Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION

EUGENIO BASBAS, TEOFILO G.R. No. 172660

ARAS, RUFINO ARAS,
GERVACIO BASBAS, ISMAEL
ARAS, EUGENIO ARAS,
SIMFRONIO ARAS, Present:
FELICIANO ARAS, ROSITA
ARAS, EUGENIO BASBAS, JR. CORONA, C. J., Chairperson,
and SPOUSES PABLITO LEONARDO-DE CASTRO,
BASARTE and MARCELINA BRION,
BASBAS BASARTE, DEL CASTILLO, and
Petitioners, VILLARAMA, JR., JJ.

- versus -

BEATA SAYSON and Promulgated:

ROBERTO SAYSON, JR.,
Respondents. August 24, 2011
x-------------------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

Petitioners seek to prevent the revival of a judgment rendered in favor of the respondents more than
two decades back.

This Petition for Review on Certiorari assails the February 17, 2004 Decision1of the Court of
Appeals (CA) in CA-G.R. CV No. 72385 which denied the appeal filed before it and affirmed in toto the
May 21, 2001 Order2 of the Regional Trial Court of Ormoc City, Branch 35. Also assailed is the April 19,
2006 Resolution3 denying the Motion for Reconsideration thereto.

In lieu of Associate Justice Lucas P. Bersamin per Raffle dated August 8, 2011.
1
CA rollo, pp. 102-109; penned by Associate Justice Elvi John S. Asuncion and concurred in by Associate Justices Godardo
A. Jacinto and Lucas P. Bersamin (now a Member of this Court).
2
Records, pp. 440-442; penned by Judge Fortunito L. Madrona.
3
CA rollo, p. 121.

1
Factual Antecedents

On September 2, 1976, respondent Beata Sayson (Beata) and her husband Roberto Sayson, Sr.
(Roberto Sr.) filed a Petition for Registration of an agricultural land located in Cagbatang, Balagtas, Matag-
ob, Leyte docketed as Land Registration Case No. 0-177. The said application was opposed by the Republic
of the Philippines and herein petitioners Eugenio Basbas (Eugenio Sr.), Teofilo Aras (Teofilo) and Rufino
Aras (Rufino). On March 22, 1979, the Court of First Instance (CFI) of Leyte, Branch V (Ormoc City)
rendered a Decision adjudicating to the spouses Sayson said agricultural land and approving its registration
under their names.4

The oppositors filed their appeal to the CA docketed as CA-G.R. No. 66541. In a Decision5 dated
July 24, 1985, the appellate court affirmed in toto the Decision of the CFI. This CA Decision became final
and executory on August 21, 19856 and, accordingly, a Writ of Possession was issued on November 21,
1985, which was never implemented.

The following year or on September 17, 1986, Original Certificate of Title (OCT) No. 24967 was
issued to the spouses Sayson pursuant to the March 22, 1979 CFI Decision. An Alias Writ of Possession
was issued on April 6, 1989 but this could also not be implemented in view of the refusal of Eugenio Sr.
and his son Eugenio Basbas, Jr. (Eugenio Jr.). Claiming that the land they occupied is not the same land
subject of the CFI Decision,8 they demanded that a relocation survey be conducted. Hence, a relocation
survey was conducted by order of the Regional Trial Court (RTC), Branch 12, Ormoc City.9

In an Order10 dated September 13, 1989, the RTC approved the Commissioners Report11 on the
relocation survey and ordered the original oppositors, petitioners Eugenio Sr., Teofilo and Rufino, as well

4
See first page of CA Decision dated July 24, 1985 in CA-G.R. No. 66541, records, p. 8.
5
Id. at 8-13; penned by Associate Justice Leonor Ines Luciano and concurred in by Presiding Justice Ramon G. Gaviola,
Jr., and Associate Justices Edgardo P. Caguioa and Ma. Rosario Quetulio-Losa.
6
See Entry of Judgment, id. at 14.
7
Id. at 15.
8
See the (Sheriffs) Progress Report, id. at 16-17.
9
See RTC Order dated June 16, 1989, id. at 18.
10
Id. at 21-22.
11
Id. at 19-20.

2
as their co-petitioners herein Gervacio Basbas (Gervacio), Ismael Aras (Ismael), Eugenio Aras (Eugenio),
Simfronio Aras (Simfronio), Feliciano Aras (Feliciano), Rosita Aras (Rosita) and Eugenio Jr. to vacate the
subject property, viz:

[R]espondents are directed to vacate the portion of Lot No. 1, Psu-08-000235 covered by
OCT No. 2496 and subject of the final decree of registration which, [up to the] present,
said respondents are still possessing pursuant to the final and executory judgment of the
Court of Appeals and as particularly defined in the Commissioners report submitted on
August 3, 1989 x x x.

Respondents are reminded that under Rule 71 of the New Rules of Court, failure
on their part to so obey this order may make them liable for contempt of this Court.

SO ORDERED.12

Gervacio, Ismael, Eugenio, Simfronio, Feliciano, Rosita and Eugenio Jr., although not oppositors
in CA-G.R. No. 66541, were likewise ordered to vacate the property in view of the following
pronouncement in the RTCs September 13, 1989 Order:

It appearing from the records that respondents Eugenio Basbas, Teofilo Aras,
Gervacio Basbas, Rufino Aras, Ismael Aras, Eugenio Aras, Simfronio Aras, Feliciano
Aras, Rosita Aras and Eugenio Basbas[,] Jr. are parties to the present case, they
having been the principal oppositors to the petition filed by the applicants as shown
in the records, pages 34, 35 and 36, Vol. 1 x x x13 (Emphasis supplied.)

This September 13, 1989 Order was, however, not implemented within the five-year period from
the time it became final.14 Hence, respondent Beata and her son Roberto Sayson, Jr. (Roberto Jr.), as
successor-in-interest of the late Roberto Sr., filed on August 18, 1995 a Complaint for Revival of
Judgment15 before the RTC of Ormoc City, Branch 12,16 docketed as Civil Case No. 3312-0. Impleaded
as defendants were Eugenio Sr., Teofilo, Rufino, Gervacio, Ismael, Eugenio, Simfronio, Feliciano, Rosita,

12
Id. at 22.
13
Id. at 21.
14
RULES OF COURT, Rule 39, Sec. 6 provides:
Sec. 6. Execution by motion or by independent action. A final and executory judgment or order may be executed
on motion within five (5) years from the date of its entry. After the lapse of such time, and before it is barred by the
statute of limitations, a judgment may be enforced by action. x x x.
15
Records, pp. 1-7.
16
The case was later transferred to Branch 35 of RTC, Ormoc City per Order dated September 22, 1997, id. at 80.

3
and Eugenio Jr. Petitioner-spouses Pablito Basarte and Marcelina Basbas-Sabarte17 (spouses Basarte), who,
although not identified in the September 13, 1989 Order as principal oppositors in the land registration case,
were likewise impleaded as defendants since they also allegedly harvested, processed, and sold the coconuts
found in the subject property.

Upon receipt of summons, Gervacio, Rufino, Ismael, Eugenio, Feliciano, Rosita and Eugenio Jr.
filed a Motion to Dismiss18 on the ground that the Complaint states no cause of action. This was, however,
denied19 so the same set of petitioners, except for Feliciano, filed an Answer with Counterclaim.20

In their Answer with counterclaim, said petitioners admitted the allegations in paragraphs 4, 5, 6,
7, 8, 9, 10, 11 and 12 of respondents Complaint which state that:

xxxx

4. On March 22, 1979, the Honorable Judge Numeriano Estenzo rendered a

decision in the above-mentioned Land Registration [c]ase in favor of the petitioners x x x
and against the oppositors, the dispositive portion of said decision reads:

WHEREFORE, decision is hereby rendered x x x [and] the land

described under Plan PSU-08-000235 dated September 10, 1973 of
Geodetic Engineer Nestorio Encenzo already APPROVED by the Acting
Regional Director on June 27, 1974 is hereby adjudicated and registered
in the names of the Spouses ROBERTO SAYSON and BEATA O.
SAYSON, of legal ages, Filipinos, spouses and residents of Campokpok,
Tabango, Leyte, Philippines and as soon as this decision becomes final, let
a decree of registration be issued by the Land Registration Commission.
SO ORDERED. (x x x)

5. From the above decision the oppositors (defendants herein) appealed;

6. On July 24, 1985, the Honorable Court of Appeals rendered its decision, the
dispositive portion [of which] reads:

WHEREFORE, PREMISES CONSIDERED, finding no merit in

this appeal the decision appealed from is hereby AFFIRMED in toto.

17
Later amended to read as Basarte per Order dated July 3, 1998, id. at 120.
18
Id. at 30-32.
19
See the RTCs Order dated May 9, 1997, id. at 49-50.
20
Id. at 73-77.

4
 SO ORDERED.

and the said decision has become final and executory on August 21, 1985 per Entry of
Judgment issued by the Court of Appeals x x x.

7. That consequently, on September 17, 1986 an Original Certificate of Title No.

N-2496 was issued in the names of Roberto Sayson and Beata O. Sayson, pursuant to
Decree No. N-191615, by the Register of Deeds for the Province of Leyte;

8. That on motion, the Honorable Court, on November 21, 1985, issued a Writ
of Possession which for some reason or [another] was not satisfied, so that the Honorable
Court, on April 7, 1989 acting on an ex-parte motion dated April 6, 1989 directed the
issuance of an Alias Writ of Possession;

9. That the Deputy Sheriff of this Court, Mr. Placid[o] Cayco tendered the Alias
Writ of Possession to the oppositors, particularly to Mr. Eugenio Basbas, Sr. and Eugenio
Basbas, Jr. who, as the Deputy Sheriff stated in his Progress Report dated May 18, 1989
did not believe and obey the CFI Decision and the decision of the Court of Appeals and x
x x [t]hey demanded a relocation survey to determine the exact location of applicants
(complainant[s] herein) property described in the alias writ of possession. x x x;

10. That on June 16, 1989, the Honorable Court, acting on the Progress Report of
Deputy Sheriff Placido Cayco, issued an Order on even date appointing Geodetic Engineer
Jose A. Tahil as Court Commissioner specifically to relocate Lot No. 1, Plan Psu-08-
000235, LRC No. 0-177, Land Reg. Record No. N51830 x x x This Order was dictated in
open court in the presence of Mr. Eugenio Basbas, Sr. and Eugenio Basbas, Jr. who had
both objected to the Writ of Possession, and their counsel Atty. Evargisto Escalon, and
Attorney Demetrio D. Sarit, counsel for the applicants. x x x

11. That pursuant to the [O]rder dated June 16, 1989 x x x the Court assigned
Commissioner, Engr. Jose A. Tahil, submitted his report stating that the job assigned to the
commissioner was already fully and peacefully accomplished; that his findings [show] that
all points are existing and intact on the field except x x x corner 3 of said lot x x x which at
present [is] already defined and indicated on the ground. The commissioner also attached
a Sketch Plan of the land to his report. x x x

12. That, finally, the Honorable Court, on September 13, 1989 issued an Order
approving the Commissioners Report and further stated:

[R]espondents (defendants herein) are directed to vacate the portion of Lot

No. 1, Psu-08-000235 covered by OCT No. 2496 and subject of final
decree of registration which, until [the] present, said respondents are still
possessing, pursuant to the final and executory judgment of the Court of
Appeals and as particularly [defined] in the Commissioners Report
submitted on August 3, 1989 x x x

5
 Respondents are reminded that under Rule 71 of the New Rules
of Court, failure on their part to so obey this Order may make them liable
for contempt of this Court.21

However, petitioners admitted but denied in part:

1) paragraphs 2 and 3, insofar as they alleged that they were all oppositors to the land registration
case when only Eugenio Sr., Teofilo and Rufino were the oppositors therein; and

2) paragraph 14, with respect to the allegation on the retirement of the Deputy Sheriff and the heart
condition of the Clerk of Court, for lack of sufficient knowledge and information sufficient to form a belief
thereon.

On the other hand, they specifically denied:

1) paragraph 13, on the ground that they have the right of ownership and/or possession over the
subject property; and

2) paragraph 15, on the ground that the property they are cultivating is owned by them, hence,
respondents cannot suffer losses and damages.

Paragraphs 2, 3, 13, 14 and 15 alluded to in the foregoing are as follows:

2. All the defendants named above are x x x of legal age and are residents of
Balagtas, Matag-ob, Leyte where they may be served summons and other court processes;
while defendant-spouses Pablito Basarte and Marcelina Basbas Basarte were not named
as among the oppositors in the land registration case whose decision is herein sought to be
revived, said spouses are nonetheless participating in the harvest, processing and sale of
the coconuts with the other defendants named above;

3. Plaintiffs Beata Sayson and her late husband, Roberto Sayson are petitioners
in Land Registration Case No. 0-177 for the registration of a parcel of agricultural land
situated in Barrio Balagtas, Matag-ob, Leyte, filed on September 2, 1976 with the then
Court of First Instance of Leyte, Branch V, Ormoc City. The above-named defendants,
namely: Eugenio Basbas, Teofilo Aras, Gervacio Basbas, Rufino Aras, Ismael Aras,

21
Id. at 2-5.

6
 Eugenio Aras, Simfronio Aras, Feliciano Aras, Rosita Aras and Eugenio Basbas, Jr. were
oppositors to the application;22

xxxx

13. That despite this admonition in the [September 13, 1989] [O]rder that they
could be cited for contempt of Court, the respondents, defendants herein, had continuously
defied the same and this notwithstanding the fact that it was upon their own demands and
insistence that a relocation survey be made on the premises subject of this case before they
would obey the alias writ of possession x x x and that the finding[s] of the Court[-
]appointed Commissioner Engr. Jose A. Tahil show that the oppositors-respondents did
[encroach] on the land of plaintiffs herein;

14. That this [September 13, 1989] Order however was not implemented thru a
Writ of Execution within the five-year period from the time the Order became final because
of the retirement of Deputy Sheriff Placido Cayco and by reason also of the fact that the
then Clerk of Court, Atty. Constantino A. Trias, Jr. who was also the ex-officio Provincial
Sheriff was not physically fit to hike thru the mountains and hills of Brgy. Balagtas where
the property and the defendants therein reside due to his heart condition;

15. That despite their knowledge of the Court[s] [September 13, 1989] Order, the
same [having been] dictated in open court, the respondents had continued to occupy the
land of the plaintiffs and for more than five (5) years since this Order for them to vacate
the land in question was issued, they had harvested the coconuts growing thereon and such
other produce of the land herein involved. And until the decision of the Court of Appeals
is executed, plaintiff will continue to suffer losses and damages by reason of defendants
unlawful occupation and possession and their continued harvesting of the produce of this
land of the herein plaintiffs.23

By way of special and affirmative defenses, said petitioners contended that the Order sought to be
revived is not the judgment contemplated under Section 6, Rule 39 of the Rules of Court, hence the action
for revival of judgment is improper. Also, except for Rufino, petitioners averred that they cannot be made
parties to the complaint for revival of judgment as they were not parties to the land registration case. They
thus believed that the September 13, 1989 Order sought to be revived is not binding upon them and hence,
the complaint states no cause of action with respect to them. As to the counterclaim, petitioners prayed that
respondents pay them moral and exemplary damages, attorneys fees and litigation expenses.

22
Id. at 1-2
23
Id. at 5-6.

7
 Pre-trial conference was thereafter set24 but since not all petitioners were served with summons,
this was reset and alias summons was issued and served upon Simfronio and the spouses Basarte.25 Upon
receipt of summons, Simfronio adopted the Answer with Counterclaim of Gervacio, Rufino, Ismael,
Eugenio, Feliciano, Rosita and Eugenio Jr.26 while the spouses Basarte filed a Motion to Dismiss27 on the
ground of lack of cause of action. As said motion was also denied,28 the spouses Basarte later filed a
Manifestation29 that they were also adopting the Answer with Counterclaim filed by Gervacio and the
others.

During the pre-trial conference on July 14, 1999, the RTC issued an Order30 which provides in
part, viz:

In todays pre-trial conference, manifestations and counter-manifestations were

exchanged. All the parties and their counsels are present. x x x [P]laintiffs counsel
presented a Special Power of Attorney by Beata Sayson but the Court observed that
same was not duly acknowledged before the Philippine Consulate or Embassy in
Canada. However, this matter is not so important[.] [W]hen the Court tried to dig and
discuss with the parties on their real positions, it turned out that the plaintiffs are seeking
revival of the previous final judgment, the original parties of which were Eugenio
Basbas, Teofilo Aras and Rufino Aras. Eugenio and Teofilo are all dead, leaving
Rufino Aras alive. It is quite complicated considering that in this action, the plaintiffs
relied on the Order of this Court penned by the previous judge dated September 13,
1989 which was made after or consequent to the final judgment aforementioned,
wherein the names of the other defendants were mentioned in the body thereof. After
considering the merits of the various contentions, the Court is of the view that the
complaint had to limit itself to the names of the original parties appearing in the
original judgment now being sought for revival. The interest of the plaintiffs in seeking
implementation or execution of the judgment sought to be revived which would involve
the other defendants can be taken when the judgment shall have been revived.

In this connection therefore and as part of the matters to be made part in the pre-
trial conference, in the exercise of the authority granted to it by law, this Court directs the
plaintiffs to make the necessary amendment and/or to submit a manifestation first to

24
See Notice of Pre-Trial, id. at 85.
25
See Orders dated March 9, 1998 & May 20, 1998, id. at 102 & 112 respectively; Alias Summons dated June 1, 1998, id.
at 113; and Officers Return, id. at 115. See also the Summons served to the spouses Basarte, id. at 148, and the Officers
Return thereof, id. at 147, after the spouses surname was amended to read as spouses Basarte instead as Sabarte.
26
See Simfronios Manifestation and Second Manifestation, id. at 116-119.
27
Id. at 149-151.
28
See RTC Order dated February 9, 1999, id. at 186.
29
Id. at 253.
30
Id. at 215-216.

8
 this Court on the point above raised regarding amendment of the designation of the
parties having in mind the objection of the defendants who manifested that should there
be an amendment, this counter-claim shall be disregarded since they were brought in
unnecessarily in this kind of action.

Plaintiffs therefore are given a period of ten (10) days from today within which to
submit the requisite manifestation furnishing copy thereof to the defendant who upon
receipt shall also be given a period of ten (10) days within which this Court will make the
necessary resolution before allowing any amendment.

Hold the pre-trial conference in abeyance.

SO ORDERED. 31 (Emphasis supplied.)

In their Manifestation with Prayer,32 respondents informed the RTC about the death of Eugenio Sr.
and Teofilo who were oppositors in the land registration case and the substitution by their heirs, namely,
Gervacio, Marcelina Basbas Basarte,33 and Eugenio Jr. for Eugenio Sr. and Ismael, Vicente, Ligaya Aras
(Ligaya), Rosendo Aras (Rosendo) and Daina Aras (Daina) for Teofilo. Respondents prayed that their
manifestation be considered for the purpose of determining the proper parties to the case. Despite petitioners
Counter-Manifestation,34 the RTC issued the following Order35 on May 15, 1999:

The Manifestation of plaintiffs and the Counter-Manifestation of defendants

having already been submitted and duly noted, the Court hereby directs that henceforth in
the denomination of this case, the names of the original parties, Eugenio Basbas and
Teofilo Aras (in Land Registration Case No. 0-177) shall still remain to be so stated as
defendants for purposes of the present case but with additional names of their respective
heirs to be included and stated immediately after each name as heirs in substitution,
namely: for Eugenio Basbas 1) Gervacio Basbas, 2) Marcelina Basbas Basarte, and 3)
Eugenio Basbas, Jr.; and for Teofilo Aras 1) Ismael Aras, 2) Vicente Aras, 3) Ligaya Aras,
4) Rosendo Aras, and 5) Daina Aras.

Since from the records, only Gervacio Basbas, Eugenio Basbas, Jr. and Ismael
Aras were duly served with summons, the Branch Clerk of Court is hereby directed to
serve summons on the other heirs, namely: Marcelina Basbas Basarte, Vicente Aras,
Ligaya Aras, Rosendo Aras, and Daina Aras.

31
Id.
32
Id. at 231-233.
33
One of the Spouses Basarte.
34
Records, pp. 237-239.
35
Id. at 250.

9
 x x x x36

After summons were served, Vicente, Rosendo, Ligaya and Daina were, however, declared in
default for not filing any responsive pleading.37 On February 2, 2001, the RTC issued a Pre-Trial Order38
where the controverted stipulations and issues to be tried, among others, were enumerated as follows:

Controverted Stipulations:

1. That defendants are not enjoying the produce of the land because there are period[s]
wherein the fruits were subject of theft and the same is now pending at the Municipal
Trial Court of Matag-ob;

2. That [even] before the start of the original case, the original defendants referring to
the late Eugenio Basbas, Sr. and Teofilo Aras, [and] Rufino Aras were occupying the
property and they were succeeded by the respective heirs of the deceased Eugenio
Basbas, Sr. and Teofilo Aras [sic];

3. That plaintiff Teofilo Aras, Sr. has a daughter named Fedeliza Aras;

Issues

1. Whether x x x the plaintiffs are entitled to revival of judgment in the earlier [land
registration] case;

2. Whether x x x the defendants except for defendant Rufino Aras are the proper parties
in the present action;

3. Whether x x x the complaint states a cause of action;

4. Whether x x x defendants are entitled to their counterclaim, and;

5. Whether judgment on the pleadings is allowed or is tenable.39

36
Id.
37
See 1st page of Pre-Trial Order, id. at 348. The Rufino Aras declared in default in said Pre-Trial Order is actually Rosendo
Aras. Rufino filed his Answer together with Gervacio and the others.
38
Id. at 348-350.
39
Id. at 349.

10
 Respondents subsequently filed an Omnibus Motion for Judgment on the Pleadings and/or
Summary Judgment.40 They contended that since petitioners Answer failed to tender an issue, they having
expressly admitted the material allegations in the complaint, particularly paragraphs 4 to 12, a judgment on
the pleadings or summary judgment is proper.

Petitioners filed an Opposition Re: Omnibus Motion for Judgment on the Pleadings and/or
Summary Judgment and Memorandum Re: Failure of Plaintiff Beata Sayson to Appear in the Pre-trial
Conference.41 They argued that the case cannot be decided based on the pleadings nor through summary
judgment considering that the controverted stipulations and issues defined in the Pre-Trial Order must be
proven by evidence. In addition, they questioned the Special Power of Attorney (SPA) executed by Beata
in Canada empowering her son Roberto Jr. to appear on her behalf in the pre-trial conference. They argued
that since said SPA has not been authenticated by a Philippine Consulate official, it is not sufficient
authorization and hence, Beata cannot be considered to have attended the pre-trial conference. The case
must, therefore, be dismissed insofar as she is concerned.

Ruling of the Regional Trial Court

In resolving respondents Omnibus Motion for Judgment on the Pleadings and/or Summary
Judgment, the RTC found that petitioners Answer does not essentially tender an issue since the material
allegations of the Complaint were admitted. Hence, said court issued an Order42 dated May 21, 2001, the
dispositive portion of which reads:

Wherefore, finding merit in the motion, judgment is hereby rendered for and in
favor of the plaintiffs and against the defendants ordering the revival of the decision of the
Court of Appeals promulgated on July 24, 1985 affirming the decree of registration of this
Court in the decision of the Land Registration Case No. 0-177 dated March 22, 1979, and
of the final Order of this Court dated September 13, 1989 and upon finality of this Order,
ordering the issuance of Writ of Possession for the lot made subject of the decision.
Without pronouncement as to costs.

SO ORDERED.43

40
Id. at 377-382.
41
Id. at 435-439.
42
Id. at 440-442
43
Id. at 442.

11
 Petitioners thus filed a Notice of Appeal44 which was approved in an Order dated June 06, 2001.45

Ruling of the Court of Appeals

Finding no merit in the appeal, the CA denied the same in a Decision46 dated February 17, 2004.
It noted that petitioners Answer admitted almost all of the allegations in respondents complaint. Hence, the
RTC committed no reversible error when it granted respondents Motion for Judgment on the Pleadings
and/or Summary Judgment. The appellate court likewise found untenable the issue as regards the failure of
the complaint to state a cause of action. To the appellate court, petitioners refusal to vacate the subject
property despite the final and executory Decision of the CA in the land registration case and the September
13, 1989 Order of the RTC for them to vacate the same, clearly support respondents cause of action against
them. Also contrary to petitioners posture, the September 13, 1989 Order is a final order as it finally
disposed of the controversy between the parties in the land registration case. The CA likewise found the
SPA executed by Beata in favor of Roberto Jr. as valid, hence, she was duly represented during the pre-trial
conference. The dispositive portion of said CA Decision reads:

WHEREFORE, premises considered, the present appeal is DENIED. The May

21, 2001 Decision of the Regional Trial Court of Ormoc City, Branch 35 is AFFIRMED.
SO ORDERED.47

Their Motion for Reconsideration48 having been denied in a Resolution49 dated April 19, 2006,
petitioners are now before this Court through the present Petition for Review on Certiorari.

Issues

Petitioners impute upon the CA the following errors:

44
Id. at 445.
45
Id. at 450.
46
Supra note 1.
47
CA rollo, p. 93.
48
Id. at 95-101.
49
Supra note 3.

12
 1. The Honorable Court of Appeals clearly committed serious errors of law in its decision
and Resolution dated February 17, 2004 and April 19, 2006 when it affirmed the Order of
the Regional Trial Court dated May 21, 2001 and declared that no reversible error was
committed by the Regional Trial Court of Ormoc City in granting respondents motion for
judgment on the pleadings and/or summary judgment;

2. The Honorable Court of Appeals clearly committed serious errors of law in its Decision
and Resolution dated February 17, 2004 and April 19, 2006 when it affirmed the Order of
the Regional Trial Court of Ormoc City dated May 21, 2001 and declared that petitioners
argument that respondents complaint failed to state a cause of action has no merit.

3. The Honorable Court of Appeals clearly committed serious errors of law when it
affirmed the Order of the Regional Trial Court of Ormoc City which ordered the revival of
the Judgment of this Court of Appeals in CA-G.R. No. 66541 entitled Beata Sayson and
Roberto Sayson vs. Eugenio Basbas, et al., despite the fact that this was not the judgment
sought to be revived in Civil Case No. 3312-0;

4. The Honorable Court of Appeals clearly committed serious errors of law in ruling that
the duly notarized Special Power of Attorney in favor of Roberto Sayson[,] Jr. is valid and
the latter is authorized to represent his mother, Beata Sayson[,] which is contrary to the
ruling in the case of ANGELITA LOPEZ, represented by PRISCILLA L. TY vs. COURT
OF APPEALS, REGIONAL TRIAL COURT OF QUEZON CITY x x x (G.R. No.
77008, December 29, 1987).50

The Parties Arguments

Petitioners insist that a judgment on the pleadings or a summary judgment

is not proper in this case since the controverted stipulations and the first three issues enumerated in the pre-
trial order involve facts which must be threshed out during trial. They also claim that the Complaint for
Revival of Judgment states no cause of action because the September 13, 1989 Order which it sought to
revive is not the judgment contemplated under Section 6, Rule 39 of the Rules of Court and, therefore,
cannot be the subject of such an action. Moreover, they argue that the CA Decision in the land registration
case should not have been revived as same was not prayed for in the Complaint for Revival of Judgment.
Lastly, petitioners assail the SPA which authorized Roberto Jr. to represent his mother, Beata, during the
pre-trial conference, it not having been authenticated by a Philippine consulate officer in Canada where it
was executed. Citing Lopez v. Court of Appeals,51 they contend that said document cannot be admitted in

50
Rollo, p. 19.
51
240 Phil. 811 (1987); In this case, an SPA was executed abroad by the real party in interest in favor of a
representative here in the Philippines to initiate an action for ejectment. Finding said SPA to be without the
authentication of an officer in the foreign service of the Philippines stationed in that foreign country pursuant to

13
evidence and hence, Beata was not duly represented during said pre-trial conference. The case, therefore,
should have been dismissed insofar as she is concerned.

For their part, respondents point out that the RTCs basis in granting the Motion for Judgment on
the Pleadings and/or Summary Judgment was petitioners admission of practically all the material
allegations in the complaint. They aver that Section 1, Rule 34 of the Rules of Court clearly provides that
where an answer fails to tender an issue or otherwise admits the material allegations of the adverse partys
pleading, the court may, on motion of that party, direct judgment on the pleadings. Also, the test for a
motion for summary judgment is whether the pleadings, affidavits or exhibits in support of the motion are
sufficient to overcome the opposing papers and to justify a finding as a matter of law that there is no defense
to the action or the claim is clearly meritorious. And since, as found by the CA, petitioners Answer did not
tender an issue and that there is no defense to the action, the grant of the Motion for Judgment on the
Pleadings and/or Summary Judgment was appropriate. Respondents likewise contend that if their prayer in
the Complaint is taken in its proper context, it can be deduced that what they were really seeking is the
implementation of the CA Decision dated July 24, 1985 and the orders ancillary thereto. With respect to
the SPA, they submit that the law does not require that a power of attorney be notarized. Moreover, Section
4, Rule 18 of the Rules of Court simply requires that a representative appear fully authorized in writing. It
does not specify a particular form of authority.

Our Ruling

There is no merit in the petition.

I. The instant case is proper for the rendition of a summary judgment.

Petitioners principally assail the CAs affirmance of the RTCs Order granting respondents Motion
for Judgment on the Pleadings and/or Summary Judgment.

Sec. 25, Rule 132 of the old Rules of Court (now Sec. 24, Rule 132 of the Revised Rules of Court, see footnote
63), this Court declared the same as not admissible in evidence. Hence, the litigation was considered not
commenced by the real party-in-interest or by one duly authorized to do so, making the entire proceedings before
the lower courts null and void.

14
 In Tan v. De la Vega,52 citing Narra Integrated Corporation v. Court of Appeals,53 the court
distinguished summary judgment from judgment on the pleadings, viz:

The existence or appearance of ostensible issues in the pleadings, on the one hand,
and their sham or fictitious character, on the other, are what distinguish a proper case for
summary judgment from one for a judgment on the pleadings. In a proper case for
judgment on the pleadings, there is no ostensible issue at all because of the failure of the
defending partys answer to raise an issue. On the other hand, in the case of a summary
judgment, issues apparently exist i.e. facts are asserted in the complaint regarding which
there is as yet no admission, disavowal or qualification; or specific denials or affirmative
defenses are in truth set out in the answer but the issues thus arising from the pleadings are
sham, fictitious or not genuine, as shown by affidavits, depositions, or admissions. x x x.

Simply stated, what distinguishes a judgment on the pleadings from a summary judgment is the
presence of issues in the Answer to the Complaint. When the Answer fails to tender any issue, that is, if it
does not deny the material allegations in the complaint or admits said material allegations of the adverse
partys pleadings by admitting the truthfulness thereof and/or omitting to deal with them at all, a judgment
on the pleadings is appropriate.54 On the other hand, when the Answer specifically denies the material
averments of the complaint or asserts affirmative defenses, or in other words raises an issue, a summary
judgment is proper provided that the issue raised is not genuine. A genuine issue means an issue of fact
which calls for the presentation of evidence, as distinguished from an issue which is fictitious or contrived
or which does not constitute a genuine issue for trial.55

a) Judgment on the pleadings is not proper because

petitioners Answer tendered issues.

In this case, we note that while petitioners Answer to respondents Complaint practically admitted
all the material allegations therein, it nevertheless asserts the affirmative defenses that the action for revival
of judgment is not the proper action and that petitioners are not the proper parties. As issues obviously arise
from these affirmative defenses, a judgment on the pleadings is clearly improper in this case.

52
G.R. No. 168809, March 10, 2006, 484 SCRA 538, 550-551.
53
398 Phil. 733,740 (2000).
54
Tan v. De la Vega, supra note 52 at 545.
55
Wood Technology Corporation v. Equitable Banking Corporation, 492 Phil.106, 116 (2005).

15
 However, before we consider this case appropriate for the rendition of summary judgment, an
examination of the issues raised, that is, whether they are genuine issues or not, should first be made.

b) The issues raised are not genuine issues, hence

rendition of summary judgment is proper.

To resolve the issues of whether a revival of judgment is the proper action and whether respondents
are the proper parties thereto, the RTC merely needed to examine the following: 1) the RTC Order dated
September 13, 1989, to determine whether same is a judgment or final order contemplated under Section
6, Rule 39 of the Rules of Court; and, 2) the pleadings of the parties and pertinent portions of the records56
showing, among others, who among the respondents were oppositors to the land registration case, the heirs
of such oppositors and the present occupants of the property. Plainly, these issues could be readily resolved
based on the facts established by the pleadings. A full-blown trial on these issues will only entail waste of
time and resources as they are clearly not genuine issues requiring presentation of evidence.

Petitioners aver that the RTC should not have granted respondents Motion for Judgment on the
Pleadings and/or Summary Judgment because of the controverted stipulations and the first three issues
enumerated in the Pre-trial Order, which, according to them, require the presentation of evidence. These
stipulations and issues, however, when examined, basically boil down to questions relating to the propriety
of the action resorted to by respondents, which is revival of judgment, and to the proper parties thereto the
same questions which we have earlier declared as not constituting genuine issues.

In sum, this Court holds that the instant case is proper for the rendition of a summary judgment,
hence, the CA committed no error in affirming the May 21, 2001 Order of the RTC granting respondents
Motion for Judgment on the Pleadings and/or Summary Judgment.

II. The Complaint states a cause of action.

Petitioners contend that the complaint states no cause of action since the

56
Particularly the (1) Complaint, records, pp. 1-7; (2) Answer, id. at 73-77; (3) respondents Manifestation with Prayer, id. at
231-233; and (4) petitioners Counter-Manifestation, id. at 237-239.

16
September 13, 1989 Order sought to be revived is not the judgment contemplated under Section 6, Rule 39
of the Rules of Court. They also aver that the RTC erred when it ordered the revival not only of the
September 13, 1989 Order but also of the July 24, 1985 CA Decision, when what was prayed for in the
complaint was only the revival of the former.

This Court, however, agrees with respondents that these matters have already been sufficiently
addressed by the RTC in its Order of May 9, 199757 and we quote with approval, viz:

The body of the Complaint as well as the prayer mentioned about the executory decision
of the Court of Appeals promulgated on July 24, 1985 that had to be finally implemented.
So it appears to this Court that the Complaint does not alone invoke or use as subject thereof
the Order of this Court which would implement the decision or judgment regarding the
land in question. The Rules of Court referring to the execution of judgment, particularly
Rule 39, Sec. 6, provides a mechanism by which the judgment that had not been enforced
within five (5) years from the date of its entry or from the date the said judgment has
become final and executory could be enforced. In fact, the rule states: judgment may be
enforced by action.

So in this Complaint, what is sought is the enforcement of a judgment and the

Order of this Court dated September 13, 1989 is part of the process to enforce that
judgment. To the mind of the Court, therefore, the Complaint sufficiently states a cause of
action.58

III. Any perceived defect in the SPA would not serve to bar the case from proceeding.

Anent the SPA, we find that given the particular circumstances in the case at bar, an SPA is not
even necessary such that its efficacy or the lack of it would not in any way preclude the case from
proceeding. This is because upon Roberto Sr.s death, Roberto Jr., in succession of his father, became a co-
owner of the subject property together with his mother, Beata. As a co-owner, he may, by himself alone,
bring an action for the recovery of the co-owned property pursuant to the well-settled principle that in a co-
ownership, co-owners may bring actions for the recovery of co-owned property without the necessity of

57
Id. at 49-50.
58
Id. at 49.

17
joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the benefit
of his co-owners.59

While we note that the present action for revival of judgment is not an action for recovery, the
September 13, 1989 Order sought to be revived herein ordered the petitioners, among others, to vacate the
subject property pursuant to the final and executory judgment of the CA affirming the CFIs adjudication of
the same in favor of respondents. This Order was issued after the failure to enforce the writ of execution
and alias writ of execution due to petitioners refusal to vacate the property. To this Courts mind, respondents
purpose in instituting the present action is not only to have the CA Decision in the land registration case
finally implemented but ultimately, to recover possession thereof from petitioners. This action is therefore
one which Roberto Jr., as co-owner, can bring and prosecute alone, on his own behalf and on behalf of his
co-owner, Beata. Hence, a dismissal of the case with respect to Beata pursuant to Sec. 5,60 Rule 18 of the
Rules of Court will be futile as the case could nevertheless be continued by Roberto Jr. in behalf of the two
of them.

WHEREFORE, the Petition for Review on Certiorari is DENIED and the assailed Decision of
the Court of Appeals dated February 17, 2004 and Resolution dated April 19, 2006 in CA-G.R. CV No.
72385 are AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice

59
Carandang v. Heirs of De Guzman, G.R. No. 160347, November 29, 2006, 508 SCRA 469, 487 citing Baloloy v.
Hular, 481 Phil. 398, (2004) and Adlawan v. Adlawan, G.R. No. 161916, January 20, 2006, 479 SCRA 275, 283.
60
Sec. 5. Effect of failure to appear. The failure of the plaintiff to appear when so required pursuant to the next
preceding section shall be caused for dismissal of the action. The dismissal shall be with prejudice, unless
otherwise ordered by the court. x x x.

18
 Chairperson

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in
the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

19
 SECOND DIVISION

PHILIPPINE BANK OF G.R. No. 175514

COMMUNICATIONS,
Petitioner, Present:

CARPIO, J., Chairperson,

NACHURA,
- versus - PERALTA,
ABAD, and
MENDOZA, JJ.

SPOUSES JOSE C. GO Promulgated:

and ELVY T. GO,
Respondents. February 14, 2011

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

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 filed by petitioner Philippine Bank
of Communications (PBCom) seeking to set aside the July 28, 2006 Decision,61 and the November
27, 2006 Resolution62 of the Court of Appeals (CA) in CA G.R. CV No. 77714. The CA decision
reversed and set aside the January 25, 2002 Decision of the Regional Trial Court, Branch 42,
Manila (RTC), which granted the motion for summary judgment and rendered judgment on the
basis of the pleadings and attached documents.

THE FACTS

61
Rollo, pp. 33-42.
62
Id. at 44-45.

20
 On September 30, 1999, respondent Jose C. Go (Go) obtained two loans from PBCom,
evidenced by two promissory notes, embodying his commitment to pay P17,982,222.22 for the
first loan, and P80 million for the second loan, within a ten-year period from September 30, 1999
to September 30, 2009.63

To secure the two loans, Go executed two (2) pledge agreements, both dated September
29, 1999, covering shares of stock in Ever Gotesco Resources and Holdings, Inc. The first pledge,
valued at P27,827,122.22, was to secure payment of the first loan, while the second pledge, valued
at P70,155,100.00, was to secure the second loan.64

Two years later, however, the market value of the said shares of stock plunged to less than
P0.04 per share. Thus, PBCom, as pledgee, notified Go in writing on June 15, 2001, that it was
renouncing the pledge agreements.65

Later, PBCom filed before the RTC a complaint66 for sum of money with prayer for a writ
of preliminary attachment against Go and his wife, Elvy T. Go (Spouses Go), docketed as Civil
Case No. 01-101190. PBCom alleged that Spouses Go defaulted on the two (2) promissory notes,
having paid only three (3) installments on interest paymentscovering the months of September,
November and December 1999. Consequently, the entire balance of the obligations of Go became
immediately due and demandable. PBCom made repeated demands upon Spouses Go for the
payment of said obligations, but the couple imposed conditions on the payment, such as the lifting
of garnishment effected by the Bangko Sentral ng Pilipinas (BSP) on Gos accounts.67

Spouses Go filed their Answer with Counterclaim68 denying the material allegations in the
complaint and stating, among other matters, that:

63
Id. at 34.
64
Id.
65
Id.
66
Id. at 46-56.
67
Id. at 35.
68
Id. at 35-36.

21
 8. The promissory note referred to in the complaint expressly state that
the loan obligation is payable within the period of ten (10) years. Thus, from the
execution date of September 30, 1999, its due date falls on September 30, 2009
(and not 2001 as erroneously stated in the complaint). Thus, prior to September 30,
2009, the loan obligations cannot be deemed due and demandable.

In conditional obligations, the acquisition of rights, as well as the

extinguishment or loss of those already acquired, shall depend upon the happening
of the event which constitutes the condition. (Article 1181, New Civil Code)

9. Contrary to the plaintiffs proferrence, defendant Jose C. Go had

made substantial payments in terms of his monthly payments. There is, therefore,
a need to do some accounting works (sic) to reconcile the records of both parties.

10. While demand is a necessary requirement to consider the defendant

to be in delay/default, such has not been complied with by the plaintiff since the
former is not aware of any demand made to him by the latter for the settlement of
the whole obligation.

11. Undeniably, at the time the pledge of the shares of stock were
executed, their total value is more than the amount of the loan or at the very least,
equal to it. Thus, plaintiff was fully secured insofar as its exposure is concerned.

12. And even assuming without conceding, that the present value of said
shares x x x went down, it cannot be considered as something permanent since the
prices of stocks in the market either increases (sic) or decreases (sic) depending on
the market forces. Thus, it is highly speculative for the plaintiff to consider said
shares to have suffered tremendous decrease in its value. More so, it is unfair for
the plaintiff to renounce or abandon the pledge agreements.

On September 28, 2001, PBCom filed a verified motion for summary judgment69 anchored
on the following grounds:

I. MATERIAL AVERMENTS OF THE COMPLAINT

ADMITTED BY DEFENDANT-SPOUSES IN THEIR ANSWER TO OBVIATE
THE NECESSITY OF TRIAL

II. NO REAL DEFENSES AND NO GENUINE ISSUES AS TO

ANY MATERIAL FACT WERE TENDERED BY THE DEFENDANT-
SPOUSES IN THEIR ANSWER

69
Id. at 64.

22
 III. PLANTIFFS CAUSES OF ACTIONS ARE SUPPORTED BY
VOLUNTARY ADMISSIONS AND AUTHENTIC DOCUMENTS WHICH
MAY NOT BE CONTRADICTED.70

PBCom contended that the Answer interposed no specific denials on the material
averments in paragraphs 8 to 11 of the complaint such as the fact of default, the entire amount
being already due and demandable by reason of default, and the fact that the bank had made
repeated demands for the payment of the obligations.71

Spouses Go opposed the motion for summary judgment arguing that they had tendered
genuine factual issues calling for the presentation of evidence.72

The RTC granted PBComs motion in its Judgment73 dated January 25, 2002, the dispositive
portion of which states:

WHEREFORE, in view of all the foregoing, judgment is rendered for the

plaintiff and against the defendants ordering them to pay plaintiff jointly and
severally the following:

1. The total amount of P117,567,779.75, plus interests and

penalties as stipulated in the two promissory notes;

2. A sum equivalent to 10% of the amount involved in this case,

by way of attorneys fees; and

3. The costs of suit.

SO ORDERED.74

Spouses Go moved for a reconsideration but the motion was denied in an order75 dated
March 20, 2002.

70
Id.
71
Id. at 36.
72
Id.
73
Id. at 80-86.
74
Id. at 86.
75
Id. at 37.

23
 RULING OF THE COURT OF APPEALS

In its Decision dated July 28, 2006, the CA reversed and set aside the assailed judgment
of the RTC, denied PBComs motion for summary judgment, and ordered the remand of the records
to the court of origin for trial on the merits. The dispositive portion of the decision states:

WHEREFORE, premises considered, the assailed judgment of the

Regional Trial Court, Branch 42 of Manila in Civil Case No. 01-101190 is hereby
REVERSED and SET ASIDE, and a new one entered denying plaintiff-appellees
motion for summary judgment. Accordingly, the records of the case are hereby
remanded to the court of origin for trial on the merits.

SO ORDERED.76

The CA could not agree with the conclusion of the RTC that Spouses Go admitted
paragraphs 3, 4 and 7 of the complaint. It found the supposed admission to be insufficient to justify
a rendition of summary judgment in the case for sum of money, since there were other allegations
and defenses put up by Spouses Go in their Answer which raised genuine issues on the material
facts in the action.77

The CA agreed with Spouses Go that paragraphs 3 and 4 of the complaint merely dwelt on
the fact that a contract of loan was entered into by the parties, while paragraph 7 simply emphasized
the terms of the promissory notes executed by Go in favor of PBCom. The fact of default, the
amount of the outstanding obligation, and the existence of a prior demand, which were all material
to PBComs claim, were hardly admitted78 by Spouses Go in their Answer and were, in fact,
effectively questioned in the other allegations in the Answer.79

76
Id. at 41.
77
Id. at 39.
78
Id.
79
Id. at 39-40.

24
 PBComs motion for reconsideration was denied in a resolution80 dated November 27, 2006.

Thus, this petition for review.

THE ISSUES

I
WHETHER THE COURT OF APPEALS ERRED OR ACTED IN GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK, OR EXCESS OF
JURISDICTION IN RULING THAT THERE EXISTS A GENUINE ISSUE
AS TO MATERIAL FACTS IN THE ACTION IN SPITE OF THE
UNEQUIVOCAL ADMISSIONS MADE IN THE PLEADINGS BY
RESPONDENTS; AND

II

WHETHER THE COURT OF APPEALS ERRED OR ACTED IN GRAVE

ABUSE OF JURISDICTION [DISCRETION] IN HOLDING THAT ISSUES
WERE RAISED ABOUT THE FACT OF DEFAULT, THE AMOUNT OF
THE OBLIGATION, AND THE EXISTENCE OF PRIOR DEMAND, EVEN
WHEN THE PLEADING CLEARLY POINTS TO THE CONTRARY.

Petitioner PBComs Position: Summary

judgment was proper, as there were no
genuine issues raised as to any material fact.

PBCom argues that the material averments in the complaint categorically admitted by
Spouses Go obviated the necessity of trial. In their Answer, Spouses Go admitted the allegations
in paragraphs 3 and 4 of the Complaint pertaining to the security for the loans and the due execution
of the promissory notes,81 and those in paragraph 7 which set forth the acceleration clauses in the
promissory note. Their denial of paragraph 5 of the Complaint pertaining to the Schedules of

80
Id. at 44-45. Penned by Associate Justice Rodrigo V. Cosico, with Associate Justices Edgardo F. Sundiam and
Apolinario D. Bruselas, Jr. (in lieu of Associate Justice Japar B. Dimaampao who was on leave per Office Order No.
300-06-RTR dated November 14, 2006), concurring.
81
Id. at 236.

25
Payment for the liquidation of the two promissory notes did not constitute a specific denial required
by the Rules.82

Even in the Comment83 of Spouses Go, the clear, categorical and unequivocal admission
of paragraphs 3, 4, and 7 of the Complaint had been conceded.84

PBCom faults the CA for having formulated non-existent issues pertaining to the fact of
default, the amount of outstanding obligation and the existence of prior demand, none of which is
borne by the pleadings or the records.85

The Spouses Go, PBCom argues, cannot negate or override the legal effect of the
acceleration clauses embodied in each of the two promissory notes executed by Go. Moreover, the
non-payment of arrearages constituting default was admitted by Go in his letters to PBCom dated
March 3 and April 7, 2000, respectively.86 Therefore, by such default, they have lost the benefit of
the period in their favor, pursuant to Article 119887 of the Civil Code.

Further, PBCom claims that its causes of action are supported by authentic documents and
voluntary admissions which cannot be contradicted. It cites the March 3 and April 7, 2000 letters
of Go requesting deferment of interest payments on his past due loan obligations to PBCom, as his
assets had been placed under attachment in a case filed by the BSP.88 PBCom emphasizes that the

82
Id. at 237
83
Id. at 174.
84
Id. at 240.
85
Id. at 241.
86
Id. at 242.
87
Article 1198 of the Civil Code provides: The debtor shall lose every right to make use of the period:
(1) When after the obligation has been contracted, he becomes insolvent, unless he gives a guaranty or security for the
debt;
(2) When he does not furnish to the creditor the guaranties or securities which he has promised;
(3) When by his own acts he has impaired said guaranties or securities after their esta blishment, and when through a
fortuitous event they disappear, unless he immediately gives new ones equally satisfactory;
(4) When the debtor violates any undertaking, in consideration of which the creditor agreed to the period;
(5) When the debtor attempts to abscond.
88
Rollo, pp. 242-243.

26
said letters, in addition to its letters of demand duly acknowledged and received by Go, negated
their claim that they were not aware of any demand having been made.89

Respondent spouses position: Summary

judgment was not proper.

The core contention of Spouses Go is that summary judgment was not proper under the
attendant circumstances, as there exist genuine issues with respect to the fact of default, the amount
of the outstanding obligation, and the existence of prior demand, which were duly questioned in
the special and affirmative defenses set forth in the Answer. Spouses Go agree with the CA that
the admissions in the pleadings pertained to the highlight of the terms of the contract. Such
admissions merely recognized the existence of the contract of loan and emphasized its terms and
conditions.90 Moreover, although they admitted paragraphs 3, 4, and 7, the special and affirmative
defenses contained in the Answer tendered genuine issues which could only be resolved in a full-
blown trial.91

On the matter of specific denial, Spouses Go posit that the Court decisions cited by
92
PBCom do not apply on all fours in this case. Moreover, the substance of the repayment schedule
was not set forth in the complaint. It, therefore, follows that the act of attaching copies to the
complaint is insufficient to secure an implied admission. Assuming arguendo that it was impliedly
admitted, the existence of said schedule and the promissory notes would not immediately make
private respondents liable for the amount claimed by PBCom.93 Before respondents may be held
liable, it must be established, first, that they indeed defaulted; and second, that the obligations has
remained outstanding.94

89
Id. at 244.
90
Id. at 210.
91
Id. at 211.
92
Philippine Bank of Communications v. Court of Appeals, G.R. No. 92067, March 22, 1991, 195 SCRA 567 and
Morales v. Court of Appeals, 274 Phil.674 (1991).
93
Rollo, p. 215.
94
Id.

27
 Spouses Go also state that although they admitted paragraphs 3, 4 and 7 of the Complaint,
the fact of default, the amount of outstanding obligation and the existence of prior demand were
fully questioned in the special and affirmative defenses.95

RULING OF THE COURT

The Court agrees with the CA that [t]he supposed admission of defendants-appellants on
the x x x allegations in the complaint is clearly not sufficient to justify the rendition of summary
judgment in the case for sum of money, considering that there are other allegations embodied and
defenses raised by the defendants-appellants in their answer which raise a genuine issue as to the
material facts in the action.96

The CA correctly ruled that there exist genuine issues as to three material facts, which have
to be addressed during trial: first, the fact of default; second, the amount of the outstanding
obligation, and third, the existence of prior demand.

Under the Rules, following the filing of pleadings, if, on motion of a party and after hearing,
the pleadings, supporting affidavits, depositions and admissions on file show that, except as to the
amount of damages, there is no genuine issue as to any material fact, and that the moving party is
entitled to a judgment as a matter of law,97 summary judgment may be rendered. This rule was
expounded in Asian Construction and Development Corporation v. Philippine Commercial
International Bank,98 where it was written:

Under Rule 35 of the 1997 Rules of Procedure, as amended, except as to

the amount of damages, when there is no genuine issue as to any material fact and
the moving party is entitled to a judgment as a matter of law, summary judgment
may be allowed.99 Summary or accelerated judgment is a procedural technique

95
Id. at 213.
96
Id. at 39.
97
Rule 35, Rules of Civil Procedure.
98
G.R. No. 153827, April 25, 2006, 488 SCRA 192.
99
Citing Northwest Airlines v. CA, 348 Phil. 438, 449 (1998).

28
 aimed at weeding out sham claims or defenses at an early stage of litigation thereby
avoiding the expense and loss of time involved in a trial.100

Under the Rules, summary judgment is appropriate when there are no

genuine issues of fact which call for the presentation of evidence in a full-blown
trial. Even if on their face the pleadings appear to raise issues, when the affidavits,
depositions and admissions show that such issues are not genuine, then summary
judgment as prescribed by the Rules must ensue as a matter of law. The
determinative factor, therefore, in a motion for summary judgment, is the presence
or absence of a genuine issue as to any material fact.

A genuine issue is an issue of fact which requires the presentation of

evidence as distinguished from a sham, fictitious, contrived or false claim. When
the facts as pleaded appear uncontested or undisputed, then there is no real or
genuine issue or question as to the facts, and summary judgment is called for. The
party who moves for summary judgment has the burden of demonstrating clearly
the absence of any genuine issue of fact, or that the issue posed in the complaint is
patently unsubstantial so as not to constitute a genuine issue for trial. Trial courts
have limited authority to render summary judgments and may do so only when
there is clearly no genuine issue as to any material fact. When the facts as pleaded
by the parties are disputed or contested, proceedings for summary judgment cannot
take the place of trial.101 (Underscoring supplied.)

Juxtaposing the Complaint and the Answer discloses that the material facts here are not
undisputed so as to call for the rendition of a summary judgment. While the denials of Spouses Go
could have been phrased more strongly or more emphatically, and the Answer more coherently and
logically structured in order to overthrow any shadow of doubt that such denials were indeed made,
the pleadings show that they did in fact raise material issues that have to be addressed and threshed
out in a full-blown trial.

PBCom anchors its arguments on the alleged implied admission by Spouses Go resulting
from their failure to specifically deny the material allegations in the Complaint, citing as precedent
Philippine Bank of Communications v. Court of Appeals,102 and Morales v. Court of Appeals.
Spouses Go, on the other hand, argue that although admissions were made in the Answer, the
special and affirmative defenses contained therein tendered genuine issues.

100
Citing Excelsa Industries, Inc, v. CA, 317 Phil. 664, 671 (1995).
101
Supra note 38 at 202-203, citing Evadel Realty and Development Corporation v. Soriano, 409 Phil. 450, 461 (2001).
102
G.R. No. 92067, March 22, 1991, 195 SCRA 567.

29
 Under the Rules, every pleading must contain, in a methodical and logical form, a plain,
concise and direct statement of the ultimate facts on which the party pleading relies for his claim
or defense, as the case may be, omitting the statement of mere evidentiary facts.103

To specifically deny a material allegation, a defendant must specify each material

allegation of fact the truth of which he does not admit, and whenever practicable, shall set forth the
substance of the matters upon which he relies to support his denial. Where a defendant desires to
deny only a part of an averment, he shall specify so much of it as is true and material and shall
deny only the remainder. Where a defendant is without knowledge or information sufficient to form
a belief as to the truth of a material averment made in the complaint, he shall so state, and this shall
have the effect of a denial.104

Rule 8, Section 10 of the Rules of Civil Procedure contemplates three (3) modes of specific
denial, namely: 1) by specifying each material allegation of the fact in the complaint, the truth of
which the defendant does not admit, and whenever practicable, setting forth the substance of the
matters which he will rely upon to support his denial; (2) by specifying so much of an averment in
the complaint as is true and material and denying only the remainder; (3) by stating that the
defendant is without knowledge or information sufficient to form a belief as to the truth of a
material averment in the complaint, which has the effect of a denial.105

The purpose of requiring the defendant to make a specific denial is to make him disclose
the matters alleged in the complaint which he succinctly intends to disprove at the trial, together
with the matter which he relied upon to support the denial. The parties are compelled to lay their
cards on the table.106

Again, in drafting pleadings, members of the bar are enjoined to be clear and concise in
their language, and to be organized and logical in their composition and structure in order to set

103
Section 1, Rule 8, Rules of Civil Procedure.
104
Section 10, Rule 8, Rules of Civil Procedure.
105
Spouses Gaza. v. Ramon J. Lim and Agnes J. Lim, 443 Phil. 337, 345 (2003).
106
Aquintey v. Tibong, G.R. No. 166704, December 20, 2006, 511 SCRA 414, 432.

30
forth their statements of fact and arguments of law in the most readily comprehensible manner
possible. Failing such standard, allegations made in pleadings are not to be taken as stand-alone
catchphrases in the interest of accuracy. They must be contextualized and interpreted in relation to
the rest of the statements in the pleading.

In Spouses Gaza v. Lim, the Court ruled that the CA erred in declaring that the petitioners
therein impliedly admitted respondents' allegation that they had prior and continuous possession of
the property, as petitioners did in fact enumerate their special and affirmative defenses in their
Answer. They also specified therein each allegation in the complaint being denied by them. The
Court therein stated:

The Court of Appeals held that spouses Gaza, petitioners, failed to deny
specifically, in their answer, paragraphs 2, 3 and 5 of the complaint for forcible
entry quoted as follows:
xxx xxx xxx
2. That plaintiffs are the actual and joint occupants and in
prior continuous physical possession since 1975 up to Nov. 28,
1993 of a certain commercial compound described as follows:
A certain parcel of land situated in Bo. Sta. Maria, Calauag,
Quezon. Bounded on the N., & E., by Julian de Claro; on the W.,
by Luis Urrutia. Containing an area of 5,270 square meters, more or
less. Declared under Ramon J. Lim's Tax Dec. No. 4576 with an
Ass. Value of P26,100.00
3. That plaintiffs have been using the premises mentioned
for combined lumber and copra business. Copies of plaintiffs'
Lumber Certificate of Registration No. 2490 and PCA Copra
Business Registration No. 6265/76 are hereto attached as Annexes
"A" and "B" respectively; the Mayor's unnumbered copra dealer's
permit dated Dec. 31, 1976 hereto attached as Annex "C";
xxx xxx xxx
5. That defendants' invasion of plaintiffs' premises was
accomplished illegally by detaining plaintiffs' caretaker Emilio
Herrera and his daughter inside the compound, then proceeded to
saw the chain that held plaintiffs' padlock on the main gate of the
compound and then busted or destroyed the padlock that closes the
backyard gate or exit. Later, they forcibly opened the lock in the
upstairs room of plaintiff Agnes J. Lim's quarters and defendants
immediately filled it with other occupants now. Copy of the
caretaker's (Emilio Herrera) statement describing in detail is hereto
attached as Annex "D";

31
 xxx xxx xxx.7
The Court of Appeals then concluded that since petitioners did not deny
specifically in their answer the above-quoted allegations in the complaint, they
judicially admitted that Ramon and Agnes Lim, respondents, "were in prior
physical possession of the subject property, and the action for forcible entry which
they filed against private respondents (spouses Gaza) must be decided in their
favor. The defense of private respondents that they are the registered owners of the
subject property is unavailing."
We observe that the Court of Appeals failed to consider paragraph 2 of
petitioners' answer quoted as follows:
2. That defendants specifically deny the allegations in
paragraph 2 and 3 of the complaint for want of knowledge or
information sufficient to form a belief as to the truth thereof, the
truth of the matter being those alleged in the special and affirmative
defenses of the defendants;"8
Clearly, petitioners specifically denied the allegations contained in
paragraphs 2 and 3 of the complaint that respondents have prior and continuous
possession of the disputed property which they used for their lumber and copra
business. Petitioners did not merely allege they have no knowledge or information
sufficient to form a belief as to truth of those allegations in the complaint, but added
the following:
SPECIAL AND AFFIRMATIVE DEFENSES
That defendants hereby reiterate, incorporate and restate the
foregoing and further allege:
5. That the complaint states no cause of action;
"From the allegations of plaintiffs, it appears that their
possession of the subject property was not supported by any concrete
title or right, nowhere in the complaint that they alleged either as an
owner or lessee, hence, the alleged possession of plaintiffs is
questionable from all aspects. Defendants Sps. Napoleon Gaza and
Evelyn Gaza being the registered owner of the subject property has
all the right to enjoy the same, to use it, as an owner and in support
thereof, a copy of the transfer certificate of title No. T-47263 is
hereto attached and marked as Annex "A-Gaza" and a copy of the
Declaration of Real Property is likewise attached and marked as
Annex "B-Gaza" to form an integral part hereof;
6. That considering that the above-entitled case is an
ejectment case, and considering further that the complaint did not
state or there is no showing that the matter was referred to a Lupon
for conciliation under the provisions of P.D. No. 1508, the Revised
Rule on Summary Procedure of 1991, particularly Section 18 thereof
provides that such a failure is jurisdictional, hence subject to
dismissal;

32
 7. That the Honorable Court has no jurisdiction over the
subject of the action or suit;
The complaint is for forcible entry and the plaintiffs were
praying for indemnification in the sum of P350,000.00 for those
copra, lumber, tools, and machinery listed in par. 4 of the complaint
and P100,000.00 for unrealized income in the use of the
establishment, considering the foregoing amounts not to be rentals,
Section 1 A (1) and (2) of the Revised Rule on Summary Procedure
prohibits recovery of the same, hence, the Honorable Court can not
acquire jurisdiction over the same. Besides, the defendants Napoleon
Gaza and Evelyn Gaza being the owners of those properties cited in
par. 4 of the complaint except for those copra and two (2) live
carabaos outside of the subject premises, plaintiffs have no rights
whatsoever in claiming damages that it may suffer, as and by way of
proof of ownership of said properties cited in paragraph 4 of the
complaint attached herewith are bunche[s] of documents to form an
integral part hereof;
8. That plaintiffs' allegation that Emilio Herrera was illegally
detained together with his daughter was not true and in support
thereof, attached herewith is a copy of said Herrera's statement and
marked as Annex "C-Gaza."
xxx xxx xxx.9
The above-quoted paragraph 2 and Special and Affirmative Defenses
contained in petitioners' answer glaringly show that petitioners did not admit
impliedly that respondents have been in prior and actual physical possession of the
property. Actually, petitioners are repudiating vehemently respondents' possession,
stressing that they (petitioners) are the registered owners and lawful occupants
thereof.
Respondents' reliance on Warner Barnes and Co., Ltd. v. Reyes10 in
maintaining that petitioners made an implied admission in their answer is misplaced.
In the cited case, the defendants' answer merely alleged that they were "without
knowledge or information sufficient to form a belief as to the truth of the material
averments of the remainder of the complaint" and "that they hereby reserve the right
to present an amended answer with special defenses and counterclaim."11 In the
instant case, petitioners enumerated their special and affirmative defenses in their
answer. They also specified therein each allegation in the complaint being denied
by them. They particularly alleged they are the registered owners and lawful
possessors of the land and denied having wrested possession of the premises from
the respondents through force, intimidation, threat, strategy and stealth. They
asserted that respondents' purported possession is "questionable from all aspects."
They also averred that they own all the personal properties enumerated in
respondents' complaint, except the two carabaos. Indeed, nowhere in the answer can
we discern an implied admission of the allegations of the complaint, specifically the
allegation that petitioners have priority of possession.

33
 Thus, the Court of Appeals erred in declaring that herein petitioners
impliedly admitted respondents' allegation that they have prior and continuous
possession of the property.107 (Underscoring supplied.)

In this case, as in Gaza, the admissions made by Spouses Go are to be read and taken
together with the rest of the allegations made in the Answer, including the special and affirmative
defenses.

For instance, on the fact of default, PBCom alleges in paragraph 8 of the Complaint that
Go defaulted in the payment for both promissory notes, having paid only three interest installments
covering the months of September, November, and December 1999.

In paragraph 6 of the Answer, Spouses Go denied the said allegation, and further alleged
in paragraphs 8 to 13 that Go made substantial payments on his monthly loan amortizations.

The portions of the pleadings referred to are juxtaposed below:

Complaint
8. The defendant defaulted in the payment of
the obligations on the two (2) promissory notes
(Annexes A and B hereof) as he has paid only
three (3) installments on interests (sic)
payments covering the months of September,
November and December, 1999, on both
promissory notes, respectively. As a
consequence of the default, the entire balance
due on the obligations of the defendant to
plaintiff on both promissory notes immediately
became due and demandable pursuant to the
terms and conditions embodied in the two (2)
promissory notes;108
Answer
6. Defendants deny the allegations in
paragraphs 8, 9, 10 and 11 of the Complaint;
xxx
8. The promissory notes referred to in the
complaint expressly state that the loan
obligation is payable within the period of ten
(10) years. Thus, from the execution date of
September 30, 1999, its due date falls on
September 3o, 2009 (and not 2001 as
erroneously stated in the complaint). Thus,
prior to September 30, 2009, the loan
obligations cannot be deemed due and
demandable.
In conditional obligations, the acquisition of
rights, as well as the extinguishment or loss of
those already acquired, shall depend upon the

107
Supra note 45.
108
Rollo, p. 50.

34
 happening of the event which constitutes the
condition. (Article 1181, New Civil Code)
9. Contrary to the plaintiffs preference,
defendant Jose C. Go has made substantial
payments in terms of his monthly payments.
There is therefore, a need to do some
accounting works (sic) just to reconcile the
records of both parties.
10. While demand is a necessary requirement
to consider the defendant to be in
delay/default, such has not been complied with
by the plaintiff since the former is not aware of
any demand made to him by the latter for the
settlement of the whole obligation.
11. Undeniably, at the time the pledge of the
shares of stocks were executed, their total
value is more than the amount of the loan, or at
the very least, equal to it. Thus, plaintiff was
fully secured insofar as its exposure is
concerned.109
12. And even assuming without conceding,
that the present value of said shares has went
(sic) down, it cannot be considered as
something permanent since, the prices of
stocks in the market either increases (sic) or
(sic) decreases depending on the market
forces. Thus, it is highly speculative for the
plaintiff to consider said shares to have
suffered tremendous decrease in its value.
Moreso (sic), it is unfair for the plaintiff to
renounce or abandon the pledge agreements.

13. As aptly stated, it is not aware of any

termination of the pledge agreement initiated
by the plaintiff.

Moreover, in paragraph 10 of the Answer, Spouses Go also denied the existence of prior
demand alleged by PBCom in paragraph 10 of the Complaint. They stated therein that they were

109
Id. at 59.

35
not aware of any demand made by PBCom for the settlement of the whole obligation. Both sections
are quoted below:

Complaint Answer
10. Plaintiff made repeated demands from (sic) 10. While demand is a necessary requirement
defendant for the payment of the obligations to consider the defendant to be in
which the latter acknowledged to have delay/default, such has not been complied with
incurred however, defendant imposed by the plaintiff since the former is not aware of
conditions such as [that] his [effecting] any demand made to him by the latter for the
payments shall depend upon the lifting of settlement of the whole obligation.
garnishment effected by the Bangko Sentral on
his accounts. Photocopies of defendants
communication dated March 3, 2000 and April
7, 2000, with plaintiff are hereto attached as
Annexes F and G hereof, as well as its demand
to pay dated April 18, 2000. Demand by
plaintiff is hereto attached as Annex H
hereof.110 [Emphases supplied]

Finally, as to the amount of the outstanding obligation, PBCom alleged in paragraph 9 of

the Complaint that the outstanding balance on the couples obligations as of May 31, 2001 was
P21,576,668.64 for the first loan and P95,991,111.11, for the second loan or a total of
P117,567,779.75.

In paragraph 9 of the Answer, however, Spouses Go, without stating any specific amount,
averred that substantial monthly payments had been made, and there was a need to reconcile the
accounting records of the parties.
Formatted: Space After: 0 pt, Line spacing: single
Complaint Answer
9. Defendants outstanding obligations under 9. Contrary to the plaintiffs preference,
the two (2) promissory notes as of May 31, defendant Jose C. Go has made substantial
2001 are: P21,576,668.64 (Annex A) and payments in terms of his monthly payments.
P95,991,111.11 (Annex B), or a total of There is therefore, a need to do some
P117,567,779.75. Copy of the Statement of accounting works just to reconcile the records
of both parties.112

110
Id. at 50.
112
Id. at 59.

36
 Account is hereto attached as Annex E
hereof.111

Clearly then, when taken within the context of the entirety of the pleading, it becomes
apparent that there was no implied admission and that there were indeed genuine issues to be
addressed.

As to the attached March 3, 2000 letter, the Court is in accord with the CA when it wrote:

The letter dated March 3, 2000 is insufficient to support the material

averments in PBComs complaint for being equivocal and capable of different
interpretations. The contents of the letter do not address all the issues material to
the banks claim and thus do not conclusively establish the cause of action of
PBCom against the spouses Go. As regards the letter dated April 7, 2000, the trial
court itself ruled that such letter addressed to PBCom could not be considered
against the defendants-appellants simply because it was not signed by defendant-
appellant Jose Go.

Notably, the trial court even agreed with the defendant-appellants on the
following points:

The alleged default and outstanding obligations are based on

the Statement of Account. This Court agrees with the defendants that
since the substance of the document was not set forth in the
complaint although a copy thereof was attached thereto, or the said
document was not set forth verbatim in the pleading, the rule on
implied admission does not apply.113
It must also be pointed out that the cases cited by PBCom do not apply to this case. Those
two cases involve denial of lack of knowledge of facts so plainly and necessarily within [the
knowledge of the party making such denial] that such averment of ignorance must be palpably
untrue.114 Also, in both cases, the documents denied were the same documents or deeds sued upon
or made the basis of, and attached to, the complaint.

In Philippine Bank of Communications v. Court of Appeals,115 the Court ruled that the
defendants contention that it had no truth or information sufficient to form a belief as to the truth

111
Id.
113
Id. at 40.
114
Warner Barnes & Co., Ltd. v. Reyes, 103 Phil. 662, 665 (1958), citing Icle Plant Equipment Co. v. Marcello, D.C.
Pa. 1941, 43 F. Supp. 281.
115
Philippine Bank of Communications v. Court of Appeals, supra note 32.

37
of the deed of exchange was an invalid or ineffectual denial pursuant to the Rules of Court,116 as it
could have easily asserted whether or not it had executed the deed of exchange attached to the
petition. Citing Capitol Motors Corporations v. Yabut,117 the Court stated that:

x x x The rule authorizing an answer to the effect that the defendant has no
knowledge or information sufficient to form a belief as to the truth of an averment
and giving such answer the effect of a denial, does not apply where the fact as to
which want of knowledge is asserted, is so plainly and necessarily within the
defendants knowledge that his averment of ignorance must be palpably untrue.118

The Warner Barnes case cited above sprung from a suit for foreclosure of mortgage, where
the document that defendant denied was the deed of mortgage sued upon and attached to the
complaint. The Court then ruled that it would have been easy for the defendants to specifically
allege in their answer whether or not they had executed the alleged mortgage.

Similarly, in Capitol Motors, the document denied was the promissory note sued upon and
attached to the complaint. In said case, the Court ruled that although a statement of lack of
knowledge or information sufficient to form a belief as to the truth of a material averment in the
complaint was one of the modes of specific denial contemplated under the Rules, paragraph 2 of
the Answer in the said case was insufficient to constitute a specific denial.119 Following the ruling
in the Warner Barnes case, the Court held that it would have been easy for defendant to specifically
allege in the Answer whether or not it had executed the promissory note attached to the
Complaint.120

In Morales v. Court of Appeals,121 the matter denied was intervenors knowledge of the
plaintiffs having claimed ownership of the vehicle in contention. The Court therein stated:

Yet, despite the specific allegation as against him, petitioner, in his Answer
in Intervention with Counterclaim and Crossclaim, answered the aforesaid
paragraph 11, and other paragraphs, merely by saying that he has no knowledge or
information sufficient to form a belief as to its truth. While it may be true that under

116
Id. at 574.
117
Id.
118
Id., citing Warner Barnes & Co., Ltd. v. Reyes, 103 Phil. 662 (1958).
119
Id.
120
Id.
121
274 Phil. 674, 686 (1991).

38
 the Rules one could avail of this statement as a means of a specific denial,
nevertheless, if an allegation directly and specifically charges a party to have done,
performed or committed a particular act, but the latter had not in fact done,
performed or committed it, a categorical and express denial must be made. In such
a case, the occurrence or non-occurrence of the facts alleged may be said to be
within the partys knowledge. In short, the petitioner herein could have simply
expressly and in no uncertain terms denied the allegation if it were untrue. It has
been held that when the matters of which a defendant alleges of having no
knowledge or information sufficient to form a belief, are plainly and necessarily
within his knowledge, his alleged ignorance or lack of information will not be
considered as specific denial. His denial lacks the element of sincerity and good
faith, hence, insufficient.122

Borrowing the phraseology of the Court in the Capitol Motors case, clearly, the fact of the
parties having executed the very documents sued upon, that is, the deed of exchange, deed or
mortgage or promissory note, is so plainly and necessarily within the knowledge of the denying
parties that any averment of ignorance as to such fact must be palpably untrue.

In this case, however, Spouses Go are not disclaiming knowledge of the transaction or the
execution of the promissory notes or the pledge agreements sued upon. The matters in contention
are, as the CA stated, whether or not respondents were in default, whether there was prior demand,
and the amount of the outstanding loan. These are the matters that the parties disagree on and by
which reason they set forth vastly different allegations in their pleadings which each will have to
prove by presenting relevant and admissible evidence during trial.

Furthermore, in stark contrast to the cited cases where one of the parties disclaimed
knowledge of something so patently within his knowledge, in this case, respondents Spouses Go
categorically stated in the Answer that there was no prior demand, that they were not in default,
and that the amount of the outstanding loan would have to be ascertained based on official records.

WHEREFORE, the petition is DENIED.

122
Id. at 674, citing Gutierrez v. Court of Appeals, 165 Phil. 752 (1976) and Warner Barnes & Co. v. Reyes, 103 Phil.
662 (1958).

39
 SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ANTONIO EDUARDO B. NACHURA DIOSDADO M. PERALTA

Associate Justice Associate Justice

ROBERTO A. ABAD
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

40
 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

41
 Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

ELAND PHILIPPINES, INC., G.R. No. 173289

Petitioner,

Present:

-versus-
CARPIO,* J.,
CORONA, J., Chairperson,
NACHURA,
AZUCENA GARCIA, ELINO PERALTA, and
FAJARDO, and HEIR OF
MENDOZA, JJ.
TIBURCIO MALABANAN named
TERESA MALABANAN,
Respondents.
Promulgated:

February 17, 2010

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

DECISION

*
Designated to sit as an additional Member, in lieu of Justice Presbitero J. Velasco, Jr., per Raffle dated
February 10, 2010.

42
PERALTA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to
reverse and set aside the decision123 dated February 28, 2006 of the Court of Appeals (CA) in CA-
G.R. CV No. 67417, which dismissed the appeal of petitioner Eland Philippines, Inc. and affirmed
the Resolutions dated November 3, 1999 and June 28, 2006 of Branch 18, Regional Trial Court
(RTC) of Tagaytay City.

The facts of the case, as shown in the records, are the following:

Respondents Azucena Garcia, Elino Fajardo, and Teresa Malabanan, the heir of Tiburcio
Malabanan, filed a Complaint124 dated March 2, 1998 for Quieting of Title with Writ of
Preliminary Injunction with the RTC, Branch XVIII, Tagaytay City against petitioner Eland
Philippines, Inc. Respondents claimed that they are the owners, in fee simple title, of a parcel of
land identified as Lot 9250 Cad-355, Tagaytay Cadastre, Plan Ap-04-008367, situated in Barangay
Iruhin, Tagaytay City, containing an area of Two Hundred Forty-Four Thousand One Hundred
Twelve (244,112) square meters, by occupation and possession under the provisions of Sec. 48
(b)125 of the Public Land Law or Commonwealth Act No. 141, as amended.

123
Penned by Associate Justice Hakim S. Abdulwahid, with Associate Justices Remedios A. Salazar-Fernando
and Estela M. Perlas-Bernabe, concurring; rollo, pp. 77-92.

124
Records, p. 1.
125
Sec. 48. The following described-citizens of the Philippines, occupying lands of the public domain or
claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may
apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the
issuance of a certificate of title thereafter, under the Land Registration Act, to wit:
xxxx
(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous,
exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim
of acquisition or ownership, for at least thirty years immediately preceding the filing of the application for
confirmation of title, except when prevented by war or force majeure. Those shall be conclusively presumed to have
performed all the conditions essential to a government grant and shall be entitled to a certificate of title under the
provisions of this Chapter.

43
 For having been in continuous, public, and adverse possession as owners of the said lot for
at least thirty years, respondents stated that they were not aware of any person or entity who had a
legal or equitable interest or claim on the same lot until the time they were requesting that the lot
be declared for tax purposes. They found out that the lot was the subject of a land registration
proceeding that had already been decided by the same court126 where their complaint was filed.
They also found out that Decree No. N-217313, LRC Record No. N-62686, was already issued on
August 20, 1997 to the petitioner pursuant to the Decision dated June 7, 1994 of the same court.
They averred that they were not notified of the said land registration case; thus, they claimed the
presence of misrepresentation amounting to actual or extrinsic fraud. Thus, they argued that they
were also entitled to a writ of preliminary injunction in order to restrain or enjoin petitioner, its
privies, agents, representatives, and all other persons acting on its behalf, to refrain from
committing acts of dispossession on the subject lot.

Summons, together with a copy of the complaint, were served on the petitioner on April 7,
1998. On April 29, 1998, petitioner filed an Entry of Appearance with Motion for Extension of
Time,127 which the trial court granted128 for a period of ten (10) days within which to file a
responsive pleading. Petitioner filed a Second Motion for Extension of Time to File Answer129
dated April 29, 1998, which the trial court likewise granted.130

Thereafter, petitioner filed a Motion to Dismiss131 dated May 9, 1998, stating that the
pleading asserting the claim of respondents stated no cause of action, and that the latter were not
entitled to the issuance of a writ of preliminary injunction, setting the same for hearing on May 21,
1998. On the date of the hearing, the trial court issued an Order,132 which granted the respondents
ten (10) days from that day to file a comment, and set the date of the hearing on July 23, 1998.

126
Land Registration Case No. TG-423.
127
Supra note 2 at 51.
128
Id. at 57.
129
Id. at 68.
130
Id. at 71.
131
Id. at 58.
132
Id. at 67.

44
Respondents filed a Motion to Admit Comment/Opposition to Defendant Eland,133 together with
the corresponding Comment/Opposition134 dated June 8, 1998.

On the scheduled hearing of September 23, 1998, the trial court issued an Order,135
considering the Motion to Dismiss submitted for resolution due to the non-appearance of the
parties and their respective counsels. The said motion was eventually denied by the trial court in
an Order136 dated September 25, 1998, ruling that the allegations in the complaint established a
cause of action and enjoined petitioner Eland to file its answer to the complaint within ten (10)
days from receipt of the same. Petitioner then filed two Motions for Extension to File an Answer.137

Petitioner, on November 9, 1998, filed a Motion for Reconsideration138 of the trial court's
Order dated September 25, 1998, denying the former's Motion to Dismiss. Again, petitioner filed
a Motion for Final Extension of Time to File Answer 139 dated November 6, 1998. Respondents
filed their Comment/Opposition to Motion for Reconsideration dated November 24, 1998.
Subsequently, the trial court denied petitioner's motion for reconsideration in an Order140 dated
January 11, 1999.

Meanwhile, respondents filed a Motion to Declare Defendant Eland in Default141 dated

November 17, 1998. On December 4, 1998 Petitioner Eland filed its Comment (on Plaintiff's
Motion to Declare Defendant Eland in Default)142 dated December 2, 1998, while respondents
filed a Reply to Comment (on Plaintiff's Motion to Declare Defendant Eland in Default) 143 dated

133
Id. at 97.
134
Id. at 99.
135
Id. at 146.
136
Id. at 147.
137
Motion for Extension to File Answer dated October 16, 1998 and Second Motion for Extension to File
Answer dated October 28, 1998.
138
Supra note 2 at 165.
139
Id. at 168.
140
Id. at 214.
141
Id. at 173.
142
Id. at 209.
143
Id. at 204.

45
December 29, 1998. Thereafter, the trial court issued an Order144 dated January 11, 1999 declaring
the petitioner in default and allowed the respondents to present evidence ex parte. Petitioner filed
a Motion for Reconsideration (of the Order dated 11 January 1999) 145 dated February 5, 1999 on
the trial court's denial of its motion to dismiss and in declaring it in default. The trial court in an
Order146 dated March 18, 1999, denied the former and granted the latter. In the same Order, the
trial court admitted petitioner's Answer Ad Cautelam.

Earlier, petitioner filed its Answer Ad Cautelam (With Compulsory Counterclaim)147 dated
November 12, 1998. Respondents countered by filing a Motion to Expunge Eland's Answer from
the Records148 dated December 2, 1998. Petitioner filed its Opposition (to Plaintiff's Motion to
Expunge Eland's Answer from the Records)149 dated December 21, 1998, as well as a Comment
(on Plaintiff's Motion to Expunge Eland's Answer from the Records)150 dated January 26, 1999.

Consequently, respondents filed a Motion to Set Presentation of Evidence Ex Parte151 dated

January 18, 1999, which was granted in an Order152 dated January 22, 1999.

On January 28, 1999, respondents presented their evidence before the Clerk of Court of the
trial court which ended on February 3, 1999; and, on February 10, 1999, respondents filed their
Formal Offer of Evidence.153 However, petitioner filed an Urgent Motion to Suspend Plaintiff's Ex
Parte Presentation of Evidence154 dated February 8, 1999. In that regard, the trial court issued an
Order155 dated February 11, 1999 directing the Clerk of Court to suspend the proceedings.

144
Id. at 214.
145
Id. at 224.
146
Id. at 305.
147
Id. at 177.
148
Id. at 197.
149
Id. at 200.
150
Id. at 221.
151
Id. at 218.
152
Id. at 220.
153
Id. at 239.
154
Id. at 235.
155
Id. at 248.

46
 On May 14, 1999, respondents filed a Motion for Clarification 156 as to whether or not the
evidence presented ex parte was nullified by the admission of petitioner's Answer Ad Cautelam.
Petitioner filed its Comment157 dated May 13, 1999 on the said motion for clarification.

A pre-trial conference was scheduled on May 27, 1999, wherein the parties submitted their
pre-trial briefs.158 However, petitioner filed a Motion to Suspend Proceedings159 dated May 24,
1999 on the ground that the same petitioner had filed a petition for certiorari with the CA, asking
for the nullification of the Order dated March 18, 1999 of the trial court and for the affirmation of
its earlier Order denying petitioner's Motion to Dismiss. The petition for certiorari was
subsequently denied; and a copy of the Resolution160 dated June 14, 1999 was received by the trial
court. Hence, in an Order161 dated July 7, 1999, the trial court ruled that the reception of evidence
already presented by the respondents before the Clerk of Court remained as part of the records of
the case, and that the petitioner had the right to cross-examine the witness and to comment on the
documentary exhibits already presented. Consequently, petitioner filed a Motion for
Reconsideration162 dated July 19, 1999, but it was denied by the trial court in an Omnibus Order163
dated September 14, 1999.

Eventually, respondents filed a Motion for Summary Judgment164 dated August 5, 1999,
while petitioner filed its Opposition165 to the Motion dated August 31, 1999. In its Resolution166

156
Id. at 376.
157
Id. at 379.
158
Id. at 370 for the respondents, p. 394 for petitioner.
159
Id. at 398.
160
Id. at 486.
161
Id. at 491.
162
Id. at 492.
163
Id. at 520.
164
Id. at 506.
165
Id. at 513.
166
Id. at 522.

47
dated November 3, 1999, the trial court found favor on the respondents. The dispositive portion of
the Resolution reads:

WHEREFORE, premises considered, the motion for summary judgment is

hereby GRANTED and it is hereby adjudged that:

1. Plaintiffs are the absolute owners and rightful possessors of Lot 9250,
CAD-355, Tagaytay Cadastre, subject to the rights of occupancy of the farm
workers on the one-third area thereof;

2. The Judgment dated June 7, 1994 in Land Registration Case No. TG-423
is set aside and the Decree No. N-217313, LRC Record No. N-62686 dated August
20, 1997 is null and void;

3. The Original Transfer Certificate of Title is ordered to be canceled, as

well as tax declaration covering Lot 9250, Cad-355.

SO ORDERED.

Petitioner appealed the Resolution of the trial court with the CA, which dismissed it in a
Decision dated February 28, 2006, which reads:

WHEREFORE, for lack of merit, the appeal is DISMISSED. The assailed

Resolution dated November 3, 1999, of the RTC, Branch 18, Tagaytay City, in
Civil Case No. TG-1784, is AFFIRMED. No pronouncement as to cost.

SO ORDERED.

48
Hence, the present petition.

The grounds relied upon by the petitioner are the following:

5.1 THE COURT OF APPEALS ACTED IN A MANNER NOT IN

ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT WHEN IT RULED THAT RESPONDENTS' MOTION
FOR SUMMARY JUDGMENT DATED AUGUST 05, 1999 DID NOT VIOLATE
THE TEN (10)-DAY NOTICE RULE UNDER SECTION 3, RULE 35 OF THE
1997 RULES OF CIVIL PROCEDURE.

5.2 THE COURT OF APPEALS ACTED IN A MANNER NOT IN

ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT WHEN IT RULED THAT A MOTION FOR SUMMARY
JUDGMENT IS PROPER IN AN ACTION FOR QUIETING OF TITLE.

5.3 THE COURT OF APPEALS ACTED IN A MANNER NOT IN

ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT WHEN IT RULED THAT THERE ARE NO GENUINE
FACTUAL AND TRIABLE ISSUES IN CIVIL CASE NO. TG-1784.

5.4 THE COURT OF APPEALS ACTED IN A MANNER NOT IN

ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT WHEN IT UPHELD THE RESOLUTION DATED
NOVEMBER 03, 1999 OF THE COURT A QUO, BASED ON TESTIMONIES
OF RESPONDENTS' WITNESSES TAKEN WITHOUT GRANTING HEREIN
PETITIONER THE RIGHT TO CROSS-EXAMINE AND UPON
DOCUMENTARY EXHIBITS PRESENTED BUT NOT ADMITTED AS
EVIDENCE.

5.5 THE COURT OF APPEALS ACTED IN A MANNER NOT IN

ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT WHEN IT UPHELD THE RESOLUTION DATED

49
 NOVEMBER 03, 1999 OF THE COURT A QUO BASED ON FALSIFIED
EVIDENCE.

5.6 THE COURT OF APPEALS ACTED IN A MANNER NOT IN

ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT WHEN IT FAILED TO RULE THAT THE COURT A
QUO PATENTLY DEPRIVED PETITIONER OF ITS RIGHT TO DUE
PROCESS IN RENDERING ITS SUMMARY JUDGMENT.

5.7 THE COURT OF APPEALS ACTED IN A MANNER NOT IN

ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT WHEN IT HELD THAT THE COURT A QUO HAS
JURISDICTION TO CANCEL PETITIONER'S ORIGINAL CERTIFICATE OF
TITLE (OCT) NO. 0-660 IN AN ACTION TO QUIET TITLE.

According to the petitioner, a motion for summary judgment must be served at least ten
(10) days before the date set for hearing thereof, and that a hearing must be held to hear the parties
on the propriety of a summary judgment, per Sec. 3 of Rule 35 of the Revised Rules of Court,
which was not observed because the petitioner received a copy of the respondents' motion for
summary judgment only on August 20, 1999, or the very same day that the motion was set for
hearing. Petitioner further claims that the trial court never conducted any hearing on the motion
for summary judgment.

Petitioner also argued that a summary judgment is only available to a claimant seeking to
recover upon a claim, counterclaim or cross-claim or to obtain a declaratory relief, and does not
include cases for quieting of title. Furthermore, petitioner also averred that a summary judgment
has no place in a case where genuine factual and triable issues exist, like in the present case. It
added that the genuine and triable issues were all raised in its Answer Ad Cautelam.

50
 Another ground relied upon by petitioner is its failure to cross-examine the witnesses for
the respondents without fault on its part. It also stated that the trial court did not issue any order
admitting in evidence the documentary exhibits presented by the respondents. Hence, according
to the petitioner, the trial court gravely erred in relying upon the testimonies of the witnesses for
the respondents, without having the latter cross-examined; and upon the documentary exhibits
presented but not admitted as evidence.

Petitioner further claimed that the trial court based its Resolution dated November 3, 1999
on falsified evidence.

Lastly, petitioner raised the issue that by rendering summary judgment, the trial court
deprived the former of its right to due process.

Respondents, in their Comment167 dated October 16, 2006, countered the first issue raised
by the petitioner, stating that their filing of the motion for summary judgment fourteen (14) days
before the requested hearing of the same motion was in compliance with Sec. 3, Rule 35 of the
Rules of Court.

As to the second and third issues, respondents argued that petitioner had a constricted
perception of the coverage of the Rules of Summary Judgment, and that the latter's citation of
cases decided by this Court showed the diverse causes of action that could be the subject matters
of summary judgment. Respondents also posited that petitioner's statements in its Answer Ad
Cautelam, although denominated as Specific Denial, were really general denials that did not
comply with the provisions of Section 10, Rule 8 of the Rules of Court.

167
Rollo, p. 469.

51
 Anent the fourth and fifth issues, respondents claimed that despite the opportunity, or the
right allowed in the Order dated July 17, 1999 of the trial court, for the petitioner to cross-examine
respondents' witnesses and to comment on the documentary evidence presented ex parte after the
default order against the same petitioner, the latter evasively moved to set aside respondents'
evidence in order to suspend further proceedings that were intended to abort the pre-trial
conference. They added that petitioner neglected to avail itself of, or to comply with, the
prescription of the rules found in Rule 35 of the Rules of Court by opting not to avail itself of the
hearing of its opposition to the summary judgment after receiving the Order dated August 20,
1999; by failing to serve opposing affidavit, deposition or admission in the records; and by not
objecting to the decretal portion of the said Order dated August 20, 1999, which stated that the
motion for summary judgment has been submitted for resolution without further argument. With
regard to the contention of the petitioner that the trial court wrongly appreciated falsified evidence,
respondents asserted that petitioner's counsel failed to study carefully the records of the
proceedings for the presentation of the evidence ex parte to be able to know that it was not only a
single-day proceeding, and that more than one witness had been presented. They further averred
that the trial court did not only rely on the photographs of the houses of the occupants of the
property in question.

Finally, as to the sixth and seventh issues, respondents asseverated that their complaint
alleged joint causes of action for quieting of title under Art. 476 of the New Civil Code and for
the review of the decree of registration pursuant to Sec. 32 of the Property Registration Decree or
P.D. No. 1529, because they are complimentary with each other.

The petition is impressed with merit.

The basic contention that must be resolved by this Court is the propriety of the summary
judgment in this particular case of quieting of title.

52
 Rule 35 of the 1997 Rules of Civil Procedure provides:

SEC. 1. Summary judgment for claimant. - A party seeking to recover upon

a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any
time after the pleading in answer thereto has been served, move with supporting
affidavits for a summary judgment in his favor upon all or any part thereof

SEC. 3. Motion and proceedings thereon. - The motion shall be served at

least ten (10) days before the time specified for the hearing. The adverse party prior
to the day of hearing may serve opposing affidavits. After the hearing, the judgment
sought shall be rendered forthwith if the pleading, depositions, and admissions on
file together with the affidavits, show that, except as to the amount of damages,
there is no genuine issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.168

In the present case, it was the respondents who moved for a summary judgment.

Petitioner contended that the ten-day notice rule was violated, because the copy of the
motion for summary judgment was served only on August 20, 1999 or on the same day it was set
for hearing. It also added that even if the petitioner received a copy of the motion only on August
20, 1999, there was no hearing conducted on that date because the trial court issued an order giving
petitioner 10 days within which to file its comment or opposition.

The above specific contention, however, is misguided. The CA was correct in its
observation that there was substantial compliance with due process. The CA ruled, as the records
show, that the ten-day notice rule was substantially complied with because when the respondents
filed the motion for summary judgment on August 9, 1999, they furnished petitioner with a copy

168
Now Secs.1 and 3, Rule 35, 1997 Rules of Civil Procedure.

53
thereof on the same day as shown in the registry receipt and that the motion was set for hearing on
August 20, 1999, or 10 days from the date of the filing thereof.

Due process, a constitutional precept, does not, therefore, always and in all situations a
trial-type proceeding. The essence of due process is found in the reasonable opportunity to be
heard and submit one's evidence in support of his defense. What the law prohibits is not merely
the absence of previous notice, but the absence thereof and the lack of opportunity to be heard.169

Petitioner further argues that summary judgment is not proper in an action for quieting of
title. This particular argument, however, is misplaced. This Court has already ruled that any action
can be the subject of a summary judgment with the sole exception of actions for annulment of
marriage or declaration of its nullity or for legal separation.170

Proceeding to the main issue, this Court finds that the grant of summary judgment was not
proper. A summary judgment is permitted only if there is no genuine issue as to any material fact
and a moving party is entitled to a judgment as a matter of law. A summary judgment is proper if,
while the pleadings on their face appear to raise issues, the affidavits, depositions, and admissions
presented by the moving party show that such issues are not genuine.171

It must be remembered that the non-existence of a genuine issue is the determining factor
in granting a motion for summary judgment, and the movant has the burden of proving such

169
Mutuc v. Court of Appeals, G.R. No. 48108, September 26, 1990, 190 SCRA 43.
170
See Carlos v. Sandoval, et al, G. R. No. 179922, December 16, 2008, SCRA 574 116, citing Republic v.
Sandiganbayan, G.R. No. 152154, November 18, 2003, 416 SCRA 133, citing Family Code, Arts. 48 & 60, and Roque
v. Encarnacion, 96 Phil. 643 (1954).
171
Mariano Nocom v. Oscar Camerino, et al., G. R. No. 182984, February 10, 2009, 578 SCRA 390, citing
Ong v. Roban Lending Corporation, G.R. No. 172592, July 9, 2008, 557 SCRA 516.

54
nonexistence. The trial court found no genuine issue as to any material fact that would necessitate
conducting a full-blown trial. However, a careful study of the case shows otherwise.

In their motion for summary judgment, the respondents failed to clearly demonstrate the
absence of any genuine issue of fact. They merely reiterated their averments in the complaint for
quieting of title and opposed some issues raised by the petitioner in its Answer Ad Cautelam, to
wit:

Nonetheless, going by the records of the admitted and uncontroverted facts

and facts established there is no more litigious or genuine issue of basic fact to be
the subject of further trial on the merits.

The first defense as to the identity of the subject property, the issue has
already become nil because of not only the lack of seriousness in the allegations
but also because the identity of the subject parcel of land Lot 9250 was proven by
the approved plan Ap-04-008367 that was already presented and offered in
evidence as Exhibit B for the plaintiffs.

The second defense that plaintiffs' claim of the property is barred by prior
judgment rule is unavailing considering that the vital documentary evidence they
presented in Land Registration Case No. TG-423 before this Honorable Court the
markings and descriptions of such documents are stated in the Judgment quoted as
follows:

(1) Tax Declaration No. 015224-A (Exhibit Q; x x x.

(2) Tax Declaration No. 05019-B (Exhibit R; x x x.
(3) Tax Declaration No. 01926-B (Exhibit S; x x x.
(4) Tax Declaration No. GR-007-0007 (Exhibit T x x x.

are the very documentary evidence adopted and relied upon by the plaintiffs in
seeking the review and nullity of the Decree No. 217313 issued on August 20, 1997
under LRC Record No. N-62686 pursuant to the Judgment dated June 7, 1994

55
rendered by this Honorable Court penned by the acting presiding Judge Eleuterio
F. Guerrero in said Land Registration Case No. TG-423.

On the other hand, as to the gravamen of the claims in the complaint, the
plaintiffs have presented clear and convincing evidence as the well-nigh or almost
incontrovertible evidence of a registerable title to the subject land in the
proceedings conducted on the reception of evidence ex-parte for the plaintiffs
establishing in detail the specifications of continuous, open, exclusive possession
as aspects of acquisitive prescription as confirmed in the affidavit herein attached
as Annex A;

In ruling that there was indeed no genuine issue involved, the trial court merely stated that:

This Court, going by the records, observed keenly that plaintiffs cause of
action for quieting of title on the disputed parcel of land is based on the alleged
fraud in the substitution of their landholdings of Lot 9250, Cad 355, Tagaytay
Cadastre containing only an area of 244,112 square meters with Lot 9121, Cad 335,
Tagaytay Cadastre, containing only an area of 19,356 square meters. While
defendant Eland in its answer practically and mainly interposed the defenses of: (a)
the parcel of land being claimed by the plaintiffs is not the parcel of land subject
matter of Land Registration Case No. TG-423; (b) the claim of the plaintiffs is
barred by prior judgment of this Court in said Land Registration Case; and (c)
plaintiffs' complaint is barred by the Statute of Limitation since Original Certificate
of Title No. 0-660 has become incontrovertible.

Cross-reference of the above-cited Land Registration Case No. TG-423 that

was decided previously by this Court with the case at bench was imperatively made
by this Court. Being minded that the Court has and can take judicial notice of the
said land registration case, this Court observed that there is no genuine issue of fact
to be tried on the merits. Firstly, because the supposed identity crisis of the
controverted parcel of land covered by the Land Registration Case No. TG-423 with
the subject parcel of land is established by Plan Ap-04-006275 (Exhibit N) LRC
Case No. 423 and by Plan A04 008367 (Exhibit B of the plaintiffs) and the
Technical Description of Lot 9250, Cad 355 (Exhibit B-1 of the plaintiffs).
Secondly, the prior judgment rule cannot be availed of by defendant Eland since
not only intrinsic fraud but extrinsic fraud were alleged in and established by the
records. (Heirs of Manuel Roxas v. Court of Appeals, G. R. No. 1184436, pro.

56
March 21, 1997). Thirdly, it is incontrovertible that the complaint in this case
seeking to review the judgment and annul the decree was filed on March 5, 1998 or
within one (1) year from August 20, 1997 or the date of issuance of Decree No.
217313, LRC Record No. N-62686, hence, the Original Certificate of Title No. 0-
660 issued to defendant Eland has not attained incontrovertibility. (Heirs of Manuel
Roxas v. Court of Appeals, G.R. No. 118436, prom. March 21, 1997).

Notwithstanding, the issue of possession is a question of fact by the

interaction of the basic pleadings, the observation of this Court is that the
plaintiffs were able to prove by the well-nigh incontrovertible evidence, the aspects
of possession in accordance with Section 48 (b) of Commonwealth Act 141, as
amended, as hereinafter illustrated.

The CA, in affirming the above Resolution of the trial court, propounded thus:

The contention of defendant-appellant is untenable. Summary judgment is

not only limited to solving actions involving money claims. Under Rule 35 of the
1997 Rules of Court, except as to the amount of damages, when there is no genuine
issue as to any material fact and the moving party is entitled to a judgment as a
matter of law, summary judgment may be allowed. The term genuine issue has been
defined as an issue of fact which calls for the presentation of evidence as
distinguished from an issue which is sham, fictitious, contrived, set up in bad faith
and patently unsubstantial so as not to constitute a genuine issue for trial.

Thus, under the aforecited rule, summary judgment is appropriate when

there are no genuine issues of fact, which call for the presentation of evidence in a
full-blown trial. Thus, even if on their face the pleadings appear to raise issues, but
when the affidavits, depositions and admissions show that such issues are not
genuine, then summary judgment as prescribed by the rules must ensue as a matter
of law.

It should be stressed that the court a quo which rendered the assailed
resolution in Civil Case No. TG-1784 was the very court that decided the LRC Case
No. TG-423. Such being the case, the court a quo was privy to all relevant facts and
rulings pertaining to LRC Case No. TG-423 which it considered and applied to this

57
 case. Thus, where all the facts are within the judicial knowledge of the court,
summary judgment may be granted as a matter of right.

On the contrary, in petitioner's Answer Ad Cautelam, genuine, factual and triable issues
were raised, aside from specifically denying all the allegations in the complaint, thus:

2. SPECIFIC DENIALS

2.1 Answering defendant specifically denies the allegations contained in

paragraphs 1 and 3 of the Complaint insofar as it alleges the personal circumstances
of the plaintiff and one A. F. Development Corporation for lack of knowledge or
information sufficient to form a belief as to the truth thereof.

2.2 Answering defendant specifically denies the allegations contained in

paragraphs 4, 5, 6 and 7 of the Complaint for lack of knowledge or information
sufficient to form a belief as to the truth of said allegations. And if the property
referred to in said paragraphs is that parcel of land which was the subject matter of
Land Registration Case No. TG-423 which was previously decided by this
Honorable Court with finality, said allegations are likewise specifically denied for
the obvious reason that the said property had already been adjudged with finality
by no less than this Honorable Court as absolutely owned by herein answering
defendant as will be further discussed hereunder.

