the parties to their former positions, discharge respondents replevin bond, and
proceed with the trial of the main action with dispatch.
SO ORDERED.

[G.R. No. 110048. November 19, 1999]

SERVICEWIDE SPECIALISTS, INC. petitioner, vs. COURT OF APPEALS,
HILDA TEE, & ALBERTO M. VILLAFRANCA, respondents.
DECISION

PURISIMA, J.:

This is a petition for review on certiorari under Rule 45 of the Decision of the
Court of Appeals[1] in CA-G.R. CV No. 19571, affirming the judgment of the Regional
Trial Court of Manila, Branch XX, dismissing Civil Case No. 84-25763 for replevin
and damages.
The litigation involves a motor vehicle, a Colt Galant, 4-door Sedan automobile,
with Motor No. 2E-08927, Serial No. A112A-5297, Model No. 1976.
The appellate court culled the facts that matter as follows: [2]
"On May 14, 1976, Leticia L. Laus of Quezon City purchased on credit a Colt Galant
xxx from Fortune Motors (Phils.) Corporation. On the same date, she executed a
promissory note for the amount ofP56,028.00, inclusive of interest at 12% per annum,
payable within a period of 48 months starting August, 1976 at a monthly installment
of P1,167.25 due and demandable on the 17th day of each month (Exhibit A, pp. 144,
Orig. Records,). It was agreed upon, among others, that in case of default in the
payment of any installment the total principal sum, together with the interest, shall
become immediately due and payable (Exhibit A; p. 144, Orig. Records). As a
security for the promissory note, a chattel mortgage was constituted over the said
motor vehicle (Exhibit B, ibid.), with a deed of assignment incorporated therein such
that the credit and mortgage rights were assigned by Fortune Motors Corp. in favor of
Filinvest Credit Corporation with the consent of the mortgagor-debtor Leticia Laus
(Exhibits B-1 and B-2; p. 147, ibid.). The vehicle was then registered in the name of
Leticia L. Laus with the chattel mortgage annotated on said certificate. (Exhibit "H";
p. 154, ibid.)
On September 25, 1978, Filinvest Credit Corporation in turn assigned the credit in
favor of Servicewide Specialists, Inc. (Servicewide, for brevity) transferring unto the
latter all its rights under the promissory note and the chattel mortgage (Exhibit B-3; p.
149, ibid.) with the corresponding notice of assignment sent to the registered car
owner (Exhibit C; p. 150, Ibid.).
On April 18, 1977, Leticia Laus failed to pay the monthly installment for that
month. The installments for the succeeding 17 months were not likewise fully paid,
hence on September 25, 1978, pursuant to the provisions of the promissory note,
Servicewide demanded payment of the entire outstanding balance of P46,775.24

inclusive of interests (Exhibits D and E; pp. 151-152, ibid.). Despite said formal
demand, Leticia Laus failed to pay all the monthly installments due until July 18,
1980.
On July 25, 1984, Servicewide sent a statement of account to Leticia Laus and
demanded payment of the amount of P86,613.32 representing the outstanding balance
plus interests up to July 25, 1985, attorneys fees, liquidated damages, estimated
repossession expense, and bonding fee (Exhibit F; p. 153, ibid.)
As a result of the failure of Leticia Laus to settle her obligation, or at least to surrender
possession of the motor vehicle for the purpose of foreclosure, Servicewide instituted
a complaint for replevin, impleading Hilda Tee and John Dee in whose custody the
vehicle was believed to be at the time of the filing of the suit.
In its complaint, plaintiff alleged that it had superior lien over the mortgaged vehicle;
that it is lawfully entitled to the possession of the same together with all its
accessories and equipments; (sic) that Hilda Tee was wrongfully detaining the motor
vehicle for the purpose of defeating its mortgage lien; and that a sufficient bond had
been filed in court. (Complaint with Annexes, pp. 1-13, ibid.). On July 30, 1984, the
court approved the replevin bond (p. 20, ibid.)
On August 1, 1984, Alberto Villafranca filed a third party claim contending that he is
the absolute owner of the subject motor vehicle duly evidenced by the Bureau of Land
Transportations Certificate of Registration issued in his name on June 22, 1984; that
he acquired the said mother vehicle from a certain Remedios D. Yang under a Deed of
Sale dated May 16, 1984; that he acquired the same free from all lien and
emcumbrances; and that on July 30, 1984, the said automobile was taken from his
residence by Deputy Sheriff Bernardo Bernabe pursuant to the seizure order issued by
the court a quo.
Upon motion of the plaintiff below, Alberto Villafranca was substituted as
defendant. Summons was served upon him. (pp. 55-56, ibid).
On March 20, 1985, Alberto Villafranca moved for the dismissal of the complaint on
the ground that there is another action pending between the same parties before the
Regional Trial Court of Makati, Branch 140, docketed as Civil Case No. 8310,
involving the seizure of subject motor vehicle and the indemnity bond posted by