2.3 Answering defendant specifically denies the allegations contained in

paragraph 8 of the Complaint insofar as it alleged that (u)pon exercise of further
circumspection, counsel for the plaintiffs once followed-up in writing the 1994
request of the plaintiffs to have the subject parcel of land be declared for taxation
purposes and insofar as it is made to appear that parcel of land being claimed by
the plaintiffs is the same parcel of land subject matter of Land Registration Case
No. TG-423 for lack of knowledge or information sufficient to form a belief as to
the truth thereof and for the reason that the names of the herein plaintiffs were never
mentioned during the entire proceedings in said land registration case and by reason
of the Affirmative Allegations contained hereunder.

58
 2.4 Answering defendant specifically denies the allegations contained in
paragraphs 9, 10, 10 (a), 10 (b), 10 (c), 10 (d), 10 (e), 10 (f), 10 (g), 10 (h), and 11
for the reason that there is no showing that the parcel of land being claimed by the
plaintiff is the same parcel of land which was the subject matter of Land
Registration Case No. TG- 423, and in the remote possibility that the parcel of land
being claimed by the plaintiffs is the same as that parcel of land subject of Land
Registration Case No. TG-423, the allegations contained in said paragraphs are still
specifically denied for the reason that no less than the Honorable Court had decided
with finality that the parcel of land is absolutely owned by herein defendant to the
exclusion of all other persons as attested to by the subsequent issuance of an
Original Certificate of Title in favor of answering defendant and for reasons stated
in the Affirmative Allegations.

2.5 Answering defendant specifically denies the allegations contained in

paragraph 12 of the Complaint for the obvious reason that it was the plaintiffs who
appear to have been sleeping on their rights considering that up to the present they
still do not have any certificate of title covering the parcel of land they are claiming
in the instant case, while on the part of herein defendant, no less than the Honorable
Court had adjudged with finality that the parcel of land subject matter of Land
Registration Case No. TG-423 is absolutely owned by herein defendant.

2.6 Answering defendant specifically denies the allegations contained in

paragraph 13 of the complaint for the reason that defendant has never ladgrabbed
any parcel of land belonging to others, much less from the plaintiffs, and further,
answering defendant specifically denies the allegations therein that plaintiffs
engaged the services of a lawyer for a fee for lack of knowledge r information
sufficient to form a belief as to the truth thereof.

2.7 Answering defendant specifically denies the allegations contained in

paragraphs 14, 15, 16, 17 and 18 of the Complaint for lack of knowledge or
information sufficient to form a belief as the truth thereof.

2.8 Answering defendant specifically denies the allegations contained in

paragraphs IV (a) to IV (c) for the reason that, as above-stated, if the parcel of land
being claimed by the plaintiffs is the same as that parcel of land subject matter of
Land Registration Case No. TG-423, this Honorable Court had already decided
with finality that said parcel of land is absolutely owned by herein answering
defendant and additionally, for those reasons stated in defendant's Motion to
Dismiss.

59
 2.9 Answering defendant specifically denies the allegations contained in
paragraph IV (d) of the Complaint for lack of knowledge or information sufficient
to form a belief as to the truth thereof.

Special and affirmative defenses were also raised in the same Answer Ad Cautelam, to wit:

xxxx

4.1 The pleading asserting the claim of the plaintiff states no cause of action
as asserted in the Motion To Dismiss filed by herein answering defendant and for
the reason that there is no evidence whatsoever showing or attesting to the fact that
the parcel of land being claimed by the plaintiffs in the Complaint is the same parcel
of land which was the subject matter of Land Registration Case No. TG-423.

4.2 The complaint was barred by the prior judgment rendered by this
Honorable in Land Registration Case No. TG-423.

4.3 The complaint is barred by the Statute of Limitation in that OCT No. 0-
660 had become incontrovertible by virtue of the Torrens System of Registration;
and to allow plaintiffs to question the validity of answering defendant's title through
the instant complaint would be a collateral of OCT No. 0-660 which is not
permissible under the law.

4.4 Plaintiffs are barred by their own acts and/or omission from filing the
present complaint under the principles of estoppel and laches.

4.5 Plaintiffs does not to the Court with clean hands as they appear to be
well aware of the proceedings in said Land Registration Case No. TG- 423 and
inspite of such knowledge, plaintiffs never bothered to present their alleged claims
in the proceedings.

4.6 Answering defendant has always acted with justice, given everyone his
due, and observed honesty and good faith in his dealings.
60
 Clearly, the facts pleaded by the respondents in their motion for summary judgment have
been duly disputed and contested by petitioner, raising genuine issues that must be resolved only
after a full-blown trial. When the facts as pleaded by the parties are disputed or contested,
proceedings for summary judgment cannot take the place of trial.172 In the present case, the
petitioner was able to point out the genuine issues. A genuine issue is an issue of fact that requires
the presentation of evidence as distinguished from a sham, fictitious, contrived or false claim.173

It is of utmost importance to remember that petitioner is already the registered owner

(Original Certificate of Title [OCT] No. 0-660 issued by the Register of Deeds) of the parcel of
land in question, pursuant to a decree of registration (Decree No. N-217313, LRC Record No.
62686) based on the ruling of the same court that granted the summary judgment for the quieting
of title.

Incidentally, the findings of the trial court contained in the disputed summary judgment
were obtained through judicial notice of the facts and rulings pertaining to that earlier case (LRC
Case No. TG-423) wherein the same trial court ruled in favor of the petitioner. It is, therefore,
disorienting that the same trial court reversed its earlier ruling, which categorically stated that:

x x x There is overwhelming evidence or proof on record that the vendors

listed in Exhibit HH, with submarkings, are the previous owners of the parcel of
land mentioned in the same deed of sale and aside form the tax declarations
covering the same property (Exhibits Q to T, inclusive), the uncontroverted
testimony of Atty. Ruben Roxas establishes beyond any shadow of doubt that
applicant's (referring to herein defendant-appellant) sellers/predecessors-in-interest
are the grandchildren, great grandchildren and great great grandchildren of the
spouses Lucio Petate and Maria Pobleta Petate, the former owners of the same

172
National Power Corporation v. Loro, et al., G. R. No. 175176, October 17, 2008,
569 SCRA 648, citing Rivera v. Solidbank Corporation, G.R. No. 163269, April 19, 2006, 487 SCRA 512, 535.
173
Id.

61
 property, whose ownership is further bolstered by tax receipts showing payments
of realty taxes (Exhibits U to GG, inclusive, with submarkings).

xxx

On the basis of the foregoing facts and circumstances, and considering that
applicant is a domestic corporation not otherwise disqualified from owning real
properties in the Philippines, this Court finds that applicant has satisfied all the
conditions/requirements essential to the grant of its application pursuant to the
provisions of the Land Registration Law, as amended, inspite of the opposition filed
by the Heirs of the late Doroteo Miranda. Hence, the grant of applicant's petition
appears to be inevitable.

WHEREFORE, this Court hereby approves the instant petition for land
registration and, thus, places under the operation of Act 141, Act 496 and/or P.D.
1529, otherwise known as the Property Registration Law, the land described in Plan
Ap-04-006275 and containing an area of Two Hundred Forty-Two Thousand Seven
Hundred Ninety-Four (242,794) square meters, as supported by its technical
description now forming part of the record of this case, in addition to other proofs
adduced in the name of the applicant, ELAND PHILIPPINES, INC., with principal
office at No. 43 E. Rodriguez Ave. (Espaa Extension), Quezon City, Metro Manila.

Once this decision becomes final and executory, the corresponding decree
of registration shall forthwith issue.

SO ORDERED.

By granting the summary judgment, the trial court has in effect annulled its former ruling
based on a claim of possession and ownership of the same land for more than thirty years without
the benefit of a full-blown trial. The fact that the respondents seek to nullify the original certificate
of title issued to the petitioner on the claim that the former were in possession of the same land for
a number of years, is already a clear indicium that a genuine issue of a material fact exists. This,
together with the failure of the respondents to show that there were no genuine issues involved,
should have been enough for the trial court to give the motion for summary judgment, filed by
62
respondents, scant consideration. Trial courts have limited authority to render summary judgments
and may do so only when there is clearly no genuine issue as to any material fact.174

Based on the foregoing, this Court deems it necessary to delve briefly on the nature of the
action of quieting of title as applied in this case. This Court's ruling in Calacala, et al. v. Republic,
et al.175 is instructive on this matter, thus:

To begin with, it bears emphasis that an action for quieting of title is

essentially a common law remedy grounded on equity. As we held in Baricuatro,
Jr. vs. CA:176

Regarding the nature of the action filed before the trial court,
quieting of title is a common law remedy for the removal of any
cloud upon or doubt or uncertainty with respect to title to real
property. Originating in equity jurisprudence, its purpose is to
secure x x x an adjudication that a claim of title to or an interest in
property, adverse to that of the complainant, is invalid, so that the
complainant and those claiming under him may be forever
afterward free from any danger of hostile claim. In an action for
quieting of title, the competent court is tasked to determine the
respective rights of the complainant and other claimants, x x x not
only to place things in their proper place, to make the one who has
no rights to said immovable respect and not disturb the other, but
also for the benefit of both, so that he who has the right would see
every cloud of doubt over the property dissipated, and he could
afterwards without fear introduce the improvements he may desire,
to use, and even to abuse the property as he deems best xxx.

Under Article 476 of the New Civil Code, the remedy may be availed of
only when, by reason of any instrument, record, claim, encumbrance or proceeding,

174
Concrete Aggregates Corp. v. CA, et al, G. R. No. 117574, January 2, 1997, 266 SCRA 88, citing
Archipelago Builders v. Intermediate Appellate Court, G.R. No. 75282, February 19, 1991, 194 SCRA 207, 212, citing
Auman v. Estenzo., No. L- 40500, 27 February 1976, 69 SCRA 524; Loreno v. Estenzo, No. L-43306, 29 October
1976, 73 SCRA 630; Viajar v. Estenzo, No. L- 45321, 30 April 1979, 89 SCRA 684.
175
G. R. No. 154415, July 28, 2005, 464 SCRA 438.
176
382 Phil. 15, 25 (2000).

63
 which appears valid but is, in fact, invalid, ineffective, voidable, or unenforceable,
a cloud is thereby cast on the complainants title to real property or any interest
therein. The codal provision reads:

Article 476. Whenever there is a cloud on title to real

property or any interest therein, by reason of any instrument, record,
claim, encumbrance or proceeding which is apparently valid or
effective but is in truth and in fact invalid, ineffective, voidable, or
unenforceable, and may be prejudicial to said title, an action may be
brought to remove such cloud or to quiet the title.

An action may also be brought to prevent a cloud from being cast upon title
to real property or any interest therein.

In turn, Article 477 of the same Code identifies the party who may bring an
action to quiet title, thus:

Article 477. The plaintiff must have legal or equitable title

to, or interest in the real property which is the subject-matter of the
action. He need not be in possession of said property.

It can thus be seen that for an action for quieting of title to prosper, the
plaintiff must first have a legal, or, at least, an equitable title on the real property
subject of the action and that the alleged cloud on his title must be shown to be in
fact invalid. So it is that in Robles, et al. vs. CA,177 we ruled:

It is essential for the plaintiff or complainant to have a legal

title or an equitable title to or interest in the real property which is
the subject matter of the action. Also, the deed, claim, encumbrance
or proceeding that is being alleged as a cloud on plaintiffs title must
be shown to be in fact invalid or inoperative despite its prima facie
appearance of validity or legal efficacy.

177
384 Phil. 635, 647 (2000).

64
 Verily, for an action to quiet title to prosper, two (2) indispensable requisites
must concur, namely: (1) the plaintiff or complainant has a legal or an equitable
title to or interest in the real property subject of the action; and (2) the deed,
claim, encumbrance, or proceeding claimed to be casting cloud on his title
must be shown to be in fact invalid or inoperative despite its prima facie
appearance of validity or legal efficacy.

Respondents, in their Complaint, claim that they have become the owners in fee-simple
title of the subject land by occupation and possession under the provisions of Sec. 48 (b) of the
Public Land Law or Commonwealth Act No. 141, as amended. Thus, it appears that the first
requisite has been satisfied. Anent the second requisite, respondents enumerated several facts that
would tend to prove the invalidity of the claim of the petitioner. All of these claims, which would
correspond to the two requisites for the quieting of title, are factual; and, as discussed earlier, the
petitioner interposed its objections and duly disputed the said claims, thus, presenting genuine
issues that can only be resolved through a full-blown trial.

Anent the propriety of the filing of an action for the quieting of title, the indefeasibility and
incontrovertibility of the decree of registration come into question. Under Sec. 32 of P.D. No.
1529 or the Property Registration Decree:

Section 32. Review of decree of registration; Innocent purchaser for value.

The decree of registration shall not be reopened or revised by reason of absence,
minority, or other disability of any person adversely affected thereby, nor by any
proceeding in any court for reversing judgments, subject, however, to the right of
any person, including the government and the branches thereof, deprived of land or
of any estate or interest therein by such adjudication or confirmation of title
obtained by actual fraud, to file in the proper Court of First Instance a petition for
reopening and review of the decree of registration not later than one year from and
after the date of the entry of such decree of registration, but in no case shall such
petition be entertained by the court where an innocent purchaser for value has
acquired the land or an interest therein, whose rights may be prejudiced. Whenever
the phrase "innocent purchaser for value" or an equivalent phrase occurs in this

65
 Decree, it shall be deemed to include an innocent lessee, mortgagee, or other
encumbrancer for value.

Upon the expiration of said period of one year, the decree of

registration and the certificate of title issued shall become incontrovertible.
Any person aggrieved by such decree of registration in any case may pursue his
remedy by action for damages against the applicant or any other persons
responsible for the fraud.

As borne out by the records and undisputed by the parties, OCT No. 0-660 of petitioner
was issued on August 29, 1997 pursuant to a Decree issued on August 20, 1997, while the
complaint for the quieting of title in Civil Case No. TG-1784 was filed and docketed on March 5,
1998; hence, applying the above provisions, it would seem that the period of one (1) year from the
issuance of the decree of registration has not elapsed for the review thereof. However, a closer
examination of the above provisions would clearly indicate that the action filed, which was for
quieting of title, was not the proper remedy.

Courts may reopen proceedings already closed by final decision or decree when an
application for review is filed by the party aggrieved within one year from the issuance of the
decree of registration.178 However, the basis of the aggrieved party must be anchored solely on
actual fraud. Shedding light on the matter is a discussion presented in one of the recognized
textbooks on property registration,179 citing decisions of this Court, thus:

The right of a person deprived of land or of any estate or interest therein by

adjudication or confirmation of title obtained by actual fraud is recognized by law
as a valid and legal basis for reopening and revising a decree of registration.180 One
of the remedies available to him is a petition for review. To avail of a petition
for review, the following requisites must be satisfied:

178
Lopez v. Padilla, G. R. No. L-27559, May 18, 1972, 45 SCRA 44.
179
Justice Agcaoili (ed.), Property Registration Decree and Related Laws (Land Titles and Deeds), 297-298
(2006).
180
Serna v. CA, G. R. No. 124605, June 18, 1999, 308 SCRA 527.

66
 (a) The petitioner must have an estate or interest in the land;

(b) He must show actual fraud in the procurement of the decree of

registration;

(c) The petition must be filed within one year from the issuance of the
decree by the Land Registration Authority; and

(d) The property has not yet passed to an innocent purchaser for value.181

A mere claim of ownership is not sufficient to avoid a certificate of title

obtained under the Torrens system. An important feature of a certificate of title
is its finality. The proceedings whereby such a title is obtained are directed against
all persons, known or unknown, whether actually served with notice or not, and
includes all who have an interest in the land. If they do not appear and oppose the
registration of their own estate or interest in the property in the name of another,
judgment is rendered against them by default, and, in the absence of fraud, such
judgment is conclusive. If an interest in the land will not by itself operate to vacate
a decree of registration, a fortiori, fraud is not alone sufficient to do so.182
As further pointed out in the same book,183 the petition for review must be filed within one
year from entry of the decree of registration. As written:

As long as a final decree has not been entered by the Land Registration
Authority and period of one year has not elapsed from the date of entry of such
decree, the title is not finally adjudicated and the decision in the registration case
continues to be under the control and sound discretion of the registration court.184
After the lapse of said period, the decree becomes incontrovertible and no longer
subject to reopening or review.

181
Walstrom v. Mapa, G. R. No. 38387, January 29, 1990, 181 SCRA 431; Cruz v. Navarro, G. R. No. L-27644,
November 29, 1973, 54 SCRA 109; Libudan v. Palma Gil, G. R. No. L-21164, May 17, 1972, 45 SCRA 17.
182
26 Phil. 581 (1914).
183
Supra note 57 at 302-304.
184
Gomez v. CA, G. R. No. 77770, December 15, 1988, 168 SCRA 491.

67
 Section 32 provides that a petition for review of the decree of
registration may be filed not later than one year from and after the date of
entry of such decree of registration. Giving this provision a literal interpretation,
it may at first blush seem that the petition for review cannot be presented until the
final decree has been entered. However, it has been ruled that the petition may be
filed at any time after the rendition of the court's decision and before the
expiration of one year from the entry of the final decree of registration for, as
noted in Rivera v. Moran,185 there can be no possible reason requiring the
complaining party to wait until the final decree is entered before urging his claim
for fraud.

The one-year period stated in Sec. 32 within which a petition to re-open and
review the decree of registration refers to the decree of registration described in
Section 31, which decree is prepared and issued by the Land Registration
Administrator.186

The provision of Section 31 that every decree of registration shall bind the
land, quiet title thereto, and be conclusive upon and against all persons, including
the national government, and Sec. 32 that the decree shall not be reopened or revised
by reason of absence, minority or other disability or by any proceeding in court,
save only in cases of actual fraud and then only for one year from the entry of the
decree, must be understood as referring to final and unappealable decrees of
registration. A decision or, as it is sometimes called after entry, a decree of a
registration court, does not become final and unappealable until fifteen days after
the interested parties have been notified of its entry, and during that period may be
set aside by the trial judge on motion for new trial, upon any of the grounds stated
in the Rules of Court.187 An appeal from the decision of the trial court prevents the
judgment from becoming final until that decree is affirmed by the judgment of the
appellate court.188

A petition for review under Section 32 is a remedy separate and distinct

from a motion for new trial and the right to the remedy is not affected by the
denial of such a motion irrespective of the grounds upon which it may have
been presented. Thus, where petitioners acquired their interest in the land before
any final decree had been entered, the litigation was therefore in effect still pending

185
48 Phil. 836 (1926).
186
Ramos v. Rodriguez, G.R. No. 94033, May 29, 1995, 244 SCRA 418.
187
Roman Catholic Archbishop of Manila v. Sunico, 36 Phil. 279 (1917).
188
Supra note at 60.

68
 and, in these circumstances, they can hardly be considered innocent purchasers in
good faith.189

Where the petition for review of a decree of registration is filed within the
one-year period from entry of the decree, it is error for the court to deny the petition
without hearing the evidence in support of the allegation of actual and extrinsic
fraud upon which the petition is predicated. The petitioner should be afforded an
opportunity to prove such allegation.190

In the present case, the one-year period before the Torrens title becomes indefeasible and
incontrovertible has not yet expired; thus, a review of the decree of registration would have been
the appropriate remedy.

Based on the above disquisitions, the other issues raised by the petitioner are necessarily
rendered inconsequential.

WHEREFORE, the petition for review on certiorari of petitioner Eland Philippines, Inc.
is hereby GRANTED, and the decision dated February 28, 2006 of the Court of Appeals (CA) in
CA-G.R. CV No. 67417, which dismissed the appeal of petitioner Eland Philippines, Inc. and
affirmed the resolutions dated November 3, 1999 and June 28, 2006 of Branch 18, RTC of
Tagaytay City, is hereby REVERSED and SET ASIDE. Consequently, the resolutions dated
November 3, 1999 and June 28, 2006 of Branch 18, RTC of Tagaytay City in Civil Case No. TG-
1784 are hereby declared NULL and VOID.

SO ORDERED.

189
Rivera v. Moran, 48 Phil. 863 (1926).
190
Republic v. Sioson, G. R. No. L-13687, November 29, 1963, 9 SCRA 533.

69
 DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

RENATO C. CORONA
Associate Justice
Chairperson

ANTONIO T. CARPIO ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

70
 I attest that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Associate Justice
Third Division, Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

71
SYLLABI/SYNOPSIS
SECOND DIVISION

[G.R. No. 124049. June 30, 1999]

RODOLFO P. VELASQUEZ, petitioner, vs. COURT OF APPEALS, and PHILIPPINE

COMMERCIAL INTERNATIONAL BANK, INC., respondents.

DECISION
BELLOSILLO, J.:

This petition for review on certiorari prays for reversal of the Decision of the Court of Appeals
promulgated 28 September 1995 which affirmed the summary judgment of 20 June 1990 of the
Regional Trial Court of Makati City, a default judgment against petitioner, and its 19 February
1996 Resolution denying petitioners motion for reconsideration.
The case arose from a complaint for a sum of money with preliminary attachment filed with
the Regional Trial Court of Makati City by private respondent Philippine Commercial
International Bank (PCIB) against petitioner Rodolfo P. Velasquez together with Mariano N.
Canilao Jr., Inigo A. Nebrida, Cesar R. Dean and Artemio L. Raymundo.191
Sometime in December 1994 the Pick-up Fresh Farms, Inc. (PUFFI), of which petitioner
Velasquez was an officer and stockholder, filed an application for a loan of P7,500,000.00 with
PCIB under the government's Guarantee Fund for Small and Medium Enterprises (GFSME).192
On 16 April 1985 the parties executed the corresponding loan agreement. As security for the loan,
promissory notes numbered TL 121231 and TL 121258 for the amounts of P4,000,000.00 and
P3,500,000.00, respectively, were signed by Inigo A. Nebrida and Mariano N. Canilao, Jr. as
officers of and for both PUFFI and Aircon and Refrigeration Industries, Inc. (ARII).193 A chattel
mortgage was also executed by ARII over its equipment and machineries in favor of PCIB.
Petitioner along with Nebrida and Canilao, Jr. also executed deeds of suretyship in favor of PCIB.
Separate deeds of suretyship were further executed by Cesar R. Dean and Artemio L.
Raymundo.194
When PUFFI defaulted in the payment of its obligations PCIB foreclosed the chattel
mortgage. The proceeds of the sale amounted to P678,000.00.195 Thus, PCIB filed an action to

191
Raffled to RTC-Br. 51, Makati City.
192
RTC Records, pp. 13-14.
193
Id., pp. 27-30.
194
Id., pp. 31-36.
195
Id., p. 135.

72
recover the remaining balance of the entire obligation including interests, penalties and other
charges. Exemplary damages and attorneys fees of 25% of the total amount due were also sought.
On 9 October 1989 a writ of preliminary attachment was granted by the trial court.196
Petitioner and Canilao filed their joint answer with counterclaim denying personal liability
and interposing the defense of novation. At the pre-trial on 11 April 1989 petitioner and counsel
failed to appear despite due notice. On 11 April 1989, upon motion of PCIB, petitioner was
declared as in default and the trial court granted the motion for summary judgment as against
Canilao.197 Both PCIB and Canilao submitted their respective position papers. Petitioner, who was
still in default as he did not move to lift the order of default, adopted Canilaos position paper
through an ex parte manifestation.198 On 8 November 1989 an ex parte hearing was conducted as
against petitioner.199
On 20 June 1990 the trial court rendered a summary judgment in favor of PCIB holding
petitioner and Canilao solidarily liable to pay P7,227,624.48 plus annual interest of 17%, and
P700,000.00 as attorneys fees and the costs of suit. The case was dismissed without prejudice with
regard to the other defendants as they were not properly served with summons.200
On 31 July 1990 petitioner filed a motion for reconsideration praying that the order of default
be lifted and that the summary judgment be set aside.201 On 13 September 1991 the trial court
denied the motion for lack of merit.202 On appeal, the Court of Appeals on 28 September 1995
affirmed in toto the RTC judgment.203 Petitioners motion for reconsideration was thereafter denied.
Hence this petition which maintains that the appellate court committed reversible error in
sustaining or affirming the summary judgment despite the existence of genuine triable issues of
facts and in refusing to set aside the default order against petitioner.
We are not persuaded. Petitioner, in raising the first error, invokes our ruling in Viajar v.
Estenzo204 that a party who moves for a summary proceeding has the burden of demonstrating
clearly the absence of any genuine issue of fact, or that the issue posed in the complaint is so
patently unsubstantial as not to constitute a genuine issue for trial, and any doubt as to the existence
of such an issue is resolved against the movant.
While this rule is true in the summary proceedings under Rule 34 of the Revised Rules of
Court, it does not apply to summary proceedings under Rule 35. A different rationale operates in
the latter for it arises out of facts already established or admitted during the pre-trial held

196
Id., pp. 182-183.
197
Id., p. 357.
198
Id. p. 577.
199
TSN, 8 November 1989, pp. 1-34.
200
Decision penned by Judge Fernando V. Gorospe, Jr.; RTC Records, pp. 602-605.
201
Id., pp. 614-625.
202
Id., pp. 774-775.
203
CA (17th Division) Decision penned by Justice Salome Montoya and concurred in by Justices Godardo Jacinto and
Portia Hormachuelos; Rollo, pp. 28-41.
204
No. L-43882, 30 April 1979, 89 SCRA 684, 697.

73
beforehand, unlike in the former where the judge merely relies on the merits of the movant's
allegations.205 Rule 34 pertains to a judgment on the pleadings while Rule 35 relates to a summary
judgment which was the holding in this case.
Petitioner further insists that there are triable issues of fact raised in his answer, namely: (a)
the denial of personal liability on his part in the deed of suretyship since he signed thereon as an
officer of ARII; (b) PCIB's acceptance of royalties coming from the Franchise Agreement between
PUFFI and Arturo Rosales who novated the loan agreement between PUFFI and PCIB; and, (c)
the propriety of payment of the entire debt. According to petitioner, the fact that the addresses
stated under the names of petitioner and fellow surety signors were those of ARII implies that they
signed as officers of the corporation, otherwise, their personal addresses would have been used.
Petitioner further avers that any ambiguity in the contract should be decided against PCIB under
the contract of adhesion doctrine.
A mere perusal of the deed of suretyship readily shows petitioners personal liability under the
loan contract, hence, proper for summary judgment. Moreover, the more appropriate doctrine in
this case is that of the complementary contracts construed together doctrine which we enunciated
in National Power Corporation v. CA206-
The surety bond must be read in its entirety and together with the contract between the NPC
and the contractors. The provisions must be construed together to arrive at their true meaning.
Certain stipulations cannot be segregated and then made to control.
That the complementary contracts construed together doctrine applies in this case finds
support in the principle that the surety contract is merely an accessory contract and must be
interpreted with its principal contract, which in this case was the loan agreement. This doctrine
closely adheres to the spirit of Art. 1374 of the Civil Code which states that -
Art. 1374. The various stipulations of a contract shall be interpreted together, attributing to
the doubtful ones that sense which may result from all of them taken jointly.
Applying the complementary contracts construed together doctrine leaves no doubt that it was
the intention of the parties that petitioner would be personally liable in the deed of suretyship
because the loan agreement, among others, provided207-
Article 3. LOAN SECURITY. - x x x x 3.4 Suretyship. - To further secure the obligations of
the BORROWER to the LENDER, Messrs. Nebrida, Raymundo, Canilao, Dean and Velasquez
and Aircon and Refrigeration Ind. Inc. shall each execute a suretyship agreement in favor of the
LENDER in form and substance acceptable to the LENDER.
It would have been a different matter had petitioner properly contested the deed of suretyship
under Sec. 8, Rule 8, of the Rules of Court. But he did not. The omission, as properly noted by the
trial court, was fatal for it resulted in petitioners admission of the due execution and genuineness
of the contract. The admission effectively eliminated any defense relating to the authenticity and
due execution of the document, e.g., that the document was spurious, counterfeit, or of different

205
Libudan v. Gil, No. L-21163, 17 May 1972, 45 SCRA 17.
206
No. L-43706, 14 November 1986, 145 SCRA 533.
207
RTC Records, p. 20.

74
import on its face as the one executed by the parties; or that the signatures appearing thereon were
forgeries; or that the signatures were unauthorized.208
Petitioner also claims that PCIB's acceptance of royalty fees which were the fruits of the
Franchising Agreement between PUFFI and Arturo Rosales209 constituted a novation of the loan
agreement and deeds of suretyship, therefore, a genuine issue of fact.
This contention is untenable. Extinctive novation has these requisites: (a) the existence of a
previous valid obligation; (b) the agreement of all the parties to the new contract; (c) the
extinguishment of the old obligation or contract; and, (d) the validity of the new one. Thus,
novation is effected only when a new contract has extinguished an earlier contract between the
same parties.210 Necessarily, there is no novation when the new contract is not between the same
parties as in the old contract.
The franchise agreement was only between PUFFI and Rosales. PCIB was never mentioned
therein; neither was there any reference to the subject loan agreement. What PCIB simply did was
to accept royalty payments out of the franchise - an act which was already beyond the scope of the
franchise agreement but which was not in conflict with the payment arrangement in the loan
agreement. Our ruling in Magdalena Estates Inc. v. Rodriguez is instructive, to wit211-
An obligation to pay a sum of money is not novated, in a new instrument wherein the old is
ratified, by changing only the terms of payment and adding other obligations not incompatible
with the old one, or wherein the old contract is merely supplemented by the new one. The mere
fact that the creditor receives a guaranty or accepts payments from a third person who has agreed
to assume the obligation, when there is no agreement that the first debtor shall be released from
responsibility, does not constitute a novation, and the creditor can still enforce the obligation
against the original debtor.
As regards the defense of overpayment, since it is being raised for the first time we need not
discuss it for it is deemed waived pursuant to Sec. 2, Rule 9, of the Rules of Court.
At this point, it must be stressed that insofar as petitioner is concerned, the RTC decision was
not a summary judgment but a judgment by default as hearing was held ex parte against him. Even
so, the RTC decision is still without grave abuse of discretion. Thus, the CA could not be in error
in upholding it despite claims by petitioner that the default order should have been set aside
because he could not be bound by the negligence of his counsel.
Petitioner attempts to avoid any personal blame by claiming that a special power of attorney
in favor of his lawyer was drawn up because he could not attend the pre-trial due to previous
commitments abroad. The lawyer, however, failed to attend thereby prejudicing his interests.
However, the findings of the Court of Appeals, as fully substantiated by the records, showed that

208
Kalilid Wood Industries Corporation v. Intermediate Appellate Court, G.R. No. 75502, 12 November 1987, 155
SCRA 594.
209
See Note 16, pp. 517-521.
210
Uraca v. Court of Appeals, G.R. No. 115158, 5 September 1997, 278 SCRA 702.
211
No. L-18411, 17 December 1966, 18 SCRA 967.

75
the lawyer was not the only one negligent, thus212-
Velasquez appears to have appointed his counsel, Atty. Rodolfo Vega, as his attorney-in-fact
to represent him at the pre-trial but the said lawyer failed to appear, hence Velasquez was declared
as in default. The records show that the Order of April 11,1984 declaring him as in default was
sent to his counsel and was received by the latter as early as May 10, 1989. No steps were taken
to have the said Order lifted or reconsidered. This is binding on Velasquez who is himself guilty
of negligence when, after executing the special power of attorney in favor of his lawyer, he left for
abroad and apparently paid no further attention to his case until he received the decision. There is
therefore no fraud, accident, mistake or excusable negligence which will warrant a lifting of the
Order of Default.
As a general rule, a client is bound by the mistakes of his counsel;213 more so by the result of
his own negligence.
WHEREFORE, the petition is DENIED. The Decision of 28 September 1995 of the Court
of Appeals affirming the 20 June 1990 judgment of the RTC- Br. 61, Makati City, ordering
petitioner Rodolfo P. Velasquez and Mariano N. Canilao, Jr. to solidarily pay respondent
Philippine Commercial and Industrial Bank (PCIB) the amount of P7,227,624.48 with annual
interest of 17% and attorneys fees of P700,000.00 plus costs of suit as well as its Resolution of 19
February 1995 denying reconsideration, is AFFIRMED.
SO ORDERED.
Puno, Mendoza, Quisumbing, and Buena, JJ., concur.

212
Rollo, p. 41.
213
Villa Rhecar Bus v. De la Cruz, G.R. No. 78936, 7 January 1988, 157 SCRA 13.

76
77
 Republic of the Philippines
Supreme Court
Manila

FIRST DIVISION

PILIPINO TELEPHONE
CORPORATION, G.R. No. 152092

Petitioner,

Present:

CORONA, C.J.,
Chairperson,

- versus - LEONARDO-DE CASTRO,

BERSAMIN,*
DEL CASTILLO, and
PEREZ, JJ.

RADIOMARINE NETWORK, INC., Promulgated:

Respondent.
August 4, 2010
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

LEONARDO-DE CASTRO, J.:

*
Per Special Order No. 876 dated August 2, 2010.

78
 This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeking to annul, reverse and set aside the Resolution214 issued on May 2, 2001 by the
former Sixth Division of the Court of Appeals in CA-G.R. SP No. 64155, entitled PILIPINO
TELEPHONE CORPORATION v. HON. JUDGE REINATO G. QUILALA, in his capacity as
Presiding Judge of the Regional Trial Court of Makati, Branch 57, and RADIOMARINE
NETWORK (SMARTNET), Inc. The assailed Court of Appeals Resolution dismissed
Pilipino Telephone Corporations (PILTEL) petition for certiorari under Rule 65 with
application for temporary restraining order (TRO) and/or writ of preliminary injunction
which sought to set aside the Resolution215 made by the Regional Trial Court (RTC) of
Makati City, Branch 57, dated November 13, 2000, rendering partial summary judgment
in Civil Case No. 99-2041, as well as the Order216 of the same trial court dated January 30,
2001 denying the motion for reconsideration thereof. The instant petition also seeks to
annul, reverse and set aside the Court of Appeals Resolution217 issued on February 7, 2002
denying petitioners motion for reconsideration of the May 2, 2001 Court of Appeals
Resolution.

The genesis of this prolonged controversy can be traced back to the execution of a
Contract to Sell218 on December 12, 1996 between petitioner PILTEL and respondent
Radiomarine Network, Inc. (RADIOMARINE), wherein the latter agreed to purchase a
3,500-square meter lot located in Makati City covered by Transfer Certificate of Title
(TCT) No. T-195516 issued by the Registry of Deeds for Makati City. The terms of
payment that were agreed upon by the parties were embodied in Article II of the said
contract, to wit:

The total consideration of FIVE HUNDRED SIXTY MILLION

PESOS [P560,000,000.00] shall be paid by the VENDEE, without the need of
any demand, to the VENDOR in the following manner:

[a] a downpayment in the amount of ONE HUNDRED EIGHTY

MILLION [P180,000,000.00] PESOS, to be paid on or before December 28,
1996;

214
Penned by Associate Justice Marina L. Buzon with Associate Justices Eubulo G. Verzola and Bienvenido L.
Reyes, concurring; rollo, pp. 77-82.
215
Rollo, pp. 220-224.
216
Id. at 271-272.
217
Id. at 83-85.
218
Id. at 111-114.

79
 [b] Any and all outstanding payables which the VENDOR owes to the
VENDEE in consideration of the cellular phone units and accessories
ordered by the VENDOR and delivered by the VENDEE between the initial
downpayment date i.e. December 28, 1996 and April 30, 1997, shall be
credited to the VENDEE as additional payment of the purchase price.

[c] The remaining balance, after deducting [a] and [b] above, shall be
paid on or about April 30, 1997. It is expressly understood however, that the
VENDOR shall submit to the VENDEE, on or about April 20, 1997, a
Statement of Account updating the deliveries of cellular phones and its
outstanding amount in order that the VENDEE can prepare the final
payment. In this way, the amount of final payment shall be made to the
VENDOR on or before April 30, 1997. Should the VENDOR be delayed in
the submission of the said Statement on the stipulated date, the date of
payment of the remaining balance shall be automatically adjusted for a
period equivalent to the number of days by which the VENDOR is delayed in
the submission thereof.219

Thus, under the terms agreed upon, respondent was to give the amount of
P180,000,000.00 as down payment. Any outstanding unpaid obligation, which petitioner
owed respondent, would be deducted from the obligations of the latter. The balance, if any,
should be paid on or before April 30, 1997.

Contemporaneous with the execution of the Contract to Sell, petitioner wrote a

Letter220 to respondent dated December 11, 1996 in which it expressed its willingness, on a
purely best effort basis, to purchase from respondent 300,000 units of various models of
Motorola, Mitsubishi and Ericsson brand cellular phones and accessories for the entire
year of 1997.

Respondent failed to pay the balance of P380,000,000.00 on the stipulated period of

April 30, 1997 alleging, among other things, that petitioner reneged on its commitment to
purchase 300,000 units of cellular phones and accessories from respondent and instead
purchased the units from other persons/entities.

On December 19, 1997, petitioner returned to respondent the amount of

P50,000,000.00, which is part of the P180,000,000.00 down payment made by the latter

219
Id. at 114.
220
Id. at 115.

80
pursuant to the Contract to Sell as evidenced by a Statement of Account221 issued by the
former.

Respondent then filed a Complaint222 on December 1, 1999 against petitioner

PILTEL seeking either the rescission of the Contract to Sell or the partial specific
performance of the same with the RTC of Makati City. It prayed that judgment be
rendered (a) ordering PILTEL to convey to it at least thirty-two percent (32%) interest in
the Valgoson property, representing the value of its down payment of P180,000,000.00, or
in the alternative, ordering PILTEL to return to it the down payment plus interest; (b)
ordering PILTEL to pay to it the amount of P81,800,764.96 representing the value of the
300,000 units of various cellular phones which it bought pursuant to the commitment of
PILTEL to purchase but which commitment PILTEL disregarded, plus interest, as actual
and compensatory damages; and (c) ordering PILTEL to pay to it the attorneys fees in the
amount of P500,000.00.

Respondent then filed a Motion for Partial Summary Judgment223 on October 6,

2000 which was opposed by petitioner in its Comment/Opposition224 filed on October 26,
2000. The motion was eventually granted by the trial court in its assailed Resolution dated
November 13, 2000, the dispositive portion of which reads:

WHEREFORE, the motion for summary judgment is granted and

defendant Piltel is hereby ordered to return or to pay to plaintiff Smartnet
the down payment of P180 Million less the forfeited amount of P18 Million
and the cash advance of P50 Million, or a net of P112 Million with interest at
6% per annum from the extrajudicial demand of October 20, 1998 until
finality of the judgment and after this judgment becomes final and executory,
additional legal interest at 12% per annum on the total obligation until the
judgment is satisfied.225

On December 5, 2000, petitioner filed a Motion for Reconsideration226 which was

denied for lack of merit by the RTC in the assailed Order dated January 30, 2001. Prior to

221
Id. at 170.
222
Id. at 117-132.
223
Id. at 397-412.
224
Id. at 202-219.
225
Id. at 224.
226
Id. at 225-245.

81
the issuance of the said Order, respondent filed its Opposition227 on December 14, 2000 to
which petitioner countered with a Reply228 filed on January 10, 2001.

Respondent then filed a Manifestation and Motion for Execution229 on March 15,
2001 manifesting its withdrawal of the two remaining causes of action and moving for the
issuance of a Writ of Execution. This was followed by an Alternative Motion for Execution
Pending Appeal230 that was filed by respondent on March 20, 2001, praying for execution
pending appeal in the event that then defendant PILTEL would be held to have the right to
appeal.

On April 4, 2001, petitioner filed a Petition for Certiorari under Rule 65231 of the
Rules of Court before the Court of Appeals, with an application for a temporary
restraining order and a writ of preliminary injunction, alleging grave abuse of discretion
on the part of Judge Reinato Quilala in issuing the November 13, 2000 Resolution and the
January 30, 2001 Order. This petition was docketed as CA-G.R. SP No. 64155. A week
later, respondent filed before the Court of Appeals its Opposition to the Application for the
Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction232 on
April 11, 2001 wherein it called the appellate courts attention to what it perceived as then
defendant PILTELs pursuance of simultaneous reliefs before the trial court and the Court
of Appeals that all seek to nullify the November 13, 2000 Resolution of the trial court
granting the summary judgment.

Meanwhile, in compliance with the trial courts Order233 dated April 6, 2001,
petitioner filed before it on April 16, 2001, by registered mail, a Consolidated Opposition234
against respondents Manifestation and Motion for Execution dated March 15, 2001 and the
Alternative Motion for Execution Pending Appeal dated March 20, 2001. On April 17,
2001, respondent filed with the trial court its Ex Parte Manifestation and Motion235 stating
therein that, upon verification with the records of the court that day, then defendant
PILTEL had failed to file its Comment/Opposition to respondents aforementioned pending
motions and, thus, respondent moved to submit both motions for the resolution of the trial
court without opposition from then defendant PILTEL. Hence, the trial court issued an

227
Id. at 451-481.
228
Id. at 246-270.
229
Id. at 507-511.
230
Id. at 512-519.
231
Id. at 273-320.
232
Id. at 1350-1370.
233
Id. at 563.
234
Id. at 520-534.
235
Id. at 1407-1432.

82
Order236 on April 23, 2001 granting the withdrawal of respondents remaining causes of
action and the execution pending appeal, the dispositive portion of which reads:

WHEREFORE, the motion for execution pending appeal of the

Partial Summary Judgment rendered on November 13, 2000 is GRANTED.

Let the corresponding Writ of Execution be issued and implemented

accordingly.

As a result, the corresponding Writ of Execution Pending Appeal237 was issued on

April 24, 2001.

Back at the Court of Appeals, petitioner filed an Urgent Manifestation and Urgent
Reiteratory Motion for the Issuance of a Temporary Restraining Order and/or Writ of
Preliminary Injunction238 on April 25, 2001.

On that same date and while its Petition for Certiorari under Rule 65 was still
pending before the Court of Appeals, petitioner filed with the trial court its Notice of
Appeal239 informing the said court that it will raise before the Court of Appeals the trial
courts November 13, 2000 Resolution and April 23, 2001 Order. This appeal was
subsequently docketed as CA-G.R. CV No. 71805.

The following day, on April 26, 2001, petitioner filed with the trial court an Urgent
Manifestation to Post Supersedeas Bond and Urgent Motion to Defer Execution Pending
Appeal.240

On April 30, 2001, respondent filed with the Court of Appeals its Supplement (To:
Opposition to the Application for the Issuance of a Temporary Restraining Order and/or
Writ of Preliminary Injunction)241 while, on the other hand, petitioner filed with the trial
court another Urgent Motion to Admit Supersedeas Bond242 on May 2, 2001. On the same

236
Id. at 535-537.
237
Id. at 579-580.
238
Id. at 542-578.
239
Id. at 538-541.
240
Id. at 1435-1437.
241
Id. at 1377-1390.
242
Id. at 586-589.

83
day, by virtue of the Writ of Execution Pending Appeal issued by the trial court and there
being no TRO issued against it by the Court of Appeals in CA-G.R. SP No. 64155, Sheriff
George C. Ragutana issued a Notice of Sale on Execution Pending Appeal of Real
Property243 giving notice to the public that the sale by public auction of the real property
described in TCT No. 195516 or the Valgoson property shall be on May 31, 2001. Likewise
on the same date, the Court of Appeals denied petitioners petition for certiorari along with
the request for the issuance of a TRO in CA-G.R. SP No. 64155, stating:

We resolve to dismiss the petition.

As pointed out by private respondent, an appeal from a partial

summary judgment may be allowed by the trial court under Section 1(g),
Rule 41 of the 1997 Rules of Civil Procedure, which reads:

SECTION 1. Subject of appeal. x x x

No appeal may be taken from:

xxxx

(g) A judgment or final order for or against one or more

of several parties or in separate claims, counterclaims, cross-
claims and third-party complaints, while the main case is
pending, unless the court allows an appeal therefrom;

xxxx

Thus, petitioner should have filed, with leave of court, a notice of appeal
from the partial summary judgment dated November 13, 2000 before
resorting to this special civil action of certiorari. Moreover with the
withdrawal and dismissal of private respondents remaining two causes of
action, the summary judgment dated November 13, 2000 ceased to be partial
as it may be considered to have completely disposed of the entire case and,
therefore, appealable.

243
CA rollo, pp. 414-415.

84
 Anent the alleged impropriety of a summary judgment, suffice it to
say that certiorari will not be issued to cure errors in proceedings or correct
erroneous conclusions of law or fact. As long as a court acts within its
jurisdiction, any alleged errors committed in the exercise of its jurisdiction
will amount to nothing more than errors of judgment which are reviewable
by timely appeal and not by certiorari.

Petitioner likewise assails the Order of execution dated April 23, 2001.
However, the copy of said Order attached to the urgent manifestation and
urgent reiteratory motion for the issuance of a temporary restraining order
and/or writ of preliminary injunction is a mere unsigned xerox copy thereof,
contrary to the requirement in Section 1, Rule 65 of the 1997 Rules of Civil
Procedure that the petition be accompanied by a clearly legible duplicate
original or certified true copy of the order subject thereof. Thus, Section 3,
Rule 46 of the 1997 Rules of Civil Procedure provides that the failure of the
petitioner to comply with the requirement, inter alia, that the petition be
accompanied by a clearly legible duplicate original or certified true copy of
the order subject thereof, shall be sufficient ground for the dismissal thereof.
As held in Manila Midtown Hotels and Land Corporation vs. NLRC, certiorari,
being an extraordinary remedy, the party who seeks to avail of the same
must observe the rules laid down by law.244

Thus, the dispositive portion of which reads as follows:

WHEREFORE, the instant petition is DISMISSED for insufficiency

in form and substance.245

In response to petitioners May 2, 2001 motion filed in the trial court, respondent
filed an Opposition to the Urgent Motion to Admit Supersedeas Bond246 on May 4, 2001
alleging that the offer to post supersedeas bond does not entitle then defendant PILTEL to
a deferment of execution pending appeal since at that time, compelling reasons warrant
immediate execution and that PILTEL has resorted to forum shopping in order to have the
execution postponed. On May 8, 2001, petitioner filed its Reply (to the Opposition to

244
Rollo, pp. 80-81.
245
Id. at 81.
246
Id. at 1438-1449.

85
Motion to Admit Supersedeas Bond)247 to which respondent filed its Rejoinder248 on May 9,
2001.

Notwithstanding the dismissal of petitioners Petition for Certiorari (CA-G.R. SP No.

64155), petitioner still filed on May 9, 2001 a Supplemental Petition for Certiorari249
challenging the April 23, 2001 Order of the trial court as having been issued with grave
abuse of discretion. Petitioner likewise filed a (Second) Urgent Manifestation and
Reiteratory Motion for a Temporary Restraining Order and/or Writ of Preliminary
Injunction250 on May 17, 2001. Both pleadings were merely noted without action by the
Court of Appeals in a Resolution251 dated May 18, 2001, to wit:

In view of the resolution of this Court dated May 2, 2001 which

dismissed the petition, the Supplemental Petition dated May 9, 2001 and
(Second) Urgent Manifestation and Reiteratory Motion for a Temporary
Restraining Order and/or Writ of Preliminary Injunction dated May 15,
2001 filed by petitioner are hereby NOTED without action.

On May 22, 2001, petitioner filed its Motion for Reconsideration252 to the May 2,
2001 Court of Appeals Resolution. It followed this up with the filing of a pleading entitled
(A) Third Urgent Manifestation and Reiteratory Motion for a Temporary Restraining
Order and/or Writ of Preliminary Injunction; and (B) Motion to Set Case for Oral
Arguments253 on June 1, 2001.

Respondent filed its Comment254 and Supplemental Comment255 on June 15, 2001
and June 25, 2001, respectively, to petitioners May 22, 2001 Motion for Reconsideration. In
return, petitioner filed by registered mail its Consolidated Reply (to Smartnets [1]
Comment and [2] Supplemental Comment) on August 23, 2001. Subsequently, respondent
filed its Rejoinder256 on September 17, 2001.

247
Id. at 1464-1471.
248
Id. at 1489A-1492.
249
Id. at 608-618.
250
Id. at 1500-1503.
251
Id. at 1507.
252
Id. at 86-110.
253
Id. at 1533-1536.
254
Id. at 1540-1588.
255
Id. at 1589-1592.
256
Id. at 1654-1677.

86
 Back at the trial court, it issued an Order257 on May 11, 2001 denying petitioners
Urgent Manifestation to Post Supersedeas Bond and Urgent Motion to Defer Execution
Pending Appeal on the ground that the reasons for the allowance of execution pending
appeal still prevail and the posting of a supersedeas bond does not entitle the judgment
debtor to a suspension of execution as a matter of right. The dispositive portion of which
states:

WHEREFORE, defendants Urgent Manifestation to Post Supersedeas

Bond, Urgent Motion to Defer Execution Pending Appeal and the Urgent
Motion to Admit Supersedeas Bond are hereby denied for lack of merit.258

Petitioner then filed on May 30, 2001 a Motion for Reconsideration259 of the said
Order of the trial court. This was subsequently denied by the trial court in an Order260
issued on August 14, 2001, which likewise granted the withdrawal of all the remaining
incidents of the case. This Order later became the subject of petitioners Supplemental
Notice of Appeal261 which it filed on September 4, 2001.

On January 4, 2002, respondent filed a Manifestation262 in CA-G.R. SP No. 64155

informing the Court of Appeals of the status of the appeal taken by petitioner in CA-G.R.
CV No. 71805 and reiterating the gross violations of the rule against forum shopping
allegedly committed by the same. A month later, or on February 7, 2002, the Court of
Appeals denied petitioners May 22, 2001 Motion for Reconsideration in CA-G.R. SP No.
64155. In denying petitioners motion, the appellate court declared that even assuming that
the Petition for Certiorari has a practical legal effect because it would lead to the reversal of
the Resolution dismissing the Complaint, it would still be denied on the ground of forum
shopping. The Court of Appeals concluded that petitioner committed forum shopping
because the subject matter of its petition for certiorari and the notice of appeal that it
subsequently filed are one and the same, to wit:

It should be noted that after the filing of the instant petition,

petitioner appealed to this Court the partial summary judgment dated
November 13, 2000 and the Order dated April 23, 2001, declaring the partial
summary judgment to have finally disposed of the entire case and granting

257
Id. at 1537-1539.
258
Id. at 1539.
259
Id. at 1736-1740.
260
Id. at 668-669.
261
Id. at 670-673.
262
Id. at 1719-1725.

87
 the motion for execution pending appeal, docketed as CA-G.R. CV No.
71805, which are the same subject matter of the instant petition.263

Hence, this petition where petitioner raises the following grounds:

I.

A SPECIAL CIVIL ACTION FOR CERTIORARI UNDER RULE 65 OF THE

RULES OF COURT IS THE PROPER REMEDY FROM A PARTIAL
SUMMARY JUDGMENT.

A. SECTION 1(G), RULE 41 OF THE RULES OF COURT DOES NOT

APPLY TO PARTIAL SUMMARY JUDGMENTS.

B. A PARTIAL SUMMARY JUDGMENT IS AN INTERLOCUTORY

ORDER THAT CANNOT BE THE SUBJECT OF AN APPEAL.

C. THE RULES AND EXISTING JURISPRUDENCE DICTATE THAT

APPEAL FROM A PARTIAL SUMMARY JUDGMENT MUST BE TAKEN
TOGETHER WITH THE JUDGMENT THAT MAY BE RENDERED IN THE
ENTIRE CASE AFTER TRIAL.

D. THE REMEDY OF AN AGGRIEVED PARTY FROM A PARTIAL

SUMMARY JUDGMENT IS A SPECIAL CIVIL ACTION FOR CERTIORARI
UNDER RULE 65 OF THE RULES OF COURT.

E. EVEN ASSUMING, ONLY FOR THE SAKE OF ARGUMENT, THAT

SECTION 1, RULE 41 IS APPLICABLE, THE GENERAL RULE EVEN AS
STATED IN THE SAME SECTION ITSELF, IS THAT NO APPEAL MAY BE
TAKEN FROM A JUDGMENT OR FINAL ORDER FOR OR AGAINST ONE
OR MORE OF SEVERAL PARTIES OR IN SEPARATE CLAIMS,
COUNTERCLAIMS, CROSS-CLAIMS AND THIRD-PARTY COMPLAINTS,
WHILE THE MAIN CASE IS PENDING. MOREOVER, THE EXCEPTION
PROVIDED THEREIN IS NOT EVEN MANDATORY.

263
Id. at 83-84.

88
F. AT THE TIME OF THE FILING OF THE PETITION IN THIS CASE,
THE PARTIAL SUMMARY JUDGMENT WAS TRULY PARTIAL, AND NOT
FINAL IN THE SENSE THAT IT DISPOSES OF THE ENTIRE CASE.

II.

EVEN ASSUMING, ONLY FOR THE SAKE OF ARGUMENT, THAT APPEAL

IS THE PROPER REMEDY FROM A PARTIAL SUMMARY JUDGMENT, A
SPECIAL CIVIL ACTION FOR CERTIORARI UNDER RULE 65 OF THE
RULES OF COURT IS NOT BARRED.

III.

JUDGE QUILALA COMMITTED PATENT AND GRAVE ABUSE OF

DISCRETION, AMOUNTING TO LACK OR EXCESS OF JURISDICTION, IN
RENDERING THE ASSAILED PARTIAL SUMMARY JUDGMENT.

IV.

THE ISSUES RAISED IN PILTELS PETITION FOR CERTIORARI WITH THE

COURT OF APPEALS ARE DIFFERENT FROM THE ISSUES RAISED IN
PILTELS APPEAL.

V.

PILTEL DID NOT COMMIT FORUM SHOPPING.

VI.

THE COURT OF APPEALS FAILED TO APPRECIATE THAT THE URGENT

MANIFESTATION AND URGENT REITERATORY MOTION FOR THE
ISSUANCE OF A TEMPORARY RESTRAINING ORDER DID NOT ASSAIL

89
 THE 23 APRIL 2001 [ORDER]; THE SAID ORDER WAS ASSAILED IN THE
ORIGINAL SUPPLEMENTAL PETITION.264

A careful perusal of the voluminous pleadings filed by the parties leads us to conclude that
this case revolves around the following core issues:

I.

WHETHER OR NOT PETITIONER IS GUILTY OF FORUM SHOPPING

II.

WHETHER OR NOT GRAVE ABUSE OF DISCRETION ATTENDED THE

TRIAL COURTS ISSUANCE OF A SUMMARY JUDGMENT

III.

WHETHER OR NOT THE PETITION FOR CERTIORARI WAS PROPERLY

DISMISSED

We find the instant petition to be without merit.

Anent the first issue, petitioner asserts that the filing of its Notice of Appeal in CA-G.R.
CV No. 71805 subsequent to the filing of its Petition for Certiorari before the Court of Appeals in
CA-G.R. SP No. 64155 does not amount to forum shopping because the issues raised in the petition
for certiorari are different from the issues raised in the appeal since the former seeks to have an

264
Id. at 38-40.

90
order declared null and void for having been rendered with grave abuse of discretion amounting
to lack or excess of jurisdiction while the latter deals with the correctness and legal soundness of
the questioned decision. Furthermore, petitioner argues that a subsequent appeal was not adequate
to address the grave abuse of discretion committed by the trial court judge and could not have
provided adequate relief. Lastly, petitioner maintains that the element of res judicata is not present
in this case so as to amount to forum shopping on the part of petitioner.265

We cannot countenance petitioners nuanced position on this issue. The

captions/subheadings of the petitioners petition for certiorari and the argument
captions/subheadings of petitioners appellants brief may, at first blush, appear to be dissimilar.
However, the discussion that expounded on each of them plainly betray a similarity of issues
presented, grounds argued, and reliefs sought.

An example is petitioners first argument in its Petition for Certiorari before the Court of
Appeals in CA-G.R. SP No. 64155 where it alleged grave abuse of discretion on the part of Judge
Quilala in granting summary judgment despite the existence of materially disputed facts and the
absence of supporting affidavits, to wit:

RESPONDENT JUDGE COMMITTED PATENT AND GRAVE ABUSE OF

DISCRETION, AMOUNTING TO LACK OR EXCESS OF JURISDICTION, IN
RENDERING SUMMARY JUDGMENT NOTWITHSTANDING THE FACT
THAT:

A. THE PLEADINGS READILY AND IMMEDIATELY SHOW THAT THERE

ARE MATERIAL DISPUTED FACTS DETERMINATIVE OF THE PARTIES

265
Id. at 2309-2326.

91
 CLAIMS AND DEFENSES WHICH CANNOT BE SETTLED WITHOUT
PRESENTATION OF EVIDENCE.266

In support of this allegation, petitioner states the following:

51. From the foregoing statement of the positions of the parties, the
following questions of material fact determinative of the parties claim and defenses
are glaring:

51.1 Does the Letter constitute a valid, binding, and enforceable agreement
between the parties?

51.2 Did the parties intend the Letter to form an integral part of the
Contract?

51.3 Was the Letter a material consideration for SMARTNETs entering into
the Contract?

51.4 Did PILTEL violate or fail to comply with any of its obligations under
the Contract?

51.5 Assuming, arguendo, that the Letter constitutes a valid binding, and
enforceable agreement, did PILTEL violate any of its provisions?

51.6 Is PILTEL guilty of fraud or bad faith in the negotiation, performance

or execution of the Contract and/or the Letter?

52. BECAUSE OF THE INDISPUTABLE EXISTENCE OF THE

FOREGOING MATERIAL QUESTIONS OF FACT WHICH GO INTO THE

266
Id. at 290.

92
 HEART OF THE PARTIES RESPECTIVE CLAIMS AND DEFENSES,
ESPECIALLY SMARTNETS CLAIM FOR PARTIAL SPECIFIC
PERFORMANCE OR (IN THE ALTERNATIVE) FOR RESCISSION,
SUMMARY JUDGMENT IS EVIDENTLY NOT PROPER.267

On the other hand, petitioner assigned as its first error in its Appellants Brief in CA-G.R.
No. 71805 the following contention:

I.

JUDGE QUILALA GRIEVOUSLY ERRED IN HOLDING THAT THE

CONTRACT HAD BEEN RENDERED VOID AND INEFFECTIVE AND
WITHOUT FORCE AND EFFECT.268

In discussing this point, petitioner argued that the trial court was required to consider the
materially disputed facts before it can properly grant summary judgment instead of directly
disputing the finding that the contract had been rendered void, to wit:

Clearly, then, in order for Judge Quilala to determine whether or not SMARTNET
is entitled to any of the relief it prayed for, it had to resolve, among others, the
following issues of fact: Does the Letter constitute a valid, binding, and
enforceable agreement between the parties? Did the parties intend the Letter
to form an integral part of the Contract? Did PILTEL violate or fail to comply
with any of its obligations under the Contract to Sell? Is PILTEL guilty of
fraud or bad faith in the negotiation, performance or execution of the Contract
to Sell?269

267
Id. at 298-299.
268
Id. at 680.
269
Id. at 719.

93
In the present Petition for Review, we likewise find the same arguments, to wit:

6.31. In this case, Judge Quilala rendered partial summary judgment

notwithstanding the fact that THE PLEADINGS READILY AND
IMMEDIATELY SHOW THAT THERE ARE MATERIAL DISPUTED
FACTS DETERMINATIVE OF THE PARTIES CLAIMS AND DEFENSES
WHICH CANNOT BE SETTLED WITHOUT PRESENTATION OF
EVIDENCE.

xxxx

The rendition of the foregoing summary judgment is improper because,

from the pleadings of the parties and the issues presented at the pre-trial conference,
including the issues presented by PILTEL in its pre-trial brief, the following
questions of material fact determinative of the parties claim and defenses are
glaring:

1. Does the Letter constitute a valid, binding, and enforceable

agreement between the parties?

2. Did the parties intend the Letter to form an integral part of the
Contract?

3. Was the Letter a material consideration for SMARTNETs entering

into the Contract?

4. Did PILTEL violate or fail to comply with any of its obligations

under the Contract?

5. Assuming, arguendo, that the Letter constitutes a valid, binding, and

enforceable agreement, did PILTEL violate any of its provisions?

94
 6. Is PILTEL guilty of fraud or bad faith in the negotiation,
performance or execution of the Contract and/or the Letter?270

From the foregoing, it can be clearly deduced that petitioner repeated the same argument
in its appeal and its petition for certiorari filed in the Court of Appeals as well as in the instant
petition that the trial courts resolution of the case by summary judgment was invalid allegedly
because of materially disputed facts which would render the whole proceeding beyond the purview
of the established rules on summary judgment.

Another illustration of petitioners proclivity to repeat its arguments in different fora can be
found in the second argument of its petition for certiorari in CA-G.R. SP No. 64155 which reads:

II

EVEN ASSUMING, ARGUENDO, THAT SUMMARY JUDGMENT IS

PROPER, RESPONDENT JUDGE COMMITTED PATENT AND GRAVE
ABUSE OF DISCRETION, AMOUNTING TO LACK OR EXCESS OF
JURISDICTION, WHEN HE DISREGARDED THE LAW AND WELL-
ESTABLISHED JURISPRUDENCE IN RENDERING JUDGMENT IN FAVOR
OF SMARTNET.

A. SMARTNET [RADIOMARINE] WENT TO COURT WITH

UNCLEAN HANDS. HENCE, IT IS NOT ENTITLED TO RELIEF FROM THE
COURTS.

B. SMARTNET CANNOT RENDER THE CONTRACT VOID AND

UNENFORCEABLE THROUGH ITS OWN DEFAULT, BREACH, OR
FAILURE.

C. SMARTNET IS NOT ENTITLED TO INTEREST.

270
Id. at 51-53.

95
 D. SMARTNETS OBLIGATION TO PAY THE BALANCE OF THE
PURCHASE PRICE IS VALID, BINDING, ENFORCEABLE AND
SUBSISTING.271

In support of which, petitioner discussed the following points:

83. SMARTNET cannot avoid the Contract by the simple expedient of not
paying. Here, the bare truth of the matter is that SMARTNET is invoking its own
refusal or failure to comply with its obligation under the Contract to annul or render
the Contract ineffective or void.

xxxx

85. SMARTNET is in effect saying that, since it has not paid, and it failed
and refused, and continues to fail and refuse, to pay the balance of the purchase
price for the Valgoson Property, the Contract is automatically annulled or
rescinded.

86. Article 1182 of the Civil Code provides that: When the fulfillment of
the obligation depends upon the sole will of the debtor, the conditional
obligation shall be void. Thus, in Osmena vs. Rama, it was held that the condition
to pay (the balance of the purchase price of shares of stock) as soon as the debtor
sells her house is void.

87. Article 1186 of the Civil Code provides that: The condition shall be
deemed fulfilled when the obligor voluntarily prevents its fulfillment. The
reason for the rule is that ONE MUST NOT PROFIT BY HIS OWN FAULT.

88. In Mana vs. Luzon Consolidated Mines & Co., a company engaged the
services of a contractor to construct a road. Halfway, the company directed the
contractor to stop work. The contractor sued for the entire contract price. The

271
Id. at 291.

96
 company refused, asserting that only half of the project was finished. The Court of
Appeals sustained the contractor and directed the company to pay the entire
contract price, saying that the project is deemed fulfilled because it was the
company that voluntarily prevented its completion.

89. The case of Valencia vs. Rehabilitation Finance Corporation and

Court of Appeals is even more applicable. There, the Rehabilitation Finance
Corporation (RFC) advertised to the general public an invitation to bid for the
construction of a building in Davao City. Valencia submitted a bid for the electrical
and plumbing works for the building. RFC awarded the plumbing to Valencia.
Valencia was asked to put up the performance bond as required under the contract.
Valencia did not put up the bond and also did not begin the work. When RFC sued
him, among the defenses put up by Valencia was that, since he did not put up a
bond, there was no contract since the condition was not complied with. The
Supreme Court, affirming the Court of Appeals, held Valencia liable for damages
to RFC, saying that:

xxxx

90. Article 1308 of the Civil Code states that: The contract must bind both
contracting parties; its validity or compliance cannot be left to the will of one
of them. Thus, in Fernandez vs. Manila Electric Company, the Supreme Court
held that the validity and fulfillment of contracts can not be left to the will of one
of the contracting parties, and the mere fact that one has made a poor bargain is no
ground for setting aside an agreement.272 (citations omitted.)

These same arguments were raised by petitioner in its Appellants Brief in CA-G.R. CV
No. 71805, to wit:

77. SMARTNET is in effect saying that, since it has not paid, and it failed
and refused, and continues to fail and refuse, to pay the balance of the purchase
price for the Valgoson Property, the Contract to Sell is automatically annulled or
rescinded.

272
Id. at 308-311.

97
 78. SMARTNET cannot avoid the Contract by the simple expedient of not
paying. The validity of, compliance with, or fulfillment of a contract cannot be left
to the will of one of the parties.

79. Article 1182 of the Civil Code provides that: When the fulfillment of
the obligation depends upon the sole will of the debtor, the conditional
obligation shall be void. Thus, in Osmena vs. Rama, it was held that the condition
to pay (the balance of the purchase price of shares of stock) as soon as the debtor
sells her house is void.

80. Article 1186 of the Civil Code provides that: The condition shall be
deemed fulfilled when the obligor voluntarily prevents its fulfillment. The
reason for the rule is that ONE MUST NOT PROFIT BY HIS OWN FAULT.

81. In Mana vs. Luzon Consolidated Mines & Co., a company engaged the
services of a contractor to construct a road. Halfway, the company directed the
contractor to stop work. The contractor sued for the entire contract price. The
company refused, asserting that only half of the project was finished. The Court of
Appeals sustained the contractor and directed the company to pay the entire
contract price, saying that the project is deemed fulfilled because it was the
company that voluntarily prevented its completion.

82. The case of Valencia vs. Rehabilitation Finance Corporation and

Court of Appeals is even more applicable. There, the Rehabilitation Finance
Corporation (RFC) advertised to the general public an invitation to bid for the
construction of a building in Davao City. Valencia submitted a bid for the electrical
and plumbing works for the building. RFC awarded the plumbing to Valencia.
Valencia was asked to put up the performance bond as required under the contract.
Valencia did not put up the bond and also did not begin the work. When RFC sued
him, among the defenses put up by Valencia was that, since he did not put up a
bond, there was no contract since the condition was not complied with. The
Supreme Court, affirming the Court of Appeals, held Valencia liable for damages
to RFC, saying that:

xxxx

98
 83. Article 1308 of the Civil Code states that: The contract must bind both
contracting parties; its validity or compliance cannot be left to the will of one
of them. Thus, in Fernandez vs. Manila Electric Company, the Supreme Court
held that the validity and fulfillment of contracts can not be left to the will of one
of the contracting parties, and the mere fact that one has made a poor bargain is no
ground for setting aside an agreement.273

It is apparent from the above that petitioner puts forward in both its petition for certiorari
and its appeal before the Court of Appeals as well as in the present petition the assertion that the
contract at issue was rendered void and unenforceable due to mistakes attributable solely to the
respondent in this case.

And finally, the most glaring demonstration of petitioners penchant for forum shopping
can be found in the prayer of its Court of Appeals petition for certiorari and appeal including the
instant petition before this Court.

In the present petition for review, petitioner sought in its prayer the following relief:

WHEREFORE, PILTEL respectfully prays that judgment be

rendered:

1. Annulling, reversing and setting aside the First and Second

Assailed Resolutions;

2. Annulling, reversing and setting aside the Resolution of the trial

court dated 13 November 2000 and the Order of the trial court dated 30
January 2001.

273
Id. at 729-732.

99
 PILTEL likewise prays for such further or other relief as may be
deemed just and equitable under the circumstances.274 (Emphasis supplied.)

In its petition for certiorari in CA-G.R. SP No. 64155, petitioner prayed for the following:

2.1. Annul, reverse and set aside the Assailed Resolution dated 13
November 2000 and the assailed Order dated 30 January 2001, AND DENY
SMARTNETS MOTION FOR PARTIAL SUMMARY JUDGMENT;

2.2 (a) Order the lower court to proceed with the trial on the merits of the
case; or, in the alternative,

(b) dismiss the Complaint, and order SMARTNET to pay PILTEL:

(i) PhP380,000,000.00, representing the balance of the

purchase price for the Valgoson Property, plus interest until the same is fully
paid;

(ii) PhP5,000,000.00, as moral damages;

(iii) PhP1,000,000.00, as exemplary damages; and

(iv) PhP1,000,000.00, as attorneys fees and costs of litigation.275

(Emphasis supplied.)

While in its Supplemental Petition for Certiorari in the same appellate case, petitioner
prayed:

274
Id. at 69-70.
275
Id. at 316.

100
 2. After due proceedings, judgment be rendered annulling, reversing and setting
aside the Order of 23 April 2001 in so far as it grants execution pending appeal.276
(Emphasis supplied.)

Petitioners Appellants Brief in CA-G.R. CV No. 71805, on the other hand, sought the
following relief:

WHEREFORE, PILTEL respectfully prays that judgment be rendered as

follows:

a. Annulling, reversing and setting aside (1) the Assailed Resolution dated
13 November 2000, (2) the First Assailed Order dated 23 April 2001, and (3) the
Second Assailed Order dated 14 August 2001;

b. Remanding the case to the Trial Court and allow the parties to present
evidence on their respective claims and defenses; and

c. Ordering SMARTNET to return the amount of Php131,795,836.38 to

PILTEL, plus interest.

PILTEL likewise prays for such further or other relief just and equitable
under the circumstances.277 (Emphasis supplied.)

It is plainly apparent from the foregoing that both the then pending suits before the Court
of Appeals and the instant petition before this Court raised the same issues and sought the same
reliefs, i.e., the annulment of the November 13, 2000 Resolution of the trial court granting partial

276
Id. at 616.
277
Id. at 736-737.

101
summary judgment, as well as the withdrawal of the other causes of action thereby disposing of
the entire case, and the execution of the summary judgment as directed by the trial court in its
April 23, 2001 Order.

Forum shopping exists when the elements of litis pendentia are present or when a final
judgment in one case will amount to res judicata in the other.278 There is res judicata when (1)
there is a final judgment or order; (2) the court rendering it has jurisdiction over the subject matter
and the parties; (3) the judgment or order is on the merits; and (4) there is between the two cases
identity of parties, subject matter and causes of action. For litis pendentia to exist, there must be
(1) identity of the parties or at least such as representing the same interests in both actions; (2)
identity of the rights asserted and relief prayed for, the relief founded on the same facts; and (3)
identity of the two cases such that judgment in one, regardless of which party is successful, would
amount to res judicata in the other.279

In the case at bar, the elements of litis pendentia and, consequently, of forum shopping are
present in petitioners petition for certiorari along with its supplemental petition for certiorari in
CA-G.R. SP No. 64155 and in its appeal in CA-G.R. CV No. 71850. Obviously, there is identity
of parties. Likewise, there is identity of causes of action as both cases assign the same errors on
the part of the trial court. Finally, there is identity of reliefs as both seek the annulment and
reversal of the same orders. It is not difficult to conclude that a decision in either case will
necessarily have a practical legal effect in the other.

278
Santos v. Heirs of Dominga Lustre, G.R. No. 151016, August 6, 2008, 561 SCRA 120, 128; Briones v.
Henson-Cruz, G.R. No. 159130, August 22, 2008, 563 SCRA 69, 84-85; Land Bank of the Philippines v.
AMS Farming Corporation, G.R. No. 174971, October 15, 2008, 569 SCRA 154, 179-180; Presidential
Commission on Good Government v. Sandiganbayan, G.R. No. 157592, October 15, 2008, 569 SCRA 360,
375; Rural Bank of the Seven Lakes (S.P.C.), Inc. v. Dan, G.R. No. 174109, December 24, 2008, 575 SCRA
476, 485-486.
279
Coca-Cola Bottlers (Phils.), Inc. v. Social Security Commission, G.R. No. 159323, July 31, 2008, 560 SCRA
719, 734-736.

102
 Petitioner further argues that the petition for certiorari alleged grave abuse of discretion
on the part of the trial court judge in issuing the November 13, 2000 Resolution and April 23, 2001
Order, while the appeal alleged grave error on the part of the trial court judge in its November 13,
2000 Resolution, April 23, 2001 Order, and August 14, 2001 Order which are entirely different
issues.280 However, it is our view that, though petitioner attempts to make distinctions between
them, the two cases at issue are undoubtedly directed against the November 13, 2000 Resolution
and the April 23, 2001 Order of the trial court, as well as all rulings of the trial court arising from
these two. Clearly, both actions alleged the same right supposedly violated by the same acts of the
trial court which caused the same damage to petitioner, thus, in violation of the rule against forum
shopping. The present petition likewise violates the said rule.

Forum shopping is the act of a litigant who repetitively avails of several judicial remedies
in different courts, simultaneously or successively, all substantially founded on the same
transactions and the same essential facts and circumstances, and raising substantially the same
issues either pending in, or already resolved adversely by some other court, or to increase his
chances of obtaining a favorable decision if not in one court, then in another. The rationale against
forum shopping is that a party should not be allowed to pursue simultaneous remedies in two
different courts as it constitutes abuse of court processes, which tends to degrade the administration
of justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of the heavily
burdened dockets of the courts.281

Petitioner stresses that when it filed its petition for certiorari directed against the November
13, 2000 Resolution granting partial summary judgment, the remedy of appeal was not yet an
available option to it as the case in the trial court had yet to be concluded. However, upon the
issuance of the April 23, 2001 Order which rendered the previously partial summary judgment as
the complete and final judgment disposing of the trial court case and was the subject of petitioners
supplemental petition for certiorari, appeal was now open to petitioner which it readily pursued.

280
Rollo, pp. 2310-2316.
281
Tokio Marine Malayan Insurance Company, Incorporated v. Valdez, G.R. No. 150107, January 28, 2008,
542 SCRA 455, 465.

103
Since the issues raised and the reliefs sought in its petition for certiorari and its appeal are identical
which would make a decision in either one as res judicata on the other and given that it is axiomatic
that the availability of appeal precludes resort to certiorari, it was imperative on the part of
petitioner to withdraw its petition for certiorari which it did not do. This is where the petitioner
crossed the line into the forbidden recesses of forum shopping. The assailed February 7, 2002
Court of Appeals Resolution correctly pointed this out citing the case of Ley Construction and
Development Corporation v. Hyatt Industrial Manufacturing Corporation,282 to wit:

Second, the Petition for Certiorari was superseded by the filing, before the
Court of Appeals, of a subsequent appeal docketed as CA-G.R. CV No. 57119,
questioning the Resolution and the two Orders. In this light, there was no more
reason for the CA to resolve the Petition for Certiorari.

Section 1, Rule 65 of the Rules of Court, clearly provides that a petition for
certiorari is available only when there is no appeal, or any plain, speedy and
adequate remedy in the ordinary course of law. A petition for certiorari cannot
coexist with an appeal or any other adequate remedy. The existence and the
availability of the right to appeal are antithetical to the availment of the special civil
action for certiorari. As the Court has held, these two remedies are mutually
exclusive.

In this case, the subsequent appeal constitutes an adequate remedy. In fact

it is the appropriate remedy, because it assails not only the Resolution but also the
two Orders.

It has been held that what is determinative of the propriety of certiorari is

the danger of failure of justice without the writ, not the mere absence of all other
legal remedies. The Court is satisfied that the denial of the Petition for Certiorari
by the Court of Appeals will not result in a failure of justice, for petitioners rights
are adequately and, in fact, more appropriately addressed in the appeal.

Third, petitioners submission that the Petition for Certiorari has a practical
legal effect is in fact an admission that the two actions are one and the same. Thus,

282
393 Phil. 633, 640-642 (2000).

104
 in arguing that the reversal of the two interlocutory Orders would likely result in
the setting aside of the dismissal of petitioners amended complaint, petitioner
effectively contends that its Petition for Certiorari, like the appeal, seeks to set
aside the Resolution and the two Orders.

Such argument unwittingly discloses a recourse to forum shopping, which

has been held as the institution of two or more actions or proceedings grounded on
the same cause on the supposition that one or the other court would make a
favorable disposition. Clearly, by its own submission, petitioner seeks to
accomplish the same thing in its Petition for Certiorari and in its appeal: both assail
the two interlocutory Orders and both seek to set aside the RTC Resolution.

Hence, even assuming that the Petition for Certiorari has a practical legal
effect because it would lead to the reversal of the Resolution dismissing the
Complaint, it would still be denied on the ground of forum shopping.

With respect to the second issue of whether or not grave abuse of discretion attended the
granting of summary judgment by the trial court, we rule that a petition for an extraordinary writ
of certiorari is not a proper remedy to assail the propriety of the said act. The pertinent provision
of law in this particular case is Section 1, Rule 65 of the 1997 Rules of Civil Procedure, to wit:

SECTION 1. Petition for certiorari. When any tribunal, board or officer

exercising judicial or quasi-judicial functions has acted without or in excess of its
or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in
the ordinary course of law, a person aggrieved thereby may file a verified petition
in the proper court, alleging the facts with certainty and praying that judgment be
rendered annulling or modifying the proceedings of such tribunal, board or officer,
and granting such incidental reliefs as law and justice may require.

105
 In other words, a writ of certiorari may be issued only for the correction of errors of
jurisdiction or grave abuse of discretion amounting to lack or excess of jurisidiction.283

In Rizal Security & Protective Services, Inc v. Maraan,284 we elaborated on the

aforementioned grounds:

The respondent acts without jurisdiction if he does not have the legal power to
determine the case. There is excess of jurisdiction where the respondent, being
clothed with the power to determine the case, oversteps his authority as determined
by law. And there is grave abuse of discretion where the respondent acts in a
capricious, whimsical, arbitrary or despotic manner in the exercise of his judgment
as to be said to be equivalent to lack of jurisdiction. x x x.

After a careful review of the records, we find that petitioner failed to sufficiently show that
the trial court, in rendering a partial summary judgment, so gravely abused its discretion amounting
to lack or excess of jurisdiction. Verily, the circumstances of this case do not show that the trial
courts discretion was exercised arbitrarily, capriciously, or despotically because the November 13,
2000 Resolution laid down the factual and legal bases relied upon by the trial court in granting the
Motion for Partial Summary Judgment. Even assuming arguendo, that the trial court committed
errors in its appreciation of the facts and pleadings on record, as petitioner contends in its petition
for certiorari, we agree with the Court of Appeals that these involve errors of judgment which are
not reviewable by certiorari. As this Court held:

As a legal recourse, the special civil action of certiorari is a limited form of review.
The jurisdiction of this Court is narrow in scope; it is restricted to resolving errors
of jurisdiction, not errors of judgment. Indeed, as long as the courts below act within
their jurisdiction, alleged errors committed in the exercise of their discretion will

283
Delos Santos v. Court of Appeals, G.R. No. 169498, December 11, 2008, 573 SCRA 690, 700.
284
G.R. No. 124915, February 18, 2008, 546 SCRA 23, 32, citing Condo Suite Club Travel, Inc. v. National
Labor Relations Commission, 380 Phil. 660, 667 (2000).

106
 amount to mere errors of judgment correctable by an appeal or a petition for
review.285

Lastly, we resolve the issue of whether or not the petition for certiorari filed by petitioner
was properly dismissed by the Court of Appeals. In dismissing the said petition, the Court of
Appeals ruled in its May 2, 2001 Resolution that appeal and not certiorari is the proper remedy
available to petitioner - a holding that was restated by the appellate court in its February 7, 2002
Resolution citing the case of Ley Construction and Development Corporation v. Hyatt Industrial
Manufacturing Corporation.286

Petitioner defends its resort to dual remedies by arguing that, under the peculiar
circumstances of the case, it could properly avail of a petition for certiorari and an appeal and that
the former is not barred even with the filing of the latter.287 However, we deem such a position
untenable as established jurisprudence declares otherwise.

The well-settled rule is that certiorari is not available where the aggrieved partys remedy
of appeal is plain, speedy and adequate in the ordinary course, the reason being that certiorari
cannot co-exist with an appeal or any other adequate remedy. The existence and availability of the
right of appeal are antithetical to the availment of the special civil action for certiorari. These two
remedies are mutually exclusive.288

Moreover, in Monterey Foods Corporation v. Eserjose,289 the Court distinguished when a

partial summary judgment is appealable and when it is not, to wit:

285
Apostol v. Court of Appeals, G.R. No. 141854, October 15, 2008, 569 SCRA 80, 92.
286
Supra note 69.
287
Rollo, pp. 2288-2290.
288
Estinozo v. Court of Appeals, G.R. No. 150276, February 12, 2008, 544 SCRA 422, 431; Macawiag v.
Balindong, G.R. No. 159210, September 20, 2006, 502 SCRA 454, 465; Caballes v. Court of Appeals, 492
Phil. 410, 420 (2005); People v. Court of Appeals, G.R. No. 144332, June 10, 2004, 431 SCRA 610, 617.
289
457 Phil. 771, 782 (2003).

107
 Petitioners maintain that the order granting partial summary judgment was
merely interlocutory in nature and did not dispose of the action in its entirety. They
cite the doctrines laid down in Province of Pangasinan v. Court of Appeals and
Guevarra v. Court of Appeals, where the Court categorically stated that a partial
summary judgment is not a final or appealable judgment.

Petitioners position is untenable.

The rulings in Province of Pangasinan and Guevarra is not applicable in

the case at bar. The said cases specifically delved on the appeal of a partial summary
judgment, which did not dispose of all the reliefs sought in the complaint. In the
case at bar, other than the admitted liability of petitioners to respondents under the
contract growing agreement, all other reliefs sought under the complaint had
already been expressly waived by respondent before the trial court.
Accordingly, the assailed November 25, 1999 Order of the trial court which
granted partial summary judgment in favor of respondent was in the nature of
a final order which leaves nothing more for the court to adjudicate in respect
to the complaint. x x x. (Emphases supplied.)

Petitioner strongly asserts that the aforementioned Court of Appeals Resolutions are invalid
while conveniently failing to take into account the fact that the petition for certiorari it filed before
the Court of Appeals had become moot and academic because of the following circumstances:
First, when the May 2, 2001 Resolution was issued by the Court of Appeals, respondent had
already filed its Manifestation and Motion for Execution dated March 15, 2001 withdrawing its
remaining causes of action and the RTC had already granted this in an Order dated April 23, 2001.
In effect, this Order terminated the case before the RTC and the proper mode to challenge it is
through an appeal which petitioner did through a Notice of Appeal on April 25, 2001. Not unlike
the factual circumstances found in the Ley Construction and Development Corporation case, the
petition for certiorari was correctly dismissed since superseding events had already rendered it not
only improper because appeal already became an available remedy but also superfluous as the
appeal that was eventually filed dealt essentially with the same issues. Second, when the February

108
7, 2002 Resolution was issued, there was already a Sheriffs Return290 issued on September 21,
2001 informing the trial court that the writ of execution pending appeal was fully satisfied
rendering the case bereft of any pending incidents at the trial court level and, thus, concluded
already which would make an appeal as the proper mode to question it and not a petition for
certiorari.

To reiterate, it is axiomatic that a writ of certiorari is available when any tribunal, board
or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there
is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law. 291 As we
have previously discussed, we find that the trial court acted within its jurisdiction when it granted
summary judgment and the purported errors attributed to the trial court appear to be errors of
judgment not reviewable by certiorari but by appeal. Likewise, we find that the particular
circumstances of this case made the remedy of appeal the proper vehicle to thresh out the issues
raised by petitioner and rendered the petition for certiorari improper and moot, notwithstanding
the fact that it was filed earlier than the appeal subsequently filed by petitioner. Premises
considered, the petition for certiorari was properly dismissed by the Court of Appeals.

WHEREFORE, the petition is hereby DENIED, and the assailed Resolutions of the Court
of Appeals are AFFIRMED in toto. With costs against petitioner.

SO ORDERED.

290
Rollo, pp. 1733-1734.
291
RULES OF COURT, Rule 65, Sec. 1.

109
 TERESITA J. LEONARDO-DE CASTRO
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

110
 CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

111
 THIRD DIVISION

PILIPINO TELEPHONE G.R. No. 160322

CORPORATION,
Petitioner, Present:

VELASCO, JR., J., Chairperson,

- versus - LEONARDO-DE CASTRO,*
PERALTA,
ABAD, and
MENDOZA, JJ.
RADIOMARINE NETWORK
(SMARTNET) PHILIPPINES, INC., Promulgated:
Respondent.
August 24, 2011
x --------------------------------------------------------------------------------------- x

DECISION

ABAD, J.:

This case is about a partys right to summary judgment when the pleadings show that there
are no genuine issues of fact to be tried.

The Facts and the Case

*
Designated as additional member in lieu of Associate Justice Maria Lourdes P. A. Sereno, per Special Order 1069
dated August 23, 2011.

112
 On December 11, 1996 petitioner Pilipino Telephone Corporation (Piltel) expressed its
willingness, on purely best effort, to buy in 1997 from respondent Radiomarine Network, Inc.
(Smartnet) 300,000 units of various brands of cellular phones and accessories (Motorola,
Mitsubishi, and Ericsson).292

On the following day, December 12, 1996, Piltel agreed to sell to Smartnet a 3,500-square
meter lot,293 known as the Valgoson Property, in Makati City for P560 million. Smartnet agreed
to pay Piltel P180 million as down payment with the balance of P380 million to be partly set off
against the obligations that Piltel was to incur from its projected purchase of cellular phones and
accessories from Smartnet. Smartnet agreed to settle any unpaid portion of the purchase price of
the land after the set off on or about April 30, 1997.

The contract to sell between the parties provides:

The total consideration of FIVE HUNDRED SIXTY MILLION PESOS

(P560,000,000.00) shall be paid by the VENDEE [Smartnet], without the need of
any demand, to the VENDOR [Piltel] in the following manner:

(a) a downpayment in the amount of ONE HUNDRED EIGHTY

MILLION (P180,000,000.00) PESOS, to be paid on or before December 28, 1996;

(b) Any and all outstanding payables which the VENDOR [Piltel] owes
to the VENDEE [Smartnet] in consideration of the cellular phone units and
accessories ordered by the VENDOR [Piltel] and delivered by the VENDEE
[Smartnet] between the initial downpayment date i.e. December 28, 1996 and April
30, 1997, shall be credited to the VENDEE [Smartnet] as additional payment of the
purchase price.

292
Records, p. 46.
293
Transfer Certificate of Title (TCT) T-195516.

113
 (c) The remaining balance, after deducting (a) and (b) above, shall be
paid on or about April 30, 1997. It is expressly understood however, that the
VENDOR [Piltel] shall submit to the VENDEE [Smartnet], on or about April 20,
1997, a Statement of Account updating the deliveries of cellular phones and its
outstanding amount in order that the VENDEE [Smartnet] can prepare the final
payment. In this way, the amount of final payment shall be made to the VENDOR
[Piltel] on or before April 30, 1997. Should the VENDOR [Piltel] be delayed in the
submission of the said Statement on the stipulated date, the date of payment of the
remaining balance shall be automatically adjusted for a period equivalent to the
number of days by which the VENDOR [Piltel] is delayed in the submission
thereof.294

The parties also agreed on a rescission and forfeiture clause295 which provided that, if
Smartnet fails to pay the full price of the land within the stipulated period and within five days
after receipt of a notice of delinquency, it would automatically forfeit to Piltel 10% of the P180
million down payment or P18 million and the contract shall be without force and effect.

Smartnet failed to pay the P380 million balance of the purchase price on or about the date
it fell due. On December 19, 1997 Piltel returned P50 million to Smartnet, a portion of the P180
million down payment that it received. Smartnet later requested Piltel for the return of the
remaining P130 million but the latter failed to do so.296

On December 1, 1999 Smartnet filed a complaint297 against Piltel for rescission of their
contract to sell involving the Valgoson Property or its partial specific performance before the
Regional Trial Court (RTC)298 of Makati City in Civil Case 99-2041. Smartnet alleged, among
other things, that it withheld payment of the balance of the purchase price of the subject property

294
Rollo, p. 84.
295
Id. at 85.
296
Records, pp. 48-51.
297
Id. at 1-10.
298
Branch 57.

114
because Piltel reneged on its commitment to purchase from Smartnet 300,000 units of cellular
phones and accessories.

Smartnet asked the court to (a) order Piltel to convey to Smartnet at least 32% interest in
the Valgoson Property, representing the value of its down payment of P180 million or, in the
alternative, order Piltel to return to Smartnet its P180 million down payment plus interest; (b) order
Piltel to pay Smartnet P81,300,764.96, representing the value of the 300,000 units of various
cellular phones which it acquired pursuant to Piltels commitment to buy them but which
commitment Piltel disregarded, plus interest, as actual and compensatory damages; and (c) order
Piltel to pay Smartnet P500,000.00 in attorneys fees.

In its answer with counterclaims,299 Piltel claimed that the agreement to purchase cellular
phones and accessories was not part of its contract with Smartnet for the sale of the Valgoson
Property and that Piltel committed to buy equipment from Smartnet only on a best effort basis. For
this reason, Piltel pointed out, Smartnet did not have the power to rescind the contract to sell the
Valgoson Property and, hence, cannot invoke that contracts rescission and forfeiture clause. Piltel
sought full payment by Smartnet of the purchase price for the Valgoson Property, moral damages,
exemplary damages, and litigation expenses.

On October 3, 2000 Smartnet filed a motion for partial summary judgment300 for the return
of the down payment it paid Piltel. The RTC granted the motion on November 13, 2000301 and
ordered Piltel to return the P180 million down payment that it received less the forfeited amount
of P18 million and the cash advance of P50 million or a net of P112 million, with interest at 6%
per annum from the time of the extrajudicial demand on it on October 20, 1998 until finality of the
judgment and an additional 12% legal interest after the judgment becomes final and executory

299
Records, pp. 169-195.
300
Rollo, pp. 162-177.
301
Id. at 196-200. Penned by Presiding Judge Reinato G. Quilala.

115
until the same is satisfied. Piltel filed a motion for reconsideration which the RTC denied for lack
of merit on January 30, 2001.

On March 15, 2001 Smartnet filed a manifestation and motion, withdrawing its two
remaining causes of action and praying for the issuance of a writ of execution. On March 20, 2001
it filed an alternative motion for execution pending appeal of the RTCs partial decision.

On April 4, 2001 Piltel filed with the Court of Appeals (CA)302 a special civil action for
certiorari with application for a temporary restraining order and a writ of preliminary injunction.
Piltel alleged that the RTC presiding judge, Reinato G. Quilala, gravely abused his discretion when
he issued a partial summary judgment in the case and denied Piltels motion for reconsideration.
But the CA dismissed the petition, prompting Piltel to challenge such dismissal before this Court
in G.R. 152092.

Meantime, on April 23, 2001 the RTC granted (a) Smartnets motion to withdraw its
remaining causes of action and (b) its motion for execution pending appeal.303 Consequently, a
writ of execution was issued on April 24, 2001.

On April 25, 2001 Piltel filed a notice of appeal to the CA from the judgment of November
13, 2000 and from the April 23, 2001 Order that allowed execution pending appeal. The appeal to
the CA was docketed as CA-G.R. CV 71805.

On April 26, 2001 Piltel filed with the RTC a motion to defer execution pending appeal
upon the posting of a supersedeas bond. The RTC denied the motion. Piltel filed a motion for
reconsideration but the court denied it on August 14, 2001304 and directed Piltel to pay 12% interest

302
In CA-G.R. SP 64155.
303
Rollo, pp. 496-498.
304
Records, pp. 1086-1087.

116
on the judgment amount from April 23, 2001, when it allowed the execution pending appeal. Piltel
filed a supplemental notice of appeal to the CA from this last order.

On June 11, 2003 the CA dismissed Piltels appeal in CA-G.R. CV 71805.305 The appellate
court held that the RTC did not err when it granted summary judgment since there were no genuine
issues involved in the case. The CA said that Smartnets failure to pay the balance of the purchase
price ipso facto avoids the contract to sell. With the denial of its motion for reconsideration,306
Piltel filed this petition under Rule 45 of the Rules of Court.

Meantime, the Court in G.R. 152092307 denied Piltels petition on August 4, 2010. The
Court affirmed the CAs ruling in CA-G.R. SP 64155 that appeal, and not certiorari, is the proper
remedy. Moreover, it held that Piltel committed forum shopping when it filed a petition for
certiorari and a notice of appeal to assail the same resolutions and orders of the RTC.

With the denial of G.R. 152092, the Court is now left with this petition assailing the CAs
dismissal of Piltels appeal in CA-G.R. CV 71805.

The Issue Presented

The core issue for resolution is whether or not there are genuine issues of fact to be tried
in this case.

305
Rollo, pp. 62-75. Penned by Associate Justice Sergio L. Pestao and concurred in by Associate Justices Bernardo P.
Abesamis and Noel G. Tijam.
306
Id. at 77-82. Then Court of Appeals Associate Justice Arturo D. Brion, now Associate Justice of the Supreme
Court, participated in the resolution of the motion for reconsideration.
307
Pilipino Telephone Corporation v. Radiomarine Network, Inc., 626 SCRA 702. Penned by Associate Justice
Teresita J. Leonardo-De Castro and concurred in by Chief Justice Renato C. Corona, and Associate Justices Lucas P.
Bersamin, Mariano C. Del Castillo and Jose P. Perez.

117
 The Courts Ruling

A genuine issue of fact is that which requires the presentation of evidence, as distinguished
from a sham, fictitious, contrived or false issue. When the facts as pleaded appear uncontested or
undisputed, then there is no real or genuine issue. Summary judgment is proper in such a case.308

Here, Piltel contends that summary judgment is out of place because the parties raise
factual issues of fraud and breach of contract. Although their contract has a built-in rescission and
forfeiture clause, this becomes operative only upon the occurrence of the following conditions: 1)
Piltel sends a Statement of Account to Smartnet; 2) Smartnet fails to pay within 10 days from
receipt of the statement; 3) Piltel sends a Notice of Delinquency to Smartnet; and 4) Smartnet fails
to pay within five days from receipt of the notice.

The rescission and forfeiture clause thus reads:

In case the VENDEE fails to fully pay, within the stipulated period, the
balance of the total consideration under Article 2(c) of this Contract to Sell, the
VENDOR shall send a notice of delinquency to the VENDEE. Failure on the part
of the VENDEE to pay within five (5) days from receipt of said notice, ten (10%)
percent of the downpayment or EIGHTEEN MILLION PESOS (P18,000,000.00)
PESOS, Philippine Currency shall automatically be forfeited in favor of the
VENDOR and the Contract to Sell shall be without force and effect.309

Notably, however, both Piltel and Smartnet admit that they entered into a contract to sell
covering the Valgoson Property; that Smartnet agreed to pay Piltel P560 million for it, with a down

308
D.M. Consunji, Inc. v. Duvaz Corporation, G.R. No. 155174, August 4, 2009, 595 SCRA 111, 120, citing Asian
Construction and Development Corporation v. Philippine Commercial Industrial Bank, G.R. No. 153827, April 25,
2006, 488 SCRA 192, 203.
309
Rollo, p. 85.

118
payment of P180 million; and that Smartnet failed to pay the balance of the purchase price on or
about April 30, 1997.

With these common admissions, it is clear that there are no genuine issues of fact as to the
existence and nature of the contract to sell as well as Smartnets failure to pay the balance of the
purchase price within the agreed period. Thus, the RTC was correct in skipping trial and deciding
the case through a summary judgment based on the undisputed facts.

Smartnets allegations respecting fraud and breach of contract referred to what appears to
be Piltels non-binding promise to buy cellular phones and accessories from Smartnet. These are
matters independent of the parties agreement concerning Piltels sale of the Valgoson Property to
Smartnet. The contract to sell of such property was not legally linked or made dependent on the
aborted cellular phone deal between the parties. Indeed, Smartnet dropped with leave of court its
causes of action relating to such deal.

All that matters is that since Smartnet failed to pay the balance of the purchase price,
automatic rescission set in and this placed Piltel under an obligation to return the down payment it
received, less the portion that it forfeited due to Smartnets default. Consequently, it is but proper
for Piltel to fully abide by such obligation. Piltel cannot avoid rescission since it in fact partially
abided by rescissions consequences when it returned to Smartnet on December 19, 1997 a P50
million portion of the down payment it received.

By returning part of the down payment, it is clear that Piltel recognized that the contract to
sell the Valgoson Property had reached the point of automatic rescission. Piltel is, therefore, in
estoppel to deny rescission based on a claim that it had not yet sent a statement of account or a
notice of delinquency to Smartnet regarding the latters default. Such statement of account and
notice of delinquency had become academic.

119
 Piltel argues that Smartnet cannot, as a defaulting buyer, rescind the contract to sell
between them by the simple act of refusing to pay. But, Smartnets nonpayment of the full price of
the property was not an act of rescission. It was but an event that rendered the contract to sell
without force and effect. In a contract to sell, the prospective seller binds himself to part with his
property only upon fulfillment of the condition agreed, in this case, the payment in full of the
purchase price. If this condition is not fulfilled, the seller is then released from his obligation to
sell.

As the Court said in Heirs of Cayetano Pangan and Consuelo Pangan v. Perreras,310 the
payment of the purchase price in a contract to sell is a positive suspensive condition, the failure of
which is not a breach but a situation that results in the cancellation of the contract. Strictly
speaking, therefore, there can be no rescission or resolution of an obligation that is still non-
existent due to the non-happening of the suspensive condition.311

Likewise, a cause of action for specific performance does not arise where the contract to
sell has been cancelled due to nonpayment of the purchase price.312 Smartnet obviously cannot
demand title to the Valgoson Property because it did not pay the purchase price in full. For its part,
Piltel also cannot insist on full payment since Smartnets failure to pay resulted in the cancellation
of the contract to sell. Indeed, in the case of Ayala Life Assurance, Inc. v. Ray Burton Devt.
Corp.,313 the Court rejected the sellers demand for full payment and instead ordered it to refund to
the buyer all sums previously paid. The order to refund is correct based on the principle that no
one should unjustly enrich himself at the expense of another.314

310
G.R. No. 157374, August 27, 2009, 597 SCRA 253, 264.
311
Garcia v. Court of Appeals, G.R. No. 172036, April 23, 2010, 619 SCRA 280, 287.
312
Ayala Life Assurance, Inc. v. Ray Burton Devt. Corp., 515 Phil. 431, 439 (2006).
313
Id.
314
Padilla v. Spouses Paredes, 385 Phil. 128, 142 (2000).

120
 Lastly, the Court sustains the CAs imposition of 12% interest pursuant to our ruling in
Eastern Shipping Lines, Inc. v. Court of Appeals.315

WHEREFORE, premises considered, the Court DENIES the petition and AFFIRMS the
June 11, 2003 Decision and the October 6, 2003 Resolution of the Court of Appeals in CA-G.R.
CV 71805.

SO ORDERED.

ROBERTO A. ABAD
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

315
G.R. No. 97412, July 12, 1994, 234 SCRA 78.

121
TERESITA J. LEONARDO-DE CASTRO DIOSDADO M. PERALTA
Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

122
 I attest that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

123
 FIRST DIVISION

[G.R. No. 153126. September 11, 2003]

MONTEREY FOODS CORP. and RAMON F. LLANOS, petitioners, vs. VICTORINO E.

ESERJOSE, and the Branch Sheriff assigned to the Regional Trial Court of Quezon
City, Branch 224, National Capital Judicial Region, respondents.

DECISION
YNARES-SANTIAGO, J.:

This is a petition for review seeking to reverse and set aside the decision316 of the Court of
Appeals dated November 21, 2001, which upheld the Orders of the Regional Trial Court of Quezon
City, Branch 224 in Civil Case No. Q-98-36421.317
It is alleged in the petition that for a period of twelve years, respondent bought from petitioner
Monterey Foods Corporation live cattle and hogs which he in turn sold and distributed to his
customers. The transactions were covered by invoices and delivery receipts and were payable
within ten days from invoice date. Due to respondents inability to pay for his purchases, his
overdue account amounted to P87,434,689.37, and as a consequence, petitioner corporation ceased
its transactions with respondent.
Sometime in 1998, during the existence of the contractual relations between the parties, they
entered into a contract growing agreement whereby petitioner corporation supplied livestock for
respondent to grow, care for and nurture in his farm located in San Jose, Batangas. After five
months of operation, petitioner corporation withdrew from the contract without paying respondent
for his services, alleging that respondent failed to post the requisite bond under the contract and
poorly performed his farm management functions to the detriment of the animals.
Respondent repeatedly demanded that petitioner corporation pay him for his services under
the contract, amounting to P1,280,000.00. His demands went unheeded; thus, he filed with the
Regional Trial Court of Quezon City, Branch 224, an action for sum of money and damages against
petitioner corporation and its President, petitioner Ramon F. Llanes, which was docketed as Civil
Case No. Q-98-36421.318 After petitioners filed their Joint Answer, the case was scheduled for pre-
trial conference on May 14, 1999.
At the pre-trial conference, petitioners and their counsel failed to appear, and an Order was

316
Penned by Associate Justice Eubulo G. Verzola, concurred in by Associate Justices Rodrigo V. Cosico and Eliezer
R. De Los Santos.
317
Rollo, pp. 96-99; penned by Judge Emilio L. Leachon, Jr.
318
Rollo, pp. 100-103.

124
issued declaring them as in default and allowing respondent to present evidence ex parte.319 On
May 24, 1999, the trial court rendered judgment, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiff and against the defendants ordering the latter to pay the former the following:
1. P1,280,000.00 representing the principal obligation;
2. P100,000.00, jointly and severally, as damages; and
3. P50,000.00 as attorneys fees.
IT IS SO ORDERED.320
Petitioners filed a motion for new trial,321 which the trial court granted.322 Hence, the case was
again set for pre-trial conference and both parties submitted their respective pre-trial briefs.323
After the pre-trial, respondent submitted a manifestation and motion alleging that petitioners
have admitted their liability under the contract growing agreement at least to the extent of
P482,766.88 when they alleged in their Joint Answer: In accordance with the standard contract
growing fee provision plaintiff [respondent herein] was entitled to a compensation of net
P482,766.88.324 Respondent thus prayed that reverse trial be conducted.325
Petitioners opposed the manifestation and motion, stating that the reverse trial order has no
basis since the amount allegedly admitted was dramatically less than the total of P1,280,000.00
claimed by respondent.326
At the initial hearing of the case, petitioners confirmed in open court that they indeed entered
into a contract growing agreement with respondent and that the latter was entitled to a net
compensation of P482,766.88 under the said contract.327 The trial court, acting on petitioners
judicial admission, rendered partial summary judgment insofar as the amount of P482,766.88 was
concerned, and set the case for trial for the presentation of evidence on petitioners claim for
damages.328 Respondent moved for the execution of the partial summary judgment, which the trial
court granted.
Petitioners filed a motion for reconsideration, which was denied for lack of merit.329

319
Rollo, p. 133.
320
Id., p. 131.
321
Id., pp. 134-152.
322
Id., pp. 157-160.
323
RTC Record, Vol. I, p. 214.
324
Joint Answer, p. 9, par. (c); Rollo, p. 113.
325
Rollo, p. 161.
326
Id., p. 167.
327
TSN, 25 November 1999, p. 66.
328
Supra, note 2; TSN, 25 November 1999, pp. 73-74.
329
Supra, note 3.

125
Accordingly, on December 15, 1999, the trial court issued a writ of execution directing the sheriff
to cause the execution of the partial summary decision.330
On December 17, 1999, petitioners filed a petition for certiorari before the Court of Appeals,
docketed as CA-G.R. SP No. 56305.331 On November 21, 2001, the Court of Appeals dismissed
the petition.332 Petitioners motion for reconsideration was likewise denied for lack of merit.333
Petitioners are now before us assigning the following errors:
A.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND
REVERSIBLE ERROR WHEN IT SANCTIONED THE WRIT OF EXECUTION
ISSUED BY THE TRIAL COURT OF A PARTIAL SUMMARY JUDGMENT WHICH
WAS NOT YET FINAL IN CHARACTER.
B.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND
REVERSIBLE ERROR WHEN IT UPHELD THE WRIT OF EXECUTION OF THE
PARTIAL SUMMARY JUDGMENT ISSUED ON AN EX-PARTE MOTION THAT
DENIED PETITIONER AN OPPORTUNITY TO BE HEARD.
C.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND
REVERSIBLE ERROR WHEN IT UPHELD THE WRIT OF EXECUTION OF THE
PARTIAL SUMMARY JUDGMENT ISSUED ON THE BASIS THAT A BOND IS
SUFFICIENT REASON FOR DISCRETIONARY EXECUTION TO ISSUE.
D.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND
REVERSIBLE ERROR WHEN IT UPHELD THE WRIT OF EXECUTION ON THE
BASIS OF A PARTIAL SUMMARY JUDGMENT THAT IS PATENTLY INVALID
E.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND
REVERSIBLE ERROR WHEN IT UPHELD THE PARTIAL SUMMARY
JUDGMENT THAT WAS RENDERED IN DISPARAGEMENT OF DUE PROCESS.
F.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND
REVERSIBLE ERROR WHEN IT UPHELD THE TRIAL COURTS PARTIAL
SUMMARY JUDGMENT ISSUED ON THE BASIS THAT THERE ARE NO

330
Supra, note 4.
331
Rollo, pp. 65-95.
332
Id., pp. 57-64.
333
Id., p. 256.

126
 GENUINE TRIABLE ISSUES OF FACT
G.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND
REVERSIBLE ERROR WHEN IT SANCTIONED THE DEPARTURE OF THE
TRIAL COURT FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS.334
Simply put, the primordial question to be resolved hinges on whether summary judgment is
proper in the case at bar.
A summary judgment or accelerated judgment is a procedural technique to promptly dispose
of cases where the facts appear undisputed and certain from the pleadings, depositions, admissions
and affidavits on record, or for weeding out sham claims or defenses at an early stage of the
litigation to avoid the expense and loss of time involved in a trial. Its object is to separate what is
formal or pretended in denial or averment from what is genuine and substantial so that only the
latter may subject a party in interest to the burden of trial.335 Moreover, said summary judgment
must be premised on the absence of any other triable genuine issues of fact.336 Otherwise, the
movant cannot be allowed to obtain immediate relief. A genuine issue is such issue of fact which
requires presentation of evidence as distinguished from a sham, fictitious, contrived or false
claim.337
Rule 35, Section 3 of the Rules of Court provides two (2) requisites for summary judgment to
be proper: (1) there must be no genuine issue as to any material fact, except for the amount of
damages; and (2) the party presenting the motion for summary judgment must be entitled to a
judgment as a matter of law.338
Applying these principles to the case at bar, we find that the Court of Appeals did not commit
any reversible error in affirming the assailed orders of the trial court. Hence, the instant petition
must be denied.
The record shows that at the hearing on November 25, 1999, petitioners admitted liability
under the contract growing agreement in the amount of P482,766.88.339 As a result, respondent
agreed to waive all his other claims in the complaint, including his claim for consequential
damages.340 Correspondingly, insofar as the complaint was concerned, there was no other genuine
issue left for which the complaint for sum of money and damages may be prosecuted. Also by
reason of such admission, petitioners, in effect, likewise waived whatever defenses they may have
to deter recovery by respondent under the said contract. Thus, respondent became entitled, as a
334
Petition, pp. 11-12; Rollo, pp. 18-19.
335
Spouses Agbada v. Inter-Urban Developers, Inc., et al., G.R. No. 144029, 19 September 2002, citing Excelsa
Industries, Inc. v. CA, 317 Phil. 664 (1995).
336
Solidbank Corporation v. Court of Appeals, G.R. No. 120010, 3 October 2002.
337
Manufacturers Hanover Trust Co. and/or Chemical Bank v. Guerrero, G.R. No. 136804, 19 February 2003.
338
Solidbank Corporation v. Court of Appeals, supra.
339
TSN, 25 November 1999, p. 66.
340
TSN, 25 November 1999, pp. 27-29.

127
matter of law, to the execution of the partial summary judgment. When there are no genuine issues
of fact to be tried, the Rules of Court allows a party to obtain immediate relief by way of summary
judgment. In short, since the facts are not in dispute, the court is allowed to decide the case
summarily by applying the law to the material facts.341
Clearly, the judgment finally disposed of all the reliefs sought in the complaint. The order
granting summary judgment was akin to a judgment on the merits made after a full-blown trial. Its
consequent execution, therefore, may issue as a matter of right in favor of respondent unless appeal
was seasonably made therein, which petitioners failed to do. Instead of filing a notice of appeal
with the trial court, petitioners elevated the matter to the Court of Appeals via petition for certiorari
under Rule 65 of the Rules of Court, which is not a substitute for the lost remedy of appeal.
Petitioners maintain that the order granting partial summary judgment was merely
interlocutory in nature and did not dispose of the action in its entirety. They cite the doctrines laid
down in Province of Pangasinan v. Court of Appeals342 and Guevarra v. Court of Appeals,343
where the Court categorically stated that a partial summary judgment is not a final or appealable
judgment.
Petitioners position is untenable.
The rulings in Province of Pangasinan and Guevarra is not applicable in the case at bar. The
said cases specifically delved on the appeal of a partial summary judgment, which did not dispose
of all the reliefs sought in the complaint. In the case at bar, other than the admitted liability of
petitioners to respondents under the contract growing agreement, all other reliefs sought under the
complaint had already been expressly waived by respondent before the trial court. Accordingly,
the assailed November 25, 1999 Order of the trial court which granted partial summary judgment
in favor of respondent was in the nature of a final order which leaves nothing more for the court
to adjudicate in respect to the complaint. In Santo Tomas University Hospital v. Surla,344 the Court
distinguished a final judgment or order from an interlocutory issuance in this wise:
The concept of a final judgment or order, distinguished form an interlocutory
issuance, is that the former decisively puts to a close, or disposes of a case or a disputed
issue leaving nothing else to be done by the court in respect thereto. Once that
judgment or order is rendered, the adjudicative task of the court is likewise ended on
the particular matter involved. An order is interlocutory, upon the other hand, if its
effects would only be provisional in character and would still leave substantial
proceedings to be further had by the issuing court in order to put the controversy to rest.
We are not unmindful of petitioners counterclaim. However, our cursory evaluation of the
same fails to convince us that the issues raised therein are closely related to or intertwined with
the growing contract agreement. The issues raised therein clearly involved transactions distinct
and separate from the growing contract agreement; they refer to the alleged obligations of
respondent under their separate contract for the sale and distribution of cattle and hogs. As such,

341
Supra, note 26.
342
G.R. No. 104266, 31 March 1993, 220 SCRA 726.
343
G.R. Nos. L-49017 and L-49024, 30 August 1983, 124 SCRA 297.
344
355 Phil. 804, 811 (1998).

128
these are in the nature of permissive counterclaims which can be litigated independently of the
main complaint.
Petitioners also argue that they were denied an opportunity to be heard on the motion to
execute the summary judgment; and that the summary judgment was rendered in disregard of due
process.
The argument is not well-taken.
A party cannot successfully invoke deprivation of due process if he was accorded the
opportunity of a hearing, through either oral arguments or pleadings.345 Contrary to petitioners
claims, the record shows that petitioners were duly represented by counsel when the motion for
summary judgment as well as the execution of the same were heard by the trial court. Petitioners
counsel did not register any opposition to respondents oral motion for summary judgment, saying
that under the Rules of Court it should be furnished a written motion for summary judgment at
least 10 days before it is heard. We find, however, that the absence of the written notice did not
divest the trial court of authority to pass on the merits of the motion made in open court. The order
of the court granting the motion for summary judgment and its execution thereof despite absence
of a notice of hearing, or proof of service thereof, is merely an irregularity in the proceedings. It
cannot deprive the court of its authority to pass on the merits of the motion. The remedy of the
aggrieved party in such cases is either to have the order set aside or the irregularity otherwise cured
by the court, or to appeal from the final judgment, and not thru certiorari.346
In fact, the counsel for petitioners actively participated in disposing of the reliefs prayed for
in the complaint when he sought the reduction in respondents claim to P482,766.88. Besides, we
find from the records that petitioners expressly agreed to the summary judgment347 and to the
execution of the same after respondent posts a bond in an amount fixed by the court.348 In short,
petitioners were never deprived of their day in court. Thus, they cannot now be allowed to claim
that they were denied due process. The Rules of Court should be liberally construed in order to
promote their objective of securing a just, speedy and inexpensive disposition of every action and
proceeding.349
Thus, in Ley Construction and Development Corporation v. Union Bank of the Philippines,350
it was held:
Admittedly, there is nothing in the records which indicates that Judge Arcangel
conducted a hearing before he resolved respondents motion for summary judgment.
Nevertheless, as explained in Carcon Development Corporation v. Court of Appeals, in
proceedings for summary judgment, the court is merely expected to act chiefly on the
345
Alauya, Jr. v. COMELEC, G.R. Nos. 152151-52, 22 January 2003; See Rule 15, Section 2 of the Rules of Court
provides: All motions shall be in writing except those made in open court or in the course of a hearing or trial.
346
See Galvez v. CA, G.R. No. 114046, 24 October 1994, 237 SCRA 685, 698, citing People, et al. v. Vergara, etc.,
et al., G.R. Nos. 101557-58, 28 April 1993, 221 SCRA 560, 570-571.
347
TSN, 25 November 1999, pp. 42-50.
348
TSN, 25 November 1999, pp. 68-69.
349
Section 6, Rule 1 of the Rules of Court.
350
389 Phil. 788, 799 (2000).

129
 basis of what is in the records of the case and that the hearing contemplated in the Rules
is not de riguer as its purpose is merely to determine whether the issues are genuine or
not, and not to receive evidence on the issues set up in the pleadings.
xxx. In view of the fact that they admitted having incurred the obligation which is
the basis of the complaint, a hearing would have served no pertinent purpose. The records
already provide sufficient basis for the court to resolve respondents motion. Thus, we find
that even if the trial court did not conduct a hearing, this fact would not affect the validity
of the summary judgment rendered by Judge Arcangel.
Neither does the fact that respondents motion to resolve its motion for summary
judgment was filed ex parte affect the validity of Judge Arcangels resolution. The
requirement in Rule 35, 3 that the opposing party be furnished a copy of the motion 10
days before the time specified for the hearing applies to the motion for summary judgment
itself and not to the motion to resolve such motion. xxx. Thus, it could not be said that
they were deprived of the opportunity to question the motion.
WHEREFORE, in view of all the foregoing, the instant petition for review is DENIED for
lack of merit. The assailed decision of the Court of Appeals dated November 21, 2001 in CA-G.R.
SP No. 56305, which affirmed the Orders of the Regional Trial Court of Quezon City, Branch 224,
directing the execution of partial summary judgment in Civil Case No. Q-98-36421, is
AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, and Carpio, JJ., concur.
Azcuna, J., on official leave.

130
 FIRST DIVISION

[G.R. No. 129382. January 23, 2002]

VICTOR SIASAT and JESUS ONG, petitioners, vs. COURT OF APPEALS, HON.
FELICIDAD Y. NAVARRO-QUIAMBAO, in her capacity as Presiding Judge, MTC,
Br. 65, Makati City, JOEL FERAREN, in his capacity as Deputy Sheriff of the
aforesaid Court, and GENIE DEVELOPMENT CORPORATION, respondents.

DECISION
PARDO, J.:

The Case

Appeal via certiorari from the decision of the Court of Appeals351 affirming in toto the
summary judgment352 of the Regional Trial Court, Makati, that denied the petition for relief from
judgment filed by petitioners who were ordered ejected from the premises in question in a decision
of the Metropolitan Trial Court, Makati.353

The Facts

The facts, as found by the Court of Appeals, are as follows:

On 29 November 1991, private respondent Genie Development Corporation (GDC,
for brevity) instituted in the Metropolitan Trial Court (MTC) of Makati a case for
ejectment against petitioners Victor Siasat and Jesus Ong. This case was docketed as Civil
Case No. 42351 and assigned to Branch 65.
Summons were duly issued and served together with the complaint and annexes upon
petitioners Victor Siasat and Jesus Ong on 18 December 1991.
On 2 January 1992, the reglementary period expired without the petitioners filing an
answer. Thus, they were declared in default.
On 30 January 1992, 28 days after the expiration of the period to answer, Atty.
Jeremias Vitan, counsel for petitioners, filed a Motion to Lift Order of Default. The

351
In CA-G. R. CV No. 50390, promulgated on January 09, 1997.
352
In Civil Case No. 92-1198, Summary Judgment dated August 10, 1994, Rollo, pp. 132-135.
353
In Civil Case No. 42351, Decision dated March 23, 1992. Rollo, pp. 128-131.

131
motion was denied. On 23 March 1992, a decision was rendered by the MTC against
petitioners.
Atty. Jeremias Vitan received the said decision on 31 March 1992. No appeal was
filed within the reglementary period resulting in the issuance of a writ of execution.
Thereafter, Deputy Sheriff Joel Feraren served the writ of execution on the
petitioners and the ejectment aspect of the decision was satisfied as evidenced by a
Certificate of Turn Over dated 28 April 1992.
Relative to the monetary aspect of the decision, Sheriff Feraren levied upon several
sewing machines and other personal properties and scheduled the auction sale thereof on
5 May 1992.
The scheduled sale did not materialize due to an order of Executive Judge Job
Madayag dated 4 May 1992 in connection with the Petition for Relief from Judgment (of
the MTC decision) with preliminary injunction and restraining order filed by petitioners
with the Makati Regional Trial Court (RTC for brevity) docketed as Civil Case No. 92-
1198.
In the petition for relief from judgment, petitioners Victor Siasat and Jesus Ong
blamed Atty. Jeremias Vitan, their former counsel, for the alleged negligence and bad
faith in causing them to be in default and in failing to appeal.
During the hearing on the petition for injunction, petitioners merely marked in
evidence the writ of execution and Notice of Levy and Sale. Private respondent GDC
filed its Answer with Opposition to Application for Injunction. It subpoenaed Atty.
Jeremias Vitan who testified that the default judgment and the lapse of the period to
appeal was due to the own making of the petitioners and not due to his negligence.
On 19 May 1992, petitioners filed a Motion for the Release of Levied Properties,
which was opposed by GDC.
On 25 May 1992, the RTC issued the writ of preliminary injunction, enjoining Sheriff
Feraren from proceeding with the auction sale of the personal properties of Victor Siasat.
However, on the same day, the RTC issued an order requiring Sheriff Feraren to
immediately release to petitioners the levied properties. By virtue of the said order, the
sheriff and petitioners forced open the premises of the private respondent and carried into
effect the release of the levied properties to petitioners.
Private respondent GDC filed a petition for certiorari before this Court, docketed as
CA-G. R. NSP No. 27999, seeking to annul the orders rendered by the RTC Judge, to wit:
(a) granting the issuance of preliminary prohibitory injunction in favor of the petitioners;
and, (2) granting petitioners motion to release the levied properties.
On 22 December 1992, the 6th Division of this Court, through Justice Quirino Abad
Santos, Jr., rendered a decision declaring that the action of the respondent judge in issuing
the two (2) assailed orders were in grave abuse of discretion amounting to lack of
jurisdiction and the orders were set aside (CA Decision, pp. 221-231, Record).
A motion for reconsideration was denied in a resolution dated 6 July 1992 (p. 250,

132
 Record).
On 14 June 1994, the private respondent GDC filed a motion for summary judgment
alleging therein that with the decision of this Court, there is no longer any genuine issue
as to any material fact, or if there is such issue, the same can be resolved on the basis of
the pleadings, documents and affidavits.
Petitioners Victor Siasat and Jesus Ong filed an opposition on 29 June 1994.
On 10 August 1994, RTC, Branch 134, rendered the assailed summary judgment.354
In time, petitioners appealed the above-cited decision to the Court of Appeals.355
On January 09, 1997, the Court of Appeals promulgated a decision, the dispositive portion of
which reads:
WHEREFORE, the assailed Summary Judgment should be, as it is hereby,
AFFIRMED EN TOTO. Costs against defendants-appellants.
SO ORDERED.356
On February 11, 1997, petitioners filed a motion for reconsideration of the decision.357
However, on May 14, 1997, the Court of Appeals denied the motion for lack of merit.358
Hence, this appeal.359

The Issue

The issue raised is whether there exist genuine issues of material facts constitutive of
petitioners substantial and meritorious claim.360

The Courts Ruling

The issue raised is factual. In an appeal via certiorari, we may not review the factual findings
of the Court of Appeals.361 When supported by substantial evidence, the findings of fact of the
354
Petition, Annex A, Rollo, pp. 49-59, at pp. 49-51.
355
Docketed as CA-G.R. CV No. 50390.
356
Supra, Note 4, at p. 59. A. M. Martinez, J., ponente, Montenegro and Lipana-Reyes+, JJ. , concurring.
357
Petition, Annex C, Rollo, pp. 61-66.
358
Petition, Annex B, Rollo, p. 60.
Petition filed on July 21, 1997, Rollo, pp. 27-48. On January 31, 2000, the Court gave due course to the petition
359

(Rollo, pp. 138-139).

360
Petitioners Memorandum, Rollo, pp. 165-195, at p. 171.
361
Sarmiento v. Court of Appeals, 353 Phil. 834,845-846 [1998]; Concepcion v. Court of Appeals, 324 SCRA 85
[2000], citing Congregation of the Virgin Mary v. Court of Appeals, 353 Phil. 591, 597 [1998], Arriola v. Mahilum,

133
Court of Appeals are conclusive and binding on the parties and are not reviewable by this Court,362
unless the case falls under any of the recognized exceptions to the rule.363
There are instances when the findings of fact of the trial court or Court of Appeals may be
reviewed by the Supreme Court, such as (1) when the conclusion is a finding grounded entirely on
speculation, surmises and conjectures; (2) when the inference made is manifestly mistaken, absurd
or impossible; (3) where there is a grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the Court of
Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial
court; (8) when the findings of fact are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as in the petitioners main and
reply briefs are not disputed by the respondents; and (10) when the findings of fact of the Court of
Appeals are premised on the supposed absence of evidence and contradicted by the evidence on
record.364
The case at bar arose from a simple ejectment of petitioners from the leased premises initiated
in the Metropolitan Trial Court, Makati. The Revised Rule on Summary Procedure covers all
ejectment cases, regardless of whether they involve questions of ownership.365 Under that Rule, a
petition for relief from judgment is a prohibited pleading.366 Hence, a party to an ejectment suit in
the municipal trial court may not file such pleading in the regional trial court.

The Judgment

WHEREFORE, the Court denies the petition, and affirms the decision of the Court of
Appeals367 in toto.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.

337 SCRA 464, 469 [2000]; Bolanos v. Court of Appeals, 345 SCRA 125, 130-131 [2000].
362
Atillo v. Court of Appeals, 334 Phil. 546, 555 [1997].
363
Cebu Shipyard and Engineering Works, Inc. v. William Lines, Inc., 366 Phil. 439, 452 [1999].
364
Misa v. Court of Appeals, 212 SCRA 217, 221-222 [1992]; Reyes v. Court of Appeals, 328 Phil. 171, 179-180
[1996].
365
Heirs of Miranda v. Court of Appeals, 325 Phil. 674, 687 [1996].
366
Section 19, Revised Rule on Summary Procedure.
367
In CA-G. R. CV No. 50390.

134
 FIRST DIVISION

EDWARD T. MARCELO, MARCELO

FIBERGLASS CORPORATION, PHIL- G.R. No. 156605
ASIA AGRO INDUSTRIES CORP.,
PHILIPPINE SPECIAL SERVICES
CORP., PROVIDENT INTERNATIONAL Present:
RESOURCES CORP., MARCELO
CHEMICAL & PIGMENT CORP.,
FARMERS FERTILIZER CORP., PUNO, C.J., Chairperson,
INSULAR RUBBER CO., INC.,
HYDRONICS CORPORATION OF THE SANDOVAL-GUTIERREZ,
PHILIPPINES, MARCELO RUBBER & CORONA,
LATEX PRODUCTS, INC., POLARIS
MARKETING CORP., H. MARCELO & AZCUNA, and
CO., INC., MARCELO STEEL CORP.,
GARCIA, JJ.
PHILIPPINE CASINO OPERATORS
CORP., and MARIA CRISTINA
FERTILIZER CORP.,

Petitioners,
Promulgated:

- versus -
August 28, 2007

SANDIGANBAYAN and THE

PRESIDENTIAL COMMISSION ON
GOOD GOVERNMENT,

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

DECISION

GARCIA, J.:

135
 This joint petition for certiorari under Rule 65 of the Rules of Court seeks the reversal and
setting aside of the Resolution368 dated August 27, 2001 of the Sandiganbayan in its Civil Case
No. 21, a suit for recovery of ill-gotten wealth, with damages, initiated by the Republic of the
Philippines (Republic or RP, for short), denying herein petitioners respective motions for summary
judgment and its Resolution369 of November 19, 2002 which likewise denied their separate
motions for reconsideration.

At the core of the case is the contract entered into on June 10, 1982 by and between the
Republic, though the Philippine Navy (PN), and Marcelo Fiberglass Corporation (MFC),
represented by its President, herein petitioner Edward T. Marcelo (Marcelo, hereinafter), for the
construction of 55 units of 16.46 fiberglass high-speed boats, at the unit price of P7,200,000.00,
subject to adjustment upon the occurrence of certain stated contingencies.370 The same contract
underwent amendments, the first effected sometime in January 1984,371 and the second, in October
1984.372

The facts:

On February 16, 1987, the Presidential Commission on Good Government (PCGG), pursuant
to Executive Order (EO) No. 1, series of 1986, issued a writ of sequestration against MFC.
The next day, PCGG agents proceeded to occupy MFC premises where four of the herein
petitioner corporations were holding office.

368
Penned by Associate Justice Teresita Leonardo-de Castro, with Associate Justices Anacleto D. Badoy, Jr.
and Ricardo M. Ilarde (both retired), concurring; rollo, pp. 104-120.
369
Penned by Associate Justice Godofredo L. Legaspi, with Associate Justices Raoul V. Victorino and
Rodolfo G. Palattao, Sr., concurring; rollo, pp. 123-125.
370
Id. at 236 et seq.
371
Id. at 263- 266.
372
Id. at 267 et seq.

136
 On July 27, 1987, the PCGG, on behalf of the Republic, filed a Complaint373 with the
Sandiganbayan against Marcelo, Fabian Ver (Ver), now deceased, and Ferdinand and Imelda
Marcos for recovery of ill-gotten or unexplained wealth which they allegedly acquired in
unlawful concert with one another. The complaint, which would later undergo amendments374
and was docketed in the Sandiganbayan as Civil Case No. 21, alleged, in gist, that Marcelo
and Ver, taking advantage of their relationship with the Marcoses, (a) obtained from the
Republic, thru the PN, a favored contract for the construction of high-speed fiberglass boats at
the cost of millions of pesos; (b) collected from the Republic advances representing 79% of
the contract price; and (c) secured a loan from foreign banks which, upon the behest of then
Pres. Marcos, was covered by what amounts to a sovereign guarantee.

On November 20, 1987, the Republic filed its Second Amended Complaint to rectify its
error in making reference to the Philippine Amusement and Gaming Corporation, when it should
properly be Philippine Casino Operators Corporation.

On May 17, 1989, Marcelo filed his Answer375 to the Second Amended Complaint attaching
thereto a copy of the PN-MFC boat-building contract, the alleged favored contract adverted to.
The Republic filed its Reply376 on June 30, 1989, followed later by Marcelos Rejoinder.377

Subsequently, the Republic served a Request for Admission378 dated June 5, 1991 on
Marcelo. In his August 15, 1991 Response to PCGGs Request for Admission,379 Marcelo included
his own counter-request for admission on matters stated in his response.

In the meantime, the Republic sought and was later granted leave to file a Third Amended

373
Id. at p. 127.
374
The complaint was actually thrice amended, the first filed before a responding pleading could be filed.
375
Answer to the Second Amended Complaint; rollo, p. 194.
376
Id. at 278.
377
Id. at 321.
378
It was not formally annexed to the petition.
379
Rollo, pp. 326 et seq.

137
Complaint380 dated October 30, 1991, therein impleading the herein petitioner corporations and
two others381 as additional defendants. As alleged, the newly impleaded sixteen (16) corporations
are beneficially owned and are dummies of the individual defendants.

To the third amended complaint, the other petitioner corporations filed their respective
Answers,382 which contained these common allegations: they are not owned, controlled or were
acquired by Marcelo who is merely an officer/stockholder; and that their assets were acquired
legally.

Following the filing by the Republic of its Pre-Trial Brief,383 Marcelo submitted his own
Pre-Trial Brief With Written Interrogatories, First Set and Request for Admission384 (to admit the
truth of the matters of fact stated in his August 15, 1991 reply to the Republics June 5, 1991 request
for admission). On October 15, 1996, MFC filed its Pre-Trial Brief With Written Interrogatories,
First Set and Request for Admission;385 the other petitioner corporations, as defendants a quo, filed
their Pre-Trial Briefs with Written Interrogatories First Set386 on the same day.

Of the written interrogatories and request for admission thus submitted, the Republic filed
an answer387 to that of Marcelos.

On August 15, 1997, the petitioners filed three separate Motion for Summary Judgment.388

380
Id. at 342 et seq.
381
Philippine Smelters Corp. and Marcelo Tire and Rubber Co., Inc.
382
Rollo, pp. 362 et seq.; pp. 365 et seq.
383
Id. at 369.
384
Id. at 375.
385
Id. at 381.
386
Id. at 433.
387
Id. at 439.
388
Id. at 446 (for petitioner Marcelo); p. 459 (for Marcelo Fiberglass Corporation [MFC]); and p. 509 (for the
other petitioner corporations). The copy of MFCs Motion For Summary Judgment (Annex V of the Petition)
does not contain a prayer. We take it to be an error in the photocopying.

138
Marcelos motion was based on two major arguments:

There is no genuine issue of fact/cause of action against him; and,

In his Pre-Trial Brief, he (Marcelo) requested the [Republic] to admit the truth
of the matter of fact related in his 15 August 1991 Response (to PCGG Request
for Admission) and Request on Plaintiff Republic of the Philippines for
Admission but the Republic did not reply to the request. Thus, pursuant to Sec.
2, Rule 26 of the Rules of Court, each of the matters of which an admission is
requested shall be deemed admitted.

For its part, MFC predicated its motion for summary judgment on two major points:

Lack of a genuine issue/cause of action against it; and,

The Republics failure and continued refusal to answer the written

interrogatories and reply to the request for admission of certain facts set forth
in its pre-trial brief.

Finally, the other petitioner corporations389 submit their entitlement to a summary

judgment on practically the same grounds invoked by Marcelo and MFC vis--vis facts embodied
in their own pre-trial brief. Thus, they argue that the matters set forth in their written interrogatories
are deemed established, more particularly the following: that they: a) are not parties or signatories
to, and were not involved in obtaining the PN-MFC contract in question; b) were not involved in
and did not do any act in securing the approval of direct payment for the subject boats, in violation
of the stipulation in the contract that payment should be made by Confirmed Irrevocable and
Divisible Letter of Credit (L/C); c) did not receive/collect anything from the Republic and there is

389
Per the Sandiganbayan, four defendant corporations did not join in the motion for summary
judgment.

139
no document showing they ever received anything; and d) were not involved in the procurement
of the alleged aforementioned foreign loan.

The Republic filed separate Opposition390 only to Marcelos and MFCs respective motions
for summary judgment, alleging in refutation to the formers motion the following:

MFCs defense of having a personality separate from that of Marcelo and the
other corporations was not raised in Marcelos answer.

The amended complaint alleges that Marcelo and Ver, taking undue advantage
of their influence and relationship, by themselves and/or in unlawful concert
with the Marcos spouses, for unjust enrichment, engaged in schemes and
strategies, including using the other corporations for the above purposes.

That MFC has a personality distinct from Marcelo is a legal issue, thus trial
should not be dispensed with.

The other corporations are merely the fruits of the ill-gotten wealth of the
individual defendants;

The case is based on the theory of conspiracy.

Against MFCs motion for summary judgment, the Republic advanced the following
arguments:

390
Rollo, pp. 518 et seq., and 531 et seq.

140
 The complaint makes out an allegation that the other corporations were utilized
as fronts for the perpetration of the illegal schemes, devices and stratagems;

There is no allegation in the motion for summary judgment that defendant

corporations were not used as a front by Marcelo. As a matter of fact, Marcelo
claims that it was MFC, not himself, which entered into the contract with the
[PN] for the construction of high-speed fiberglass boats labeled as favored in
the Third Amended Complaint.

Marcelo and MFC in turn filed their respective Replies391 to the opposition entered by the
Republic.

Eventually, on August 27, 2001, the Sandiganbayan rendered the herein assailed
Resolution392 denying the separate motions of Marcelo and MFC, as defendants a quo, for
summary judgment and the collective motion for such judgment interposed by the other defending
corporations. In a subsequent Resolution393 of November 19, 2002, the Sandiganbayan denied the
petitioners respective motions for reconsideration. Hence, this recourse.

391
Id. at 522 and 534.
392
Supra note 1.
393
Supra note 2.

141
 Before discussing the merits of the petition, the Court deems it appropos to delve into
Criminal Case No. 20224 which involved the subject PN-MFC boat supply contract.

In a Commission on Audit (COA) Report dated March 12, 1992 (COA Report), the COA
alleged that the PN disbursed for the boat supply contract P337,700,000.00. The disbursement, so
the report claims, was contrary to pertinent laws and COA rules governing the disbursement of
public funds, such as:

(a) There was no certificate of availability of funds;

(b) No performance bond was posted, as required;

(c) No demand for delivery was made despite failure to deliver after payment of
80% of the contract price;

(d) Default provision was not invoked or enforced against MFC; and,

(e) Payments were not made in accordance with the terms of the contract.

On the basis of the COA Report, an Information, docketed as Criminal Case No. 20224,
was filed against Marcelo, then Rear Admiral Simeon Alejandro and three other PN officials for
violation of Sec. 3(e) of the Anti-Graft Law (R.A. No. 3019, as amended) penalizing as corrupt
practice the act of a public officer and/or the conspiring private individual , inter alia, of causing
injury to the government by giving unwarranted benefits to a private party through evident bad
faith, manifest partiality or gross inexcusable negligence. As alleged, the giving of unwarranted
benefits stems from the disbursement of P337,437,000 to MFC in partial payment of undelivered

142
55 units of high speed boats.

Following a review, however, on motion of Alejandro et al., the Ombudsman approved an

Order394 of April 14, 1999, for the withdrawal of the Information, on the strength of, inter alia,
the ensuing findings of the Special Investigator embodied in the same Order:

Further, the failure to deliver the boats was for reasons not attributable to
MFC. First, in breach of contractual stipulations, the PN incurred delay in making
the down payments until the foreign exchange crisis supervened. Second, due to
the dollar crisis, the Central Bank (CB) refused to authorize the opening of (LCs)
to finance the importation of the boat components. The CB finally authorized the
opening of the LCs only two years after the first request was made, and it was for
restricted LCs. Third, when the shipment of the 55 MTU diesel engines arrived in
the Philippines between June and December 1986, they were taken to the MFC
manufacturing plant in Malabon so that boat manufacture could be commenced.
However, before the manufacture could start, the PCGG, on February 16, 1987,
sequestered not only the imported boat components but also all the properties of
MFC and padlocked its manufacturing plant. xxx..

The undisputed facts also show that the down payments made by the PN
were used for the importation of boat engines, gearboxes and other components
needed for the construction of the boats, and that the PN could not lawfully demand
the delivery of the boats from MFC since the latters obligation to deliver the boats
had not yet arisen.

xxx xxx xxx

Moreover, a corporation is a distinct juridical entity . In this case, the party

that entered into the Contract with PN for the construction of speed boats was MFC,
which exclusively assumed the obligation to put up a performance bond; it was to

394
Rollo, pp. 664 et seq.

143
 MFC that down payments were made by PN; and it was MFC which, was solely
obligated to build the boats and deliver them to PN. Under the circumstances, if
MFC committed any culpable act, it alone bears the responsibility therefor.

xxx xxx xxx

As discussed earlier, there is no injury or prejudice to the government. The

down payments made by the PN to MFC were used to import MTU engines and
other boat parts, which were seized by the PCGG . Also, the facts show that no
party received any unwarranted benefits, advantage or preference under the
contract. It must be emphasized that none of the down payments or money subject
of this case inured to the benefit of MFC or Marcelo .

As no injury or prejudice was caused to the Government and no party

received any unwarranted benefit under the Contract, it is baseless to say that undue
injury was caused or unwarranted benefits given through manifest partiality,
evident bad faith or gross inexcusable negligence. xxx the elements of the crime
charged are not present in this case. 395 (Underscoring and words in brackets added)

The main issue tendered in this joint petition turns on whether or not respondent
Sandiganbayan committed grave abuse of discretion amounting to lack or excess of jurisdiction in
denying the motion for summary judgment of Marcelo, MFC and the other petitioner corporations.
According to the petitioners, the pleadings of the parties, and the admissions and documentary
evidence of the [Republic] show that there is no genuine issue as to any material fact and that
[they] are entitled to a [summary] judgment as a matter of law. 396 They thus urgently urge the
reversal of the assailed Resolutions and the consequent dismissal of Civil Case No. 21.

The petition is impressed with merit.

395
Id. at 673-677.
396
Id. at 41.

144
 It needs to stress at the outset that Civil Case No. 21 is one of several suits involving ill-
gotten or unexplained wealth that the Republic, through the PCGG, has initiated. The Court has
resolved several similar cases, establishing in the process doctrinal teachings. As it were, several
sub-issues in the present petition may have already been addressed, if not rendered moot and
academic, in those cases. Accordingly, this petition shall be resolved taking into stock and in the
light of the relevant holdings and doctrines in those cases, foremost of which is Baseco v. PCGG.397
There, the Court made it abundantly clear that the right and duty of the Government to recover ill-
gotten wealth are undisputed. The Court added the caveat, however, that plain and valid that right
may be, a balance must still be sought to the end that proper respect be accorded and adequate
protection assured, the fundamental rights of private property and free enterprise. Among the
things we stressed in BASECO is the need, in ill-gotten wealth cases, to give due regard to the
basic rights of the parties, with particular emphasis on the right to property and the requirement of
evidentiary substantiation.

It is the petitioners main posture, positing the propriety of summary judgment in Civil Case
No. 21, that there is no more genuine factual issues to be tried by the Sandiganbayan, the
Republic, for failing to answer the petitioners requests for admission, having already admitted
certain vital facts in this case. Excepting, the Republic counters that the said requests for
admission were sufficiently denied by its allegations in the complaint.

In denying the motions for summary judgment, the Sandiganbayan wrote:

The answers of [the Republic] to the written interrogatories propounded by

Marcelo indubitably show the existence of genuine factual issues between the
parties, such as, whether or not Marcelo President of [MFC] was the real
beneficiary of the amounts collected from the [Republic] by [MFC] through the
alleged favored contract mentioned in the complaint; and whether or not [MFC]
was used as conduit by Marcelo allegedly to amass ill-gotten wealth.

It must be stressed that the crucial factual question that serves as underpinning of
the alleged causes of action invoked by the [Republic] in this case is whether or
not the subject contract, including the amendments, was a favored contract,

397
G.R. No. L-75885, May 27, 1987, 150 SCRA 181.

145
 unlawfully obtained by the defendants in conspiracy with one another. Corollary
thereto, whether or not the other [petitioner] corporations allegedly owned or
controlled beneficially by the individual defendants were the fruits of the alleged
ill-gotten wealth obtained through the said contract or whether individual
defendants Marcelo and Ver acted as dummies or agents of former President
Marcos in the defendant corporations.
xxx xxx xxx

Incidentally, the instant motions for summary judgment were filed before the
[anti-graft] Court could issue an order under Section 1, Rule 9398 of the Rules of
Court relative to the written interrogatories. Moreover, the factual details alleged
and conclusions of fact and law adduced in the said pleadings largely rely on the
terms and conditions of the [favored] contract and its amendments which are
precisely being questioned to be a favored contract. From the allegations of the
defendants, it is apparent that the [Republic] extended enormous sums of money .
Even assuming that the factual background alleged in the Answer of Marcelo
which was reiterated in the Answer of [MFC], to be true or to have been
established or admitted, still, a genuine factual issue remains to be tried and that is
whether or not the subject contract was a favored contract as it appears from the
record that the implementation of its terms, as narrated by the defendants, had
resulted in the expenditure of hundreds of millions of pesos on the part of the
[Republic] without a single delivery having been made or required to be made .
The factual issue of whether or not the subject contract is a favored one, which we
take to mean as disadvantageous to the government, is not settled by the
allegation that the contract was implemented in the midst of a foreign exchange
crisis and that the government failed to comply with the staggered payments
which the government was required to tender before any delivery could be made
by the [MFC] under the terms of the contract. For the defendant to invoke the
terms of the contract to excuse the non-delivery of the subject matter thereof
simply begs the questions because the very stipulations of the contract are in issue
in this case.399 (Words in brackets added)

We examine the records and found that summary judgment is in order. Under Section 3, Rule
35 of the Rules of Court, summary judgment may be allowed where, save for the amount of
damages, there is no genuine issue as to any material fact and the moving party is entitled to a
judgment as a matter of law. Summary or accelerated judgment is a procedural technique
aimed at weeding out sham claims or defenses at an early stage of the litigation, thereby
avoiding the expense of time involved in a trial. Even if the pleadings appear, on their face, to
raise issues, summary judgment may still ensue as a matter of law if the affidavits, depositions

398
SECTION 1. Defenses and objections not pleaded.- Defenses and objections not pleaded either in a motion
to dismiss or in the answer are deemed waived. xxx
399
Resolution dated August 17, 2001, at 13-15, rollo, pp. 116-118.

146
 and admissions show that such issues are not genuine.400 The presence or absence of a
genuine issue as to any material fact determines, at bottom, the propriety of summary
judgment. A genuine issue, as opposed to fictitious or contrived one, is an issue of fact that
requires the presentation of evidence. To the moving party rests the onus of demonstrating the
absence of any genuine issue of fact, or that the issue posed in the complaint is patently
unsubstantial so as not to constitute a genuine issue for trial.401 In Estrada v. Consolacion,402
the Court stated that when the moving party is a defending party, his pleadings, depositions or
affidavits must show that his defenses or denials are sufficient to defeat the claimants claim.
The affidavits or depositions shall show that there is no defense to the cause of action or the
cause of action has no merits, as the case may be. In fine, in proceedings for summary
judgment, the burden of proof is upon the plaintiff to prove the cause of action and to show
that the defense is interposed solely for the purpose of delay. After the plaintiff discharges its
burden, the defendants has the burden to show facts sufficient to entitle him to defend.

With the view we take of the case, there is really no more genuine issues to be tried in this
case, the Republic having failed or refused to answer the requests for admission and the
written interrogatories of the petitioners. As it were, the Republic only answered petitioner
Marcelos request for admission or interrogatories. But then the Republics answer serves only
to highlight and confirm the fact that petitioner Marcelos participation in all the transactions
subject of this case is as President of MFC, 403 thus:

1.0 Regarding the Specific Averments of Illegal Acts in paragraph 11, sub-
paragraph (d), of the Third Amended Complaint which reads:
(d) illegally securing a loan with a foreign
bank with the Guarantee of the Government, upon
the personal behest of defendant Ferdinand E.
Marcos, which loan remains unpaid to date

1.1. Was the alleged loan for defendant Marcelo personally?

ANSWER: The loan was for the [MFC] of which Marcelo is the
President, who stands to benefit from the proceeds of the loan.

1.2. In the affirmative, what documents indicate that the loan was for defendant .
400
Carcon Development Corporation v. CA, G.R. No. 88218, December 19, 1989, 180 SCRA 348.
401
Evadel Realty and Development Corporation v. Soriano, G.R. No. 144291, April 20, 2001, 357 SCRA 395.
402
G.R. No. L-40948, June 29, 1976, 71 SCRA 523, 528-29.
403
Pre-Trial Brief with Written Interrogatories First Set and Request for Admission of Marcelo, Annex n
of Petition, rollo, pp. 375 et seq.; See also pp. 7-8 Sandiganbayan Resolution of August 27, 2001, rollo, pp. 110-111.

147
 Marcelo personally?

ANSWER: The loan was negotiated by Marcelo in his capacity as

President of [MFC] with the Swiss Bank Corporation. The Monetary Board
[in] August 12, 1983 approved the loan.

2.0 Regarding the Specific Averments of Illegal Acts in paragraph 11, sub-
paragraph (c), of the Third Amended Complaint which reads:
(c) unlawfully received and collected from
plaintiff hundreds of millions of pesos by way of
advances representing 79% of the contract price for
the construction of the aforementioned high-speed
fiberglass boats, without, to date, delivering a single
boat to the prejudice and damage of Plaintiff and the
Filipino people

2.1 Was the amount allegedly received and collected from plaintiff
for the personal account of defendant Edward T. Marcelo?

ANSWER: The amounts collected from plaintiff were for the account
of [MFC] but only as conduit. The real beneficiary of the amount is Marcelo.
The Contract to Buildand its Amended Contractprovide that payments should
be by CONFIRMED IRREVOCABLE, DIVISIBLE LETTER OF CREDIT
established in favor of the BUILDER. However, payments were made directly
to [MFC] as shown in Land Bank application for Cashiers Check;

2.2 In the affirmative, what documents indicate that the amount

allegedly received and collected went to the personal account of
defendant Edward T. Marcelo?

ANSWER: The defendant, as President of [MFC] stands to benefit

from the proceeds of the amount collected. The Amended Article of
Incorporationshows that Marcelo is the President of the Corporation, a wholly
owned family corporation.

3.0 Regarding the Specific Averments of Illegal Acts in paragraph 11, sub-
paragraph (b), of the Third Amended Complaint which reads:

148
 (b) securing the approval of direct payments
on the above-mentioned contracts, in violation of the
stipulation that payment should be by confirmed,
irrevocable and divisible letter of credit

3.1 Was the direct payment allegedly secured for Marcelo

personally?

ANSWER: The direct payment was secured by defendant as President

of [MFC] as shown in his letter dated November 4, 1982 requesting for release
of the first downpayment of P127,710.00.

3.2 In the affirmative, what documents indicate that the direct

payments allegedly secured went to the personal account of
defendant Edward T. Marcelo?

ANSWER: The defendant, as President of [MFC] stands to benefit

from the proceeds of the direct payments made by plaintiff.

4.0 Regarding the Specific Averments of Illegal Acts in paragraph 11, sub-
paragraph (a), of the Third Amended Complaint which reads:
(a) unlawfully obtaining a favored contract
with the [PN] for the construction of high-speed
fiberglass boats at the cost of hundreds of millions of
pesos

4.1 Is Marcelo personally a party to the contract referred to

by plaintiff?

ANSWER: Yes, defendant is signatory to the contract as President of

[MFC]. Defendant Marcelos letter-requestdated November 4, 1982, to then
President Marcos who approved it in his marginal notedated November 10,

149
 1982. 404 (Words in bracket added.)

It is basic that a corporation is clothed with a personality distinct from that of its officers,405
its stockholders and from other corporations it may be connected.406 Under the doctrine of
piercing the veil of corporate existence, however, the corporations separate personality may
be disregarded when the separate identity is used to protect a dishonest or fraudulent act,
justify a wrong, or defend a crime. In such instance, the wrongdoing must clearly and
convincingly be established;407 it cannot be presumed.408 Absent malice or bad faith, the
officer or shareholder cannot be made personally liable for corporate obligations and cannot
be held liable to third persons who have claims against the corporation.

A reading of the Republics answers to Marcelos interrogatories leads us to view, like the
Ombudsman,409 that there was nothing irregular with the boat supply contract. Neither were the
circumstances leading to the contract award tainted with irregularity. For, the answers yield
nothing more than a reiteration of mere conclusions of fact stated in the underlying complaint. The
complaint does not even state how the conclusion was arrived at that Marcelo was the real
beneficiary of the amounts collected under the contract, absent factual averments that would
support the same. The Republics argument that since MFC did not allege in its motion for summary
judgment that it is not used as a front by Marcelo, then the two should be treated as one and the
same,410 is simply specious. There is no such principle as presumption of piercing the veil of
corporate fiction. Nor could it be simply assumed that by the mere bare allegation or conclusion
of law, in an answer to written interrogatories, that Marcelo is a conduit of the Marcoses, a genuine
issue has been created. On this score, the Sandiganbayan was certainly in error.

As the Court distinctly notes, the complaint in Civil Case No. 21 imputes an unlawful or at
least a highly improper act against petitioner Marcelo in that he obtained a favored contract with

404
Rollo, p. 375.
405
Lafarge Cement Phil., Inc.v.Continental Cement Corp., G.R. No. 155173, November 23, 2004, 443 SCRA
522.
406
Concept Builders, Inc. v. NLRC, G.R. No. 108734, May 29, 1996, 257 SCRA 149.
407
Secosa v. Heirs of Francisco, G.R. No. 160039, June 29, 2004, 433 SCRA 273.
408
Matuguina Integrated Wood Products v. Court of Appeals, G.R. No. 98310, October 24, 1996, 263 SCRA
490.
409
Supra note 27.
410
Rollo, p. 532.

150
the PN, collected hundreds of million of pesos by way of advances and illegally secured a foreign
loan with sovereign guarantee courtesy of then Pres. Marcos. The complaint, however fails to
disclose why the contract characterization favored was, a conclusion of law, as it were. The Court
will go further. The complaint violates fundamental rules of pleading. For one, it yields a
substantial lack of specific averments constituting the Republics cause or causes of action against
the petitioners, particularly Marcelo. In fine, the complaint does not state with definiteness how or
in what specific manner the petitioners committed the alleged illegal and fraudulent acts so broadly
enumerated therein. For another, it is replete with sweeping generalizations, conclusions of fact
and law, and contains inferences derived from facts that are not found in the complaint. In short,
the complaint is an embodiment, a concrete example, of how one should not prepare a legal
complaint. The Courts disposition in Remitere v. Montinola Vda. De Yulo411 should be
enlightening:

It is not stated anywhere in the complaint why the sale was absolutely void,
nor were there stated any particular facts or circumstances upon which the alleged
nullity of the sale or transaction is predicated. The averment that "the public sale
was and still is absolutely a void sale . is a conclusion of law or an inference from
facts not stated in the pleading. A pleading should state the ultimate facts
essential to the rights of action or defense asserted, as distinguished from a mere
conclusion of fact, or conclusion of law. An allegation that a contract is valid or
void, as in the instant case, is a mere conclusion of law.

xxx xxx xxx

Not being statements of ultimate facts which constitute the basis of a right
of the plaintiffs-appellants, nor are they statements of ultimate facts which
constitute the wrongful acts or omissions of the defendants-appellees that violated
the right of the plaintiffs-appellants the allegations of the complaint in the present
case have not fulfilled the requirements of Section 3, Rule 6 of the Rules of
Court xxx that the complaint should contain a "concise statement of the
ultimate facts constituting the plaintiff's cause or causes of action. (Emphasis
added.)

411
G.R. No. L-19751, February 28, 1966, 16 SCRA 251.

151
 It cannot be over-emphasized that the Republic cannot any more prove malice or wrongdoing
on the part of either Marcelo or MFC, or that the separate corporate identity of MFC was used
for unlawful means. For, the Republic has veritably acknowledged the regularity of the boat-
construction contract by its failure to answer written interrogatories and the request for
admission propounded by petitioner MFC. To be precise, the Republic did not answer the
following written interrogatories412 of MFC:

1.0 Regarding the Specific Averments of Illegal Acts in paragraph 11, sub-paragraph
(d), of the Third Amended Complaint which reads:

(d) illegally securing a loan with a foreign bank with

the Guarantee of the Government, upon the personal behest
of defendant Ferdinand E. Marcos, which loan remains
unpaid to date

1.1. Was there any loan with a foreign bank ever availed of for Republic to say that the
loan remains unpaid to date?

1.2. Who availed of such loan with a foreign bank?

1.2. When was such loan with a foreign bank availed of?

1.3. How much of such loan with a foreign bank was availed of?

1.4. What is the name of the foreign bank from which such loan was secured and availed
of?

1.5. Why was the loan with foreign bank secured?

412
Pre-Trial Brief for MFC, Annex O of the Petition, rollo, pp. 381 et seq.

152
1.6. In 1982, what were the loan options proposed by the Republic[s] Philippine
National Bank for plaintiff Republic[s] [PN] to pay for the domestic/deferred letter
of credit which the latter was supposed to open in favor of defendant [MFC]?

1.7. In 1983, without a long term foreign loan to pay for the letter of credit which [the]
[PN] was to open with [the] Land Bank of the Philippines, was plaintiff Republic[s]
Central Bank of the Philippines willing to approve the importations by defendant
[MFC] under the boat-building contract?

1.8. What specific provision of law in 1982 was violated for plaintiff Republic to
conclude that securing a loan with a foreign bank with the guarantee of the
government is illegal?

1.9. Who required and why was the Guarantee of Government secured for the loan with
a foreign bank?

1.10. In 1982, without the guarantee of the Republic[s] National Government, was
plaintiff Republics own [PNB] Bank willing to lend plaintiff Republic[s] own [PN]
the amounts to pay for the latters opening of a domestic/deferred letter of credit in
favor of defendant [MFC]?

1.11. In 1982, who in [the] National Government has power to approve the
issuance of [the] National Governments guarantee of a loan?

1.12. In 1982, in what a particular form, document or writing should the

approval of the issuance of plaintiff Republic[s] National Governments
guarantee of a loan appear?

2.0 Regarding the Specific Averments of Illegal Acts in paragraph 11, sub-
paragraph (c), of the Third Amended Complaint which reads:

(c) unlawfully received and collected from Plaintiff hundreds of millions of

pesos by way of advances representing 79% of the contract price for

153
 the construction of the aforementioned high-speed fiberglass boats,
without, to date, delivering a single boat to the prejudice and

2.1. How much exactly was received and collected from plaintiff Republic

2.2 Who among the defendants received and collected such amount?

2.3. What does plaintiff Republic mean by the word advances?

2.3.1.Were the amounts received and collected borrowed from plaintiff Republic?

2.3.2. If they were borrowed, what are the loan documents evidencing the loan?

2.3.3. If they were not borrowed, why were they received and collected from
plaintiff Republic?

2.4. In its 5 June 1991 Request for Admission, plaintiff Republic asserts and
acknowledges that there is an upward adjustment of the contract price from P425.7
Million to P926.524 Million. This was the agreement in November 1985. What is
the contract price plaintiff Republic is referring to in the aforequoted allegations
in the Third Amended Complaint?

2.4.1. Under the June 1983 amendment to the contract, the parties agreed that the foreign
exchange risk shall be for the account of the Philippines. With the contract price
of P425.7 Million in June 1982 at the exchange rate of P8.00 to US$1.00, what is
the additional amount assumed by the plaintiff Republic [PN] by November 1985
when the exchange rate had changed to P18.00 to US$1.00?

2.5. What are the pre-conditions for the delivery by defendant [MFC] of any boat under
the contract?

154
2.6. Which of these preconditions have been satisfied for plaintiff Republic to
rightfully complain of the non-delivery of the boats to date?

2.7. Article VIII, part B, of the contract stipulates that delivery of the boats shall be
effected provided that [PN] shall have fulfilled all its obligations as stipulated in
this contract. Has plaintiff Republic fulfilled all its obligations as stipulated in the
contract?

2.8. Article XIII, part A of the contract signed and executed on 18 June 1982, stipulates
and obligates plaintiff Republic to make the following payments:

1. THIRTY (30) PERCENT of the total contract price as

downpayment upon the signing of the Contract on 18
December 1982.

2. TWENTY (20) PERCENT of the total contract price

xxx for the engines, gear boxes, fiberglass materials, radar and
communication equipment xxx after SIX (6) MONTHS from
date of the execution of this contract xxx or by 18 December 1982.

2.8.1. How many payments were received by defendant [MFC] from plaintiff
Republic?

2.8.2. On what dates were each of such payments received?

2.8.3. What were the amounts received on each of such dates?

2.8.4. How many years, months and/or days had elapsed from 18 June 1992 before
each of such payment was received?

2.8.5. How many years, months and/or days had elapsed before or after 18 November
1995 when each payment was received?

155
2.8.6. What percentage of the adjusted contract price of P926.524 Million was
received in each of the payment was received?

2.9. Article XIII, part A, of the contract further stipulates and obligates plaintiff
Republic to open a CONFIRMED, IRREVOCABLE, DIVISIBLE LETTER OF
CREDIT in favor of defendant Marcelo Fiberglass Corporation.

2.9.1. When did plaintiff Republic open such a [L/C] for either the full value of the
contract price or any part thereof?

2.9.2. What efforts did plaintiff Republic exert on its own to comply with this
obligation?

2.10. Article X, part A, of the contract further provides:

If, at any time, either the construction of the boat, or any performance required
hereunder as a prerequisite to the delivery of the boat, is delayed due to acts of state,
xxx by destruction of the shipyard xxx by fire and/or other causes beyond the
control of either contracting party, the time of delivery of the boat under this
Contract shall be extended for a period of time corresponding to the duration and
cause of such events.

2.10.1. Was not the construction of the boats and a prerequisite to the delivery of
the boats delayed by an act of state or by cause beyond the control of defendant
[MFC] when the state, plaintiff Republic, paid the 20% of the original contract
price, intended for the engines, gear boxes, fiberglass materials, radar and
communication equipment of the boats, only in November 1985 or almost three
years past due and when the contract price to be paid had increased because of the
change foreign exchange rate?

2.10.2. Was not the construction of the boats and a prerequisite to the delivery of
the boats delayed by an act of state and by cause beyond the control of defendant
[MFC] when the state, plaintiff Republic never delivered the full 20% of the
increased contract price intended for the very engines, gear boxes, fiberglass
materials, radar and communication equipment of the boats?

156
2.10.3. Was not the construction of the boats delayed by an act of state or by cause
beyond the control of defendant [MFC] when the Central Bank . from 1982 to 1986,
because of the dollar crisis which was aggravated by the murder of Senator Benigno
S. Aquino on 21 August 1983, refused or could not provide the foreign exchange
necessary for [MFC] to import the engines, gear boxes, fiberglass materials and
radio and communications equipment for the boats?

2.10.4. Was not a prerequisite to the delivery of the boats delayed by an act of state
or by cause beyond the control of defendant [MFC] when the State, plaintiff
Republic never opened or could not open the required [L/C]?

2.10.5. Was not the construction of the boats further delayed by an act of state or
by cause beyond the control of defendant [MFC] when the state, plaintiff Republic,
sequestered on 17 February 1987 all assets of [MFC], padlocked its offices and
shipyard/plant, and barred entry by anyone thereto up to this day?

2.10.6. Was not the construction of the boats further delayed by an act of state or
by cause beyond the control of defendant [MFC] when the State, plaintiff Republic,
negligently caused in 1994 the destruction by fire of the shipyard/plant of defendant
[MFC] while under its full and exclusive sequestration, control and custody?

2.10.7. Considering that the foregoing causes of the delay in the construction of the
boats and delay in the prerequisite to the delivery of the boats, most of which are
still existing up to this day, is not the extension of time granted in the contract for
the delivery of the boats still continuing?

xxx xxx xxx

3.2. Is such direct payment in violation of the stipulation in the amended contract of
June 1983 which allows the payment of the 30% downpayment either by bank draft
or [L/C]?

xxx xxx xxx

157
3.3. Is plaintiff Republic aware of its own documentary evidence consisting of
the 22 December 1983 letter of its own Defense Ministry, through then Minister
Juan Ponce Enrile, who explained therein that:

The Office of Budget and Management (OBM) released the

amount of P127.71 M. representing the 30% downpayment
required in the contract. The amount was subsequently paid to MFC
to save for the government front-end fee and other bank charges
amounting to P1,915,650.00

3.4. Does plaintiff Republic know that, for the reason stated by its own Defense
Ministry, it was itself who requested defendant [MFC] to accept payment and that
the latter merely acceded to the request?

3.4. Who secured the approval of, and who approved the direct payments?

3.4.1. What is the basis of plaintiff Republic in identifying such person (s) as the
one who secured the approval?

xxx

4.1. What does plaintiff Republic mean by the phrase favored contract?

4.1.2. What circumstances made the contract being referred to a favored one?

4.2. What specific provision of law was violated for plaintiff Republic to
conclude that the contract or the act of obtaining it is unlawful?

4.2.1. Is obtaining the contract unlawful because it is a favored one?

4.2.2. Or, is the contract favored because obtaining it is unlawful?

158
4.2.3. What is the reason for the answers to the two preceding questions?

4.3. Without using unlawful favored or words of similarly sweeping

conclusionary import, what is wrong with obtaining that contract with the [PN] for
the construction of high speed fiberglass boats at the costs of hundreds of millions
of pesos?

4.4. What did plaintiff Republic, its then Ministry of National Defense, its [AFP]
and its [PN] do to the offer made in 1979 by defendant [MFC] to construct the
boats required by the [PN] until the contract was signed on 18 June 1982?

4.5. What did plaintiff Republic, its then Ministry of National Defense, its
[AFP], and its [PN] do to comply with the contract entered into on 18 June 1983
up to the time defendant [MFC] was sequestered in February 1987?

4.6. With its sovereignty and all resources and powers , what efforts did plaintiff
Republic exert to know what itself, its then Ministry of National Defense, its
[AFP] and its [PN] did within the periods of almost four (4) years each referred
to in the two preceding questions? (Words in brackets added.)

The Republic did not also answer the written interrogatories of the other defendant
corporations. In effect, the Republic admitted the non-participation of the other defendant
corporations in the contracts in question. This is evident from the following written
interrogatories which were deemed admitted by the Republic:

1.1. What is the specific involvement of, or the specific acts done by, each of the other
Defendant Corporations in securing the alleged loan?

xxx xxx xxx

159
 2.1. How much exactly was received and collected by each of the Other Defendant
Corporations from plaintiff?

2.2. When did each of the Other Defendant Corporations receive the amounts allegedly
received from plaintiff, if any?

2.3. What documents indicate that each of the Other Defendant Corporations received
such amount allegedly received from plaintiff?

xxx xxx xxx

4.1. Which of the other defendant corporations is a party or signatory to the contract
referred to by plaintiff?

4.2. What is the specific involvement of, or the specific acts done by, each of the other
defendant corporations in obtaining the contract referred to by plaintiff?

The Republic cannot plausibly evade the consequences of its failure to answer written
interrogatories and requests for admission. If the plaintiff fails or refuses to answer the
interrogatories, it may be a good basis for the dismissal of his complaint for non-suit unless he can
justify such failure or refusal.413

To be sure, the Rules of Court prescribes the procedures and defines all the consequence/s
for refusing to comply with the different modes of discovery. The case of Republic v.
Sandiganbayan,414 a case for recovery of ill-gotten wealth where the defendants served upon the

413
Santiago Land Development Company v. Court of Appeals, G.R. No. 103922, July 9, 1996, 258 SCRA 535.
414
G.R. No. 90478, November 21, 1991, 204 SCRA 213.

160
PCGG written

interrogatories but the latter refused to make a discovery, is relevant. Some excerpts of what the
Court said thereat:

The message is plain. It is the duty of each contending party to lay before
the court the facts in issue--fully and fairly; xxx

Initially, that undertaking of laying the facts before the court is

accomplished by the pleadings filed by the parties; "ultimate facts" are set forth in
the pleadings; xxx. The law says that every pleading "shall contain in a concise and
direct statement of the ultimate facts on which the party pleading relies for his claim
or defense, as the case may be, omitting the statement of mere evidentiary facts."

Parenthetically, if this requirement is not observed, i.e., the ultimate facts

are alleged too generally or "not averred with sufficient definiteness or particularity
to enable x x (an adverse party) properly to prepare his responsive pleading or to
prepare for trial," a bill of particulars seeking a "more definite statement" may be
ordered . xxx.

The truth is that "evidentiary matters' may be inquired into and

learned by the parties before the trial. Indeed, it is the purpose and policy of
the law that the parties - before the trial if not indeed even before the pre-trial
- should discover or inform themselves of all the facts relevant to the action,
not only those known to them individually, but also those known to their
adversaries; in other words, the desideratum is that civil trials should not be
carried on in the dark; and the Rules of Court make this ideal possible through
the deposition-discovery mechanism set forth in Rules 24 to 29. xxx

xxx xxx xxx.

In line with this principle of according liberal treatment to the deposition-

discovery mechanism, such modes of discovery as (a) depositions under Rule 24,(b)
interrogatories to parties under Rule 25, and (c) requests for admissions under Rule
26, may be availed of without leave of court, and generally, without court

161
 intervention. The Rules of Court explicitly provide that leave of court is not
necessary to avail of said modes of discovery after an answer to the complaint
has been served. xxx.

On the other hand, leave of court is required as regards discovery in

accordance with Rule 27, or under Rule 28, which may be granted upon due
application and a showing of due cause.

To ensure that availment of the modes of discovery is otherwise

untrammeled and efficacious, the 'law imposes serious sanctions on the party
who refuses to make discovery, such as dismissing the action or proceeding or
part thereof, ; taking the matters inquired into as established in accordance
with the claim of the party seeking discovery; refusal to allow the disobedient
party support or oppose designated claims or defenses; xxx

xxx xxx xxx

.

One last word. xxx all that is entailed to activate or put in motion the process
of discovery by interrogatories to parties under Rule 25 of the Rules of Court, is
simply the delivery directly to a party of a letter setting forth a list of questions with
the request that they be answered individually. That is all. The service of such a
communication on the party has the effect of imposing on him the obligation of
answering the questions "separately and fully in writing under oath," and serving
"a copy of the answers on the party submitting the interrogatories " The sanctions
for refusing to make discovery have already been mentioned. So, too, discovery
under Rule 26 is begun by nothing more complex than the service on a party of a
letter or other written communication containing a request that specific facts therein
set forth be admitted in writing. That is all. Again, the receipt of such a
communication by the party has the effect of imposing on him the obligation of
serving the party requesting admission with "a sworn statement either denying
specifically the matters of which an admission is requested or setting forth in detail
the reasons why he cannot truthfully either admit or deny those matters," failing in
which "(e)ach of the matters of which admission is requested shall be deemed
admitted." xxx. (emphasis supplied)

While earlier touched upon, other considerations obtain which should have impelled the
Sandiganbayan to grant the motion for summary judgment. We refer to the defect in the Republics
complaint itself. We start with the very PN-MFC contract itself which served as the main prop of
the Republics case. There is no dispute that the Republic did not attach to its complaint a copy of
162
what it claims to be a favored contract, let alone set out therein the relevant terms and conditions
of the contract, or pertinent averments as would show, in general, why the same is unlawful or
grossly disadvantageous to the State as would merit the tag favored. The rule obtains that when a
claim is based on a written instrument or document, the substance of such instrument or document
shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading
as an exhibit which shall be deemed to be a part of the pleading, or said copy may with like effect
be set forth therein:415

"SECTION 7. Action or defense based on document.

Whenever an action or defense is based upon a written instrument
or document, the substance of such instrument or document shall be
set forth in the pleading, and the original or a copy thereof shall be
attached to the pleading as an exhibit, which shall be deemed to be
a part of the pleading, or said copy may with like effect be set forth
in the pleading."

The record reveals that it was petitioner Marcelo no less who brought out the contract first,
as an attachment to his Answer.

On the alleged illegal advances, the particulars on the matter are not alleged; the
circumstances that would justify its conclusion that either petitioner Marcelo or MFC received the
79% monetary equivalent of the contract without delivering a single boat could not be found.
Again, the specific information was volunteered by Marcelo himself in his answer.

As to the allegation that the petitioners secured a loan with a foreign bank with the

415
Rule 8, Sec. 7, 1964 Revised Rules of Court.

163
guarantee of the government, upon the personal behest of defendant Ferdinand Marcos, which
loan remains unpaid to date, a copy of the alleged loan document is not appended to the complaint.
Neither is there a reference to the pertinent provisions of the loan agreement made in the complaint,
nor were the circumstances surrounding the alleged incurring of the obligation enumerated. This
is material in the sense that the petitioners deny that there was any loan at all obtained.

On the allegation that petitioners secured the approval of direct payments on the alleged
favored boat supply contract in violation of the stipulation that payment should be by confirmed,
irrevocable and divisible letter of credit, the existence of a cause of action based on the allegation
could not be determined since a copy of the contract was not attached to the complaint, nor was
there made a reference to the particular stipulation claimed to have been violated.

With respect to the allegation that the petitioners acted as dummies, nominees or agents of
Ferdinand E. Marcos in corporations such as the Philippine Casino Operators Corporation,
beneficially owned and/or controlled by the latter, it is noted that allegation partakes of a
conclusion of fact unsupported by a particular averment of circumstances that will show why such
inference or conclusion was arrived at. In this regard, we are reminded of the Courts ruling in
Republic v. Sandiganbayan:416

Under paragraph 6-A of the Amended Complaint, the Companies alleged to

be beneficially owned or controlled by defendants Lucio Tan, Ferdinand and
Imelda Marcos and/or the other individual defendants were identified and
enumerated, including herein corporate respondents. But except for this bare
allegation, the complaint provided no further information with respect to the
manner by which herein corporate respondents are beneficially owned or
controlled by the individual defendants. Clearly, the allegation is a conclusion
of law that is bereft of any factual basis. (emphasis supplied)

416
G.R. No. 115748, August 7, 1996, 260 SCRA 411.

164
 To stress, the Rules of Court require every pleading to contain in a methodical and logical
form, a plain, concise and direct statement of the ultimate facts on which the party pleading relies
for his claim or defense.417 A transgression of this rule is fatal. 418

In view of the absence of specific averments in the Republics complaint, the same is
defective for it presents no basis upon which the court should act, or for the defendant to meet it
with an intelligent answer.419 The complaint, to stress, did not present the very documents claimed
to be the source of the Marcelo-Marcos vinculum: it did not attach the alleged boat supply contract
which is the main cause of action against the petitioners; the unpaid loan document from which
another claimed cause of action arose; and other relevant documents and information. The
Republic tags, at every turn, the PN-MFC contract to be a favored contract, without, however, so
much as stating with sufficient particularity the circumstances that led it to arrive at such
conclusion.

The foregoing is nonetheless true with respect to the case against the other petitioner
corporations (except MFC). There is no cause of action against them. Not only because the
complaint does not, as to them, spell out specific illegal acts and omissions committed by them,
but also on account of our ruling in Republic v. Sandiganbayan,420 or what subsequent opinions
would later refer to as The Final Dispositions case, which proscribes their being impleaded in the
case. Thus:

As regards actions in which the complaints seek recovery of defendants'

shares of stock in existing corporations (e.g., San Miguel Corporation, etc.) because
(they were) allegedly purchased with misappropriated public funds, the impleading
of said firms would clearly appear to be unnecessary. If warranted by the evidence,

417
Rule 8, Sec. 1.
418
Republic v. Sandiganbayan, G.R. No. 92594, March 4, 1994, 230 SCRA 710.
419
Republic v. Sandiganbayan, supra.
420
G.R. No. 96073, January 23, 1995, 240 SCRA 376; also, see Republic v. Sandiganbayan , G.R. No. 152154,
July 15, 2003, 406 SCRA 190.

165
 judgments may be handed down against the corresponding defendants divesting
them of ownership of their stock, the acquisition thereof being illegal and
consequently burdened with a constructive trust, and imposing on them the
obligation of surrendering them to the Government.

Quite the same thing may be said of illegally obtained funds deposited in
banks. The impleading of the banks would also appear unnecessary. xxx.

xxx xxx xxx

And as to corporations organized with ill-gotten wealth, but are not guilty
of misappropriation, fraud or other illicit conduct in other words, the companies
themselves are the object or thing involved in the action, the res thereof there is no
need to implead them either. Indeed, their impleading is not proper on the strength
alone of having been formed with ill-gotten funds, absent any other particular
wrongdoing on their part. The judgment may simply be directed against the shares
of stock shown to have been issued in consideration of ill-gotten wealth.

Such showing of having been formed with, or having received ill-gotten

funds, however strong or convincing, does not, without more, warrant identifying
the corporations in question with the persons who formed or made use of them to
give the color or appearance of lawful, innocent acquisition to illegally amassed
wealth at the least, not so as (to) place on the Government the onus of impleading
the former together with the latter in actions to recover such wealth. xxx. In this
light, they are simply the res in the actions for the recovery of illegally acquired
wealth, and there is, in principle, no cause of action against them and no ground to
implead them as defendants in said actions.

The Government is, thus, not to be faulted for not making such corporations
defendants in the actions referred to. It is even conceivable that had this been
attempted, motions to dismiss would have lain to frustrate such attempts.
(Underscoring supplied)

It does not escape our notice that, in line with our ruling in Republic immediately adverted
to, petitioner corporations were perhaps not originally impleaded because it was unnecessary, they

166
being perceived to have been formed with ill-gotten wealth. As against them, there is no cause of
action other than that they constitute the res of the action. However, the fact that they were
subsequently impleaded in Civil Case No. 21 could only mean that a cause of action exists against
them, one that must be specifically alleged in the amended complaint. It appears, however, that
their inclusion was made without the corresponding insertion of general or specific averments of
illegal acts they are alleged to have committed as should constitute the cause of action against
them. It may not be said that those general and specific averments already existing in the complaint
before the amendment apply to them, because they refer only to the boat building contract, a
transaction for which only Marcelo and MFC have been specifically made answerable.

The Republics argument in their Opposition to the Motions for Summary Judgment that
the Final Dispositions case suggested that the other petitioner corporations should be impleaded
does not commend itself for concurrence. On the contrary, we categorically ruled therein that their
impleading is not at all proper.

In all then, we hold that the Sandiganbayan committed grave abuse of discretion in denying
the petitioners separate motions for a summary judgment. To us, the petitioners were entitled to a
summary judgment owing to the interplay of the following premises:

1. The Republics complaint, as couched and presented to the

Sandiganbayan does not contain concise and direct statement of the ultimate facts
on which it relies for its claim against petitioners Marcelo and MFC. Worse still,
it does not specify the act or omission by which the other petitioners wronged the
Republic. In net effect, the complaint no less does not present genuine ill-gotten
wealth issue; and

2. In view of the Republics failure to respond to MFCs interrogatories, the

Republic veritably conceded the regularity of the PN-MFC contract, that no
wrongdoing was committed vis--vis the conclusion of that contract and that the
separate personality of MFC was not used for unlawful means to activate the
piercing of corporate veil principle. The questions in the interrogatories were
167
 simple and direct and the answers thereto would have constituted the fact/s sought
to be established. We do not see any reason why the Republic could not have
answered them. They refer to relevant matters that could clarify the important facts
left out by, to borrow from Republic v. Sandiganbayan,421 the roaming generalities
in the complaint.

Assume the element of regularity and the bona fides of the transaction and no genuine issue
as to any material fact would come into fore.

421
Supra note 51.

168
With the foregoing disquisitions, each of the petitioners counterclaim for damages need not

detain us long. Suffice it to state that resolution thereof entails factual determination which is not

proper in a certiorari proceeding.

WHEREFORE, the instant petition is GRANTED and the Resolutions of the

Sandiganbayan dated August 27, 2001 and November 19, 2002 are REVERSED and SET
ASIDE. Accordingly, the complaint against the petitioners in Civil Case No. 21 is DISMISSED.

No pronouncement as to costs.

SO ORDERED.

CANCIO C. GARCIA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

169
 ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA
Associate Justice Associate Justice

ADOLFO S. AZCUNA
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
above decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

170
 Republic of the Philippines
Supreme Court
Manila

FIRST DIVISION

THE BOARD OF REGENTS OF THE G.R. No. 172448

MINDANAO STATE UNIVERSITY
represented by its Chairman,
Present:
Petitioner,

CORONA, C.J.,
Chairperson,
LEONARDO-DE CASTRO,
- versus - BERSAMIN,
VILLARAMA, JR., and
PERLAS-BERNABE,* JJ.

ABEDIN LIMPAO OSOP, Promulgated:

Respondent.

February 22, 2012

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

DECISION

LEONARDO-DE CASTRO, J.:

*
Per Special Order No. 1203 dated February 17, 2012.

171
 This Petition for Review under Rule 45 of the Rules of Court assails the Decision422 dated
March 14, 2006 of the Court of Appeals in CA-G.R. SP No. 82052. The Court of Appeals
dismissed the Petition for Certiorari filed by therein petitioner Dr. Macapado A. Muslim (Muslim)
and declared the Motion for Intervention of the Board of Regents of the Mindanao State University
(MSU) as a stray pleading proscribed by Rule 19, Section 2 of the Rules of Court.

The instant controversy arose from the following factual background:

Herein respondent Abedin Limpao Osop (Osop) is the former Chancellor of the Mindanao
State University-General Santos City (MSU-GSC) campus. Osop retired in 1987 under the Early
Retirement Law, but several years after his retirement, he was appointed by Moner M. Bajunaid,
then MSU-GSC Chancellor, as a substitute for another professor of the Electrical Engineering
Department, College of Engineering, of MSU-GSC, who was on study leave. Osops appointment
took effect on July 1, 1994.423

In 1997, Muslim, the succeeding Chancellor of MSU-GSC, renewed Osops appointment

as Assistant Professor IV, effective January 1, 1997 until December 31, 1997. His appointment
was duly noted by the MSU Board of Regents during its 166th Meeting held at DECS Conference
Room, U.L. Complex, Meralco Avenue, Pasig City, on February 19, 1997.424

Muslim allowed Osop to continue teaching at MSU-GSC even after December 31, 1997.
On April 17, 1998, Muslim issued Special Order No. 144-98C designating Osop as Chairperson
of the Electrical Engineering Department, College of Engineering, of MSU-GSC, with a term of

422
Rollo, pp. 54-65; penned by Associate Justice Rodrigo F. Lim, Jr. with Associate Justices Teresita Dy-Liacco
Flores and Ramon R. Garcia, concurring.
423
Records, Vol. 1, p. 49.
424
Id. at 21-56.

172
office from April 18, 1998 to April 17, 1999, unless revoked or amended by competent
authority.425

However, on July 15, 1998, Muslim caused to be served upon the College of Engineering
and other offices of MSU-GSC a letter426 dated July 14, 1998 addressed to Osop that reads in full:

Dear Prof. Osop:

In view of the return to the campus of Prof. Danilo Dadula for whom you
have been serving as substitute since July 1, 1994, and considering the expiration
of your temporary appointment last December 31, 1997, I regret to inform you that
your services with the university will have to end. And since I am not renewing
your appointment, you are hereby advised to cease from reporting to duty effective
immediately. Moreover, you should clear yourself from monetary and other official
accountabilities with the university.

On behalf of MSU-GSC, we thank you for your services.

Very truly yours,

(signed)
MACAPADO A. MUSLIM, Ph. D.
Chancellor

Muslim also issued Memorandum Order No. 010-98C427 dated July 14, 1998, addressed to
Virgilio Ramos (Ramos), Dean of the College of Engineering of MSU-GSC, concerning the

425
Id. at 56.
426
Id. at 61.
427
Id. at 62.

173
expiration and non-renewal of Osops appointment and directing Ramos to already distribute Osops
teaching load to the remaining faculty members of the College. In the same Memorandum Order,
Muslim asked Ramos to explain the latters failure to include Osop in the list of substitute faculty
members which he submitted to the Office of the Chancellor before the start of the 1st semester of
1998.

In compliance with Memorandum Order No. 010-98C, Ramos explained in his letter dated
July 16, 1998 that there was no request for the appointment of a substitute for Prof. Danilo Dadula
(Dadula) when the latter went on a study leave. He explained:

Basing on our records, there was no request for substitute of Engr. Danilo
P. Dadula when he went on study leave in June 1994.

On 17 June 1994, Engr. Noel S. Gunay, then the Chairman of the Electrical
Engineering Department, recommended the hiring of Prof. Abedin Limpao Osop
in view of the study leave of Julito G. Fuerzas, PEE. Chancellor Moner M.
Bajunaid, in his letter dated 30 June 1994, informed Dean Carlos B. Cuanan of the
approval of the higher management to hire Prof. Abedin Limpao Osop as substitute
of Engr. Julito G. Fuerzas effective 1 July 1994. After more than a semester, Engr.
Fuerzas stopped schooling but did not return to this campus. Since then, Prof.
Abedin Limpao Osop went on teaching with the College of Engineering and his
appointment was renewable yearly as those on probationary status.

Per DBM Plantilla of Personnel, page 336 of 444 pages, Prof. Abedin
Limpao Osop has an item. For this, I presumed Prof. A.L. Osop was not a
contractual or substitute faculty of the college.

xxxx

Regarding the distribution of Prof. A. L. Osops teaching load to appropriate

faculty members at this time poses some problems. He is handling major courses
in electrical engineering and the electrical engineers have excessive overload.

174
 xxxx

It has been noted and experienced that real excessive overload is more on the
number of preparations than on overload teaching units. For the interest of our
students and with much concern on the efficient delivery of instruction, the faculty
of the Electrical Engineering Department could not absorb the load of Prof. A. L.
Osop. Since his load are major EE courses, the same could not be handled by any
of the faculty in the other departments.

In view thereof, may we request for the reconsideration of your decision to

terminate the services of Prof. Abedin Limpao Osop.428

Muslim responded by issuing handwritten Memorandum Order No. 012-98C429 dated July
17, 1998, in which he reiterated his earlier order to Ramos to already distribute Osops teaching
load.

On July 21, 1998, Osop filed before the Regional Trial Court (RTC) of General Santos
City, Branch 22, a Complaint for Injunction with Prayer for Writ of Preliminary
Injunction/Temporary Restraining Order (TRO), Damages and Attorneys Fees against Muslim and
Ramos. The Complaint was docketed as Civil Case No. 6381.430

Osop filed two days later, on July 23, 1998, an Urgent Motion for Writ of Preliminary
Mandatory Injunction and/or Temporary Restraining Order. At the hearing held the very next day,
on July 24, 1998, the RTC issued an Order in which it noted the absence of Muslim, and to give
chance for the possibility of an amicable settlement, it reset the hearing for the issuance of a TRO
to July 27, 1998. Nevertheless, in the same Order, the RTC already directed Osop to submit a bond

428
Id. at 64-65.
429
Id. at 63.
430
Id. at 5-14.

175
of P20,000.00 to answer for damages that Muslim and Ramos might suffer if it turns out that Osop
was not entitled to an injunction/TRO. Osop filed his injunction/TRO bond on July 27, 1998.

At the hearing of Osops application for the issuance of a TRO on July 27, 1998, the RTC
issued an Order,431 whereby, in consideration of the principle of exhaustion of administrative
remedies, it suggested that Osop first write Muslim to seek reconsideration of Muslims letter and
Memorandum Order No. 010-98C both dated July 14, 1998. Osop accordingly wrote Muslim such
a letter dated July 27, 1998.432

Muslim endorsed Osops letter dated July 27, 1998 to Emily Marohombsar (Marohombsar),
then MSU President. In a letter433 dated August 7, 1998, Marohombsar wrote:

Based on the meticulous study made, the management is not legally nor
morally under obligation to retain Prof. Osop in the service or liable for the non-
renewal of his appointment the nature of which was temporary and contingent on
the return of Prof. Danilo Dadula. With the return of Prof. Dadula, the renewal of
the appointment of Prof. Osop would have been an unjustifiable superfluity.

This Office, concurring with the opinion of Director Imam, upholds your
position on the case of Prof. Osop.

Marohombsars aforequoted decision was based on the Brief from the MSU Human
Resources Development Office dated August 6, 1998, signed by Director Lomala O. Imam, stating
that [t]he issue is not one of termination or dismissal but an expiration of an appointment which is

431
Id. at 110.
432
Id. at 119.
433
Rollo, p. 81.

176
not permanent in nature and that [t]he renewal or non-renewal of a temporary or probationary
appointment is a management prerogative.434

On August 6, 1998, Muslim and Ramos filed before the RTC a Motion to Dismiss Civil
Case No. 6381 citing the following grounds: (1) lack of cause of action due to non-exhaustion of
administrative remedies and non-inclusion of indispensable parties; (2) appointment in a
temporary character; (3) presumption of regularity; and (4) forum shopping.435

The RTC issued an Omnibus Order on September 10, 1998, dismissing Civil Case No.
6381, for the following reasons:

The complaint is essentially one for illegal dismissal filed by [herein

respondent] Abedin Limpao Osop, a faculty member of the Mindanao State
University (MSU), against defendant Macapagal A. Muslim, Chancellor of the
MSU, and Virgilio Ramos, Dean of the College of Engineering of the same
university. A party aggrieved by a decision, ruling, order or action of an agency of
the government involving termination of services may appeal to the Civil Service
Commission. Regional Trial Courts have no jurisdiction to entertain cases
involving dismissal of officers and employees covered by the Civil Service Law.
(Mateo v. C.A., 247 SCRA 284). The Civil Service Commission is the sole arbiter
of all controversies pertaining to the Civil Service. (Dario v. Mison, 176 SCRA
84).436

Thus, the RTC decreed:

WHEREFORE, in view of the foregoing, the instant complaint is hereby

DISMISSED for lack of jurisdiction. Accordingly, [Osops] application for

434
Id. at 82.
435
Records, Vol. I, p. 201.
436
Id. at 264.

177
 preliminary injunction, being merely ancillary to the principal action is also hereby
dismissed without prejudice. The injunction bond is cancelled ipso facto.437

The RTC denied Osops Motion for Reconsideration in an Order438 dated September 25,
1998, prompting him to file with the Court of Appeals a Petition for Certiorari and Mandamus, 439
under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 49966, in which he argued,
inter alia, that:

2) The issue of removal from office of [Osop], who is faculty member

of a state university, is beyond the jurisdiction of the Civil Service Commission;

xxxx

4) In Civil Case No. 6381 [Osop] is suing [Muslim and Ramos] also
for damages, a subject matter that is beyond the jurisdiction of the Civil Service
Commission.440

In the meantime, concerned students of MSU-GSC filed before the Civil Service
Commission (CSC) Regional Office No. 11 a Complaint for the illegal termination of Osop by
Muslim. CSC Regional Office No. 11 issued an Order dated November 27, 1998 finding that
Osops termination was in order given that his appointment as a substitute was good only until the
return of the person being substituted.441

437
Id. at 265.
438
Id. at 343-344.
439
Id. at 347-370.
440
Id. at 356-357.
441
Id. at 418-420.

178
 Eventually, on June 7, 1999, the Court of Appeals rendered a Decision442 in CA-G.R. SP
No. 49966, granting Osops Petition for Certiorari, based on the following ratiocination:

Anent the order of the Civil Service Commission Regional Office dated
November 27, 1998 holding the termination of [Osop] as legal, we agree with
[Osop] that this finding should not be legally binding upon him because he is not a
party to the complaint apparently initiated by alleged concerned students of MSU-
GSC.

Secondly, [Osops] side of the issue was never heard because only Muslim
was allowed to adduce evidence hence a denial of due process on the part of [Osop].

Coming now to the issue of whether or not [Osops] complaint was correctly
dismissed by the trial court for having failed to exhaust administrative remedies
and that consequently this case falls with the Civil Service Commission, we answer
in the negative.

[Osop] cites Sections 4, 5 and 6(e)(h) of the MSU charter R.A. 1387 as
amended by R.A. Nos. 1893, 3791, 3868, to wit:

Sec. 4. The government of said University is vested in a

board of regents to be known as the Board of Regents of the
Mindanao State University. (R.A. 1893)

Sec. 5. The Mindanao State University shall have the general

powers set out in Section thirteen of Act Numbered Fourteen
hundred and fifty-nine and the administration of said university and
the exercise of its corporate powers are hereby vested exclusively in
the Board of Regents and in the President of the University, insofar
as authorized by said Board.

442
Id. at 426-434.

179
 Sec. 6. The Board of Regents shall have the following
powers of administration and the exercise of the powers of the
corporation.

xxxx

(e) To appoint, on the recommendation of the President of

the University, professors, instructors, lecturers, and other
employees of the University; to fix their compensation, hours of
service, and such other duties and conditions as it may deem proper;
to grant to them in its discretion leave of absence under such
regulations as it may promulgate, any provisions of law to the
contrary notwithstanding, and to remove them for cause after an
investigation and hearing shall have been had; and to extend with
their consent the tenure of faculty members of the University beyond
the age of sixty-five, any other provision of law to the contrary
notwithstanding, on recommendation of the President of the
University, whenever in his opinion their services are specially
needed; Provided, however, that no extension of service shall be
made beyond the age of seventy.

xxxx

(h) To prescribe rules for its own government, and to enact

for the government of the University such general ordinances and
regulations, not contrary to law, as are consistent with the purposes
of the University as defined in Section 2 of this Act.

Moreover, Article 152 of the Code of MSU provides:

Art. 152. Terms and Conditions of Appointment. The precise

terms and conditions of every appointment shall be stated in writing.
In case of a non-renewal of a probationary appointment the person
so concerned shall be so informed in writing at least sixty days
before the termination date.

180
 Proceeding from all the foregoing, it appears clearly that the authority to
remove is vested in the Board of Regents and only after an investigation and
hearing.

Due process was clearly not observed in the removal of [Osop]. First of all,
only the Board of Regents have the power of removal which must be for cause and
after an investigation and hearing shall have been had. Secondly, even a mere
probationary appointment requires that in case of non-renewal the person so
concerned shall be informed in writing at least sixty (60) days before termination
date. These basic requisites were not at all observed in the termination of [Osop].

Therefore, we agree with [Osop] that his non-referral of the matter of his
removal to the Board of Regents before he resorted to court action is accepted as
an exception to the doctrine of exhaustion of administrative remedies.

The doctrine of exhaustion of administrative remedies admits of several

exception[s], to wit:

1. When there is a violation of due process.

xxxx

On another point, the two grounds relied upon by Muslim for terminating
[Osop] to wit: (1) that Prof. Danilo Dadula for whom [Osop] has been serving as
substitute since July 1, 1997 had already returned to MSU, and: (2) [Osops]
temporary appointment expired on December 31, 1997, clearly appears to be
without basis.

[Osop] contends and respondent Muslim does not deny that the notation
vice Danilo Dadula on study grant contained in [Osops] appointment is erroneous
because [Osop] was recruited as a substitute for Engineer Julito Fuerzas.

Assuming that [Osop] merely substituted for Dadula, [Muslim] does not
deny that Danilo Dadula returned to MSU General Santos from his study grant in
June 1996 and has taught in the Department of Mechanical Engineering of the

181
 College of Engineering since then up to April 1998. During the said period, [Osop]
was also teaching in the said University and before the letter of July 15, 1998
advising [Osop] of his termination, he was teaching at the same time as Dadula for
which he was never asked to leave contrary to Muslims claim that [Osop] merely
acted as a substitute of Dadula. Meanwhile Dadula has filed a leave of absence and
has not reported for duty for the first semester of SY 1998-1999. To repeat, from
June 1996 up to April 1998, Dadula and [Osop] taught together in the College of
Engineering of MSU. Hence, if [Osop] was merely a substitute for Dadula, he
should have been required to leave as early as June 1996, upon Dadulas return.

Further, contradicting Muslims claim that [Osop] is a mere substitute of

Dadula on April 17, 1998, Muslim issued Special Order 144-98C designating
[Osop] as Chairperson of the Electrical Engineering Department of the College of
Engineering with a term of office from April 18, 1998 up to April 17, 1999. Clearly,
therefore, when [Osop] continued teaching up to July 15, 1998 and even his
appointment as Chairperson of the Electrical Engineering Department until April
17, 1999 by Muslim himself, his appointment has ceased to be probationary in
character.443

In the end, the Court of Appeals decreed:

WHEREFORE, premises considered, the petition for certiorari is

GRANTED. The Omnibus Order of the RTC of General Santos City, Branch 22
dated September 10, 1998 is hereby SET ASIDE. The RTC is directed to hear and
try Civil Case No. 6381 with utmost dispatch.444

The Motion for Reconsideration of Muslim and Ramos was denied by the Court of Appeal
in its Resolution dated November 11, 1999.445

443
Id. at 429-434.
444
Id. at 434.
445
Id. at 478.

182
 Muslim then appealed the foregoing judgment of the Court of Appeals in CA-G.R. SP No.
49966 by way of a Petition for Review before this Court, docketed as G.R. No. 141276. However,
in a Resolution dated July 3, 2000, the Court denied Muslims Petition for Review; and in a
Resolution dated April 4, 2001, the Court likewise denied Muslims Motion for Reconsideration.446

On June 26, 2001, Osop filed an Amended Complaint447 before the RTC impleading MSU
as a defendant in Civil Case No. 6381. Despite the opposition of Muslim and Ramos, the RTC
admitted the Amended Complaint in its Order448 dated July 11, 2001, which reads:

Considering that no responsive pleading has yet been filed by [Muslim and
Ramos], the amended complaint is hereby ADMITTED.

WHEREFORE, the defendants Macapado Muslim and Virgilio Ramos are

ordered to file their answers within ten (10) days from today, and as prayed for by
the counsel of [Osop], issue the corresponding summons to newly impleaded
defendant Mindanao State University (MSU) at its main office in Marawi City. The
summons to defendant MSU, Marawi City shall be sent via registered mail to the
Clerk of Court of Marawi City who is requested to serve the same and thereafter to
make a return to this court.

The Solicitor General is hereby ordered to enter his appearance as counsel

for defendant Macapado A. Muslim and Virgilio Ramos, who were both sued in
their official and personal capacities and defendant MSU.

Muslim and Ramos, through counsel, Atty. Emmanuel C. Fontanilla, filed their Answer to
Amended Complaint on July 20, 2001.449

446
Id. at 507.
447
Id. at 508-517.
448
Id. at 589.
449
Id. at 632-642.

183
 On July 27, 2001, RTC Clerk of Court Asuncion de Leon Omila served summons upon
MSU at its main campus in Marawi City which required the university to enter its appearance in
Civil Case No. 6381 and to answer Osops Amended Complaint within 15 days after service of said
summons.450

The Office of the Solicitor General (OSG) entered its appearance before the RTC in Civil
Case No. 6381 on September 14, 2001 as counsel for Muslim, Ramos, and MSU (Muslim, et al.).
The OSG requested that it be furnished with a copy of the Amended Complaint and that the period
to file the answer be suspended until receipt of said Amended Complaint.451 In its Order452 dated
September 26, 2001, the RTC granted the OSG a period of 15 days from receipt of a copy of the
Amended Complaint from Osop within which to file a responsive pleading.

For failure of MSU to file an answer to the Amended Complaint within the given period,
Osop filed a Motion to Declare Defendant MSU in Default.453 Osops Motion was denied by the
RTC in its Order454 dated February 1, 2002 since there was no proof as to when the OSG received
a copy of the Amended Complaint from Osop.

The OSG filed a Manifestation on February 14, 2002 which stated that upon verification
with its Record Section, it discovered that Atty. Fontanilla, counsel for Muslim and Ramos, was
actually deputized by the OSG to handle Civil Case No. 6381; and that MSU is adopting the
Answer to the Amended Complaint already filed by Ramos and Muslim, as all the defendants in
said case were in the same position.455

450
Id. at 660.
451
Id. at 664-668.
452
Id. at 670.
453
Id. at 751.
454
Records, Vol. II, p. 23.
455
Id. at 46-48.

184
 Osop filed a Motion for Reconsideration of the RTC Order dated February 1, 2002 denying
his Motion to Declare Defendant MSU in Default. In another Order456 dated June 21, 2002, the
RTC denied Osops Motion for Reconsideration for being moot and academic in light of the
Manifestation of the OSG that MSU was adopting the Answer to the Amended Complaint of
Muslim and Ramos.

Meanwhile, Osop filed on January 11, 2002 a Motion for Summary Judgment457 in Civil
Case No. 6381, to which Muslim and Ramos filed on January 16, 2002 an Opposition.458

In an Order459 dated October 21, 2002, Judge Antonio Lubao of RTC-Branch 22 voluntarily
inhibited himself from further hearing Civil Case No. 6381 to avoid conflict of interest considering
that he was a faculty member at the MSU College of Law. Thus, the case was re-raffled to RTC-
Branch 37, presided over by Judge Eddie R. Rojas.

After an exchange of pleadings among the parties, the RTC issued an Order460 dated March
20, 2003, which granted Osops Motion for Summary Judgment in Civil Case No. 6381 pursuant
to Rule 35, Section 1 of the Rules of Court. The RTC explicated that:

The law itself determines when a summary judgment is proper. Under the
rules, summary judgment is appropriate when there are no genuine issues of fact
which call for the presentation of evidence in a full-blown trial. Even if on their
face the pleading appear to raise issues, when the affidavits, depositions and
admissions show that such issues are not genuine, then summary judgment as
prescribed by the rules must ensure as a matter of law. What is crucial for
determination, therefore, is the presence of a genuine issue as to any material fact.

456
Id. at 101.
457
Records, Vol. I, pp. 759-782.
458
Records, Vol. II, pp. 1-7.
459
Id. at 111-112.
460
Id. at 121-123.

185
 A genuine issue is an issue of fact which require (sic) the presentation of
evidence as distinguished from a sham, fictitious, contrived or false claim. When
the facts as pleaded appear uncontested or undisputed, then there is no real or
genuine issue or question as to the facts, and summary judgment is called for. The
party who moves for summary judgment has the burden of demonstrating clearly
the absence of any genuine issue of fact, or that the issue posed in the complaint is
patently unsubstantial so as not to constitute a genuine issue of trial.

Applying these (sic) principle to the present case, it can be said that [Osop]
has clearly demonstrate (sic) the absence of any genuine issue of fact, as well as the
issue posed by [Muslim, et al.] that [Osop] is a contractual employee is patently
unsubstantial so as not to constitute a genuine issue for a full-blown trial.

From the decision rendered by the Seventeenth Division Court of Appeals

concerning the petition for Certiorari and Mandamus filed by [Osop], in this case
it ruled that the appointment of [Osop] by [Muslim] ceases to be probationary in
character when the former was allowed to continue teaching up to July 15, 1998
(sic) and even appointed as Chairperson of the Electrical Engineering Department.
The issue raised by [Muslim, et al.] in their answer that [Osop] is a contractual
employee is indeed patently unsubstantial as to constitute a genuine issue in this
case for trial. Once and for all, such an issue has already been settled by the
honorable Court of Appeals whose decision has become final and executory. Thus,
there was no more genuine issue that was left to be tried except the amount of
damages and attorneys fees.

xxxx

After having been taken into account the foregoing premises and pleadings
of the parties in support of their respective stand on the matter under consideration
as well as from the implied admissions arising from the failure of [Muslim, et al.]
to set forth reasons why [they] could not truthfully either admit or deny those
matters alleged in the amended complaint, and having concluded from the attendant
circumstances that [Osop] is entitled to judgment as a matter of law for such amount
as may be found to be due him in damages.

Consequently, the RTC disposed:

186
 WHEREFORE, a summary judgment is hereby rendered in favor of [Osop]
by ordering [Muslim and Ramos] or their successors, and defendant Mindanao
State University to give teaching loads to [Osop] and to pay such amount as may
be found to be due him in damages.

For the meantime, let this case be called for trial to resolve the sole issue of
damages that may be awarded in favor of [Osop] on May 30, 2003, at 2:00 oclock
in the afternoon.461

Muslim, et al. filed a Motion for Reconsideration of the aforementioned Order on April 1,
2003, which Osop opposed.

Osop, for his part, filed a Motion for Execution Pending Appeal, and Muslim, et al. filed a
Comment thereon.