Servicewide (Motion to Dismiss with Annexes; pp. 57-110, ibid.) On March 28, 1985,
the court granted the aforesaid motion (p. 122, ibid.), but subsequently the order of
dismissal was reconsidered and set aside (pp. 135-136, ibid.). For failure to file his
Answer as required by the court aquo, Alberto Villafranca was declared in default and
plaintiffs evidence was received ex parte.
On December 27, 1985, the lower court rendered a decision dismissing the complaint
for insufficiency of evidence. Its motion for reconsideration of said decision having
been denied, xxx.
In its appeal to the Court of Appeals, petitioner theorized that a suit for replevin
aimed at the foreclosure of a chattel is an action quasi in rem, and does not require the
inclusion of the principal obligor in the Complaint. However, the appellate court
affirmed the decision of the lower Court; ratiocinating, thus:
A cursory reading, however, of the Promissory Note dated May 14, 1976 in favor of
Fortune Motors (Phils.) Corp. in the sum of P56,028.00 (Annex A of Complaint, p. 7,
Original Records) and the Chattel Mortgage of the same date (Annex B of Complaint;
pp. 8-9, ibid.) will disclose that the maker and mortgagor respectively are one and the
same person: Leticia Laus. In fact, plaintiff-appellant admits in paragraphs (sic) nos. 2
and 3 of its Complaint that the aforesaid public documents (Annexes A and B thereof)
were executed by Leticia Laus, who, for reasons not explained, was never
impleaded. In the case under consideration, plaintiff-appellants main case is for
judicial foreclosure of the chattel mortgage against Hilda Tee and John Doe who was
later substituted by appellee Alberto Villafranca. But as there is no privity of contract,
not even a causal link, between plaintiff-appellant Servicewide Specialists, Inc. and
defendant-appellee Alberto Villafranca, the court a quo committed no reversible error
when it dismissed the case for insufficiency of evidence against Hilda Tee and Alberto
Villafranca since the evidence adduced pointed to Leticia Laus as the party liable for
the obligation sued upon (p. 2, RTC Decision). [3]
Petitioner presented a Motion for Reconsideration but in its Resolution [4] of May
10, 1993, the Court of Appeals denied the same, taking notice of another case pending
between the same parties xxx relating to the very chattel mortgage of the motor
vehicle in litigation.

Hence, the present petition for review on certiorari under Rule 45. Essentially, the
sole issue here is: Whether or not a case for replevin may be pursued against the
defendant, Alberto Villafranca, without impleading the absconding debtor-mortgagor?
Rule 60 of the Revised Rules of Court requires that an applicant for replevin must
show that he is the owner of the property claimed, particularly describing it, or is
entitled to the possession thereof. [5]Where the right of the plaintiff to the possession of
the specified property is so conceded or evident, the action need only be maintained
against him who so possesses the property. In rem action est per quam rem nostram
quae ab alio possidetur petimus, et semper adversus eum est qui rem possidet. [6]
Citing Northern Motors, Inc. vs. Herrera,[7] the Court said in the case of BA
Finance (which is of similar import with the present case):
There can be no question that persons having a special right of property in the goods
the recovery of which is sought, such as a chattel mortgagee, may maintain an action
for replevin therefor. Where the mortgage authorizes the mortgagee to take possession
of the property on default, he may maintain an action to recover possession of the
mortgaged chattels from the mortgagor or from any person in whose hands he may
find them.[8]
Thus, in default of the mortgagor, the mortgagee is thereby constituted as
attorney-in-fact of the mortgagor, enabling such mortgagee to act for and in behalf of
the owner. That the defendant is not privy to the chattel mortgage should be
inconsequential. By the fact that the object of replevin is traced to his possession, one
properly can be a defendant in an action for replevin. It is here assumed that the
plaintiffs right to possess the thing is not or cannot be disputed. [9] (Italics supplied)
However, in case the right of possession on the part of the plaintiff, or his
authority to claim such possession or that of his principal, is put to great doubt (a
contending party may contest the legal bases for plaintiffs cause of action or an
adverse and independent claim of ownership or right of possession may be raised by
that party), it could become essential to have other persons involved and impleaded
for a complete determination and resolution of the controversy.[10] In the case under
scrutiny, it is not disputed that there is an adverse and independent claim of ownership
by the respondent as evinced by the existence of a pending case before the Court of
Appeals involving subject motor vehicle between the same parties herein. [11] Its