In an Order462 dated August 21, 2003, the RTC denied the Motion for Reconsideration of
the Order dated March 20, 2003 filed by Muslim, et al., thus:

In resolving [Muslim, et al.s] Motion for Reconsideration, the Court casts

doubt on the veracity of [Muslim, et al.s] claim that the findings of the Court of
Appeals as to the appointment of [Osop] was a mere opinion and that there could
be no final determination on the matters not principally raised before it. It was
emphasized in the ruling of the Honorable Supreme Court in the case of Padua vs.
Robles, G.R. No. 127930, December 15, 2000, which lays down the rules in
construing judgments. It was held that the sufficiency and efficacy of a judgment
must be tested by its substance rather than its form. In construing a judgment, its
legal effects including such effects that necessarily follows because of legal
implications, rather than the language used, govern. Also, its meaning, operations,
and consequences must be ascertained like any other written instrument. If the

461
Id. at 123.
462
Id. at 241-243.

187
record shows that the judgment could not have been rendered without deciding the
particular matter, it will be considered as having settled that matter as to all future
actions between the parties, and if a judgment necessarily presupposes certain
premises, they are as conclusive as the judgment itself. Reasons for the rule are that
a judgment is an adjudication on all the matters which are essential to support it,
and that every proposition assumed or decided by the court leading up to the final
conclusions and upon which such conclusion is based is as effectually passed upon
as the ultimate question which is solved. Thus a judgment rest on the intent of the
court as gathered from every part thereof, including the situation to which it applies
and attendant circumstances.

[Muslim, et al.] lost sight of the fact that the court gave due course to
[Osops] Motion for Summary Judgment only after finding that the issue raised by
them in their answer was patently unsubstantial as to constitute a genuine issue.
Inasmuch as [Muslim, et al.] failed to show a plausible ground of defense
something fairly arguable and of substantial character, they cannot therefore further
insist that they have a genuine issue to warrant this Court to hear and try the above-
entitled case.

Hence, in the present recourse, [Muslim, et al.s] Motion for Reconsideration

is hereby denied due course for bereft of any merit.

In the same Order, the RTC granted Osops Motion for Execution Pending Appeal, to wit:

Anent [Osops] Motion for Execution Pending Appeal, it alleged that [Osop]
has been unemployed for almost five (5) years and if [Muslim, et al.s] appeal on
the resolution of this Court, it will be just for the purpose of delaying the
termination of the case and to cause further misery to [Osop].

Section 2, Rule 39 of the 1997 Rules of Civil Procedure, lays down the rule
for execution pending appeal, categorized as discretionary execution. It is evident
from the said provision that a primary consideration for allowing execution pending
appeal would be the existence of good reasons. In turn, good reasons has been held
to consist of compelling circumstances justifying the immediate execution lest
judgment becomes illusory. Such reason must constitute superior circumstances

188
 demanding urgency which will outweigh the injury or damages should the losing
party secure a reversal of the resolution issued by this Court.

After weighing the reasons presented, the Court deemed it wise to give due
course to [Osops] Motion for Execution Pending Appeal. The effective and
efficient administration of justice requires that the prevailing party should not be
deprived of the fruits of the verdict rendered in his favor. The system of judicial
review should not be misused and abused to evade the decision/order from attaining
finality.

With the foregoing reasons, [Osops] Motion for Execution Pending Appeal
is hereby given due course, but insofar as to the giving of teaching loads to [Osop]
only inasmuch as no amount of damages could be ascertained at this moment.

Let therefore a Writ of Execution Pending Appeal be issued in this case

directing [Muslim and Ramos] or their successors and defendant Mindanao State
University to give teaching loads to [Osop] with a bond fix at Five Thousand
(P5,000.00) Pesos.463

Muslim, et al., filed a Motion for Reconsideration464 of the Order dated August 21, 2003,
which Osop again opposed.465

On October 1, 2003, Osop filed a Motion for Partial Execution (Based on a Final Executory
Judgment) praying that a writ of execution be issued ordering Muslim, et al. to give him teaching
loads.466

463
Id. at 242-243.
464
Id. at 263-266.
465
Id. at 280-281.
466
Id. at 290-291.

189
 Two days after, on October 3, 2003, Muslim, et al. filed a Second Motion for
Reconsideration and Supplement to the Opposition (also Reply to Motion for Partial Execution).467

In an Order468 dated October 9, 2003 the RTC denied Muslim, et al.s Second Motion for
Reconsideration and Supplement to the Opposition (also Reply to Motion for Partial Execution)
for being a pro forma motion.

Subsequently, the RTC issued an Order469 dated November 10, 2003 granting Osops
Motion for Partial Execution and ordering the issuance of a writ for the partial execution of the
Order dated March 20, 2003, particularly, for its directive that Muslim, et al. give Osop teaching
load.

RTC Clerk of Court Fulgar issued the Writ of Execution470 the next day, November 11,
2003. As shown in the Sheriffs Return471 dated November 17, 2003, original copies of RTC Order
dated November 10, 2003 and Writ of Execution dated November 11, 2003 were duly served upon
Muslim, et al. on November 12, 2003.

Aggrieved, Muslim, in his personal capacity,472 filed on January 12, 2004, with the Court
of Appeals, a Petition for Certiorari and Prohibition with Prayer for a Writ of Preliminary and
Instant Issuance of Temporary Restraining Order, which was docketed as CA-G.R. SP No.
82052.473 Muslim averred that in issuing the Order dated November 10, 2003, the RTC committed
grave abuse of discretion amounting to lack or excess of jurisdiction as it:

467
Id. at 309-314.
468
Id. at 328.
469
Id. at 366-372.
470
Id. at 382-383.
471
Id. at 384.
472
In the Amended Complaint, Muslim was sued not only in his official capacity but also in his personal
capacity.
473
Records, Vol. II, pp. 418-438.

190
 1. Consider[ed] the Decision of the Court of Appeals in a Certiorari as a judgment
on the merit.

2. Plac[ed] the action in the lower court within the purview of summary procedure.

3. Grant[ed] partial execution.

4. Consider[ed] the order of finding no genuine issue as a final order.474

After the parties filed their respective Memorandum, the Court of Appeals issued a
Resolution dated October 6, 2004 considering the case submitted for decision.475

On January 14, 2005, MSU, through the OSG, filed before the Court of Appeals a Motion
to Intervene (with Motion to Admit Memorandum) in CA-G.R. SP No. 82052.476 Osop opposed
the intervention of MSU.477

The Court of Appeals rendered its Decision in CA-G.R. SP No. 82052 on March 14, 2006,
dismissing Muslims Petition for Certiorari and Prohibition.478 It held that:

In the instant case, it is indubitably shown that the main issue that needs to
be resolved is whether or not [Osop] was a probationary employee. In CA-G.R. SP
No. 49966, the appellate court, despite the fact that the issue brought therein was
whether or not public respondent gravely abused his discretion in dismissing the
case for lack of jurisdiction, nevertheless ruled that the appointment of [Osop]

474
Id. at 430.
475
Id. at 669.
476
Id. at 681-718.
477
Id. at 944-946.
478
Muslims Motion for Reconsideration is still pending in court.

191
ceased to be probationary in character. Respondent judge merely took judicial
notice of the appellate courts findings that [Osop] had indeed ceased to be a
probationary employee. To Our assessment, what respondent judge may have had
on his mind was that even if he decided otherwise, the case would still be appealed
to the Court of Appeals which, as adverted to, already made a finding that [Osop]
was a permanent employee. Moreover, the appellate courts decision was also
binding between the parties; it was deemed to be the law of the case, hence, it was
only proper for public respondent to conform to this Courts decision.

xxxx

A trial court which has jurisdiction over the person and subject matter of
the case, can grant a motion for summary judgment, and such is within its power or
authority in law to perform. Its propriety rests on its sound exercise of discretion
and judgment. In the event that it errs in finding that there is no genuine issue to
thus call for the rendition of a summary judgment, the resulting decision may not
be set aside either directly or indirectly by petition for certiorari, but may only be
corrected on appeal or other direct review. The court a quo categorically stated that
its March 20, 2003 [Order] had become final and executory as quoted hereunder:

A review of the records of the case will show that the

[Muslim, et al.] received the Order dated [20] March 2003, granting
the summary judgment, on March 25, 2003. On that date, the fifteen
(15) days prescriptive period within which to file an appeal began to
run. Instead of preparing an appeal, [Muslim, et al.] filed their
Motion for Reconsideration on April 1, 2003. The filing of the said
Motion interrupted the reglementary period to appeal. By that time,
however, eight (8) days had already lapsed; thus, from their receipt
of the Order dated August 21, 2003, denying their Motion for
Reconsideration, on September 2, 2003, they had only seven (7)
days left or until September 9, 2003 within which to file a notice of
appeal. However, on said date, [Muslim, et al.] filed another Motion
for Reconsideration praying that the order for execution pending
appeal be recalled. On October 9, 2003, an Order had been issued
denying [Muslim, et al.s] Motion for Reconsideration, copy of
which was received by [Muslim, et al.] on that same day.

Again, carefully going over the records, the Court finds that
the Orders issued were already final and executory. [Muslim, et al.]

192
 received the Order granting the summary judgment of [Osop] dated
March 20, 2003. Hence, they had until September 9, 2003 within
which to file its appeal. [Muslim, et al.] filed a Motion for
Reconsideration and the Court on its Order dated August 21, 2003
denied the same. [Muslim, et al.] received a copy of the denial of its
Motion for Reconsideration, which was considered pro-forma, was
likewise denied on October 9, 2003, [Muslim, et al.] received copy
of the order of denial on that very same day. Such second motion for
reconsideration filed by [Muslim, et al.], being a pro-forma, does
(sic) not toll the running of the period to perfect an appeal or any
remedy provided by law. Thus, it can be concluded that the subject
orders issued by this Court are now final and executory. Now, once
a judgment attains finality it becomes the ministerial duty of the trial
court to order its execution.

Indeed, it bears stressing that the right to appeal is not a natural right or a
part of due process. It is a procedural remedy of statutory origin and, as such, may
be exercised only in the manner and within the time frame provided by the
provisions of law authorizing its exercise. Failure of a party to perfect an appeal
within the period fixed by law renders the decision sought to be appealed final and
executory. After a decision is declared final and executory, vested rights are
acquired by the winning party who has the right to enjoy the finality of the case.

To determine whether a judgment or order is final or interlocutory, the test

is: Does it leave something to be done in the trial court with respect to the merits
of the case? If it does, it is interlocutory, if it does not, it is final. A final judgment
is one that disposes of a case in a manner that leaves nothing more to be done by
the court in respect thereto. A summary judgment is one which is final as it already
adjudicated the issues and determined the rights of the parties. It is only
interlocutory when the court denies a motion for summary judgment or renders a
partial summary judgment as there would still be issues left to be determined by the
court. In the instant case, the March 20, 2003 Order was unequivocal, other than
setting a hearing to determine the amount of damages, but had, on the other hand,
already disposed of the case. As such, the issuance of the November 10, 2003 Order
granting the motion for partial execution was proper as the summary judgment
already became final and executory as adverted to.

In a petition for certiorari, even if, in the greater interest of substantial

justice, certiorari may be availed of, it must be shown that the trial court acted with
grave abuse of discretion amounting to lack or excess of jurisdiction, that is, that

193
 the trial court exercised its powers in an arbitrary or despotic manner by reason of
passion or personal hostilities, so patent and gross as to amount to an evasion or
virtual refusal to perform the duty enjoined or to act in contemplation of law. We
find that such abuse is not extant in the instant case.479

Muslim filed a Motion for Reconsideration of the foregoing judgment on May 9, 2006 480
and a Supplemental Motion for Reconsideration on June 23, 2006.481

On July 11, 2006, the Court of Appeals issued a Resolution stating that it received on June
8, 2006 a copy of the instant Petition (G.R. No. 172448) filed by MSU; and since said Petition
assails its Decision dated March 14, 2006 in CA-G.R. SP No. 82052, it was constrained to await
the ruling of the Supreme Court in G.R. No. 172448. Hence, the Court of Appeals opted to hold in
abeyance the resolution of Muslims Motion for Reconsideration and Supplemental Motion for
Reconsideration of the Decision dated March 14, 2006 in CA-G.R. SP No. 82052.

The issue relevant to the Petition at bar insofar as MSU is concerned arises from the
pronouncement of the Court of Appeals in the same Decision dated March 14, 2006 in CA-G.R.
SP No. 82052 quoted hereunder:

At the outset this case was deemed submitted for decision on October 6,
2004. On January 10, 2005, this Court received a Motion to Intervene (with Motion
to Admit Memorandum) filed by Mindanao State University (MSU) through the
Office of the Solicitor General (OSG). However, Section 2, Rule 19 of the Rules of
Court, allows intervention only at any time before rendition of judgment by the trial
court, and We hold the motion to intervene is a stray pleading and is deemed not
filed.482

479
Rollo, pp. 60-65.
480
CA rollo, pp. 575-586.
481
Id. at 886-904.
482
Records, Vol. II, pp. 951-952.

194
The instant Petition of MSU presented the following assignment of errors:

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT

PETITIONERS MOTION FOR INTERVENTION WAS IMPROVIDENTLY
FILED.

II

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT

RESPONDENTS MOTION FOR SUMMARY JUDGMENT WAS PROPER
ALTHOUGH PETITIONER PRESENTED DEFENSES IN THEIR ANSWER TO
AMENDED COMPLAINT TENDERING FACTUAL ISSUES WHICH
REQUIRE TRIAL ON THE MERITS.

III

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT

RESPONDENT ACQUIRED PERMANENT STATUS.

IV

195
 THE COURT OF APPEALS GRAVELY ERRED UPHOLDING THE TRIAL
COURTS ORDER GRANTING RESPONDENT MOTION FOR ISSUANCE OF
PARTIAL WRIT OF EXECUTION.483

MSU anchors its right to intervene on Rule 19, Section 1 of the Rules of Court. MSU
stresses that it has a legal interest in the controversy considering that, ultimately, it will be the one
liable for the relief Osop prays for, particularly, Osops reinstatement at MSU-GSC.

Rule 19, Section 1 of the Rules of Court provides:

Section 1. Who may intervene. A person who has a legal interest in the
matter in litigation, or in the success of either of the parties, or an interest against
both, or is so situated as to be adversely affected by a distribution or other
disposition of property in the custody of the court or of an officer thereof may, with
leave of court, be allowed to intervene in the action. The court shall consider
whether or not the intervention will unduly delay or prejudice the adjudication of
the rights of the original parties, and whether or not the intervenors rights may be
fully protected in a separate proceeding.

In Alfelor v. Halasan,484 the Court held that:

Under this Rule, intervention shall be allowed when a person has (1) a legal
interest in the matter in litigation; (2) or in the success of any of the parties; (3) or
an interest against the parties; (4) or when he is so situated as to be adversely
affected by a distribution or disposition of property in the custody of the court or
an officer thereof.485

483
Rollo, pp. 24-25.
484
G.R. No. 165987, March 31, 2006, 486 SCRA 451.
485
Id. at 460.

196
 Jurisprudence describes intervention as a remedy by which a third party, not originally
impleaded in the proceedings, becomes a litigant therein to enable him, her or it to protect or
preserve a right or interest which may be affected by such proceedings.486 The right to intervene
is not an absolute right; it may only be permitted by the court when the movant establishes facts
which satisfy the requirements of the law authorizing it.487

While undoubtedly, MSU has a legal interest in the outcome of the case, it may not avail
itself of the remedy of intervention in CA-G.R. SP No. 82052 simply because MSU is not a third
party in the proceedings herein.

In Osops Amended Complaint before the RTC, MSU was already impleaded as one of the
defendants in Civil Case No. 6381. MSU came under the jurisdiction of the RTC when it was
served with summons. It participated in Civil Case No. 6381, where it was represented by Atty.
Fontanilla, counsel for Muslim and Ramos, who was deputized by the OSG as counsel for MSU.
MSU adopted the Answer to the Amended Complaint of its co-defendants, Muslim and Ramos,
and also joined Muslim and Ramos in subsequent pleadings filed before the RTC in Civil Case
No. 6381. Evidently, the rights and interests of MSU were duly presented before the RTC in Civil
Case No. 6381. Unfortunately, the RTC issued the Orders dated March 20, 2003 and August 21,
2003 in Civil Case No. 6381 adverse to MSU and its co-defendants, Muslim and Ramos.

The Orders dated March 20, 2003 and August 21, 2003 of the RTC in Civil Case No. 6381
granted summary judgment in Osops favor. Muslim filed his Petition for Certiorari and
Prohibition in CA-G.R. SP No. 82052 which is still pending before the Court of Appeals (which
has yet to resolve Muslims Motion for Reconsideration and Supplemental Motion for

486
Asias Emerging Dragon Corporation v. Department of Transportation and Communications, G.R. No.
169914, March 24, 2008, 549 SCRA 44, 48.
487
Id. at 51.

197
Reconsideration). Consequently, we are careful not to make any declarations herein that will
prematurely judge the merits of CA-G.R. SP No. 82052.

MSU, on its part, neither filed an appeal nor a Petition for Certiorari before the Court of
Appeals to challenge the adverse RTC Orders. MSU sat on its rights. Despite receiving on
September 2, 2003488 a copy of the RTC Order dated August 21, 2003 (denying the Motion for
Reconsideration of the RTC Order dated March 20, 2003 filed by MSU, together with Muslim and
Ramos) in Civil Case No. 6381, MSU did not act until it filed its Motion for Intervention on
January 14, 2005489 in CA-G.R. SP No. 82052, after an interval of 16 months. Evidently, it was
already way beyond the reglementary period for MSU to file an appeal (15 days) 490 or a Petition
for Certiorari (60 days).491 The RTC Orders dated March 20, 2003 and August 21, 2003 had
already become final and executory as to MSU. It cannot now circumvent the finality of the RTC
Orders by seeking to intervene in CA-G.R. SP No. 82052 and thereby, to unduly benefit from the
timely action taken by Muslim, who alone, filed the Petition in CA-G.R. SP No. 82052.

In view of the foregoing, the Court finds no further need to address the other assignment
of errors of MSU. Given that the Court of Appeals did not allow MSU to intervene in CA-G.R. SP
No. 82052, it has no personality to question the judgment of the appellate court in this case.

WHEREFORE, the instant Petition for Review is hereby DENIED.

SO ORDERED.

488
Records, Vol. II, p. 368.
489
Id. at 681-718.
490
Rules of Court, Rule 41, Sec. 3.
491
Id., Rule 65, Sec. 4.

198
 TERESITA J. LEONARDO-DE CASTRO
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

199
 LUCAS P. BERSAMIN MARTIN S. VILLARAMA, JR.
Associate Justice
Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

200
 Republic of the Philippines
Supreme Court
Manila

FIRST DIVISION

THE BOARD OF REGENTS OF THE G.R. No. 172448

MINDANAO STATE UNIVERSITY
represented by its Chairman,
Present:
Petitioner,

CORONA, C.J.,
Chairperson,
LEONARDO-DE CASTRO,
- versus - BERSAMIN,
VILLARAMA, JR., and
PERLAS-BERNABE,* JJ.

ABEDIN LIMPAO OSOP, Promulgated:

Respondent.

February 22, 2012

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

DECISION

LEONARDO-DE CASTRO, J.:

*
Per Special Order No. 1203 dated February 17, 2012.

201
 This Petition for Review under Rule 45 of the Rules of Court assails the Decision492 dated
March 14, 2006 of the Court of Appeals in CA-G.R. SP No. 82052. The Court of Appeals
dismissed the Petition for Certiorari filed by therein petitioner Dr. Macapado A. Muslim (Muslim)
and declared the Motion for Intervention of the Board of Regents of the Mindanao State University
(MSU) as a stray pleading proscribed by Rule 19, Section 2 of the Rules of Court.

The instant controversy arose from the following factual background:

Herein respondent Abedin Limpao Osop (Osop) is the former Chancellor of the Mindanao
State University-General Santos City (MSU-GSC) campus. Osop retired in 1987 under the Early
Retirement Law, but several years after his retirement, he was appointed by Moner M. Bajunaid,
then MSU-GSC Chancellor, as a substitute for another professor of the Electrical Engineering
Department, College of Engineering, of MSU-GSC, who was on study leave. Osops appointment
took effect on July 1, 1994.493

In 1997, Muslim, the succeeding Chancellor of MSU-GSC, renewed Osops appointment

as Assistant Professor IV, effective January 1, 1997 until December 31, 1997. His appointment
was duly noted by the MSU Board of Regents during its 166th Meeting held at DECS Conference
Room, U.L. Complex, Meralco Avenue, Pasig City, on February 19, 1997.494

Muslim allowed Osop to continue teaching at MSU-GSC even after December 31, 1997.
On April 17, 1998, Muslim issued Special Order No. 144-98C designating Osop as Chairperson
of the Electrical Engineering Department, College of Engineering, of MSU-GSC, with a term of

492
Rollo, pp. 54-65; penned by Associate Justice Rodrigo F. Lim, Jr. with Associate Justices Teresita Dy-Liacco
Flores and Ramon R. Garcia, concurring.
493
Records, Vol. 1, p. 49.
494
Id. at 21-56.

202
office from April 18, 1998 to April 17, 1999, unless revoked or amended by competent
authority.495

However, on July 15, 1998, Muslim caused to be served upon the College of Engineering
and other offices of MSU-GSC a letter496 dated July 14, 1998 addressed to Osop that reads in full:

Dear Prof. Osop:

In view of the return to the campus of Prof. Danilo Dadula for whom you
have been serving as substitute since July 1, 1994, and considering the expiration
of your temporary appointment last December 31, 1997, I regret to inform you that
your services with the university will have to end. And since I am not renewing
your appointment, you are hereby advised to cease from reporting to duty effective
immediately. Moreover, you should clear yourself from monetary and other official
accountabilities with the university.

On behalf of MSU-GSC, we thank you for your services.

Very truly yours,

(signed)
MACAPADO A. MUSLIM, Ph. D.
Chancellor

Muslim also issued Memorandum Order No. 010-98C497 dated July 14, 1998, addressed to
Virgilio Ramos (Ramos), Dean of the College of Engineering of MSU-GSC, concerning the

495
Id. at 56.
496
Id. at 61.
497
Id. at 62.

203
expiration and non-renewal of Osops appointment and directing Ramos to already distribute Osops
teaching load to the remaining faculty members of the College. In the same Memorandum Order,
Muslim asked Ramos to explain the latters failure to include Osop in the list of substitute faculty
members which he submitted to the Office of the Chancellor before the start of the 1st semester of
1998.

In compliance with Memorandum Order No. 010-98C, Ramos explained in his letter dated
July 16, 1998 that there was no request for the appointment of a substitute for Prof. Danilo Dadula
(Dadula) when the latter went on a study leave. He explained:

Basing on our records, there was no request for substitute of Engr. Danilo
P. Dadula when he went on study leave in June 1994.

On 17 June 1994, Engr. Noel S. Gunay, then the Chairman of the Electrical
Engineering Department, recommended the hiring of Prof. Abedin Limpao Osop
in view of the study leave of Julito G. Fuerzas, PEE. Chancellor Moner M.
Bajunaid, in his letter dated 30 June 1994, informed Dean Carlos B. Cuanan of the
approval of the higher management to hire Prof. Abedin Limpao Osop as substitute
of Engr. Julito G. Fuerzas effective 1 July 1994. After more than a semester, Engr.
Fuerzas stopped schooling but did not return to this campus. Since then, Prof.
Abedin Limpao Osop went on teaching with the College of Engineering and his
appointment was renewable yearly as those on probationary status.

Per DBM Plantilla of Personnel, page 336 of 444 pages, Prof. Abedin
Limpao Osop has an item. For this, I presumed Prof. A.L. Osop was not a
contractual or substitute faculty of the college.

xxxx

Regarding the distribution of Prof. A. L. Osops teaching load to appropriate

faculty members at this time poses some problems. He is handling major courses
in electrical engineering and the electrical engineers have excessive overload.

204
 xxxx

It has been noted and experienced that real excessive overload is more on the
number of preparations than on overload teaching units. For the interest of our
students and with much concern on the efficient delivery of instruction, the faculty
of the Electrical Engineering Department could not absorb the load of Prof. A. L.
Osop. Since his load are major EE courses, the same could not be handled by any
of the faculty in the other departments.

In view thereof, may we request for the reconsideration of your decision to

terminate the services of Prof. Abedin Limpao Osop.498

Muslim responded by issuing handwritten Memorandum Order No. 012-98C499 dated July
17, 1998, in which he reiterated his earlier order to Ramos to already distribute Osops teaching
load.

On July 21, 1998, Osop filed before the Regional Trial Court (RTC) of General Santos
City, Branch 22, a Complaint for Injunction with Prayer for Writ of Preliminary
Injunction/Temporary Restraining Order (TRO), Damages and Attorneys Fees against Muslim and
Ramos. The Complaint was docketed as Civil Case No. 6381.500

Osop filed two days later, on July 23, 1998, an Urgent Motion for Writ of Preliminary
Mandatory Injunction and/or Temporary Restraining Order. At the hearing held the very next day,
on July 24, 1998, the RTC issued an Order in which it noted the absence of Muslim, and to give
chance for the possibility of an amicable settlement, it reset the hearing for the issuance of a TRO
to July 27, 1998. Nevertheless, in the same Order, the RTC already directed Osop to submit a bond

498
Id. at 64-65.
499
Id. at 63.
500
Id. at 5-14.

205
of P20,000.00 to answer for damages that Muslim and Ramos might suffer if it turns out that Osop
was not entitled to an injunction/TRO. Osop filed his injunction/TRO bond on July 27, 1998.

At the hearing of Osops application for the issuance of a TRO on July 27, 1998, the RTC
issued an Order,501 whereby, in consideration of the principle of exhaustion of administrative
remedies, it suggested that Osop first write Muslim to seek reconsideration of Muslims letter and
Memorandum Order No. 010-98C both dated July 14, 1998. Osop accordingly wrote Muslim such
a letter dated July 27, 1998.502

Muslim endorsed Osops letter dated July 27, 1998 to Emily Marohombsar (Marohombsar),
then MSU President. In a letter503 dated August 7, 1998, Marohombsar wrote:

Based on the meticulous study made, the management is not legally nor
morally under obligation to retain Prof. Osop in the service or liable for the non-
renewal of his appointment the nature of which was temporary and contingent on
the return of Prof. Danilo Dadula. With the return of Prof. Dadula, the renewal of
the appointment of Prof. Osop would have been an unjustifiable superfluity.

This Office, concurring with the opinion of Director Imam, upholds your
position on the case of Prof. Osop.

Marohombsars aforequoted decision was based on the Brief from the MSU Human
Resources Development Office dated August 6, 1998, signed by Director Lomala O. Imam, stating
that [t]he issue is not one of termination or dismissal but an expiration of an appointment which is

501
Id. at 110.
502
Id. at 119.
503
Rollo, p. 81.

206
not permanent in nature and that [t]he renewal or non-renewal of a temporary or probationary
appointment is a management prerogative.504

On August 6, 1998, Muslim and Ramos filed before the RTC a Motion to Dismiss Civil
Case No. 6381 citing the following grounds: (1) lack of cause of action due to non-exhaustion of
administrative remedies and non-inclusion of indispensable parties; (2) appointment in a
temporary character; (3) presumption of regularity; and (4) forum shopping.505

The RTC issued an Omnibus Order on September 10, 1998, dismissing Civil Case No.
6381, for the following reasons:

The complaint is essentially one for illegal dismissal filed by [herein

respondent] Abedin Limpao Osop, a faculty member of the Mindanao State
University (MSU), against defendant Macapagal A. Muslim, Chancellor of the
MSU, and Virgilio Ramos, Dean of the College of Engineering of the same
university. A party aggrieved by a decision, ruling, order or action of an agency of
the government involving termination of services may appeal to the Civil Service
Commission. Regional Trial Courts have no jurisdiction to entertain cases
involving dismissal of officers and employees covered by the Civil Service Law.
(Mateo v. C.A., 247 SCRA 284). The Civil Service Commission is the sole arbiter
of all controversies pertaining to the Civil Service. (Dario v. Mison, 176 SCRA
84).506

Thus, the RTC decreed:

WHEREFORE, in view of the foregoing, the instant complaint is hereby

DISMISSED for lack of jurisdiction. Accordingly, [Osops] application for

504
Id. at 82.
505
Records, Vol. I, p. 201.
506
Id. at 264.

207
 preliminary injunction, being merely ancillary to the principal action is also hereby
dismissed without prejudice. The injunction bond is cancelled ipso facto.507

The RTC denied Osops Motion for Reconsideration in an Order508 dated September 25,
1998, prompting him to file with the Court of Appeals a Petition for Certiorari and Mandamus, 509
under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 49966, in which he argued,
inter alia, that:

2) The issue of removal from office of [Osop], who is faculty member

of a state university, is beyond the jurisdiction of the Civil Service Commission;

xxxx

4) In Civil Case No. 6381 [Osop] is suing [Muslim and Ramos] also
for damages, a subject matter that is beyond the jurisdiction of the Civil Service
Commission.510

In the meantime, concerned students of MSU-GSC filed before the Civil Service
Commission (CSC) Regional Office No. 11 a Complaint for the illegal termination of Osop by
Muslim. CSC Regional Office No. 11 issued an Order dated November 27, 1998 finding that
Osops termination was in order given that his appointment as a substitute was good only until the
return of the person being substituted.511

507
Id. at 265.
508
Id. at 343-344.
509
Id. at 347-370.
510
Id. at 356-357.
511
Id. at 418-420.

208
 Eventually, on June 7, 1999, the Court of Appeals rendered a Decision512 in CA-G.R. SP
No. 49966, granting Osops Petition for Certiorari, based on the following ratiocination:

Anent the order of the Civil Service Commission Regional Office dated
November 27, 1998 holding the termination of [Osop] as legal, we agree with
[Osop] that this finding should not be legally binding upon him because he is not a
party to the complaint apparently initiated by alleged concerned students of MSU-
GSC.

Secondly, [Osops] side of the issue was never heard because only Muslim
was allowed to adduce evidence hence a denial of due process on the part of [Osop].

Coming now to the issue of whether or not [Osops] complaint was correctly
dismissed by the trial court for having failed to exhaust administrative remedies
and that consequently this case falls with the Civil Service Commission, we answer
in the negative.

[Osop] cites Sections 4, 5 and 6(e)(h) of the MSU charter R.A. 1387 as
amended by R.A. Nos. 1893, 3791, 3868, to wit:

Sec. 4. The government of said University is vested in a

board of regents to be known as the Board of Regents of the
Mindanao State University. (R.A. 1893)

Sec. 5. The Mindanao State University shall have the general

powers set out in Section thirteen of Act Numbered Fourteen
hundred and fifty-nine and the administration of said university and
the exercise of its corporate powers are hereby vested exclusively in
the Board of Regents and in the President of the University, insofar
as authorized by said Board.

512
Id. at 426-434.

209
 Sec. 6. The Board of Regents shall have the following
powers of administration and the exercise of the powers of the
corporation.

xxxx

(e) To appoint, on the recommendation of the President of

the University, professors, instructors, lecturers, and other
employees of the University; to fix their compensation, hours of
service, and such other duties and conditions as it may deem proper;
to grant to them in its discretion leave of absence under such
regulations as it may promulgate, any provisions of law to the
contrary notwithstanding, and to remove them for cause after an
investigation and hearing shall have been had; and to extend with
their consent the tenure of faculty members of the University beyond
the age of sixty-five, any other provision of law to the contrary
notwithstanding, on recommendation of the President of the
University, whenever in his opinion their services are specially
needed; Provided, however, that no extension of service shall be
made beyond the age of seventy.

xxxx

(h) To prescribe rules for its own government, and to enact

for the government of the University such general ordinances and
regulations, not contrary to law, as are consistent with the purposes
of the University as defined in Section 2 of this Act.

Moreover, Article 152 of the Code of MSU provides:

Art. 152. Terms and Conditions of Appointment. The precise

terms and conditions of every appointment shall be stated in writing.
In case of a non-renewal of a probationary appointment the person
so concerned shall be so informed in writing at least sixty days
before the termination date.

210
 Proceeding from all the foregoing, it appears clearly that the authority to
remove is vested in the Board of Regents and only after an investigation and
hearing.

Due process was clearly not observed in the removal of [Osop]. First of all,
only the Board of Regents have the power of removal which must be for cause and
after an investigation and hearing shall have been had. Secondly, even a mere
probationary appointment requires that in case of non-renewal the person so
concerned shall be informed in writing at least sixty (60) days before termination
date. These basic requisites were not at all observed in the termination of [Osop].

Therefore, we agree with [Osop] that his non-referral of the matter of his
removal to the Board of Regents before he resorted to court action is accepted as
an exception to the doctrine of exhaustion of administrative remedies.

The doctrine of exhaustion of administrative remedies admits of several

exception[s], to wit:

2. When there is a violation of due process.

xxxx

On another point, the two grounds relied upon by Muslim for terminating
[Osop] to wit: (1) that Prof. Danilo Dadula for whom [Osop] has been serving as
substitute since July 1, 1997 had already returned to MSU, and: (2) [Osops]
temporary appointment expired on December 31, 1997, clearly appears to be
without basis.

[Osop] contends and respondent Muslim does not deny that the notation
vice Danilo Dadula on study grant contained in [Osops] appointment is erroneous
because [Osop] was recruited as a substitute for Engineer Julito Fuerzas.

Assuming that [Osop] merely substituted for Dadula, [Muslim] does not
deny that Danilo Dadula returned to MSU General Santos from his study grant in
June 1996 and has taught in the Department of Mechanical Engineering of the

211
 College of Engineering since then up to April 1998. During the said period, [Osop]
was also teaching in the said University and before the letter of July 15, 1998
advising [Osop] of his termination, he was teaching at the same time as Dadula for
which he was never asked to leave contrary to Muslims claim that [Osop] merely
acted as a substitute of Dadula. Meanwhile Dadula has filed a leave of absence and
has not reported for duty for the first semester of SY 1998-1999. To repeat, from
June 1996 up to April 1998, Dadula and [Osop] taught together in the College of
Engineering of MSU. Hence, if [Osop] was merely a substitute for Dadula, he
should have been required to leave as early as June 1996, upon Dadulas return.

Further, contradicting Muslims claim that [Osop] is a mere substitute of

Dadula on April 17, 1998, Muslim issued Special Order 144-98C designating
[Osop] as Chairperson of the Electrical Engineering Department of the College of
Engineering with a term of office from April 18, 1998 up to April 17, 1999. Clearly,
therefore, when [Osop] continued teaching up to July 15, 1998 and even his
appointment as Chairperson of the Electrical Engineering Department until April
17, 1999 by Muslim himself, his appointment has ceased to be probationary in
character.513

In the end, the Court of Appeals decreed:

WHEREFORE, premises considered, the petition for certiorari is

GRANTED. The Omnibus Order of the RTC of General Santos City, Branch 22
dated September 10, 1998 is hereby SET ASIDE. The RTC is directed to hear and
try Civil Case No. 6381 with utmost dispatch.514

The Motion for Reconsideration of Muslim and Ramos was denied by the Court of Appeal
in its Resolution dated November 11, 1999.515

513
Id. at 429-434.
514
Id. at 434.
515
Id. at 478.

212
 Muslim then appealed the foregoing judgment of the Court of Appeals in CA-G.R. SP No.
49966 by way of a Petition for Review before this Court, docketed as G.R. No. 141276. However,
in a Resolution dated July 3, 2000, the Court denied Muslims Petition for Review; and in a
Resolution dated April 4, 2001, the Court likewise denied Muslims Motion for Reconsideration.516

On June 26, 2001, Osop filed an Amended Complaint517 before the RTC impleading MSU
as a defendant in Civil Case No. 6381. Despite the opposition of Muslim and Ramos, the RTC
admitted the Amended Complaint in its Order518 dated July 11, 2001, which reads:

Considering that no responsive pleading has yet been filed by [Muslim and
Ramos], the amended complaint is hereby ADMITTED.

WHEREFORE, the defendants Macapado Muslim and Virgilio Ramos are

ordered to file their answers within ten (10) days from today, and as prayed for by
the counsel of [Osop], issue the corresponding summons to newly impleaded
defendant Mindanao State University (MSU) at its main office in Marawi City. The
summons to defendant MSU, Marawi City shall be sent via registered mail to the
Clerk of Court of Marawi City who is requested to serve the same and thereafter to
make a return to this court.

The Solicitor General is hereby ordered to enter his appearance as counsel

for defendant Macapado A. Muslim and Virgilio Ramos, who were both sued in
their official and personal capacities and defendant MSU.

Muslim and Ramos, through counsel, Atty. Emmanuel C. Fontanilla, filed their Answer to
Amended Complaint on July 20, 2001.519

516
Id. at 507.
517
Id. at 508-517.
518
Id. at 589.
519
Id. at 632-642.

213
 On July 27, 2001, RTC Clerk of Court Asuncion de Leon Omila served summons upon
MSU at its main campus in Marawi City which required the university to enter its appearance in
Civil Case No. 6381 and to answer Osops Amended Complaint within 15 days after service of said
summons.520

The Office of the Solicitor General (OSG) entered its appearance before the RTC in Civil
Case No. 6381 on September 14, 2001 as counsel for Muslim, Ramos, and MSU (Muslim, et al.).
The OSG requested that it be furnished with a copy of the Amended Complaint and that the period
to file the answer be suspended until receipt of said Amended Complaint.521 In its Order522 dated
September 26, 2001, the RTC granted the OSG a period of 15 days from receipt of a copy of the
Amended Complaint from Osop within which to file a responsive pleading.

For failure of MSU to file an answer to the Amended Complaint within the given period,
Osop filed a Motion to Declare Defendant MSU in Default.523 Osops Motion was denied by the
RTC in its Order524 dated February 1, 2002 since there was no proof as to when the OSG received
a copy of the Amended Complaint from Osop.

The OSG filed a Manifestation on February 14, 2002 which stated that upon verification
with its Record Section, it discovered that Atty. Fontanilla, counsel for Muslim and Ramos, was
actually deputized by the OSG to handle Civil Case No. 6381; and that MSU is adopting the
Answer to the Amended Complaint already filed by Ramos and Muslim, as all the defendants in
said case were in the same position.525

520
Id. at 660.
521
Id. at 664-668.
522
Id. at 670.
523
Id. at 751.
524
Records, Vol. II, p. 23.
525
Id. at 46-48.

214
 Osop filed a Motion for Reconsideration of the RTC Order dated February 1, 2002 denying
his Motion to Declare Defendant MSU in Default. In another Order526 dated June 21, 2002, the
RTC denied Osops Motion for Reconsideration for being moot and academic in light of the
Manifestation of the OSG that MSU was adopting the Answer to the Amended Complaint of
Muslim and Ramos.

Meanwhile, Osop filed on January 11, 2002 a Motion for Summary Judgment527 in Civil
Case No. 6381, to which Muslim and Ramos filed on January 16, 2002 an Opposition.528

In an Order529 dated October 21, 2002, Judge Antonio Lubao of RTC-Branch 22 voluntarily
inhibited himself from further hearing Civil Case No. 6381 to avoid conflict of interest considering
that he was a faculty member at the MSU College of Law. Thus, the case was re-raffled to RTC-
Branch 37, presided over by Judge Eddie R. Rojas.

After an exchange of pleadings among the parties, the RTC issued an Order530 dated March
20, 2003, which granted Osops Motion for Summary Judgment in Civil Case No. 6381 pursuant
to Rule 35, Section 1 of the Rules of Court. The RTC explicated that:

The law itself determines when a summary judgment is proper. Under the
rules, summary judgment is appropriate when there are no genuine issues of fact
which call for the presentation of evidence in a full-blown trial. Even if on their
face the pleading appear to raise issues, when the affidavits, depositions and
admissions show that such issues are not genuine, then summary judgment as
prescribed by the rules must ensure as a matter of law. What is crucial for
determination, therefore, is the presence of a genuine issue as to any material fact.

526
Id. at 101.
527
Records, Vol. I, pp. 759-782.
528
Records, Vol. II, pp. 1-7.
529
Id. at 111-112.
530
Id. at 121-123.

215
 A genuine issue is an issue of fact which require (sic) the presentation of
evidence as distinguished from a sham, fictitious, contrived or false claim. When
the facts as pleaded appear uncontested or undisputed, then there is no real or
genuine issue or question as to the facts, and summary judgment is called for. The
party who moves for summary judgment has the burden of demonstrating clearly
the absence of any genuine issue of fact, or that the issue posed in the complaint is
patently unsubstantial so as not to constitute a genuine issue of trial.

Applying these (sic) principle to the present case, it can be said that [Osop]
has clearly demonstrate (sic) the absence of any genuine issue of fact, as well as the
issue posed by [Muslim, et al.] that [Osop] is a contractual employee is patently
unsubstantial so as not to constitute a genuine issue for a full-blown trial.

From the decision rendered by the Seventeenth Division Court of Appeals

concerning the petition for Certiorari and Mandamus filed by [Osop], in this case
it ruled that the appointment of [Osop] by [Muslim] ceases to be probationary in
character when the former was allowed to continue teaching up to July 15, 1998
(sic) and even appointed as Chairperson of the Electrical Engineering Department.
The issue raised by [Muslim, et al.] in their answer that [Osop] is a contractual
employee is indeed patently unsubstantial as to constitute a genuine issue in this
case for trial. Once and for all, such an issue has already been settled by the
honorable Court of Appeals whose decision has become final and executory. Thus,
there was no more genuine issue that was left to be tried except the amount of
damages and attorneys fees.

xxxx

After having been taken into account the foregoing premises and pleadings
of the parties in support of their respective stand on the matter under consideration
as well as from the implied admissions arising from the failure of [Muslim, et al.]
to set forth reasons why [they] could not truthfully either admit or deny those
matters alleged in the amended complaint, and having concluded from the attendant
circumstances that [Osop] is entitled to judgment as a matter of law for such amount
as may be found to be due him in damages.

Consequently, the RTC disposed:

216
 WHEREFORE, a summary judgment is hereby rendered in favor of [Osop]
by ordering [Muslim and Ramos] or their successors, and defendant Mindanao
State University to give teaching loads to [Osop] and to pay such amount as may
be found to be due him in damages.

For the meantime, let this case be called for trial to resolve the sole issue of
damages that may be awarded in favor of [Osop] on May 30, 2003, at 2:00 oclock
in the afternoon.531

Muslim, et al. filed a Motion for Reconsideration of the aforementioned Order on April 1,
2003, which Osop opposed.

Osop, for his part, filed a Motion for Execution Pending Appeal, and Muslim, et al. filed a
Comment thereon.

In an Order532 dated August 21, 2003, the RTC denied the Motion for Reconsideration of
the Order dated March 20, 2003 filed by Muslim, et al., thus:

In resolving [Muslim, et al.s] Motion for Reconsideration, the Court casts

doubt on the veracity of [Muslim, et al.s] claim that the findings of the Court of
Appeals as to the appointment of [Osop] was a mere opinion and that there could
be no final determination on the matters not principally raised before it. It was
emphasized in the ruling of the Honorable Supreme Court in the case of Padua vs.
Robles, G.R. No. 127930, December 15, 2000, which lays down the rules in
construing judgments. It was held that the sufficiency and efficacy of a judgment
must be tested by its substance rather than its form. In construing a judgment, its
legal effects including such effects that necessarily follows because of legal
implications, rather than the language used, govern. Also, its meaning, operations,
and consequences must be ascertained like any other written instrument. If the

531
Id. at 123.
532
Id. at 241-243.

217
record shows that the judgment could not have been rendered without deciding the
particular matter, it will be considered as having settled that matter as to all future
actions between the parties, and if a judgment necessarily presupposes certain
premises, they are as conclusive as the judgment itself. Reasons for the rule are that
a judgment is an adjudication on all the matters which are essential to support it,
and that every proposition assumed or decided by the court leading up to the final
conclusions and upon which such conclusion is based is as effectually passed upon
as the ultimate question which is solved. Thus a judgment rest on the intent of the
court as gathered from every part thereof, including the situation to which it applies
and attendant circumstances.

[Muslim, et al.] lost sight of the fact that the court gave due course to
[Osops] Motion for Summary Judgment only after finding that the issue raised by
them in their answer was patently unsubstantial as to constitute a genuine issue.
Inasmuch as [Muslim, et al.] failed to show a plausible ground of defense
something fairly arguable and of substantial character, they cannot therefore further
insist that they have a genuine issue to warrant this Court to hear and try the above-
entitled case.

Hence, in the present recourse, [Muslim, et al.s] Motion for Reconsideration

is hereby denied due course for bereft of any merit.

In the same Order, the RTC granted Osops Motion for Execution Pending Appeal, to wit:

Anent [Osops] Motion for Execution Pending Appeal, it alleged that [Osop]
has been unemployed for almost five (5) years and if [Muslim, et al.s] appeal on
the resolution of this Court, it will be just for the purpose of delaying the
termination of the case and to cause further misery to [Osop].

Section 2, Rule 39 of the 1997 Rules of Civil Procedure, lays down the rule
for execution pending appeal, categorized as discretionary execution. It is evident
from the said provision that a primary consideration for allowing execution pending
appeal would be the existence of good reasons. In turn, good reasons has been held
to consist of compelling circumstances justifying the immediate execution lest
judgment becomes illusory. Such reason must constitute superior circumstances

218
 demanding urgency which will outweigh the injury or damages should the losing
party secure a reversal of the resolution issued by this Court.

After weighing the reasons presented, the Court deemed it wise to give due
course to [Osops] Motion for Execution Pending Appeal. The effective and
efficient administration of justice requires that the prevailing party should not be
deprived of the fruits of the verdict rendered in his favor. The system of judicial
review should not be misused and abused to evade the decision/order from attaining
finality.

With the foregoing reasons, [Osops] Motion for Execution Pending Appeal
is hereby given due course, but insofar as to the giving of teaching loads to [Osop]
only inasmuch as no amount of damages could be ascertained at this moment.

Let therefore a Writ of Execution Pending Appeal be issued in this case

directing [Muslim and Ramos] or their successors and defendant Mindanao State
University to give teaching loads to [Osop] with a bond fix at Five Thousand
(P5,000.00) Pesos.533

Muslim, et al., filed a Motion for Reconsideration534 of the Order dated August 21, 2003,
which Osop again opposed.535

On October 1, 2003, Osop filed a Motion for Partial Execution (Based on a Final Executory
Judgment) praying that a writ of execution be issued ordering Muslim, et al. to give him teaching
loads.536

533
Id. at 242-243.
534
Id. at 263-266.
535
Id. at 280-281.
536
Id. at 290-291.

219
 Two days after, on October 3, 2003, Muslim, et al. filed a Second Motion for
Reconsideration and Supplement to the Opposition (also Reply to Motion for Partial Execution).537

In an Order538 dated October 9, 2003 the RTC denied Muslim, et al.s Second Motion for
Reconsideration and Supplement to the Opposition (also Reply to Motion for Partial Execution)
for being a pro forma motion.

Subsequently, the RTC issued an Order539 dated November 10, 2003 granting Osops
Motion for Partial Execution and ordering the issuance of a writ for the partial execution of the
Order dated March 20, 2003, particularly, for its directive that Muslim, et al. give Osop teaching
load.

RTC Clerk of Court Fulgar issued the Writ of Execution540 the next day, November 11,
2003. As shown in the Sheriffs Return541 dated November 17, 2003, original copies of RTC Order
dated November 10, 2003 and Writ of Execution dated November 11, 2003 were duly served upon
Muslim, et al. on November 12, 2003.

Aggrieved, Muslim, in his personal capacity,542 filed on January 12, 2004, with the Court
of Appeals, a Petition for Certiorari and Prohibition with Prayer for a Writ of Preliminary and
Instant Issuance of Temporary Restraining Order, which was docketed as CA-G.R. SP No.
82052.543 Muslim averred that in issuing the Order dated November 10, 2003, the RTC committed
grave abuse of discretion amounting to lack or excess of jurisdiction as it:

537
Id. at 309-314.
538
Id. at 328.
539
Id. at 366-372.
540
Id. at 382-383.
541
Id. at 384.
542
In the Amended Complaint, Muslim was sued not only in his official capacity but also in his personal
capacity.
543
Records, Vol. II, pp. 418-438.

220
 5. Consider[ed] the Decision of the Court of Appeals in a Certiorari as a judgment
on the merit.

6. Plac[ed] the action in the lower court within the purview of summary procedure.

7. Grant[ed] partial execution.

8. Consider[ed] the order of finding no genuine issue as a final order.544

After the parties filed their respective Memorandum, the Court of Appeals issued a
Resolution dated October 6, 2004 considering the case submitted for decision.545

On January 14, 2005, MSU, through the OSG, filed before the Court of Appeals a Motion
to Intervene (with Motion to Admit Memorandum) in CA-G.R. SP No. 82052.546 Osop opposed
the intervention of MSU.547

The Court of Appeals rendered its Decision in CA-G.R. SP No. 82052 on March 14, 2006,
dismissing Muslims Petition for Certiorari and Prohibition.548 It held that:

In the instant case, it is indubitably shown that the main issue that needs to
be resolved is whether or not [Osop] was a probationary employee. In CA-G.R. SP
No. 49966, the appellate court, despite the fact that the issue brought therein was
whether or not public respondent gravely abused his discretion in dismissing the
case for lack of jurisdiction, nevertheless ruled that the appointment of [Osop]

544
Id. at 430.
545
Id. at 669.
546
Id. at 681-718.
547
Id. at 944-946.
548
Muslims Motion for Reconsideration is still pending in court.

221
ceased to be probationary in character. Respondent judge merely took judicial
notice of the appellate courts findings that [Osop] had indeed ceased to be a
probationary employee. To Our assessment, what respondent judge may have had
on his mind was that even if he decided otherwise, the case would still be appealed
to the Court of Appeals which, as adverted to, already made a finding that [Osop]
was a permanent employee. Moreover, the appellate courts decision was also
binding between the parties; it was deemed to be the law of the case, hence, it was
only proper for public respondent to conform to this Courts decision.

xxxx

A trial court which has jurisdiction over the person and subject matter of
the case, can grant a motion for summary judgment, and such is within its power or
authority in law to perform. Its propriety rests on its sound exercise of discretion
and judgment. In the event that it errs in finding that there is no genuine issue to
thus call for the rendition of a summary judgment, the resulting decision may not
be set aside either directly or indirectly by petition for certiorari, but may only be
corrected on appeal or other direct review. The court a quo categorically stated that
its March 20, 2003 [Order] had become final and executory as quoted hereunder:

A review of the records of the case will show that the

[Muslim, et al.] received the Order dated [20] March 2003, granting
the summary judgment, on March 25, 2003. On that date, the fifteen
(15) days prescriptive period within which to file an appeal began to
run. Instead of preparing an appeal, [Muslim, et al.] filed their
Motion for Reconsideration on April 1, 2003. The filing of the said
Motion interrupted the reglementary period to appeal. By that time,
however, eight (8) days had already lapsed; thus, from their receipt
of the Order dated August 21, 2003, denying their Motion for
Reconsideration, on September 2, 2003, they had only seven (7)
days left or until September 9, 2003 within which to file a notice of
appeal. However, on said date, [Muslim, et al.] filed another Motion
for Reconsideration praying that the order for execution pending
appeal be recalled. On October 9, 2003, an Order had been issued
denying [Muslim, et al.s] Motion for Reconsideration, copy of
which was received by [Muslim, et al.] on that same day.

Again, carefully going over the records, the Court finds that
the Orders issued were already final and executory. [Muslim, et al.]

222
 received the Order granting the summary judgment of [Osop] dated
March 20, 2003. Hence, they had until September 9, 2003 within
which to file its appeal. [Muslim, et al.] filed a Motion for
Reconsideration and the Court on its Order dated August 21, 2003
denied the same. [Muslim, et al.] received a copy of the denial of its
Motion for Reconsideration, which was considered pro-forma, was
likewise denied on October 9, 2003, [Muslim, et al.] received copy
of the order of denial on that very same day. Such second motion for
reconsideration filed by [Muslim, et al.], being a pro-forma, does
(sic) not toll the running of the period to perfect an appeal or any
remedy provided by law. Thus, it can be concluded that the subject
orders issued by this Court are now final and executory. Now, once
a judgment attains finality it becomes the ministerial duty of the trial
court to order its execution.

Indeed, it bears stressing that the right to appeal is not a natural right or a
part of due process. It is a procedural remedy of statutory origin and, as such, may
be exercised only in the manner and within the time frame provided by the
provisions of law authorizing its exercise. Failure of a party to perfect an appeal
within the period fixed by law renders the decision sought to be appealed final and
executory. After a decision is declared final and executory, vested rights are
acquired by the winning party who has the right to enjoy the finality of the case.

To determine whether a judgment or order is final or interlocutory, the test

is: Does it leave something to be done in the trial court with respect to the merits
of the case? If it does, it is interlocutory, if it does not, it is final. A final judgment
is one that disposes of a case in a manner that leaves nothing more to be done by
the court in respect thereto. A summary judgment is one which is final as it already
adjudicated the issues and determined the rights of the parties. It is only
interlocutory when the court denies a motion for summary judgment or renders a
partial summary judgment as there would still be issues left to be determined by the
court. In the instant case, the March 20, 2003 Order was unequivocal, other than
setting a hearing to determine the amount of damages, but had, on the other hand,
already disposed of the case. As such, the issuance of the November 10, 2003 Order
granting the motion for partial execution was proper as the summary judgment
already became final and executory as adverted to.

In a petition for certiorari, even if, in the greater interest of substantial

justice, certiorari may be availed of, it must be shown that the trial court acted with
grave abuse of discretion amounting to lack or excess of jurisdiction, that is, that

223
 the trial court exercised its powers in an arbitrary or despotic manner by reason of
passion or personal hostilities, so patent and gross as to amount to an evasion or
virtual refusal to perform the duty enjoined or to act in contemplation of law. We
find that such abuse is not extant in the instant case.549

Muslim filed a Motion for Reconsideration of the foregoing judgment on May 9, 2006550
and a Supplemental Motion for Reconsideration on June 23, 2006.551

On July 11, 2006, the Court of Appeals issued a Resolution stating that it received on June
8, 2006 a copy of the instant Petition (G.R. No. 172448) filed by MSU; and since said Petition
assails its Decision dated March 14, 2006 in CA-G.R. SP No. 82052, it was constrained to await
the ruling of the Supreme Court in G.R. No. 172448. Hence, the Court of Appeals opted to hold in
abeyance the resolution of Muslims Motion for Reconsideration and Supplemental Motion for
Reconsideration of the Decision dated March 14, 2006 in CA-G.R. SP No. 82052.

The issue relevant to the Petition at bar insofar as MSU is concerned arises from the
pronouncement of the Court of Appeals in the same Decision dated March 14, 2006 in CA-G.R.
SP No. 82052 quoted hereunder:

At the outset this case was deemed submitted for decision on October 6,
2004. On January 10, 2005, this Court received a Motion to Intervene (with Motion
to Admit Memorandum) filed by Mindanao State University (MSU) through the
Office of the Solicitor General (OSG). However, Section 2, Rule 19 of the Rules of
Court, allows intervention only at any time before rendition of judgment by the trial
court, and We hold the motion to intervene is a stray pleading and is deemed not
filed.552

549
Rollo, pp. 60-65.
550
CA rollo, pp. 575-586.
551
Id. at 886-904.
552
Records, Vol. II, pp. 951-952.

224
The instant Petition of MSU presented the following assignment of errors:

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT

PETITIONERS MOTION FOR INTERVENTION WAS IMPROVIDENTLY
FILED.

II

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT

RESPONDENTS MOTION FOR SUMMARY JUDGMENT WAS PROPER
ALTHOUGH PETITIONER PRESENTED DEFENSES IN THEIR ANSWER TO
AMENDED COMPLAINT TENDERING FACTUAL ISSUES WHICH
REQUIRE TRIAL ON THE MERITS.

III

THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT

RESPONDENT ACQUIRED PERMANENT STATUS.

IV

225
 THE COURT OF APPEALS GRAVELY ERRED UPHOLDING THE TRIAL
COURTS ORDER GRANTING RESPONDENT MOTION FOR ISSUANCE OF
PARTIAL WRIT OF EXECUTION.553

MSU anchors its right to intervene on Rule 19, Section 1 of the Rules of Court. MSU
stresses that it has a legal interest in the controversy considering that, ultimately, it will be the one
liable for the relief Osop prays for, particularly, Osops reinstatement at MSU-GSC.

Rule 19, Section 1 of the Rules of Court provides:

Section 1. Who may intervene. A person who has a legal interest in the
matter in litigation, or in the success of either of the parties, or an interest against
both, or is so situated as to be adversely affected by a distribution or other
disposition of property in the custody of the court or of an officer thereof may, with
leave of court, be allowed to intervene in the action. The court shall consider
whether or not the intervention will unduly delay or prejudice the adjudication of
the rights of the original parties, and whether or not the intervenors rights may be
fully protected in a separate proceeding.

In Alfelor v. Halasan,554 the Court held that:

Under this Rule, intervention shall be allowed when a person has (1) a legal
interest in the matter in litigation; (2) or in the success of any of the parties; (3) or
an interest against the parties; (4) or when he is so situated as to be adversely
affected by a distribution or disposition of property in the custody of the court or
an officer thereof.555

553
Rollo, pp. 24-25.
554
G.R. No. 165987, March 31, 2006, 486 SCRA 451.
555
Id. at 460.

226
 Jurisprudence describes intervention as a remedy by which a third party, not originally
impleaded in the proceedings, becomes a litigant therein to enable him, her or it to protect or
preserve a right or interest which may be affected by such proceedings.556 The right to intervene
is not an absolute right; it may only be permitted by the court when the movant establishes facts
which satisfy the requirements of the law authorizing it.557

While undoubtedly, MSU has a legal interest in the outcome of the case, it may not avail
itself of the remedy of intervention in CA-G.R. SP No. 82052 simply because MSU is not a third
party in the proceedings herein.

In Osops Amended Complaint before the RTC, MSU was already impleaded as one of the
defendants in Civil Case No. 6381. MSU came under the jurisdiction of the RTC when it was
served with summons. It participated in Civil Case No. 6381, where it was represented by Atty.
Fontanilla, counsel for Muslim and Ramos, who was deputized by the OSG as counsel for MSU.
MSU adopted the Answer to the Amended Complaint of its co-defendants, Muslim and Ramos,
and also joined Muslim and Ramos in subsequent pleadings filed before the RTC in Civil Case
No. 6381. Evidently, the rights and interests of MSU were duly presented before the RTC in Civil
Case No. 6381. Unfortunately, the RTC issued the Orders dated March 20, 2003 and August 21,
2003 in Civil Case No. 6381 adverse to MSU and its co-defendants, Muslim and Ramos.

The Orders dated March 20, 2003 and August 21, 2003 of the RTC in Civil Case No. 6381
granted summary judgment in Osops favor. Muslim filed his Petition for Certiorari and
Prohibition in CA-G.R. SP No. 82052 which is still pending before the Court of Appeals (which
has yet to resolve Muslims Motion for Reconsideration and Supplemental Motion for

556
Asias Emerging Dragon Corporation v. Department of Transportation and Communications, G.R. No.
169914, March 24, 2008, 549 SCRA 44, 48.
557
Id. at 51.

227
Reconsideration). Consequently, we are careful not to make any declarations herein that will
prematurely judge the merits of CA-G.R. SP No. 82052.

MSU, on its part, neither filed an appeal nor a Petition for Certiorari before the Court of
Appeals to challenge the adverse RTC Orders. MSU sat on its rights. Despite receiving on
September 2, 2003558 a copy of the RTC Order dated August 21, 2003 (denying the Motion for
Reconsideration of the RTC Order dated March 20, 2003 filed by MSU, together with Muslim and
Ramos) in Civil Case No. 6381, MSU did not act until it filed its Motion for Intervention on
January 14, 2005559 in CA-G.R. SP No. 82052, after an interval of 16 months. Evidently, it was
already way beyond the reglementary period for MSU to file an appeal (15 days) 560 or a Petition
for Certiorari (60 days).561 The RTC Orders dated March 20, 2003 and August 21, 2003 had
already become final and executory as to MSU. It cannot now circumvent the finality of the RTC
Orders by seeking to intervene in CA-G.R. SP No. 82052 and thereby, to unduly benefit from the
timely action taken by Muslim, who alone, filed the Petition in CA-G.R. SP No. 82052.

In view of the foregoing, the Court finds no further need to address the other assignment
of errors of MSU. Given that the Court of Appeals did not allow MSU to intervene in CA-G.R. SP
No. 82052, it has no personality to question the judgment of the appellate court in this case.

WHEREFORE, the instant Petition for Review is hereby DENIED.

SO ORDERED.

558
Records, Vol. II, p. 368.
559
Id. at 681-718.
560
Rules of Court, Rule 41, Sec. 3.
561
Id., Rule 65, Sec. 4.

228
 TERESITA J. LEONARDO-DE CASTRO
Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

229
 LUCAS P. BERSAMIN MARTIN S. VILLARAMA, JR.
Associate Justice
Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

230
 SECOND DIVISION

SPOUSES WILFREDO N. ONG and G.R. No. 172592

EDNA SHEILA PAGUIO-ONG,
Petitioners, Present:

QUISUMBING, J., Chairperson,

- versus - CARPIO MORALES,
TINGA,
BRION, and
AUSTRIA-MARTINEZ,* JJ.
ROBAN LENDING CORPORATION,
Respondent.
Promulgated:

July 9, 2008

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

DECISION

CARPIO MORALES, J.:

On different dates from July 14, 1999 to March 20, 2000, petitioner-spouses Wilfredo N.
Ong and Edna Sheila Paguio-Ong obtained several loans from Roban Lending Corporation
(respondent) in the total amount of P4,000,000.00. These loans were secured by a real estate
mortgage on petitioners parcels of land located in Binauganan, Tarlac City and covered by TCT
No. 297840.562

*
Additional member per Raffle dated July 2, 2008 pursuant to Administrative Circular No. 84-2007 in lieu
of Justice Arturo D. Brion who inhibited.
562
Records, pp. 11-16.

231
 On February 12, 2001, petitioners and respondent executed an Amendment to Amended
Real Estate Mortgage563 consolidating their loans inclusive of charges thereon which totaled
P5,916,117.50. On even date, the parties executed a Dacion in Payment Agreement564 wherein
petitioners assigned the properties covered by TCT No. 297840 to respondent in settlement of their
total obligation, and a Memorandum of Agreement565 reading:

That the FIRST PARTY [Roban Lending Corporation] and the

SECOND PARTY [the petitioners] agreed to consolidate and restructure all
aforementioned loans, which have been all past due and delinquent since April
19, 2000, and outstanding obligations totaling P5,916,117.50. The SECOND
PARTY hereby sign [sic] another promissory note in the amount of
P5,916,117.50 (a copy of which is hereto attached and forms xxx an integral part
of this document), with a promise to pay the FIRST PARTY in full within one
year from the date of the consolidation and restructuring, otherwise the
SECOND PARTY agree to have their DACION IN PAYMENT agreement,
which they have executed and signed today in favor of the FIRST PARTY be
enforced[.]566

In April 2002 (the day is illegible), petitioners filed a Complaint,567 docketed as Civil Case
No. 9322, before the Regional Trial Court (RTC) of Tarlac City, for declaration of mortgage
contract as abandoned, annulment of deeds, illegal exaction, unjust enrichment, accounting, and
damages, alleging that the Memorandum of Agreement and the Dacion in Payment executed are
void for being pactum commissorium.568

Petitioners alleged that the loans extended to them from July 14, 1999 to March 20, 2000
were founded on several uniform promissory notes, which provided for 3.5% monthly interest
rates, 5% penalty per month on the total amount due and demandable, and a further sum of 25%
attorneys fees thereon,569 and in addition, respondent exacted certain sums denominated as

563
Id. at 37.
564
Id. at 40.
565
Id. at 38-39.
566
Id. at 38-39.
567
Id. at 1-5.
568
Id. at 2.
569
Id. at 2-3. Vide id. at 20.

232
EVAT/AR.570 Petitioners decried these additional charges as illegal, iniquitous, unconscionable,
and revolting to the conscience as they hardly allow any borrower any chance of survival in case
of default.571

Petitioners further alleged that they had previously made payments on their loan accounts,
but because of the illegal exactions thereon, the total balance appears not to have moved at all,
hence, accounting was in order.572

Petitioners thus prayed for judgment:

a) Declaring the Real Estate Mortgage Contract and its

amendments x x x as null and void and without legal force and effect for having
been renounced, abandoned, and given up;

b) Declaring the Memorandum of Agreement xxx and Dacion

in Payment x x x as null and void for being pactum commissorium;

c) Declaring the interests, penalties, Evat [sic] and attorneys

fees assessed and loaded into the loan accounts of the plaintiffs with defendant
as unjust, iniquitous, unconscionable and illegal and therefore, stricken out or
set aside;

d) Ordering an accounting on plaintiffs loan accounts to

determine the true and correct balances on their obligation against legal charges
only; and

e) Ordering defendant to [pay] to the plaintiffs: --

e.1 Moral damages in an amount not less than P100,000.00 and

exemplary damages of P50,000.00;

e.2 Attorneys fees in the amount of P50,000.00 plus P1,000.00

appearance fee per hearing; and

e.3 The cost of suit.573

570
Id. at 21.
571
Id. at 3.
572
Id. at 3.
573
Id. at 4.

233
as well as other just and equitable reliefs.
In its Answer with Counterclaim,574 respondent maintained the legality of its transactions
with petitioners, alleging that:

xxxx

If the voluntary execution of the Memorandum of Agreement and

Dacion in Payment Agreement novated the Real Estate Mortgage then the
allegation of Pactum Commissorium has no more legal leg to stand on;

The Dacion in Payment Agreement is lawful and valid as it is recognized

x x x under Art. 1245 of the Civil Code as a special form of payment whereby
the debtor-Plaintiffs alienates their property to the creditor-Defendant in
satisfaction of their monetary obligation;

The accumulated interest and other charges which were computed for
more than two (2) years would stand reasonable and valid taking into
consideration [that] the principal loan is P4,000,000 and if indeed it became
beyond the Plaintiffs capacity to pay then the fault is attributed to them and not
the Defendant[.]575

After pre-trial, the initial hearing of the case, originally set on December 11, 2002, was
reset several times due to, among other things, the parties efforts to settle the case amicably.576

During the scheduled initial hearing of May 7, 2003, the RTC issued the following order:

Considering that the plaintiff Wilfredo Ong is not around on the ground
that he is in Manila and he is attending to a very sick relative, without objection
on the part of the defendants counsel, the initial hearing of this case is reset to
June 18, 2003 at 10:00 oclock in the morning.

Just in case [plaintiffs counsel] Atty. Concepcion cannot present his

witness in the person of Mr. Wilfredo Ong in the next scheduled hearing, the

574
Id. at 51-54.
575
Id. at 52-53.
576
Id. at 127-128, 138-143, 147-153.

234
 counsel manifested that he will submit the case for summary judgment.577
(Underscoring supplied)

It appears that the June 18, 2003 setting was eventually rescheduled to February 11, 2004
at which both counsels were present578 and the RTC issued the following order:

The counsel[s] agreed to reset this case on April 14, 2004, at 10:00
oclock in the morning. However, the counsels are directed to be ready with their
memorand[a] together with all the exhibits or evidence needed to support their
respective positions which should be the basis for the judgment on the pleadings
if the parties fail to settle the case in the next scheduled setting.

x x x x579 (Underscoring supplied)

At the scheduled April 14, 2004 hearing, both counsels appeared but only the counsel of
respondent filed a memorandum.580

By Decision of April 21, 2004, Branch 64 of the Tarlac City RTC, finding on the basis of
the pleadings that there was no pactum commissorium, dismissed the complaint.581

On appeal,582 the Court of Appeals583 noted that

x x x [W]hile the trial court in its decision stated that it was rendering
judgment on the pleadings, x x x what it actually rendered was a summary
judgment. A judgment on the pleadings is proper when the answer fails to tender
an issue, or otherwise admits the material allegations of the adverse partys
pleading. However, a judgment on the pleadings would not have been proper in
this case as the answer tendered an issue, i.e. the validity of the MOA and DPA.
On the other hand, a summary judgment may be rendered by the court if the
pleadings, supporting affidavits, and other documents show that, except as to the
amount of damages, there is no genuine issue as to any material fact.584

577
Id. at 141.
578
Id. at 154.
579
Id. at 155.
580
Id. at 156-164, 204.
581
Id. at 205-206.
582
Id. at 207.
583
Decision of November 30, 2005, penned by Court of Appeals Associate Justice Portia Alio-Hormachuelos,
with the concurrences of Associate Justices Mariano C. Del Castillo and Magdangal M. de Leon. CA rollo,
pp. 35-45.
584
CA rollo, pp. 40-41.

235
 Nevertheless, finding the error in nomenclature to be mere semantics with no bearing on
the merits of the case,585 the Court of Appeals upheld the RTC decision that there was no pactum
commissorium.586

Their Motion for Reconsideration587 having been denied,588 petitioners filed the instant
Petition for Review on Certiorari,589 faulting the Court of Appeals for having committed a clear
and reversible error

I. . . . WHEN IT FAILED AND REFUSED TO APPLY PROCEDURAL

REQUISITES WHICH WOULD WARRANT THE SETTING ASIDE
OF THE SUMMARY JUDGMENT IN VIOLATION OF
APPELLANTS RIGHT TO DUE PROCESS;

II. . . . WHEN IT FAILED TO CONSIDER THAT TRIAL IN THIS CASE

IS NECESSARY BECAUSE THE FACTS ARE VERY MUCH IN
DISPUTE;

III. . . . WHEN IT FAILED AND REFUSED TO HOLD THAT THE

MEMORANDUM OF AGREEMENT (MOA) AND THE DACION EN
PAGO AGREEMENT (DPA) WERE DESIGNED TO CIRCUMVENT
THE LAW AGAINST PACTUM COMMISSORIUM; and

IV. . . . WHEN IT FAILED TO CONSIDER THAT THE MEMORANDUM

OF AGREEMENT (MOA) AND THE DACION EN PAGO (DPA)
ARE NULL AND VOID FOR BEING CONTRARY TO LAW AND
PUBLIC POLICY.590

The petition is meritorious.

Both parties admit the execution and contents of the Memorandum of Agreement and
Dacion in Payment. They differ, however, on whether both contracts constitute pactum
commissorium or dacion en pago.

585
Id. at 41.
586
Id. at 41-43.
587
Id. at 48-53.
588
Id. at 65-66.
589
Id. at 8-25.
590
Rollo, p. 15.

236
 This Court finds that the Memorandum of Agreement and Dacion in Payment constitute
pactum commissorium, which is prohibited under Article 2088 of the Civil Code which provides:

The creditor cannot appropriate the things given by way of pledge or

mortgage, or dispose of them. Any stipulation to the contrary is null and void.

The elements of pactum commissorium, which enables the mortgagee to acquire ownership
of the mortgaged property without the need of any foreclosure proceedings,591 are: (1) there should
be a property mortgaged by way of security for the payment of the principal obligation, and (2)
there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in
case of non-payment of the principal obligation within the stipulated period.592

In the case at bar, the Memorandum of Agreement and the Dacion in Payment contain no
provisions for foreclosure proceedings nor redemption. Under the Memorandum of Agreement,
the failure by the petitioners to pay their debt within the one-year period gives respondent the right
to enforce the Dacion in Payment transferring to it ownership of the properties covered by TCT
No. 297840. Respondent, in effect, automatically acquires ownership of the properties upon
petitioners failure to pay their debt within the stipulated period.

Respondent argues that the law recognizes dacion en pago as a special form of payment
whereby the debtor alienates property to the creditor in satisfaction of a monetary obligation. 593
This does not persuade. In a true dacion en pago, the assignment of the property extinguishes the
monetary debt.594 In the case at bar, the alienation of the properties was by way of security, and
not by way of satisfying the debt.595 The Dacion in Payment did not extinguish petitioners
obligation to respondent. On the contrary, under the Memorandum of Agreement executed on the

591
Vide Lumayag v. Heirs of Jacinto Nemeo, G.R. No. 162112, July 3, 2007, 526 SCRA 315, 328.
592
Development Bank of the Philippines v. Court of Appeals, 348 Phil. 15, 31 (1998).
593
Records, p. 53. Vide CIVIL CODE, Article 1245.
594
Vide CIVIL CODE, Article 1245; Development Bank of the Philippines v. Court of Appeals, 348 Phil. 15, 30
(1998).
595
Vide Development Bank of the Philippines v. Court of Appeals, ibid.

237
same day as the Dacion in Payment, petitioners had to execute a promissory note for P5,916,117.50
which they were to pay within one year.596

Respondent cites Solid Homes, Inc. v. Court of Appeals597 where this Court upheld a
Memorandum of Agreement/Dacion en Pago.598 That case did not involve the issue of pactum
commissorium.599

That the questioned contracts were freely and voluntarily executed by petitioners and
respondent is of no moment, pactum commissorium being void for being prohibited by law.600

Respecting the charges on the loans, courts may reduce interest rates, penalty charges, and
attorneys fees if they are iniquitous or unconscionable.601

This Court, based on existing jurisprudence,602 finds the monthly interest rate of 3.5%, or
42% per annum unconscionable and thus reduces it to 12% per annum. This Court finds too the
penalty fee at the monthly rate of 5% (60% per annum) of the total amount due and demandable
principal plus interest, with interest not paid when due added to and becoming part of the principal
and likewise bearing interest at the same rate, compounded monthly603 unconscionable and reduces
it to a yearly rate of 12% of the amount due, to be computed from the time of demand.604 This
Court finds the attorneys fees of 25% of the principal, interests and interests thereon, and the
penalty fees unconscionable, and thus reduces the attorneys fees to 25% of the principal amount
only.605

596
Records, p. 38.
597
341 Phil. 261 (1997).
598
Records, p. 160.
599
Solid Homes, Inc. v. Court of Appeals, supra note 37 at 274-280.
600
Vide CIVIL CODE, Articles 1409 and 2088.
601
Vide CIVIL CODE, Articles 1229 and 2227; United Coconut Planters Bank v. Beluso, G.R. No. 159912,
August 17, 2007; 530 SCRA 567, 590; Poltan v. BPI Family Savings Bank, Inc., G.R. No. 164307, March 5,
2007, 517 SCRA 430, 444-446; Radiowealth Finance Co., Inc. v. International Corporate Bank, G.R. Nos.
77042-43, February 28, 1990, 182 SCRA 862, 868-869.
602
Vide Poltan v. BPI Family Savings Bank, Inc., G.R. No. 164307, March 5, 2007, 517 SCRA 430, 444-446.
603
Records, p. 41.
604
Vide United Coconut Planters Bank v. Beluso, G.R. No. 159912, August 17, 2007, 530 SCRA 567, 590, 604-
605.
605
Vide Titan Construction Corporation v. Uni-Field Enterprises, Inc., G.R. No. 153874, March 1, 2007, 517
SCRA 180, 190.

238
 The prayer for accounting in petitioners complaint requires presentation of evidence, they
claiming to have made partial payments on their loans, vis a vis respondents denial thereof.606 A
remand of the case is thus in order.

Prescinding from the above disquisition, the trial court and the Court of Appeals erred in
holding that a summary judgment is proper. A summary judgment is permitted only if there is no
genuine issue as to any material fact and a moving party is entitled to a judgment as a matter of
law.607 A summary judgment is proper if, while the pleadings on their face appear to raise issues,
the affidavits, depositions, and admissions presented by the moving party show that such issues
are not genuine.608 A genuine issue, as opposed to a fictitious or contrived one, is an issue of fact
that requires the presentation of evidence.609 As mentioned above, petitioners prayer for
accounting requires the presentation of evidence on the issue of partial payment.

But neither is a judgment on the pleadings proper. A judgment on the pleadings may be
rendered only when an answer fails to tender an issue or otherwise admits the material allegations
of the adverse partys pleadings.610 In the case at bar, respondents Answer with Counterclaim
disputed petitioners claims that the Memorandum of Agreement and Dation in Payment are illegal
and that the extra charges on the loans are unconscionable.611 Respondent disputed too petitioners
allegation of bad faith.612

WHEREFORE, the challenged Court of Appeals Decision is REVERSED and SET

ASIDE. The Memorandum of Agreement and the Dacion in Payment executed by petitioner-
spouses Wilfredo N. Ong and Edna Sheila Paguio-Ong and respondent Roban Lending
Corporation on February 12, 2001 are declared NULL AND VOID for being pactum
commissorium.

606
Vide records, pp. 3, 51-52.
607
RULES OF COURT, Rule 35, Section 3; Pineda v. Heirs of Eliseo Guevarra, G.R. No. 143188, February
14, 2007, 515 SCRA 627, 638.
608
Vide Marcelo v. Sandiganbayan, G.R. No. 156605, August 28, 2007, 531 SCRA 385, 398.
609
Ibid.
610
RULES OF COURT, Rule 34, Section 1.
611
Records, pp. 53.
612
Id. at 51.

239
 In line with the foregoing findings, the following terms of the loan contracts between the
parties are MODIFIED as follows:

1. The monthly interest rate of 3.5%, or 42% per annum, is reduced to 12% per
annum;

2. The monthly penalty fee of 5% of the total amount due and demandable is reduced
to 12% per annum, to be computed from the time of demand; and

3. The attorneys fees are reduced to 25% of the principal amount only.

Civil Case No. 9322 is REMANDED to the court of origin only for the purpose of
receiving evidence on petitioners prayer for accounting.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING DANTE O. TINGA

Associate Justice Associate Justice
Chairperson

PRESBITERO J. VELASCO, JR. ARTURO D. BRION

Associate Justice Associate Justice

240
 ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons
Attestation, I certify that the conclusions in the above decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

241
 SECOND DIVISION

[G.R. No. 138292. April 10, 2002]

KOREA EXCHANGE BANK, petitioner, vs. FILKOR BUSINESS INTEGRATED, INC.,

KIM EUNG JOE, and LEE HAN SANG, respondents.

DECISION
QUISUMBING, J.:

This petition assails the order613 dated April 16, 1999 of the Regional Trial Court of Cavite
City, Branch 88, in Civil Case No. N-6689. Said order denied petitioners partial motion for
reconsideration of the trial courts order614 dated March 12, 1999 whereby respondents were
ordered to pay petitioner various sums of U.S. dollars as payment of the formers various loans
with interest but omitted to state that the property mortgaged as security for said loans be
foreclosed and sold at public auction in case respondents fail to pay their obligations to petitioner
ninety days from entry of judgment.
The facts are summarized from the findings of the trial court.
On January 9, 1997, respondent Filkor Business Integrated, Inc. (Filkor), borrowed
US$140,000 from petitioner Korea Exchange Bank, payable on July 9, 1997. Of this amount, only
US$40,000 was paid by Filkor.615
In addition, Filkor executed nine trust receipts in favor of petitioner, from June 26, 1997 to
September 11, 1997. However, Filkor failed to turn over to petitioner the proceeds from the sale
of the goods, or the goods themselves as required by the trust receipts in case Filkor could not sell
them.616
In the period from June 9, 1997 to October 1, 1997, Filkor also negotiated to petitioner the
proceeds of seventeen letters of credit issued by the Republic Bank of New York and the Banque
Leumi France, S.A. to pay for goods which Filkor sold to Segerman International, Inc. and Davyco,
S.A. When petitioner tried to collect the proceeds of the letters of credit by presenting the bills of
exchange drawn to collect the proceeds, they were dishonored because of discrepancies.617
Prior to all the foregoing, in order to secure payment of all its obligations, Filkor executed a
Real Estate Mortgage on February 9, 1996. It mortgaged to petitioner the improvements belonging

613
Rollo, p. 155.
614
Id. at 141-151.
615
Id. at 141.
616
Id. at 141-142.
617
Id. at 142-145.

242
to it constructed on the lot it was leasing at the Cavite Export Processing Zone Authority.618
Respondents Kim Eung Joe and Lee Han Sang also executed Continuing Suretyships binding
themselves jointly and severally with respondent Filkor to pay for the latters obligations to
petitioner.619
As respondents failed to make good on their obligations, petitioner filed Civil Case No. N-
6689 in the Regional Trial Court of Cavite City, docketed as Korea Exchange Bank vs. Filkor
Business Integrated, Inc. In its complaint, petitioner prayed that (a) it be paid by respondents under
its twenty-seven causes of action; (b) the property mortgaged be foreclosed and sold at public
auction in case respondents failed to pay petitioner within ninety days from entry of judgment; and
(c) other reliefs just and equitable be granted.620
Petitioner moved for summary judgment pursuant to Section 1, Rule 35 of the 1997 Rules of
Civil Procedure. On March 12, 1999, the trial court rendered its order granting petitioners motion,
reasoning as follows:
xxx
It appears that the only reason defendants deny all the material allegations in the
complaint is because the documents attached thereto are mere photocopies and not the
originals thereof. Section 7, Rule 8 of the Rules of Court allows copies of documents to
be attached to the pleading as an exhibit. Defendants are, therefore, deemed to have
admitted the genuineness and due execution of all actionable documents attached to the
complaint inasmuch as they were not specifically denied, pursuant to Section 8 of the
Rule 8 of the Rules of Court.
In the case at bar, there is clearly no substantial triable issue, hence, the motion for
summary judgment filed by plaintiff is proper.
A summary of judgment is one granted by the court upon motion by a party for an
expeditious settlement of the case, there appearing from the pleadings, depositions,
admissions and affidavits that there are no important questions or issues of fact involved
(except as to the amount of damages) and that, therefore, the moving party is entitled to
a judgment as a matter of law (Sections 1, 2, 3, Rule 35, 1997 Rules of Civil Procedure).
The court having taken into account the pleadings of the parties as well as the
affidavits attached to the motion for summary judgment and having found that there is
indeed no genuine issue as to any material fact and that plaintiff is entitled to a summary
of judgment as a matter of law, hereby renders judgment for the plaintiff and against the
defendants, ordering said defendants jointly and severally to pay plaintiff, as follows621
The trial court then rendered judgment in favor of petitioner, granting its prayers under all its
twenty-seven causes of action. It, however, failed to order that the property mortgaged by
respondent Filkor be foreclosed and sold at public auction in the event that Filkor fails to pay its

618
Id. at 146.
619
Ibid.
620
Id. at 56-61.
621
Id. at 147-148.

243
obligations to petitioner.
Petitioner filed a motion for partial reconsideration of the trial courts order, praying that the
aforesaid relief of foreclosure and sale at public auction be granted. In an order dated April 16,
1999, the trial court denied petitioners motion, ruling as follows:
Plaintiff, in opting to file a civil action for the collection of defendants obligations,
has abandoned its mortgage lien on the property subject of the real estate mortgage.
The issue has already been resolved in Danao vs. Court of Appeals, 154 SCRA 446,
citing Manila Trading and Supply Co. vs. Co Kim, et al., 71 Phil. 448, where the Supreme
Court ruled that:
The rule is now settled that a mortgage creditor may elect to waive his
security and bring, instead, an ordinary action to recover the indebtedness with
the right to execute a judgment thereon on all the properties of the debtor
including the subject matter of the mortgage, subject to the qualification that if
he fails in the remedy by him elected, he cannot pursue further the remedy he
has waived.
WHEREFORE, the Partial Motion for Reconsideration filed by the plaintiff of the
Courts Order dated March 12, 1999 is hereby denied for lack of merit.
SO ORDERED.622
Hence, the present petition, where petitioner ascribes the following error to the trial court.
THE REGIONAL TRIAL COURT OF CAVITE CITY ERRED IN RULING THAT
PETITIONER HAD ABANDONED THE REAL ESTATE MORTGAGE IN ITS
FAVOR, BECAUSE IT FILED A SIMPLE COLLECTION CASE.623
The resultant issue is whether or not petitioners complaint before the trial court was an action
for foreclosure of a real estate mortgage, or an action for collection of a sum of money. In addition,
we must also determine if the present appeal was correctly lodged before us rather than with the
Court of Appeals.
In petitioners complaint before the trial court, Paragraph 183 thereof alleges:
183. To secure payment of the obligations of defendant Corporation under the First
to the Twenty-Seventh Cause of Action, on February 9, 1996, defendant Corporation
executed a Real Estate Mortgage by virtue of which it mortgaged to plaintiff the
improvements standing on Block 13, Lot 1, Cavite Export Processing Zone, Rosario,
Cavite, belonging to defendant Corporation covered by Tax Declaration No. 5906-1 and
consisting of a one-story building called warehouse and spooling area, the guardhouse,
the cutting/sewing area building and the packing area building. (A copy of the Real Estate
Mortgage is attached hereto as Annex SS and made an integral part hereof.)624

622
Id. at 155.
623
Id. at 4.
624
Id. at 54.

244
 This allegation satisfies in part the requirements of Section 1, Rule 68 of the 1997 Rules of
Civil Procedure on foreclosure of real estate mortgage, which provides:
SECTION 1. Complaint in action for foreclosure. In an action for the foreclosure of
a mortgage or other encumbrance upon real estate, the complaint shall set forth the date
and due execution of the mortgage; its assignments, if any; the names and residences of
the mortgagor and the mortgagee; a description of the mortgaged property; a statement
of the date of the note or other documentary evidence of the obligation secured by the
mortgage, the amount claimed to be unpaid thereon; and the names and residences of all
persons having or claiming an interest in the property subordinate in right to that of the
holder of the mortgage, all of whom shall be made defendants in the action.
In Paragraph 183 above, the date and due execution of the real estate mortgage are alleged.
The properties mortgaged are stated and described therein as well. In addition, the names and
residences of respondent Filkor, as mortgagor, and of petitioner, as mortgagee, are alleged in
paragraphs 1 and 2 of the complaint.625 The dates of the obligations secured by the mortgage and
the amounts unpaid thereon are alleged in petitioners first to twenty-seventh causes of action.626
Moreover, the very prayer of the complaint before the trial court reads as follows:
WHEREFORE, it is respectfully prayed that judgment be rendered:
xxx
2. Ordering that the property mortgaged be foreclosed and sold at public auction in
case defendants fail to pay plaintiff within ninety (90) days from entry of judgment.
x x x627
Petitioners allegations in its complaint, and its prayer that the mortgaged property be
foreclosed and sold at public auction, indicate that petitioners action was one for foreclosure of
real estate mortgage. We have consistently ruled that what determines the nature of an action, as
well as which court or body has jurisdiction over it, are the allegations of the complaint and the
character of the relief sought.628 In addition, we find no indication whatsoever that petitioner had
waived its rights under the real estate mortgage executed in its favor. Thus, the trial court erred in
concluding that petitioner had abandoned its mortgage lien on Filkors property, and that what it
had filed was an action for collection of a sum of money.
Petitioners action being one for foreclosure of real estate mortgage, it was incumbent upon
the trial court to order that the mortgaged property be foreclosed and sold at public auction in the
event that respondent Filkor fails to pay its outstanding obligations. This is pursuant to Section 2

625
Id. at 12.
626
Id. at 13-54.
627
Id. at 56-61.
628
Union Bank of the Philippines vs. Court of Appeals, G.R. No. 131729, 290 SCRA 198, 218 (1998); Javelosa vs.
Court of Appeals, G.R. No. 124292, 265 SCRA 493 (1996); Amigo vs. Court of Appeals, et al., G.R. No. 102833, 253
SCRA 382 (1996); Caiza vs. Court of Appeals, G.R. No. 110427, 268 SCRA 640 (1997); Bernarte vs. Court of
Appeals, et al., G.R. No. 107741, 263 SCRA 323 (1996); Bernardo Sr., et al. vs. Court of Appeals, et al., G.R. No.
120730, 263 SCRA 660 (1996).

245
of Rule 68 of the 1997 Rules of Civil Procedure, which provides:
SEC. 2. Judgment on foreclosure for payment or sale.- If upon the trial in such action
the court shall find the facts set forth in the complaint to be true, it shall ascertain the
amount due to the plaintiff upon the mortgage debt or obligation, including interest and
other charges as approved by the court, and costs, and shall render judgment for the sum
so found due and order that the same be paid to the court or to the judgment obligee
within a period of not less than ninety (90) days nor more than one hundred twenty (120)
days from entry of judgment, and that in default of such payment the property shall be
sold at public auction to satisfy the judgment. (Italics supplied.)
Accordingly, the dispositive portion of the decision of the trial court dated March 12, 1999,
must be modified to comply with the provisions of Section 2 of Rule 68 of the 1997 Rules of Civil
Procedure. This modification is subject to any appeal filed by respondents of said decision.
On the propriety of the present appeal, we note that what petitioner impugns is the
determination by the trial court of the nature of action filed by petitioner, based on the allegations
in the complaint. Such a determination as to the correctness of the conclusions drawn from the
pleadings undoubtedly involves a question of law.629 As the present appeal involves a question of
law, petitioner appropriately filed it with this Court, pursuant to Section 1 of Rule 45 of the 1997
Rules of Civil Procedure, which provides:
SECTION 1. Filing of petition with Supreme Court. A party desiring to appeal by
certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on certiorari. The petition
shall raise only questions of law which must be distinctly set forth. (Italics supplied).
There is no dispute with respect to the fact that when an appeal raises only pure questions of
law, this Court has jurisdiction to entertain the same.630
WHEREFORE, the petition is GRANTED. The Order dated March 12, 1999, of the Regional
Trial Court of Cavite City, Branch 88, in Civil Case No. N-6689 is hereby MODIFIED, to state
that the mortgaged property of respondent Filkor be ordered foreclosed and sold at public auction
in the event said respondent fails to pay its obligations to petitioner within ninety (90) days from
entry of judgment.
No pronouncement as to costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur.

629
Martin, Rules of Court of the Philippines, Vol. 1, 945 (1989 ed.).
630
Far East Marble (Phils.), Inc. vs. Court of Appeals, G.R. No. 94093, 225 SCRA 249, 255 (1993).

246
 FIRST DIVISION

MARITIMEINDUSTRY AUTHORITY G.R. No. 173128

(MARINA) and/or ATTY. OSCAR M. SEVILLA,
Petitioners, Present:

CORONA, C.J.,
Chairperson,
- versus - LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

MARC PROPERTIES CORPORATION, Promulgated:

Respondent.
February 15, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 which seeks to reverse the
Decision631 dated June 2, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 80967. The CA
dismissed petitioners appeal questioning the summary judgment rendered by the trial court which
ordered petitioner to reimburse the expenses incurred by the respondent for repair/renovation
works on its building.

The factual antecedents:

On October 23, 2001, petitioner Maritime Industry Authority (MARINA), a government

agency represented by then Administrator and concurrently Vice-Chairman of the Board of
Directors Oscar M. Sevilla, entered into a Contract of Lease632 with respondent Marc Properties
Corporation represented by its Executive Vice-President Ericson M. Marquez. It was agreed that
the MARINA offices will be transferred from PPL Building, Taft Avenue, Manila to an eight-

631
Rollo, pp. 36-44. Penned by Associate Justice Andres B. Reyes, Jr. (now Presiding Justice) with Associate Justices
Regalado E. Maambong and Monina Arevalo-Zenarosa concurring.
632
Records, pp. 122-129.

247
storey commercial building (MARC Building) and Condominium Unit 5 of MARC 2000 Tower
which are both owned by respondent. The parties fixed the monthly rental at P1,263,607.74 (plus
VAT) from January 1, 2002 up to December 31, 2002 and renewable for the same one-year period.
The Contract of Lease also contained the following provisions:

Article II

xxxx

Section 2.01 - The LESSEE, at its own expense, shall have the right and
authority to alter, renovate and introduce in the leased premises such improvement
as it may deem appropriate to render the place suitable for the purpose intended by
the LESSEE, provided, that such alteration, renovation and construction of
additional improvement will not cause any damage to the buildings and such
improvements shall be in accordance with the LESSORs House Rules &
Regulations. The renovation of existing electrical, sanitary/plumbing works,
sprinkler systems, mechanical works, exhaust and ventilation systems, doors, will
be referred to the Administration Office of the LESSOR and will be done only by
the original contractors of the system and cost will be for the account of the
LESSEE. Alternatively, the LESSEE may be allowed to use its own contractor but
subject to close supervision and approval of all works done by the original
contractors of the system and/or the Building Administration. This is to safeguard
the original design intent of the Buildings.

Article IX

Section 9.00 - The LESSEE may pre-terminate the term of this Contract of
Lease by notifying the LESSOR in writing at least ninety (90) days prior to
LESSEES vacating the premises, provided further that the LESSEE shall pay to the
LESSOR a penalty equivalent to two (2) months rental.

Article XI

xxxx

Section 11.13 - This Contract of Lease is subject to the approval of the

Board of Directors of the Maritime Industry Authority and the Office of the
President and shall become binding on both parties only after its approval by the
above-mentioned government offices. The LESSEE shall provide the LESSOR the
written approval of both offices.633

633
Id. at 123, 126 & 128.

248
 On December 14, 2001, respondent received a letter from Administrator Sevilla requesting
for rescission of their Contract of Lease for the reason that the MARINA Board of Directors during
its 158th Regular Meeting resolved to deny the proposed transfer of the MARINA office from its
present address to respondents building.634 In its letter-reply dated December 17, 2001, respondent
expressed disappointment and enumerated those facts and circumstances for which respondent
believes that the Boards decision was unreasonable. Respondent asserted that if the Board will not
reconsider its decision, MARINA must take responsibility for the cost already incurred by
respondent as damages and lost rental opportunity. Thus, respondent said it can only accept the
request for rescission upon reimbursement of P1,055,000.00 representing the amount advanced by
respondent and paid to its Contractors and payment of penalty equivalent to 2 months rental or
P2,527,215.48 in accordance with Art. IX, Sec. 9.00 of the Contract of Lease. With no immediate
response from petitioners, respondent again wrote Administrator Sevilla reiterating its position on
the matter.635

In their letter-reply dated January 23, 2002, petitioners asserted that MARINA is not liable
to pay the penalty considering that the Contract of Lease clearly provides that it is subject to the
approval of the Board and the Office of the President (OP) to become binding on the parties. As
to the actual amount expended for carpentry and electrical works done on the building, petitioners
requested to be furnished with copies of the official receipts so that it may be properly guided in
the disposition thereof. In compliance, respondent furnished petitioners with copies of the letter
and accomplishment reports/official receipts submitted by its contractors. Respondents counsel
faulted Administrator Sevilla for not submitting the Contract of Lease to the Board of Directors
notwithstanding the fact that respondent had filed a motion for reconsideration of the Boards
decision, a clear breach of petitioners contractual obligation which entitles respondent to the
penalty and damages sought. Petitioners asserted that MARINA is not liable for penalty and
damages since the Contract of Lease was not perfected; however, Administrator Sevilla reiterated
MARINAs commitment to pay actual expenses incurred for the works done on the premises based
on [MARINAs] request. Petitioners likewise furnished respondent with copies of the Agenda of
the 160th Regular Meeting of the MARINA Board of Directors held on June 28, 2002 and

634
Id. at 130.
635
Id. at 195-197.

249
Secretarys Certificate dated July 1, 2002 stating the resolution of the MARINA Board not to
approve/ratify the Contract of Lease.636

On July 10, 2002, respondent instituted Civil Case No. 02-104015 in the Regional Trial
Court of Manila (Branch 42) against petitioners MARINA and/or Atty. Oscar M. Sevilla. The
Complaint alleged the following:

xxxx

2. In or about the first week of August 2001 the herein [defendant] Atty.
Oscar M. Sevilla, as MARINA Administrator, represented to Mr. Ericson M.
Marquez, Executive Vice-President of herein [plaintiff] MARC, that the MARINA
has decided to terminate its lease on the 4th, 5th and 6th floors of the PPL Building
and to transfer said principal office to a new location; to this end, he negotiated for
the lease to MARINA of the entire 8-storey Marc Building, located at 1971 Taft
Avenue, Malate, Manila, and Unit #5 of the adjacent Marc 2000 Tower, both of
which belong to herein plaintiff MARC.

3. After about three (3) months of negotiations and after the terms and
conditions of the lease of said properties of herein plaintiff were ironed out with the
understanding that these were with the prior knowledge and consent of the
MARINA, a Contract of Lease on said 8-storey MARC Building and Unit #5 of the
Marc 2000 Tower was executed and signed x x x.

3.a. As a corollary to said contract, herein defendant Atty. Oscar M.

Sevilla wrote a letter, dated October 30, 2001, addressed to Mr. Emilio C.
Yap, informing the latter that Pursuant to Section 4 of the Contract of Lease
for the Fourth, Fifth and Sixth floors of the PPL Bldg., which floors we are
presently occupying, we regret to inform you that MARINA is not renewing
said Lease Contract beginning January 2002.

4. To prepare for the occupancy on January 1, 2002 of the leased properties,

herein defendants requested that alterations/renovations be made on plaintiffs
MARC Building for the account and at the expense of the MARINA, in accordance
with plans prepared and provided by Mr. Roberto C. Arceo, Administrative and
Finance Director of MARINA; and, pursuant to said request alterations/renovations
started on December 5, 2001 and was done by the lowest bidders, JTV Construction
Group, Inc., for civil works/renovations, and NCC Communication Networks, for
wiring and cable installation, for which MARC advanced/paid the sum of
P1,555,170.40.

5. The said Contract of Lease of the MARINA with MARC stipulated in

Sec. 11.13 of Article XI thereof that said contract is subject to the approval of the
636
Id. at 198-207, 212-222.

250
 Board of Directors of the MARINA and the Office of the President of the
Philippines and shall become binding on both parties after its approval by the afore-
mentioned government offices, which stipulation, therefore, carries with it the
obligation on the part of the MARINA Administrator, Atty. Oscar M. Sevilla, to
submit the said contract to the said Board for approval or disapproval; however,
in breach of said stipulation, he did not do so.

5.a. On the contrary, in a letter addressed to Mr. Ericson Marquez,

dated December 14, 2001, the MARINA Administrator, Atty. Oscar M.
Sevilla, requested the rescission of the said Contract of Lease and, as
justification, he falsely asserted, that during yesterdays 158th Regular
Meeting of the MARINA Board held at the MARINA Conference Room,
the Board resolved to DENY the proposed transfer of the MARINA from
its present address to your owned building, when in truth and in fact, neither
the said transfer nor the said Contract of Lease was included in the agenda
or taken up during the said 158th Regular Meeting held on December 13,
2001.

5.b. Neither was said Contract of Lease taken up in said Boards next
regular meeting held on February 21, 2002 notwithstanding the fact that
MARC filed a Motion for Reconsideration, dated February 14, 2002, which
provided the MARINA Administrator with another opportunity to submit
the said contract to the MARINA Board for its consideration; yet, he again
did not do so.

6. The breach on the part of the defendants of the stipulation clearly

provided in the said Contract of Lease, alleged in paragraph 5 hereof, resulted in
damages to the plaintiff which may be compensated with the sum of P2,527,215.48
equivalent to two (2) months rental, - the measure of damages provided for in said
contract.

x x x x637 (Italics supplied.)

Petitioners through the Solicitor General filed their Answer638 specifically denying the
foregoing allegations. Petitioners argued that respondents demand for P2,527,215.48 is based
solely on Art. V, Sec. 5.0 of the Contract of Lease, which provision presupposes the approval of
the contract which is subject to the suspensive condition provided in Art. XI, Sec. 11.13. Petitioners
contended that by claiming that there was no reason to reject the Contract of Lease considering the
clear advantages of approving the same, respondent is effectively imposing its judgment on the
Board of Directors and the OP; this simply cannot be done. Petitioners pointed out that the approval

637
Id. at 2-4.
638
Id. at 40-52.

251
or rejection of the contract is a prerogative lodged solely on the said authorities and respondent is
devoid of any authority to question the wisdom of the Boards rejection of the contract as obviously
there were other considerations -- to which respondent is not privy -- factored in by the Board in
its decision. Lastly, petitioners asserted that this being a suit against the State, it must be dismissed
outright as there was no allegation in the complaint that the State had given its consent to be sued
in this case.

Respondent filed a motion for summary judgment in its favor contending that there is no
genuine issue in this case as to any material fact even as to the amount of damages. Petitioners
filed their opposition alleging the existence of genuine factual issues which can only be resolved
in a full-blown trial on the merits.

On March 5, 2003, the trial court issued an Order639 granting in part the motion for
summary judgment. Citing petitioners admission in the Answer that Administrator Sevilla, as an
act of good faith, offered in behalf of MARINA to shoulder the actual expenses incurred for the
works done on the premises based on their request, as well as the other proofs/official receipts
submitted by respondent and the January 23, 2002, May 13, 2002 and July 1, 2002 letters of
Administrator Sevilla who promised or at least gave the impression that respondent will be
reimbursed by MARINA of the amount of P1,555,170.40, the trial court ruled that summary
judgment for the said claim is proper. Accordingly, the trial court ordered:

WHEREFORE, in view of all the foregoing, the motion for summary

judgment is partly granted. The defendants are directed to jointly and severally pay
the plaintiff the sum of P1,555,170.40 as reimbursement of the expenses it incurred
in the repairs/renovations of the MARC Building with legal interest from the filing
(July 10, 2002) of the complaint. In so far as the other claims of plaintiff, the motion
for summary judgment is denied.

SO ORDERED.640

Respondent then moved to set the case for pre-trial, which was granted. Meanwhile,
petitioners filed a motion for reconsideration641 of the March 5, 2003 Order arguing that while

639
Id. at 250-252. Penned by Judge Guillermo G. Purganan.
640
Id. at 252.
641
Id. at 260-268.

252
admittedly they had offered to pay the respondent reimbursement for the alterations/renovations
made on its building as shown by the afore-mentioned letters of Administrator Sevilla, petitioners
did not admit that such alterations/renovations which respondent claims to have been prosecuted
on the MARC Building were actually made thereon and that such changes were in fact in
accordance with the plans prepared and provided for by MARINA. Petitioners stressed that these
factual matters are still to be determined which can only be done through a full-blown trial; the
reimbursable amount being also subject to verification since petitioners have not yet been given
the opportunity to independently confirm such amount. Further, it was contended that respondents
submission of accomplishment reports on the alterations/renovation works it claims to have been
done and the amount it allegedly expended do not automatically establish petitioners liability for
the same. Petitioners subsequently requested that the scheduled pre-trial be cancelled pending
resolution of their motion for reconsideration of the March 5, 2003 Order.642

In its Order643 dated June 30, 2003, the trial court denied petitioners motion for
reconsideration, as follows:

As correctly observed by the plaintiff the answer raises issues which are
sham or not genuine. In their answer[,] defendants did not specifically allege what
were not done in plaintiffs MARC Building or what were done therein which were
not in accordance with the plan. Neither did defendants specifically alleged in their
answer what amount covered by the receipts of the contractors is not reimbursable.

xxxx

The defendants opted not to file opposing or counter affidavits. Thus, there
is no proof what works were done in the MARC Building which was not in
accordance with the plan submitted by MARINA. Neither is there proof that the
amounts covered by the receipts of the contracts include amounts which were not
for works done in said MARC Building.

Anent the alleged lack of opportunity for defendants to confirm the amount
demanded by the plaintiff. From May 31, 2002 when defendants received copies of
the receipts issued by the contractors up to the time they filed their Answer dated
October 14, 2002, four and a half (4 ) months elapsed, during which defendants
have had full opportunity to verify the correctness of said receipts. Thereafter,
another four (4) months elapsed up to the time plaintiffs motion for summary
judgment was set for hearing on January 10, 2003. There were, therefore, a total of

642
Id. at 301-303.
643
Id. at 312-313.

253
 8 months during which defendants could have verified the correctness of the
amounts covered by said receipts.

WHEREFORE, in view of all the foregoing, the motion for reconsideration

is denied.

SO ORDERED.644

The Office of the Solicitor General received a copy of the above order on July 14, 2003.
On July 18, 2003, the Solicitor General filed a notice of appeal. Said notice of appeal was later
withdrawn upon manifestation by the Solicitor General that since the March 5, 2003 Order is a
partial summary judgment, the same is interlocutory and not appealable, without prejudice to
petitioners availment of the appropriate remedy from the said ruling.645

On the scheduled pre-trial hearing on July 3, 2003, counsel for petitioners appeared but
without a special power of attorney as directed in the Notice of Pre-Trial. On motion of the
respondent, the trial court declared petitioners as in default and allowed the respondent to present
its evidence ex-parte.646 Petitioners filed a motion for reconsideration claiming that the scheduled
pre-trial was premature considering the pendency of their motion for reconsideration of the March
5, 2003 Order, and invoking the liberal policy on setting aside default orders. The trial court,
however denied said motion for reconsideration.647

Petitioners sought relief from the CA by filing a petition for certiorari with prayer for
issuance of TRO and/or writ of preliminary injunction (CA-G.R. SP No. 79343). Petitioners asked
the appellate court to hold in abeyance the proceedings in Civil Case No. 02-104015. Apparently,
however, petitioners urgent motion for the issuance of TRO was not acted upon by the CA. After
admission of the documentary exhibits identified by Ericson Marquez and formally offered in
evidence, and there being no restraining order issued by the appellate court, the case was deemed
submitted for decision.648

644
Id. at 313.
645
Id. at 317, 336-340, 346.
646
Id. at 314.
647
Id. at 323-329, 335.
648
Id. at 353-357, 363-368.

254
 On December 1, 2003, the trial court rendered its Decision649 upholding the March 5, 2003
order granting the prayer for reimbursement but denying the rest of respondents claims. The
dispositive portion thereof reads:

WHEREFORE, premises considered, except for the amount of

Php1,555,170.40 representing reimbursement of the renovations advanced by the
plaintiff which this Court had already awarded in the Order dated March 5, 2003,
the rest of the plaintiffs claims vis--vis unpaid rentals of Php 2,527,215.48 together
with interest thereon at the legal rate as well as attorneys fees are hereby dismissed
for lack of factual and legal basis.

No pronouncement as to costs.

SO ORDERED.650

Both parties appealed the trial courts decision (CA-G.R. CV No. 80967).651However,
respondents appeal was dismissed for non-payment of appellate docket and other legal fees.
Respondent challenged the said dismissal before this Court in a petition for certiorari and
mandamus (G.R. No. 165110). G.R. No. 165110 was likewise dismissed under Resolution dated
October 6, 2004 of this Courts Third Division.652

By Decision dated June 2, 2006, the CA dismissed petitioners appeal holding that the trial
courts rendition of partial summary judgment was inaccord with Section 1, Rule 35 of the 1997
Rules of Civil Procedure, as amended, as it was based on petitioners admission in their Answer.
In rejecting petitioners argument that they raised a genuine factual issue as to the reimbursable
amount for the renovation works, the CA stated:

As to the contention that defendant-appellant is entitled to verify first the

authenticity, genuineness and due execution of the documents (e.g., receipts)
relative to the renovation, suffice it to note that plaintiff-appellee had offered its
evidence on 13 December 2002 or three (3) months prior to the issuance of the
contested order. Yet, defendant-appellant has never lift its finger to challenge the
authenticity, genuineness, and due execution of the said documents. For this failure,
it is established beyond cavil that there is no genuine issue as to any material fact
warranting thereby the issuance of a summary judgment.653

649
Id. at 376-382. Penned by Judge Guillermo G. Purganan.
650
Id. at 382.
651
Id. at 384-394.
652
CA rollo, pp. 26, 52,194-196.
653
Rollo, pp. 43-44.

255
 Hence, this petition raising the sole issue of whether the CA was correct in sustaining the
trial courts order granting the motion for partial summary judgment thereby dispensing with a full
trial on respondents claim for reimbursement of P1,555,170.40, the amount allegedly advanced by
respondent for the repair/renovation works on its building. With the previous dismissal by the CA
of respondents appeal and its petition for certiorari in this Court, the present petition is thus
confined to the propriety of the trial courts partial summary judgment insofar as the aforesaid claim
for reimbursement.

We find the petition meritorious.

Sections 1 and 3, Rule 35 of the 1997 Rules of Civil Procedure, as amended, provide:

SECTION 1. Summary judgment for claimant. A party seeking to recover

upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at
any time after the pleading in answer thereto has been served, move with supporting
affidavits, depositions or admissions for a summary judgment in his favor upon all
or any part thereof.

SECTION 3. Motion and proceedings thereon. The motion shall be served

at least ten (10) days before the time specified for the hearing. The adverse party
may serve opposing affidavits, depositions or admissions at least three (3) days
before the hearing. After the hearing, the judgment sought shall be rendered
forthwith if the pleadings, supporting affidavits, depositions, and admissions on
file, show that, except as to the amount of damages, there is no genuine issue
as to anymaterial fact and that the moving party is entitled to a judgment as a
matter of law. (Emphasis supplied.)

Summary judgment is a procedural device resorted to in order to avoid long drawn out
litigations and useless delays where the pleadings on file show that there are no genuine issues of
fact to be tried.654A genuine issue is such issue of fact which require the presentation of evidence
as distinguished from a sham, fictitious, contrived or false claim.655There can be no summary
judgment where questions of fact are in issue or where material allegations of the pleadings are in
dispute.656 A party who moves for summary judgment has the burden of demonstrating clearly the

654
Solidbank Corporation v. Court of Appeals, G.R. No. 120010, October 3, 2002, 390 SCRA 241, 249.
655
Id., citing Evadel Realty and Development Corporation v. Soriano, G.R. No. 144291, April 20, 2001, 357 SCRA
395, 401.
656
Manufacturers Hanover Trust Co. v. Guerrero, G.R. No. 136804, February 19, 2003, 397 SCRA 709, 715.

256
absence of any genuine issue of fact, or that the issue posed in the complaint is so patently
unsubstantial as not to constitute a genuine issue for trial, and any doubt as to the existence of such
an issue is resolved against the movant.657

Contrary to the findings of the trial court and CA, the Answer filed by petitioners contained
a specific denial of absolute liability for the amount being claimed as actual expenses for
repairs/renovations works done on repondents building after the execution of the Contract of
Lease.

5. SPECIFICALLY DENY the allegation in paragraph 4 of the complaint

that MARINA requested for alterations/renovations in accordance with the plans
prepared by MARINA on the MARC building for the account of and at the expense
of MARINA, the truth being those stated in the Special and Affirmative Defenses
hereof. They likewise SPECIFICALLY DENY the rest of the allegations therein
that said request alterations/renovations started on December 5, 2001 and was done
by the lowest bidders, JTV Construction Group, Inc., for civil works/renovations
and NCC Communication Networks, for wiring and cable installation, for whcih
plaintiff allegedly advanced/paid the sum of P1,555,170.40 for lack of knowledge
or information sufficient to form a belief as to the truth thereof.

xxxx

13. As an act of good faith, Atty. Sevilla, in behalf of MARINA, has offered
to shoulder and pay the actual expenses incurred for the works done on the premises
based on MARINAs request. Moreover, defendants cannot allow plaintiff to collect
from them the additional sum of P2,527,215.48 which is equivalent to two (2)
months rental as penalty simply because there is no justification therefor.

x x x x658

Furthermore, petitioners averred in their Opposition to Plaintiffs Motion for Summary

Judgment in Favor of Plaintiff:

With regard to the claim for reimbursement, plaintiff has yet to conclusively
prove that the alterations/renovations it claims to have been made in its building
were actually made and that the same were actually in accordance with the alleged
request made by MARINA.

657
Go v. Court of Appeals, G.R. No. 120040, January 29, 1996, 252 SCRA 564, 569.
658
Records, pp. 41-42, 49.

257
 The reply-letter dated January 23, 2002 of defendant Sevilla in response to
the letters of Ericson Marquez dated December 17, 2001 and January 18, 2002,
demanding reimbursements of the alterations/renovation allegedly made upon its
building, shows that it merely required Marquez to show proof or receipt of the
expenses plaintiff alleges it had incurred.

Likewise, the letter of defendant Sevilla dated July 1, 2002, this time in
response to a similar demand letter made by plaintiffs counsel, Atty. Antonio
Atienza, simply stated that defendants have committed themselves to pay the actual
expenses incurred by plaintiff as based on MARINAs request. The same offer
was reiterated by defendants in paragraph 13 of their answer to plaintiffs complaint.
It must be noted, however, that said offer specifically pertains only to
alterations/renovations which were actually made on plaintiffs properties in
accordance with MARINAs request.

Verily, defendants have yet to actually acquiesce to the veracity of the

accomplishment reports, receipt, etc. submitted by plaintiff since the same are still
subject to verification which can only be achieved through a full-blown trial.659
(Emphasis and underscoring in the original.)

As can be gleaned, the fact that Administrator Sevilla sent respondent letters wherein
MARINA offered to shoulder actual expenses for works done on the premises based on MARINAs
request does not necessarily mean that petitioners had waived their right to question the
amountbeing claimed by the respondent.660Since the factual basis of the claim for reimbursement
was not admitted by the petitioners, it is clear that the resolution of the question of actual works
done based on MARINAs request, as well as the correctness of the amount actually spent by
respondent for the purpose, required a trial for the presentation of testimonial and documentary
evidence to support such claim. The trial court therefore erred in granting summary judgment for
the respondent. The averments in the answer and opposition clearly pose factual issues and hence
rendition of summary judgment would be improper.

It must be stressed that trial courts have limited authority to render summary judgments
and may do so only when there is clearly no genuine issue as to any material fact. When the facts
as pleaded by the parties are disputed or contested, proceedings for summary judgment cannot take
the place of trial.661As already stated, the burden of demonstrating clearly the absence of genuine

659
Id. at 237-238.
660
See D.M. Consunji, Inc. v. Duvaz Corporation, G.R. No. 155174, August 4, 2009, 595 SCRA 111, 123.
661
Asian Construction and Development Corporation v. Philippine Commercial International Bank, G.R. No.
153827, April 25, 2006, 488 SCRA 192, 203.

258
issues of fact rests upon the movant, in this case the respondent, and not upon petitioners who
opposed the motion for summary judgment. Any doubt as to the propriety of the rendition of a
summary judgment must thus be resolved against the respondent. But here, the partial summary
judgment was premised merely on the trial courts hasty conclusion that respondent is entitled to
the reimbursement sought simply because petitioners failed to point out what particular works
were not done or implemented not in accordance with MARINAs specifications after demands
were made by respondent and the filing of the complaint in court. Precisely, a trial is conducted
after the issues have been joined to enable herein respondent to prove, first, that repair/renovation
works were actually done and such were in accordance with MARINAs request, and second, that
it actually advanced the cost thereof by paying the contractors; and more importantly, to provide
opportunity for the petitioners to scrutinize respondents evidence, cross-examine its witnesses and
present rebuttal evidence. Moreover, the trial court should have been more circumspect in ruling
on the motion for summary judgment, taking into account petitioners concern for judicious
expenditure of public funds in settling its liabilities to respondent.

The partial summary judgment rendered under the trial courts Order dated March 5, 2003
being a nullity, the case should be remanded to saidcourt for the conduct of trial on the issue of the
reimbursement of expenses for repair/renovation works being claimed by the respondent. For this
purpose, petitioners shall be afforded fair opportunity to scrutinize the respondents evidence,
cross-examine its witnesses and present controverting evidence. It is to be noted that the partial
summary judgment was rendered before petitioners were declared non-suited. Petitioners had
promptly challenged the validity of the default order and even sought an injunction against the ex-
parte presentation of evidence by the respondent; however, the CA did not act on the matter until
the rendition of the trial courts December 1, 2003 Decision. Substantial justice in this instance can
best be served if a full opportunity is given to both parties to litigate their dispute and submit the
merits of their respective positions.662

WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated
June 2, 2006 of the Court of Appeals in CA-G.R. CV No. 80967 is REVERSED and SET ASIDE.
The Decision dated December 1, 2003 insofar only as it upheld the Order dated March 5, 2003 of

662
Bahia Shipping Services, Inc. v. Mosquera, G.R. No. 153432, February 18, 2004, 423 SCRA 305, 308.

259
the Regional Trial Court of Manila, Branch 42, is SET ASIDE. The case is hereby REMANDED
to the said court for further proceedings.

No costs.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the conclusions
in the above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.
260
RENATO C. CORONA
Chief Justice

261
 THIRD DIVISION

[G.R. No. 150922. September 21, 2004]

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), petitioner, vs. PHILIPPINE

VILLAGE HOTEL, INC., respondent.

DECISION
PANGANIBAN, J.:

Basic is the rule that a partial summary judgment is an interlocutory order, because it does not
completely and finally dispose of a litigation. That the case below has been needlessly delayed is
due to the error of petitioner itself in its choice of remedy. It cannot blame the Court of Appeals
for the delay, because the latter was merely following proper procedures, for which it cannot be
faulted.

The Case

Before us is a Petition for Review663 under Rule 45 of the Rules of Court, challenging the July
24, 2001 Decision664 and the November 22, 2001 Resolution665 of the Court of Appeals (CA) in
CA-GR CV No. 61355. The assailed Decision disposed as follows:
WHEREFORE, premises considered, this Court DISMISSES the appeal without
prejudice.666
The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The antecedent facts are summarized by the appellate court as follows:

x x x. [Respondent] Philippine Village Hotel, Inc. (PVHI) has several outstanding
accounts totalling P152 million in favor of [petitioner] Government Service Insurance

663
Rollo, pp. 11-39.
Id., pp. 41-47. Second Division. Penned by Justice Hilarion L. Aquino with the concurrence of Justices Ma. Alicia
664

Austria-Martinez (Division chairman of the CA and now a member of this Court) and Jose L. Sabio Jr. (member).
665
Id., pp. 49-50.
666
Assailed CA Decision, p. 6; rollo, p. 46.

262
 System (GSIS). Due to PVHIs default in its monthly amortization, [petitioner] on April
23, 1987 filed separate applications for extrajudicial foreclosure of the mortgages
securing said obligations with the City Sheriff of Pasay City. After several legal and
judicial skirmishes pertaining to the propriety of the applications for extrajudicial
foreclosure of said mortgages, the legal impediments to said proceedings were finally
eliminated. So, on October 13 and 14, 1988, the foreclosure proceedings were held and
the GSIS emerged as the buyer at auction of the mortgaged properties. On May 11, 1989,
GSIS filed an Ex-Parte Petition for the Issuance of a Writ of Possession before the
Regional Trial Court, Branch III, Pasay City docketed therein as LRC Case No. 3079. On
August 16, 1989, said court issued the writ of possession applied for.
Meanwhile, the PVHI and GSIS amicably settled their dispute. On December 13,
1989, they entered into a Memorandum of Agreement by virtue of which the accounts of
PVHI in favor of the GSIS were completely settled. Under the MOA, the total obligation
of PVHI to GSIS was fixed at P300 million to be paid in the manner therein specified. It
was further stipulated that the MOA was subject to the approval of the Office of the
President and Commission on Audit.
Of the P300 million obligation, PVHI was able to pay on time P30 million. x x x.
On March 5, 1990, PVHI filed a Complaint for Specific Performance with Damages
with the court a quo seeking for a judicial declaration of the validity and effectivity of
the MOA and to compel GSIS to accept payment of the outstanding obligation of P270
million. This Complaint was docketed as Civil Case No. 90-52272 before the Regional
Trial Court, Branch 2 in Manila. On March 6, 1990, the said court issued a Temporary
Restraining Order restraining GSIS and the Sheriff of Pasay City from implementing the
writ of possession issued by the Regional Trial Court, Branch III of Pasay City in LRC
No. 3079 and from consolidating title to the properties covered by the foreclosed
mortgages. This was followed with the issuance by the court a quo of a writ of preliminary
injunction.
The proceeding in the action for specific performance went its normal course until
the PVHI has presented its evidence and rested its case. At this stage of the proceeding,
PVHI filed a Motion for Partial Summary Judgment. The GSIS opposed said motion. On
June 16, 1993, the court a quo rendered a Partial Summary Judgment confirming the
validity of the MOA and directing PVHI to pay P 270 million to GSIS and the latter to
accept the same and then to comply with all its obligations under the MOA.667
Consequently, petitioner interposed an appeal to the CA and claimed that the trial court had
erred in (a) issuing the writ of preliminary injunction, (b) granting the Motion for Partial Summary
Judgment, and (c) declaring the MOA effective and valid.668

Ruling of the Court of Appeals

667
Id., pp. 1-3 & 41-43. Citations omitted.
668
Id., pp. 3 & 43.

263
 The Court of Appeals ruled that the appeal was an improper remedy, and that the proper mode
of review was certiorari under Rule 65 of the Rules of Court.669 It dismissed the recourse by virtue
of Item No. 4 of Supreme Court Circular No. 2-90, according to which, inappropriate modes of
appeal brought to this Court and the CA shall be dismissed.670
In denying petitioners Motion for Reconsideration, the appellate court held that the cases
relied upon were not applicable because of differences in factual milieu.671
Hence, this Petition.672

The Issues

In its Memorandum, petitioner raises the following issues for our consideration:
I.
Whether the Court of Appeals committed reversible error when it dismissed the appeal
on procedural technicality instead of deciding the case on the merits.
A. Whether the trial courts Partial Summary Judgment is a decision on the
merits, which necessitates the adjudication of petitioners appeal below on the
merits and not on a mere technicality.
B. Whether the Honorable Court of Appeals has the power and jurisdiction
to pass upon the merits and/or validity of the Partial Summary Judgment.
C. Whether circumstances present require the Court of Appeals, or even the
Supreme Court, to pass upon the merits of the appealed case rather than dismiss
the same on a mere technicality.
II.
Whether the separate and corresponding approvals of the Office of the President and the
Commission on Audit on the subject Memorandum of Agreement is a sine qua non for
the effectivity of the said Contract.673
In more direct language, the issue is simply whether the CA -- on appeal -- may validly pass
upon the Partial Summary Judgment issued by the RTC, considering that the latter has not
adjudged the amount of recoverable damages. Should this issue be decided affirmatively, a

669
Id., pp. 5 & 45.
670
Id., pp. 6 & 46.
671
CA Resolution p. 2; rollo, p. 50.
672
The case was deemed submitted for decision on June 10, 2003, upon this Courts receipt of petitioners Memorandum,
signed by Attys. Nelson L. Guerrero, Librada C. Mendiola and Cesar L. Aganon. Respondents Memorandum -- signed
by Attys. Armando M. Marcelo, Elsie S. Ramos and Elvin Michael L. Cruz -- was received by this Court on May 5,
2003.
673
Petitioners Memorandum, p. 9-10; rollo, p. 279-280. Original in upper case.

264
corollary one is whether the MOA is valid.

This Courts Ruling

The Petition has no merit.

Main Issue:
Proper Remedy

Petitioner argues that the CA should have taken cognizance of the appeal brought before it,
because the principal issue in the case -- the validity of the MOA -- had allegedly been fully
decided on the merits through the Partial Summary Judgment. Supposedly, the only issue that
remains to be resolved by the trial court is the amount of liquidated damages, which may be the
subject of a separate appeal.674
Petitioner adds that the appeal should not have been dismissed on a mere technicality. It
stresses that the most equitable, judicious, expeditious, practical, and inexpensive manner of
resolving this case is for it to be decided on its merits by this Court, considering in particular the
amount of time already lost and the fact that the entire records of the case have been submitted and
made available to the CA.675 Petitioner further contends that an interlocutory order may
nevertheless be appealed by virtue of the exception provided under Section 1(g) of Rule 41.676
These contentions are unmeritorious. A partial summary judgment does not finally dispose of
an action. Our pronouncements in Guevarra v. Court of Appeals677 and Province of Pangasinan v.
Court of Appeals678 were categorical: a partial summary judgment is merely an interlocutory order,
not a final judgment. What the rules contemplate is that the appeal from the partial summary
judgment shall be taken together with the judgment that may be rendered in the entire case after a
trial is conducted on the material facts on which a substantial controversy exists.679
The dispositive portion of the assailed Partial Summary Judgment is quoted below:
WHEREFORE, premises considered, this Court hereby grants the Motion for Partial
Summary Judgment, confirms the validity and effectivity of the subject Memorandum of
Agreement dated December 13, 1989, allows x x x PVHI to pay the P270 Million balance
of the settlement price within ninety days from the finality of this O[r]der, and, lastly,
orders x x x GSIS, upon such full payment of the settlement price, to comply with all its

674
Id., pp. 12 & 282.
675
Id., pp. 15-19 & 285-289.
676
Id., pp. 16 & 286.
677
124 SCRA 297, August 30, 1983.
678
220 SCRA 726, March 31, 1993.
679
Guevarra v. CA, supra, p. 316, per Vasquez, J.

265
 obligations under the Memorandum of Agreement by delivering to [respondent] the Deed
of Conveyance on the main hotel building and the chattels subject matter of the said
agreement, together with the deed of absolute sale over the hotel annex referred to therein,
in favor of x x x PVHI, and by canceling the debenture bonds mentioned in said
agreement. Trial on the issu[e] of damages shall resume on July 5/7, 1993 at 8:30 in the
morning at which time x x x GSIS shall present the evidence-in-chief on said issue.
(Emphasis supplied)
It is clear from the above that only the issue of the validity of the subject MOA has been
settled. Just as clearly, trial on the issue of damages is yet to take place; thus, the case has not come
to a close. The Partial Summary Judgment is therefore not reviewable by ordinary appeal to the
CA.
Neither was the exception provided in Rule 41 available to petitioner. The Rule states:
Section 1. Subject of appeal. x x x
No appeal may be taken from:
xxx xxx xxx
(g) A judgment or final order for or against one or more of several parties or in
separate claims, counterclaims, cross-claims and third-party complaints, while the main
case is pending, unless the court allows an appeal therefrom;
Granting arguendo that the exception was applicable, petitioner should have filed a Record on
Appeal -- not a Notice on Appeal -- with the trial court, which would necessarily keep the records
in order to be able to resolve the recoverable damages, if any.680
The question of damages is inseparable from that of the validity of the MOA. Indeed, the
amount recoverable, if any, is dependent on the subsequent finding of the CA on the validity of
the MOA. Should the appellate court reverse the RTC and hold that the MOA is invalid, the trial
courts finding on the amount of recoverable damages would necessarily be reversed as well.
Contrary to petitioners contention, a strict application of the rule on interlocutory orders will
not frustrate substantial justice. What has delayed this case is not the application of the proper rules
of procedure, but petitioners wrong mode of redress. The RTC was gravely mistaken in allowing
the elevation to the CA of the entire records of the case, on which the trial court had not yet
rendered a complete and final judgment.
It is therefore not surprising that more than eight years have elapsed, but the issue of damages
still has to be resolved. Petitioner has only itself to blame for the delay and for the needless
vexation of the judicial system. Had it not chosen the wrong remedy, the main case would have
perhaps been finally resolved by the trial court long ago.
WHEREFORE, the Petition is DENIED, and the challenged Decision and Resolution

680 SEC. 2. Modes of Appeal.

(a) Ordinary Appeal - No record on appeal shall be required except in special proceedings and other cases of multiple
or separate appeals where the law or the rules so require. In such cases, the record on appeal shall be filed and served
in like manner.

266
AFFIRMED. Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

267
 SECOND DIVISION

SALVADOR P. ESCAO G. R. No. 151953

and MARIO M. SILOS,
Petitioners,
Present:

QUISUMBING,
- versus - Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
RAFAEL ORTIGAS, JR., VELASCO, JR., JJ.
Respondent.
Promulgated:

June 29, 2007

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

DECISION

TINGA, J.:

The main contention raised in this petition is that petitioners are not under obligation to
reimburse respondent, a claim that can be easily debunked. The more perplexing question is
whether this obligation to repay is solidary, as contended by respondent and the lower courts, or
merely joint as argued by petitioners.

On 28 April 1980, Private Development Corporation of the Philippines (PDCP)681 entered

into a loan agreement with Falcon Minerals, Inc. (Falcon) whereby PDCP agreed to make available

268
and lend to Falcon the amount of US$320,000.00, for specific purposes and subject to certain terms
and conditions.682 On the same day, three stockholders-officers of Falcon, namely: respondent
Rafael Ortigas, Jr. (Ortigas), George A. Scholey and George T. Scholey executed an Assumption
of Solidary Liability whereby they agreed to assume in [their] individual capacity, solidary liability
with [Falcon] for the due and punctual payment of the loan contracted by Falcon with PDCP.683 In
the meantime, two separate guaranties were executed to guarantee the payment of the same loan
by other stockholders and officers of Falcon, acting in their personal and individual capacities.
One Guaranty684 was executed by petitioner Salvador Escao (Escao), while the other685 by
petitioner Mario M. Silos (Silos), Ricardo C. Silverio (Silverio), Carlos L. Inductivo (Inductivo)
and Joaquin J. Rodriguez (Rodriguez).

Two years later, an agreement developed to cede control of Falcon to Escao, Silos and
Joseph M. Matti (Matti). Thus, contracts were executed whereby Ortigas, George A. Scholey,
Inductivo and the heirs of then already deceased George T. Scholey assigned their shares of stock
in Falcon to Escao, Silos and Matti.686 Part of the consideration that induced the sale of stock was
a desire by Ortigas, et al., to relieve themselves of all liability arising from their previous joint and
several undertakings with Falcon, including those related to the loan with PDCP. Thus, an
Undertaking dated 11 June 1982 was executed by the concerned parties,687 namely: with Escao,
Silos and Matti identified in the document as SURETIES, on one hand, and Ortigas, Inductivo and
the Scholeys as OBLIGORS, on the other. The Undertaking reads in part:

3. That whether or not SURETIES are able to immediately cause PDCP and PAIC
to release OBLIGORS from their said guarantees [sic], SURETIES hereby
irrevocably agree and undertake to assume all of OBLIGORs said

681
Now PDCP Development Bank.
682
See rollo, p. 29.
683
Id. at 38.
684
Id. at 39.
685
Id. at 41.
686
See id. at 52-55.
687
See id. at 54.

269
 guarantees [sic] to PDCP and PAIC under the following terms and
conditions:

a. Upon receipt by any of [the] OBLIGORS of any demand

from PDCP and/or PAIC for the payment of FALCONs obligations
with it, any of [the] OBLIGORS shall immediately inform
SURETIES thereof so that the latter can timely take appropriate
measures;

b. Should suit be impleaded by PDCP and/or PAIC against any

and/or all of OBLIGORS for collection of said loans and/or credit
facilities, SURETIES agree to defend OBLIGORS at their own
expense, without prejudice to any and/or all of OBLIGORS
impleading SURETIES therein for contribution, indemnity,
subrogation or other relief in respect to any of the claims of PDCP
and/or PAIC; and

c. In the event that any of [the] OBLIGORS is for any reason

made to pay any amount to PDCP and/or PAIC, SURETIES shall
reimburse OBLIGORS for said amount/s within seven (7) calendar
days from such payment;

4. OBLIGORS hereby waive in favor of SURETIES any and all fees which
may be due from FALCON arising out of, or in connection with, their said
guarantees[sic].688

Falcon eventually availed of the sum of US$178,655.59 from the credit line extended by
PDCP. It would also execute a Deed of Chattel Mortgage over its personal properties to further
secure the loan. However, Falcon subsequently defaulted in its payments. After PDCP foreclosed
on the chattel mortgage, there remained a subsisting deficiency of P5,031,004.07, which Falcon
did not satisfy despite demand.689

688
Id. at 53-54. Emphasis supplied.
689
See id. at 29-30.

270
 On 28 April 1989, in order to recover the indebtedness, PDCP filed a complaint for sum of
money with the Regional Trial Court of Makati (RTC) against Falcon, Ortigas, Escao, Silos,
Silverio and Inductivo. The case was docketed as Civil Case No. 89-5128. For his part, Ortigas
filed together with his answer a cross-claim against his co-defendants Falcon, Escao and Silos, and
also manifested his intent to file a third-party complaint against the Scholeys and Matti.690 The
cross-claim lodged against Escao and Silos was predicated on the 1982 Undertaking, wherein they
agreed to assume the liabilities of Ortigas with respect to the PDCP loan.

Escao, Ortigas and Silos each sought to seek a settlement with PDCP. The first to come to
terms with PDCP was Escao, who in December of 1993, entered into a compromise agreement
whereby he agreed to pay the bank P1,000,000.00. In exchange, PDCP waived or assigned in favor
of Escao one-third (1/3) of its entire claim in the complaint against all of the other defendants in
the case.691 The compromise agreement was approved by the RTC in a Judgment692 dated 6 January
1994.

Then on 24 February 1994, Ortigas entered into his own compromise agreement693 with
PDCP, allegedly without the knowledge of Escao, Matti and Silos. Thereby, Ortigas agreed to pay
PDCP P1,300,000.00 as full satisfaction of the PDCPs claim against Ortigas,694 in exchange for
PDCPs release of Ortigas from any liability or claim arising from the Falcon loan agreement, and
a renunciation of its claims against Ortigas.

In 1995, Silos and PDCP entered into a Partial Compromise Agreement whereby he agreed
to pay P500,000.00 in exchange for PDCPs waiver of its claims against him.695

690
See id. at 48-49.
691
See id. at 56.
692
Id. at 56-57.
693
Id. at 58-60.
694
Id. at 59.
695
See id. at 62-63.

271
 In the meantime, after having settled with PDCP, Ortigas pursued his claims against Escao,
Silos and Matti, on the basis of the 1982 Undertaking. He initiated a third-party complaint against
Matti and Silos,696 while he maintained his cross-claim against Escao. In 1995, Ortigas filed a
motion for Summary Judgment in his favor against Escao, Silos and Matti. On 5 October 1995,
the RTC issued the Summary Judgment, ordering Escao, Silos and Matti to pay Ortigas, jointly
and severally, the amount of P1,300,000.00, as well as P20,000.00 in attorneys fees.697 The trial
court ratiocinated that none of the third-party defendants disputed the 1982 Undertaking, and that
the mere denials of defendants with respect to non-compliance of Ortigas of the terms and
conditions of the Undertaking, unaccompanied by any substantial fact which would be admissible
in evidence at a hearing, are not sufficient to raise genuine issues of fact necessary to defeat a
motion for summary judgment, even if such facts were raised in the pleadings.698 In an Order dated
7 March 1996, the trial court denied the motion for reconsideration of the Summary Judgment and
awarded Ortigas legal interest of 12% per annum to be computed from 28 February 1994.699

From the Summary Judgment, recourse was had by way of appeal to the Court of Appeals.
Escao and Silos appealed jointly while Matti appealed by his lonesome. In a Decision700 dated 23
January 2002, the Court of Appeals dismissed the appeals and affirmed the Summary Judgment.
The appellate court found that the RTC did not err in rendering the summary judgment since the
three appellants did not effectively deny their execution of the 1982 Undertaking. The special

696
While apparently dropping his cross-claim against Silos.
697
Rollo, pp. 33-34.
698
Id. at 34.
699
Id. at 35-36.
700
Id. at 26-32. Penned by Associate Justice R. A. Barrios, concurred in by then Presiding Justice of the Court
of Appeals (now Supreme Court Associate Justice) M. A. Austria-Martinez and Associate Justice B. L. Reyes.

272
defenses that were raised, payment and excussion, were characterized by the Court of Appeals as
appear[ing] to be merely sham in the light of the pleadings and supporting documents and
affidavits.701 Thus, it was concluded that there was no genuine issue that would still require the
rigors of trial, and that the appealed judgment was decided on the bases of the undisputed and
established facts of the case.

Hence, the present petition for review filed by Escao and Silos.702 Two main issues are
raised. First, petitioners dispute that they are liable to Ortigas on the basis of the 1982 Undertaking,
a document which they do not disavow and have in fact annexed to their petition. Second, on the
assumption that they are liable to Ortigas under the 1982 Undertaking, petitioners argue that they
are jointly liable only, and not solidarily. Further assuming that they are liable, petitioners also
submit that they are not liable for interest and if at all, the proper interest rate is 6% and not 12%.

Interestingly, petitioners do not challenge, whether in their petition or their memorandum

before the Court, the appropriateness of the summary judgment as a relief favorable to Ortigas.
Under Section 3, Rule 35 of the 1997 Rules of Civil Procedure, summary judgment may avail if
the pleadings, supporting affidavits, depositions and admissions on file show that, except as to the
amount of damages, there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law. Petitioner have not attempted to demonstrate before us
that there existed a genuine issue as to any material fact that would preclude summary judgment.
Thus, we affirm with ease the common rulings of the lower courts that summary judgment is an
appropriate recourse in this case.

The vital issue actually raised before us is whether petitioners were correctly held liable to
Ortigas on the basis of the 1982 Undertaking in this Summary Judgment. An examination of the
document reveals several clauses that make it clear that the agreement was brought forth by the
desire of Ortigas, Inductivo and the Scholeys to be released from their liability under the loan
agreement which release was, in turn, part of the consideration for the assignment of their shares

701
Id. at 31.
702
Matti did not appeal. See id. at 169.

273
in Falcon to petitioners and Matti. The whereas clauses manifest that Ortigas had bound himself
with Falcon for the payment of the loan with PDCP, and that amongst the consideration for
OBLIGORS and/or their principals aforesaid selling is SURETIES relieving OBLIGORS of any
and all liability arising from their said joint and several undertakings with FALCON.703 Most
crucial is the clause in Paragraph 3 of the Undertaking wherein petitioners irrevocably agree and
undertake to assume all of OBLIGORs said guarantees [sic] to PDCP x x x under the following
terms and conditions.704

At the same time, it is clear that the assumption by petitioners of Ortigass guarantees [sic]
to PDCP is governed by stipulated terms and conditions as set forth in sub-paragraphs (a) to (c) of
Paragraph 3. First, upon receipt by any of OBLIGORS of any demand from PDCP for the payment
of Falcons obligations with it, any of OBLIGORS was to immediately inform SURETIES thereof
so that the latter can timely take appropriate measures. Second, should any and/or all of
OBLIGORS be impleaded by PDCP in a suit for collection of its loan, SURETIES agree[d] to
defend OBLIGORS at their own expense, without prejudice to any and/or all of OBLIGORS
impleading SURETIES therein for contribution, indemnity, subrogation or other relief705 in respect
to any of the claims of PDCP. Third, if any of the OBLIGORS is for any reason made to pay any
amount to [PDCP], SURETIES [were to] reimburse OBLIGORS for said amount/s within seven
(7) calendar days from such payment.706

Petitioners claim that, contrary to paragraph 3(c) of the Undertaking, Ortigas was not made
to pay PDCP the amount now sought to be reimbursed, as Ortigas voluntarily paid PDCP the
amount of P1.3 Million as an amicable settlement of the claims posed by the bank against him.

703
See id. at 52.
704
Id. at 53.
705
Id.
706
Id. at 54.

274
However, the subject clause in paragraph 3(c) actually reads [i]n the event that any of OBLIGORS
is for any reason made to pay any amount to PDCP x x x707 As pointed out by Ortigas, the
phrase for any reason reasonably includes any extra-judicial settlement of obligation such as what
Ortigas had undertaken to pay to PDCP, as it is indeed obvious that the phrase was incorporated
in the clause to render the eventual payment adverted to therein unlimited and unqualified.

The interpretation posed by petitioners would have held water had the Undertaking made
clear that the right of Ortigas to seek reimbursement accrued only after he had delivered payment
to PDCP as a consequence of a final and executory judgment. On the contrary, the clear intent of
the Undertaking was for petitioners and Matti to relieve the burden on Ortigas and his fellow
OBLIGORS as soon as possible, and not only after Ortigas had been subjected to a final and
executory adverse judgment.

Paragraph 1 of the Undertaking enjoins petitioners to exert all efforts to cause PDCP x x x
to within a reasonable time release all the OBLIGORS x x x from their guarantees [sic] to PDCP
x x x708 In the event that Ortigas and his fellow OBLIGORS could not be released from their
guaranties, paragraph 2 commits petitioners and Matti to cause the Board of Directors of Falcon
to make a call on its stockholders for the payment of their unpaid subscriptions and to pledge or
assign such payments to Ortigas, et al., as security for whatever amounts the latter may be held
liable under their guaranties. In addition, paragraph 1 also makes clear that nothing in the
Undertaking shall prevent OBLIGORS, or any one of them, from themselves negotiating with
PDCP x x x for the release of their said guarantees [sic].709

707
Id. at 53.
708
Id.
709
Id.

275
 There is no argument to support petitioners position on the import of the phrase made to
pay in the Undertaking, other than an unduly literalist reading that is clearly inconsistent with the
thrust of the document. Under the Civil Code, the various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from all of them
taken jointly.710 Likewise applicable is the provision that if some stipulation of any contract should
admit of several meanings, it shall be understood as bearing

710
CIVIL CODE, Art. 1374.

276
that import which is most adequate to render it effectual.711 As a means to effect the general intent
of the document to relieve Ortigas from liability to PDCP, it is his interpretation, not that of
petitioners, that holds sway with this Court.

Neither do petitioners impress us of the non-fulfillment of any of the other conditions set
in paragraph 3, as they claim. Following the general assertion in the petition that Ortigas violated
the terms of the Undertaking, petitioners add that Ortigas paid PDCP BANK the amount of P1.3
million without petitioners ESCANO and SILOSs knowledge and consent.712 Paragraph 3(a) of
the Undertaking does impose a requirement that any of the OBLIGORS shall immediately inform
SURETIES if they received any demand for payment of FALCONs obligations to PDCP, but that
requirement is reasoned so that the [SURETIES] can timely take appropriate measures713
presumably to settle the obligation without having to burden the OBLIGORS. This notice
requirement in paragraph 3(a) is markedly way off from the suggestion of petitioners that Ortigas,
after already having been impleaded as a defendant in the collection suit, was obliged under the
1982 Undertaking to notify them before settling with PDCP.

The other arguments petitioners have offered to escape liability to Ortigas are similarly
weak.

Petitioners impugn Ortigas for having settled with PDCP in the first place. They note that
Ortigas had, in his answer, denied any liability to PDCP and had alleged that he signed the
Assumption of Solidary Liability not in his personal capacity, but as an officer of Falcon. However,
such position, according to petitioners, could not be justified since Ortigas later voluntarily paid

711
CIVIL CODE, Art. 1373.
712
Rollo, p. 18.
713
Id. at 53.

277
PDCP the amount of P1.3 Million. Such circumstances, according to petitioners, amounted to
estoppel on the part of Ortigas.

Even as we entertain this argument at depth, its premises are still erroneous. The Partial
Compromise Agreement between PDCP and Ortigas expressly stipulated that Ortigass offer to pay
PDCP was conditioned without [Ortigass] admitting liability to plaintiff PDCP Banks complaint,
and to terminate and dismiss the said case as against Ortigas solely.714 Petitioners profess it is
unthinkable for Ortigas to have voluntarily paid PDCP without admitting his liability, 715 yet such
contention based on assumption cannot supersede the literal terms of the Partial Compromise
Agreement.

Petitioners further observe that Ortigas made the payment to PDCP after he had already
assigned his obligation to petitioners through the 1982 Undertaking. Yet the fact is PDCP did
pursue a judicial claim against Ortigas notwithstanding the Undertaking he executed with
petitioners. Not being a party to such Undertaking, PDCP was not precluded by a contract from
pursuing its claim against Ortigas based on the original Assumption of Solidary Liability.

At the same time, the Undertaking did not preclude Ortigas from relieving his distress
through a settlement with the creditor bank. Indeed, paragraph 1 of the Undertaking expressly
states that nothing herein shall prevent OBLIGORS, or any one of them, from themselves
negotiating with PDCP x x x for the release of their said guarantees [sic].716 Simply put, the
Undertaking did not bar Ortigas from pursuing his own settlement with PDCP. Neither did the
Undertaking bar Ortigas from recovering from petitioners whatever amount he may have paid

714
Id. at 59.
715
Id.
716
Id. at 53.

278
PDCP through his own settlement. The stipulation that if Ortigas was for any reason made to pay
any amount to PDCP[,] x x x SURETIES shall reimburse OBLIGORS for said amount/s within
seven (7) calendar days from such payment717 makes it clear that petitioners remain liable to
reimburse Ortigas for the sums he paid PDCP.

We now turn to the set of arguments posed by petitioners, in the alternative, that is, on the
assumption that they are indeed liable.

Petitioners submit that they could only be held jointly, not solidarily, liable to Ortigas,
claiming that the Undertaking did not provide for express solidarity. They cite Article 1207 of the
New Civil Code, which states in part that [t]here is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires solidarity.

Ortigas in turn argues that petitioners, as well as Matti, are jointly and severally liable for
the Undertaking, as the language used in the agreement clearly shows that it is a surety
agreement718 between the obligors (Ortigas group) and the sureties (Escao group). Ortigas points
out that the Undertaking uses the word SURETIES although the document, in describing the
parties. It is further contended that the principal objective of the parties in executing the
Undertaking cannot be attained unless petitioners are solidarily liable because the total loan
obligation can not be paid or settled to free or release the OBLIGORS if one or any of the
SURETIES default from their obligation in the Undertaking.719

717
Supra note 26.
718
Rollo, p. 177.
719
Rollo, p. 178.

279
 In case, there is a concurrence of two or more creditors or of two or more debtors in one
and the same obligation, Article 1207 of the Civil Code states that among them, [t]here is a solidary
liability only when the obligation expressly so states, or when the law or the nature of the obligation
requires solidarity. Article 1210 supplies further caution against the broad interpretation of
solidarity by providing: The indivisibility of an obligation does not necessarily give rise to
solidarity. Nor does solidarity of itself imply indivisibility.

These Civil Code provisions establish that in case of concurrence of two or more creditors
or of two or more debtors in one and the same obligation, and in the absence of express and
indubitable terms characterizing the obligation as solidary, the presumption is that the obligation
is only joint. It thus becomes incumbent upon the party alleging that the obligation is indeed
solidary in character to prove such fact with a preponderance of evidence.

The Undertaking does not contain any express stipulation that the petitioners agreed to bind
themselves jointly and severally in their obligations to the Ortigas group, or any such terms to that
effect. Hence, such obligation established in the Undertaking is presumed only to be joint. Ortigas,
as the party alleging that the obligation is in fact solidary, bears the burden to overcome the
presumption of jointness of obligations. We rule and so hold that he failed to discharge such
burden.

Ortigas places primary reliance on the fact that the petitioners and Matti identified
themselves in the Undertaking as SURETIES, a term repeated no less than thirteen (13) times in
the document. Ortigas claims that such manner of identification sufficiently establishes that the
obligation of petitioners to him was joint and solidary in nature.

The term surety has a specific meaning under our Civil Code. Article 2047 provides the
statutory definition of a surety agreement, thus:

280
 Art. 2047. By guaranty a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the latter should fail
to do so.

If a person binds himself solidarily with the principal debtor, the provisions
of Section 4, Chapter 3, Title I of this Book shall be observed. In such case the
contract is called a suretyship. [Emphasis supplied]720

As provided in Article 2047 in a surety agreement the surety undertakes to be bound

solidarily with the principal debtor. Thus, a surety agreement is an ancillary contract as it
presupposes the existence of a principal contract. It appears that Ortigass argument rests solely on
the solidary nature of the obligation of the surety under Article 2047. In tandem with the
nomenclature SURETIES accorded to petitioners and Matti in the Undertaking, however, this
argument can only be viable if the obligations established in the

720
CIVIL CODE, Art. 2047.

281
Undertaking do partake of the nature of a suretyship as defined under Article 2047 in the first
place. That clearly is not the case here, notwithstanding the use of the nomenclature SURETIES
in the Undertaking.

Again, as indicated by Article 2047, a suretyship requires a principal debtor to whom the
surety is solidarily bound by way of an ancillary obligation of segregate identity from the
obligation between the principal debtor and the creditor. The suretyship does bind the surety to the
creditor, inasmuch as the latter is vested with the right to proceed against the former to collect the
credit in lieu of proceeding against the principal debtor for the same obligation.721 At the same
time, there is also a legal tie created between the surety and the principal debtor to which the
creditor is not privy or party to. The moment the surety fully answers to the creditor for the
obligation created by the principal debtor, such obligation is extinguished.722 At the same time, the
surety may seek reimbursement from the principal debtor for the amount paid, for the surety does
in fact become subrogated to all the rights and remedies of the creditor.723

Note that Article 2047 itself specifically calls for the application of the provisions on joint
and solidary obligations to suretyship contracts.724 Article 1217 of the Civil Code thus comes into
play, recognizing the right of reimbursement from a co-debtor (the principal debtor, in case of
suretyship) in favor of the one who paid (i.e., the surety).725 However, a significant distinction still

721
Since, generally, it is not necessary for a creditor to proceed against a principal in order to hold the surety
liable, where, by the terms of the contract, the obligation of the surety is the same as that of the principal, then as soon
as the principal is in default, the surety is likewise in default, and may be sued immediately and before any proceedings
are had against the principal. Palmares v. Court of Appeals, 351 Phil. 664, 685 (1998) citing Standard Accident
Insurance Co. v. Standard Oil Co., 133 So. 2d 539; School District No. 65 of Lincoln County v. Universal Surety Co.,
135 N. W. 2d 232; Depot Realty Syndicate v. Enterprise Brewing Co., 171 P. 223.
722
Payment made by one of the solidary debtors extinguishes the obligation. See CIVIL CODE, Art. 1217.
723
See Palmares v. Court of Appeals, supra note 41 at 686; citing 74 AM JUR 2d, PRINCIPAL AND
SURETY, 68, 53.
724
See note 49.

282
lies between a joint and several debtor, on one hand, and a surety on the other. Solidarity signifies
that the creditor can compel any one of the joint and several debtors or the surety alone to answer
for the entirety of the principal debt. The difference lies in the respective faculties of the joint and
several debtor and the surety to seek reimbursement for the sums they paid out to the creditor.

Dr. Tolentino explains the differences between a solidary co-debtor and a surety:

A guarantor who binds himself in solidum with the principal debtor under the
provisions of the second paragraph does not become a solidary co-debtor to all
intents and purposes. There is a difference between a solidary co-debtor and a
fiador in solidum (surety). The latter, outside of the liability he assumes to pay
the debt before the property of the principal debtor has been exhausted,
retains all the other rights, actions and benefits which pertain to him by reason
of the fiansa; while a solidary co-debtor has no other rights than those
bestowed upon him in Section 4, Chapter 3, Title I, Book IV of the Civil Code.

The second paragraph of [Article 2047] is practically equivalent to the

contract of suretyship. The civil law suretyship is, accordingly, nearly synonymous
with the common law guaranty; and the civil law relationship existing between the
co-debtors liable in solidum is similar to the common law suretyship.726

In the case of joint and several debtors, Article 1217 makes plain that the solidary debtor
who effected the payment to the creditor may claim from his co-debtors only the share which
corresponds to each, with the interest for the payment already made. Such solidary debtor will
not be able to recover from the co-debtors the full amount already paid to the creditor, because the
right to recovery extends only to the proportional share of the other co-debtors, and not as to the
particular proportional share of the solidary debtor who already paid. In contrast, even as the surety
is solidarily bound with the principal debtor to the creditor, the surety who does pay the creditor
has the right to recover the full amount paid, and not just any proportional share, from the principal

725
See Lapanday Agricultural v. Court of Appeals, 381 Phil. 41, 52 (2000). Art. 1217 reads in part: "Payment
made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the
creditor may choose which offer to accept x x x

He who made payment may claim from his co-debtors only the share which corresponds to each, with interest
for the payment already made. If the payment is made before the debt is due, no interest for the intervening period
may be demanded x x x"
726
A. TOLENTINO, V CIVIL CODE OF THE PHILIPPINES (1992 ed.), at 502. See also Inciong v. Court
of Appeals, 327 Phil. 364, 373 (1996).

283
debtor or debtors. Such right to full reimbursement falls within the other rights, actions and benefits
which pertain to the surety by reason of the subsidiary obligation assumed by the surety.

What is the source of this right to full reimbursement by the surety? We find the right under
Article 2066 of the Civil Code, which assures that [t]he guarantor who pays for a debtor must be
indemnified by the latter, such indemnity comprising of, among others, the total amount of the
debt.727 Further, Article 2067 of the Civil Code likewise establishes that [t]he guarantor who pays
is subrogated by virtue thereof to all the rights which the creditor had against the debtor.728

Articles 2066 and 2067 explicitly pertain to guarantors, and one might argue that the
provisions should not extend to sureties, especially in light of the qualifier in Article 2047 that the
provisions on joint and several obligations should apply to sureties. We reject that argument, and
instead adopt Dr. Tolentinos observation that [t]he reference in the second paragraph of [Article
2047] to the provisions of Section 4, Chapter 3, Title I, Book IV, on solidary or several obligations,
however, does not mean that suretyship is withdrawn from the applicable provisions governing
guaranty.729 For if that were not the implication, there would be no material difference between
the surety as defined under Article 2047 and the joint and several debtors, for both classes of
obligors would be governed by exactly the same rules and limitations.

Accordingly, the rights to indemnification and subrogation as established and granted to

the guarantor by Articles 2066 and 2067 extend as well to sureties as defined under Article 2047.
These rights granted to the surety who pays materially differ from those granted under Article
1217 to the solidary debtor who pays, since the indemnification that pertains to the latter extends
only [to] the share which corresponds to each [co-debtor]. It is for this reason that the Court cannot
accord the conclusion that because petitioners are identified in the Undertaking as SURETIES,
they are consequently joint and severally liable to Ortigas.

727
CIVIL CODE, Art. 2066.
728
CIVIL CODE, Art. 2067.
729
A. TOLENTINO, supra note 46 citing Manila Surety & Fidelity Co. v. Barter Construction & Co., et al.,
53 Off. Gaz. 8836 & Arranz v. Manila Fidelity & Surety Co., 53 Off. Gaz. 7247.

284
 In order for the conclusion espoused by Ortigas to hold, in light of the general presumption
favoring joint liability, the Court would have to be satisfied that among the petitioners and Matti,
there is one or some of them who stand as the principal debtor to Ortigas and another as surety
who has the right to full reimbursement from the principal debtor or debtors. No suggestion is
made by the parties that such is the case, and certainly the Undertaking is not revelatory of such
intention. If the Court were to give full fruition to the use of the term SURETIES as conclusive
indication of the existence of a surety agreement that in turn gives rise to a solidary obligation to
pay Ortigas, the necessary implication would be to lay down a corresponding set of rights and
obligations as between the SURETIES which petitioners and Matti did not clearly intend.

It is not impossible that as between Escao, Silos and Matti, there was an agreement whereby
in the event that Ortigas were to seek reimbursement from them per the terms of the Undertaking,
one of them was to act as surety and to pay Ortigas in full, subject to his right to full reimbursement
from the other two obligors. In such case, there would have been, in fact, a surety agreement which
evinces a solidary obligation in favor of Ortigas. Yet if there was indeed such an agreement, it
does not appear on the record. More consequentially, no such intention is reflected in the
Undertaking itself, the very document that creates the conditional obligation that petitioners and
Matti reimburse Ortigas should he be made to pay PDCP. The mere utilization of the term
SURETIES could not work to such effect, especially as it does not appear who exactly is the
principal debtor whose obligation is assured or guaranteed by the surety.

Ortigas further argues that the nature of the Undertaking requires solidary obligation of the
Sureties, since the Undertaking expressly seeks to reliev[e] obligors of any and all liability arising
from their said joint and several undertaking with [F]alcon, and for the sureties to irrevocably agree
and undertake to assume all of obligors said guarantees to PDCP.730 We do not doubt that a finding
of solidary liability among the petitioners works to the benefit of Ortigas in the facilitation of these
goals, yet the Undertaking itself contains no stipulation or clause that establishes petitioners
obligation to Ortigas as solidary. Moreover, the aims adverted to by Ortigas do not by themselves

730
Rollo, p. 89-90.

285
establish that the nature of the obligation requires solidarity. Even if the liability of petitioners and
Matti were adjudged as merely joint, the full relief and reimbursement of Ortigas arising from his
payment to PDCP would still be accomplished through the complete execution of such a judgment.

Petitioners further claim that they are not liable for attorneys fees since the Undertaking
contained no such stipulation for attorneys fees, and that the situation did not fall under the
instances under Article 2208 of the Civil Code where attorneys fees are recoverable in the absence
of stipulation.

We disagree. As Ortigas points out, the acts or omissions of the petitioners led to his being
impleaded in the suit filed by PDCP. The Undertaking was precisely executed as a means to obtain
the release of Ortigas and the Scholeys from their previous obligations as sureties of Falcon,
especially considering that they were already divesting their shares in the corporation. Specific
provisions in the Undertaking obligate petitioners to work for the release of Ortigas from his surety
agreements with Falcon. Specific provisions likewise mandate the immediate repayment of Ortigas
should he still be made to pay PDCP by reason of the guaranty agreements from which he was
ostensibly to be released through the efforts of petitioners. None of these provisions were complied
with by petitioners, and Article 2208(2) precisely allows for the recovery of attorneys fees [w]hen
the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest.

Finally, petitioners claim that they should not be liable for interest since the Undertaking
does not contain any stipulation for interest, and assuming that they are liable, that the rate of
interest should not be 12% per annum, as adjudged by the RTC.

The seminal ruling in Eastern Shipping Lines, Inc. v. Court of Appeals731 set forth the rules
with respect to the manner of computing legal interest:

731
G.R. No. 97412, 12 July 1994, 234 SCRA 78.

286
 I. When an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for
damages. The provisions under Title XVIII on Damages of the Civil Code govern
in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual

and compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:

1. When the obligation is breached, and it consists in the payment

of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the absence
of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of
the Civil Code.

2. When an obligation, not constituting a loan or forbearance of

money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when
such certainty cannot be so reasonably established at the time
the demand is made, the interest shall begin to run only from the
date the judgment of the court is made (at which time
quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount finally
adjudged.

287
 3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether
the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a
forbearance of credit.732

Since what was the constituted in the Undertaking consisted of a payment in a sum of
money, the rate of interest thereon shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand. The interest rate imposed by the RTC is thus proper. However,
the computation should be reckoned from judicial or extrajudicial demand. Per records, there is no
indication that Ortigas made any extrajudicial demand to petitioners and Matti after he paid PDCP,
but on 14 March 1994, Ortigas made a judicial demand when he filed a Third-Party Complaint
praying that petitioners and Matti be made to reimburse him for the payments made to PDCP. It is
the filing of this Third Party Complaint on 14 March 1994 that should be considered as the date of
judicial demand from which the computation of interest should be reckoned.733 Since the RTC held
that interest should be computed from 28 February 1994, the appropriate redefinition should be
made.

WHEREFORE, the Petition is GRANTED in PART. The Order of the Regional Trial Court
dated 5 October 1995 is MODIFIED by declaring that petitioners and Joseph M. Matti are only
jointly liable, not jointly and severally, to respondent Rafael Ortigas, Jr. in the amount of
P1,300,000.00. The Order of the Regional Trial Court dated 7 March 1996 is MODIFIED in that
the legal interest of 12% per annum on the amount of P1,300,000.00 is to be computed from 14
March 1994, the date of judicial demand, and not from 28 February 1994 as directed in the Order
of the lower court. The assailed rulings are affirmed in all other respects. Costs against petitioners.

732
Id. at 95-97.
733
See Records, pp. 429-436.

288
 SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:

(On Official Leave)

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ATTESTATION

289
 I attest that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Acting Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons
Attestation, it is hereby certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

290
 THIRD DIVISION

BENJAMIN BITANGA, G.R. No. 173526

Petitioner,
Present:

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
- versus -
NACHURA, and
REYES, JJ.

Promulgated:
PYRAMID CONSTRUCTION
ENGINEERING CORPORATION,
Respondent. August 28, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

291
 Assailed in this Petition for Review under Rule 45734 of the Revised Rules of Court are:
(1) the Decision735 dated 11 April 2006 of the Court of Appeals in CA-G.R. CV No. 78007 which
affirmed with modification the partial Decision736 dated 29 November 2002 of the Regional Trial
Court (RTC), Branch 96, of Quezon City, in Civil Case No. Q-01-45041, granting the motion for
summary judgment filed by respondent Pyramid Construction and Engineering Corporation and
declaring petitioner Benjamin Bitanga and his wife, Marilyn Bitanga (Marilyn), solidarily liable
to pay P6,000,000.000 to respondent; and (2) the Resolution737 dated 5 July 2006 of the appellate
court in the same case denying petitioners Motion for Reconsideration.

The generative facts are:

On 6 September 2001, respondent filed with the RTC a Complaint for specific performance
and damages with application for the issuance of a writ of preliminary attachment against the
petitioner and Marilyn. The Complaint was docketed as Civil Case No. Q-01-45041.

Respondent alleged in its Complaint that on 26 March 1997, it entered into an agreement
with Macrogen Realty, of which petitioner is the President, to construct for the latter the Shoppers
Gold Building, located at Dr. A. Santos Avenue corner Palayag Road, Sucat, Paraaque City.
Respondent commenced civil, structural, and architectural works on the construction project by
May 1997. However, Macrogen Realty failed to settle respondents progress billings. Petitioner,
through his representatives and agents, assured respondent that the outstanding account of
Macrogen Realty would be paid, and requested respondent to continue working on the construction
project. Relying on the assurances made by petitioner, who was no less than the President of
Macrogen Realty, respondent continued the construction project.

734
Appeal by Certiorari to the Supreme Court.
735
Penned by Associate Justice Renato C. Dacudao with Associate Justices Mario L. Guaria III and Fernanda
Lampas-Peralta, concurring. Rollo, pp. 37-52.
736
Penned by Judge Lucas P. Bersamin (now a Justice of the Court of Appeals).
737
Rollo, pp. 61-64.

292
 In August 1998, respondent suspended work on the construction project since the
conditions that it imposed for the continuation thereof, including payment of unsettled accounts,
had not been complied with by Macrogen Realty. On 1 September 1999, respondent instituted with
the Construction Industry Arbitration Commission (CIAC) a case for arbitration against Macrogen
Realty seeking payment by the latter of its unpaid billings and project costs. Petitioner, through
counsel, then conveyed to respondent his purported willingness to amicably settle the arbitration
case. On 17 April 2000, before the arbitration case could be set for trial, respondent and Macrogen
Realty entered into a Compromise Agreement,738 with petitioner acting as signatory for and in
behalf of Macrogen Realty. Under the Compromise Agreement, Macrogen Realty agreed to pay
respondent the total amount of P6,000,000.00 in six equal monthly installments, with each
installment to be delivered on the 15th day of the month, beginning 15 June 2000. Macrogen Realty
also agreed that if it would default in the payment of two successive monthly installments,
immediate execution could issue against it for the unpaid balance, without need of judgment or
decree from any court or tribunal. Petitioner guaranteed the obligations of Macrogen Realty under
the Compromise Agreement by executing a Contract of Guaranty739 in favor of respondent, by

738
Id. at 93.
739
GUARANTY

This Guaranty made and executed this 17th day of April 2000 at Makati City, Philippines,
by and between:

Benajamin M. Bitanga, of legal age, Filipino, married, with office address located at 314
Sen. Gil Puyat Avenue, Makati City (hereafter referred to as the Guarantor)

- in favor of

PYRAMID CONSTRUCTION ENGINEERING CORPORATION, a corporation organized and

existing under the laws of the Republic of the Philippines, with office address located at Pyramid
Building, 124 Kaingin Road, Balintawak, Quezon City, represented herein by its duly authorized
representative, Mr. Engracio Ang, Jr. (hereafter referred to as PYRAMID).

W I T N E S S E T H: That

WHEREAS, on 17 April 2000, Pyramid and Macrogen Realty Corporation (hereafter

referred to as the Debtor) executed a Compromise Agreement (hereafter referred to as
Agreement), acknowledged before Jose Vicente B. Salazar Notary Public for Makati City, as Doc.
No. 118, Page 25, Book No. 2, Series of 2000;

293
virtue of which he irrevocably and unconditionally guaranteed the full and complete payment of
the principal amount of liability of Macrogen Realty in the sum of P6,000,000.00. Upon joint
motion of respondent and Macrogen Realty, the CIAC approved the Compromise Agreement on
25 April 2000.740

However, contrary to petitioners assurances, Macrogen Realty failed and refused to pay all the

monthly installments agreed upon in the Compromise Agreement. Hence, on 7 September

2000, respondent moved for the issuance of a writ of execution741 against Macrogen Realty,

which CIAC granted.

WHEREAS, in said Agreement, Macrogen, in order to put an end to CIAC Case No. 36-99,
agreed to pay and Pyramid has agreed to accept the total amount of SIX MILLION PESOS
(P6,000,000.00), payable in six monthly installments, on the 15th day of each month, beginning in
June 15, 2000;

WHEREAS, the Guarantor agrees to execute and deliver to Pyramid an irrevocable and
unconditional guaranty for the due and punctual payment of the principal amount of Six Million
Pesos (P6,000,000.00) due and payable by the Debtor to Pyramid under the Agreement.

NOW, THEREFORE, for and in consideration of the foregoing and for other good and
valuable consideration, receipt of which is hereby acknowledged by the Guarantor, the latter
agrees as follows:

SECTION 1. SCOPE OF GUARANTY

1.1. The Guarantor hereby absolutely, unconditionally and irrevocably guarantees to Pyramid the
full and complete payment by Debtor of the principal amount of Six Million pesos (P6,000,000.00).

1.2. The Guarantor irrevocably and unconditionally agrees that this Guaranty shall be a continuing
guaranty and as such shall remain in full force and effect and be binding on the Guarantor until all
sums payable by the Debtor under and pursuant to the Agreement shall have been fully paid by
the Debtor. (Rollo, pp. 136-137.)
740
Rollo, p. 101.
741
Id. at 104.

294
 On 29 November 2000, the sheriff742 filed a return stating that he was unable to locate any
property of Macrogen Realty, except its bank deposit of P20,242.33, with the Planters Bank,
Buendia Branch.

Respondent then made, on 3 January 2001, a written demand743 on petitioner, as guarantor

of Macrogen Realty, to pay the P6,000,000.00, or to point out available properties of the Macrogen
Realty within the Philippines sufficient to cover the obligation guaranteed. It also made verbal
demands on petitioner. Yet, respondents demands were left unheeded.

Thus, according to respondent, petitioners obligation as guarantor was already due and
demandable. As to Marilyns liability, respondent contended that Macrogen Realty was owned and
controlled by petitioner and Marilyn and/or by corporations owned and controlled by them.
Macrogen Realty is 99% owned by the Asian Appraisal Holdings, Inc. (AAHI), which in turn is
99% owned by Marilyn. Since the completion of the construction project would have redounded
to the benefit of both petitioner and Marilyn and/or their corporations; and considering, moreover,
Marilyns enormous interest in AAHI, the corporation which controls Macrogen Realty, Marilyn
cannot be unaware of the obligations incurred by Macrogen Realty and/or petitioner in the course
of the business operations of the said corporation.

Respondent prayed in its Complaint that the RTC, after hearing, render a judgment ordering
petitioner and Marilyn to comply with their obligation under the Contract of Guaranty by paying
respondent the amount of P6,000,000.000 (less the bank deposit of Macrogen Realty with Planters
Bank in the amount of P20,242.23) and P400,000.000 for attorneys fees and expenses of litigation.
Respondent also sought the issuance of a writ of preliminary attachment as security for the
satisfaction of any judgment that may be recovered in the case in its favor.

742
Id. at 106.
743
Id. at 202.

295
 Marilyn filed a Motion to Dismiss,744 asserting that respondent had no cause of action
against her, since she did not co-sign the Contract of Guaranty with her husband; nor was she a
party to the Compromise Agreement between respondent and Macrogen Realty. She had no part
at all in the execution of the said contracts. Mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of another corporation is not by itself a sufficient
ground for disregarding the separate personality of the latter corporation. Respondent misread
Section 4, Rule 3 of the Revised Rules of Court.

The RTC denied Marilyns Motion to Dismiss for lack of merit, and in its Order dated 24
January 2002 decreed that:

The Motion To Dismiss Complaint Against Defendant Marilyn Andal

Bitanga filed on November 12, 2001 is denied for lack of merit considering that
Sec. 4, Rule 3, of the Rules of Court (1997) specifically provides, as follows:

SEC. 4. Spouses as parties. Husband and wife shall sue or be

sued jointly, except as provided by law.

and that this case does not come within the exception.745

Petitioner filed with the RTC on 12 November 2001, his Answer746 to respondents
Complaint averring therein that he never made representations to respondent that Macrogen Realty
would faithfully comply with its obligations under the Compromise Agreement. He did not offer
to guarantee the obligations of Macrogen Realty to entice respondent to enter into the Compromise
Agreement but that, on the contrary, it was respondent that required Macrogen Realty to offer
some form of security for its obligations before agreeing to the compromise. Petitioner further

744
Id. at 120.
745
Rollo, p. 124.
746
Id. at 113.

296
alleged that his wife Marilyn was not aware of the obligations that he assumed under both the
Compromise Agreement and the Contract of Guaranty as he did not inform her about said
contracts, nor did he secure her consent thereto at the time of their execution.

As a special and affirmative defense, petitioner argued that the benefit of excussion was
still available to him as a guarantor since he had set it up prior to any judgment against him.
According to petitioner, respondent failed to exhaust all legal remedies to collect from Macrogen
Realty the amount due under the Compromise Agreement, considering that Macrogen Realty still
had uncollected credits which were more than enough to pay for the same. Given these premise,
petitioner could not be held liable as guarantor. Consequently, petitioner presented his
counterclaim for damages.

At the pre-trial held on 5 September 2002, the parties submitted the following issues for
the resolution of the RTC:

(1) whether the defendants were liable under the contract of guarantee dated
April 17, 2000 entered into between Benjamin Bitanga and the plaintiff;

(2) whether defendant wife Marilyn Bitanga is liable in this action;

(3) whether the defendants are entitled to the benefit of excussion, the plaintiff
on the one hand claiming that it gave due notice to the guarantor, Benjamin
Bitanga, and the defendants contending that no proper notice was received
by Benjamin Bitanga;

(4) if damages are due, which party is liable; and

297
 (5) whether the benefit of excussion can still be invoked by the defendant
guarantor even after the notice has been allegedly sent by the plaintiff
although proper receipt is denied.747

On 20 September 2002, prior to the trial proper, respondent filed a Motion for Summary
Judgment.748 Respondent alleged therein that it was entitled to a summary judgment on account of
petitioners admission during the pre-trial of the genuineness and due execution of the Contract of
Guaranty. The contention of petitioner and Marilyn that they were entitled to the benefit of
excussion was not a genuine issue. Respondent had already exhausted all legal remedies to collect
from Macrogen Realty, but its efforts proved unsuccessful. Given that the inability of Macrogen
Realty as debtor to pay the amount of its debt was already proven by the return of the writ of
execution to CIAC unsatisfied, the liability of petitioner as guarantor already arose.749 In any event,
petitioner and Marilyn were deemed to have forfeited their right to avail themselves of the benefit
of excussion because they failed to comply with Article 2060750 of the Civil Code when petitioner
ignored respondents demand letter dated 3 January 2001 for payment of the amount he
guaranteed.751 The duty to collect the supposed receivables of Macrogen Realty from its creditors
could not be imposed on respondent, since petitioner and Marilyn never informed respondent about
such uncollected credits even after receipt of the demand letter for payment. The allegation of
petitioner and Marilyn that they could not respond to respondents demand letter since they did not
receive the same was unsubstantiated and insufficient to raise a genuine issue of fact which could
defeat respondents Motion for Summary Judgment. The claim that Marilyn never participated in
the transactions that culminated in petitioners execution of the Contract of Guaranty was nothing
more than a sham.

747
Id. at 125-126.
748
Id. at 127.
749
Machetti v. Hospicio de San Jose, 43 Phil. 297, 301 (1922).
750
Article 2060. In order that the guarantor may make use of the benefit of excussion, he must set it up against
the creditor upon the latters demand for payment from him, and point out to the creditor available property
of the debtor within Philippine territory, sufficient to cover the amount of the debt.
751
Luzon Steel Corporation v. Sia, 138 Phil. 62, 68 (1969).

298
 In opposing respondents foregoing Motion for Summary Judgment, petitioner and Marilyn
countered that there were genuinely disputed facts that would require trial on the merits. They
appended thereto an affidavit executed by petitioner, in which he declared that his spouse Marilyn
could not be held personally liable under the Contract of Guaranty or the Compromise Agreement,
nor should her share in the conjugal partnership be made answerable for the guaranty petitioner
assumed, because his undertaking of the guaranty did not in any way redound to the benefit of
their family. As guarantor, petitioner was entitled to the benefit of excussion, and he did not waive
his right thereto. He never received the respondents demand letter dated 3 January 2001, as Ms.
Dette Ramos, the person who received it, was not an employee of Macrogen Realty nor was she
authorized to receive the letter on his behalf. As a guarantor, petitioner could resort to the benefit
of excussion at any time before judgment was rendered against him. 752 Petitioner reiterated that
Macrogen Realty had uncollected credits which were more than sufficient to satisfy the claim of
respondent.

On 29 November 2002, the RTC rendered a partial Decision, the dispositive portion of
which provides:

WHEREFORE, summary judgment is rendered ordering defendants

SPOUSES BENJAMIN BITANGA and MARILYN ANDAL BITANGA to pay
the [herein respondent], jointly and severally, the amount of P6,000,000.00, less
P20,242.23 (representing the amount garnished bank deposit of MACROGEN in
the Planters Bank, Buendia Branch); and the costs of suit.

Within 10 days from receipt of this partial decision, the [respondent] shall
inform the Court whether it shall still pursue the rest of the claims against the
defendants. Otherwise, such claims shall be considered waived.753

752
Article 2062 of the Civil Code.
753
The RTC was referring to the respondents prayer for attorneys fees and expenses of litigation in its
Complaint. The records, however, do not show that respondent acted pursuant to this directive of the RTC.
Rollo, p. 374.

299
 Petitioner and Marilyn filed a Motion for Reconsideration of the afore-quoted Decision,
which the RTC denied in an Order dated 26 January 2003.754

In time, petitioner and Marilyn filed an appeal with the Court of Appeals, docketed as CA-
G.R. CV 78007. In its Decision dated 11 April 2006, the appellate court held:

UPON THE VIEW WE TAKE OF THIS CASE, THUS, the judgment

appealed from must be, as it hereby is, MODIFIED to the effect that defendant-
appellant Marilyn Bitanga is adjudged not liable, whether solidarily or otherwise,
with her husband the defendant-appellant Benjamin Bitanga, under the compromise
agreement or the contract of guaranty. No costs in this instance.755

In holding that Marilyn Bitanga was not liable, the Court of Appeals cited Ramos v. Court
of Appeals,756 in which it was declared that a contract cannot be enforced against one who is not a
party to it. The Court of Appeals stated further that the substantial ownership of shares in Macrogen
Realty by Marilyn Bitanga was not enough basis to hold her liable.

The Court of Appeals, in its Resolution dated 5 July 2006, denied petitioners Motion for
Reconsideration757 of its earlier Decision.

Petitioner is now before us via the present Petition with the following assignment of errors:

754
Rollo, p. 376.
755
Id. at 51-52.
756
G.R. No. 132196, 9 December 2005, 477 SCRA 85.
757
Rollo, pp. 63-64.

300
 THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
VALIDITY OF THE PARTIAL SUMMARY JUDGMENT BY THE REGIONAL
TRIAL COURT OF QUEZON CITY, BRANCH 96, DESPITE THE CLEAR
EXISTENCE OF DISPUTED GENUINE AND MATERIAL FACTS OF THE
CASE THAT SHOULD HAVE REQUIRED A TRIAL ON THE MERITS.

II

THE COURT OF APPEALS GRAVELY ERRED IN NOT UPHOLDING THE

RIGHT OF PETITIONER BENJAMIN M. BITANGA AS A MERE
GUARANTOR TO THE BENEFIT OF EXCUSSION UNDER ARTICLES 2058,
2059, 2060, 2061, AND 2062 OF THE CIVIL CODE OF THE PHILIPPINES.758

As in the two courts below, it is petitioners position that summary judgment is improper in
Civil Case No. Q-01-45041 because there are genuine issues of fact which have to be threshed out
during trial, to wit:

(A) Whether or not there was proper service of notice to petitioner

considering the said letter of demand was allegedly received by one Dette Ramos
at Macrogen office and not by him at his residence.

(B) Whether or not petitioner is entitled to the benefit of excussion?759

We are not persuaded by petitioners arguments.

Rule 35 of the Revised Rules of Civil Procedure provides:

758
Id. at 443.
759
Id. at 445-446.

301
 Section 1. Summary judgment for claimant. A party seeking to recover upon a
claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time
after the pleading in answer thereto has been served, move with supporting
affidavits, depositions or admissions for a summary judgment in his favor upon all
or any part thereof.

For a summary judgment to be proper, the movant must establish two requisites: (a) there

must be no genuine issue as to any material fact, except for the amount of damages; and (b)

the party presenting the motion for summary judgment must be entitled to a judgment as a

matter of law. Where, on the basis of the pleadings of a moving party, including documents

appended thereto, no genuine issue as to a material fact exists, the burden to produce a

genuine issue shifts to the opposing party. If the opposing party fails, the moving party is

entitled to a summary judgment.760

In a summary judgment, the crucial question is: are the issues raised by the opposing party
not genuine so as to justify a summary judgment?761

First off, we rule that the issue regarding the propriety of the service of a copy of the
demand letter on the petitioner in his office is a sham issue. It is not a bar to the issuance of a
summary judgment in respondents favor.

A genuine issue is an issue of fact which requires the presentation of evidence as

distinguished from an issue which is a sham, fictitious, contrived or false claim. To forestall
summary judgment, it is essential for the non-moving party to confirm the existence of genuine

760
Equitable PCI Bank v. Ong, G.R. No. 156207, 15 September 2006, 502 SCRA 127, 129.
761
Wood Technology Corporation v. Equitable Banking Corporation, G.R. No. 155394, 17 February 2005, 451
SCRA 725, 733.

302
issues, as to which he has substantial, plausible and fairly arguable defense, i.e.,762 issues of fact
calling for the presentation of evidence upon which reasonable findings of fact could return a
verdict for the non-moving party, although a mere scintilla of evidence in support of the party
opposing summary judgment will be insufficient to preclude entry thereof.

Significantly, petitioner does not deny the receipt of the demand letter from the respondent.
He merely raises a howl on the impropriety of service thereof, stating that the address to which the
said letter was sent was not his residence but the office of Macrogen Realty, thus it cannot be
considered as the correct manner of conveying a letter of demand upon him in his personal
capacity.763

Section 6, Rule 13 of the Rules of Court states:

SEC. 6. Personal service. Service of the papers may be made by delivering

personally a copy to the party or his counsel, or by leaving it in his office with his
clerk or with a person having charge thereof. If no person is found in his office,
or his office is not known, or he has no office, then by leaving the copy, between
the hours of eight in the morning and six in the evening, at the partys or counsels
residence, if known, with a person of sufficient age and discretion then residing
therein.

The affidavit of Mr. Robert O. Pagdilao, messenger of respondents counsel states in part:

2. On 4 January 2001, Atty. Jose Vicente B. Salazar, then one of the Associates
of the ACCRA Law Offices, instructed me to deliver to the office of Mr.
Benjamin Bitanga a letter dated 3 January 2001, pertaining to Construction
Industry Arbitration Commission (hereafter, CIAC) Case No. 99-56,

762
Agbada v. Inter-Urban Developers, Inc., 438 Phil. 168, 190-191 (2002).
763
Records, p. 402.

303
 entitled Pyramid Construction Engineering Corporation vs. Macrogen
Realty Corporation.

3. As instructed, I immediately proceeded to the office of Mr. Bitanga located

at the 12th Floor, Planters Development Bank Building, 314 Senator Gil
Puyat Avenue, Makati City. I delivered the said letter to Ms. Dette Ramos,
a person of sufficient age and discretion, who introduced herself as one of
the employees of Mr. Bitanga and/or of the latters companies.764 (Emphasis
supplied.)

We emphasize that when petitioner signed the Contract of Guaranty and assumed
obligation as guarantor, his address in the said contract was the same address where the demand
letter was served.765 He does not deny that the said place of service, which is the office of
Macrogen, was also the address that he used when he signed as guarantor in the Contract of
Guaranty. Nor does he deny that this is his office address; instead, he merely insists that the person
who received the letter and signed the receiving copy is not an employee of his company. Petitioner
could have easily substantiated his allegation by a submission of an affidavit of the personnel
manager of his office that no such person is indeed employed by petitioner in his office, but that
evidence was not submitted.766 All things are presumed to have been done correctly and with due
formality until the contrary is proved. This juris tantum presumption stands even against the most
well-reasoned allegation pointing to some possible irregularity or anomaly.767 It is petitioners
burden to overcome the presumption by sufficient evidence, and so far we have not seen anything
in the record to support petitioners charges of anomaly beyond his bare allegation. Petitioner
cannot now be heard to complain that there was an irregular service of the demand letter, as it does
not escape our attention that petitioner himself indicated 314 Sen. Gil Puyat Avenue, Makati
City as his office address in the Contract of Guaranty.

764
Rollo, p. 201.
765
Id. at 98.
766
Omnia praesemuntur rite et solemniter esse acta donee probetur in contrarium.
767
Gold Line Transit, Inc. v. Ramos, 415 Phil. 492, 502-503 (2001).

304
 Moreover, under Section 6, Rule 13 of the Rules of Court, there is sufficiency of service
when the papers, or in this case, when the demand letter is personally delivered to the party or his
counsel, or by leaving it in his office with his clerk or with a person having charge thereof,
such as what was done in this case.

We have consistently expostulated that in summary judgments, the trial court can determine a
genuine issue on the basis of the pleadings, admissions, documents, affidavits or counter affidavits
submitted by the parties. When the facts as pleaded appear uncontested or undisputed, then there
is no real or genuine issue or question as to any fact, and summary judgment is called for.768

The Court of Appeals was correct in holding that:

Here, the issue of non-receipt of the letter of demand is a sham or

pretended issue, not a genuine and substantial issue. Indeed, against the positive
assertion of Mr. Roberto O. Pagdilao (the private courier) in his affidavit that he
delivered the subject letter to a certain Ms. Dette Ramos who introduced herself
as one of the employees of [herein petitioner] Mr. Benjamin Bitanga and/or of the
latters companies, said [petitioner] merely offered a bare denial. But bare denials,
unsubstantiated by facts, which would be admissible in evidence at a hearing, are
not sufficient to raise a genuine issue of fact sufficient to defeat a motion for
summary judgment.769

We further affirm the findings of both the RTC and the Court of Appeals that, given the
settled facts of this case, petitioner cannot avail himself of the benefit of excussion.

Under a contract of guarantee, the guarantor binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so. The guarantor who pays
for a debtor, in turn, must be indemnified by the latter. However, the guarantor cannot be

768
Rivera v. Solidbank, G.R. No. 163269, 19 April 2006, 487 SCRA 512, 535.
769
Rollo, pp. 47-48.

305
compelled to pay the creditor unless the latter has exhausted all the property of the debtor and
resorted to all the legal remedies against the debtor. This is what is otherwise known as the
benefit of excussion.770

Article 2060 of the Civil Code reads:

Art. 2060. In order that the guarantor may make use of the benefit of
excussion, he must set it up against the creditor upon the latters demand for payment
from him, and point out to the creditor available property of the debtor within
Philippine territory, sufficient to cover the amount of the debt.771

The afore-quoted provision imposes a condition for the invocation of the defense of
excussion. Article 2060 of the Civil Code clearly requires that in order for the guarantor to make
use of the benefit of excussion, he must set it up against the creditor upon the latters demand for
payment and point out to the creditor available property of the debtor within the Philippines
sufficient to cover the amount of the debt.772

It must be stressed that despite having been served a demand letter at his office, petitioner still
failed to point out to the respondent properties of Macrogen Realty sufficient to cover its debt as

770
JN Development Corporation v. Philippine Export and Foreign Loan Guarantee Corporation, G.R. No.
151060, 31 August 2005, 468 SCRA 554, 564.
771
Other relevant provisions of the Civil Code reads:

Art. 2058. The guarantor cannot be compelled to pay the creditor unless the latter has exhausted
all the property of the debtor, and has resorted to all the legal remedies against the debtor.

Art. 2061. The guarantor having fulfilled all the conditions required in the preceding article, the
creditor who is negligent in exhausting the property pointed out shall suffer the loss, to the extent of said
property, for the insolvency of the debtor resulting from such negligence.

Art. 2062. In every action by the creditor, which must be against the principal debtor alone, except
in the cases mentioned in article 2059, the former shall ask the court to notify the guarantor of the action. The
guarantor may appear so that he may, if he so desire, set up such defenses as are granted him by law. The
benefit of excussion mentioned in article 2058 shall always be unimpaired, even if judgment should be
rendered against the principal debtor and the guarantor in case of appearance by the latter.
772
JN Development Corporation v. Philippine Export and Foreign Loan Guarantee Corporation, supra note 37.

306
required under Article 2060 of the Civil Code. Such failure on petitioners part forecloses his
right to set up the defense of excussion.

Worthy of note as well is the Sheriffs return stating that the only property of Macrogen
Realty which he found was its deposit of P20,242.23 with the Planters Bank.

Article 2059(5) of the Civil Code thus finds application and precludes petitioner from
interposing the defense of excussion. We quote:

Art. 2059. This excussion shall not take place:

xxxx

(5) If it may be presumed that an execution on the property of the principal

debtor would not result in the satisfaction of the obligation.

As the Court of Appeals correctly ruled:

We find untenable the claim that the [herein petitioner] Benjamin Bitanga
cannot be compelled to pay Pyramid because the Macrogen Realty has allegedly
sufficient assets. Reason: The said [petitioner] had not genuinely controverted the
return made by Sheriff Joseph F. Bisnar, who affirmed that, after exerting diligent
efforts, he was not able to locate any property belonging to the Macrogen Realty,
except for a bank deposit with the Planters Bank at Buendia, in the amount of
P20,242.23. It is axiomatic that the liability of the guarantor arises when the
insolvency or inability of the debtor to pay the amount of debt is proven by the
return of the writ of execution that had not been unsatisfied.773

IN ALL, we fail to point out any impropriety in the rendition of a summary judgment in
favor of the respondent.

773
Rollo, p. 48.

307
 WHEREFORE, premises considered, the instant petition is DENIED for lack of merit.
The Decision of the Court of Appeals dated 11 April 2006 and its Resolution dated 5 July 2006
are AFFIRMED. Costs against petitioner.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

308
MA. ALICIA AUSTRIA-MARTINEZ ANTONIO EDUARDO B. NACHURA
Associate Justice Associate Justice

RUBEN T. REYES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons
Attestation, it is hereby certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the Courts Division.

309
 REYNATO S. PUNO
Chief Justice

310
 FIRST DIVISION

[G.R. No. 141238. February 15, 2002]

SATURNINO SALERA, JR., SARAH SALERA, SAMUEL SALERA, and SUSAN

SALERA, petitioners, vs. A-1 INVESTORS, INC., respondent.

DECISION
PUNO, J.:

Petitioners owe the courts candor and must call a spade a spade. They seek to permanently
enjoin the satisfaction of a final judgment through a mere complaint for injunction which, in
hindsight, they claim is an action for annulment of judgment. We cannot allow their wily ways to
make a mockery of the justice system and render a final judgment empty. They should avail of
remedies for their grievances in accordance with law.
The petitioners filed this petition for review on certiorari to annul the Court of Appeals
Decision dated December 15, 1998 prohibiting the Regional Trial Court of Cebu City, Branch 16,
from proceeding further with Civil Case No. CEB-20550 and Resolution dated December 21, 1999
denying their motion for reconsideration of the December 15, 1998 decision.
The following facts spurred the present controversy:
It is undisputed that on August 27, 1992, Teodora Salera, mother of the petitioners, contracted
a P50,000.00 loan and issued a promissory note to respondent A-1 Investors, Inc. payable one
month after or on September 27, 1992, with interest of six percent (6%) per month. The promissory
note also stated that she would pay liquidated damages of two percent (2%) per month of any
unpaid amount due and that in case legal services are necessary for collection of payment, she
would be liable for attorney's fees equivalent to 25% of the amount due, but in no case less than
P500.00.774
As the loan remained unpaid long after it had fallen due, respondent A-1 Investors, Inc. filed
a complaint for collection of a sum of money on August 15, 1996, docketed as Civil Case No.
15996 in the Metropolitan Trial Court of Quezon City, Branch 36, against Teodora Salera and
impleaded her husband, Saturnino Salera, Sr., pursuant to Section 4, Rule 3 of the then Rules of
Court.775 The summons for said case was received from the sheriff by the couple's son, petitioner

774
Original Records, p. 163; Plaintiff's Pre-trial Brief in Civil Case No. CEB-20550 in the RTC of Cebu City, Branch
16, p. 1; Rollo, pp. 38-39, Complaint in Civil Case No. 15996 in the Metropolitan Trial Court of Quezon City, Branch
36.
775
Sec. 4, Rule 3 of the Rules of Court provides, viz:
Sec. 4. Married woman. - A married woman may not sue or be sued alone without joining her husband, except in the
following instances:

311
Samuel Salera, at their family's residential address at 35-J Amon Court, Lahug, Cebu City in
September 1996, but Samuel refused to sign receipt of a copy thereof.776
Saturnino, Sr. claims that from 1993 to 1997, he lived in Clarin, Bohol as he ran for and was
elected mayor of that town in the 1995 local elections. He and his wife, Teodora, did not receive
the summons that was sent to the Salera residence in Cebu, and were not able to file an Answer to
the Complaint in Civil Case No. 15996. Consequently, they were held in default and a decision
was rendered on November 27, 1996, viz:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against
defendants Spouses Saturnino Salera and Teodora Salera, as follows:
1. Ordering said defendants to pay the sum of FIFTY (P50,000.00) PESOS with
interest at the rate of 6% per month from September 27, 1992 until fully paid;
2. Ordering said defendants to pay liquidated damages in amount equivalent to 2%
per month from September 27, 1992 until fully paid;
3. Ordering the defendants to pay an amount equivalent to 25% of the total amount
due, as and for, attorney's fees; and,
4. Ordering the defendants to pay the costs of suit.777
A copy of the decision was sent again to the family's residential address in Cebu and was
received by a certain Joel Ario on December 23, 1996, but Saturnino, Sr. was then still residing in
Bohol. The Salera spouses did not appeal and the decision became final and executory upon
expiration of the appeal period. On April 23, 1997, Saturnino, Sr.s daughter, Sarah Salera, received

(a) When they are judicially separated;

(b) If they have in fact been separated for at least one year;
(c) When there is a separation of property agreed upon in the marriage settlements;
(d) If the administration of all the property in the marriage has been transferred to her, in accordance with Articles 196
and 197 of the Civil Code;
(e) When the litigation is between the husband and the wife;
(f) If the suit concerns her paraphernal property;
(g) When the action is upon the civil liability arising from a criminal offense;
(h) If the litigation is incidental to the profession, occupation or business in which she is engaged;
(i) In any civil action referred to in Articles 25 to 35 of the Civil Code; and
(j) In an action upon a quasi-delict.
In the cases mentioned in paragraphs (g) to (j), the husband must be joined as a party defendant if the third paragraph
of Article 163 of the Civil Code is applicable.
776
Original Records, p. 47.
777
Id., p. 50; Decision, p. 2.

312
a Writ of Execution778 and a Notice of Levy Upon Realty Pursuant to Writ of Execution779 in
connection with Civil Case No. 15996. Although Sarah was already 28 years old and a college
graduate, she simply received these documents from the sheriff without reading them, placed them
in her drawer without informing her parents about them, and forgot about them. It was only a week
after that she showed the documents to her parents.780
Saturnino, Sr. claims to have been practically unaware of the proceedings in Civil Case No.
15996 and was aghast when on July 10, 1997, his son informed him that he (the son) received a
Notice to Parties of Public Auction dated June 23, 1997. The notice stated that Sheriff Jessie
Belarmino would sell the Salera spouses property on July 17, 1997 pursuant to a Writ of Execution
issued in Civil Case No. 15996. The property consisted of a parcel of land in Cebu covered by
TCT No. 66400 with an area of 405 square meters.781
As Saturnino, Sr. felt aggrieved and denied of due process in Civil Case No. 15996, he filed
on July 14, 1997, a complaint for "Injunction with Damages" against respondent A-1 Investors,
Inc. docketed as Civil Case No. CEB-20550 before the Regional Trial Court (RTC) of Cebu City,
and prayed that the court award damages in his favor and issue a temporary restraining order,
followed by a preliminary injunction, and that the injunction be made permanent after trial.782 The
RTC of Cebu issued a TRO, and subsequently a preliminary injunction enjoining the sale of the
levied property. It gave due consideration to Saturnino Sr.s allegation that he was unaware of the
proceedings in Civil Case No. 15996 and he had no relation with respondent A-1 Investors, Inc.
as it was his wife, and not him, who signed the loan agreement; that the levied property is his
exclusive property and not answerable to the debt of his wife; and that assuming he was liable to
pay respondent, the levied property was exempt from execution as it was their family home. 783
Respondent A-1 Investors, Inc. filed a Motion for Summary Judgment and a Supplemental Motion
for Summary Judgment with Urgent Motion to Quash Writ of Preliminary Injunction. In an Order
dated October 1, 1997, the court denied the motions and ordered the respondent to answer.
Respondent filed a motion for reconsideration of the October 1 Order and an Answer. On October
28, 1997, Saturnino, Sr. died and all his children, the petitioners herein, replaced him as plaintiffs
in the injunction case. His wife, Teodora Salera, executed an affidavit stating that the levied
property was the exclusive property of her husband and that she was waiving in favor of her
children her one-fifth share of the levied property which she was to inherit.784 Respondent's motion
for reconsideration was denied. The case was then set for pre-trial conference and both petitioners
and respondent filed their pre-trial briefs. On January 12, 1998, respondent filed a Petition for
Certiorari and Prohibition with the Court of Appeals.785 The appellate court granted the petition

778
Id., p. 8.
779
Id., p. 7.
780
TSN, Sarah Salera, July 28, 1997, pp. 16-21.
781
Original Records, p. 1; Complaint, p. 1.
782
Original Records, p. 3.
783
Id., pp. 63-64.
784
Id., pp. 152-153.
785
Rollo, pp. 3-7; Petition, pp. 1-5.

313
in the assailed Decision dated December 15, 1998, viz:
Though not specifically raised, the petition for prohibition is an indirect attack on the
jurisdiction of the court to take cognizance of the complaint for injunction, while invoking
at the same time the jurisdiction of the same court to render a summary judgment in his
favor. Be that as it may, (i)t is hornbook doctrine that in order (t)o ascertain whether a
court has jurisdiction or not, the provisions of the law should be inquired into. (Ignacio
vs. Court of Appeals, G.R. No. 113947, 11 December 95, First Division, Minute
Resolution) Furthermore, the jurisdiction of the court must appear clearly from the statute
law or it will not be held to exist. (Azarcon vs. Sandiganbayan, 268 SCRA 747, 757).
Clearly, from the provision of law abovecited, the RTC must be prohibited from further
proceeding with the case. In the same case, it was held that (j)urisdiction cannot be
conferred by xxx erroneous belief of the court that it had jurisdiction. (Azarcon vs.
Sandiganbayan, supra, p. 763) Clearly, Civil Case CEB-20550 is but a mere brazen
attempt by Salera to substitute for a lost appeal of the MeTC-QC decision which had
already attained finality. Even if the case had been brought before the RTC-QC, the same
would have been dismissed anyway, execution having been issued as a matter of right in
favor of petitioner for failure of Salera to appeal.
WHEREFORE, above premises considered, RTC-Cebu City is prohibited from
further proceeding with Civil Case CEB-20550.786
Petitioners filed a motion for reconsideration which was denied in the assailed Resolution
dated December 21, 1999.
Hence this appeal with the following assignment of errors:
I. WHETHER OR NOT REGIONAL TRIAL COURTS HAVE JURISDICTION
OVER INJUNCTION CASES;
II. WHETHER OR NOT RESPONDENT IS ESTOPPED FROM RAISING THE
ISSUE OF LACK OF JURISDICTION;
III. WHETHER OR NOT THE COMPLAINT IN CIVIL CASE NO. CEB-20550
SHOULD HAVE BEEN TREATED AS A PETITION TO ANNUL THE DECISION IN
CIVIL CASE NO. 15996 OF THE METROPOLITAN TRIAL COURT OF QUEZON
CITY.
The petition must fail.
Petitioners anchor their position that the RTC of Cebu has jurisdiction over their injunction
case on Section 19 (1) of Batas Pambansa Blg. 129, as amended by R.A. No. 7691, which states
that Regional Trial Courts have jurisdiction over civil actions in which the subject of the litigation
is incapable of pecuniary estimation. They assert that the complaint for injunction filed by
Saturnino, Sr. falls within this category of civil actions as the subject of the action was the restraint
of the public auction of property levied pursuant to a writ of execution issued in Civil Case No.
15996.
While petitioners are correct that a complaint for injunction is a recognized remedy to enjoin

786
Rollo, p. 31; Decision, p. 7.

314
the performance of an act,787 which action falls within the province of Regional Trial Courts,788 it
must be taken into account that Saturnino, Sr. sought to permanently enjoin the public auction of
property levied pursuant to a writ of execution issued in Civil Case No. 15996 on the ground that
he was not served with summons and was denied due process. In doing so, Saturnino, Sr. was
actually seeking the annulment of the decision in Civil Case No. 15996 which was the basis of the
writ of execution pursuant to which the public auction was to be held. The proper remedy for
petitioners' predicament is therefore not an action for injunction, but for annulment of judgment.
It is thus understandable why petitioners are staunch in claiming, in hindsight, that although
the complaint filed in the RTC of Cebu was captioned Injunction with Damages, the allegations
therein suffice to constitute an action for annulment of the decision in Civil Case No. 15996 for
lack of due process amounting to lack of jurisdiction and/or extrinsic fraud. The issue of whether
or not the Metropolitan Trial Court of Quezon City did not acquire jurisdiction over the person of
Saturnino, Sr. in Civil Case No. 15996 and his exclusion from the proceedings in said case
amounted to extrinsic fraud which denied him of due process should be properly resolved in an
action for annulment of judgment as mandated by Sections 1 and 2789 in relation to Section 10 of
Rule 47 of the 1997 Rules of Civil Procedure, viz:
Sec. 1. Coverage.- This Rule shall govern the annulment by the Court of Appeals of
judgments or final orders and resolutions in civil actions of Regional Trial Courts for
which the ordinary remedies of new trial, appeal, petition for relief or other appropriate
remedies are no longer available through no fault of the petitioner.
Sec. 2. Grounds for annulment.- The annulment may be based only on the grounds
of extrinsic fraud and lack of jurisdiction.
xxx x x
x xxx
Sec. 10. Annulment of judgments or final orders of Municipal Trial Courts. - An
action to annul a judgment or final order of a Municipal Trial Court shall be filed in the
Regional Trial Court having jurisdiction over the former. It shall be treated as an ordinary
civil action and sections 2, 3, 4, 7, 8 and 9 of this Rule shall be applicable thereto.
Unfortunately for the petitioners, the complaint filed by Saturnino, Sr. in the RTC of Cebu
was, without a shadow of doubt, not for annulment of the decision rendered in Civil Case No.
15996. Not only was the complaint captioned Injunction with Damages, but it likewise did not
pray for annulment of judgment, viz:
WHEREFORE, in view of the foregoing, it is respectfully prayed that:
1. Upon the filing of this Complaint, a temporary restraining order be issued and to
be followed by a preliminary injunction after a preliminary hearing upon putting by the
plaintiff a bond in such amount that this Honorable Court may determine, directing
defendants to immediately stop from proceeding with the auction sale on July 17, 1997

787
Manila Banking Corp., et al. v. Court of Appeals, et al., 187 SCRA 138 (1990).
788
Notre Dame de Lourdes Hospital v. Mallare-Phillips, 197 SCRA 187 (1991).
789
See also Gacutana-Fraile v. Domingo, et al., G.R. No. 138518, December 15, 2000.