resolution is a factual matter, the province of which properly lies in the lower Court
and not in the Supreme Court, in the guise of a petition for review on certiorari. For it
is basic that under Rule 45, this Court only entertains questions of law, and rare are
the exceptions and the present case does not appear to be one of them.
In a suit for replevin, a clear right of possession must be established. (Italics
supplied) A foreclosure under a chattel mortgage may properly be commenced only
once there is default on the part of the mortgagor of his obligation secured by the
mortgage. The replevin in this case has been resorted to in order to pave the way for
the foreclosure of what is covered by the chattel mortgage. The conditions essential
for such foreclosure would be to show, firstly, the existence of the chattel mortgage
and, secondly, the default of the mortgagor. These requirements must be shown
because the validity of the plaintiffs exercise of the right of foreclosure is inevitably
dependent thereon.[12]
Since the mortgagees right of possession is conditioned upon the actual fact of
default which itself may be controverted, the inclusion of other parties, like the debtor
or the mortgagor himself, may be required in order to allow a full and conclusive
determination of the case. When the mortgagee seeks a replevin in order to effect the
eventual foreclosure of the mortgage, it is not only the existence of, but also the
mortgagors default on, the chattel mortgage that, among other things, can properly
uphold the right to replevy the property. The burden to establish a valid justification
for such action lies with the plaintiff. An adverse possessor, who is not the mortgagor,
cannot just be deprived of his possession, let alone be bound by the terms of the
chattel mortgage contract, simply because the mortgagee brings up an action for
replevin.[13]
Leticia Laus, being an indispensable party, should have been impleaded in the
complaint for replevin and damages. An indispensable party is one whose interest will
be affected by the courts action in the litigation, and without whom no final
determination of the case can be had. The partys interest in the subject matter of the
suit and in the relief sought are so inextricably intertwined with the other parties that
his legal presence as a party to the proceeding is an absolute necessity. In his absence,
there cannot be a resolution of the dispute of the parties before the Court which is
effective, complete, or equitable.

Conversely, a party is not indispensable to the suit if his interest in the controversy
or subject matter is distinct and divisible from the interest of the other parties and will
not necessarily be prejudiced by a judgment which does complete justice to the parties
in Court. He is not indispensable if his presence would merely complete relief
between him and those already parties to the action or will simply avoid multiple
litigation.[14] Without the presence of indispensable parties to a suit or proceeding, a
judgment of a Court cannot attain real finality.[15]
That petitioner could not locate the mortgagor, Leticia Laus, is no excuse for
resorting to a procedural short-cut. It could have properly availed of substituted
service of summons under the Revised Rules of Court. [16] If it deemed such a mode to
be unavailing, it could have proceeded in accordance with Section 14 of the same
Rule.[17] Indeed, petitioner had other proper remedies, it could have resorted to but
failed to avail of. For instance, it could have properly impleaded the mortgagor. Such
failure is fatal to petitioners cause.
With the foregoing disquisition and conclusion, the other issues raised by
petitioner need not be passed upon.
WHEREFORE, the Petition is DENIED and the Decision of the Court of
Appeals in CA-G.R. CV No. 19571 AFFIRMED. No pronouncement as to costs.
SO ORDERED.