315
 and after trial, to make said injunction permanent and perpetual;
2. And on plaintiff's claim for damages, defendants be ordered jointly and solidarily
to pay plaintiff the following sums of money:
a. P500,000.00 or such amount as this Honorable Court may deem just, legal, and
equitable under the premises by way of moral damages;
b. P100,000.00 or such amount as this Honorable Court may deem just, legal and
equitable under the premises by way of exemplary damages;
c. P100,000.00 as attorneys fees;
d. P50,000.00 as litigation expenses, and
e. Triple costs of this suit.
Further, plaintiff prays for such other relief and remedies this Honorable Court may
find just and equitable under the circumstances.790
Section 4 in relation to the above-quoted Section 10, Rule 47 of the 1997 Rules of Civil
Procedure on annulment of judgments or final orders provides, viz:
Sec. 4. Filing and contents of petition.- The action shall be commenced by filing a
verified petition alleging therein with particularity the facts and the law relied upon for
annulment, as well as those supporting the petitioner's good and substantial cause of
action or defense, as the case may be.
. . . A certified true copy of the judgment or final order or resolution shall be attached
to the original copy of the petition intended for the court and indicated as such by the
petitioner.
The petitioner shall also submit together with the petition affidavits of witnesses or
documents supporting the cause of action or defense and a sworn certification that he has
not theretofore commenced any other action involving the same issues in the Supreme
Court, the Court of Appeals or different divisions thereof, or any other tribunal or agency;
if there is such other action or proceeding, he must state the status of the same, and if he
should thereafter learn that a similar action or proceeding has been filed or is pending
before the Supreme Court, the Court of Appeals, or different divisions thereof, or any
other tribunal or agency thereof within five (5) days therefrom.
It is clear from the contents of the complaint filed by the petitioners that the action is not for
annulment of the decision in Civil Case No. 15996. It does not allege with particularity the facts
and the law relied upon for annulment, as well as those supporting the petitioner's good and
substantial cause of action which petitioners now claim are extrinsic fraud and lack of jurisdiction.
Neither is a certified true copy of the decision in Civil Case No. 15996 attached to the original
copy of the petition intended for the court and indicated as such by the petitioner. Nor were
affidavits of witnesses or documents supporting the cause of action, i.e., annulment of judgment
on the ground of lack of jurisdiction and extrinsic fraud, submitted together with the complaint.
Petitioners cannot now mislead the court into treating the complaint for injunction as an action for

790
Original Records, p. 3; Complaint, p. 3.

316
annulment of judgment with the ancillary remedy of injunction.
More importantly, even assuming arguendo that the action was for annulment of judgment,
the RTC of Cebu did not have jurisdiction over the subject matter of the complaint as Section 10,
Rule 47 of the 1997 Rules of Civil Procedure provides:
Sec. 10. Annulment of judgments or final orders of Municipal Trial Courts.- An
action to annul a judgment or final order of a Municipal Trial Court shall be filed in the
Regional Trial Court having jurisdiction over the former. . .
It is therefore the RTC of Quezon City which has jurisdiction over a case seeking annulment of
the final decision of the Metropolitan Trial Court of Quezon City, Branch 36, which is similar in
rank as the above-mentioned Municipal Trial Court.
Petitioners claim that respondent A-1 Investors, Inc. is now estopped from assailing the
jurisdiction of the RTC of Cebu over the subject matter of the action for two reasons. First,
respondent did not raise this issue of jurisdiction in their Petition for Certiorari and Prohibition in
the Court of Appeals. Thus, petitioners argue that it was error for the appellate court to have
granted the petition on the ground of lack of jurisdiction over the subject matter. Second, according
to petitioners, while it is established doctrine that lack of jurisdiction over the subject matter can
be raised at any time during the proceedings even for the first time on appeal, this rule admits of
an exception as when the defendant actively participated in the proceedings and invoked the
jurisdiction of the court in seeking affirmative remedies such as respondents Motion for Summary
Judgment, Supplemental Motion for Summary Judgment with Urgent Motion to Quash Writ of
Execution, and Answer. In such cases, the defendant is estopped from assailing the jurisdiction of
the court pursuant to the policy that it is not right for a party who has affirmed and invoked the
jurisdiction of a court in a particular matter to secure an affirmative relief, to afterwards deny that
same jurisdiction to escape a penalty.791
A careful perusal of the records would, however, show that respondent A-1 Investors, Inc.
questioned the jurisdiction of the RTC of Cebu over the subject matter of the action, i.e., to issue
a preliminary injunction to enjoin the public auction of property levied pursuant to a writ of
execution issued in Civil Case No. 15996 of the Metropolitan Trial Court of Quezon City. In its
motion for reconsideration of the October 1, 1997 Order of the RTC of Cebu that denied
respondent's motion for summary judgment, respondent stated, viz:
4. Even assuming arguendo that the lot subject of the execution is an exclusive
property of the plaintiff, this Court still has no authority to issue an injunction based
on said ground because in doing so, this Court will in effect be varying the mandate
of the Writ of Execution issued by the Quezon City Metropolitan Trial Court,
Branch 36, in Civil Case No. 15996 (See Annex D, Complaint) which enjoins the
properties of herein plaintiffs and his spouse to satisfy the money judgment in the said
case.
5. With due respect, it is well to remind this Honorable Court that it is beyond its
authority to deviate from the mandate of a lawful, valid, and enforceable Writ of

791
Rollo, p. 8; Petition, p. 7, citing Tijam v. Sibonghanoy, 23 SCRA 29 (1968).

317
 Execution issued by a court outside of its jurisdiction.792 (emphasis supplied)
In its Answer, respondent A-1 Investors, Inc. similarly stated in its affirmative defenses, viz:
5. Assuming arguendo that the subject house and lot are exclusive properties of the
plaintif (sic), still this Honorable Court has no authority to issue an injunction based
on said ground for the reason that it has no authority to deviate from the mandate
of the Writ of Execution issued by the Quezon City Metropolitan Trial Court in Civil
Case No. 15996 (See Annex D, Complaint) which enjoins the properties of plaintiff
herein and his spouse to satisfy the money judgment in said case.793 (emphasis supplied)
While the respondent invoked the jurisdiction of the court and sought affirmative remedies
such as the Motion for Summary Judgment and the Supplemental Motion for Summary Judgment
with Urgent Motion to Quash Writ of Execution, it also questioned the jurisdiction of the court
over the subject matter in its Motion for Reconsideration and Answer. Respondent A-1 Investors,
Inc. is not estopped from assailing the jurisdiction of the RTC of Cebu over the subject matter
because it properly raised this lack of jurisdiction as one of its defenses in its Answer. It was thus
proper for the Court of Appeals to grant the petition filed by respondent A-1 Investors, Inc. on the
ground that the RTC of Cebu did not have jurisdiction over the subject matter of the complaint
even though respondent did not raise the issue of jurisdiction on appeal. Section 1, Rule 9 of the
1997 Rules of Civil Procedure provides, viz:
Section 1. Defenses and objections not pleaded. - Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived. However, when
it appears from the pleadings or the evidence on record that the court has no jurisdiction
over the subject matter, that there is another action pending between the same parties
for the same cause, or that the action is barred by a prior judgment or by statute of
limitations, the court shall dismiss the claim. (emphasis supplied)
Well-settled is the rule that the issue of jurisdiction over the subject matter may, at any time, be
raised by the parties or motu proprio considered by the Court.794
WHEREFORE, the petition is DENIED and the impugned decision and resolution of the
Court of Appeals are AFFIRMED. The preliminary injunction issued by the RTC of Cebu, Branch
16 in Civil Case No. CEB-20550 is lifted and said court is prohibited from further proceeding with
Civil Case No. CEB-20550. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan and Ynares-Santiago, JJ., concur.

792
Original Records, p. 137; Motion for Reconsideration, p. 3.
793
Original Records, p. 144; Answer, p. 2.
794
Namuhe v. Ombudsman, 298 SCRA 298 (1998), citing Section 1, Rule 9, 1997 Rules of Civil Procedure (formerly
Section 2, Rule 9); Fabian v. Desierto, 295 SCRA 470 (1998).

318
 FIRST DIVISION

EDWARD ROCO TAN G.R. No. 168809

and EDWIN ROCO TAN,
Petitioners, Present:

Panganiban, C.J. (Chairperson),

- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
BENIGNO DE LA VEGA, ANGELA
TUASON STALEY and ANTONIO Promulgated:
PEREZ Y TUASON,
Respondents. March 10, 2006

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

DECISION

YNARES-SANTIAGO, J.:

319
 Assailed in this petition for review is the February 3, 2005 Decision795of the Court of
Appeals in CA-G.R. CV No. 79957, which affirmed the March 21, 2003 Order796of the Regional
Trial Court of Pasig City, Branch 264, granting the motion for judgment on the pleadings filed by
respondents in Civil Case No. 62269. Likewise questioned is the appellate courts July 6, 2005
Resolution797which denied petitioners motion for reconsideration.

The undisputed facts show that on August 3, 1992, respondents filed a complaint for
quieting of title and for declaration of nullity of Free Patent No. 495269, Original Certificate of
Title (OCT) No. 711 and Transfer Certificate of Title (TCT) No. 186516, against the heirs of
Macario Mencias (defendant heirs), namely, Aquilina Mencias, Aurora M. Gabat, Merlyn M.
Cadete, Myrna M. Quirante; and the Secretary of the Department of Environment and Natural
Resources, the Director of the Land Management Bureau and the Register of Deeds of Marikina.
The complaint was later amended to implead herein petitioner purchasers of the disputed lot and
to nullify TCT No. 272191 issued in their name.

The Amended Complaint averred that respondents are the co-owners of a 159,576 square
meter parcel of land located in Marikina, Rizal, Metro Manila and covered by TCT No. 257152,
issued on June 20, 1969. Said title was a transfer from TCT No. 22395 in the name of J. Antonio
Araneta as trustee of the children of Angela I. Tuason. Among the lots covered by TCT No. 257152
is the controverted Lot 89 containing an area of 54,197 square meters.798

Sometime in April 1992, respondents learned that the defendant heirs are causing the
ejectment of the occupants of a 29,945 square meter portion of Lot 89; and that Macario Mencias
was able to obtain Free Patent No. 495269 on July 31, 1971, and OCT No. 711 on August 11,
1971, over said portion. Upon Macario's death, OCT No. 711 was canceled and TCT No. 186516

795
Rollo, pp. 33-57; penned by Associate Justice Martin S. Villarama, Jr. and concurred in by Associate Justices
Regalado E. Maambong and Lucenito N. Tagle.
796
Records, pp. 768-774; penned by Judge Leoncio M. Janolo, Jr.
797
Rollo, p. 60.
798
Id. at 63.

320
was issued to the defendant heirs on July 5, 1990.799 By virtue of a Deed of Sale inscribed on
November 14, 1994, TCT No. 186516 was further cancelled and TCT No. 271604 was issued on
the same date in favor of New Atlantis Real Estate & Development, Inc., (Corporation) represented
by its President, Victor C. Salvador, Jr. The questioned lot was thereafter sold by the Corporation
to petitioners. TCT No. 271604 was thus cancelled and in lieu thereof, TCT No. 272191 was issued
to petitioners on November 17, 1994.800

Respondents contended that Macarios OCT No. 711 and its derivative titles-TCT No.
186516, in the name of defendant heirs and petitioners TCT NO. 272191, are void because the
area they cover is entirely within their (respondents) land, specifically, Lot 89, as shown by the
notation in the said titles, i.e., This survey is covered by F.P.A. No. (III-1) 4496; and This survey
is entirely inside No. 89, II-4755.801 Respondents further averred that since the controverted lot is
already a private land, the Director of Lands and the Secretary of Agriculture and Natural
Resources, had no jurisdiction to approve Macarios application and to issue Free Patent No.
495269. The pendency of this action was allegedly inscribed in the defendant heirs title (TCT No.
186516) on August 4, 1992 and carried over to the petitioners' TCT No. 272191.802

In their Answer,803the defendant heirs contended that Lot 89 was never part of respondents
TCT No. 257152 which originated from OCT No. 730. Respondents own exhibits, i.e., the
documents purportedly issued by the Bureau of Lands (Exhibits E and F), show that Lot 89 was
covered by OCT No. 734 and not OCT No. 730. Defendant heirs further stated that respondents
TCT No. 257152 was issued in lieu of TCT No. 22395 which is a mere reconstitution of TCT No.
45046. Upon verification with the Register of Deeds of Rizal, TCT No. 45046, covers a different
parcel of land situated in San Juan, Rizal, and measuring about 356 square meters only. The
defendant heirs also raised the defenses of laches and prescription.

799
Id. at 64.
800
Id. at 67.
801
Id. at 66.
802
Id. at 66-68.
803
Id. at 85-88.

321
 On the other hand, petitioners asserted, inter alia, that they are purchasers in good faith
and for value and that they have no knowledge of any defect in the title of the Corporation from
whom they purchased the controverted lot. The notice of lis pendens alleged to have been inscribed
in TCT No. 186516 on August 4, 1992 does not appear in the Corporations title, TCT No. 271604
nor in their title, TCT No. 272191. Absent said notice, petitioners claim that they cannot be charged
with knowledge of any defect in the Corporation's title. Neither does the note This survey is
covered by F.P.A. No. (III-1) 4496; and This survey is entirely inside No. 89, II-4755, serve as
sufficient warning to third persons because said notes do not indicate that the property is covered
by another title.804

For failure to file their Answer, defendant Aurora M. Gabat,805 public defendants Secretary
of the Department of Environment and Natural Resources, Director of Land Management Bureau
and the Register of Deeds of Marikina,806were declared in default.

On March 4, 2003, respondents filed a motion for judgment on the pleadings which was
granted by the trial court. It was held that the disputed lot is within Lot 89 covered by respondents
TCT No. 257152, issued on June 20, 1969. Said lot therefore became a private land long before
the Free Patent was issued to Macario on July 31, 1971. Hence, the titles derived or issued on the
basis of said Free Patent are void because Public Land Act applies only to public lands and not
private lands. On the theory that the spring cannot rise higher than its source, the trial court
concluded that petitioners cannot be purchasers in good faith considering that their title was
derived from Macario who acquired the property by virtue of a void title. It further ruled that
petitioners defense of good faith must fail because they were forewarned of the notice indicating
that the questioned lot is inside Lot 89. The dispositive portion of the March 21, 2003 order, reads:

804
Id. at 69-84.
805
Order dated July 15, 1995, records, p. 147.
806
Order dated July 20, 1993, records, p. 87.

322
 WHEREFORE, premises considered, Plaintiffs [respondents herein]
Motion is hereby Granted and judgment rendered as follows:

1. Plaintiffs Transfer Certificate of Title (TCT) No. 257152 is declared

valid and superior to defendants [petitioners] TCT No. 272191;

2. Free Patent No. 495269 issued by then Secretary of Environment

and Natural Resources to Macario Mencias on July 21, 1971 is declared null and
void;

3. Original Certificate of Title (OCT) No. 711, Transfer Certificate of

Title (TCT) No. 271604/T-1358 and Transfer Certificate of Title (TCT) No.
272191, TCT No. 186516 and TCT No. 272191, all derivatives [sic] title of Free
Patent 495269 issued by Registry of Deeds of Marikina, are also declared null and
void;

4. The Bureau of Lands and Land Registration Administration are

directed to enter into their technical files the findings in this order;

5. The Registry of Deeds of Marikina is directed to cancel Transfer

Certificate of Title (TCT) NO. 272191 in the names of Edward and Edwin Roco
Tan.

SO ORDERED.807

Petitioners appealed to the Court of Appeals which affirmed the assailed order of the trial
court. They filed a motion for reconsideration but was denied in a resolution dated July 6, 2005.

Hence, this petition.

807
Records, pp. 773-774.

323
 The sole issue for resolution is whether a judgment on the pleadings is proper in the instant
case.

Section 1, Rule 34 of the Rules of Court, states:

SECTION 1. Judgment on the pleadings. Where an answer fails to tender

an issue, or otherwise admits the material allegations of the adverse partys pleading,
the court may, on motion of that party, direct judgment on such pleading. x x x.

Where a motion for judgment on the pleadings is filed, the essential question is whether
there are issues generated by the pleadings. In a proper case for judgment on the pleadings, there
is no ostensible issue at all because of the failure of the defending partys answer to raise an
issue.808The answer would fail to tender an issue, of course, if it does not deny the material
allegations in the complaint or admits said material allegations of the adverse partys pleadings by
confessing the truthfulness thereof and/or omitting to deal with them at all. Now, if an answer does
in fact specifically deny the material averments of the complaint and/or asserts affirmative
defenses (allegations of new matter which, while admitting the material allegations of the
complaint expressly or impliedly, would nevertheless prevent or bar recovery by the plaintiff), a
judgment on the pleadings would naturally be improper.809

In this case, we find that the trial court erred in rendering judgment on the pleadings
because the pleadings filed by the parties generated ostensible issues that necessitate the
presentation of evidence. Respondents action for declaration of nullity of Free Patent No. 495269
and the titles derived therefrom is based on their claim that the lot titled in the name of petitioners,
is a portion of a bigger tract of land previously titled in the name of their (respondents)
predecessors-in-interest. The documents presented in support thereof were the photocopy of

808
Wood Technology Corporation v. Equitable Banking Corporation, G.R. No. 153867, February 17, 2005, 451 SCRA
724, 731.
809
Mongao v. Pryce Properties Corporation, G.R. No. 156474, August 16, 2005, 467 SCRA 201, 209-210.

324
respondents TCT No. 257152 which shows that the land it covers, including lot 89, originated
from OCT No. 730; and photocopies of the documents alleged to have been issued by the Bureau
of Lands and confirming that the disputed lot is a portion of respondents Lot 89. Pertinent portions
of the Amended Complaint, state:

5. Sometime in early April, 1992, plaintiff de la Vega was informed by

one of the occupants of the above-described lot No. 89 that the heirs of Macario
Mencias, the defendants herein, were causing the ejectment of said occupants and
claiming to be the owners of an area of 29,945 sq. ms. (sic) which is within, or part
of, Lot No. 89 covered by plaintiffs T.C.T. No. 257152. It was only then that the
plaintiffs heard of Macario Mencias and of his encroaching into plaintiffs Lot 89.

6. The plaintiffs later learned that, unknown to them, Macario Mencias

had applied with the then Bureau of Lands for, and obtained on 31 July 1971, Free
Patent No. 495269 which was granted under the signature of the then Secretary of
Agriculture and Natural Resources and covering an area of 29,945 sq. ms. (sic) as
described in Plan F (III-1) 4496-D. On 11 August 1971, Original Certificate of Title
No. 711 (Rizal) was issued to him based on the said Free Patent, and upon his death,
said OCT No. 711 was cancelled and transferred to his heirs, the defendants herein,
to whom T.C.T. No. 186516 (Marikina) was issued on 5 July 1990. The plaintiffs
were never notified of said application of Mencias for free patent nor of the issuance
of Free Patent No. 495269 and OCT No. 711 to him and T.C.T. No. 186515 to his
heirs, the defendants herein. Photocopies of OCT No. 711, which incorporated Free
Patent No. 495269, and T.C.T. No. 186516 are hereto appended as Annexes B and
C, respectively.

xxxx

8. A letter dated 29 October 1971 of Mr. Amando A. Salvador as Chief

of the Survey Division of the then Bureau of Lands and addressed to Macario
Mencias, 1st Indorsement, dated 15 February 1974, signed by Mr. Daniel C. Florida
as Acting Chief of the Legal Division of the Bureau of Lands, a report dated 17
December 1976 by Mr. Jose B. Isidro as Hearing Officer addressed to the Director
of Lands, and the 1st Indorsement, dated 3 January 1977, also addressed to the
Director of Lands by Mr. Claudio C. Batiles as the District Land Officer,
photocopies of which are appended hereto as Annexes D, E, F and G, respectively,
unequivocally confirmed that the area of 29,945 sq. ms. (sic) covered by the Free
Patent based on Plan F (III-1) 4496-D and issued to Macario Mencias was entirely
inside Lot 89 of Plan II-4755, which was covered by T.C.T. No. 22395 in the name
of J Antonio Araneta, Trustee of the children Angela I. Tauson, and since 20 June
1969, by T.C.T. No. 257152 in the plaintiffs names.

9. There can be no doubt that the area of 29,945 sq. ms. (sic) covered
by Free Patent No. 495269, which was incorporated in OCT No. 711 issued to

325
 Macario Mencias, was within Lot 89 of Plan II-4755 covered by T.C.T. No. 22395
and, since 20 June 1969, by T.C.T. No. 2597152 (sic) in the plaintiffs names,
because the technical description of said area embodied in the said Free Patent itself
and in OCT No. 711 disclosed the following information:

NOTE: This survey is covered by F.P.A. No. (III-1) 4496.

This survey is entirely inside No. 89, II-4755 (See Annex B hereof).
(See Annex B hereof).

10. In fact the very same notes were carried over in T.C.T. No. 186516
issued to the heirs of Mencias, the defendants herein, thus forewarning all those
who dealt or may have dealt with the private defendants regarding the area therein
described that there was something anomalous in said title (See Annex C hereof).

xxxx

14. The records of the Registry of Deeds of Marikina, Metro Manila,

disclosed that TCT No. 186516, Annex C, was cancelled and T.C.T. No. 271604,
covering the same parcel of land covered by T.C.T. No. 186516, was issued on
November 14, 1994 by the Register of Deeds of Marikina, Mr. Artemio B. Caa, to
the New Atlantis Real Eastate & Dev., Inc. represented by its President, Victor C.
Salvador, Jr., based on a sale in its favor inscribed on the same date; and that T.C.T.
No. 271604 was thereupon cancelled and in lieu thereof T.C.T. No. 272191 was
issued by the said Register of Deeds to private defendants Edward and Edwin Roco
Tan on November 17, 1994 based on a sale in their favor inscribed on the same
date. A photocopy of T.C.T. No. 272191 is hereto attached as Annex H.

xxxx

16. Neither New Atlantis Real Estate & Dev. Inc., nor Edward Roco
Tan and Edwin Roco Tan could claim to be purchasers in good faith not only
because their titles are void and inexistent and could not possibly have any legal
effect whatsoever but also because the NOTE cited in paragraphs 9 and 10 above,
which likewise appears on T.C.T. No. 272191 itself, discloses the very basis for its
nullity.

17. The notice of the pendency of this action (Notice of Lis Pendens)
was duly inscribed on T.C.T. No. 186516 on August 4, 1992 under Entry No.
274711, which notice has been carried over to T.C.T. No. 272191, a photocopy of
which is hereto appended as Annex H.

x x x x.810

810
Rollo, pp. 64-68.

326
 The foregoing averments were specifically denied by defendant heirs who raised, among
others, the affirmative defense that respondents TCT No. 22395 is void and that lot 89 is not found
inside respondents land. Thus

11. Lot 89 was never a part of the Mariquina Estate as shown in

subdivision plan PSD 29965 as surveyed in December, 1950 up to June, 1951. This
fact is also certified by the Office of the Register of Deeds of Rizal as early as 1967,
a photo copy of said certification is hereto attached as Annex 1;

12. Plaintiffs own exhibits (Annexes E, F, in relation to Annex A) show

that lot 89 was never part of Original Certificate of Title (O.C.T.) No. 730 from
which plaintiffs alleged title was derived (T.C.T. No. 257152, Annex A). In
Annexes E and F, Lot No. 89 of II-4755 is covered by O.C.T. No. 734 and not 730;

13. T.C. T. No. 257152 is spurious, falsified, hence, null and void. This
certificate of title was issued in lieu of T.C.T. No. 22395/T 389 as per Annex A of
the Complaint. T.C.T. No. 22395/T 389 was in turn issued in lieu of T.C.T. No.
45046 as shown in a document (T.C.T. No. 22395) hereto attached as Annex 2;

14. It also appears that T.C.T. No. 22395 is a mere reconstitution of a

lost/destroyed T.C.T. No. 45046 as shown on page 3 of T.C.T. No. 257152;

15. Upon verification with the Office of the Register of Deeds of Rizal,
T.C.T. No. 45046 covered a different parcel of land situated in San Juan, Rizal and
measuring about 356 square meters only, photo copy of which is hereto attached as
Annex 3 hereof;

x x x x.811

Petitioners asserted, inter alia, the affirmative defense of good faith and denied the material
allegations of the complaint relating to the origin of the title of respondents; and the latters claim
that Lot 89 is covered by TCT No. 257152. Pertinent portions of the Answer state:

In further support of the Specific Denials and Affirmative Allegations

herein set forth, and by way of Affirmative Defenses, defendants allege:

xxxx

4.2 Defendants are innocent purchasers for value of the subject

property. They had no knowledge, actual or constructive, of the alleged defect in

811
Id. at 86.

327
 their title, Transfer Certificate of Title No. 272191, or of the title of their
predecessor-in-interest, the Corporation.

4.2.1 Plaintiff's (sic) notice of lis pendens alleged to have been duly
inscribed on TCT No. 186516 on August 4, 1992 under Entry No, 274711 did not
appear or was not annotated on the corporations title, TCT No. 271604, which was
issued on November 14, 1994 or long after the alleged inscription was made on the
said title. Attached and made integral part hereof as Annex A is a copy of
Corporation's title, TCT No. 271604.

4.2.2 Neither did said inscription appear or annotated on defendants title,

TCT No. 272191, which was issued on 17 November 1994. Attached and made
integral part hereof as Annex B is a copy of TCT No. 272191.

4.2.3 It bears stressing that if the said inscription was duly made on 4
August 1992 as plaintiffs alleged, the same would have been annotated on TCT
Nos. 271604 and 272191 which were issued long after the said entry was allegedly
made. Obviously, if said entry does appear today on TCT No. 272191, it was made
only recently or at the earliest, after the latter title was issued on 17 November 1994.
But certainly said entry could not have been possibly made on 4 August 1992.

4.2.4 With the absence of the notice of lis pendens, defendants could not
be charged with notice of any defect in their title No. 272191 nor their status as
innocent purchasers for value be adversely affected by the same.

4.2.5 Neither does the note, this survey is covered by F.P.A. No. (III-1)
4496; This survey is entirely inside No. 89 II-4755. serve as sufficient notice to
defendants of any defect in their title. Said note does not indicate or disclose that
the subject property is covered by another title.

4.2.6 Moreover, the fact that the subject property was covered by TCT
No. 271604 duly issued by the Registry of Deeds in the name of the corporation
without any encumbrance, liens or adverse claims annotated thereon negates any
possibility that the subject property belongs to any person other than the
corporation.812

It is clear from the foregoing that the pleadings filed in the instant case generated the
following issues: (1) whether respondents TCT No. 257152 is valid; (2) whether Lot 89 is covered
by TCT No. 257152; and (3) whether petitioners are purchasers in good faith. This is clearly not a
proper case for judgment on the pleadings considering that the Answers tendered factual issues.

812
Id. at 76-79.

328
The trial court rendered a summary judgment on March 21, 2003 and not a judgment on the
pleadings.

In Narra Integrated Corporation v. Court of Appeals,813the Court explained the distinction

between a proper case of summary judgment and judgment on the pleadings, in this wise:

The existence or appearance of ostensible issues in the pleadings, on the one

hand, and their sham or fictitious character, on the other, are what distinguish a
proper case for summary judgment from one for a judgment on the pleadings. In a
proper case for judgment on the pleadings, there is no ostensible issue at all because
of the failure of the defending partys answer to raise an issue. On the other hand,
in the case of a summary judgment, issues apparently exist i.e. facts are asserted
in the complaint regarding which there is as yet no admission, disavowal or
qualification; or specific denials or affirmative defenses are in truth set out in the
answerbut the issues thus arising from the pleadings are sham, fictitious or not
genuine, as shown by affidavits, depositions, or admissions. x x x.

In any case, a summary judgment is likewise not warranted in this case as there are genuine
issues which call for a full blown trial. A genuine issue is an issue of fact which requires the
presentation of evidence as distinguished from a sham, fictitious, contrived or false claim. When
the facts as pleaded appear uncontested or undisputed, then there is no real or genuine issue or
question as to the facts, and summary judgment is called for. The party who moves for summary
judgment has the burden of demonstrating clearly the absence of any genuine issue of fact, or that
the issue posed in the complaint is patently unsubstantial so as not to constitute a genuine issue for
trial. Trial courts have limited authority to render summary judgments and may do so only when
there is clearly no genuine issue as to any material fact. When the facts as pleaded by the parties
are disputed or contested, proceedings for summary judgment cannot take the place of trial.814

In the instant case, presentation of evidence is necessary to determine the validity of TCT
No. 22395 from which respondents title (TCT No. 257152) was derived. As alleged by defendant
heirs, TCT No. 22395 was a mere reconstitution of TCT No. 45046, which per verification from
the Register of Deeds of Rizal pertain to a different piece of land measuring only about 356 square

813
398 Phil. 733, 740 (2000).
814
Evadel Realty and Development Corporation v. Soriano, G.R. No. 144291, April 20, 2001, 357 SCRA 395, 401.

329
meters and located in San Juan, Rizal. These allegations were never refuted by respondents, hence,
they cannot be simply brushed aside by the trial court.

Moreover, even assuming that the title of respondents predecessors-in-interest (TCT No.
22395) is valid, the evidence at this stage is still insufficient to sustain the conclusion of the trial
court that Lot 89 is inside respondents land now covered by TCT No. 257152. The title appended
by respondents in their complaint is a mere photocopy. Likewise, the document allegedly issued
by the Bureau of Lands and presented by respondents to prove that Lot 89 is inside their land are
also mere photocopies and not authenticated by said office. Furthermore, the title referred in the
said documents as the origin of TCT No. 257152, is a different title, that is OCT No. 734 and not
OCT No. 730. There is thus a need to present evidence to settle the issues in a full blown trial.

If the evidence show that the Free Patent and the OCT issued to petitioners predecessors-
in-interest is valid and or Lot 89 is not inside TCT No. 257152, then judgment should be rendered
in favor of petitioners; and whether the latter acted in good or bad faith will no longer be a decisive
issue in this case. On the other hand, if the title of petitioners predecessors-in-interest is declared
void, the defense of good faith may still be available to petitioners who claim to be purchasers in
good faith and for value. The rule is that a void title may be the source of a valid title in the hands
of an innocent purchaser for value.815 An innocent purchaser for value is one who buys the property
of another, without notice that some other person has a right to, or interest in, such property and
pays a full and fair price for the same at the time of such purchase, or before he has notice of the
claims or interest of some other person in the property.816

Since good faith is always presumed,817it was premature for the trial court to conclude that
petitioners are not purchasers in good faith. Note that the complaint did not state that the notice of
the pendency of this action was inscribed in the title of the Corporation from whom petitioners
purchased the property. Petitioners even denied the presence of said inscription in their own title
and in the title of the Corporation.818 Neither the presence of the notation This survey is covered

815
Republic v. Agunoy, Sr., G.R. No. 155394, February 17, 2005, 451 SCRA 735, 752; Republic v. Court of Appeals,
365 Phil. 522, 530 (1999).
816
Republic v. Court of Appeals, supra at 529.
817
Rosencor Development Corporation v. Inquing, G.R. No. 140479, March 8, 2001, 354 SCRA 119, 137.
818
Records, pp. 220-221.

330
by F.P.A. No. (III-1) 4496; and This survey is entirely inside No. 89, II-4755, in the title of the
Corporation automatically make petitioners purchasers in bad faith. In the absence of other
evidence to explain said notation, bad faith, which is never presumed, cannot be charged against
petitioners. The notation that the disputed lot is covered by Free Patent Application No. (III-1)
4496, will not place the title in dubious light because the same is the number of the application for
Free Patent of Macario Mencias,819petitioners predecessor-in-interest. The same is true with
respect to the notation in the title that the questioned lot is inside Lot 89. Considering that the title
presented is a mere photocopy and that the notes appearing thereon do not indicate that the subject
property is covered by any title, the trial court should have directed the parties to substantiate their
respective allegations instead of rendering judgment. Indeed, in determining the propriety of
rendering a motion for summary judgment, the lower court should take that view of the evidence
most favorable to the party against whom it is directed, giving such party the benefit of all
favorable inferences.820

In sum, we find that respondents failed to prove that presentation of evidence may be
dispensed with in the present controversy. The instant case is neither a proper case for rendition of
judgment on the pleadings nor of summary judgment. A full blown trial should therefore be
conducted to resolve the issues raised by the parties.

WHEREFORE, in view of all the foregoing, the petition is GRANTED and the February
3, 2005 Decision and the July 6, 2005 Resolution of the Court of Appeals in CA-G.R. CV No.
79957 are REVERSED and SET ASIDE. Let the records of this case be remanded to the Regional
Trial Court of Pasig City, Branch 264 for further proceedings.

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice

819
Id. at 61.
820
SolidBank Corp. v. Court of Appeals, 439 Phil. 23, 35-36 (2002).

331
WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice

MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

332
ARTEMIO V. PANGANIBAN
Chief Justice

333
 EN BANC

ALFONSO T. YUCHENGCO and Y G.R. No. 149802

REALTY CORPORATION,
Petitioners,

- versus -

THE HON. SANDIGANBAYAN, Fourth

Division, REPUBLIC OF THE
PHILIPPINES, PRESIDENTIAL
COMMISSION ON GOOD
GOVERNMENT, ESTATE OF
FERDINAND E. MARCOS, IMELDA R.
MARCOS, PRIME HOLDINGS, INC.,
ESTATE OF RAMON U. COJUANGCO,
represented by IMELDA O. COJUANGCO,
and IMELDA O. COJUANGCO,
Respondents.
x------------------------x

ALFONSO T. YUCHENGCO and Y

REALTY CORPORATION,Petitioners,
G.R. No. 150320
- versus -

THE HON. SANDIGANBAYAN, Fourth

Division, REPUBLIC OF THE
PHILIPPINES, PRESIDENTIAL
COMMISSION ON GOOD
GOVERNMENT, ESTATE OF
FERDINAND E. MARCOS, IMELDA R.
MARCOS, PRIME HOLDINGS, INC.,
ESTATE OF RAMON U. COJUANGCO,
represented by IMELDA O. COJUANGCO,
and IMELDA O. COJUANGCO,
Respondents.

334
x------------------------x

REPUBLIC OF THE PHILIPPINES,

Petitioner,

- versus -
G.R. No. 150367

THE HON. SANDIGANBAYAN (Fourth

Division), ESTATE OF FERDINAND E.
MARCOS (rep. by its Administrator, the
Bureau of Internal Revenue), IMELDA R.
MARCOS, PRIME HOLDINGS, INC.,
ESTATE OF RAMON U. COJUANGCO,
(represented by its Administratrix, IMELDA
O. COJUANGCO), ALFONSO T.
YUCHENGCO and Y REALTY
CORPORATION,
Respondents.
x - - - - - - -- - - - - - - - - - - - - - - - - -x

ALFONSO T. YUCHENGCO and Y

REALTY CORPORATION,
Petitioners,

- versus -

REPUBLIC OF THE PHILIPPINES, G.R. No. 153207

PRESIDENTIAL COMMISSION ON
GOOD GOVERNMENT, ESTATE OF
FERDINAND E. MARCOS, IMELDA R.
MARCOS, PRIME HOLDINGS, INC.,
ESTATE OF RAMON U. COJUANGCO,
represented by IMELDA O. COJUANGCO
and IMELDA O. COJUANGCO,
Respondents.
x - - -- - - - - - - - - - - - - - - - - - - - - -x

REPUBLIC OF THE PHILIPPINES,

Petitioner,

335
 - versus -

ESTATE OF FERDINAND E. MARCOS,

(represented by its Administrator, the
Commissioner of Internal Revenue), G.R. No. 153459
IMELDA R. MARCOS, PRIME
HOLDINGS, INC., ESTATE OF RAMON U.
COJUANGCO
(represented by the Administratrix, IMELDA
O. COJUANGCO), IMELDA O.
COJUANGCO, ALFONSO T.
YUCHENGCO and Y REALTY
CORPORATION,
Respondents.

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

DISSENTING OPINION

GARCIA, J.:

336
 Before the Court are these five (5) separate petitions to nullify and set aside certain
issuances of the Sandiganbayan, Fourth Division, in Civil Case No. 0002, a complaint for
reconveyance, reversion, accounting, restitution and damages thereat instituted by the Republic
of the Philippines (Republic), through the Presidential Commission on Good Government
(PCGG).

Per its en banc Resolution of March 4, 2003,[1] the Court ordered the consolidation of
these five (5) petitions, emanating, as they all do, from the same case.

I. THE UNDERLYING CASE:

CIVIL CASE NO. 0002

Civil Case No. 0002, one of several suits involving ill-gotten or unexplained wealth that
the Republic, through the PCGG, initiated with the Sandiganbayan pursuant to Executive
Order (EO) Nos. 1 and 2 in relation to EO No. 14, all series of 1986,[2] seeks the recovery of
ill-gotten wealth from former President Ferdinand E. Marcos (Pres. Marcos, hereafter), later
substituted by his Estate, his wife, their three (3) children (Marcos family, or Marcoses,
collectively) and their alleged cronies. Among the properties identified as partaking the nature
of ill-gotten wealth, as the term is contextually understood, are shares of stock in Philippine
Telecommunications Investment Corporation (PTIC, for short) which, in turn, covered over
two (2) million shares in Philippine Long Distance Telephone Company, Inc. (PLDT).
The Republic seeks to recover the covered PLDT shares from Imelda O. Cojuangco,
the Estate of Ramon U. Cojuangco, represented by its administratrix Imelda O. Cojuangco
(collectively, Cojuangcos), and Prime Holdings, Inc. (PHI), as part of the alleged ill-gotten
wealth of the Marcos family.

Subsequently, petitioner Alfonso T. Yuchengco (Yuchengco), joined later by his

ally, Y Realty Corporation (Y Realty), intervened, claiming they are the rightful owners of
PHIs 46% shareholding in PTIC. They would assert that their claim for recovery of the property
allegedly unjustly taken from them is superior to the forfeiture claim of the Republic.

Acting on a February 1996 motion of the Cojuangcos, the Sandiganbayan would later
resolve to sever the PLDT-share-ownership issue from the other claims involved in Civil Case
No. 0002, and allowed a separate trial with respect only to the issue related to the PLDT shares.
In the course of the separate trial, the Sandiganbayan (Fourth Division) issued certain orders

337
and resolutions, infra, that are now subject to challenge in either one of the herein five (5)
consolidated petitions.

Three (3) of these petitions, i.e., G.R. No. 150367, G.R. No. 149802 and G. R.
No. 150320, are for certiorari under Rule 65 of the Rules of Court, the first filed
by Republic and the remaining two, by Yuchengco/Y Realty (collectively,
the Yuchengcos). These recourses similarly assail as having been issued in grave abuse of
discretion or in excess or lack of jurisdiction, ergo null and void, certain resolutions and orders
issued by the graft court in Civil Case 0002. As each petitioner in these three (3) petitions
alleged, the resolutions and orders adverted to effectively deny them due process of law.
Accordingly, they pray that writs of certiorari issue with the end in view of enjoining respondent
Sandiganbayan to allow them additional trial dates for purposes of presenting their respective
evidence in the separate trial below.

On the other hand, G.R. No. 153459 and G.R. No. 153207, filed by Republic and
the Yuchengcos, respectively, under Rule 45 of the Rules of Court, each seeks a review and the
setting aside, allegedly for not being in accord with the evidence adduced below, and for being
contrary to law and settled jurisprudence, the Sandiganbayans Partial Decision[3] on the PLDT
issue dated April 25, 2002, but promulgated on May 6, 2002 (simply Partial Decision,
hereafter). The Partial Decision, which was rendered after the three (3) aforementioned petitions
for certiorari had been filed, disposes, as follows:

WHEREFORE, premises considered, the complaint of the plaintiff

Republic of the Philippines on the PLDT shares subject of separate trial is hereby
DISMISSED for lack of merit.

The Motion for Summary Judgment is hereby GRANTED, and the

Complaint-in-Intervention DISMISSED.

SO ORDERED.

The arguments and counter-arguments of the herein four (4) main sets of litigants
(the Republic, the Marcoses, the Cojuangcos and the Yuchengcos)on a menu of issues
presently pressed in pleadings after pleadings are as numerous as they are extensive. What is
more, the parties, along the way, squeezed the rules of procedure to the hilt, thus adding
incidental matters to an already complex proceedings. So as not to be sidetracked, or, worse
still, waylaid thereby and thus neglect, if not altogether miss, the proverbial tree for the forest,

338
the Court shall limit itself and shall accord particular focus only to what it perceives to be
material determinative facts and matters which led to the filing of the instant petitions. Towards
the same end, the Court shall condense the several issues raised into two (2) core questions for
resolution, to wit:

1. whether or not petitioners in G.R. Nos. 149802,

150320 and 150367 were denied due process when the respondent court in effect
directed them to terminate the presentation of their respective evidence; and

2. whether or not the challenged Partial Decision, subject of the petitions

for review in G.R. Nos. 153459 and 153207, conforms to the evidence presented,
the law and/or settled jurisprudence.

II. THE PARTIES & THEIR PRINCIPAL

CLAIM in CIVIL CASE No. 0002

A. Petitioner Republic

The original complaint in Civil Case No. 0002, filed on July 16, 1987 by the Republic,
thru the PCGG, named, as defendants, Pres. Marcos and Imelda R. Marcos (Mrs. Marcos,
hereafter), their three (3) children, and seven (7) other individuals. As the case progressed,
the Republic successively amended its original complaint to include other alleged illegally
acquired assets and/or implead other parties.

Among the properties sought to be recovered as part of the alleged ill-gotten wealth of the
Marcos family are, as indicated earlier, shares of stock in PTIC and PLDT.
The Republics Third Amended Complaint (Amended Complaint), dated April 20,
1990,[4] impleaded, as additional party-defendants, the herein respondents Cojuangcos/PHI,
and, as to them, the Amended Complaint pertinently avers:

1. This is a civil action against Defendants Ferdinand E. Marcos, Imelda R.

Marcos, . . . Imelda Cojuangco, the Estate of Ramon Cojuangco, and Prime
Holdings, Inc. to recover from them ill-gotten wealth consisting of funds and other
property which they . . . had acquired and accumulated in flagrant breach of trust

339
 and of their fiduciary obligations as public officers, . . . thus resulting in their unjust
enrichment during Defendant Ferdinand E. Marcos 20 years of rule . . . .

2. The wrongs committed by Defendants, acting singly or collectively and

in unlawful concert with one another. . . include the misappropriation and theft of
public funds, plunder of the nations wealth, extortion, blackmail, bribery,
embezzlement and other acts of corruption, betrayal and public trust . . . .

xxx xxx xxx

17. Among the assets acquired by Defendants in the manner above-

described . . . are funds and other property listed in Annex A hereof and made an
integral part of this Complaint, [including, but not limited to the following]:

xxx xxx xxx

c. Stocks

Shares of stocks in numerous corporations . . ., including about 2.4

million shares of . . . [PLDT] valued, at current market prices,
approximately P1.6 Billion pesos and covered by shares of stock in . . .
(PTIC) registered in the names of Prime Holdings Inc. (PHI), Ramon
Cojuangco and the latters associates.

During his lifetime, Ramon U. Cojuangco held 76,779 shares of

stock in PTIC, while Imelda O. Cojuangco held 21,525 shares of stock in
her own name, the beneficial and actual ownership of which is that of
defendants Ferdinand Marcos and his family.

Defendant Prime Holdings, Inc. (PHI) held 111,415 shares which in

truth and in fact belong to defendants Ferdinand E. Marcos and his family.
This stockholding of defendants Marcos and his family in PTIC, through
Ramon U. Cojuangco and PHI, constitutes the majority stockholding in
PTIC. PTIC, in turn, is the biggest stockholder of PLDT shares. In the
manner above stated, defendants Marcos and his family effectively
controlled PLDT. (Underscoring in the Original; Words in bracket, added)

As may thus be gathered from the above averments, petitioner Republic, as plaintiff a
quo, seeks to recover from respondents Cojuangcos/PHI, the following PTIC shares of
stock, viz: (1) the 111,415 shares in PHIs name; (2) the 76,779 and the 21,525 shares in the
name of Ramon U. Cojuangco and Imelda O. Cojuangco, respectively. The desired recovery is

340
predicated on the postulate that the three, as defendants a quo, are mere
dummies/nominees/conduits of the Marcos family in the control of PLDT.

B. Respondents Cojuangcos and PHI

In its Answer dated June 5, 1990,[5] to the Republics Amended Complaint, PHI belied
allegations that the Marcos family is the beneficial owner of its 111,415 PTIC shares, stating in
this regards, as follows:

11. Answering defendant PHI specifically denies the allegations contained

in paragraphs 20 (a) and 20 (b) of plaintiffs Complaint. Insofar as the facts alleged
in paragraph 20 (c) thereof, defendant PHI respectfully alleges that: (a) Defendant
PHI is the registered stockholder of 111,415 shares in . . . (PTIC); that during his
lifetime Ramon U. Cojuangco held 76,779 shares of stock in PTIC; that Imelda O.
Cojuangco held 21,525 shares of stock in her name, but answering defendant
specifically denies that these shares registered in said names are owned, actually
and/or beneficially, by Ferdinand E. Marcos and his family.

xxx xxx xxx

The truth of the matter is that the members of the family of the late Ramon
U. Cojuangco own all the outstanding shares in PHI in full legal and beneficial
ownership . . . .
Respondent Cojuangcos Answer dated June 9, 1990,[6] to the same Amended
Complaint contains virtually the same material averments as those in PHIs answer. And like
PHI, the Cojuangcos also pray for the dismissal, as to them, of the Amended Complaint.

C. Respondent Imelda R. Marcos

As its most essential, Mrs. Marcos Answer with Counterclaim dated November 22,
1993,[7] confirmed the Republics allegation about the Marcoses ownership over the PLDT
shares in controversy, but with the qualification that these shares were legitimate acquisitions.
Very much later, however, Mrs. Marcos, by motion dated January 22, 1999, sought leave to
amend answer for the purpose of pursuing a cross-claim against Cojuangcos/PHI. The
respondent court, however, denied her motion, holding that the proferred Amended Answer
with Cross-Claim thus attached to her motion varied her theory of defense, in that, while she
asserted in her original answer that the late Pres. Marcos had lawfully acquired and thus owned
the PLDT shares in question, she, in the intended amended answer with cross-claim, traversed

341
the allegations of the Republics Amended Complaint by pleading lack of knowledge of facts
sufficient to form a belief as to the truth thereof. Nonetheless, the respondent court allowed
Mrs. Marcos to file a pleading to contain her cross-claim against Cojuangcos/PHI.

Accordingly, Mrs. Marcos filed a Cross-Claim dated April 21, 1999[8] against
Cojuangcos/PHI, alleging, inter alia, the following:
2. The . . . (PLDT), . . . is one of the assets listed in Annex A of the Third
Amended Complaint [of the Republic] . . . .

3. The Philippine Telecommunications Investment Corp. (PTIC) was

organized . . . with the primary purpose to . . . otherwise deal in all securities, shares
of stocks and bonds of the [PLDT]. x x x . PTIC is the single biggest corporate
stockholder of PLDT.

3.1. PTICs capital stock were originally subscribed by . . ., among

others: defendants Ramon Cojuangco and Imelda Cojuangco both of whom
held shares of stock in their respective names as trustees . . .for and in behalf
of the late President Ferdinand E. Marcos, . . . and family . . . . All shares of
stock in PTIC acquired and registered in their respective names subsequent
to the incorporation were likewise acquired and held for and behalf of said
principals.

3.2. On 7 December 1967, defendant Ramon Cojuangco and Mr.

Luis T. Rivilla,. . . executed an agreement whereby . . . (67,392) shares of
PTIC, which were held in their names were transferred, . . . unto defendant
Imelda R. Marcos in consideration of the extinguishment of [their] loan of
. . .(P3,400,000.00) . . . .

xxx xxx xxx

3.4. Mrs. Marcos subsequently authorized Messrs. Cojuangco and

Rivilla, their assigns, . . . to hold said 67,392 PTIC shares for and in her
behalf on the understanding, agreement and recognition of her true, lawful
and beneficial ownership thereof.

4. Sometime in 1977, defendants Ramon Cojuangco and Imelda Cojuangco

likewise acquired for and in behalf of Mr. and Mrs. Marcos and their family
approximately . . . (54,349) fully paid shares of stock in PTIC from General
Telephone and Electronics, Inc. (GTE), an American company. Again, this share
acquisition was on the understanding, agreement and recognition that defendant
Cojuangcos were mere trustees/nominees of Mr. and Mrs. Marcos and their family.

342
 xxx xxx xxx

5. All the shares of stock of PTIC registered in the name of defendants

Ramon Cojuangco, Imelda Cojuangco, their assigns, nominees and representatives,
. . ., were never acquired and held in their own right, . . . since they have always
been held by them as trustees/nominees for and in behalf of Mr. and Mrs. Marcos
and family the true, lawful and beneficial owners thereof.

xxx xxx xxx

6. On 05 October 1977, . . .. (PHI) was organized . . . as an investment and

holding company. PHIs principal asset at present is the . . . (111,415) PTIC shares
of stock registered and held in PTIC.

6.1 PHI was incorporated to serve as the holding company of all the
PTIC shares owned by Mr. and Mrs. Marcos and family, in addition to those
being held by trustees/nominees . . . . For this purpose, PHI was organized
with the following as incorporators [Jose D. Campos, Rolando C. Gapud,
Renato E. Lirio, Gervaso T. Gaviola and Ernesto S. Abalos, with 400 shares
each], all of whom are the trustees/nominees of the Marcoses:

xxx xxx xxx

6.3 In 1978, . . . (111,415) shares of stock in PTIC were transferred

and registered in the name of PHI. These PTIC shares came from various
sources, including from registered stockholders of PTIC.

xxx xxx xxx (Words in bracket added.)

On the basis of the foregoing averments, Mrs. Marcos, for her own behalf and that of
her family, prayed that judgment be rendered ordering the Cojuangcos/PHI, their assignees and
agents, to transfer in her favor (i) the aforesaid shares of stock in PTIC being held by them as
trustees/nominees of the Marcos family, and (ii) all the two thousand (2,000) shares of stock in
PHI being held by them as such trustees/nominees, together with all the fruits accruing from
the time that they were constituted or acted as such trustees/nominees.

In fine, Mrs. Marcos maintained that all PTIC shares registered in the names of
Cojuangcos/PHI as well as the PHI shares which are registered in the name of its incorporators
have always been held by them as trustees and/or nominees of the Marcos spouses and their
family who are the lawful and beneficial owners thereof. She assumed the same posture in her
343
Pre-trial Brief dated April 24, 1999[9] as well in her Answer to petitioner Republics Request for
Admission.[10]

Via a Resolution promulgated on February 22, 2000,[11] the respondent court dismissed
Mrs. Marcos Cross-claim for being barred and for failure to state a cause of action. Her motion
for reconsideration was denied in another Resolution of May 23, 2000.[12]

D. Petitioner Yuchengcos

Petitioner Yuchengco filed his Complaint-in-Intervention and his Amended Complaint-

in-Intervention in August 1988 and May 1993, respectively, both of which the Sandiganbayan
(Third Division) admitted. He asserted ownership over a certain number of PTIC shares and
necessarily a portion of the disputed PLDT shares. Y Realty later joined Yuchengco in his
Second Amended Complaint-in-Intervention and, to the extent of their combined claim over
the disputed PLDT shares, pitted the same against that of either the Republic,
the Marcos family, or the Cojuangcos/PHI.

The Yuchengcoss joint Second Amended Complaint-in-Intervention dated September

20, 1993[13] - admitted on June 11, 1995 - contained the ensuing material averments:

FIRST CAUSE OF ACTION

6. In the early to mid-1960s, the largest block of stock of . . . [PLDT]
was held by General Telephone & Electronics Corporation (GTE), which
held 28% of its outstanding stock.

In 1967, GTE decided to divest its shareholdings in PLDT. . . . GTE

agreed to sell its PLDT shares to the Ramon U. Cojuangco group, which
included . . . Ferdinand E. Marcos and/or . . . Imelda R. Marcos, Estate of
Ramon U. Cojuangco and Imelda O. Cojuangco, and their nominees.

The Ramon U. Cojuangco group caused. . . (PTIC) to be formed for

the purpose of purchasing GTEs 28% stockholdings in PLDT. xxx.

7. In 1967, PTIC was owned by the following: GTE received 25%

of PTIC as part of the consideration for selling its shareholding in PLDT to
PTIC. Approximately 57% of the PTIC stock was divided among the
Ramon U. Cojuangco group.

Gregorio Romulo and Leonides Virata each received 3% of PTIC

for their services rendered . . . .
344
 The remaining 12% of PTIC was divided among various persons.
Plaintiff-in-intervention Yuchengco - . . . who already controlled 10% of
PLDT purchased 7.75% of the stock in PTIC (18,720 shares) . . . . He placed
the 7.75% shares in the name of . . . Y Realty Corporation.

8. Some time after PTICs acquisition of 28% of PLDT, Gregorio

Romulo and Leonides Virata . . . approached . . . Yuchengco and offered to
sell their respective 3% shareholdings in PTIC to him for P300,000.00 each.
Plaintiff-in-intervention Yuchengco agreed to buy.

9. But, the Ramon U. Cojuangco group learned of the agreed sale

and sent Atty. Alberto Meer to . . . Yuchengco to inform him that . . .
President Marcos objected to his acquiring additional shares in PTIC.
xxxx Yuchengco was instructed to pay the purchase price of P600,000.00
and to transfer the 6% stockholdings to the Ramon U. Cojuangco group.
Otherwise, . . . Yuchengco was told, his business interests would suffer.

Gregorio Romulo, upon finding out, also strenuously objected to

selling to the Ramon U. Cojuangco group.

But, . . . Yuchengco and Gregorio Romulo complied as they could

not do otherwise. xxx Yuchengco paid the P600,000.00 price. The 6%
stockholdings of Gregorio Romulo and Leonides Virata were transferred to
the Ramon U. Cojuangco group and eventually to. . .[PHI].

10. xxx Yuchengco was the victim of illegal coercion and duress
of the Marcos regime. He was coerced into giving up Gregorio Romulos
and Leonides Viratas 6%shareholdings in PTIC . . . .

xxx Yuchengco was prevented by the same illegal coercion and

duress and by force majeure (Martial Law) from seeking judicial relief until
after the ouster of the former regime.

11. Consequently, . . . [PHI] holds the 6% stockholdings in PTIC,

and all dividends and distributions attributable thereto, in constructive trust
for . . .

xxx xxx xxx

SECOND CAUSE OF ACTION

345
 xxx xxx xxx

14. On 22 November 1967 at about the time GTE sold out its PLDT
shares to PTIC and received 25% of PTIC GTE through its . . ., John J.
Douglas, entered into a put and call agreement with . . . Yuchengco for
GTEs 25% stockholdings in PTIC. xxx

15. But, as with the Leonides Virata and Gregorio Romulo

shares, Yuchengco was prevented from acquiring GTEs 25% shares in
PTIC by exercise of his put and call agreement with GTE.

16. In February 1976, GTE was compelled by the Ramon U.

Cojuangco group to waive its 25% stockholdings in PTIC for free. At a
meeting in Tokyo with Ted Brophy, . . . and Ramon U. Cojuangco, [and 3
others], Brophy waived the 25% stockholdings, notwithstanding plaintiffs
put and call agreement with GTE. Said 25% stockholdings in PTIC were re-
issued to the Ramon U. Cojuangco group for a nominal amount and
eventually transferred to . . . [PHI].

xxx xxx xxx

17. Again, . . . Yuchengco . . . was coerced into not exercising his

put and call agreement with GTE for the latters 25% stockholdings in
PTIC, when he was otherwise ready, willing and able to do so. xxx.

Plaintiff-in-intervention Yuchengco was prevented by the same

illegal coercion and duress and by force majeure (Martial Law) from
seeking judicial relief until after the ouster of the former regime.

18. Consequently, . . .[PHI] and the owners of . . . [PHI] whether

they be (a) the Estate of Ramon U. Cojuangco and Imelda O. Cojuangco (b)
plaintiff Republic and the PCGG, or (c) the Estate of Ferdinand E. Marcos
and Imelda R. Marcos hold the 25% stockholdings in PTIC, and all
dividends and distributions attributable thereto, in constructive trust for
plaintiff-in-intervention Yuchengco, and should be compelled to turn over
the same to him.

ALTERNATIVE THIRD CAUSE OF ACTION

xxx xxx xxx

346
 20. In the event the Honorable Court should adjudge that . .
. Yuchengco is not entitled to recover, under the Second Cause of Action,
the 25% shareholdings in PTIC formerly belonging to GTE, then plaintiffs-
in-intervention are at least entitled to recover 4.6% of said 25%
shareholdings, as demonstrated below.

20.1. xxx Y Realty Corporation owns 7.7% of the stock in

PTIC, and . . . Yuchengco is entitled to recover the 6%
shareholdings formerly belonging to Gregorio Romulo and
Leonides Virata . . . for a total of 13.75%.

20.2. When GTE was coerced by the Ramon U. Cojuangco

group to waive its 25% stockholdings in PTIC in February 1976, the
remaining stockholders of PTIC were entitled to a pro-
rata distribution of said 25% stockholdings which were instead
wholly re-issued to the Ramon U. Cojuangco group for a nominal
amount and eventually transferred to . . . [PHI].

20.3. Thus, plaintiffs-in-intervention, with 13.75% of the

remaining 75% stock, were entitled to 4.6% of the 25%
stockholdings formerly belonging to GTE.

[It is thus prayed]

On the first cause of action,

(a) xxx Ordering . . . [PHI] to turn over the 6% PTIC shareholdings

including stock, cash and other dividends and stock splits thereon, to . .
. Yuchengco; and

(b) Adjudging plaintiff-in-intervention Yuchengco to be the true

owner of said 6% PTIC [formerly Viratas and Romulos], shareholdings;

On the second cause of action

(a) Ordering . . . [PHI] to turn over the 25% PTIC shareholdings

(formerly of GTE), including all . . . dividends and stock splits thereon, to .
. . Yuchengco [as true owner thereof]; and xxx

On the alternative third cause of action,

(a) Ordering defendant-in-intervention [PHI] to turn over 4.6% of

its PTIC shareholdings (plaintiffs-in-interventions pro-rata share of GTEs

347
 former 25% shares), including all stock, cash and other dividends and stock
splits thereon, to plaintiffs-in-intervention; and

(b) Adjudging plaintiffs-in-intervention to be the true owners of said

4.6% PTIC shareholdings. (Underscoring as found in the original; Emphasis
and words in bracket added).

In their answer to the Amended Complaint-in-Intervention, which they later manifested

as serving as their answer to the Second Amended Complaint-in-Intervention,
respondents Cojuangcos/PHI set up, inter alia, by way of affirmative defense, the following
grounds: (1) lack of cause of action, since the PTIC and PHI shares of stock in the name of the
late Ramon U. Cojuangco and members of his family were lawfully acquired by them; (2)
neither of the Marcos spouses was a member of the Ramon U. Cojuangco group, so that they
(the Marcos spouses) have no interest whatsoever over any share in the said corporations; and
(3) no jurisdiction has been acquired by the Sandiganbayan over the Amended Complaint-in-
Intervention for non-payment of the proper docket fees.

III. THE PETITIONS

A. G.R. Nos. 150367 and 153459 (Republics)

On February 16, 2001, petitioner Republic secured a subpoena ad

testificandum[14]
for Mrs. Marcos to testify as its witness respecting her claim over the disputed
PLDT shareholdings. Mrs. Marcos, however, wasted no time in moving for the quashal of the
subpoena, invoking in this regard her right against self-incrimination. In its opposition to
motion, petitioner Republic argued that Mrs. Marcos has waived such right when, in her
Answer and subsequent pleadings, she made judicial admissions and declaration of the
beneficial ownership of the Marcoses over the disputed PLDT shares. The respondent court,
per its Order ofMay 4, 2001, denied her motion to quash subpoena.[15] Another resolution
of July 9, 2001 would eventually follow denying reconsideration of the denial of her motion to
quash subpoena, along the following tenor:

Be that as it may, the prosecutions Opposition to Motion to Quash, dated 3

April 2001, specifically mentions only defendant Imelda Marcos admission that
Ferdinand Marcos acquired the properties mentioned in paragraph 19 of the
complaint; hence, other than this fact, said prosecution may not propound any

348
 question that may violate her right against self-incrimination, upon proper and
timely objection.

xxx xxx xxx

WHEREFORE, defendant Imelda Marcos Motion for Reconsideration

dated 19 June 2001, is hereby denied, and the subpoena earlier issued stand.
However, in lieu of the testimony of said defendant in court, the plaintiff may,
instead, make use of the provisions in Rule 26 of the Revised Rules on Civil
Procedure. [16]

In the meantime, petitioner Republic continued presenting other witnesses, relying - as

it would later claim on the oral assurance given by the graft court during the hearing on March
26, 2001 that it would allow the Republic to present Mrs. Marcos as its adverse or hostile
witness.

At the May 28, 2001 hearing, the respondent court directed petitioner Republic to wrap up
by May 30, 2001 the presentation of its evidence. This prompted petitioner Republic to
posthaste file its Respectful Motion For Additional Time To Complete Presentation Of
Evidence[17] therein praying for two (2) additional settings to complete the presentation of its
evidence. But, in an open court Order dated May 30, 2001,[18] the respondent court denied the
said respectful motion; the desired reconsideration was also denied per
[19]
a Resolution dated August 27, 2001.

Meanwhile, in the September 5, 2001 hearing, PCGG Special Counsel Tomas

Evangelista, apparently unaware of the August 27, 2001 Order adverted to, reiterated the
Republics intention to present Mrs. Marcos as its witness, only to be apprised by the respondent
court of its August 27, 2001 Order, supra. In the end, Atty. Evangelista requested that he be
allowed thirty (30) days within which to file the Republics formal offer of documentary
evidence, which respondent court in fact directed him to do via an Order dated September 5,
2001[20].

Hence, petitioner Republic filed on October 6, 2001 its Formal Offer of Evidence dated
October 4, 2001, followed later by a Supplemental Offer of Evidence dated November 13,
2001[21] therein reserving the right to present the testimony of Mrs. Marcos, as a hostile witness
regarding her cross-claim, should this Court grant its petition for certiorari that it (Republic)

349
intended to file. The intended petition was eventually filed and is presently docketed as G.R.
No. 150367.

Via its petition in G.R. No. 150367, petitioner Republic seeks to nullify the following
issuances of the respondent court, as described hereunder for better perspective:

1) Order dated May 30, 2001,[22] denying the Republics respectful motion
for additional time to complete the presentation of evidence and Resolution of
August 27, 2001,[23]denying the motion to reconsider the May 30, 2001 order; and

2) Order dated September 5, 2001,[24] directing the Republic to submit its

offer of evidence within 30 days from that date.

It is the Republics submission that the respondent court gravely abused its discretion
when it issued the aforementioned assailed orders and resolution considering that:

I. THE ASSAILED ORDERS . . . AMOUNT TO A DEPRIVATION OF

THE REPUBLICS SUBSTANTIVE AND CONSTITUTIONALLY ENSHRINED
RIGHT TO THE FULL RECOVERY OF THE MARCOSES ILL-GOTTEN
WEALTH.

II. THE ASSAILED ORDERS BLATANTLY VIOLATED THE

REPUBLICS RIGHT TO PROCEDURAL DUE PROCESS OF LAW WHEN
THE RESPONDENT COURT, AFTER ISSUING AND SUSTAINING THE
VALIDITY OF THE SUBPOENA TO IMELDA MARCOS, DENIED
PETITIONERS PLEA TO PRESENT HER AS ADVERSE/HOSTILE WITNESS
AND TO COMPLETE THE PRESENTATION OF THE REPUBLICS
EVIDENCE.

A. BY ISSUING THE ASSAILED ORDERS, THE

RESPONDENT COURT VIOLATED THE REPUBLICS RIGHT
TO DUE PROCESS OF LAW INASMUCH AS IT BARRED THE
REPUBLIC FROM PRESENTING IMELDA MARCOS AS
ADVERSE/HOSTILE WITNESS, NOTWITHSTANDING THAT
THE REPUBLIC CONSISTENTLY AND CATEGORICALLY
ASSERTED ITS RIGHT TO PRESENT HER AS SUCH
WITNESS.

350
 B. BY ISSUING THE ASSAILED ORDERS, THE
RESPONDENT COURT RENDERED NUGATORY ITS OWN
SUBPOENA DIRECTED TO IMELDA MARCOS, WHOSE
VALIDITY THE RESPONDENT COURT HAD ALREADY
SUSTAINED WITH FINALITY.

C. BY ISSUING THE ASSAILED ORDERS, THE

RESPONDENT COURT CAPRICIOUSLY SUBORDINATED
THE PROCESS OF LAW TO EXPEDIENCY AND DISPATCH.

D. BY ISSUING THE ASSAILED ORDERS, THE

RESPONDENT COURT DEPRIVED THE REPUBLIC OF DUE
PROCESS OF LAW WHEN IT EFFECTIVELY BARRED THE
REPUBLIC FROM PRESENTING, AMONG OTHER
EVIDENCE, IMELDA MARCOS, A VITAL AND MATERIAL
WITNESS WHOSE TESTIMONY WITH RESPECT TO HER
CROSS-CLAIM AGAINST THE RESPONDENTS
COJUANGCOS WILL BUTTRESS THE REPUBLICS CAUSE
OF ACTION IN CIVIL CASE NO. 0002 NOT ONLY AGAINST
HER, BUT ALSO AGAINST THE RESPONDENTS
COJUANGCOS.

E. THE ASSAILED ORDERS BETRAY THE

RESPONDENT COURTS GLARING, ALL-TOO-
TRANSPARENT TURNABOUT INASMUCH AS THEY
IRONICALLY SUPPRESSED THE ENFORCEABILITY OF THE
RESPONDENT COURTS OWN SUBPOENA TO IMELDA
MARCOS, EVEN AS THE RESPONDENT COURT HAD
ALREADY SUSTAINED THE VALIDITY OF THAT
SUBPOENA.

On the basis of the foregoing arguments, petitioner Republic prays, by way of relief,
that this Court, upon the annulment of the assailed Orders and Resolution subject of its petition
in G.R. No. 150367, direct the respondent court to allow the Republic to complete its
presentation of evidence, and compel respondent Mrs. Marcos to take the witness stand.

In their comment to the petition in G.R. No. 150367, respondents Cojuangcos/PHI maintained
the correctness of the assailed orders and resolution. Setting particular focus on Republics claim
of having been denied its day in court, said respondents contend that an agreed calendar of
hearings was in place, but petitioner Republic moved to cancel a number of trial dates for lack

351
of preparedness or for want of ready witnesses, which thus impelled the respondent court to
come out with the assailed issuances.

In the light of conflicting allegations thus made, the Court deems it appropriate to recite
additional determinative antecedents as may be gathered from the records. Thus
It would appear that at the preliminary conference held on September 28, 1998, the
parties agreed to continue the preliminary conference and the pre-trial on January 14, 1999.
Following a series of postponements, the pre-trial for the Republics Amended Complaint was
finally conducted on May 25, 2000 and terminated on the same day. The Pre-trial Order issued
on that date sets the trial of the case, upon mutual agreement, to July 10, 14, 31, August 11 and
18, 2000 at 8:30 in the morning.

Thereafter, the respondent court issued a Supplemental Pre-Trial Order dated July 10,
2000,[25] therein defining the principal issue, as follows:

Whether the properties, assets, and funds sought to be recovered by

the plaintiff are ill-gotten or lawfully acquired;

Subsequent events show that the scheduled July 10, 2000 hearing was cancelled at the
instance of petitioner Republics counsel. The July 14, 2000 hearing was also cancelled and
reset to July 31, 2000. The July 31, 2000 hearing was likewise cancelled but the parties agreed,
however, for the continuation of trial on August 11 and 18, 2000 in the morning and on
September 13, 18, 20 and 25, 2000, morning and afternoon sessions.

Presented in the August 11, 2000 hearing as petitioner Republics witness was Atty.
Francisco G. de Guzman. The August 18, 2000 hearing - when petitioner Republic intended to
present the PCGG records custodian, Ma. Lourdes Magno - was cancelled. Owing to the
voluminous records she had to identify and testify on, the respondent court ordered that Magnos
testimony be taken before the Executive Clerk of Court on three trial dates to end on September
5, 2000.

On September 5, 2000, the respondent court scheduled four (4) hearings for the
remaining days of the month of September 2000.

However, the first three (3) settings, i.e., September 13, 18 and 20, 2000, were,
upon petitioner Republics written motion dated September 11, 2000, and for reasons ranging

352
from its inability to locate a misplaced deposition to affording the new assigned Solicitor time
to go over the case records, cancelled.

Despite the developments immediately adverted to above, the parties and their counsels
nonetheless appeared for the September 18, 2000 hearing. There, Atty. Taningco of the PCGG
manifested that the Government panel is in the process of compiling the records to support the
Republics motion for admission, which, in turn, would serve as his basis for recommending the
filing of a motion for summary judgment. Accordingly, the respondent court, in a bid to
expedite an early case disposition, then blocked off the following dates for the presentation of
evidence: For petitioner Republic, December 5, 2000, January 29, 30 and 31, February 1 and
2, 2001; and for respondents Cojuangcos/PHI, March 12, 13, 14, 15, 26, 27 and 28, 2001.

What transpired next were the following events:

1. The scheduled hearing on December 5, 2000 was cancelled because the Republics
witness was not available.

2. Petitioner Republic filed a motion to reset the January 29, 30 and 31, 2001 hearings,
its Special Counsel having just received his assignment order for Civil Case No. 0002.

3. On January 29, 2001, petitioner Republic manifested its intention to call Mrs. Marcos
on the witness stand, but requested for additional hearing dates, pleading that it will not be ready
to present Mrs. Marcos within its allotted time. Respondents Cojuangcos/ PHI offered to
stipulate on the testimony of the Republics intended witness, one Atty. Manuel G. Montecillo.

4. Respondent court cancelled the January 29, 2001 hearing and required the parties to
make an appearance at the next scheduled hearing, January 30, 2001, as previously set.

5. The January 30, 2001 schedule was cancelled, as requested by petitioner Republic,
owing to lack of witness. In addition, the same petitioner also asked for the cancellation of the
three (3) succeeding scheduled hearings, i.e., January 31, February 1 and 2, 2001, and instead
requested for a February 9, 2001 setting, undertaking to present Mrs. Marcos on that date, then
rest its case, with or without her testimony.
6. The February 9, 2001 setting was reset, owing to the unavailability on that day of
the Republics intended witness, Mrs. Marcos, who, Atty. Evangelista of PCGG explained, was
physically indisposed. Acting on the Republics request for a month to present Mrs. Marcos, the

353
respondent court granted the desired resetting to March 12, 13, 14 and 15, 2001, on the
condition that the Republic will have to rest its case with or without her testimony.
7. On March 12, 2001, the Republic requested to reset the scheduled hearing.
Respondent court gave the Republic another opportunity to present its evidence and accordingly
reset the hearings to March 26, 27, and 28, 2001, as previously scheduled.

8. On March 26, 2001, the Republic presented Lourdes Magno, the PCGG record
custodian. Her direct, cross and redirect examinations were done that day. Ms. Magno was
followed on March 27, 2001, by Rosalie Sarthou of the BIR. Respondents Cojuangcos/PHI
manifested that the Republic had until the next trial date to finish its presentation of evidence.

9. After the parties, in the March 28, 2001 hearing, were through with Ms. Sarthou, the
Republic requested and was granted five additional trial dates, i.e.,May 7, 9, 16, 28, and 30,
2001, for the presentation of further evidence.

10. The hearing on May 7, 2001 was cancelled and reset to May 9, 2001. On May 9, 2001,
Republic presented Mr. Danilo Daniel, a PCGG Director, after which the presentation of further
evidence was continued to May 28, and 30, 2001.

It is upon the foregoing factual backdrop that the respondent court issued, in the May
28, 2001 hearing, its Order of even date directing petitioner Republicto terminate the
presentation of its evidence on the hearing of May 30, 2001. The May 28, 2000 Order is, as
earlier stated, what moved petitioner Republic to file its Respectful Motion for Additional Time
To Complete Presentation Of Evidence.[26]

In the meantime, pending resolution of G.R. No. 150367, the separate trial continued.
After respondents Cojuangcos/PHI have rested their case, the respondent court rendered
its Partial Decision, which, to reiterate, is the subject of petitioner Republics petition for
review, now docketed as G.R. No. 153459, on the following supporting grounds:

THE SANDIGANBAYAN COMMITTED (SIC) GRAVELY ERRED IN

ITS PARTIAL DECISION DATED MAY 6, 2002 WHEN IT DECIDED
QUESTIONS OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW OR
WITH THE APPLICABLE DECISIONS OF THE HONORABLE COURT

354
AND/OR HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE
OF JUDICIAL PROCEEDINGS CONSIDERING THAT:

I. THE SANDIGANBAYAN PARTIAL DECISION DATED MAY 6,

2002 DOES NOT COMPLY WITH THE BASIC REQUIREMENT UNDER
SECTION 14, ARTICLE VIII OF THE 1987 CONSTITION THAT NO
DECISION SHALL BE RENDERED BY ANY COURT WITHOUT CLEARLY
AND DISTINCTLY EXPRESSING THEREIN THE FACTS AND THE LAW ON
WHICH IT IS BASED, HENCE, PETITIONER WAS DEPRIVED OF ITS RIGHT
TO DUE PROCESS OF LAW.

II. THE SANDIGANBAYAN RULED IN ITS PARTIAL DECISION

DATED MAY 6, 2002 AGAINST THE ADMISSIBILITY OF THE
DOCUMENTARY EVIDENCE AFTER ADMITTING THE SAME IN
EVIDENCE, THEREBY DEPRIVING PETITIONER OF ITS RIGHT TO DUE
PROCESS OF LAW.

III. THE PARTIAL DECISION DATED MAY 6, 2002 IS FATALLY

FLAWED AS IT FAILED OR OMITTED TO MENTION VITAL FACTS AND
REFUSED TO CONSIDER MATERIAL EVIDENCE PRESENTED BY
PETITIONER TO SUPPORT ITS COMPLAINT AND REFUSED TO
CONSIDER EVIDENCE WHICH THE SANDIGANBAYAN ITSELF HAD IN
FACT ALREADY ADMITTED.

IV. PETITIONER WAS DEPRIVED OF THE OPPORTUNITY TO

PRESENT RESPONDENT IMELDA R. MARCOS AS ITS
ADVERSE/HOSTILE WITNESS, ALSO IN A MANNER VIOLATIVE OF
PETITIONERS FUNDAMENTAL RIGHT TO PROCEDURAL AND
SUBSTANTIVE DUE PROCESS OF LAW.

V. THE SANDIGANBAYAN DISREGARDED THE DECLARATIONS

UNDER OATH/JUDICIAL ADMISSIONS OF RESPONDENT IMELDA
MARCOS POSITIVELY IDENTIFYING AND CLAIMING OWNERSHIP
OVER THE SUBJECT SHARES IN PLDT, WHICH DECLARATION
LIKEWISE CONCLUSIVELY ESTABLISHES AND CONFIRMS THE
ACTUAL AND BENEFICIAL OWNERSHIP BY RESPONDENTS MARCOS
OF SAID SHARES OR, THEIR PRINCIPAL-NOMINEE RELATIONSHIP.

VI. THE SANDIGANBAYAN COMMITTED UNDUE HASTE IN

DECIDING THE CASE, IN UTTER DISREGARD OF ITS MANDATED DUTY
TO ASCERTAIN THE TRUTH IN ALL MATTERS IN CONTROVERSY.

355
 Petitioner Republic thus pray for a judgment: (1) reversing and setting aside the Partial
Decision dated April 25, 2002; and (2) ordering respondents Cojuangcos/PHI, their assignees,
nominees, and agents to RETURN and RECONVEY to the Republic (a) the 111,415 PTIC
shares in the name of Prime Holdings, Incorporated (PHI) ceded and conveyed by Ramon U.
Cojuangco and Luis T. Rivilla to PHI; (b) the 76,779 PTIC shares in the name of Ramon U.
Cojuangco; and (c) the 21,525 PTIC shares in the name of Imelda O. Cojuangco, for being
ILL-GOTTEN WEALTH of Ferdinand E. Marcos and his family.[27]

This brings us to the Yuchengcos petitions.

B. G.R. Nos. 149802, 150320 and 153207 [Yuchengcos]

As already elsewhere herein mentioned, petitioner Yuchengcos intervened in Civil Case No.
0002 to recover ownership of a portion of the disputed PLDT shares the forfeiture of
which petitioner Republic itself is pursuing owing to their being ill-gotten wealth. Mr.
Yuchengcos original Complaint-in-Intervention was filed on August 11, 1988; the Amended
Complaint-in-Intervention, on May 31 1993, and the Second Amended Complaint-in-
Intervention, on September 22, 1993, this time joined by Y Realty.

In a Resolution dated October 9, 1996, the respondent court dismissed the Amended Complaint-
in-Intervention for non-payment of docket fees, among other grounds, and denied the
Yuchengcos Motion to Admit Second Amended Complaint, posthaste sending the Yuchengcos
to this Court on earlier separate petitions for review on certiorari.

However, Mr. Yuchengcos intervention was effectively reinstated and his and Y
Realtys Second Amended Complaint-in-Intervention admitted by the respondent court pursuant
to the Decision rendered by this Court in G.R. No. 131127, (Yuchengco vs. Republic, et al.), on
June 8, 2000,[28] in relation to a companion Decision dated March 13, 2001,[29] in G.R. No.
131530, (Y Realty Corporation vs. Hon. Sandiganbayan).

In its Decision in G.R. No. 131127, this Court ordered petitioner Yuchengco to submit to public
respondent Sandiganbayan the value of the properties he seeks to recover and to pay the proper
docket fees therefor within thirty (30) days upon determination thereof either by the
Sandiganbayan or its clerk of court, which in turn is directed to act with dispatch on the matter.
Following another round of legal skirmish on our judgments in G.R. No. 131127 and G.R. No.
131530, the respondent court assessed the Yuchengcos the docket fees due on the Second

356
Amended Complaint-in-Intervention in the amount of P8,729,185.00, which the latter paid
on April 4, 2001.

Barely a month after, the Yuchengcos filed with the respondent court an Urgent Motion To
Suspend Trial Pending Discovery Proceedings dated April 30, 2001,[30] followed by
a Supplement thereto dated May 7, 2001[31]. Thereat, they prayed for the cancellation of the
separate trial settings already made and agreed upon until they shall have fully undertaken pre-
trial discovery proceedings under the provisions of Rule 23 of the Rules of Court, a right they
allegedly are entitled to, but were unable to exercise due to the erroneous dismissal by the
respondent court of their Amended Complaint-in-Intervention.

The Yuchengcos commenced with the discovery process by filing and serving notices
for the deposition-taking of Atty. Francisco De Guzman, former PHI Corporate Secretary, and
Atty. Teresa Mercado- Ferrer, then Corporate Secretary of PTIC on May 15, 2001 and May 17,
2001, respectively, with a request for the issuance of subpoena for them. On May 15, 2001,
however, they filed amended notices re-scheduling the deposition taking of Attys. De Guzman
and Mercado-Ferrer for May 31, 2001 and June 1, 2001, respectively. The Yuchengcos would
later request another rescheduling and issuance of the corresponding subpoenas for the June 11
and 12, 2001 deposition taking of both individuals. The deposition taking of Atty. De Guzman
proceeded as scheduled and was completed - on June 12, 2001. The scheduled deposition taking
of Atty. Mercado-Ferrer on June 11, 2001, however, was deferred upon her request for a 2-
week time to prepare therefor. Her deposition was finally taken on July 6 and completed on July
13, 2001.
In the meantime, the respondent court, via a Resolution dated May 24, 2001,[32] as
reiterated in an Order given in open court on July 12, 2001, denied the Yuchengcos Urgent
Motion To Suspend Trial Pending Discovery and its Supplement, for the reason that: (a) Rule
23 of the Rules of Court does not authorize the suspension of trial owing alone to the fact that
a party wishes, in the interim, to avail itself of a mode of discovery; (b) petitioners were not
being deprived of their right of discovery, as they have in fact taken the deposition of Mr.
Gregorio Romulo in 1987; and (c) the ground relied upon was not among the instances calling
for the suspension of trial under Section 8, Rule 30 of the Rules of Court.[33] The Yuchengcos
would receive a copy of the denying resolution on June 7, 2001. Respondent court would, in
a Resolution of September 5, 2001,[34] deny the Yuchengcos motion for reconsideration [filed
on August 17] of the aforesaid May 24, 2001 order.

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 At the hearing of May 30, 2001 for the continuation of the reception of the Republics
evidence, respondent court issued an order to reflect that the parties agreed on the following
settings, viz: (1) July 12, 2001 for the pre-trial conference vis--vis the Yuchengcos complaint-
in-intervention, and July 30 and August 7, 2001 for the reception of their evidence; and (2)
August 29 and September 12, 2001, for the reception of the evidence for respondents
Cojuangcos and PHI.[35]
In the pre-trial conference for the complaint-in-intervention conducted on July 12, 2001,
the Yuchengcos orally moved for the resetting of the scheduled pre-trial as well as the trial dates
previously agreed upon. They likewise moved to change the order of trial vis--vis respondents
Cojuangcos/PHI, such that they (Yuchengcos) shall be presenting their evidence as plaintiffs-
in-intervention only after Cojuangcos/PHI shall have presented their defense evidence in
relation to the Republics Amended Complaint. Both motions were denied in open court. The
parties thereupon agreed on their trial dates. The dispositive portion of the July 12, 2001 Pre-
Trial Order reads:

WHEREFORE, with this Pretrial Order, the pretrial stage of this case with
respect to plaintiff-in-intervention Y Realty Corporation is hereby terminated.

As agreed upon by all the parties, let the trial on the merits be set on July
26 and 30, 2001 for the reception of evidence for said plaintiff-intervenor, and on
August 7, 29, 2001 and September 5 and 12, 2001 for the turn of the defendants-
intervenors to present their evidence. [36]

At the initial scheduled hearing on July 26, 2001 for the presentation of their evidence
as plaintiffs-in-intervention, the Yuchengcos were unable to present any witness to testify on
their behalf. Likewise, on July 30, 2001, the Yuchengcos manifested that the subpoenaed Atty.
de Guzman and Atty. Mercado-Ferrer were not in court. This development prompted
respondents Cojuangcos/PHI to counter-manifest that De Guzmans and Mercado-Ferrers
testimonies need not be taken anymore, both having already been deposed and subjected to
cross-examination, for which reason they (Cojuangcos/ PHI) have waived their right to cross-
examine.

At the next hearing session August 7, 2001 - the Yuchengcos again moved for the
cancellation and resetting of the hearing on the ground that the witness they intended to present
on that day one Nene Trajano - was unavailable. The respondent court denied the motion to

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cancel, and, in an open court order, deemed the Yuchengcos as having waived their right to
present evidence, rationalizing as follows:

When this case was called for hearing today, Atty. Laurence Arroyo
appeared for the plaintiffs-in-intervention, . . ., and moved for the cancellation of
todays hearing as his . . . witnesses are not present in Court.

The Court reminded the plaintiffs-in-intervention that precisely the parties

agreed on the trial dates for them to present and terminate the presentation of their
respective evidence, i.e.,the hearings for plaintiffs-in-intervention were set on July
26, 30, and August 7, 2001 and for defendants-in-intervention on August 29,
September 5 and 12. It appears that the plaintiffs-in-intervention failed to present
their evidence on July 26, 30, and in todays hearing.

In view thereof, the plaintiffs-in-intervention are hereby deemed to have

waived their right to present further evidence and let the reception of evidence by
the defendants-in-intervention be set on August 29, September 5, and 12, 2001 at
8:30 in the morning, as previously scheduled and agreed upon by the parties. [37]

On August 15, 2001, the Yuchengcos moved for a reconsideration of the respondent
courts Resolution of May 24, 2001, as reiterated in the open-court Order decreed on July 12,
2001. The desired reconsideration was, however, denied per the respondent
courts Resolution dated September 5, 2001.[38]

The Yuchengcos received a copy of the formal Order of August 7, 2001, on August 15,
2001 and took due notice of the denying September 5 Resolution on September 18, 2001.

Unable to accept these denials, the Yuchengcos came to us via their present petition
in G.R. No. 149802, on the singular ground that -

RESPONDENT SANDIGANBAYAN COMMITTED GRAVE ABUSE

OF DISCRETION, OR ACTED WITHOUT OR IN EXCESS OF ITS
JURISDICTION, IN ISSUING THE QUESTIONED RESOLUTIONS AND
ORDER, ALL OF WHICH CONSTITUTE AN ARBITRARY DENIAL OF
PETITIONERS RIGHT TO PRE-TRIAL DISCOVERY.

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 In the meantime, on August 21, 2001, the Yuchengcos moved for a reconsideration of
the Order of August 7, 2001,[39] but their motion for reconsideration was likewise denied by the
respondent court per its Resolution dated September 28, 2001,[40] saying:

xxx it appearing that the court, in various instances, had accorded plaintiffs-
in-intervention the opportunities to present their evidence but failed altogether to
do so, thus effectively delaying the early disposition of the instant case which has
been pending for the last fourteen (14) years.

The Yuchengcos received their copy of the Resolution of September 28,

2001 on October 8, 2001.

On October 12, 2001, the respondent court rejected the Yuchengcos further requests for
the issuance of subpoenae to Imelda O. Cojuangco, her son, Antonio, and three (3) other
individuals. For, as explained by the respondent court, such request is an attempt on the part of
the Yuchengcos to set to naught its earlier Order considering them as having waived their right
to present further evidence.

Hence, the Yuchengcos second petition for certiorari, now docketed as G.R. No.
150320, in which they ascribe to the respondent court the commission of grave abuse of
discretion or of an act in excess of its jurisdiction in issuing the Order and Resolution
dated August 7, 2001 and September 28, 2001, respectively. Pressing on, the Yuchengcos argue
that they -

I. xxx WERE DEPRIVED OF THEIR RIGHT TO PRESENT EVIDENCE AND

THEIR DAY IN COURT IN VIOLATION OF DUE PROCESS.

II. xxx SHOULD NOT HAVE BEEN COMPLELLED TO PRESENT EVIDENCE

WHEN RESPONDENTS REPUBLIC/PCGG HAD NOT YET
FORMALLY OFFERED THEIR EVIDENCE AND RESTED THEIR
CASE.

III. xxx SHOULD NOT HAVE BEEN COMPELLED TO PRESENT EVIDENCE

BEFORE RESPONDENTS (DEFENDANTS) PHI/COJUANGCOS.

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 IV. xxx WERE UNREASONABLY BOUND TO THE SCHEDULE OF TRIAL
IN THE 30 MAY 2001 ORDER, CONSISTING OF MERELY 3 TRIAL
DATES SPANNING 13 DAYS.

V. RESPONDENT SANDIGANBAYAN ERRONEOUSLY FOUND THAT

PETITIONERS FAILED TO PRESENT EVIDENCE ON 26 AND 30
JULY AND 7 AUGUST 2001. (Petition, G.R. No. 150320, p. 26)

To summarize, assailed and sought to be nullified by the Yuchengcos in their certiorari

petitions in G.R. No. 149802 and G.R. No. 150320, are the following related issuances of the
respondent court:

(1) Resolution dated May 24, 2001, denying their Urgent Motion To
Suspend Trial Pending Discovery and its Supplement;

(2) Order dated July 12, 2001, denying their verbal motions for the re-
setting of the agreed pre-trial and trial dates insofar as their complaint-in-
intervention is concerned or, in the alternative, for a change in the order of trial so
that Cojuangcos/ PHI be made to present their evidence in relation to the complaint
of petitioner Republic ahead of them (Yuchengcos), and the Resolution dated
September 5, 2001, denying reconsideration of the Resolution dated May 24,
2001 and of the Order of July 12, 2001; and

(3) Resolution dated August 7, 2001, declaring them as being deemed to

have waived their right to present evidence, and the Resolution dated September
28, 2001, denying reconsideration of the Resolution of August 7, 2001.

Apropos the Yuchengcos Second Amended Complaint-in-Intervention, respondent

Cojuangcos/PHI filed on September 20, 2001 a Motion For Summary Judgment.[41] They
contended that the pleadings and affidavits on record failed to tender any genuine issue on the
alleged coercion and duress allegedly exerted by the late Pres. Marcos and/or the Cojuangco
group. According to them, the desired recovery of PLDT shares sought under the Second
Amended Complaint-in-Intervention is anchored on such coercion and duress employed.

To this motion for summary judgment, the Yuchengcos interposed an opposition,

followed by a supplement to opposition.

On the basis of the foregoing antecedents, and acting on the motion for summary
judgment, the respondent court rendered its assailed Partial Decision.[42] Feeling aggrieved,

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just like the Republic, over the dismissal of their PLDT shares claims, the Yuchengcos have
challenged in their petition in G.R. No. 153207 the aforesaid Partial Decision, raising the
following issues for resolution:

I. The Sandiganbayan gravely erred when it insisted on rendering the questioned

Partial Decision despite the pendency of G.R. Nos. 149802 and 150320.

II. The Sandiganbayan gravely erred in confining the presentation of petitioners

evidence to three (3) hearing dates spanning less than two (2) weeks.

III. The Sandiganbayan gravely erred in granting respondents PHI/Cojuangcos

Motion for Summary Judgment.

IV. The Sandiganbayan gravely erred in finding that the subject PTIC shares do not
partake of the character of ill-gotten wealth. (Petition, G.R. No. 153207, pp.
33-34)

IV. THE COURTS RULING

As a matter of sound and long appellate practice, the Court, before considering the merits of a
petition before it, looks into the matter of timeliness and accordingly would dismiss or otherwise
deny further due course to petitions for non-compliance with the jurisdictional caveat on
timeliness of filing. The threshold question, therefore, is whether or not all the five (5) petitions
at bar were timely filed.

Lateness and Mootness of the Petition in G.R. NO. 149802

A review of the records clearly indicates that the Yuchengcos petition for certiorari in G.R. No.
149802 was filed out of time. As it were, there can hardly be any quibbling that the Resolution
of May 24, 2001 assailed thereby is interlocutory in character. For, respondent courts refusal to
suspend trial until the Yuchengcos shall have completed their discovery did not terminate the
case. Further proceedings were still required, such as the further reception of evidence for all
parties, inclusive of the Yuchengcos. In his ponencia in Investments, Inc. vs. Court of
Appeals,[43] then Justice and later Chief Justice Andres Narvasa explained the nature of an
interlocutory order and how it differs with one that is final:

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 The concept of final judgment, as distinguished from one which has become
final (or executory as of right [final and executory]), is definite and settled. A final
judgment or order is one that finally disposes of a case, leaving nothing more to be
done by the Court in respect thereto, e.g., an adjudication on the merits which, on
the basis of the evidence presented at the trial, declares categorically what the rights
and obligations of the parties are and which party is in the right; or a judgment or
order that dismisses an action on the ground, for instance, of res judicataor
prescription. Once rendered, the task of the Court is ended, as far as deciding the
controversy or determining the rights and liabilities of the litigants is concerned.
Nothing more remains to be done by the Court except to await the parties next move
. . . and ultimately, of course, to cause the execution of the judgment once it
becomes final or, to use the established and more distinctive term, final and
executory.

xxx xxx xxx

Conversely, an order that does not finally dispose of the case, and does not
end the Courts task of adjudicating the parties contentions and determining their
rights and liabilities as regards each other, but obviously indicates that other things
remain to be done by the Court, is interlocutory, e.g., an order denying a motion to
dismiss under Rule 16 of the Rules, . . . . Unlike a final judgment or order, which
is appealable, as above pointed out, an interlocutory order may not be questioned
on appeal except only as part of an appeal that may eventually be taken from the
final judgment rendered in the case. (at pp. 339-340)

Following Investments, Inc., the remedy of an appeal from the interlocutory May 24,
2001 Order was unavailing to the Yuchengcos, thus the propriety of their coming to this Court,
with respect to that order, in G.R. No. 149802 via a special action for certiorari under Rule 65
of the Rules of the Court.

It may be recalled, however, that prior to the filing of their petition in G.R. No. 149802,
the Yuchengcos first urged the respondent court for a reconsideration of its May 24, 2001
Resolution, a copy of which they received, by their own admission, on June 7, 2001. The
corresponding motion filed on August 15, 2001 also sought the reconsideration of the open-
court Order dated July 12, 2001. Given these defining dates, there is a need to look into the
timeliness of the said motion as a preliminary step to determine the timeliness of the
Yuchengcos petition in G.R. No. 149802 itself.

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 The rule on the filing of petitions for certiorari is embodied in Section 4, Rule 65 of the
Rules of Court, partly reading -

SEC. 4. When and where petition filed. The petition may be filed not later
than sixty (60) days from notice of the judgment, order or resolution. In case a
motion for reconsideration or new trial is timely filed, whether such motion is
required or not, the sixty (60) day period shall be counted from notice of the denial
of said motion. [44]

As the rule now thus stands, the 60-day reglementary period within which to file a
petition for certiorari shall be reckoned from notice of the resolution or order sought to be
nullified, save when a motion for reconsideration is timely filed in which case the 60-day period
shall start from receipt of the denial of such motion.

A corollary rule, subsumed in the same Section 4 of Rule 65, applies in the event it is
determined that a motion for reconsideration is not timely. In such a situation, a party seeking
to avail himself of the remedy of certiorari under the same Rule 65, does not have a new 60-
day period from receipt of the denial of the motion for reconsideration, within which to file the
petition. As such, the timeliness of the petition must be reckoned from the date of notice or
receipt of the order or resolution assailed, as if no motion for reconsideration was filed.

Given the following sequence of events: a copy of the May 24, 2001 resolution was
received on June 7; the motion for reconsideration thereof was filed on August 15, with a copy
of the resolving issuance dated September 5 received on September 18, the question that now
comes to fore is: Vis-a-vis the May 24, 2001 resolution, was the motion for its reconsideration
filed on August 15, 2001 timely, so that the Yuchengcos can validly reckon, as they in fact did,
the 60-day period from their receipt on September 18, 2001 of the September 5, 2001 Resolution
denying reconsideration of the Resolution of May 24, 2001 jointly with the Order of July 12,
2001?

To answer the poser, a determination must first be made as to when should a motion for
reconsideration of an interlocutory order be filed. In Denso (Phils.), Inc. vs. The Intermediate
Appellate Court, et al.,[45] this Court ruled that a motion for reconsideration of an interlocutory
order is not subject to the usual limiting fifteen-day period of appeal prescribed for final
judgments or orders. The Denso ruling, however, stopped short of directly addressing the issue
of precisely when should a party file a motion for reconsideration of an interlocutory order. For,

364
apart from saying that such motion is not subject to the 15-day-appeal-period rule, it merely
held that moving for reconsideration after the lapse of a 38-day period after receipt of the
assailed order is not unreasonable.

While the Rules of Court has no specific provision dealing directly with the question,
Section 4 of Rule 65 provides a logical answer.

Taken in its proper perspective, the clause not subject to the limiting 15-day period for
appeal prescribed for final judgments or orders cannot plausibly be stretched to mean that the
period to ask for reconsideration of an interlocutory order can exceed the 60-day threshold
prescribed under the Section 4 of Rule 65 for filing a petition for certiorari. Else, a legal
aberration would ensue where a party who has merely 60 days from notice of an adverse
interlocutory order to interpose a special action for certiorari would be allowed a longer period
to move for reconsideration of such order.

Withal, the filing of the Yuchengcos motion for reconsideration of the Resolution
of May 24, 2001 on August 15, 2001, which is the 69th day from notice of the said Resolution
on June 7, 2001, is beyond the 60-day period prescribed under the present Section 4 of Rule 65,
and is, therefore, late. Perforce, and as discussed earlier, their petition in G.R. No. 149802 itself
was belatedly filed. In fine, for lack of a timely motion for reconsideration of the May 24,
2001Resolution, the same has, in a manner of speaking, thereby become final and executory.
Certiorari, insofar as the said resolution is concerned, is no longer available.

Apropos the Order of July 12, 2001, this Court is of the view that the same petition in
G.R. No. 149802 has, with respect to such order, become moot and academic. As we look back
at the incidents subject of the stated order, the Yuchengcos had moved that the trial be
suspended to await the completion of their discovery procedure or, in the alternative, for
respondents Cojuangcos/PHI to present their evidence, vis--vis the claim of petitioner Republic,
ahead of them (Yuchengcos). By this desired variation of the order of trial, the Yuchengcos
were, as we see it, actually hoping to be given additional trial dates for presentation of evidence
on top of those dates allotted them but did not utilize. Owing, however, to the promulgation of
the Partial Decision dated April 25, 2002, we can assume that during the pendency of the
petition in G.R. No. 149802, petitioner Republic and respondent Cojuangcos/PHI had, in the
separate trial on the PLDT shares, already finished with the presentation of their evidence and
have rested their case, the latter in relation to both the Republics Amended Complaint and the
Yuchengcos Complaint-in-Intervention. In net effect, the change in the order of presentation of

365
evidence veritably sought in G.R. No. 149802 can no longer be granted, or, if granted, can no
longer be implemented. It is, therefore, futile to belabor, let alone rule, on the merits of this
particular petition insofar as it relates to the Order of July 12, 2001. Time and again, we have
said that courts exist to decide actual controversies, and do not render opinions on moot cases.

The Due Process Issue in

G.R. NOS. 150320 and 150367

The Court shall first pass upon the issue of due process, or lack of it, to be precise,
uniformly invoked in G.R. Nos. 150320 and 150367. If non-observance of the requirements of
due process indeed tainted the separate trial below, then the resolution on the issue of the
substantive correctness of the Partial Decision raised in petitions for review in G.R. No.
153459 and G.R. No. 153207 should be clear, simple and unavoidable. For, a judgment arrived
at after a trial marred by lack of due process deserves to be immediately struck down as a nullity.

It may be well to revisit the various issuances sought to be annulled under Rule 65 of
the Rules of Court on due procedural ground. Specifically, petitionerRepublic assails, in G.R.
No.150367, the respondent courts Order dated May 30, 2001 denying its motion for
additional time to present its evidence, as well as the Order dated September 5,
2001 requiring the same petitioner to file and terminate its formal offer of evidence within 30
days. On the other hand, in G.R. No. 150320, the Yuchengcos urge the annulment of
the August 7, 2001 and September 28, 2001 Resolutions in which they were deemed by the
respondent court to have waived their right to present further evidence. At bottom, respondent
court issued these assailed orders and/or resolutions owing to both petitioners failure to
complete the presentation of their respective evidence within the agreed trial dates, a failure
which, if allowed to continue, would, in the eyes of that court, further derail the early disposition
of Civil Case No. 0002. It could have been that the respondent court was, in the end, actuated
by the desire to resolve a case that has been pending for the last fourteen (14) years. And this,
in hindsight, is not an idle speculation on our part as respondent court would later write in
its Partial Decision, citing Republic vs. Sandiganbayan,[46] the following:

We stress that the resolution of the complaint-in-intervention, along with

the principal case, is long overdue. What the Supreme Court has said in this regard
four years ago has acquired even greater urgency today

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 xxx Eleven years have passed since the government started its
search for and reversion of such alleged ill-gotten wealth. The
definitive resolution of such cases on the merits is thus long overdue.
If there is adequate proof of illegal acquisition, accumulation,
misappropriation, fraud or illicit conduct, let it be brought now . . .

It cannot be gainsaid that the respondent court merely exercised its discretion to order
and to be guided by such order - the termination of the respective presentation of evidence by
both petitioners Yuchengcos and Republic or to set a limiting timetable for such presentation.
We are loathe to disturb such exercise of judicial discretion which has spawned the petitions
for certiorari in G.R. No. 150320 and G.R. No. 150367. For, jurisprudence teaches that
certiorari lies only when the tribunal acts without or oversteps its jurisdiction, or gravely abuses
its discretion, [47] as when the power is exercised in an arbitrary or despotic manner by reason
of passion, prejudice or personal hostility.[48] The abuse must, in fine, be of such degree as to
amount to an evasion of positive duty, or a virtual refusal to perform a duty enjoined, or to act
at all, in contemplation of law, as to be equivalent to having acted without jurisdiction.[49]

What we said in Lee, et al. vs. People[50] is also apropos, viz.:

xxx Certiorari may not be availed of where it is not shown that the
respondent court lacked or exceeded its jurisdiction over the case even if its findings
are not correct.

In other words, certiorari will issue only to correct errors or jurisdiction and
not to correct errors of procedure or mistakes in the courts findings and conclusions.
An interlocutory order may be assailed by certiorari only when it is shown that the
court acted without or in excess of jurisdiction or with grave abuse of discretion.
However, this Court generally frowns upon this remedial measure as regards
interlocutory orders. To tolerate the practice of allowing interlocutory orders to be
the subject of review by certiorari will not only delay the administration of justice
but will also unduly burden the courts. (At pp. 402-03)

Complementing Lee is Ampeloquio, Sr. vs. Court of Appeals[51] where we wrote:

xxx If every error committed by the trial court were to be a proper object of
review by certiorari, the trial would never come to an end and the appellate courts
dockets would be clogged ad infinitum with the aggrieved parties-litigants filing

367
 petitions against every interlocutory order of the trial court. Such a situation could
only undermine the proper conduct of litigation before the courts and ought not to
be tolerated if we are to enhance the prompt administration of justice at every level
of the judicial hierarchy.

In the light of the foregoing doctrinal holdings, we can say without fear of contradiction
that not every erroneous interlocutory order, if that be the case, is correctible by certiorari. We
grant certiorari only upon clear showing that the trial court issued its challenged interlocutory
order without or in excess of jurisdiction or in grave abuse of discretion amounting to lack of
jurisdiction. Conversely, absent the vitiating element of want or excess of jurisdiction, certiorari
is unavailing as a remedy.

We thus sustain as defensible, nay correct, under the obtaining factual milieu and
certainly within the jurisdiction of the respondent court, the issuance of the assailed orders and
resolutions respecting the presentation of evidence. As it were, petitioners Republics and
Yuchengcos respective certiorari petitions basically rest on the postulate that the respondent
court violated their right to due process of law when it refused to grant them what basically
were requests for further postponements to further receive their respective evidence.

Lest it be overlooked, the matter of granting or denying a plea for continuance or

postponement is, as a rule, addressed to the sound discretion of the trial court.[52] In 1916, or
some eighty nine (89) years ago, the landmark case of Lino- Luna vs. Arcenas,[53] expounded
on the juridical concept of discretion in the following wise:

In its very nature, the discretionary control conferred upon the trial judge
over the proceedings had before him implies the absence of any hard-and-fast rule
by which it is to be exercised, and in accordance with which it may be reviewed.
But the discretion conferred upon the courts is not a willful, arbitrary, capricious
and uncontrolled discretion. It is a sound, judicial discretion which should always
be exercised with due regard to the rights of the parties and the demands of equity
and justice. As was said in the case of The Styria vs. Morgan (186 U.S., 1, 9): The
establishment of a clearly defined rule of action would be the end of discretion, and
yet discretion should not be a word for arbitrary will or inconsiderate action. So in
the case of Goodwin vs. Prime (92 Me., 355), it was said that discretion implies
that in the absence of positive law or fixed rule the judge is to decide by his view
of expediency or by the demands of equity and justice.

There being no positive law or fixed rule to guide the judge in the court
below in such cases, there is no positive law or fixed rule to guide a court of appeal

368
 in reviewing his action in the premises, and such courts will not therefore attempt
to control the exercise of discretion by the court below unless it plainly appears that
there was inconsiderate action or the exercise of mere arbitrary will, or in other
words that his action in the premises amounted to an abuse of discretion. But the
right of an appellate court to review judicial acts which lie in the discretion of
inferior courts may properly be invoked upon a showing of a strong and clear case
of abuse of power to the prejudice of the appellant, or that the ruling objected to
rested on an erroneous principle of law not vested in discretion.

The doctrine, supported by numerous citations of authority, is thus stated in

the Encyclopedia of Pleading and Practice (vol. 2, pp. 416, 418):

Abuse of discretion. - Accordingly, where the power is so

exercised as to deprive a party of a legal right, or unduly benefit one
party at the expense of the other, or where, generally, the injustice
or inexpediency of the act is so clear as to show beyond a reasonable
doubt the violation of equitable considerations, the act of decision is
always reviewable in some form on appeal, as an abuse of power.

Presumption. - The presumption on appeal that the exercise

of discretionary powers was sound is very strong. The appellant
must rebut it by showing a strong and clear case of abuse of power
to his prejudice, or that the decision below rested on an erroneous
principle of law not vested in discretion. A mere mistake of
judgment, or a difference in opinion between the appellate and the
trial court, is not sufficient.

It cannot be stressed enough that postponements have a way of causing delays of the
vexatious kind. With this in mind and with respect to the specific issue before us, we are now
confronted with the task of harmonizing two (2) basic, but not necessarily irreconcilable, rights
etched no less in the Bill of Rights. We refer to the right to due process, on one hand, and the
right to speedy trial, on the other. This undertaking becomes all the more made difficult by the
stark reality that these petitions involve ill-gotten wealth reputedly amassed by the Marcos
family, their friends and former business associates where, as in several like cases, the Court
itself dictated a resolution in utmost dispatch, albeit acknowledging in the same breath that over
and above the exigencies of recovering ill-gotten wealth, we must carry out the more pressing
constitutional task of seeing to it that all parties are afforded due processes and substantial
justice, stressingthat this burden extends [E]ven to those suspected . . . of having acquired
and/or accumulated ill-gotten wealth [54]

369
 It is, therefore, well-nigh apropos to hark on judicial precedents on the two constitutional
rights adverted to above.

In the abstract due process has been described as nothing more and nothing less than the
embodiment of the sporting idea of fair play.[55] Its irreducible minimum requirements are
notice and hearing,[56] the right to be heard being its most basic tenet.[57] In PCIB vs. Court of
Appeals,[58] we held that the essence of due process is that a party is afforded a reasonable
opportunity to be heard in support of his case; what the law abhors and prohibits is the absolute
absence of the opportunity to be heard. Hence, a party cannot feign denial of due process when,
having been afforded the opportunity to present his side, chooses, for whatever reason, not to
be heard.[59]

On the other hand, the right to speedy trial, as an adjunct to the right of all persons to a
speedy disposition of their cases before judicial, quasi-judicial, or administrative bodies,
requires that court proceedings should be conducted according to fixed rules and must be free
from vexatious, capricious and oppressive delays.[60] In the determination of whether or not the
right to speedy trial has been violated, the factors that may be considered and balanced are
length of delay, reason for the delay, assertion of the right or failure to assert it, and prejudice
to counsel by the delay.[61]

Given the foregoing perspective, it was in keeping with the imperatives of speedy trial
for the respondent court, in the exercise of its discretion, to issue the orders/resolutions assailed
in G.R. No. 150320 and G.R. No. 150367 as a necessary consequence to its denial of
petitioners innumerable motions for postponement.

An old but still good decisional law holds that the postponement of the hearing of a case,
which had been previously set with due notice to the parties and their attorneys, is not an
absolute right of the litigants nor of their counsel.[62] Owing, however, to the practice that
persists to this day, we acknowledged the stubborn reality that continuances and postponements
form part of the procedural system of dispensing justice.[63] But even so, the Court has already
taken measures to cleanse the system of this practice which, when abused, as it has often been
abused, leads to the wheels of justice grinding to a halt. One reformative step is the mandatory
continuous trial scheme prescribed under Supreme Court (SC) Administrative Order No.4,
series of 1988, in relation to SC Circular No. 1-89. Under this scheme, trials are to be held on
the scheduled dates without needless postponements, the factual issues for trial well defined at
pre-trial and the whole proceedings terminated and ready for judgment within ninety (90) days

370
from the date of the initial hearing, unless, for meritorious reasons, an extension is permitted.
Following a trial period involving the participation of designated pilot courts, the Court issued
Administrative Circular (AC) No. 3-90, series of 1990, decreeing the adoption of the mandatory
continuous trial system starting February 15, 1990, in all trial courts.

Not to be overlooked as another measure towards a speedy disposition of cases is the

issuance of SC Administrative Circular No. 3-99 prescribing guidelines on effective
management of cases to ensure their speedy disposition. Some highlights:

B. Trial

(5) The judge shall conduct trial with utmost dispatch, with judicious
exercise of the courts power to control trial proceedings to avoid delay.

xxx xxx xxx

(7) The trial shall be terminated within ninety (90) days from initial hearing.
Appropriate disciplinary sanctions may be imposed on the judge and the lawyers
for failure to comply with this requirement due to causes attributable to them.

(8) Each party is bound to complete the presentation of his evidence within
the trial dates assigned to him. After the lapse of said dates, the party is deemed to
have completed the presentation of evidence. However, upon verified motion based
on compelling reasons, the judge may allow a party additional trial dates in the
afternoon; provided that said extension will not go beyond the three-month limit
computed from the first trial date except when authorized in writing by the Court
Administrator, Supreme Court.

It is thus abundantly clear that the mandatory continuous trial scheme, the guidelines on
trial, and, to a significant level, the ideal articulated in Republic (PCGG) vs.
Sandiganbayan[64] to resolve ill-gotten wealth cases with utmost dispatch, circumscribed, in a
way, the respondent courts otherwise wide latitude in the conduct of its proceedings. At bottom,
then, respondent court acted with some degree of circumspection and, doubtless, well within its
authority when, in its assailed issuances in G.R. No. 150367, it refused to
accommodate petitioner Republic with additional trial dates and ordered it to file its formal
offer of exhibits and rest its case. The same conclusion applies to petitioner Yuchengcos in G.R.
No. 150320. Grave abuse of discretion cannot be ascribed on the respondent court in (i)

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proceeding to hear the evidence of the Yuchengcos on the agreed trial dates of July 26 and 30
and August 7, 2001, (ii) refusing to reset the hearings to later dates, and (iii) declaring them to
have effectively waived their right to present further evidence when they were still without
evidence or witness on the last trial date. There is hardly any dispute that these were trial dates
previously agreed upon and to which the Yuchengcos committed to abide. And under the cited
Guidelines on Trial, petitioner Yuchengcos were bound to complete the presentation of their
evidence within the trial dates assigned to them. Likewise, at the end of the trial dates, they
were deemed to have completed with the presentation of their evidence. It would be an
aberration for the Court to fault and reverse the graft court for following what it has enjoined
the latter to observe in the first place.

As to petitioner Republic, it was given, per our own count, no less than twenty (20) trial
dates. There were, in fact, more trial settings than those agreed upon and directed in the pre-
trial of May 25, 2000. The accommodating attitude of the graft court
towards petitioner Republic did not escape petitioner Yuchengcos notice. While perhaps a bit
exaggerated, petitioner Yuchengcos statement in page 88 of their Consolidated Memorandum
that not once did [the Sandiganbayan] deny their (Republics) requests to cancel scheduled
hearings belies the Republics lament that the respondent court did not accord it fair, adequate
and reasonable opportunity to present all evidence they consider vital.

The problem lies not in the alleged unreasonable refusal of the respondent court to grant
the Republic more trial dates, but, as the respondent court aptly suggested, in the
Republics innumerable requests for cancellation and resetting of hearings, on one pretext after
another, which, at the end of the day, reflected on the unpreparedness of its set of counsels and
the seeming unavailability of admissible material evidence. With the view we take of the
case, petitionerRepublic sought, but in vain, to present respondent Mrs. Marcos, it being its
posture that her testimony - after she had announced to the four winds that the Marcos family
owns the disputed PLDT shares in the name of respondent Cojuangcos/PHI - would have been
vital to its case. Ironical as it may sound, petitionerRepublic seems to imply by its consuming
bid to have Mrs. Marcos on the witness stand that it cannot adequately prove its case without
her testimony. For, how else explain the fact that it footnoted its Formal Offer of Evidence with
the reservation to have her testify, if so allowed by this Court?

To be sure, we have taken note of petitioner Republics assertion that respondent court
gave its word during the March 26, 2001 hearing that it can present Mrs. Marcos after all of its
intended witnesses shall have testified. This assurance, if indeed given, cannot be taken to mean,

372
however, that the court has to forever await her testimony. The refusal to
grant petitioner Republic additional trial dates just to have the unwilling Mrs. Marcos testify is
understandable, when taken in the perspective of vexatious delays juxtaposed with the
Republics counsels commitment given in one of the hearings to finish with the presentation of
evidence with or without her testimony. As we refer to the records, we see that the first
time petitioner Republic manifested its intention to present Mrs. Marcos as its hostile witness
was during the hearing of January 29, 2001. But the succeeding scheduled hearing dates, i.e,
January 30 and 31, 2001, February 1, 2, and 9, March 12, 13, 14, 15, 26, 27, and 28, May 7, 9,
16 and 28, 2001 came and went without Mrs. Marcos testifying as a witness
of petitioner Republic. It is in fact not amiss to say that all these scheduled hearings were, at the
instance of petitioner Republic, cancelled or reset to other dates, either because of the
unavailability of the intended witness or the government handling counsel was ill prepared for
trial.

The Yuchengcos were no better. They agreed to present their evidence on certain trial
dates, but were unable to do so in any of those trial dates, inclusive of the last scheduled hearing.
In any event, the depositions of Attys. de Guzman and Mercado-Ferrer, together with that of
Gregorio Romulo, were received in evidence for said petitioners over the objections of the
adverse parties. Moreover, petitioner Yuchengcos wasted their trial dates by their unyielding
insistence on presenting witnesses who have already been deposed, and even after respondents
Cojuangcos/PHI anticipatorily manifested their intention to waive their right to further cross-
examine the deponents. While perhaps a bit anti-climactic to state at this juncture, there was no
attempt to present petitioner Yuchengco himself, when it would seem that he was in the best of
position to testify on his and/or Y Realty Corporations claim over the PTIC and PLDT shares
or on the alleged duress exerted on him by the Marcoses or the Cojuangco group.

Neither do we find persuasive cogency in the Yuchengcos posture that the separate trial
should have been suspended to await the completion of their discovery efforts. For, such
arrangement, if allowed and put in motion, would have veritably provided said petitioners with
tools to cause the indefinite suspension of the separate trial by the convenient plea of inadequate
availment of discovery. Besides, we are at loss to understand the Yuchengcos contention about
their inability to undertake discovery procedure until this Court reinstated their Amended
Complaint-in-Intervention heretofore dismissed by the respondent court. There is no rule, and
the Yuchengcos have cited none precluding them from undertaking such discovery procedure
prior to the reinstatement action of this Court. Neither is there any rule requiring the suspension
of trial just to allow a party-litigant to complete discovery procedure.

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 And, when we take into stock of respondent courts constant reminders to the contending
parties to observe the trial schedule in view of the length of time that Civil Case No. 0002 has
been pending, petitioners Republic and Yuchengcos have, in the final reckoning, only
themselves to point at for their present plight. The recorded facts indicate that they were not
denied the opportunity to be heard.

Finally, we cannot write finis to the due process issue without resolving the question of
whether the respondent court, through the use of its coercive powers, could have had compelled
Mrs. Marcos to be petitioner Republics hostile witness and testify on the circumstances
surrounding their (the Marcos family) claimed acquisition and ownership of the disputed PLDT
and PTIC shares.

The Court only has to recall that when Mrs. Marcos refused to make a court appearance
for petitioner Republic, she invoked her right against self-incrimination under Article III,
Section 17 of the Constitution.[65] She was correct. She cannot be compelled to testify without
violating her constitutional right against self-incrimination. As she aptly observed, Civil Case
No. 0002, while basically a civil suit, is penal in nature, since it is, for all intents and purposes,
a forfeiture proceeding, taken under and pursuant to EO Nos. 1 and 2, series of 1986.[66] These
twin issuances indeed seek, as ultimate objective, the recovery of all ill-gotten wealth
accumulated by former President Ferdinand E. Marcos, his immediate family, relatives,
subordinates and close associates, and the properties being contemplated to be recovered being
those funds, moneys, assets and properties illegally acquired or misappropriated by said
persons thus, stamping upon the civil suit the characteristics of a forfeiture proceedings.

The suggestion that the right against compulsory self-incrimination may be invoked
only in criminal proceedings is valid to a certain extent, but not enough justification to compel
Mrs. Marcos to testify against her volition, given the penal characteristics of Civil Case No.
0002. This is because Rule 115, Section 1(e) of the Rules of Court accords the accused at a trial
the right to be exempt from being compelled to be witness against himself . The kernel of this
privilege is testimonial compulsion, or simply a prohibition against legal process to extract from
a persons own lips an admission of guilt against his will.[67] As this Court has further explained
in People vs. Ayson[68] -

The right of a defendant in a criminal case (to be exempt from being a

witness against himself) signifies that he cannot be compelled to testify or produce
evidence in the criminal cases in which he is the accused, or one of the accused. He

374
 cannot be compelled to do so even by subpoena or other process or order of the
Court. He cannot be required to be a witness either for the prosecution, or for a co-
accused, or even for himself. In other words unlike an ordinary witness (or a party
in a civil action) who may be compelled to testify by subpoena, having only the
right to refuse to answer a particular incriminatory question at the time it is put to
him the defendant in a criminal action can refuse to testify altogether. He can
refuse to take the witness stand, be sworn, answer any question. And, as the law
categorically states, his neglect or refusal to be a witness shall not in any manner
prejudice or be used against him. (Emphasis supplied)

Lest we be misunderstood, this Courts concurrence with Mrs. Marcos is really nothing
more than being faithful with what was taught in the oft-cited case of Cabal vs. Kapunan,[69] to
wit:

In a strict signification, a forfeiture is a divestiture of property without

compensation, in consequence of a default or an offense, and the term is used in
such a sense in this article. A forfeiture, as thus defined, is imposed by way
of punishment not by the mere convention of the parties, but by the lawmaking
power, to insure a prescribed course of conduct. It is a method deemed necessary
by the legislature to restrain the commission of an offense and to aid in the
prevention of such an offense. The effect of such a forfeiture is to transfer the title
to the specific thing from the owner to the sovereign power. (23 Am. Jur. 599, italics
in the original)

In Blacks Law Dictionary a forfeiture is defined to be the incurring of a

liability to pay a definite sum of money as the consequence of violating the
provisions of some statute or refusal to comply with some requirement of law. It
may be said to be a penalty imposed for misconduct or breach of duty. (Com. vs.
French, 114 S.W. 255)

As a consequence, proceedings for forfeiture of property are deemed

criminal or penal, and, hence, the exemption of defendants in criminal cases from
the obligation to be witnesses against themselves is applicable thereto.

xxx xxx xxx

The rule protecting a person from being compelled to furnish evidence

which would incriminate him exists not only when he is liable criminally to
prosecution and punishment, but also when his answer would tend to expose him
to a xxx forfeiture xxx. (Am. Jur. Sec. 43, p. 48) (Italics in the original)

375
 Assayed against the cited jurisprudence, respondent Mrs. Marcos can, as was her bent,
refuse to testify altogether, notwithstanding the express allegations she made in the pleadings
adverted to by petitioner Republic.

The Propriety of SUMMARY JUDGMENT as

Against the Yuchengcos Second Amended Complaint-in-Intervention

Under Section 3, Rule 35, of the 1997 Rules of Civil Procedure, summary judgment
may be allowed where, save for the amount of damages, there is no genuine issue as to any
material fact and the moving party is entitled to a judgment as a matter of law. Summary or
accelerated judgment is a procedural technique aimed at weeding out sham claims or defenses
at an early stage of the litigation, thereby avoiding the expense and loss of time involved in a
trial. Even if the pleadings appear, on their face, to raise issues, summary judgment may still
ensue as a matter of law if the affidavits, depositions and admissions show that such issues are
not genuine.[70] The presence or absence of a genuine issue as to any material fact determines,
at bottom, the propriety of summary judgment. A genuine issue, as differentiated from a
fictitious or contrived one, is an issue of fact that requires the presentation of evidence. To the
party who moves for summary judgment rests the onus of demonstrating clearly the absence of
any genuine issue of fact, or that the issue posed in the complaint is patently unsubstantial so
as not to constitute a genuine issue for trial.[71]

Guided by the principles above indicated, we hold that, under the circumstances
obtaining, summary judgment is proper and the respondent court did not commit a reversible
error in granting the corresponding motion for summary judgment filed by respondents
Cojuangcos/PHI on the Second Amended Complaint-in-Intervention.

As may be observed, petitioner Yuchengco anchored his claim over the disputed PLDT
shares on the proposition that the Marcos regime coerced him into giving up 6% of PTIC shares
formerly owned by Gregorio Romulo and Leonides Virata which he paid for. Apart from this
6% PTIC-share transaction, he alleged having entered into a put and call agreement with GTE
for the purchase of the latters 25% equity in PTIC, but that he was again coerced into not
exercising his option to purchase, only to be apprised later that PHI acquired the same 25%
stockholdings.

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 It cannot be overemphasized, vis--vis the Yuchengcos claim that, when respondents
Cojuangcos/PHI moved for summary judgment, the Yuchengcos, consequent to their having
been deemed to have waived their right to present their evidence, were effectively precluded
from pursuing discovery procedure. In net effect, the only facts before the respondent court at
the time of the filing of the motion for summary judgment were those to be gathered from the
pleadings and the depositions of Mr. Romulo and Attys. de Guzman and Mercado-Ferrer.

No substantial proof of coercion or duress, however, appears from the depositions on

file. On the other hand, the only relevant facts deducible from the deposition of Atty. Mercado-
Ferrer on the put and call option, are: (1) the put option of petitioner Alfonso T. Yuchengco
expired in 1972; and (2) petitioner Y Realty Corporation executed a waiver of its pre-emptive
right on the transfer of the PTIC shares held by GTE to Mr. Ramon U. Cojuangco in 1978.
Thus, if, by its own terms, the put and call option expired in 1972, Yuchengcos right had long
lapsed when the assignment of the PTIC shares were made in favor of the late Ramon U.
Cojuangco. Moreover, the waiver Y Realty Corporation executed may be seen to confirm
petitioner Yuchengcos assent to the aforesaid assignment of PTIC shares in favor of Ramon
Cojuangco.

As to Mr. Gregorio D. Romulo, his deposition taken on August 3, 1987 yields the
following:

ATTY. QUISUMBING:

Q: And who were the major stockholders in that corporation i.e. [PTIC]?
A: The stockholders involved is the Gentel who turned over their equity to PLDT
into the corporation and it was assumed that this company formed in the
Bahamas would be the body agent of PLDT which in turn would buy all
those equipments from Gentel through the Bahamas corporation paying
Gentel its share with a large commission, I do not know.

Q: When you said Gentel, are you referring to General Telephone & Electronics
Corporation you have mentioned?
A: Yes, sir.

Q: And who held the interest in PTIC eventually?

A: What resulted, from my point of view, was while in Manila, I received word that
I was the owner of 3% shares in PTIC, I immediately wired my office in
New York and wanted to know if I could hold the shares in my name or if

377
 they wanted to transfer to them but I had the offer and I wanted to know
definitely what was the position of the Headquarters with regards to this.

Q: And what was their position?

A: Our position was the acquired 3% do not mean anything to us of a company that
is from PLDT, at least one regular share of the PLDT had no or rather IT&T
had no interest in PLDT except to acquire if it could be acquired and we
have quite to iron in the fire at that time so I dont know now.

Q: Who else held stockholding interest?

A: I was informed that Leo Virata had 3%, Tony Meer had 3%, Oscar Africa had
1% or 2% and the rest were distributed among the relatives and in-laws of
Cojuangco, oh yes, Mr. Alfonso Yuchengco. I dont know if awarded or
allowed to possess the 7% of the original shares.

ATTY. FRANCISCO:
I would like to request for the striking of the testimony of the witness from
the record, that is hearsay because he claimed that he was merely informed
of the other interests.

ATTY. LEANO:
I adopt the manifestation of counsel.

xxx xxx xxx

COMMISSIONER:
ALL objections are recorded.

ATTY. QUISUMBING:
Q: Did you subsequently make any confirmation of the information that you
received?
A: Yes, but I never saw a piece of paper, I was told by Ramon Cojuangco and
Antonio Meer about this information after their return from their trip abroad
and that we successfully negotiated the purchase of PLDT.

Q: And what was the role of then President Marcos in this acquisition?

ATTY. LEANO:
No basis.

ATTY. FRANCISCO:
Leading.

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 xxx xxx xxx

COMMISSIONER:
But the witness may answer the question if he so desire.

A: I believe that I can answer the question by simply telling the Court how we were
informed that PLDT was available apparently because I am only told this.
The person that found that this PLDT was going to be sold to Ninoy Aquino
was his cousin Danding Cojuangco, his cousin told the President and the
President asked Ambassador Roberto S. Benedicto to go to the offices of
PLDT and stop all ways then he signed for Monching Cojuangco because
he felt that a transaction of this nature, of this large was beyond the abilities
of Danding . . . I do not know but that was then transmitted to us by
Monching Cojuangco, I do not know and I cannot testify to the veracity of
this story but what we were told that in order to meet us

ATTY. FRANCISCO:
I move to strike out the answer of the witness for being hearsay.

ATTY. PALMA:
Counsel for Prime Holding adopts the same objection.

ATTY. LEANO:
For Mrs. Cojuangco, the same objection for being hearsay.

COMMISSIONER:
All objections recorded.

xxx xxx xxx

ATTY. QUISUMBING:
Q: So General Telephone and Electronics Corporation was paid the monthly fee
and who made those payment on the fees?

ATTY. LEANO:
The best evidence would be the payment.

A: I believe it was already PLDT that is being privy to the financial method, PLDT
is not answering definitely who came, who held but much later on, every
interest then was bought up by at that time Chairman of the Board of the
DBP and that our friend Alfonso Yuchengco may eventually had PTIC but
since we were, at least was completely out of the picture, I did not know
whether it was true or not but since Leo Virata was still at that time very

379
 much involved with PLDT because of the guarantee issued by DBP during
the time of Licaros, I believe he has reason to at least suspect that the
company of General Telephone had negotiated with Mr. Yuchengco, I do
not know if this is true, I have not spoken to Mr. Yuchengco about this
matter, he has not asked me to speak about this. I decided this because
naturally it is always a matter of motive, my motive is that long before
Senator Salonga made sequestration, I was sequestered and so with Leo
Virata and I felt my repose had been dead a long time that whoever enjoyed
the benefits of that sequestration should at least be taken to proper
authorities or in turn make amends of the years that they have illegally
enjoyed the recourse which is substantial and which at todays prices must
be worth an awful of money.

Q: Now, you mentioned Licaros of the DBP

ATTY. LEANO:
I object, may I move for the striking out of the answer for being hearsay.

ATTY. PALMA:
Same objection for being hearsay.

ATTY. FRANCISCO:
It is not responsive to the question.

ATTY. LEANO:
All his statements are hearsay, all his statements are mere expression of
opinion and under the law, the best evidence should be the document.

xxx xxx xxx

COMMISSIONER:
All objections are recorded.

ATTY. QUISUMBING:
Q: You mentioned the DBP and Licaros, were they connected then at that time and
how?
A: In the purchase of eventually of PLDT, it required the guaranty of the DBP that
any future commitments made by this group will be guaranteed by the
Philippine government.

Q: What specifically was guaranteed by the DBP?

A: Of my knowledge, it was required that the agreed purchase price be guaranteed
by DBP to Gentel.

380
Q: Do you remember the figure? And the guarantee of the DBP was given in favor
of whom?
A: It was released by order of Mr. Licaros in favor, I believe of PTIC.

Q: Which is the PTIC, what did you mean by PTIC, what firm?
A: That PTIC is the Philippine Telecommunications Investment Company.

Q: So the DBP issued a guaranty, guaranteeing PTIC an obligation to whom?

A: To Gentel.

Q: Was there an intermediary bank involved in the U.S.?

A: In the later operation, I only remember the Irving Trust lending $1million to
Ramon Cojuangco in order to pay the options of this group to purchase
PLDT from Gentel.

xxx xxx xxx

Q: You spoke of this sequestration or rather the sequestration of yours and of Leo
Virata, what did you mean by that, will you give us specifics?
A: I will give you the specifics as I know it happened to me personally. Leo Virata
and I decided to bail out because we did not like what was going on, we
offered our shares to Alfonso Yuchengco, he offered to pay them but being
honorable, we have to tell Ramon Cojuangco and Tony Meer that in turn
have a meeting in the new PLDT building where across from the office of
Tony and Ramon was a lunch and we were told that our shares had to be
given to Pasig, now what that mean, I do not know, there is approximately
no way to verify that. Those words were enough for Ramon, to tell
Monching, go ahead and take these two and you will be taken cared of later
on, he was never paid, I found out this.

Q: While you say you do not know exactly what Pasig means, who used the word
Pasig?
A: Monching, Ramon Cojuangco.

Q: What do you understand of Pasig?

ATTY. LEANO:
May I make another objection insofar as the estate is concerned because of
the testimony of the witness, we would like to manifest our continuing
objection to any and all questions and matters that would affect the estate
of Ramon Cojuangco, we are making this objection in behalf of the widow
whom we are representing in behalf of the estate.

381
COMMISSIONER:
The objection is recorded.

A: Now, this is the way we were told, and Mr. Cojuangco, there was a pre-long
negotiation in that lunch between Mr. Virata, myself and later, Mr.
Yuchengco. I do not know how the thing terminated because I was asked
by Mr. Virata to go home because I get very violent, I did not like being
treated that way by anybody and that is it, I went home and much later on
because I refused to discuss this with anybody, I found out that Mr.
Yuchengco was never paid but that he paid me, I know he did because I
used in my name to pay a corporate obligation to the RCBC bank which is
I believe was his bank.

Q: Now, you said that you got violently angry, so what did you understand by the
word Pasig?
A: I cannot specify because in my mind, at that time there was a turmoil, too much
I understand we have been drinking since lunch time and this was about
4:00 in the afternoon, so what was conveyed to me by the words Pasig, I
cannot definitely say now but I do know what it conveyed in those days the
long regime of powers that were in control at that time.

Q: You said that you have never been treated that way before, you refer to your
selling, to your offer to sell to Yuchengco but being forced to sell to
another?

ATTY. LEANO:
He never said that, may we just make our objection.

Q: What were forced to do that made you angry?

A: What made me angry was, I know that the company had a tremendous future,
when Mr. Yuchengco gave me a visit in the hospital seven years ago on my
stroke, not now, he mentioned the fact that he had never been reimbursed
of the money that he advanced to me and that I thought that was terrible.

Q: Now let us go back to your reasons as well as of the reasons Leo Virata in getting
rid of this 3% share each in PTIC, what were those reasons exactly that
made you decide to sell out?
A: Normally, inspection of the corporation means to look to the corporation papers,
I never did, or they are signed by the incorporators in terms of the original
documents at the buyers list, I never saw them, we understood that PTIC
was in operation, pay regular dividends, I never saw them, so naturally I
asked the man who got me in to all this things in the first place, what

382
 happened, he said, I do not know, I have not received anything either, so let
us get rid of this and we have thought most likely the buyer is Mr. Alfonso
Yuchengco.

Q: What happened to your offer to Yuchengco?

A: He accepted it, I and Leo Virata arrived and we decided to tell Monching and
Tony that we had sold our shares to Mr. Yuchengco. Apparently Leo told
Ramon this only and by the time we arrived in the PLDT building, he had
already apparently consulted and we were told that the Pasig did not like
and said go ahead and you will be taken cared of which much later on told
me never happened. Doon ako nagalit, masiyado nanag pag-oonse. Well,
anyway now, there is nothing more demanding of persons at their state that
being locked in a hospital room for years and in the usual reading, I decided
whoever enjoyed those shares, better make good and since I have read in
the newspapers about investigation of PTIC which seem to get out the cloud,
I decided to do this, maybe to give some clue to the investigation of PTIC,
I dont know.

Q: And what was the figure agreed upon with Mr. Yuchengco?
A: Apparently . . .

ATTY. LEANO
I just want to make the same objection for being hearsay.

ATTY. QUISUMBING:
These objections are to be used during the presentation of evidence not at
the taking of the deposition. Just remember that.

ATTY.LEANO: But we want to make our objection.

xxx xxx xxx

COMMISSIONER:
All objections are recorded.

A: I do not know anymore that anybody else, after this maybe stray bit of
information will be remembered later on but none right now and I was
reviewing over my mind time and again, my participation in the whole
affair, I was eventually and I was used in that way as a means to get IT&T
into their negotiation and let Gentel to the bargaining if only to show that
they could afford to buy Gentel, in effect, they were closing the deal, leaving
IT&T to force Gentel to sit down and negotiate with them. That was the

383
 idea because unfortunately, IT&T did not work for them but for this group
apparently that I do not know anymore.

Q: My last question only is, how much is the figure for the sale of this 3%
A: I understand, well, I used part of it to pay an obligation worth P636,000.00, it
was an obligation with the defunct T.J. Wolfe that was bought by me which
appears in its book that amount or a little bit more with RCBC, now the
balance maybe used by Mr. Virata for something else, I do not know. x x x

CROSS EXAMINATION:
BY ATTY. LEANO

xxx xxx xxx

Q: Was Tony Meer present in that meeting?

A: He was always in the meeting . . . . (TSN of the Deposition of Gregorio L.
Romulo, August 3, 1987 pp. 12 37). [72]

As we see it, Mr. Romulos deposition is virtually a hearsay account and should,
therefore, be disregarded, being itself inadmissible in evidence. Supporting and opposing
affidavits shall be based on personal knowledge of the declarant, shall set forth such facts as
would be admissible in evidence, and shall show affirmatively that the affiant is competent to
testify to the matters stated therein. Therefore, in determining whether summary judgment is
proper, statements contained in affidavits, which would be inadmissible in evidence (such as
statements of opinion, belief and hearsay) must be disregarded. So it must be with the Romulo
deposition.

One minor point. Petitioner Yuchengcos drew attention to the pendency of their
petitions in G.R. Nos. 149802 and 150320 when the Partial Decisionwas rendered, suggesting
doubtless that it was error on the part of the respondent court to proceed with the separate trial
below without awaiting the outcome of said petitions.

We are not persuaded. The pendency of the petitions in G.R. Nos. 149802 and 150320
did not, without more, dilute the validity of the assailed Partial Decision or diminish the
authority of the respondent court to render the same. Section 7, Rule 65 of the Rules of Court
says as much:

384
 SEC. 7. Expediting proceedings; injunctive relief. - The court in which the
petition [for certiorari, prohibition or mandamus] is filed may issue orders
expediting the proceedings, and it may also grant a temporary restraining order or
a writ of preliminary injunction for the preservation of the rights of the parties
pending such proceedings. The petition shall not interrupt the course of the
principal case unless a temporary restraining order or a writ of preliminary
injunction has been issued against the public respondent from further proceedings
in the case.

The governing rule, in fine, is that to arrest the course of the principal action during the
pendency of certiorari proceedings, there must be an interrupting restraining order or a writ of
preliminary injunction from the appellate court directed to the lower court. [73] There was none
in the instant case. Accordingly, it was in order for the respondent court to proceed with the
separate trial in Civil Case No. 0002 and necessarily in rendering a judgment, in this instance,
the Partial Decision, which, in its estimation, is called for by the facts and law of the case.

DISMISSAL OF THE AMENDED COMPLAINT

AGAINST COJUANGCOS/PHI

We now come what, to us, is the center of the controversy. We refer to the question of
whether or not the disputed PLDT shares, which are covered by the equally disputed PTIC
shares of respondents Cojuangcos/PHI, are indeed part of the ill-gotten wealth of the Marcos
family - ergo to be forfeited in favor of the State - using the evidentiary standards and
determinative indicia set out in Bataan Shipyard & Engineering Co., Inc. (Baseco) vs.
PCGG,[74] and applied analogously in subsequent cases,[75] whence the conclusion that the
wealth is ill-gotten may be reasonably deduced. Respondent court cited the benchmark outlined
in Baseco in support of its Partial Decision,[76] to wit:

One, evidence indicating manifest partiality and favorable treatment by the

former President towards the alleged trustees, as demonstrated by active interplay
between him and such trustees and/or presidential interventions which have
resulted in inexplicable benefits to the trustees or to the corporations held by him
through such trustees; and

Two, the existence of documents and records in the possession of the former
President which, through indorsements and/or assignment made thereon in blank
by his trustees, provide the legal instrumentation for him to assert, now or in the
future, ownership or control over the properties held by his trustees and/or to
recover such properties from them. (At p. 23)

385
 The respondent court dismissed the Republics Amended Complaint as against the
Cojuangcos/ PHI on the finding that the former has not adequately discharged its burden of
proving, by the threshold preponderance of evidence required in ill-gotten wealth cases, that
the subject PLDT shares are ill-gotten. Wrote the respondent court:

xxx the Republic has failed to provide such proof of authenticity or

reliability of the documents offered by it in evidence. Thus almost all the documents
offered by the Republic are photocopies, and no effort was undertaken . . . to submit
the originals of said documents, or to have them properly identified, or to otherwise
justify the admission of mere photocopies. Not surprisingly, defendants . . . objected
to the admission of the Republics documentary exhibits, citing violation of the Best
Evidence Rule (Section 3, Rule 130 of the Revised Rules of Civil Procedure
[Rules], the Rules on Presentation of Documentary Evidence (Section 20, Rule 132
of the Rules), the Hearsay Evidence Rule, and the rule as to Purpose/s of
Documentary Evidence (Section 34, Rule 132 of the Rules). (at p. 31)

Excepting, petitioner Republic tags the respondent courts determinative finding as

a sweeping conclusion or bare generalization. Pressing the point, petitioner Republic argues
that the Partial Decision did not identify with particular specificity which evidence failed to
hurdle the bar of admissibility for being mere photocopies or are otherwise unidentified,
unauthenticated, and constitutive of hearsay.[77]

Petitioner Republics lament is, to a point, well taken. Indeed, not all documents the
Republic offered in evidence in the separate trial on the PLDT shares suffer from the infirmity
imputed on them by the graft court. For, as argued with some measure of merit, most of these
documentary evidence have been identified and authenticated during the deposition taking of
the deponents whose depositions were entered into evidence after the usual procedure of
comparing the originals with the faithful reproductions thereof which were those marked in
evidence. And certainly not lost on this Court is the fact that some documents are common
exhibits, thus, there exists no tenable reason for any of the parties offering them as common
exhibits to object to their admissibility.

Were want of proof of authenticity and reliability of the offered documentary evidence
was, with respect to the Republics Amended Complaint, the rationale behind the
adverse Partial Decision, as it strikes this Court to be, we can only say that such disposition is
not in accordance with Section 3 of EO No. 14[78]which enjoins courts, in resolving suits filed

386
in the recovery efforts, not to strictly apply technical rules of evidence. Be that as it may, we
instead take the course of delving into the substance of the evidence on record
which petitioner Republic asserts to be vital facts and material evidence,[79] and thereby
determine whether or not the respondent court indeed justifiably ignored them in arriving at the
disputed holding dismissing the Amended Complaint as against the Cojuangcos/PHI. Towards
this end, the Court shall first ascertain what could be those asserted vital facts and material
evidence be by looking at the allegations of the Republic in its Petition. Thus, according to the
Republics petition in G.R. No. 153459, to cite pertinently:

1. PHI was registered by Jose Y. Campos on November 8, 1977 with a paid-

up capital of a measly Fifty Thousand Pesos (P50,000.00) and utilizing as place of
business the address of UNILAB, a corporation owned and controlled by Jose Y.
Campos, and with UNILABs officers and directors, namely Rolando Gapud,
Renato Lirio, [etc.] . . . and Gervacio Gaviola managing PHI xxx albeit, said
managing officers and directors had no financial interest whatsoever in PHI.

2. On May 2, 1978, Ramon U. Cojuangco, ceded and conveyed in favor of

PHI by way of Deed of Assignment dated May 2, 1978, some 44,023 shares of
stock of PTIC . . . . On that same date, also by way of Deed of Assignment . . .
Ramon U. Cojuangco ceded and conveyed in favor of PHI another 33,696 shares
of stock of PTIC . . . . Also on the same date, Luis Tirso Rivilla ceded and conveyed
in favor of PHI another 33,696 shares . . . . Ramon U. Cojuangco and Luis Tirso
Rivilla were compensated by PHI for said PTIC shares of stock which all in all sum
up to 111,415 shareholdings in the name of PHI. xxx

3. From the foregoing evidence, there is no doubt that respondent PHI is a

corporation which was formed and organized and maintained by the former
dictator, President Ferdinand E. Marcos through confessed dummies, Jose Yao
Campos and Rolando C. Gapud, who, in conspiracy with Ramon U. Cojuangco and
Luis Tirso Rivilla, sought to acquire for the Marcoses the single biggest majority
shareholdings in PLDT.

4. The foregoing is confirmed by the declarations of confessed

nominees/cronies of former President Ferdinand E. Marcos: Jose Y. Campos,
Roland C. Gapud and Atty. Francisco de Guzman.

xxx xxx xxx

On the basis of the foregoing evidence, respondents Cojuangcos cannot

lawfully acquire ownership of title over the PHI shares of stocks, because the same

387
 constitute the Marcos ill-gotten wealth, formed and/or acquired in violation of the
1973 Constitution. xx (Petition, G.R. No. 153459, pp. 69-90)

Indubitably, petitioner Republic calls attention to the sworn declarations of Messrs. Jose
Yao Campos, Roland C. Gapud and Atty. Francisco de Guzman (Campos, Gapud and de
Guzman, respectively, hereafter) as alleged proof of its theory of the case, i.e., that the disputed
PLDT shares are in fact owned by the Marcos family and that respondents Cojuangcos/PHI are
but dummies/nominees/conduit for the Marcos family to control PLDT. It is, hence, our task to
scrutinize the sworn declarations of Campos et al., to ascertain if they indeed prove the facts
adverted to by petitioner Republic, failing which would naturally impel this Court to affirm
the Partial Decision insofar as it dismissed the Republics Amended Complaint against the
respondents Cojuangcos/PHI.

Following are excerpts of the Sworn Statement of Mr. Campos, dated March 21,
1986[80]:

xxx a discussion between me and Mr. Ramon Diaz, a member of the Commission
[PCGG} who inquired about certain assets and properties that I might be holding
in favour (sic) of certain beneficiaries and which . . . are now about to be claimed
by the Philippine Government.

1. My relationship with the then President Ferdinand E. Marcos dates back

to the time when he was first elected as Congressman . . . [and] continued when he
was then elected President . . . . Thereafter I assisted in the organization and
acquisition of some business ventures for the former President. Following his
directive I instructed my lawyers and requested the assistance of my other business
associates and officers of the company to organize, establish and manage these
business ventures for and on behalf of the President;

2. The companies that we have organized for and on behalf of former President
Marcos are listed in Annex A attached herewith;

3. In the organization, administration and management of the abovenamed

corporations, it was my policy that whenever such a corporation is organized for
and on behalf of the intended beneficiaries, I execute and I require all my said
business associates to execute a Deed of Trust or Deed of Assignment duly signed
in favour (sic) of an unnamed beneficiary and to deliver the original copy thereof
to the former President. It is in fact my policy and procedure that we disclaim

388
 completely any interest in any of such businesses and make it clear to the former
President that we hold such interests on his behalf;

4. In the latter part of 1979 I suffered a severe heart attack . . . . Because of this . .
., I requested former President Marcos to relieve me of my responsibilities
regarding the businesses that have been entrusted to me and following such request,
I signed and delivered to him a Certification dated January 1980, attached herewith
as Annex B to the effect that my family including my wife and children expressly
disclaimed any interest in the businesses that I have been holding in his behalf and
they acknowledged the truthfulness, authenticity and validity of various Deeds of
Trust and Deeds of Assignment which I and my business associates signed and
executed as aforementioned covering properties, interest and shares of stock of the
corporations listed therein.

5. Occasioned by the withdrawal of my active participation in the management of

the above named corporations, Mr. Rolando C. Gapud who was my financial
consultant took over the direct responsibility of directing, managing and
administering all the activities of the said corporation. However, since Mr. Gapud
did not have the administrative staff to efficiently manage the businesses, he
requested me that all the employees and officers involved in the organization should
continue to remain in the companies even only in a nominal capacity considering
that they had previously disclaimed any interest therein. It is for this reason that
Roland C. Gapud and my business associates, namely, . . . Francisco G. de Guzman,
. . . Ernesto Abalos, Gervasio T. Gaviola, . . ., Renato E. Lirio, Rafael de Guzman,
[etc.] . . . continued to be named stockholders in these corporations although they
did not have any financial interest therein;

xxx xxx xxx

Among the Philippine corporations listed in item #4.16 of Annex A of

Mr. Campos aforesaid Sworn Statement and held in trust by him and his associates was Prime
Holdings Corporation.
Moreover, on the occasion of his deposition-taking on December 18, 1995 at the Philippine
Consulate General, Vancouver, British Columbia, Canada Mr. Campos, responding to written
interrogatories, made the following declarations in answer:[81]

2.2 The records show that [PHI] owns approximately 46% of the stock of . . . (PTIC)
which in turn owns approximately 28% of Philippine Long Distance Telephone
Company (PLDT). The records of this Civil Case No. 0002 show that PCGG has
sequestered 111,415 shares of stock in PTIC registered in the name of [PHI]. Was
anything with respect to PTIC delivered to the PCGG by Atty. De Guzman or

389
anyone else in your behalf? Please describe with specificity the things that were
delivered.

ANSWER: As I said, I dont know that Prime Holdings has any holdings of
PTIC.

3. In your Sworn Statement, page 2, you stated that with respect to the
corporations you held in trust for President Marcos, it was your policy that
whenever such a corporation was organized, you executed, and you required all
your business associates to execute, a Deed of Trust or Deed of Assignment in favor
of an unnamed beneficiary, and delivered the originals thereof to President Marcos.
x x x. Was this policy followed in the case of [PHI]? xxx

ANSWER: All the corporations that I organized that was the standard policy
that we surrendered direct to President Marcos.

3.1. Was it also your policy to deliver to President Marcos the stock
certificates that you and your business associates held in trust for him?

ANSWER: Yes, Mam.

3.2. If stock certificates that you and your business associates held in trust
for President Marcos were delivered to him was it also your policy to have the stock
certificates indorsed in blank? Were the stock certificates in [PHI] Inc. indorsed in
blank?

ANSWER: If there are certificates issued in Prime Holdings, it is the same

way it was delivered to him. If there is such certificate issued, it is indorsed in blank
and follow the same pattern for all the corporations. Whatever we have decided, we
deliver, sign in blank and deliver to him.

3.3 Did you and your business associates deliver to President Marcos the
stock certificates issued by [PHI]? If not, what did you and your business associates
do with the stock certificates?

ANSWER: If Prime Holdings certificates have been issued, as I said Mam,

it is delivered to the President.

4. In your Sworn Statement, page 2, you also stated that it is in fact my

policy and procedure that we disclaim completely any interest in the businesses
organized for President Marcos and make it clear to the former President that we
held such interests in his behalf. xxx. Was this policy and procedure followed in
the case of [PHI]? xxx

390
 ANSWER: The policy is followed by every corporation that we organized
for the President.

4.1 Did you and your business associates also disclaim completely any
interest in . . . (PTIC) and make it clear to the former President that we hold such
interests on his behalf?

ANSWER: Mam, as I said, I dont know that Prime Holdings has such
holdings of the PTIC shares that you referred to.

5. The records of . . . (PTIC) show that Luis T. Rivilla owned approximately

P4,565,750 worth of shares of stock in PTIC and that some time in 1978-1980, he
transferred approximately P2,903,762 worth of such shares to [PHI]. Who was the
true or beneficial owner of the shares of stock in PTIC transferred by Luis T. Rivilla
to [PHI] in 1978-1980?

ANSWER: Any matters that pertain to PTIC, I dont have any knowledge
of, Maam.

xxx

ANSWER: Consul Morales, just to make everything short, after my heart

attack in 1979, Mr. Gapud took over the management of the corporations that
belonged to the President . . . I did not participate anymore in anything of the
Presidents corporations managed by Mr. Gapud after my heart attack and after he
took over the management of those corporations. It is because of health reasons that
I was compelled not only to relinquish that to the President, but also my own
companies and

xxx xxx xxx

10. Did you ever have any discussions or correspondence with anyone other
than President Marcos, Ramon U. Cojuangco or Rolando C. Gapud regarding the
beneficial ownership by President Marcos or any member of his family, directly or
indirectly, of shares of stock in PLDT, PTIC, or Prime Holdings, Inc.?

ANSWER: No, Maam.

xxx xxx xxx

11. In your Sworn Statement, pages 2-3, you stated that because of a heart
attack in the latter part of 1979, you requested President Marcos to relieve you or

391
 your responsibilities regarding the businesses entrusted to you, and that Rolando C.
Gapud took over the direct responsibility of directing, managing and administering
all the activities of the said corporations. xxx

ANSWER: Yes, Mam.

11.1 Please describe in detail the circumstances surrounding the transfer, if

any, of the direct responsibility of directing, managing and administering all the
activities of PHI] to Mr. Gapud?

ANSWER: As I stated Maam, Prime Holdings has been a holding company.

The only assets are the stock certificates and there is nothing. I think at that time I
transferred there is nothing Mr. Gapud has to manage to do because its a shared
corporation. (Words in bracket added)

Contextually, the only conclusion the Court can plausibly attach to the above response
of Mr. Campos is that he had no knowledge about PHIs shareholdings in PTIC. His answers,
such as Mam, as I said I dont know that Prime Holdings has such holdings of the PTIC shares
that you referred to, and Any matters that pertain to PTIC I dont have any knowledge say as
much. It is also a fact deducible from Mr. Campos sworn declarations that he adhered to a set
of pattern or practice when he organized corporations for then Pres. Marcos. Thus, he declared
that he, his family and his associates executed deeds of trust or assignment in favor of an
unnamed beneficiary, and there disclaim any interest in the corporations that he (Mr. Campos)
organized for Pres. Marcos. Or, they indorsed the stock certificates in blank. And, all of such
deeds or certificates were delivered to the late President. Yet, Mr. Campos was unable to declare
with certitude if these patterns and practices were followed vis--vis PHI. Accordingly, the
question begging an answer is whether there truly exists, in respect to PHI shares, certificates
indorsed in blank or deeds of trust or assignment in favor of an unnamed beneficiary delivered
to the late President. If there is one person who can provide a satisfactory answer to this
question, it is Mr. Campos. But he is not saying anything. Under this scenario, we cannot see
our way clear on how the sworn declarations of Mr. Campos could have, as asserted by
petitioner Republic, proved that respondent PHI was merely incorporated to hold the PTIC
shares, that in turn would have proved that PHI together with respondents Cojuangcos were
mere dummies of the Marcos family to hold the controlling share of PLDT.

On the other hand, Mr. Gapuds deposition - taken on October 19, October 20
and December 11, 1995 at the Hong Kong Philippine Consulate Office - materially reads:

392
CONSUL AGUILUCHO:
On paragraph 4 of Exhibit E, Mr. Gaviola stated:

That I have no personal knowledge of the operation of Prime

Holdings, Inc. as Mr. Rolando C. Gapud handled all the directing,
managing and administering of all the activities of the said
corporation.

Question: Based on your personal knowledge, do you affirm or deny the contents
of the said paragraph 4 of Exhibit E?

MR. GAPUD: I affirm. xxx

Madam Consul, I would like to make a clarification here. Because Mr. Gaviola says
I handled all the directing and managing and administering of all the activities. Prior
to the heart attack of Mr. Campos I recall that he was also involved in the
administration of this company. So, with that clarification I affirm paragraph 4.

CONSUL AGUILUCHO: For how long did you manage [PHI]?

MR. GAPUD: I would estimate maybe two or three years after Mr. Campos heart
attack.

CONSUL AGUILUCHO: Do you know anything about the . . . (PTIC), 46% of the
capital stock of which is owned by [PHI]?

MR. GAPUD: Well, very little except for that which I have read from the
newspapers.

CONSUL AGUILUCHO: Do you know the PTIC owns 25% of the common voting
stock of the . . . PLDT?

MR. GAPUD: Yes.

CONSUL AGUILUCHO : Do you know the beneficial owner or owners of [PHI]?

MR. GAPUD : What I know . . . is the shares of stock and/or the assignments
endorsed in blank were delivered to President Marcos by Mr. Campos.

CONSUL AGUILUCHO: The heirs of Ramon U. Cojuangco, namely: Imelda O.

Cojuangco and her children . . .claim that they own . . .(80%) percent of the
outstanding capital stock of [PHI], while the Estate of Ramon U. Cojuangco
allegedly owns the remaining twenty (20%) percent.

393
Question: Based on your personal knowledge, do you affirm or deny the said
allegation?

MR. GAPUD: I do not know. I can neither affirm or deny.

CONCUL AGUILUCHO: The said heirs also alleged that [PHI] was incorporated
on 5 October 1977 with the following stockholders, namely: Rolando C. Gapud,
Renato E. Lirio, Jose D. Campos, Jr., Gervasio T. Gaviola and Ernesto S. Abalos,
with 400 shares each, . . . .

Question: Based on your personal knowledge, do you affirm or deny the said
allegation?

MR. GAPUD: I affirm.

CONCUL AGUILUCHO: Did you really own the 400 shares of the Prime
Holdings?

MR. GAPUD: No.

CONSUL AGUILUCHO: For whom did you hold those 400 shares?

MR. GAPUD: Well, as I said earlier the shares and/or assignment indorsed in blank
were delivered by Mr. Campos to President Marcos.

CONSUL AGUILUCHO: The same heirs likewise alleged:

In separate Deeds of Assignment dated 18 February 1981, two (2)

of the incorporators of Prime Holdings, namely: Rolando C. Gapud
and Jose D. Campos, Jr., assigned and conveyed to Messrs. Ramon
U. Cojuangco and Oscar Africa, respectively, all their shareholdings
in Prime, consisting of four hundred (400) shares of stock each, or
twenty (20%) percent each of the shares of stock of Prime (Annexes
C and -1).

Question: Based on your personal knowledge, do you affirm or deny the said
allegation?

xxx

MR. GAPUD: Madam Consul, I think I can only affirm that which pertains to me,
namely: the Deed of Assignment that I signed. I will leave it to Mr. Campos to
affirm his Deed of Assignment.

394
 ATTY. MANALAYSAY: Madam Consul General, in view of the identification by
the witness of the Deed of Assignment, may we request that the same be marked as
our Exhibit 1 (Cojuangco)

xxx xxx xxx

ASST. SOLICITOR GENERAL DEL ROSARIO: Do you identify this as your

signature?

MR. GAPUD: Yes.

xxx xxx xxx

CONSUL AGUILUCHO: May we continue?

Showing you the said Annex C now marked as Exhibit F for purposes of this
proceeding, do you affirm or deny the authenticity of this document?

MR. GAPUD: Yes, I affirm.

CONSUL AGUILUCHO: Is it really true that you assigned your 400 shares to
Ramon U. Cojuangco?

MR. GAPUD: Yes.

CONSUL AGUILUCHO: How much did you receive as consideration for

assigning your shares to him?

MR. GAPUD: The consideration for the assignment was that upon my assignment,
first, my fiduciary responsibilities as nominee were extinguished, and secondly, I
had transferred and extinguished any and all liabilities under the subscription
payable.

CONSUL AGUILUCHO: Do you know if Ramon U. Cojuangco received the said

shares for himself or for anybody else?

MR. GAPUD: I dont know.

xxx xxx xxx. [82] (Underscoring added)

Continuing his deposition-taking on December 11, 1995, Mr. Gapud also said:

395
VICE CONSUL HERNANDEZ: No. 5, regarding [PHI] which was one of the
companies organized for former President Ferdinand E, Marcos, as stated by
deponent Jose Y. Campos in his Sworn Statement (EXHIBIT D) and affirmed by
you also, and the various Deeds of Assignment of shares in Prime Holdings, Inc.
by the listed Stockholders-Nominees in favor of the late Ramon U. Cojuangco and
his children, respectively, namely:

Deed of Assignment dated February 18, 1981 signed by you and marked EXHIBIT
F;

Deed of Assignment dated February 18, 1981 signed by JOSE D. CAMPOS, JR.,
copy marked EXHIBIT F-1;

Deed of Assignment dated June 1983 signed by RENATO E. LIRIO, copy marked
as EXHIBIT F-2;

Deed of Assignment dated June 1983 signed by GERVACIO T. GAVIOLA, copy

marked as EXHIBIT F-3;

Deed of Assignment dated June 1983 signed by ERNESTO S. ABALOS, copy

marked EXHIBIT F-4;

Deed of Assignment dated July 1983 signed by OSCAR T. AFRICA, copy marked
EXHIBIT F-5;

The aforesaid Deeds of Assignments obviously will be with the knowledge and
upon authorization and order of former President Ferdinand E. Marcos, is this
correct?

ATTY. MANALAYSAY: Your Honor, before the witness answers the question,
we would like to reiterate our objection insofar as the question referring to Mr.
Oscar T. Africa is concerned. We are objecting to the question on the ground that
Mr. Gapud would be incompetent to testify with respect to Mr. Africa, considering
that Mr. Africa is not among the stockholders-nominees mentioned by Mr. Campos
or Mr. Gapud as far as Prime Holdings is concerned and Mr. Africa is not among
the incorporators of Prime Holdings, Inc.

xxx xxx xxx

VICE CONSUL HERNANDEZ: Can we note your objection and let Mr. Gapud
answer?

396
 So the aforesaid Deeds of Assignments obviously will be with the knowledge and
upon authorization and order of former President Ferdinand E. Marcos, is this
correct?

MR. GAPUD: Considering that [PHI] was incorporated upon the instructions of
former President Marcos, obviously all the nominees would act only upon his
authorization. Thats my answer. [83]

Like Mr. Campos before him, Mr. Gapud also seems to be without personal knowledge
of whether or not PHI owned shares in PTIC. He admits that whatever he knows about PHIs
holding in PTIC, if there be any, is based only on what he has read from the newspapers. True
it is that he acknowledged not actually owning the 400 PHI shares in his name. But when asked
for whom he held such shares, he hedged on his answer, saying: Well, as I said earlier the
shares and/or assignment indorsed in blank were delivered by Mr. Campos to President
Marcos. Mr. Gapud, however, would later contradict himself with respect to the disposition of
the said 400 PHI shares with his statement that he assigned what on paper was his PHI shares
to the late Ramon U. Cojuangco. Clearly, it would have been implausible for him to make the
assignment to Mr. Cojuangco if the covering certificates had previously been delivered to Pres.
Marcos. He also affirmed that his assignment of PHI shares to Mr. Cojuangco was for a
consideration, albeit this consisted of being freed from his fiduciary responsibilities as nominee
and of the extinguishment of his liabilities on his subscription.

Taken as a package, Mr. Gapuds sworn statements do not sufficiently

prove petitioner Republics theory of the case.

The sworn statement of Atty. Francisco de Guzman, former PHI corporate secretary,
taken during his deposition on June 12, 2001, is hereunder pertinently reproduced, viz.:

ATTY. QUISUMBING: But as of 1978 . . . Prime Holdings, Inc. [PHI] was

incorporated on instruction of Mr. Jose Yao Campos in 1977, so as of 1978 [PHI]
was still a holding company of Mr. Campos?

xxx xxx xxx

Witness: Please repeat the question.

Atty. Quisumbing :The records in the Securities and Exchange Commission

indicate that [PHI] was incorporated in October of 1977 and you already testified
that [PHI] was incorporated on instructions of Mr. Campos?
397
Witness: Yes sir:

Q: And you also testified that Prime Holdings is a holding company?

A: Yes, sir.

Q: Of Mr. Campos?
A: I said holding company, you asked me what is the nature of the company and I
think you clarified the question, a holding company is one that hold assets
and I said yes, sir, thats how I understand a holding company.

Q: And you testified that all of these five (5) original stockholders of [PHI] worked
for Mr. Campos?
A: Yes, sir.

Q: So, the following year of 1978 you were still Corporate Secretary of [PHI]?
A: Yes, sir.

Q: And were you still taking instructions from Mr. Campos the following year 1978
with regard to [PHI]?
A: Yes, sir.

Q: And how long after that did you continue to take instructions from Mr. Campos
with regard to [PHI]?
A: xxx Im not too sure about this, but he distanced himself in many operations even
of United Laboratories when he had a heart attack in 1979, sir.

Q: So you are saying that you took instructions from Mr. Campos with regard to
[PHI] until 1979 when Mr. Campos had a heart attack?
A: Yes, that is the possibility of having instructions from him because after that he
really was very inactive in all these corporations and it was then that Mr.
Gapud who took over, sir.

Q: In 1979?
A: Yes, sir.

Q: By the way, in 1979 after Mr. Campos suffered this heart attack and I believe
that was late 1979, did Mr. Campos also retire from active involvement in
UNILAB?
A: Yes, sir.

xxx xxx xxx

398
Q: After 1979 when Mr. Gapud took over, are you aware if there are any transfers
of shares of stocks in [PHI] to other people?
A: Yes, sir.

Q: Will you tell us about that?

A: My recollection is, Mr. Gapud himself made a Deed of Assignment but I dont
remember to whom the Deed of Assignment, in whose favor.

Q: What year was that?

A: I cannot recall the year, sir.

Q: But this was in 1979?

A: I suppose so, sir.

Q: Now, did Mr. Gapud assign his four hundred shares to Mr. Ramon U.
Cojuangco?

A: I think the document will show because I cannot recall as to the person who
made the assignment, sir, Im sorry, I dont really have a single paper of the
records, sir.

xxx xxx xxx

Q: Was it the standard operating procedure in Jose Yao Campos holdings

companies that the stock certificates of the stockholders would be endorsed
in blank?
A: Yes, sir.

Q: And who would hold custody or possession of those blank endorsed stock
certificates?
A: In the case of many of the corporations I think including [PHI] these are not
fully paid shares and therefore, I knew that no stock certificates have been
issued, sir.

Q: So, specifically in the case of [PHI] there were no stock certificates issued
because the subscriptions were not fully paid?
A: Yes, sir.

Q: Do you know if the stockholders of [PHI], this is prior to 1981, had executed
Deed of Assignment in blank for their subscriptions to PHI shares?
A: Yes, sir, in the standard operating procedure in the companies of Mr. Campos is
that all the subscribers would have either a Deed of Assignment signed or a
Deed of Trust, sir.

399
Q: And you are referring to these holding companies that Mr. Campos, a number
of holding companies that Mr. Campos have caused to be incorporated,
these are the companies?
A: Yes, sir.

Q: You said Deed of Trust, would there be a designated trustee?

A: No, sir.

Q: So, these are Deeds of Assignment or Deeds of Trust, the beneficiary of which
would be left blank?
A: Yes, sir.

Q: But the assignors or the trustees or grantors would all sign, would all execute
these Deeds?
A: Yes, sir.

Q: Who would have possession, you mentioned standard operating procedure or

SOP, under that SOP who would hold the blank deeds?
A: A copy of which usually two (2) copies are made, sir.

Q: Two (2) originals?

A: No.

Q: Xerox copies?
A: No, one original and one xerox copy and the original will be included in the
records, sir.

Q: The records of that particular company?

A: Yes, sir, and the other one we give it to the Treasurer.

Q: Of that particular company?

A: No, to Mr. Gaviola, sir.

Q: Mr. Gaviola was the Treasurer of [PHI] wasnt he?

A: I think he is because he is always, was the Treasurer of many of the companies
of Mr. Campos, sir.

Q: So, there is the SOP also, Mr. Gervacio Gaviola is the Treasurer of [PHI]?
A: Yes, sir.

400
 xxx xxx xxx

Q: Do you know, so what happened to those blank Deeds of Assignment and Deeds
of Trust of [PHI] that were entrusted with the trusted lawyers of UNILAB?
A: When [PHIs] records were delivered, all those records, all those papers are with
the records, sir.

Q: So, you are referring to the 1982 delivery to the representative of Mr. Ramon U.
Cojuangco?
A: Yes, sir, except two (2) Deeds of Assignment which were I think made directly
afterward when Mr. Gapud and Mr. Jose Campos, Jr. made the direct
assignments to persons actually designated in the Deeds of Assignment, sir.

Q: Who were those?

A: The shares of Mr. Gapud was given to Mr. Ramon U. Cojuangco, Mr. Campos,
Jr. I cant remember to whom he made the assignment, sir.

Q: Does the name Atty. Africa ring a bell?

A: Yes, sir.

Q: Would he be the person who was the assignee of the shares of either Mr. Gapud
or Mr. Campos, Jr.?
A: Well, I think so, sir.

Q: Now, this was in the year 1981, do you recall that?

A: No, sir.

Q: Do you recall it might be 1982?

A: I have no idea as to the year when this was made, sir.

Q: But you testified that there was a change of ownership of [PHI] that led to the
change of officers including yourself in 1982?
A: I didnt say ownership, sir. I said that when there was a change when Mr. Ramon
Cojuangco became the Chairman, just on time when he said there will be a
change of officer that is why they got the records from me.

Q: So, are you saying that there was no change of ownership in [PHI] in 1981,
1982?
A: Except the assignments made by the two (2) persons, sir. That is what I know.
xxx xxx xxx

Q: You indicated earlier that those change of officers of [PHI] in 1982, who were
the new officers that took over?

401
A: I do not know, sir.

xxx xxx xxx

Q: Who do you know was changed among the officers of [PHI] Holdings, Inc.
A: Mr. Gapud as the Chairman and President, sir.

Q: Was replaced?
A: Was replaced by Mr. Cojuangco, sir.

Q: By Mr. Ramon Cojuangco?

A: Yes, sir.

Q: And this is about 1982?

A: Possibly I cannot recall the exact date, sir.

xxx xxx xxx

Atty. Quisumbing:
You testified earlier that Mr. Cojuangco became the President?

Witness: Yes, sir. I testified to that effect because that was the instruction given to
me that the succeeding minutes of the annual meeting Mr. Gapud told me
that the new Chairman and President will be, was Mr. Ramon Cojuangco,
sir.

Q: And that was the instruction of Mr. Gapud?

A: Yes, sir.

Q: He was the President and Chairman before Mr. Cojuangco?

A: Yes, sir.

Q: Now, did you have any involvement in [PHI] after 1982

A: None, sir.

Q: And you testified that all the records that you were holding of [PHI] were taken
from you in 1982
A: Yes, sir.

Q: By Mr. Gapud?
A: Yes, sir.

402
 Q: Do you know who if (sic) he retained those records or if he turned it over to the
new Chairman and President?
A: Well, he told me he will be turning it over to the Cojuangcos, sir.

Q: And those include the blank Deeds of Assignment and Deeds of Trust?
A: I suppose so, sir.[84] (Underscoring and the word PHI in bracket in lieu of the
words Prime Holdings Inc. added)

In esse, Atty. Guzman merely reiterated facts deducible from the sworn declarations of
Mr. Campos and Mr. Gapud, foremost of which is that PHI was among the corporations
organized upon Mr. Campos instructions and that for all the corporations of Mr. Campos, deeds
of trust or assignment were executed. Atty. De Guzmans statements are also affirmatory of the
fact that Mr. Gapud assigned PHI shares in his name to Mr. Cojuangco. Interestingly, however,
Atty. De Guzman disclosed a detail about the formation and the running of PHI not heretofore
known, i.e., that there were two copies of the deeds of trust or assignment, one a machine copy,
and the other, the original, that was kept in the records of the company. But of particular
significance from this disclosure is the actuality that until the time that Mr. Cojuangco assumed
the chairmanship and presidency of PHI and the records were delivered to him (Cojuangco),
the deeds of trust or assignment were on file with the records, except two (2) Deeds of
Assignment which were xxx made directly afterward when Mr. Gapud and Mr. Jose Campos,
Jr. made the direct assignments to persons actually designated in the Deeds of Assignments.

Given the above, it would appear that the execution of the Deeds of Assignment to
Ramon Cojuangco markedly departs from the set pattern usually followed in the organization
of corporations on behalf of the late President Marcos, respondent PHI included. The pattern,
to repeat, consisted of: the execution of deeds of trust or assignment to an unnamed beneficiary,
or to indorse in blank the stock certificates, and deliver the corresponding deeds to the late
President. In the case of what for the nonce may be referred to as the Cojuangco assignment,
the beneficiary portion of the deeds was not in blank. Instead, the name of Mr. Ramon
Cojuangco specifically appeared therein. Possession of the deeds were with the respondents
Cojuangcos, not the Marcoses, necessarily implying that nothing was delivered to the late
President Marcos in regards to the covered PHI shares. And there can be no serious argument
that petitionerRepublic has not produced any deed of assignment or trust executed to an
unnamed beneficiary or certificates indorsed in blank which would have otherwise
corresponded to the disputed shareholdings of the Cojuangcos in PLDT by virtue of the PHI
shares assigned to them.

403
 Upon the above observations and absent any positive testimony, even from persons
already extended by the PCGG state immunity from criminal prosecution and like privileges,
notably Messrs. Campos, Gapud and De Guzman, provided they disclose, among other things,
relevant information respecting the alleged accumulated ill-gotten wealth of the Marcoses, that
respondents Cojuangcos held their assigned shares on behalf of the late Pres. Marcos, we also
hold as untenable petitioner Republics unyielding posture that the aforementioned deeds of
assignment to respondents Cojuangcos are sham and fictitious.

In all, this Court is unable to accord concurrence to petitioner Republics theory that the
disputed PLDT shares, covered by the necessary PTIC stock certificates in the name of
respondents Cojuangcos/PHI, are part of the Marcoses ill-gotten wealth, for lack of direct and
substantial proof thereof. PetitionerRepublics recovery efforts cannot be predicated on
speculations, surmises or vague inferences, as here. In this sense, the respondent court stood on
solid legal ground when it held that a claim or recovery of properties alleged by the Republic
to have been ill-gotten cannot proceed under the mere presumption that said properties are
indeed ill-gotten.

On another point, petitioner Republic has made much of respondent courts failure to
appreciate in its favor the allegations, partaking of judicial admissions, made by respondent
Mrs. Marcos in her Answer to its Amended Complaint, Cross-claim and other pleadings,
bearing on the Marcoses ownership of the disputed PLDT shares. In this regard, suffice it to
state that these admissions are evidence against the party who made them or, in appropriate
case, their privies.[85] In the concrete, the admissions adverted to made by Mrs. Marcos, even if
they partake of judicial admissions, are binding and conclusive only as to her. They cannot bind
or prejudice respondents Cojuangcos/PHI who have taken issue against Mrs. Marcos on her
ownership claim over the PLDT shares in question.

This brings us to what are known as the General Telephone & Electronics [GTE]
Documents, which to petitioner Republic are likewise material evidentiary link to prove that
the disputed PLDT shares form part of the Marcoses ill-gotten wealth, but which merited scant
consideration from, if not altogether ignored by, the respondent court.

Two (2) letters comprise the GTE Documents: one, purportedly from Leslie H. Warker
of GTE to Mr. Ramon Cojuangco confirming an appointment with the latters principal; and the
other, from Theodore F. Brophy of GTE to US Assistant Secretary of State Eugene H.

404
Braderman naming then Pres. Marcos as the Principal. Per petitioner Republics account, photo-
copies of the GTE Documents were among the papers and materials seized by the US Customs
Service from the Marcos family in February 26, 1986 in Hawaii and subsequently turned over
to PCGG.

The Warker letter under date of June 18, 1967[86] reads in full, as follows:

Mr. Ramon Cojuangco

Manila
Philippine Islands

Dear Mr. Cojuangco:

We have received your cable on July 18, 1967 to Mr. Douglas in which you
confirmed that an appointment had been secured for Mr. Brophy to meet with your
principal during the week of August 13, 1967, the date and hour to be finalized
upon Mr. Brophys arrival.

Based on this assurance, the Proposal with Respect to the Sale of General
Telephone & Electronics Corporations Stockholdings in [PLDT] to a Philippine
Group dated June 6, 1967 will remain open until 4:30 p.m. New York time on
August 31, 1967, and unless accepted by that time (or further extended) will expire.

Article VIII. D. of the proposal shall be deemed to be modified in this

respect by this letter.

I assure you of Mr. Brophys cooperation with you in pursuing the proposal
and hope that during your meetings you will be able to reach a mutually satisfactory
solution to any questions which may arise.

Sincerely yours,

(Sgd.) LESLIE H. WARKER

The Brophy letter to Mr. Braderman[87] referred to above reads:

October 9, 1967

Dear Mr. Braderman:

In accordance with your request to Mr. Stratton Anderson of our Washington

Office, I am enclosing a copy of a Proposal with Respect to the Sale of General

405
 Telephone & Electronics Corporations Stockholdings in [PLDT] to a Philippine
Group, dated June 6, 1967, together with a letter of July 18, 1967 amending the
Proposal, and a copy of a press release issued by this Corporation upon the
completion of the step provided for in Article VIII E.P. of the proposal.

The principal referred to in the July 18 letter is President Marcos.

Since the transaction has not been completed, and we cannot be sure at this time
that it will be completed, we would prefer not to submit a detailed memorandum
concerning the background of the Proposal. I would, however, be glad to discuss it
with you on the telephone and answer any questions you may have.

Sincerely yours,

(Sgd.) Theodore F. Brophy

Petitioner Republic contends that the said GTE Documents are authorized public
records of a private document. As such, it argues, citing Section 27 of Rule 132,[88] that there
would be no need to present the original copies thereof, as they may be proved by a mere copy
thereof, provided such copy is attested by the legal custodian of the records, with an appropriate
certificate that such officer has the custody. According to said petitioner, the attestation of Ms.
Lourdes Magno, PCGG Record Officer, with the certification that she has such custody would
suffice for the purpose of authenticating and proving their genuineness so as to have the GTE
documents received in evidence.

We disagree. Not every single paper or document in the custody of PCGG in relation to
its quest to recover the ill-gotten wealth of the Marcos family has the character and probative
value of an authorized public record. Even the official seal of the PCGG on the two (2) GTE
Documents does not suffice to make them authorized public records of a private document and
thus enhance their admissibility. The GTE Documents are still private writings. The GTE
Documents turned over by the US Government in the hands of the PCGG are not self-
authenticating, for what is contextually considered a public document is not the private writing,
but the public record thereof.[89] Their authenticity and due execution, as condition sine qua
non for their reception in evidence, with the evidentiary weight they might otherwise be entitled
to, must first be proved under Section 20, Rule 132 of the Rules Court, which reads:

406
 SEC. 20. Proof of private document. Before any private document offered
as authentic is received in evidence, its due execution and authenticity must be
proved either:

(a) By anyone who saw the document executed or written, or

(b) By evidence of the genuineness of the signature or handwriting of the

maker.

Any other private document need only be identified as that which it is

claimed to be.

A contrary ruling would otherwise put the recovery suits beyond the pale of the law on
admissibility of evidence. This could not have been the intention of then President Corazon C.
Aquino when she issued EO No. 14, series of 1986, supra, providing that technical rules of
procedure and evidence shall not be applied strictly to [said ill-gotten wealth cases].
In Republic vs. Sandiganbayan (Third Division),[90] the Court wrote:

xxx Eleven years have passed since the government initiated its search for
and reversion of such ill-gotten wealth. The definitive resolution of such cases on
the merits is thus long overdue. If there is proof of illegal acquisition, accumulation,
misappropriation, fraud of illicit conduct, let it be brought out now. Let the
ownership of these funds and other assets be finally determined and resolved with
dispatch, free from all the delaying technicalities and annoying procedural
sidetracks.

A little over six years (6) later, in July 2003, the Court, in Republic vs.
Sandiganbayan [91] repeated the same message imparted in the earlier Republiccase, although
the clause [A]lmost two decades have passed was used, and aptly so, in lieu of [E]leven years
have passed.

What we said in both Republic cases is as sound and compelling as it is today. It should not,
however, be given a slant to mean that the Court has laid down a policy that each and every
recovery suit brought by the PCGG shall be governed by different norms of justice or fair play.
Far from it. If the required quantum of proof obtains to establish illegal acquisition,
accumulation, misappropriation, fraud or illicit conduct, ours is the duty to affirm the recovery
efforts of the Republic. On the other hand, should such proof be wanting, we have the equally
exacting obligation to declare that it is so. Simple justice demands such attitude from this Court.

407
So does the guarantee against deprivation of property without due process, which, like other
basic constitutional guarantees, applies to all individuals, including tyrants, charlatans and
scoundrels of every stripe, to borrow from Justice Isagani A. Cruz in his dissent in Marcos vs.
Manglapus.[92]
It has been said that each case, and each litigious situation, must stand on its own peculiar set
of facts, just as every case disposition must stand on the basis of such facts established by
relevant and competent evidence in the light of applicable statutory and decisional law. Other
decided cases may be appropriate as points of reference , but, in the ultimate analysis, ones
cause of action shall succeed or fail on the basis of the superiority of his evidence, taking into
account the burden of proof assigned on each party and the quantum of evidence required by
the circumstances. So it must be with ill-gotten wealth recovery cases,

Insofar as the disputed PLDT shares in underlying Civil Case No. 0002 are concerned, we agree
with the holding of the respondent court that there is no satisfactory proof that they are indeed
part of the ill-gotten wealth being recovered by the State. The case for petitioner Republic falls
short to satisfy the standards set mainly in BASECO[93] to establish a finding of ill-gotten
wealth. We thus lend concurrence to respondent courts conclusion, that:

Hence, a claim for recovery of properties alleged by the Republic to have

been ill-gotten cannot proceed under the mere presumption that said properties are
indeed ill-gotten. Before that characterization can be appended to the properties
sought to (be) recovered, there must be proof of such claim. The characterization
cannot arise on the basis of public notoriety. In the case at bar, the Republic failed
to present the proof required to characterize the PLDT shares as ill-gotten. As a
necessary consequence of this failure, its claim for recovery thereof cannot succeed.
(at p. 41)

In amplification of the foregoing, I reiterate what I wrote in my COMMENT (Annex A

hereof) to the DISSENTING (now majority) OPINION of Justice Morales and my
REJOINDER (Annex B hereof) to her reply to my comment.

WHEREFORE, I vote to DENY, for lack of merit, the instant petitions and
to AFFIRM the assailed issuances of the Sandiganbayan (4th Division) in Civil Case No. 0002.

408
CANCIO C. GARCIA
Associate Justice

409
[1]
Rollo (G.R. 150367), p. 564. An earlier resolution of November 19, 2001; Rollo (G.R. 150369),
p. 564.] consolidated the petition in G.R. No. 150320 with the petition in G.R. No. 149802.
[2]
EO 1 created the PCGG to assist the President in the recovery of vast government resources
allegedly amassed by former Pres. Marcos, his immediate family, relatives and close
associates; EO 2 asserted that ill-gotten assets are in the form of, among others, trust
accounts and shares of stock, and EO 14, as amended, vested the Sandiganbayan exclusive
& original jurisdiction over all cases of ill-gotten wealth.
[3]
Penned by Justice Narciso S. Nario and concurred in by Justices Rodolfo Palatao and Nicodemo
Ferrer; Rollo (G. R No. 153459), pp. 9- 81.
[4]
Rollo (G.R. No. 150367), pp. 72 et seq.
[5]
Ibid., pp. 118 et seq.
[6]
Ibid., pp. 110 et seq.
[7]
Ibid., pp. 124 et seq.
[8]
Ibid., pp. 163-171.
[9]
Ibid., pp. 203 et seq.
[10]
Id., pp. 213 et seq.
[11]
Id., pp. 582 et seq.
[12]
Id., pp. 589 et seq.
[13]
Id., pp. 420-432.
[14]
Rollo (G.R. No. 150367), p. 222.
[15]
Ibid., pp. 333-334.
[16]
Ibid., pp. 318.
410
[17]
Ibid., pp. 277 et seq.
[18]
Ibid., pp. 65-66.
[19]
Ibid., pp. 68 et seq.
[20]
Ibid., p. 71; In the same order, the trial court made reference to the manifestation of
Cojuangco/PHI that, instead of presenting their witness on the witness stand, they are
submitting the deposition of Mr. Campos, Atty. De Guzman and Atty. Mercado Ferrer as
evidence.
[21]
Annex BB and CC, respectively, of the Petition in G.R. 153459.
[22]
See Note No. 18, supra.
[23]
See Note No. 19, supra.
[24]
See Note No. 20, supra.
[25]
Partial Decision, p. 17; See Note No. 3, supra.
[26]
See Note No. 17, supra.
[27]
Petition, G.R. No. 153459, p. 167.
[28]
Reported in 344 SCRA 290.
[29]
Rollo (G.R. No. 149802), pp. 106 et seq.
[30]
Ibid., pp. 90 et seq.
[31]
Id., pp. 100 et seq.
[32]
Id., p. 58 et seq
[33]
Sec. 8. Suspension of Actions.- The suspension of actions shall be governed by the provisions
of the Civil Code. Article 2030 of the Civil Code provides for suspension of action: 1. If
willingness to discuss a possible compromise is expressed by one of the parties; or 2. If it
appears that one of the parties, before the commencement of the action or proceedings,
offered to discuss a possible compromise but the other party refused the offer.
[34]
Rollo (G.R. No. 149802), p. 61
[35]
Ibid., pp.184-185; July 26 would later be included as intervenors hearing date.
[36]
Rollo (G.R. No. 150367), pp. 302 et seq.

[37]
Rollo (G.R. No. 150320), pp. 78-79.
[38]
Rollo (G.R. No. 149802), p. 61.
[39]
See Note No. 37, supra.
[40]
Rollo (G.R. No. 150320), p. 80.
[41]
Rollo, (G.R. No. 153207), pp. 689-714.
[42]
See Note No. 3, supra.
[43]
147 SCRA 334 [1987].
[44]
As amended by SC Adm. Memo. No. 00-2-03-SC , September 1, 2000.
[45]
148 SCRA 280 [1987].
[46]
269 SCRA 334 [1999].
[47]
Litton Mills, Inc. vs. Galleon Trader, Inc., 163 SCRA 489 [1988].
[48]
Butuan Bay Export Corp. vs. CA, 97 SCRA 297 [1980].
[49]
Pure Foods Corp. vs. NLRC, 171 SCRA 415 [1989].
[50]
393 SCRA 397, 402-403 [2002]
[51]
333 SCRA 465 [ 2000], citing Espiritu vs. Solidum, 52 SCRA 131[1973].
[52]
PNB vs. Donasco, 7 SCRA 409 [1963].
[53]
34 Phil. 80, 96-97 [1916].
[54]
Republic [PCGG] vs. Sandiganbayan [First Division], 258 SCRA 685 [1996].

411
[55]
Ynot vs. IAC, 148 659 [1987], quoting Justice Felix Frankfurter.
[56]
David vs. Aquilisan, 94 SCRA 707 [1979 ], citing other cases.
[57]
Alliance of Democratic Free Labor Organization vs. Laguesma, 254 SCRA 565 [1996].
[58]
406 SCRA 575, citing DBP vs. Court of Appeals, 302 SCRA 362.
[59]
Stronghold Insurance Co. vs. CA, 205 SCRA 605.
[60]
Acosta vs. People, 5 SCRA 774 [1962].
[61]
Talabon vs. Iloilo Provincial Warden, 78 Phil. 599 [1947].
[62]
Linis vs. Rovira, 61 Phil. 137, 139 [1935] .
[63]
People vs. Maceda, 188 SCRA 532 [1990]; Perez vs. Perez, 73 SCRA 517 [1976].
[64]
See Note No. 54, supra .
[65]
Sec. 17. No person shall be compelled to be a witness against himself.
[66]
See Note No. 2, supra.
[67]
Villaflor vs. Summers, 41 Phil. 62 [1921].
[68]
175 SCRA 216 [1989].
[69]
6 SCRA 1059 [1962].
[70]
Carcon Development Corp. vs. CA, 180 SCRA 348 [1989].
[71]
Evadel Realty and Development Corporation vs. Soriano, 357 SCRA 395 [2001].

[72]
Rollo (G.R. No. 153207), pp. 1597 et seq.

[73]
Yasay vs. Desierto, 300 SCRA 494 [1998], citing Reyes vs. Comelec, 254 SCRA 514
[1996]; People vs. Almendras, et al., 401 SCRA 555, 571 [2003].
[74]
150 SCRA 181 [1987].
[75]
Silverio vs. PCGG, 155 SCRA 60 [1987]; Republic vs. Sandiganbayan, 240 SCRA 376
[1987].
[76]
See Note No. 3, supra.
[77]
Petition, G.R. No. 150459, pp. 41-42.
[78]
See Note No. 2, supra.
[79]
Petition, G.R. No. 153459, p. 61.
[80]
Exhibit MMM; Rollo (153459) pp. 549 et seq.
[81]
Transcript, EXHIBIT ZZZ to ZZZ-1-N.
[82]
TSN, pp. 14 to 19, EXHIBIT 000-4; Rollo (G.R. No.153459), pp. 1679-1685.

[83]
Ibid., pp. 1709-1710.

[84]
Rollo (G.R. No. 153207), pp. 1323 et seq.
[85]
Santiago vs. De los Santos, 61 SCRA 146 [1974].
[86]
Rollo (G.R. No. 153459), p. 1716.
[87]
Ibid., p. 1717.
[88]
SEC. 27. Public record of a private document.- An authorized public record of a private
document may be proved by the original record, or by a copy thereof, attested by the legal
custodian of the record, with an appropriate certificate that such officer has the custody.
[89]
Herrera, REMEDIAL LAW, Vol. VI, 99 ed., p. 229.
412
[90]
269 SCRA 316 [1999], See Note No. 46.
[91]
406 SCRA 190 [2003].
[92]
177 SCRA 668 [1989].
[93]
See Note No. 74, supra.

413
 THIRD DIVISION

[G.R. No. 148864. August 21, 2003]

SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C.

EVANGELISTA, petitioners, vs. MERCATOR FINANCE CORP., LYDIA P.
SALAZAR, LAMECS**REALTY AND DEVELOPMENT CORP. and the
REGISTER OF DEEDS OF BULACAN, respondents.

DECISION
PUNO, J.:

Petitioners, Spouses Evangelista (Petitioners), are before this Court on a Petition for Review
on Certiorari under Rule 45 of the Revised Rules of Court, assailing the decision of the Court of
Appeals dismissing their petition.
Petitioners filed a complaint[1] for annulment of titles against respondents, Mercator Finance
Corporation, Lydia P. Salazar, Lamecs Realty and Development Corporation, and the Register of
Deeds of Bulacan. Petitioners claimed being the registered owners of five (5) parcels of
land[2] contained in the Real Estate Mortgage[3] executed by them and Embassy Farms, Inc.
(Embassy Farms). They alleged that they executed the Real Estate Mortgage in favor of Mercator
Financing Corporation (Mercator) only as officers of Embassy Farms. They did not receive the
proceeds of the loan evidenced by a promissory note, as all of it went to Embassy Farms. Thus,
they contended that the mortgage was without any consideration as to them since they did not
personally obtain any loan or credit accommodations. There being no principal obligation on
which the mortgage rests, the real estate mortgage is void.[4] With the void mortgage, they assailed
the validity of the foreclosure proceedings conducted by Mercator, the sale to it as the highest
bidder in the public auction, the issuance of the transfer certificates of title to it, the subsequent
sale of the same parcels of land to respondent Lydia P. Salazar (Salazar), and the transfer of the
titles to her name, and lastly, the sale and transfer of the properties to respondent Lamecs Realty
& Development Corporation (Lamecs).
Mercator admitted that petitioners were the owners of the subject parcels of land. It, however,
contended that on February 16, 1982, plaintiffs executed a Mortgage in favor of defendant
Mercator Finance Corporation for and in consideration of certain loans, and/or other forms of
credit accommodations obtained from the Mortgagee (defendant Mercator Finance Corporation)
amounting to EIGHT HUNDRED FORTY-FOUR THOUSAND SIX HUNDRED TWENTY-
FIVE & 78/100 (P844,625.78) PESOS, Philippine Currency and to secure the payment of the same
and those others that the MORTGAGEE may extend to the MORTGAGOR (plaintiffs) x x x.[5] It
contended that since petitioners and Embassy Farms signed the promissory note[6] as co-makers,
aside from the Continuing Suretyship Agreement[7] subsequently executed to guarantee the
indebtedness of Embassy Farms, and the succeeding promissory notes[8]restructuring the loan, then
petitioners are jointly and severally liable with Embassy Farms. Due to their failure to pay the
obligation, the foreclosure and subsequent sale of the mortgaged properties are valid.

414
 Respondents Salazar and Lamecs asserted that they are innocent purchasers for value and in
good faith, relying on the validity of the title of Mercator. Lamecs admitted the prior ownership of
petitioners of the subject parcels of land, but alleged that they are the present registered owner.
Both respondents likewise assailed the long silence and inaction by petitioners as it was only after
a lapse of almost ten (10) years from the foreclosure of the property and the subsequent sales that
they made their claim. Thus, Salazar and Lamecs averred that petitioners are in estoppel and guilty
of laches.[9]
During pre-trial, the parties agreed on the following issues:

a. Whether or not the Real Estate Mortgage executed by the plaintiffs in favor of
defendant Mercator Finance Corp. is null and void;

b. Whether or not the extra-judicial foreclosure proceedings undertaken on subject

parcels of land to satisfy the indebtedness of Embassy Farms, Inc. is (sic) null and
void;

c. Whether or not the sale made by defendant Mercator Finance Corp. in favor of Lydia
Salazar and that executed by the latter in favor of defendant Lamecs Realty and
Development Corp. are null and void;

d. Whether or not the parties are entitled to damages.[10]

After pre-trial, Mercator moved for summary judgment on the ground that except as to the
amount of damages, there is no factual issue to be litigated. Mercator argued that petitioners had
admitted in their pre-trial brief the existence of the promissory note, the continuing suretyship
agreement and the subsequent promissory notes restructuring the loan, hence, there is no genuine
issue regarding their liability. The mortgage, foreclosure proceedings and the subsequent sales are
valid and the complaint must be dismissed.[11]
Petitioners opposed the motion for summary judgment claiming that because their personal
liability to Mercator is at issue, there is a need for a full-blown trial.[12]
The RTC granted the motion for summary judgment and dismissed the complaint. It held:

A reading of the promissory notes show (sic) that the liability of the signatories thereto are
solidary in view of the phrase jointly and severally. On the promissory note appears (sic) the
signatures of Eduardo B. Evangelista, Epifania C. Evangelista and another signature of Eduardo
B. Evangelista below the words Embassy Farms, Inc. It is crystal clear then that the plaintiffs-
spouses signed the promissory note not only as officers of Embassy Farms, Inc. but in their
personal capacity as well(.) Plaintiffs(,) by affixing their signatures thereon in a dual capacity
have bound themselves as solidary debtor(s) with Embassy Farms, Inc. to pay defendant
Mercator Finance Corporation the amount of indebtedness. That the principal contract of loan is
void for lack of consideration, in the light of the foregoing is untenable.[13]

Petitioners motion for reconsideration was denied for lack of merit.[14] Thus, petitioners went
up to the Court of Appeals, but again were unsuccessful. The appellate court held:

415
The appellants insistence that the loans secured by the mortgage they executed were not
personally theirs but those of Embassy Farms, Inc. is clearly self-serving and misplaced. The fact
that they signed the subject promissory notes in the(ir) personal capacities and as officers of the
said debtor corporation is manifest on the very face of the said documents of indebtedness (pp.
118, 128-131, Orig. Rec.). Even assuming arguendo that they did not, the appellants lose sight
of the fact that third persons who are not parties to a loan may secure the latter by pledging or
mortgaging their own property (Lustan vs. Court of Appeals, 266 SCRA 663, 675). x x x. In
constituting a mortgage over their own property in order to secure the purported corporate debt
of Embassy Farms, Inc., the appellants undeniably assumed the personality of persons interested
in the fulfillment of the principal obligation who, to save the subject realities from foreclosure
and with a view towards being subrogated to the rights of the creditor, were free to discharge the
same by payment (Articles 1302 [3] and 1303, Civil Code of the Philippines).[15] (emphases in
the original)

The appellate court also observed that if the appellants really felt aggrieved by the foreclosure
of the subject mortgage and the subsequent sales of the realties to other parties, why then did they
commence the suit only on August 12, 1997 (when the certificate of sale was issued on January
12, 1987, and the certificates of title in the name of Mercator on September 27, 1988)? Petitioners
procrastination for about nine (9) years is difficult to understand. On so flimsy a ground as lack of
consideration, (w)e may even venture to say that the complaint was not worth the time of the
courts.[16]
A motion for reconsideration by petitioners was likewise denied for lack of merit. [17] Thus,
this petition where they allege that:

THE COURT A QUO ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AFFIRMING IN TOTO THE
MAY 4, 1998 ORDER OF THE TRIAL COURT GRANTING RESPONDENTS MOTION
FOR SUMMARY JUDGMENT DESPITE THE EXISTENCE OF GENUINE ISSUES AS TO
MATERIAL FACTS AND ITS NON-ENTITLEMENT TO A JUDGMENT AS A MATTER OF
LAW, THEREBY DECIDING THE CASE IN A WAY PROBABLY NOT IN ACCORD WITH
APPLICABLE DECISIONS OF THIS HONORABLE COURT.[18]

We affirm.
Summary judgment is a procedural technique aimed at weeding out sham claims or defenses
at an early stage of the litigation.[19] The crucial question in a motion for summary judgment is
whether the issues raised in the pleadings are genuine or fictitious, as shown by affidavits,
depositions or admissions accompanying the motion. A genuine issue means an issue of fact which
calls for the presentation of evidence, as distinguished from an issue which is fictitious or contrived
so as not to constitute a genuine issue for trial.[20] To forestall summary judgment, it is essential
for the non-moving party to confirm the existence of genuine issues where he has substantial,
plausible and fairly arguable defense, i.e., issues of fact calling for the presentation of evidence
upon which a reasonable finding of fact could return a verdict for the non-moving party. The proper
inquiry would therefore be whether the affirmative defenses offered by petitioners constitute
genuine issue of fact requiring a full-blown trial.[21]

416
 In the case at bar, there are no genuine issues raised by petitioners. Petitioners do not deny
that they obtained a loan from Mercator. They merely claim that they got the loan as officers of
Embassy Farms without intending to personally bind themselves or their property. However, a
simple perusal of the promissory note and the continuing suretyship agreement shows otherwise.
These documentary evidence prove that petitioners are solidary obligors with Embassy Farms.
The promissory note[22] states:

For value received, I/We jointly and severally promise to pay to the order of MERCATOR
FINANCE CORPORATION at its office, the principal sum of EIGHT HUNDRED FORTY-
FOUR THOUSAND SIX HUNDRED TWENTY-FIVE PESOS & 78/100 (P 844,625.78),
Philippine currency, x x x, in installments as follows:

September 16, 1982 - P154,267.87

October 16, 1982 - P154,267.87
November 16, 1982 - P154,267.87
December 16, 1982 - P154,267.87
January 16, 1983 - P154,267.87
February 16, 1983 - P154,267.87

x x x x x x x x x.
The note was signed at the bottom by petitioners Eduardo B. Evangelista and Epifania C.
Evangelista, and Embassy Farms, Inc. with the signature of Eduardo B. Evangelista below it.
The Continuing Suretyship Agreement[23] also proves the solidary obligation of
petitioners, viz:

(Embassy Farms, Inc.)

Principal
(Eduardo B. Evangelista)
Surety
(Epifania C. Evangelista)
Surety
(Mercator Finance Corporation)
Creditor

To: MERCATOR FINANCE COPORATION

(1) For valuable and/or other consideration, EDUARDO B. EVANGELISTA and EPIFANIA C.
EVANGELISTA (hereinafter called Surety), jointly and severally unconditionally guarantees
(sic) to MERCATOR FINANCE COPORATION (hereinafter called Creditor), the full, faithful
and prompt payment and discharge of any and all indebtedness of EMBASSY FARMS, INC.
(hereinafter called Principal) to the Creditor.

xxxxxxxxx

417
(3) The obligations hereunder are joint and several and independent of the obligations of the
Principal. A separate action or actions may be brought and prosecuted against the Surety whether
or not the action is also brought and prosecuted against the Principal and whether or not the
Principal be joined in any such action or actions.

x x x x x x x x x.
The agreement was signed by petitioners on February 16, 1982. The promissory
notes[24] subsequently executed by petitioners and Embassy Farms, restructuring their loan,
likewise prove that petitioners are solidarily liable with Embassy Farms.
Petitioners further allege that there is an ambiguity in the wording of the promissory note and
claim that since it was Mercator who provided the form, then the ambiguity should be resolved
against it.
Courts can interpret a contract only if there is doubt in its letter.[25] But, an examination of the
promissory note shows no such ambiguity. Besides, assuming arguendo that there is an ambiguity,
Section 17 of the Negotiable Instruments Law states, viz:

SECTION 17. Construction where instrument is ambiguous. Where the language of the
instrument is ambiguous or there are omissions therein, the following rules of construction apply:

xxxxxxxxx

(g) Where an instrument containing the word I promise to pay is signed by two or more persons,
they are deemed to be jointly and severally liable thereon.

Petitioners also insist that the promissory note does not convey their true intent in executing
the document. The defense is unavailing. Even if petitioners intended to sign the note merely as
officers of Embassy Farms, still this does not erase the fact that they subsequently executed a
continuing suretyship agreement. A surety is one who is solidarily liable with the
principal.[26] Petitioners cannot claim that they did not personally receive any consideration for the
contract for well-entrenched is the rule that the consideration necessary to support a surety
obligation need not pass directly to the surety, a consideration moving to the principal alone being
sufficient. A surety is bound by the same consideration that makes the contract effective between
the principal parties thereto.[27] Having executed the suretyship agreement, there can be no dispute
on the personal liability of petitioners.
Lastly, the parol evidence rule does not apply in this case.[28] We held in Tarnate v. Court of
Appeals,[29] that where the parties admitted the existence of the loans and the mortgage deeds and
the fact of default on the due repayments but raised the contention that they were misled by
respondent bank to believe that the loans were long-term accommodations, then the parties could
not be allowed to introduce evidence of conditions allegedly agreed upon by them other than those
stipulated in the loan documents because when they reduced their agreement in writing, it is
presumed that they have made the writing the only repository and memorial of truth, and whatever
is not found in the writing must be understood to have been waived and abandoned.
IN VIEW WHEREOF, the petition is dismissed. Treble costs against the petitioners.

418
 SO ORDERED.
Panganiban, and Sandoval-Gutierrez, JJ., concur.
Corona, and Carpio-Morales, JJ., on official leave.

**
Sometimes spelled as Lamecs.
[1]
RTC of Malolos, Bulacan, Br. 85, Rollo, pp. 23-29.
[2]
With Transfer Certificates of Title Nos. T-193458, T-192133, T-193136, T-193137 and T-
193138; Id. at 30-39.
[3]
Id. at 40.
[4]
Id. at 26.
[5]
Id. at 63.
[6]
Id. at 71.
[7]
Id. at 72-73.
[8]
Id. at 80-83.
[9]
Id. at 85-97.
[10]
Id. at 118.
[11]
Id. at 119-123.
[12]
Id. at 128-131.
[13]
Id. at 134, dated May 4, 1998.
[14]
Id. at 159, dated July 17, 1998.
[15]
Id. at 222-223, Decision dated May 12, 2000.
[16]
Id. at 223.
[17]
Id. at 234, dated May 14, 2001.
[18]
Id. at 12.
[19]
Evadel Realty and Development Corporation v. Soriano, 357 SCRA 395 (2001).
[20]
Manufacturers Hanover Trust Co. and/or Chemical Bank v. Rafael Ma. Guerrero, G.R. No.
136804, February 19, 2003.
[21]
Spouses Guillermo Agbada & Maxima Agbada v. Inter-urban Developers, et al., G.R. No.
144029, September 19, 2002.
[22]
Rollo, p. 71.
[23]
Id. at 72-73.

419
[24]
Id. at 80-83.
[25]
Article 1370. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control. (Civil Code of the
Philippines); Ong Yong, et al., v. David S. Tiu, et al., G.R. Nos. 144476 & 144629,
February 1, 2002.
[26]
Goldenrod, Incorporated v. Court of Appeals, 366 SCRA 217 (2001).
[27]
Charles Lee v. Court of Appeals, et al., G.R. Nos. 117913-14, February 1, 2002.
[28]
SEC. 9. Evidence of written agreements When the terms of an agreement have been reduced
to writing, it is considered as containing all the terms agreed upon and there can be, between
the parties and their successors in interest, no evidence of such terms other than the contents
of the written agreement.
However, a party may present evidence to modify, explain or add to the terms of the written
agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the parties
thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties of their successors in interest after the
execution of the written agreement.
The term agreement includes wills.
[29]
241 SCRA 254 (1995).

420
 Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

PHILIP TURNER and ELNORA G.R. No. 157479

TURNER,
Petitioners, Present:

CARPIO MORALES, Chairperson,

BRION,
-versus - BERSAMIN,
VILLARAMA, JR., and
ARANAL-SERENO, JJ.
Promulgated:
LORENZO SHIPPING
CORPORATION, November 24, 2010
Respondent.
x-----------------------------------------------------------------------------------------x

DECISION

BERSAMIN, J.:

This case concerns the right of dissenting stockholders to demand payment of the value of their
shareholdings.

In the stockholders suit to recover the value of their shareholdings from the corporation,
the Regional Trial Court (RTC) upheld the dissenting stockholders, herein petitioners, and ordered
the corporation, herein respondent, to pay. Execution was partially carried out against the
respondent. On the respondents petition for certiorari, however, the Court of Appeals (CA)
corrected the RTC and dismissed the petitioners suit on the ground that their cause of action for
collection had not yet accrued due to the lack of unrestricted retained earnings in the books of the
respondent.

Thus, the petitioners are now before the Court to challenge the CAs decision promulgated
on March 4, 2003 in C.A.-G.R. SP No. 74156 entitled Lorenzo Shipping Corporation v. Hon.

421
Artemio S. Tipon, in his capacity as Presiding Judge of Branch 46 of the Regional Trial Court of
Manila, et al.[1]

Antecedents

The petitioners held 1,010,000 shares of stock of the respondent, a domestic corporation
engaged primarily in cargo shipping activities. In June 1999, the respondent decided to amend its
articles of incorporation to remove the stockholders pre-emptive rights to newly issued shares of
stock. Feeling that the corporate move would be prejudicial to their interest as stockholders, the
petitioners voted against the amendment and demanded payment of their shares at the rate
of P2.276/share based on the book value of the shares, or a total of P2,298,760.00.
The respondent found the fair value of the shares demanded by the petitioners unacceptable. It
insisted that the market value on the date before the action to remove the pre-emptive right was
taken should be the value, or P0.41/share (or a total of P414,100.00), considering that its shares
were listed in the Philippine Stock Exchange, and that the payment could be made only if the
respondent had unrestricted retained earnings in its books to cover the value of the shares, which
was not the case.
The disagreement on the valuation of the shares led the parties to constitute an appraisal committee
pursuant to Section 82 of the Corporation Code, each of them nominating a representative, who
together then nominated the third member who would be chairman of the appraisal committee.
Thus, the appraisal committee came to be made up of Reynaldo Yatco, the petitioners nominee;
Atty. Antonio Acyatan, the respondents nominee; and Leo Anoche of the Asian Appraisal
Company, Inc., the third member/chairman.
On October 27, 2000, the appraisal committee reported its valuation of P2.54/share, for an
aggregate value of P2,565,400.00 for the petitioners.[2]

Subsequently, the petitioners demanded payment based on the valuation of the appraisal
committee, plus 2%/month penalty from the date of their original demand for payment, as well as
the reimbursement of the amounts advanced as professional fees to the appraisers.[3]

In its letter to the petitioners dated January 2, 2001,[4] the respondent refused the petitioners
demand, explaining that pursuant to the Corporation Code, the dissenting stockholders exercising
their appraisal rights could be paid only when the corporation had unrestricted retained earnings
to cover the fair value of the shares, but that it had no retained earnings at the time of the

422
 petitioners demand, as borne out by its Financial Statements for Fiscal Year 1999 showing a
deficit of P72,973,114.00 as of December 31, 1999.
Upon the respondents refusal to pay, the petitioners sued the respondent for collection and
damages in the RTC in Makati City on January 22, 2001. The case, docketed as Civil Case No.
01-086, was initially assigned to Branch 132.[5]
On June 26, 2002, the petitioners filed their motion for partial summary judgment, claiming that:

7) xxx the defendant has an accumulated unrestricted retained earnings

of ELEVEN MILLION NINE HUNDRED SEVENTY FIVE
THOUSAND FOUR HUNDRED NINETY (P11,975,490.00) PESOS,
Philippine Currency, evidenced by its Financial Statement as of the
Quarter Ending March 31, 2002; xxx

8) xxx the fair value of the shares of the petitioners as fixed by the
Appraisal Committee is final, that the same cannot be disputed xxx

9) xxx there is no genuine issue to material fact and therefore, the

plaintiffs are entitled, as a matter of right, to a summary judgment. xxx [6]

The respondent opposed the motion for partial summary judgment, stating that the determination
of the unrestricted retained earnings should be made at the end of the fiscal year of the
respondent, and that the petitioners did not have a cause of action against the respondent.
During the pendency of the motion for partial summary judgment, however, the Presiding Judge
of Branch 133 transmitted the records to the Clerk of Court for re-raffling to any of the
RTCs special commercial courts in Makati City due to the case being an intra-corporate
dispute. Hence, Civil Case No. 01-086 was re-raffled to Branch 142.

Nevertheless, because the principal office of the respondent was in Manila, Civil Case No.
01-086 was ultimately transferred to Branch 46 of the RTC in Manila, presided by Judge Artemio
Tipon,[7] pursuant to the Interim Rules of Procedure on Intra-Corporate Controversies (Interim
Rules) requiring intra-corporate cases to be brought in the RTC exercising jurisdiction over the
place where the principal office of the corporation was found.

After the conference in Civil Case No. 01-086 set on October 23, 2002, which the petitioners
counsel did not attend, Judge Tipon issued an order,[8] granting the petitioners motion for
partial summary judgment, stating:

423
 As to the motion for partial summary judgment, there is no question that the
3-man committee mandated to appraise the shareholdings of plaintiff submitted its
recommendation on October 27, 2000 fixing the fair value of the shares of stocks
of the plaintiff at P2.54 per share. Under Section 82 of the Corporation Code:

The findings of the majority of the appraisers shall be final, and the
award shall be paid by the corporation within thirty (30) days after the
award is made.

The only restriction imposed by the Corporation Code is

That no payment shall be made to any dissenting stockholder unless

the corporation has unrestricted retained earning in its books to cover such
payment.

The evidence submitted by plaintiffs shows that in its quarterly financial

statement it submitted to the Securities and Exchange Commission, the defendant
has retained earnings of P11,975,490 as of March 21, 2002. This is not disputed by
the defendant. Its only argument against paying is that there must be unrestricted
retained earning at the time the demand for payment is made.

This certainly is a very narrow concept of the appraisal right of a stockholder.

The law does not say that the unrestricted retained earnings must exist at the time
of the demand. Even if there are no retained earnings at the time the demand is
made if there are retained earnings later, the fair value of such stocks must be paid.
The only restriction is that there must be sufficient funds to cover the creditors after
the dissenting stockholder is paid. No such allegations have been made by the
defendant.[9]

On November 12, 2002, the respondent filed a motion for reconsideration.

On the scheduled hearing of the motion for reconsideration on November 22, 2002, the
petitioners filed a motion for immediate execution and a motion to strike out motion for
reconsideration. In the latter motion, they pointed out that the motion for reconsideration was
prohibited by Section 8 of the Interim Rules. Thus, also on November 22, 2002, Judge Tipon
denied the motion for reconsideration and granted the petitioners motion for immediate
execution.[10]

Subsequently, on November 28, 2002, the RTC issued a writ of execution.[11]

Aggrieved, the respondent commenced a special civil action for certiorari in the CA to challenge
the two aforecited orders of Judge Tipon, claiming that:

424
 A.
JUDGE TIPON GRAVELY ABUSED HIS DISCRETION IN GRANTING
SUMMARY JUDGMENT TO THE SPOUSES TURNER, BECAUSE AT THE
TIME THE COMPLAINT WAS FILED, LSC HAD NO RETAINED EARNINGS,
AND THUS WAS COMPLYING WITH THE LAW, AND NOT VIOLATING
ANY RIGHTS OF THE SPOUSES TURNER, WHEN IT REFUSED TO PAY
THEM THE VALUE OF THEIR LSC SHARES. ANY RETAINED EARNINGS
MADE A YEAR AFTER THE COMPLAINT WAS FILED ARE IRRELEVANT
TO THE SPOUSES TURNERS RIGHT TO RECOVER UNDER THE
COMPLAINT, BECAUSE THE WELL-SETTLED RULE, REPEATEDLY
BROUGHT TO JUDGE TIPONS ATTENTION, IS IF NO RIGHT EXISTED AT
THE TIME (T)HE ACTION WAS COMMENCED THE SUIT CANNOT BE
MAINTAINED, ALTHOUGH SUCH RIGHT OF ACTION MAY HAVE
ACCRUED THEREAFTER.

B.
JUDGE TIPON IGNORED CONTROLLING CASE LAW, AND THUS
GRAVELY ABUSED HIS DISCRETION, WHEN HE GRANTED AND ISSUED
THE QUESTIONED WRIT OF EXECUTION DIRECTING THE EXECUTION
OF HIS PARTIAL SUMMARY JUDGMENT IN FAVOR OF THE SPOUSES
TURNER, BECAUSE THAT JUDGMENT IS NOT A FINAL JUDGMENT
UNDER SECTION 1 OF RULE 39 OF THE RULES OF COURT AND
THEREFORE CANNOT BE SUBJECT OF EXECUTION UNDER THE
SUPREME COURTS CATEGORICAL HOLDING IN PROVINCE OF
PANGASINAN VS. COURT OF APPEALS.

Upon the respondents application, the CA issued a temporary restraining order (TRO),
enjoining the petitioners, and their agents and representatives from enforcing the writ of execution.
By then, however, the writ of execution had been partially enforced.

The TRO lapsed without the CA issuing a writ of preliminary injunction to prevent the
execution. Thereupon, the sheriff resumed the enforcement of the writ of execution.

The CA promulgated its assailed decision on March 4, 2003,[12] pertinently holding:

However, it is clear from the foregoing that the Turners appraisal right is
subject to the legal condition that no payment shall be made to any dissenting
stockholder unless the corporation has unrestricted retained earnings in its books to
cover such payment. Thus, the Supreme Court held that:

The requirement of unrestricted retained earnings to cover the

shares is based on the trust fund doctrine which means that the capital

425
 stock, property and other assets of a corporation are regarded as equity
in trust for the payment of corporate creditors. The reason is that
creditors of a corporation are preferred over the stockholders in the
distribution of corporate assets. There can be no distribution of assets
among the stockholders without first paying corporate creditors. Hence,
any disposition of corporate funds to the prejudice of creditors is null
and void. Creditors of a corporation have the right to assume that so
long as there are outstanding debts and liabilities, the board of directors
will not use the assets of the corporation to purchase its own stock.

In the instant case, it was established that there were no unrestricted retained
earnings when the Turners filed their Complaint. In a letter dated 20 August 2000,
petitioner informed the Turners that payment of their shares could only be made if
it had unrestricted earnings in its books to cover the same. Petitioner reiterated this
in a letter dated 2 January 2001 which further informed the Turners that its
Financial Statement for fiscal year 1999 shows that its retained earnings ending
December 31, 1999 was at a deficit in the amount of P72,973,114.00, a matter
which has not been disputed by private respondents. Hence, in accordance with the
second paragraph of sec. 82, BP 68 supra, the Turners right to payment had not yet
accrued when they filed their Complaint on January 22, 2001, albeit their appraisal
right already existed.
In Philippine American General Insurance Co. Inc. vs. Sweet Lines, Inc., the
Supreme Court declared that:

Now, before an action can properly be commenced all the essential

elements of the cause of action must be in existence, that is, the cause of
action must be complete. All valid conditions precedent to the institution
of the particular action, whether prescribed by statute, fixed by agreement
of the parties or implied by law must be performed or complied with
before commencing the action, unless the conduct of the adverse party has
been such as to prevent or waive performance or excuse non-performance
of the condition.

It bears restating that a right of action is the right to presently enforce

a cause of action, while a cause of action consists of the operative facts
which give rise to such right of action.The right of action does not arise
until the performance of all conditions precedent to the action and may be
taken away by the running of the statute of limitations, through estoppel,
or by other circumstances which do not affect the cause of
action. Performance or fulfillment of all conditions precedent upon which
a right of action depends must be sufficiently alleged, considering that the
burden of proof to show that a party has a right of action is upon the person
initiating the suit.

426
 The Turners right of action arose only when petitioner had already retained
earnings in the amount of P11,975,490.00 on March 21, 2002; such right of action
was inexistent on January 22, 2001 when they filed the Complaint.

In the doctrinal case of Surigao Mine Exploration Co. Inc., vs. Harris, the
Supreme Court ruled:

Subject to certain qualifications, and except as otherwise provided by

law, an action commenced before the cause of action has accrued is
prematurely brought and should be dismissed. The fact that the cause of
action accrues after the action is commenced and while it is pending is of
no moment. It is a rule of law to which there is, perhaps, no exception,
either at law or in equity, that to recover at all there must be some cause
of action at the commencement of the suit. There are reasons of public
policy why there should be no needless haste in bringing up litigation, and
why people who are in no default and against whom there is as yet no
cause of action should not be summoned before the public tribunals to
answer complaints which are groundless. An action prematurely brought
is a groundless suit. Unless the plaintiff has a valid and subsisting cause
of action at the time his action iscommenced, the defect cannot be cured
or remedied by the acquisition or accrual of one while the action is
pending, and a supplemental complaint or an amendment setting up such
after-accrued cause of action is not permissible.

The afore-quoted ruling was reiterated in Young vs Court of Appeals and Lao
vs. Court of Appeals.

The Turners apprehension that their claim for payment may prescribe if they
wait for the petitioner to have unrestricted retained earnings is misplaced. It is the
legal possibility of bringing the action that determines the starting point for the
computation of the period of prescription. Stated otherwise, the prescriptive period
is to be reckoned from the accrual of their right of action.

Accordingly, We hold that public respondent exceeded its jurisdiction when

it entertained the herein Complaint and issued the assailed Orders. Excess of
jurisdiction is the state of being beyond or outside the limits of jurisdiction, and as
distinguished from the entire absence of jurisdiction, means that the act although
within the general power of the judge, is not authorized and therefore void, with
respect to the particular case, because the conditions which authorize the exercise
of his general power in that particular case are wanting, and hence, the judicial
power is not in fact lawfully invoked.

We find no necessity to discuss the second ground raised in this petition.

427
 WHEREFORE, upon the premises, the petition is GRANTED. The assailed
Orders and the corresponding Writs of Garnishment are NULLIFIED. Civil Case
No. 02-104692 is hereby ordered DISMISSED without prejudice to refiling by the
private respondents of the action for enforcement of their right to payment as
withdrawing stockholders.

SO ORDERED.

The petitioners now come to the Court for a review on certiorari of the CAs decision,
submitting that:

I.
THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW
WHEN IT GRANTED THE PETITION FOR CERTIORARI WHEN THE
REGIONAL TRIAL COURT OF MANILA DID NOT ACT BEYOND ITS
JURISDICTION AMOUNTING TO LACK OF JURISDICTION IN GRANTING
THE MOTION FOR PARTIAL SUMMARY JUDGMENT AND IN GRANTING
THE MOTION FOR IMMEDIATE EXECUTION OF JUDGMENT;

II.
THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW
WHEN IT ORDERED THE DISMISSAL OF THE CASE, WHEN THE
PETITION FOR CERTIORARI MERELY SOUGHT THE ANNULMENT OF
THE ORDER GRANTING THE MOTION FOR PARTIAL SUMMARY
JUDGMENT AND OF THE ORDER GRANTING THE MOTION FOR
IMMEDIATE EXECUTION OF THE JUDGMENT;

III.
THE HONORABLE COURT OF APPEALS HAS DECIDED QUESTIONS OF
SUBSTANCE NOT THEREFORE DETERMINED BY THIS HONORABLE
COURT AND/OR DECIDED IT IN A WAY NOT IN ACCORD WITH LAW OR
WITH JURISPRUDENCE.

Ruling

The petition fails.

The CA correctly concluded that the RTC had exceeded its jurisdiction in entertaining the
petitioners complaint in Civil Case No. 01-086, and in rendering the summary judgment and
issuing writ of execution.

A.

428
 Stockholders Right of Appraisal, In General

A stockholder who dissents from certain corporate actions has the right to demand payment
of the fair value of his or her shares. This right, known as the right of appraisal, is expressly
recognized in Section 81 of the Corporation Code, to wit:

Section 81. Instances of appraisal right. - Any stockholder of a corporation

shall have the right to dissent and demand payment of the fair value of his shares
in the following instances:

1. In case any amendment to the articles of incorporation has the effect of

changing or restricting the rights of any stockholder or class of shares, or of
authorizing preferences in any respect superior to those of outstanding shares of
any class, or of extending or shortening the term of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage, pledge or other

disposition of all or substantially all of the corporate property and assets as provided
in the Code; and

3. In case of merger or consolidation. (n)

Clearly, the right of appraisal may be exercised when there is a fundamental change in the
charter or articles of incorporation substantially prejudicing the rights of the stockholders. It does
not vest unless objectionable corporate action is taken.[13] It serves the purpose of enabling the
dissenting stockholder to have his interests purchased and to retire from the corporation.[14]

Under the common law, there were originally conflicting views on whether a corporation had the
power to acquire or purchase its own stocks. In England, it was held invalid for a corporation to
purchase its issued stocks because such purchase was an indirect method of reducing capital
(which was statutorily restricted), aside from being inconsistent with the privilege of limited
liability to creditors.[15] Only a few American jurisdictions adopted by decision or statute the strict
English rule forbidding a corporation from purchasing its own shares. In some American states
where the English rule used to be adopted, statutes granting authority to purchase out of surplus
funds were enacted, while in others, shares might be purchased even out of capital provided the
rights of creditors were not prejudiced.[16] The reason underlying the limitation of share purchases
sprang from the necessity of imposing safeguards against the depletion by a corporation of its
assets and against the impairment of its capital needed for the protection of creditors.[17]

429
Now, however, a corporation can purchase its own shares, provided payment is made out of
surplus profits and the acquisition is for a legitimate corporate purpose.[18] In the Philippines, this
new rule is embodied in Section 41 of the Corporation Code, to wit:

Section 41. Power to acquire own shares. - A stock corporation shall have the
power to purchase or acquire its own shares for a legitimate corporate purpose or
purposes, including but not limited to the following cases: Provided, That the
corporation has unrestricted retained earnings in its books to cover the shares to be
purchased or acquired:

1. To eliminate fractional shares arising out of stock dividends;

2. To collect or compromise an indebtedness to the corporation, arising out of

unpaid subscription, in a delinquency sale, and to purchase delinquent shares sold
during said sale; and

3. To pay dissenting or withdrawing stockholders entitled to payment for their

shares under the provisions of this Code. (n)

The Corporation Code defines how the right of appraisal is exercised, as well as the
implications of the right of appraisal, as follows:

1. The appraisal right is exercised by any stockholder who has voted against the
proposed corporate action by making a written demand on the corporation
within 30 days after the date on which the vote was taken for the payment of
the fair value of his shares. The failure to make the demand within the period is
deemed a waiver of the appraisal right.[19]

2. If the withdrawing stockholder and the corporation cannot agree on the fair
value of the shares within a period of 60 days from the date the stockholders
approved the corporate action, the fair value shall be determined and appraised
by three disinterested persons, one of whom shall be named by the stockholder,
another by the corporation, and the third by the two thus chosen. The findings
and award of the majority of the appraisers shall be final, and the corporation
shall pay their award within 30 days after the award is made. Upon payment by
the corporation of the agreed or awarded price, the stockholder shall forthwith
transfer his or her shares to the corporation.[20]

3. All rights accruing to the withdrawing stockholders shares, including voting

and dividend rights, shall be suspended from the time of demand for the
payment of the fair value of the shares until either the abandonment of the
corporate action involved or the purchase of the shares by the corporation,
except the right of such stockholder to receive payment of the fair value of the
shares.[21]

430
 4. Within 10 days after demanding payment for his or her shares, a dissenting
stockholder shall submit to the corporation the certificates of stock representing
his shares for notation thereon that such shares are dissenting shares. A failure
to do so shall, at the option of the corporation, terminate his rights under this
Title X of the Corporation Code. If shares represented by the certificates
bearing such notation are transferred, and the certificates are consequently
canceled, the rights of the transferor as a dissenting stockholder under this Title
shall cease and the transferee shall have all the rights of a regular stockholder;
and all dividend distributions that would have accrued on such shares shall be
paid to the transferee.[22]

5. If the proposed corporate action is implemented or effected, the corporation

shall pay to such stockholder, upon the surrender of the certificates of stock
representing his shares, the fair value thereof as of the day prior to the date on
which the vote was taken, excluding any appreciation or depreciation in
anticipation of such corporate action.[23]

Notwithstanding the foregoing, no payment shall be made to any dissenting stockholder

unless the corporation has unrestricted retained earnings in its books to cover the payment. In case
the corporation has no available unrestricted retained earnings in its books, Section 83 of
the Corporation Code provides that if the dissenting stockholder is not paid the value of his shares
within 30 days after the award, his voting and dividend rights shall immediately be restored.
The trust fund doctrine backstops the requirement of unrestricted retained earnings to fund the
payment of the shares of stocks of the withdrawing stockholders. Under the doctrine, the capital
stock, property, and other assets of a corporation are regarded as equity in trust for the payment of
corporate creditors, who are preferred in the distribution of corporate assets.[24] The creditors of a
corporation have the right to assume that the board of directors will not use the assets of the
corporation to purchase its own stock for as long as the corporation has outstanding debts and
liabilities.[25] There can be no distribution of assets among the stockholders without first paying
corporate debts. Thus, any disposition of corporate funds and assets to the prejudice of creditors is
null and void.[26]

B.
Petitioners cause of action was premature

That the respondent had indisputably no unrestricted retained earnings in its books at the time the
petitioners commenced Civil Case No. 01-086 on January 22, 2001 proved that the respondents
legal obligation to pay the value of the petitioners shares did not yet arise. Thus, the CA did not

431
err in holding that the petitioners had no cause of action, and in ruling that the RTC did not validly
render the partial summary judgment.
A cause of action is the act or omission by which a party violates a right of another.[27] The essential
elements of a cause of action are: (a) the existence of a legal right in favor of the plaintiff; (b) a
correlative legal duty of the defendant to respect such right; and (c) an act or omission by such
defendant in violation of the right of the plaintiff with a resulting injury or damage to the plaintiff
for which the latter may maintain an action for the recovery of relief from the
defendant.[28] Although the first two elements may exist, a cause of action arises only upon the
occurrence of the last element, giving the plaintiff the right to maintain an action in court for
recovery of damages or other appropriate relief.[29]
Section 1, Rule 2, of the Rules of Court requires that every ordinary civil action must be based on
a cause of action. Accordingly, Civil Case No. 01-086 was dismissible from the beginning for
being without any cause of action.

The RTC concluded that the respondents obligation to pay had accrued by its having the
unrestricted retained earnings after the making of the demand by the petitioners. It based its
conclusion on the fact that the Corporation Code did not provide that the unrestricted retained
earnings must already exist at the time of the demand.

The RTCs construal of the Corporation Code was unsustainable, because it did not take
into account the petitioners lack of a cause of action against the respondent. In order to give rise
to any obligation to pay on the part of the respondent, the petitioners should first make a valid
demand that the respondent refused to pay despite having unrestricted retained earnings.
Otherwise, the respondent could not be said to be guilty of any actionable omission that could
sustain their action to collect.

Neither did the subsequent existence of unrestricted retained earnings after the filing of the
complaint cure the lack of cause of action in Civil Case No. 01-086. The petitioners right of action
could only spring from an existing cause of action. Thus, a complaint whose cause of action has
not yet accrued cannot be cured by an amended or supplemental pleading alleging the existence or
accrual of a cause of action during the pendency of the action.[30] For, only when there is an
invasion of primary rights, not before, does the adjective or remedial law become
operative.[31] Verily, a premature invocation of the courts intervention renders the complaint
without a cause of action and dismissible on such ground.[32] In short, Civil Case No. 01-086, being
a groundless suit, should be dismissed.

432
Even the fact that the respondent already had unrestricted retained earnings more than sufficient
to cover the petitioners claims on June 26, 2002 (when they filed their motion for partial
summary judgment) did not rectify the absence of the cause of action at the time of the
commencement of Civil Case No. 01-086. The motion for partial summary judgment,
being a mere application for relief other than by a pleading,[33] was not the same as the
complaint in Civil Case No. 01-086. Thereby, the petitioners did not meet the requirement
of the Rules of Court that a cause of action must exist at the commencement of an action,
which is commenced by the filing of the original complaint in court.[34]
The petitioners claim that the respondents petition for certiorari sought only the annulment of the
assailed orders of the RTC (i.e., granting the motion for partial summary judgment and the motion
for immediate execution); hence, the CA had no right to direct the dismissal of Civil Case No. 01-
086.
The claim of the petitioners cannot stand.

Although the respondents petition for certiorari targeted only the RTCs orders granting the motion
for partial summary judgment and the motion for immediate execution, the CAs directive for the
dismissal of Civil Case No. 01-086 was not an abuse of discretion, least of all grave, because such
dismissal was the only proper thing to be done under the circumstances. According to Surigao
Mine Exploration Co., Inc. v. Harris:[35]

Subject to certain qualification, and except as otherwise provided by law, an action

commenced before the cause of action has accrued is prematurely brought and
should be dismissed. The fact that the cause of action accrues after the action is
commenced and while the case is pending is of no moment. It is a rule of law to
which there is, perhaps no exception, either in law or in equity, that to recover at
all there must be some cause of action at the commencement of the suit. There are
reasons of public policy why there should be no needless haste in bringing up
litigation, and why people who are in no default and against whom there is as yet
no cause of action should not be summoned before the public tribunals to answer
complaints which are groundless. An action prematurely brought is a groundless
suit. Unless the plaintiff has a valid and subsisting cause of action at the time
his action is commenced, the defect cannot be cured or remedied by the
acquisition or accrual of one while the action is pending, and a supplemental
complaint or an amendment setting up such after-accrued cause of action is not
permissible.

Lastly, the petitioners argue that the respondents recourse of a special action for certiorari was the
wrong remedy, in view of the fact that the granting of the motion for partial summary
judgment constituted only an error of law correctible by appeal, not of jurisdiction.

433
The argument of the petitioners is baseless. The RTC was guilty of an error of jurisdiction, for it
exceeded its jurisdiction by taking cognizance of the complaint that was not based on an existing
cause of action.
WHEREFORE, the petition for review on certiorari is denied for lack of merit.

We affirm the decision promulgated on March 4, 2003 in C.A.-G.R. SP No. 74156

entitled Lorenzo Shipping Corporation v. Hon. Artemio S. Tipon, in his capacity as Presiding
Judge of Branch 46 of the Regional Trial Court of Manila, et al.

Costs of suit to be paid by the petitioners.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice
Chairperson

ARTURO D. BRION MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

MARIA LOURDES P. ARANAL-SERENO

Associate Justice
434
 ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

CONCHITA CARPIO MORALES

Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation,
I certify that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

[1]
Rollo, pp. 20-35; penned by Associate Justice Portia Alio-Hormachuelos, with Associate Justice
Jose L. Sabio, Jr. (retired) and Associate Justice Amelita G. Tolentino concurring.
[2]
Id., p.127.
[3]
Id., p.100.
[4]
Id., pp 118-119.
[5]
Id., p. 120-124.
[6]
Id., pp 151-152.
[7]
Already retired.
[8]
Rollo, pp. 91-93.
[9]
Id., p. 92.
[10]
Id., pp. 94-96.
[11]
Id., p. 97.
[12]
Id., pp. 20-35.
[13]
18 CJS, Corporations, 314, pp. 641-642.
[14]
Ibid.

435
[15]
Ballantine, Law of Corporations, Revised Edition, Callaghan and Co., Chicago, 1946, p. 603.
[16]
Id., p. 604.
[17]
Id., p. 605.
[18]
II Campos Jr., The Corporation Code, Comments, Notes and Selected Cases (1990).
[19]
Section 82, Corporation Code.
[20]
Ibid.
[21]
Id., Section 83.
[22]
Id., Section 86.
[23]
Id., Section 82.
[24]
Boman Environment Development Corporation v. Court of Appeals, G.R. No. L-
77860, November 22, 1988, 167 SCRA 540, 541; citing Steinberg v. Velasco, 52 Phil. 953 (1929).
According to 42A, Words and Phrases, Trust Fund Doctrine, p. 445, the trust fund doctrine is a
rule that the property of a corporation is a trust fund for the payment of creditors, but such property
can be called a trust fund only by way of analogy or metaphor. As between the corporation itself
and its creditors it is a simple debtor, and as between its creditors and stockholders its assets are in
equity a fund for the payment of its debts (citing McIver v. Young Hardware Co., 57 S.E. 169, 171,
144 N.C. 478, 119 Am. St. Rep. 970; Gallagher v. Asphalt Co. of America, 55 A. 259, 262, 65 N.J.
Eq. 258).
[25]
Boman Environment Development Corporation v. Court of Appeals, supra.
[26]
Id.
[27]
Section 2, Rule 2, Rules of Court.
[28]
Rebollido v. Court of Appeals, G.R. No. 81123, February 28, 1989, 170 SCRA 800; Heirs of
Ildefonso Coscolluela v. Rico General Insurance Corporation, G.R. No. 84628, November 16,
1989, 179 SCRA 511; Nabus v. Court of Appeals, G.R. No. 91670, February 7, 1990, 193 SCRA
732;Mathay v. Consolidated Bank, G.R. No. L-23136, August 26, 1974, 58 SCRA 559; Leberman
Realty Corporation v. Typingco, G.R. No. 126647, July 29, 1998, 293 SCRA 316.
[29]
Swagman Hotels and Travel, Inc. v. Court of Appeals, G.R. No. 161135, April 8, 2005, 455
SCRA 175.
[30]
Lao v. Court of Appeals, G.R. No. 47013, February 17, 2000, 325 SCRA 694.
[31]
Id.
[32]
Estrada v. Court of Appeals, G.R. No. 137862, November 11, 2004, 442 SCRA 117.
[33]
Section 1, Rule 15, Rules of Court.
[34]
Section 5, Rule 1, Rules of Court; A.G. Development Corporation v. Court of Appeals, G.R.
No. 111662, October 23, 1997, 281 SCRA 155.
[35]
68 Phil 113 (1939).

436
 THIRD DIVISION

[G.R. No. 131466. November 27, 1998]

CRISTINA DIMAN, CLARISSA DIMAN, GEORGE DIMAN, FELIPE DIMAN and

FLORINA DIMAN, petitioners, vs. HON, FLORENTINO M. ALUMBRES,
PRESIDING JUDGE, REGIONAL TRIAL COURT, LAS PIAS, BRANCH 255;
HEIRS OF VERONICA V. MORENO LACALLE, REPRESENTED BY JOSE
MORENO LACALLE, respondents.

DECISION
NARVASA, C.J.:

The petition for review on certiorari in this case was initially dismissed by Resolution dated
January 14, 1998; but after deliberating on petitioners' motion for reconsideration dated February
23, 1998, the private respondents' comment thereon, the reply to the comment, as well as the record
of the case itself, the Court was convinced that the order of dismissal should be reconsidered and
the petition reinstated. It accordingly promulgated a resolution to that effect on October 12, 1998,
and required "respondents to file their Comment on the petition within ten (10) days from notice
**."
Notice of the Resolution was duly served on private respondents' attorney on October 21,
1998. The latter filed a motion for extension of time of thirty (30) days to file comment, counted
from October 31. The Court granted the extension sought, but only for fifteen (15) days.
The comment was filed late, on November 20, 1998, Counsel's explanation is that he had
sought an extension of 30 days "due to the other volume of legal works similarly situated and
school work of the undersigned as professor of law and dean of the University of Manila," and had
entertained "the honest belief" that it would be granted. However, he learned belatedly that only a
15-day extension had been conceded. He forthwith completed the comment and filed it, albeit five
days late.
The Court admits the late comment, but takes this occasion to reiterate the familiar doctrine
that no party has a right to an extension of time to comply with an obligation within the period set
therefor by law; motions for extension are not granted as a matter of course; their concession lies
in the sound discretion of the Court exercised in accordance with the attendant circumstances; the
movant is not justified in assuming that the extension sought will be granted, or that it will be
granted for the length of time suggested by him. It is thus incumbent on any movant for extension
to exercise due diligence to inform himself as soon as possible of the Court's action on his motion,
by time inquiry of the Clerk of Court. Should he neglect to do so, he runs the risk of time running
out on him, for which he will have nobody but himself to blame.
Now, the petition for review on certiorari appends practically all the material pleadings,
motions, orders and judgments in the Regional Trial Court and the Court of Appeals. The
respondents' comment on the petition has been filed, as just mentioned, and opposes its material
437
averments. There is now no impediment to the adjudication of petitioners' appeal on the merits on
the basis of the record as it stands at this time. This, the Court will now proceed to do.
In 1991, more than fifty years after the effectivity of the Rules of Court[1] -- containing
provisions relative inter alia to the modes of discovery[2] -- this Court had occasion to observe that
"among far too many lawyers (and not a few judges), there is, if not regrettable unfamiliarity and
even outright ignorance about the nature, purposes and operation of the modes of discovery, at
least a strong yet unreasoned and unreasonable disinclination to resort to them -- which is a great
pity for the intelligent and adequate use of the deposition-discovery procedure, could, as the
experience of other jurisdictions convincingly demonstrate, effectively shorten the period of
litigation and speed up adjudication."[3]
The case at bar deals with one of such modes of discovery -- a request for admission under
Rule 26 of the Rules of 1964; more particularly, the legal consequences of the failure to respond
thereto in the manner indicated by law. It also treats of other adjective devices to expedite
litigation: a summary judgment under Rule 34,[4] and a judgment on demurrer to evidence under
Rule 35.[5] Had the principles involved been better understood and more faithfully observed, the
case might have been more quickly decided.
Actually, there are several adjective tools incorporated in the Rules of Court explicitly
designed, like those just mentioned, to abbreviate litigation or abort it at certain stages. Their
obvious purpose is to unmask as quickly as may be feasible, and give short shrift to, untenable
causes of action or defenses and thus avoid waste of time, effort and money. [6] For reasons yet to
be fathomed, these devices seem to be of scant familiarity and of infrequent availment, as above
observed, with the result that the salutary objective of the Rules of bringing about a simple,
inexpensive and expeditious system of litigation has not been fully achieved.
Now, to come to grips with the case. There is no disagreement about the antecedents. The case
began in the Regional Trial Court of Las Pias (Branch 255), where a complaint for "Quieting of
Title and Damages" was filed by the Heirs of Veronica V.Moreno Lacalle (represented by Jose
Moreno Lacalle) against Cristina Diman, Clarissa Diman, George Diman, Felipe Diman and
Florina Diman.[7] In their complaint, the Lacalle heirs claimed that:
a) their mother, the late Veronica V. Moreno Lacalle (who died in 1992), was the owner
of a "parcel of land situated at Brgy. Pulang Lupa Uno, Las Pias, ** covered by Transfer
Certificate of Title No. 273301 of the Registry of Deeds of the Province of Rizal;"
b) Veronica Lacalle had acquired the land in 1959 by virtue of a deed of absolute sale,
and retained as caretakers the persons she found in occupancy of the lot at the time of
the sale, namely: Julian Nario and his wife, Adelaida Legaspi, "with arrangement to
share the agricultural fruits" until the former would have need of the property;
c) the caretakers of the lot were served with a notice for them to vacate the land (dated
November 22, 1994) and an alias writ of demolition (dated June 7, 1994) issued by the
Metropolitan Trial Court in Civil Case No. 2619 -- a case for "ejectment with damages"
filed by the Dimans against the Narios, judgment in which, commanding the Narios'
ouster, had supposedly been affirmed by the Makati Regional Trial Court (Branch 137);
d) neither the deceased Veronica nor any of her heirs had been made parties to said
ejectment action;

438
 e) the complaint for ejectment contains false assertions, and had caused them injury for
which the Dimans should be made to pay damages.
In their answer with counterclaim dated February 2, 1995,[8] the Dimans alleged that:
a) they are the registered and absolute owners of the land registered in their names under
TCT Nos. 90628, 90629 and 58676 (Pasay City), and have no knowledge of the land
claimed by the Lacalle Heirs;
b) they are entitled to eject from their land the Nario Spouses, who were falsely
claiming to be their lessees;
c) if the Heirs' theory is that the land in their title, No. 273301, is the same as that
covered by the Dimans' titles, then said title No. 2733101 is spurious because:
(1) no less than three official agencies -- (i) the Office of the Registrar of Deeds
for Rizal and Regional Registrar for Region IV, (ii) the Registrar of Deeds of
Pasay City, and (iii) the Pangasiwaan Pangtalaan ng Lupain (Land
Registration Authority) -- have certified to the absence of any entry in their
records concerning TCT No. 273301 covering land with an area of 22,379
square meters in the name of Veronica Vda. De Moreno Lacalle;
(2) Decree No. N-11601 explicitly cited as basis by TCT No. 273301 refers to
land in Mauban, Quezon Province, according to the records of the Land
Registration Authority; and GLRO Record No. 14978 also expressly mentioned
as basis for TCT No. 273301, refers to a registration case heard in Pangasinan;

and

d) they are entitled to damages on their counterclaim.

After joinder of the issues, the Dimans served on the Heirs on February 2, 1995, a REQUEST
FOR ADMISSION (dated February 2, 1995) of the truth of the following specified matters of fact,
to wit:[9]
a) the Heirs' TCT 273301 (Rizal) is not recorded in the Registry of Rizal, or of Pasay
City, or of Paraaque, or of Las Pias;
b) the Dimans' transfer certificates of title are all duly registered in their names in Pasay
City, as alleged in their answer;
c) in the Index Records of Registered Property Owners under Act No. 496 in the Office
of the land Registration Authority, there is no record of any property situated in Las Pias
in the name of Veronica Lacalle, more particularly described in TCT 273301;
4) the Heirs cannot produce a certified true copy of TCT 273301;
5) neither Veronica Lacalle nor any of her heirs ever declared the property under TCT
273301 for taxation purposes since its alleged acquisition on February 24, 1959 or since
the issuance of said title on August 7, 1959;
6) not a single centavo has been paid by the Heirs as real estate taxes; and

439
 7) no steps have been taken by the Heirs to ascertain the genuineness and authenticity of
the conflicting titles.
The REQUEST FOR ADMISSION was received by Jose Lacalle himself through registered
mail on February 6, 1995, and copy thereof, by the latter's lawyer (Atty. Cesar T. Ching) on
February 4, 1995.However, no response whatever was made to the request by Lacalle, his lawyer,
or anyone else, despite the lapse of the period therefor fixed by Section 2 of Rule 26 (not less than
ten days after service). The Dimans thereupon filed with the Court a "MANIFESTATION WITH
MOTION TO REQUIRE PLAINTIFFS TO ANSWER REQUEST FOR ADMISSION," dated
March 28, 1995,[10] giving the Heirs ten (10) more days to file their answer to the request for
admission, a copy of which was personally delivered to the latter's lawyer; but again, no response
whatever was made.
The Dimans then submitted a "MOTION FOR SUMMARRY JUDGMENT" dated April 17,
1995.[11] In that motion they drew attention to the Heirs' failure to file any Pre-Trial Brief, and the
several instances when the Heirs failed to appear at scheduled hearings resulting in the dismissal
of their complaint, which was however later reinstated. They argued that because the heirs had
failed to respond to their REQUEST FOR ADMISSION, each of the matters of which an
admission was requested, was deemed admitted pursuant to Section 2, Rule 26. On this basis, and
on the basis of the joint affidavit of Clarissa Diman de los Reyes and Florina Diman Tan -- attached
to the motion and substantiating the facts recited in the request for admission -- the Dimans asserted
that no genuine issue existed and prayed that "a summary judgment be entered dismissing the case
for lack of merit."
The Heirs' counsel filed a two-page opposition dated May 15, 1995[12] in which, betraying an
unfortunate unfamiliarity with the concept of summary judgments, he asserted inter alia that:
"In order for defendants (Dimans) to successfully pray for judgment on the pleadings,
they have to clearly alleged in their permissive counterclaim their cause of action and if
the answer of the plaintiffs (Heirs) to such kind of counterclaim admit (sic) it or the
answer to the counterclaim is a sham, that is the time for the defendants to move for a
judgment summarily. ** ** (D)efendants have no cause of action for praying for
summary judgment. It is the plaintiffs who will pray for that and not the defendants."
Subsequently, the Dimans submitted a reply dated May 23, 1995;[13] the Heirs, a rejoinder
dated June 1, 1995;[14] and the Dimans, a pleading entitled "Exceptions and Comment to Plaintiffs'
Rejoinder" dated June 8, 1995.[15]
The Trial Court denied the Dimans' motion for summary judgment. In its Order of June 14,
1995,[16] the Court declared that a "perusal of the Complaint and the Answer will clearly show that
material issue is raised in that both plaintiffs and defendants claimed ownership over the land in
dispute, presenting their respective titles thereto and accused each other of possessing false title to
the land." It stressed, citing jurisprudence, that a summary judgment "is not proper where the
defendant presented defenses tendering factual issues which call for the presentation of evidence."
The case proceeded to trial in due course. At its start, the Heirs' counsel, Atty. Michael
Moralde, responding to questions of the Court, admitted that his clients did not have the original
copy of the title which was the basis for their cause of action, but asserted that they were "still
searching" for it since "(i)n every municipality there are several Registry of Deeds." He theorized

440
that the word "'title' ** is a relative term ** (and) does not only refer to a document but refers to
ownership."[17]
Only Jose Moreno Lacalle gave evidence for the plaintiff Heirs. Like Atty. Moralde, he
admitted that he had no copy "of the document which says ** (his) mother is the registered owner;"
that the deed of sale was not the only basis for his and his co-heirs' claim to the land, but also "a
xerox copy of the ** title ** except that ** (he) cannot find the original;" that "maybe" the original
was in possession of the person who was his mother's agent in all her transactions, a certain Mr.
Lopez, whom he could no longer locate; that he had tried to verify the existence of the title "from
the Register of Deeds of Pasig and Pasay" without success; that he had not, however, gone to the
Register of Deeds of Paraaque or Las Pias.[18]
The Heirs' documentary evidence consisted of (1) Veronica Lacalle's death certificate, (2) the
special power of attorney authorizing Jose Lacalle to act for his brothers and sisters; and (3) the
deed of absolute sale purportedly executed by Eusebio Mojica, Clara Mojica, Maria Mojica,
Antonia Mojica, Amanda Mojica and Teodora Aranda which deeded over to Veronica Lacalle the
"Land 'known as Lot 1 PSU-151453,'" but which made no reference to any Torrens title over it
Shortly after the Heirs rested their case, the Dimans filed a "Motion for Judgment on Demurrer
to Evidence," dated June 25, 1996.[19] They summarized the Heirs' evidence -- focusing attention
on the Heirs failure to present "even an unauthenticated photocopy of the title," and the absence
of any proof that any proceedings for registration of the land under the Torrens Act had been
instituted -- and emphasized anew said Heirs' implied admissions resulting from their failure to
answer their (the Dimans') request therefor as a mode of discovery. On these premises, the Dimans
contended that a judgment on demurrer should be rendered, there being no genuine issue between
the parties notwithstanding the ostensible conflict of averments in their basic pleadings.
The Heirs presented a three-page opposition, dated July 7, 1996.[20] In it their counsel set out
the startling contention that "(d)emurrer to evidence is violative to due process as the judgment be
rendered without giving the plaintiff the opportunity to cross-examine the defendant," and
petulantly inquired, "How could the truth come out without cross-examination of the defendants
by plaintiff?" particularly, as regards "whether their (the Dimans') title is not fake." Said counsel
also posited the amazing notion that "Demurrer to evidence may be correct only in criminal cases
as it is the right of the accused to remain silent, and that includes his right to file demurrer for fear
of cross-examination. But not in Civil Cases." Once more counsel regrettably exposed his
ignorance of quite elementary legal principles.
Again, the Dimans' efforts at expediting disposition of the litigation were unsuccessful. By
Order dated December 2, 1996,[21] the Trial Court denied their motion to dismiss. Respecting the
Heirs' omission to present in evidence any copy (even a photocopy) of TCT No. 273301, the Court
remarked that "Not being able to prove the genuineness and authenticity of TCT No. 273301, it
being only a mere xerox copy ** (the Heirs) did not formally offer the same in
evidence." However, the Court said, the deed of sale of the land in Veronica Lacalle's favor that
was submitted instead -- the "genuineness and authenticity ** (of which had) been fully
established" by the certification of the Clerk of Court of the Manila RTC -- was adequate for the
purpose. According to the Court, "(e)xecution of a deed of conveyance in a certain prescribed form
gave to the transfer of a title to the land conveyed ** (and) without being controverted by any
convincing evidence to the contrary can be sufficient basis in granting the plaintiffs' relief for

441
quieting of their title." The Order passed sub silentio on the quaint contentions in the Heirs'
opposition.
The Dimans moved for reconsideration under date of January 2, 1997,[22] inter alia (1)
alleging that although the photocopy of TCT 2773301 annexed to the Heirs' complaint states that
the "certificate is a transfer from T.C.T. No. 259150" (and this, presumably, would be the vendors'
[the Mojicas'] title), no effort whatever was made to submit proof thereof, and (2) reiterating the
proposition that the Heirs were bound by their implied admissions under Rule 26.
The Dimans also submitted a "SUPPLEMENT TO MOTION FOR RECONSIDERATION"
dated January 7, 1997[23] in which they invited attention to the identity of the technical description
of the land contained in the deed of sale to Veronica Lacalle and that set out in TCT No. 273301. It
must therefore have been Veronica Lacalle, they reasoned, who had instituted the registration
proceedings leading to the supposed issuance of said TCT No. 273301. Yet the heirs failed to
present evidence of the record of any such registration proceedings, just as they failed to present
evidence of any authentic copy of the title itself.
The Heirs filed a one-page "Vehement Opposition ** " dated February 15, 1997.[24] Once
again they reiterated the astounding argument that the Dimans' "insistence ** (on the demurrer to
evidence) is tantamount to suppression of their evidence as they are afraid of cross-examination"!
Again the Trial Court rebuffed the Dimans. In its Order of February 28, 1997,[25] the Court
ruled that the issues raised in the motion for reconsideration and its supplement had already been
passed upon in the Order of December 2, 1996. It then set the case "for the reception of defendants'
evidence on April 22, 1997 **."
What the Dimans did was to commence a special civil action of certiorari, mandamus and
prohibition in the Court of Appeals praying (a) that it set aside the Orders of June 14, 1995
(denying summary judgment), of December 2, 1996 (denying demurrer to evidence), and of
February 28, 1997 (denying reconsideration); (b) that the Trial Judge be commanded to dismiss
the case before it; and (c) that said judge be prohibited from conducting further proceedings in the
case.
But once again their efforts met with failure. The Appellate Tribunal (Seventh Division)
promulgated judgment on September 9, 1997 decreeing that their petition be "DENIED due course
and DISMISSED." The Court of Appeals held that insofar as concerned the Order of June 14,
1995, the petition for its invalidation had not been filed within a reasonable time; and that as
regards the Order of December 2, 1996, the remedy of certiorari was improper because : (1) said
order was merely interlocutory, (2) any error therein constituted only an error of judgment
correctible by appeal, and (3) there was no capriciousness or whimsicality attendant upon the
order. The Dimans' motion for reconsideration was later denied by the Court of Appeals by
Resolution dated November 5, 1997.[26]
The Dimans thereupon filed with this Court a petition for review on certiorari of the Appellate
Tribunal's Decision of September 9, 1997. But seemingly consistent with the pattern of judicial
misfortune which they had theretofore been traversing, their petition for review was dismissed, by
Resolution dated January 14, 1998. Their appeal was however subsequently reinstated, as earlier
recounted.

442
 Now, what first strikes the Court about the case at bar is the regrettable absence of familiarity,
therein laid bare, with the rules of discovery and with the underlying philosophy and principles of
the cognate remedy of summary judgment. That resulted in the undue protraction of the present
action despite ample demonstration of the absence of any genuine issue -- that is to say, that the
issues ostensibly arising from the pleadings were sham or fictitious.
A Trial Court has no discretion to determine what the consequences of a party's refusal to
allow or make discovery should be; it is the law which makes that determination; and it is grave
abuse of discretion for the Court to refuse to recognize and observe the effects of that refusal as
mandated by law. Particularly as regards request for admission under Rule 26 of the Rules of
Court, the law ordains that when a party is served with a written request that he admit : (1) the
genuineness of any material and relevant document described in and exhibited with the request, or
(2) the truth of any material and relevant matter of fact set forth in the request, said party is bound
within the period designated in the request,[27] to file and serve on the party requesting the
admission a sworn statement either (10 denying specifically the matters of which an admission is
requested or (2) setting forth in details the reasons why he cannot truthfully either admit or deny
those matters. If the party served does not respond with such sworn statement, each of the matters
of which an admission is requested shall be deemed admitted.[28]
In this case, the Dimans' request for admission was duly served by registered mail on Jose
Lacalle on February 6, 1995, and a copy thereof on his lawyers on February 4, 1995. Neither made
any response whatever within the reglementary period. Nor did either of them do so even after
receiving copy of the Dimans' "MANIFESTATION WITH MOTION TO REQUIRE
PLAINTIFFS TO ANSWER REQUEST FOR ADMISSION." dated March 28, 1995. On account
thereof, in legal contemplation, the Heirs impliedly admitted all the facts listed in the request for
admission. These plain and simple legal propositions were disregarded by His Honor.
It is also the law which determines when a summary judgment is proper. It declares that
although the pleadings on their face appear to raise issues of fact -- e.g., there are denials of, or a
conflict in, factual allegations -- if it is shown by admissions, depositions or affidavits, that those
issues are sham, fictitious, or not genuine, or, in the language of the Rules, that "except as to the
amount of damages, there is no genuine issue as to any material fact and that the moving party is
entiled to a judgment as a matter of law,[29] the Court shall render a summary judgment for the
plaintiff[30] or the defendant[31] as the case may be.[32]
Parenthetically, the existence or appearance of ostensible issues in the pleadings, on the one
hand, and their sham or fictitious character, on the other, are what distinguish a proper case for a
summary judgment[33] from one for a judgment on the pleadings under Rule 19 of the 1964
Rules.[34] In the latter case, there is no ostensible issue at all, but the absence of any because of the
failure of the defending party's answer to raise an issue. Rule 19 expresses the principle as follows:
"Where an answer fails to tender an issue, or otherwise admits the material allegations of
the adverse party's pleading, the court may, on motion of that party, direct judgment on
such pleading **."[35]
On the other hand, in the case of a summary judgment, issues apparently exist -- i.e., facts are
asserted in the complaint regarding which there is as yet no admission, disavowal or qualification;
or specific denials or affirmative defenses are in truth set out in the answer -- but the issues thus
arising from the pleadings are sham, fictitious, not genuine, as shown by admissions, depositions

443
or admissions. In other words, as a noted authority remarks, a judgment on the pleadings is a
judgment on the facts as pleaded while a summary judgment is a judgment on the facts as
summarily proven by affidavits, depositions or admissions.[36] Another distinction is that while the
remedy of a judgment on the pleadings may be sought only by a claimant (one seeking to recover
upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief, supra), a summary
judgment may be applied for by either a claimant or a defending party.
These basic distinctions escaped His Honor. He denied the Dimans' motion for summary
judgment in his Order of June 14, 1995, opining that a "perusal of the Complaint and the Answer
will clearly show that material issue is raised in that both plaintiffs and defendants claimed
ownership over the land in dispute, presenting their respective titles thereto and accused each other
of possessing false title to the land." He added, citing cases, that a summary judgment "is not
proper where the defendant presented defenses tendering factual issues which call for the
presentation of evidence." Such a ratiocination is grossly erroneous. Clearly, the grounds relied on
by the Judge are proper for the denial of a motion for judgment on the pleadings -- as to which the
essential question, as already remarked, is: are there issues arising from or generated by the
pleadings? -- but not as regards a motion for summary judgment -- as to which the crucial question
is: issues having been raised by the pleadings, are those issues genuine, or sham or fictitious, as
shown by affidavits, depositions or admissions accompanying the application therefor?
Errors on principles so clear and fundamental as those herein involved cannot but be deemed
so egregious as to constitute grave abuse of discretion, being tantamount to whimsical or capricious
exercise of judicial prerogative.
When the Heirs closed their evidence as party plaintiffs, and the Dimans moved to dismiss on
ground of insufficiency of the Heirs' evidence, the Trial Judge was charged with the duty to assess
the evidence to ascertain whether or not "upon the facts and the law the plaintiff(s) ** (have) shown
no right to relief." It was in the first place incumbent on His Honor to hold the Heirs bound to their
admissions appearing in the record, express and implied. In accordance with Section 2, Rule 26 of
the 1964 Rules of Court, the Heirs were impliedly, but no less indubitably, deemed to have
admitted the facts on which admissions had been duly requested by reason of their failure to reply
thereto. Said Section 2 reads as follows:
"SEC. 2. Implied admissions. -- Each of the matters of which an admission is
requested shall be deemed admitted unless, within a period designated in the request,
which shall not be less than twn (10) days after service thereof, or within such further
time as the court may allow on motion and notice, the party to whom the request is
directed serves upon the party requesting the admission a sworn statement either
denying specifically the matters on which an admission is requested or setting forth in
detail the reasons why he cannot truthfully either admit or deny those matters.
Objections on the ground of irrelevancy or impropriety of the matter requested shall be
promptly submitted to the court for resolution."[37]
In determining the chief issue in the case, the Trial Judge should have taken due account of
the following circumstances on record and obvious legal propositions:

1) the Heirs' admissions of the following facts, viz.:

444
a) the Heirs' TCT 273301 (Rizal) is not recorded in the Registry of Rizal, or of Pasay City, or of
Paraaque, or of Las Pias;

b) on the other hand, the Dimans' transfer certificates of title are all duly registered in their names
in Pasay City;

c) there is no record of any property situated in Las Pias in the name of Veronica Lacalle -- more
particularly described in TCT 273301 -- in the Index Records of Registered Property Owners
under Act No. 496 in the Office of the Land Registration Authority;

d) the Heirs do not have and cannot produce even a certified true copy of TCT 273301;

e) neither Veronica Lacalle nor any of her heirs ever declared the property under TCT 273301
for taxation purposes since its alleged acquisition on February 24, 1959 or since the issuance of
said title on August 7, 1959;

f) not a single centavo was ever paid by the Heirs as real estate taxes; and

g) no steps were ever taken by the Heirs to ascertain the genuineness and authenticity of the
conflicting titles.

2) the statement in open Court of the Heirs' own counsel that his clients did not have
original copy of the title, that they were fact "still searching" for the title;[38]
3) the testimony of Jose Moreno Lacalle that he had no copy "of the document which
says ** (his) mother is the registered owner" of the land in question; that he "cannot find
the original" which "maybe" was in possession of his mother's agent, a certain Mr.
Lopez, who, he could no longer locate; that he had tried to verify the existence of the
title "from the Register of Deeds of Pasig and Pasay" without success; that he had not,
however, gone to the Register of Deeds of Paraaque or Las Pias;[39]
4) that the only document bearing on the issue submitted by the heirs, the deed of
absolute sale purportedly executed by Eusebio Mojica, Clara Mojica, Maria Mojica,
Antonia Mojica, Amanda Mojica and Teodora Aranda -- which deeded over to Veronica
Lacalle the "land 'known as Lot 1 PSU-151453,'" but which made no reference to any
Torrens title over it -- was not accompanied by proof of the vendors' ownership of the
land in question;
5) that the land subject of the Heirs' action for quieting of title being registered land
(being in fact registered in the Dimans' favor), the unregistered deed of sale relied upon
by the Heirs cannot and does not affect said land, or bind any third party (including the
Dimans) for the reason that, as a matter of law:
" ** (N)o deed, mortgage, lease or other voluntary instrument, except a will
purporting to convey or affect registered land, shall take effect as a conveyance
or bind the land, but shall operate only as a contract between the parties and as
evidence of authority to the Register of Deeds to make registration;" and it is the
"act of registration (that) shall be the operative act to convey or effect the land in

445
 so far as third persons are concerned," which "registration shall be made in the **
Register of Deeds for the province or city where the land lies."[40]

and

6) that there is no proof whatever of the ownership or character of the rights of the
vendors (the Mojicas) over the property purportedly conveyed.
In fine, the Heirs had proven nothing whatever to justify a judgment in their favor. They had
not presented any copy whatever of the title they wished to be quieted. They had not adduced any
proof worthy of the name to establish their precedessors' ownership of the land. On the contrary,
their own evidence, from whatever aspect viewed, more than persuasively indicated their lack of
title over the land, or the spuriousness of their claim of ownership thereof. The evidence on record
could not be interpreted in any other way, and no other conclusion could be drawn therefrom
except the unmeritoriousness of the complaint. The case at bar is a classic example of the eminent
propriety of a summary judgment, or a judgment on demurrer to evidence.
Considering these circumstances, including the outlandish grounds of opposition advanced by
the Heirs against the Dimans' motions for summary judgment and for demurrer to evidence, no
less than the obviously mistaken grounds cited by the Trial Court for denying said motions, this
Court has no hesitation in declaring that it was indeed grave abuse of discretion on the part of the
Trial Court to have refused to render a summary judgment or one on demurrer to evidence. In no
sense may the Trial Court's errors be considered, as the Court of Appeals did in its judgment of
September 9, 1997, as mere errors of judgment correctible by appeal, untarnished by any
capriciousness or whimsicality.
WHEREFORE, the challenged decision of the Court of Appeals promulgated on September
9, 1997 is REVERSED and SET ASIDE: the Orders dated July 14, 1996 and December 2, 1996
rendered in the action for "Quieting of Title and Damages" -- docketed as Civil Case No. 94-3085
of the Regional Trial Court at Las Pias (Branch 255) and entitled "Heirs of Veronica V. Moreno
Lacalle, represented by Jose Moreno Lacalle versus Cristina Diman, Clarissa Diman, George
Diman, Felipe Diman and Florina Diman" -- are annuled; and said Civil Case No. 94-3085 is
DISMISSED. Costs against private respondents.
IT IS SO ORDERED.
Romero, Kapunan, Purisima, and Pardo, JJ., concur.

[1]
On July 1, 1940, superseding for the most part Act No. 190 (the Code of Civil Procedure) and
G.O. No. 58 (Criminal Procedure), as amended, in effect since the American Occupation
[2]
The provisions on discovery were retained, unchanged, in the revised issuance of the Rules,
effective on January 1, 1964. In the more recent amendments which became effective on July 1,
1997, these provisions have also been substantially retained with just a few changes.
[3]
Republic v. Sandiganbayan, 204 SCRA 211, 200
[4]
Now Rule 35, under the amendments effective July 1, 1997.

446
[5]
Now Rule 33, under the 1997 amendments
[6]
These devices or tools are the following: (1) motion to dismiss under Rule 16; (2) a motion to
declare a defending party in default under Rule 18 of the Rules of 1964 (now Sec. 3, Rule 9 of the
1997 Rules; (3) at the pre-trial under Rule 20 (Rule 18 under the 1997 Rules) : (a) a motion to
declare a complaining party non-suited, or a defending party in default, for failure to appear; (b)
the execution of a compromise, or an agreement to refer the dispute to voluntary arbitration or
other alternative mode of dispute-resolution; (4) a motion to dismiss under Rule 17; (5) admission
of facts (supra) or other sanctions (e.g., contempt, striking out of pleadings, etc.) resulting from a
refusal to make or allow discovery under Rules 24 to 29 (now Rules 23 to 29 of the 1997 Rules);
(6) a motion for judgment on the pleadings under Rule 19 (now Rule 34 in the 1997 Rules); (7) a
motion for summary judgment under Rule 34 (now Rule 35 in the 1997 Rules) supra; (8) a
demurrer to evidence, or a motion to dismiss after plaintiff has rested on the ground that 'upon the
facts and the law, the plaintiff has shown no right to relief" under Rule 35 (now Rule 33 in the
1997 Rules), supra.
[7]
Court of Appeals Record, pp. 30-35
[8]
Court of Appeals Record, pp. 37-41
[9]
Court of Appeals Record, pp. 42-44.
[10]
Court of Appeals Record, pp. 45-46
[11]
Court of Appeals Record, pp. 47-55
[12]
Court of Appeals Record, pp. 56 et seq
[13]
Id., pp. 57-60
[14]
Id., pp. 61-64
[15]
Id., pp. 65-69
[16]
Id., pp. 72-73
[17]
Id., pp. 76-77
[18]
Id., pp. 78 et seq
[19]
Id., pp. 93-103
[20]
Id., pp. 104-106
[21]
Id., pp. 107-108
[22]
Id., pp. 109-112
[23]
Id., pp. 113-116
[24]
Id., pp. 117
[25]
Id., p. 121
[26]
Id., p. 123

447
[27]
Which shall not be less than fifteen (15) days after service thereof, or within such further time
as the court may allow on motion
[28]
Sec. 2, Rule 26, Rules of 1964
[29]
Sec. 3, Rule 34
[30]
SEC. 1, Rule 34, Rules of 1964 reads: "Summary judgment for claimant.--A party seeking to
recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any
time after the pleading in answer thereto has been served, move with supporting affidavits for a
summary judgment in his favor upon all or any part thereof." The last clause was amended to read:
"move with supporting affidavits, depositions or admissions for a summary judgment ** " (Sec. 1,
Rule 35, Rules of 1997).
[31]
SEC. 2, Rule 34, Rules of 1964 reads: "Summary judgment for defending party.--A party
against whom a claim, counterclaim, or cross-claim is asserted or a declaratory relief is sought
may, at any time, move with supporting affidavits for a summary judgment in his favor as to all or
any part thereof." The last clause was similarly amended to read: "move with supporting affidavits,
depositions or admissions for a summary judgment ** " (Sec. 2, Rule 35, Rules of 1997).
[32]
SEE Regalado, Remedial Law Compendium, Sixth Revised Ed., Vol. 1, pp. 360-362, citing
Agcanas v. Nagum, Mar. 30, 1970; Estrada v. Consolacion, June 29, 1976; Motor Service Co. v.
Yellow Taxicab Co., 96 Phil. 688; Miranda v. Malate Garage & Taxicab, Inc., 99 Phil. 670; Moran,
Comments on the Rules, 1979 ed. Vol. 1, pp. 166-170: See also Vergara v. Suelto, 156 SCRA 753;
PNB v. Noah's Ark etc., 226 SCRA 36
[33]
Under Rule 34 of the Rules of 1964 (now Rule 35 of the 1997 Rules)
[34]
Now Rule 34 of the 1997 Rules
[35]
Italics supplied . N.B. Rule 34 of the 1997 Rules pertinently reads: "Where an answer fails
to tender an issue, or otherwise admits the material allegations of the adverse party's pleading,
the court may, on motion of that party, direct judgment on such pleading. However, in actions
for declaration of nullity or annulment of marriage or for legal separation, the material facts
alleged in the complaint shall always be proved. (Emphasis ours.)
[36]
Moran, op. cit., at p. 170
[37]
Emphasis supplied
[38]
Id., pp. 76-77
[39]
Id., pp. 78 et seq
[40]
Sec. 51, PD 1529 (Property Registration Decree); Abuyo v. De Suazo, 18 SCRA 600;
Taedo v. C.A., 252 SCRA 80, citing Nuguid v. C.A., 171 SCRA 213; Sajonas v. C.A., 158
SCRA 79; Dela Calzada-Cieras v. C.A., 212 SCRA 390; Davao Grains, Inc. v. I.A.C., 171
SCRA 612; Quilisadio v. C.A., 182 SCRA 401; Heirs of Marasigan v. I.A.C., 152 SCRA
253

448
 FIRST DIVISION

EDWARD ROCO TAN G.R. No. 168809

and EDWIN ROCO TAN,
Petitioners, Present:
Panganiban, C.J. (Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
BENIGNO DE LA VEGA, ANGELA
TUASON STALEY and ANTONIO Promulgated:
PEREZ Y TUASON,
Respondents. March 10, 2006

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

DECISION

YNARES-SANTIAGO, J.:

Assailed in this petition for review is the February 3, 2005 Decision[1]of the Court of
Appeals in CA-G.R. CV No. 79957, which affirmed the March 21, 2003 Order[2]of the Regional
Trial Court of Pasig City, Branch 264, granting the motion for judgment on the pleadings filed by
respondents in Civil Case No. 62269. Likewise questioned is the appellate courts July 6, 2005
Resolution[3]which denied petitioners motion for reconsideration.

449
 The undisputed facts show that on August 3, 1992, respondents filed a complaint for
quieting of title and for declaration of nullity of Free Patent No. 495269, Original Certificate of
Title (OCT) No. 711 and Transfer Certificate of Title (TCT) No. 186516, against the heirs of
Macario Mencias (defendant heirs), namely, Aquilina Mencias, Aurora M. Gabat, Merlyn M.
Cadete, Myrna M. Quirante; and the Secretary of the Department of Environment and Natural
Resources, the Director of the Land Management Bureau and the Register of Deeds of
Marikina. The complaint was later amended to implead herein petitioner purchasers of the disputed
lot and to nullify TCT No. 272191 issued in their name.

The Amended Complaint averred that respondents are the co-owners of a 159,576 square
meter parcel of land located in Marikina, Rizal, Metro Manila and covered by TCT No. 257152,
issued on June 20, 1969. Said title was a transfer from TCT No. 22395 in the name of J. Antonio
Araneta as trustee of the children of Angela I. Tuason. Among the lots covered by TCT No. 257152
is the controverted Lot 89 containing an area of 54,197 square meters.[4]

Sometime in April 1992, respondents learned that the defendant heirs are causing the
ejectment of the occupants of a 29,945 square meter portion of Lot 89; and that Macario Mencias
was able to obtain Free Patent No. 495269 on July 31, 1971, and OCT No. 711 on August 11,
1971, over said portion. Upon Macario's death, OCT No. 711 was canceled and TCT No. 186516
was issued to the defendant heirs on July 5, 1990.[5] By virtue of a Deed of Sale inscribed on
November 14, 1994, TCT No. 186516 was further cancelled and TCT No. 271604 was issued on
the same date in favor of New Atlantis Real Estate & Development, Inc., (Corporation) represented
by its President, Victor C. Salvador, Jr. The questioned lot was thereafter sold by the Corporation
to petitioners. TCT No. 271604 was thus cancelled and in lieu thereof, TCT No. 272191 was issued
to petitioners on November 17, 1994.[6]

Respondents contended that Macarios OCT No. 711 and its derivative titles-TCT No.
186516, in the name of defendant heirs and petitioners TCT NO. 272191, are void because the
area they cover is entirely within their (respondents) land, specifically, Lot 89, as shown by the
notation in the said titles, i.e., This survey is covered by F.P.A. No. (III-1) 4496; and This survey
is entirely inside No. 89, II-4755.[7] Respondents further averred that since the controverted lot is

450
already a private land, the Director of Lands and the Secretary of Agriculture and Natural
Resources, had no jurisdiction to approve Macarios application and to issue Free Patent No.
495269. The pendency of this action was allegedly inscribed in the defendant heirs title (TCT No.
186516) on August 4, 1992 and carried over to the petitioners' TCT No. 272191.[8]

In their Answer,[9]the defendant heirs contended that Lot 89 was never part of respondents
TCT No. 257152 which originated from OCT No. 730. Respondents own exhibits, i.e., the
documents purportedly issued by the Bureau of Lands (Exhibits E and F), show that Lot 89 was
covered by OCT No. 734 and not OCT No. 730. Defendant heirs further stated that respondents
TCT No. 257152 was issued in lieu of TCT No. 22395 which is a mere reconstitution of TCT No.
45046. Upon verification with the Register of Deeds of Rizal, TCT No. 45046, covers a different
parcel of land situated in San Juan, Rizal, and measuring about 356 square meters only. The
defendant heirs also raised the defenses of laches and prescription.

On the other hand, petitioners asserted, inter alia, that they are purchasers in good faith
and for value and that they have no knowledge of any defect in the title of the Corporation from
whom they purchased the controverted lot. The notice of lis pendens alleged to have been
inscribed in TCT No. 186516 on August 4, 1992 does not appear in the Corporations title, TCT
No. 271604 nor in their title, TCT No. 272191. Absent said notice, petitioners claim that they
cannot be charged with knowledge of any defect in the Corporation's title. Neither does the note
This survey is covered by F.P.A. No. (III-1) 4496; and This survey is entirely inside No. 89, II-
4755, serve as sufficient warning to third persons because said notes do not indicate that the
property is covered by another title.[10]

For failure to file their Answer, defendant Aurora M. Gabat,[11] public defendants Secretary
of the Department of Environment and Natural Resources, Director of Land Management Bureau
and the Register of Deeds of Marikina,[12]were declared in default.

On March 4, 2003, respondents filed a motion for judgment on the pleadings which was
granted by the trial court. It was held that the disputed lot is within Lot 89 covered by respondents
TCT No. 257152, issued on June 20, 1969. Said lot therefore became a private land long before
the Free Patent was issued to Macario on July 31, 1971. Hence, the titles derived or issued on the

451
basis of said Free Patent are void because Public Land Act applies only to public lands and not
private lands. On the theory that the spring cannot rise higher than its source, the trial court
concluded that petitioners cannot be purchasers in good faith considering that their title was
derived from Macario who acquired the property by virtue of a void title. It further ruled that
petitioners defense of good faith must fail because they were forewarned of the notice indicating
that the questioned lot is inside Lot 89. The dispositive portion of the March 21, 2003 order, reads:

WHEREFORE, premises considered, Plaintiffs [respondents herein] Motion is

hereby Granted and judgment rendered as follows:

1. Plaintiffs Transfer Certificate of Title (TCT) No. 257152 is declared valid and
superior to defendants [petitioners] TCT No. 272191;
2. Free Patent No. 495269 issued by then Secretary of Environment and Natural
Resources to Macario Mencias on July 21, 1971 is declared null and void;

3. Original Certificate of Title (OCT) No. 711, Transfer Certificate of Title (TCT)
No. 271604/T-1358 and Transfer Certificate of Title (TCT) No. 272191, TCT No.
186516 and TCT No. 272191, all derivatives [sic] title of Free Patent 495269 issued
by Registry of Deeds of Marikina, are also declared null and void;

4. The Bureau of Lands and Land Registration Administration are directed to enter
into their technical files the findings in this order;

5. The Registry of Deeds of Marikina is directed to cancel Transfer Certificate of

Title (TCT) NO. 272191 in the names of Edward and Edwin Roco Tan.
SO ORDERED.[13]

Petitioners appealed to the Court of Appeals which affirmed the assailed order of the trial
court. They filed a motion for reconsideration but was denied in a resolution dated July 6, 2005.

Hence, this petition.

452
 The sole issue for resolution is whether a judgment on the pleadings is proper in the instant
case.

Section 1, Rule 34 of the Rules of Court, states:

SECTION 1. Judgment on the pleadings. Where an answer fails to tender an issue,

or otherwise admits the material allegations of the adverse partys pleading, the court
may, on motion of that party, direct judgment on such pleading. x x x.

Where a motion for judgment on the pleadings is filed, the essential question is whether
there are issues generated by the pleadings. In a proper case for judgment on the pleadings, there
is no ostensible issue at all because of the failure of the defending partys answer to raise an
issue.[14]The answer would fail to tender an issue, of course, if it does not deny the material
allegations in the complaint or admits said material allegations of the adverse partys pleadings by
confessing the truthfulness thereof and/or omitting to deal with them at all. Now, if an answer does
in fact specifically deny the material averments of the complaint and/or asserts affirmative
defenses (allegations of new matter which, while admitting the material allegations of the
complaint expressly or impliedly, would nevertheless prevent or bar recovery by the plaintiff), a
judgment on the pleadings would naturally be improper.[15]

In this case, we find that the trial court erred in rendering judgment on the pleadings
because the pleadings filed by the parties generated ostensible issues that necessitate the
presentation of evidence. Respondents action for declaration of nullity of Free Patent No. 495269
and the titles derived therefrom is based on their claim that the lot titled in the name of petitioners,
is a portion of a bigger tract of land previously titled in the name of their (respondents)
predecessors-in-interest. The documents presented in support thereof were the photocopy of
respondents TCT No. 257152 which shows that the land it covers, including lot 89, originated
from OCT No. 730; and photocopies of the documents alleged to have been issued by the Bureau
of Lands and confirming that the disputed lot is a portion of respondents Lot 89. Pertinent portions
of the Amended Complaint, state:

5. Sometime in early April, 1992, plaintiff de la Vega was informed by one

of the occupants of the above-described lot No. 89 that the heirs of Macario
Mencias, the defendants herein, were causing the ejectment of said occupants and

453
claiming to be the owners of an area of 29,945 sq. ms. (sic) which is within, or part
of, Lot No. 89 covered by plaintiffs T.C.T. No. 257152. It was only then that the
plaintiffs heard of Macario Mencias and of his encroaching into plaintiffs Lot 89.

6. The plaintiffs later learned that, unknown to them, Macario Mencias had
applied with the then Bureau of Lands for, and obtained on 31 July 1971, Free
Patent No. 495269 which was granted under the signature of the then Secretary of
Agriculture and Natural Resources and covering an area of 29,945 sq. ms. (sic) as
described in Plan F (III-1) 4496-D. On 11 August 1971, Original Certificate of Title
No. 711 (Rizal) was issued to him based on the said Free Patent, and upon his death,
said OCT No. 711 was cancelled and transferred to his heirs, the defendants herein,
to whom T.C.T. No. 186516 (Marikina) was issued on 5 July 1990. The plaintiffs
were never notified of said application of Mencias for free patent nor of the issuance
of Free Patent No. 495269 and OCT No. 711 to him and T.C.T. No. 186515 to his
heirs, the defendants herein. Photocopies of OCT No. 711, which incorporated Free
Patent No. 495269, and T.C.T. No. 186516 are hereto appended as Annexes B and
C, respectively.

xxxx

8. A letter dated 29 October 1971 of Mr. Amando A. Salvador as Chief of

the Survey Division of the then Bureau of Lands and addressed to Macario
Mencias, 1st Indorsement, dated 15 February 1974, signed by Mr. Daniel C. Florida
as Acting Chief of the Legal Division of the Bureau of Lands, a report dated 17
December 1976 by Mr. Jose B. Isidro as Hearing Officer addressed to the Director
of Lands, and the 1st Indorsement, dated 3 January 1977, also addressed to the
Director of Lands by Mr. Claudio C. Batiles as the District Land Officer,
photocopies of which are appended hereto as Annexes D, E, F and G, respectively,
unequivocally confirmed that the area of 29,945 sq. ms. (sic) covered by the Free
Patent based on Plan F (III-1) 4496-D and issued to Macario Mencias was entirely
inside Lot 89 of Plan II-4755, which was covered by T.C.T. No. 22395 in the name
of J Antonio Araneta, Trustee of the children Angela I. Tauson, and since 20 June
1969, by T.C.T. No. 257152 in the plaintiffs names.

9. There can be no doubt that the area of 29,945 sq. ms. (sic) covered by
Free Patent No. 495269, which was incorporated in OCT No. 711 issued to Macario
Mencias, was within Lot 89 of Plan II-4755 covered by T.C.T. No. 22395 and, since
20 June 1969, by T.C.T. No. 2597152 (sic) in the plaintiffs names, because the
technical description of said area embodied in the said Free Patent itself and in OCT
No. 711 disclosed the following information:

NOTE: This survey is covered by F.P.A. No. (III-1) 4496.

This survey is entirely inside No. 89, II-4755 (See Annex B hereof).
(See Annex B hereof).

454
 10. In fact the very same notes were carried over in T.C.T. No. 186516
issued to the heirs of Mencias, the defendants herein, thus forewarning all those
who dealt or may have dealt with the private defendants regarding the area therein
described that there was something anomalous in said title (See Annex C hereof).

xxxx

14. The records of the Registry of Deeds of Marikina, Metro Manila,

disclosed that TCT No. 186516, Annex C, was cancelled and T.C.T. No. 271604,
covering the same parcel of land covered by T.C.T. No. 186516, was issued on
November 14, 1994 by the Register of Deeds of Marikina, Mr. Artemio B. Caa, to
the New Atlantis Real Eastate & Dev., Inc. represented by its President, Victor C.
Salvador, Jr., based on a sale in its favor inscribed on the same date; and that T.C.T.
No. 271604 was thereupon cancelled and in lieu thereof T.C.T. No. 272191 was
issued by the said Register of Deeds to private defendants Edward and Edwin Roco
Tan on November 17, 1994 based on a sale in their favor inscribed on the same
date. A photocopy of T.C.T. No. 272191 is hereto attached as Annex H.

xxxx

16. Neither New Atlantis Real Estate & Dev. Inc., nor Edward Roco Tan
and Edwin Roco Tan could claim to be purchasers in good faith not only because
their titles are void and inexistent and could not possibly have any legal effect
whatsoever but also because the NOTE cited in paragraphs 9 and 10 above, which
likewise appears on T.C.T. No. 272191 itself, discloses the very basis for its nullity.
17. The notice of the pendency of this action (Notice of Lis Pendens) was
duly inscribed on T.C.T. No. 186516 on August 4, 1992 under Entry No. 274711,
which notice has been carried over to T.C.T. No. 272191, a photocopy of which is
hereto appended as Annex H.

x x x x.[16]

The foregoing averments were specifically denied by defendant heirs who raised, among
others, the affirmative defense that respondents TCT No. 22395 is void and that lot 89 is not found
inside respondents land. Thus

11. Lot 89 was never a part of the Mariquina Estate as shown in subdivision
plan PSD 29965 as surveyed in December, 1950 up to June, 1951. This fact is also
certified by the Office of the Register of Deeds of Rizal as early as 1967, a photo
copy of said certification is hereto attached as Annex 1;
12. Plaintiffs own exhibits (Annexes E, F, in relation to Annex A) show that
lot 89 was never part of Original Certificate of Title (O.C.T.) No. 730 from which
plaintiffs alleged title was derived (T.C.T. No. 257152, Annex A). In Annexes E
and F, Lot No. 89 of II-4755 is covered by O.C.T. No. 734 and not 730;

455
 13. T.C. T. No. 257152 is spurious, falsified, hence, null and void. This
certificate of title was issued in lieu of T.C.T. No. 22395/T 389 as per Annex A of
the Complaint. T.C.T. No.22395/T 389 was in turn issued in lieu of T.C.T. No.
45046 as shown in a document (T.C.T. No. 22395) hereto attached as Annex 2;

14. It also appears that T.C.T. No. 22395 is a mere reconstitution of a

lost/destroyed T.C.T. No. 45046 as shown on page 3 of T.C.T. No. 257152;

15. Upon verification with the Office of the Register of Deeds of Rizal,
T.C.T. No. 45046 covered a different parcel of land situated in San Juan, Rizal and
measuring about 356 square meters only, photo copy of which is hereto attached as
Annex 3 hereof;

x x x x.[17]

Petitioners asserted, inter alia, the affirmative defense of good faith and denied the material
allegations of the complaint relating to the origin of the title of respondents; and the latters claim
that Lot 89 is covered by TCT No. 257152. Pertinent portions of the Answer state:

In further support of the Specific Denials and Affirmative Allegations

herein set forth, and by way of Affirmative Defenses, defendants allege:
xxxx

4.2 Defendants are innocent purchasers for value of the subject

property. They had no knowledge, actual or constructive, of the alleged defect in
their title, Transfer Certificate of Title No. 272191, or of the title of their
predecessor-in-interest, the Corporation.

4.2.1 Plaintiff's (sic) notice of lis pendens alleged to have been duly
inscribed on TCT No. 186516 on August 4, 1992 under Entry No, 274711 did not
appear or was not annotated on the corporations title, TCT No. 271604, which was
issued on November 14, 1994 or long after the alleged inscription was made on the
said title. Attached and made integral part hereof as Annex A is a copy of
Corporation's title, TCT No. 271604.

4.2.2 Neither did said inscription appear or annotated on defendants title,

TCT No. 272191, which was issued on 17 November 1994. Attached and made
integral part hereof as Annex B is a copy of TCT No. 272191.

4.2.3 It bears stressing that if the said inscription was duly made on 4
August 1992 as plaintiffs alleged, the same would have been annotated on TCT
Nos. 271604 and 272191 which were issued long after the said entry was allegedly
made. Obviously, if said entry does appear today on TCT No. 272191, it was made
only recently or at the earliest, after the latter title was issued on 17 November
1994. But certainly said entry could not have been possibly made on 4 August 1992.

456
 4.2.4 With the absence of the notice of lis pendens, defendants could not be
charged with notice of any defect in their title No. 272191 nor their status as
innocent purchasers for value be adversely affected by the same.

4.2.5 Neither does the note, this survey is covered by F.P.A. No. (III-1)
4496; This survey is entirely inside No. 89 II-4755. serve as sufficient notice to
defendants of any defect in their title. Said note does not indicate or disclose that
the subject property is covered by another title.

4.2.6 Moreover, the fact that the subject property was covered by TCT No.
271604 duly issued by the Registry of Deeds in the name of the corporation without
any encumbrance, liens or adverse claims annotated thereon negates any possibility
that the subject property belongs to any person other than the corporation.[18]

It is clear from the foregoing that the pleadings filed in the instant case generated the
following issues: (1) whether respondents TCT No. 257152 is valid; (2) whether Lot 89 is covered
by TCT No. 257152; and (3) whether petitioners are purchasers in good faith. This is clearly not a
proper case for judgment on the pleadings considering that the Answers tendered factual
issues. The trial court rendered a summary judgment on March 21, 2003 and not a judgment on
the pleadings.

In Narra Integrated Corporation v. Court of Appeals,[19]the Court explained the distinction

between a proper case of summary judgment and judgment on the pleadings, in this wise:

The existence or appearance of ostensible issues in the pleadings, on the one

hand, and their sham or fictitious character, on the other, are what distinguish a
proper case for summary judgment from one for a judgment on the pleadings. In a
proper case for judgment on the pleadings, there is no ostensible issue at all because
of the failure of the defending partys answer to raise an issue. On the other hand,
in the case of a summary judgment, issues apparently exist i.e. facts are asserted
in the complaint regarding which there is as yet no admission, disavowal or
qualification; or specific denials or affirmative defenses are in truth set out in the
answerbut the issues thus arising from the pleadings are sham, fictitious or not
genuine, as shown by affidavits, depositions, or admissions. x x x.

In any case, a summary judgment is likewise not warranted in this case as there are genuine
issues which call for a full blown trial. A genuine issue is an issue of fact which requires the
presentation of evidence as distinguished from a sham, fictitious, contrived or false claim. When
the facts as pleaded appear uncontested or undisputed, then there is no real or genuine issue or
question as to the facts, and summary judgment is called for. The party who moves for summary

457
judgment has the burden of demonstrating clearly the absence of any genuine issue of fact, or that
the issue posed in the complaint is patently unsubstantial so as not to constitute a genuine issue for
trial. Trial courts have limited authority to render summary judgments and may do so only when
there is clearly no genuine issue as to any material fact. When the facts as pleaded by the parties
are disputed or contested, proceedings for summary judgment cannot take the place of trial.[20]

In the instant case, presentation of evidence is necessary to determine the validity of TCT
No. 22395 from which respondents title (TCT No. 257152) was derived. As alleged by defendant
heirs, TCT No. 22395 was a mere reconstitution of TCT No. 45046, which per verification from
the Register of Deeds of Rizal pertain to a different piece of land measuring only about 356 square
meters and located in San Juan, Rizal. These allegations were never refuted by respondents, hence,
they cannot be simply brushed aside by the trial court.
Moreover, even assuming that the title of respondents predecessors-in-interest (TCT No.
22395) is valid, the evidence at this stage is still insufficient to sustain the conclusion of the trial
court that Lot 89 is inside respondents land now covered by TCT No. 257152. The title appended
by respondents in their complaint is a mere photocopy.Likewise, the document allegedly issued
by the Bureau of Lands and presented by respondents to prove that Lot 89 is inside their land are
also mere photocopies and not authenticated by said office. Furthermore, the title referred in the
said documents as the origin of TCT No. 257152, is a different title, that is OCT No. 734 and not
OCT No. 730.There is thus a need to present evidence to settle the issues in a full blown trial.

If the evidence show that the Free Patent and the OCT issued to petitioners predecessors-
in-interest is valid and or Lot 89 is not inside TCT No. 257152, then judgment should be rendered
in favor of petitioners; and whether the latter acted in good or bad faith will no longer be a decisive
issue in this case. On the other hand, if the title of petitioners predecessors-in-interest is declared
void, the defense of good faith may still be available to petitioners who claim to be purchasers in
good faith and for value. The rule is that a void title may be the source of a valid title in the hands
of an innocent purchaser for value.[21] An innocent purchaser for value is one who buys the
property of another, without notice that some other person has a right to, or interest in, such
property and pays a full and fair price for the same at the time of such purchase, or before he has
notice of the claims or interest of some other person in the property.[22]

Since good faith is always presumed,[23]it was premature for the trial court to conclude that
petitioners are not purchasers in good faith. Note that the complaint did not state that the notice of
the pendency of this action was inscribed in the title of the Corporation from whom petitioners
purchased the property. Petitioners even denied the presence of said inscription in their own title

458
and in the title of the Corporation.[24] Neither the presence of the notation This survey is covered
by F.P.A. No. (III-1) 4496; and This survey is entirely inside No. 89, II-4755, in the title of the
Corporation automatically make petitioners purchasers in bad faith. In the absence of other
evidence to explain said notation, bad faith, which is never presumed, cannot be charged against
petitioners. The notation that the disputed lot is covered by Free Patent Application No. (III-1)
4496, will not place the title in dubious light because the same is the number of the application for
Free Patent of Macario Mencias,[25]petitioners predecessor-in-interest. The same is true with
respect to the notation in the title that the questioned lot is inside Lot 89. Considering that the title
presented is a mere photocopy and that the notes appearing thereon do not indicate that the subject
property is covered by any title, the trial court should have directed the parties to substantiate their
respective allegations instead of rendering judgment.Indeed, in determining the propriety of
rendering a motion for summary judgment, the lower court should take that view of the evidence
most favorable to the party against whom it is directed, giving such party the benefit of all
favorable inferences.[26]

In sum, we find that respondents failed to prove that presentation of evidence may be
dispensed with in the present controversy. The instant case is neither a proper case for rendition of
judgment on the pleadings nor of summary judgment. A full blown trial should therefore be
conducted to resolve the issues raised by the parties.

WHEREFORE, in view of all the foregoing, the petition is GRANTED and the February
3, 2005 Decision and the July 6, 2005 Resolution of the Court of Appeals in CA-G.R. CV No.
79957 are REVERSED and SET ASIDE. Let the records of this case be remanded to the
Regional Trial Court of Pasig City, Branch 264 for further proceedings.

SO ORDERED.

CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR:

459
 ARTEMIO V. PANGANIBAN
Chief Justice

MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions
in the above Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice

460
[1]
Rollo, pp. 33-57; penned by Associate Justice Martin S. Villarama, Jr. and concurred in by
Associate Justices Regalado E. Maambong and Lucenito N. Tagle.
[2]
Records, pp. 768-774; penned by Judge Leoncio M. Janolo, Jr.
[3]
Rollo, p. 60.
[4]
Id. at 63.
[5]
Id. at 64.
[6]
Id. at 67.
[7]
Id. at 66.
[8]
Id. at 66-68.
[9]
Id. at 85-88.
[10]
Id. at 69-84.
[11]
Order dated July 15, 1995, records, p. 147.
[12]
Order dated July 20, 1993, records, p. 87.
[13]
Records, pp. 773-774.
[14]
Wood Technology Corporation v. Equitable Banking Corporation, G.R. No. 153867, February
17, 2005, 451 SCRA 724, 731.
[15]
Mongao v. Pryce Properties Corporation, G.R. No. 156474, August 16, 2005, 467 SCRA 201,
209-210.
[16]
Rollo, pp. 64-68.
[17]
Id. at 86.
[18]
Id. at 76-79.
[19]
398 Phil. 733, 740 (2000).
[20]
Evadel Realty and Development Corporation v. Soriano, G.R. No. 144291, April 20, 2001, 357
SCRA 395, 401.
[21]
Republic v. Agunoy, Sr., G.R. No. 155394, February 17, 2005, 451 SCRA 735, 752; Republic
v. Court of Appeals, 365 Phil. 522, 530 (1999).
[22]
Republic v. Court of Appeals, supra at 529.
[23]
Rosencor Development Corporation v. Inquing, G.R. No. 140479, March 8, 2001, 354 SCRA
119, 137.
[24]
Records, pp. 220-221.
[25]
Id. at 61.
[26]
SolidBank Corp. v. Court of Appeals, 439 Phil. 23, 35-36 (2002).

461
462
 SECOND DIVISION

[G.R. No. 144029. September 19, 2002]

SPOUSES GUILLERMO AGBADA and MAXIMA AGBADA, petitioners, vs. INTER-

URBAN DEVELOPERS, INC., and REGIONAL TRIAL COURT-BR. 105,
QUEZON CITY, respondents.

DECISION
BELLOSILLO, J.:

This is a Petition for Review on Certiorari of the Decision of the Court of Appeals in CA-
G.R. SP No. 54273, "Spouses Guillermo and Maxima Agbada v. Regional Trial Court, Quezon
City, Branch 105, and Inter-Urban Developers, Inc.," which dismissed the Petition for Annulment
of Judgment with Preliminary Injunction filed by petitioner-spouses, specifically to nullify and to
set aside the Summary Judgment rendered by respondent Regional Trial Court in its Civil Case
No. Q-93-18592, "Inter-Urban Developers, Inc. (represented by Philip Tiam Lee) v. Spouses
Guillermo and Maxima Agbada," for Foreclosure of Real Estate Mortgage, as well as
the Resolution of the appellate court denying reconsideration of the assailed CA Decision.
On 21 February 1991 petitioner-spouses Guillermo Agbada and Maxima Agbada
borrowed P1,500,000.00 from respondent Inter-Urban Developers, Inc. through its president,
Simeon L. Ong Tiam.[1] To secure the loan, the parties concurrently executed a Deed of Real Estate
Mortgage over a parcel of land and the improvements thereon situated in Tandang Sora, Quezon
City owned by the spouses.[2] The loan was payable within six (6) months from 21 February 1991
at three percent (3%) interest per month, otherwise, failure to discharge the loan within the
stipulated period would entitle Inter-Urban Developers, Inc. to foreclose the mortgage judicially
or extra-judicially.[3] The spouses failed to pay the loan within the six-month period despite several
out-of-court demands made by respondent Inter-Urban Developers, Inc.[4]
On 10 December 1993 Inter-Urban Developers, Inc. filed with the Regional Trial Court of
Quezon City, Branch 105, a complaint for foreclosure of real estate mortgage.[5] On 2 March 1994,
without assistance of counsel, the spouses filed their unverified answer admitting that they had
borrowed the amount of P1,500,000.00 from respondent and had executed the real estate mortgage
to secure the loan but denying that it was payable within six (6) months and at three percent (3%)
interest per month.[6] As affirmative defense they alleged in their answer that -

[petitioner-spouses] and Simeon L. Ong Tiam, then acting for and in behalf of [Inter-Urban
Developers], were compadre and comadre, for this reason, after the execution of the Real Estate
Mortgage Contract x x x [Spouses Guillermo and Maxima Agbada] were only charged with
interest at legal rate and the period for the said contract is five (5) years from execution thereof x
x x x That the said contract is merely simulated and for formality sake only x x x x That the
claim or demand set forth in the plaintiffs complaint is not yet due and demandable, thus, the
complaint states no cause of action against the defendants x x x x[7]
463
 The parties filed their respective pre-trial briefs with petitioner-spouses again filing their own
and without the assistance of counsel. When the pre-trial was set on 21 April 1994 it had to be
postponed on account of petitioner-spouses' absence. It was reset to 13 May 1994 but it was again
postponed upon request of petitioner Guillermo Agbada who had no lawyer yet to assist him. But
he submitted a one-page hand written letter addressed to the trial judge asking for continuance of
the pre-trial and further admitting liability for the due and demandable loan:"hindi ko po nais
makipaglaban dito sa kasong ito dahilan po itong perang ito dapat ko pong bayaran."[8] On 8 June
1994, pre-empting the pre-trial conference, Inter-Urban Developers, Inc.moved for summary
judgment alleging that -

1. In [the spouses] answer which is dated 1 March 1994, they admit the amount of indebtedness
as alleged in the Complaint; 2. They likewise admit in their Special and Affirmative Defenses
that they have executed the Real Estate Mortgage Contract subject of this Complaint; 3. What
[the spouses] are questioning in this Complaint is only the period and their compadre, Simeon
Ong Tiam, then President of [Inter-Urban Developers], to be payable after five years and at the
legal rate of interest; 4. Their Compadre, Simeon Ong Tiam, and the [Inter-Urban Developers]
are not one and the same entity so that their alleged arrangement with their compadre does not in
anyway bind [Inter-Urban Developers] who has relied on the subject Deed of Real Estate
Mortgage; the said mortgage contract which execution, [the spouses] admit, clearly shows that
they contracted with the [Inter-Urban Developers], the amount of P1,500,000.00 payable within
six months from execution at the interest rate of three percent per month x x x x 5. The
[petitioner] Mr. Guillermo Agbada, in one scheduled setting, has written this Honorable Court,
as borne by the records of this case, that he is admitting the total amount of indebtedness and is
only bidding for time because he has already arranged with a bank to pay the total amount of
indebtedness so as to terminate the case once and for all x x x x [9]

The motion for summary judgment was supported by an affidavit of the treasurer-cashier
of Inter-Urban Developers, Inc. to the effect that she witnessed the execution of the mortgage
contract and that she personally gave the check of P1,500,000.00 for the loan.[10] The spouses
opposed the motion although they failed to submit supporting counter- affidavits.[11]
On 7 July 1994, this time with the assitance of counsel, petitioner-spouses Agbada moved to
amend their answer to allege that the mortgage contract was not reflective of the true intention of
the parties since in reality the loan was interest-free and would mature only after five (5) years
from execution thereof and that consequently they were denying under oath the due execution and
authenticity of the mortgage document, although the proposed answer was still not verified by
them.[12] Interestingly, the amended answer departed from the allegation in the original answer that
the loan would earn interest at the legal rate. The trial court denied the amendment of the
answer holding that the change would substantially alter the gist of the defense.[13]
On 13 January 1995 the trial court promulgated its Summary Judgment in favor of
respondent Inter-Urban Developers, Inc. It held that Simeon Ong Tiam, compadre of petitioner-
spouses and then president of Inter-Urban Developers, Inc. could not have obligated his principal
by contemporaneous agreement amending the maturity of the loan from six (6) months tofive (5)
years and the interest rate from three percent (3%) per month to the default or statutory rate, much
less interest-free, since the undertaking was contrary to the express provisions of the duly executed
loan and mortgage contract.[14] The trial court awarded Inter-Urban Developers, Inc. the amounts

464
of "P1.5 million with monthly interest of 3% from February 21, 1991 until fully paid plus attorneys
fees of P10,000.00 including the real estate taxes and registration expenses. In case of failure of
defendants to do so within ninety (90) days from finality, the decree of foreclosure shall issue."[15]
Petitioner-spouses did not appeal the Summary Judgment nor did they pay the judgment
debt. On 31 May 1995 Inter-Urban Developers, Inc. moved for a decree of foreclosure which the
spouses did not oppose nor did they attend the hearing on the motion.[16] On 14 July 1995 the trial
court granted the motion and issued a decree of foreclosure.[17] On 19 August 1996 respondent
moved for an order authorizing the sale of the mortgaged real estate for failure of the spouses to
pay the judgment debt.[18] Once again the petitioner-spouses did not oppose the motion nor did
they attend the hearing thereon.[19] On 26 August 1996 the trial court ordered the foreclosure sale
of the mortgaged property.[20] On 10 September 1996 Inter-Urban Developers, Inc. moved ex
parte for the appointment of a special sheriff to attend to the foreclosure sale since no sheriff was
assigned in RTC-Br. 105.[21] On 11 September 1996, acting on the ex parte motion, the trial court
ordered the Ex-Oficio Sheriff to designate a special sheriff to carry out the foreclosure sale.[22] On
6 November 1996 the mortgaged real estate was sold at public auction to respondent Inter-Urban
Developers, Inc. as highest bidder for P4,637,092.74 which was supposed to be in full satisfaction
of the judgment debt.[23]
On 3 April 1997, upon motion of Inter-Urban Developers, Inc. and despite petitioner-spouses'
opposition thereto on the ground that the purchase price of the mortgaged property was below its
appraised value according to an appraisal report, the trial court confirmed the sale in favor of Inter-
Urban Developers, Inc.[24] The trial court ruled that it could not have given weight to the appraisal
report since this report was not authenticated nor was the appraiser presented as witness during the
hearing of the motion to allow Inter-Urban Developers, Inc. an opportunity to cross-examine on
the appraised value of the property.[25]
The spouses moved for reconsideration of the confirmation order insisting on the inadequacy
of the purchase price but on 25 September 1997 the trial court denied the motion. On 27 October
1997, for the second time, the spouses moved for reconsideration of the order denying their first
motion for reconsideration, calling the attention of the court to their affidavit to the effect that the
appraiser deliberately absented himself from the hearing of the motion.[26] On 6 March 1998
the trial court denied the motion.[27] Petitioner-spouses did not appeal the order of confirmation of
the sale nor any of the subsequent orders.
On 13 April 1998 petitioner-spouses filed with the Court of Appeals a motion for extension
of time to file a petition for review of a subject matter they did not identify. [28] In a Resolution of
16 April 1998 the appellate court granted the motion and docketed the purported petition as CA-
G.R. SP No. 47325 under Rule 43 of the 1997 Rules of Civil Procedure as amended.[29] On 24
April 1998 the spouses moved for a second extension of the period to file their petition for
review[30] which on 22 May 1998 the Court of Appeals denied with finality and recorded entry of
judgment of the denial.[31] On 29 January 1998 Inter-Urban Developers, Inc. moved for the
issuance of a writ of possesion over the foreclosed real estate.
On 26 February 1999 the petitioner-spouses filed a Motion to Tender the Full Obligation of
the Defendant Spouses alleging that they had paid their obligation worth P6,307,532.66[32] in the
form of cashier's check which they left with the maid of the counsel of record for Inter-Urban
Developers, Inc.[33] On 21 July 1999 the trial court denied the motion.[34] On 23 March 1999 for
the first time since Summary Judgment had been rendered against them, petitioner-spouses filed

465
with the trial court a Motion to Cancel Certificate of Sale for being Signed by an Unauthorized
Officer/Person and to Recall Summary Judgment for Lack of Jurisdiction[35] which was denied on
20 July 1999.[36] On 21 July 1999 the trial court issued a writ of possesion in favor of
respondent Inter-Urban Developers, Inc. over the subject real property.[37]
On 10 August 1999 petitioner-spouses Guillermo Agbada and Maxima Agbada filed with the
Court of Appeals a petition for annulment of judgment with prayer for preliminary injunction.The
petition sought the annulment of the Summary Judgment for alleged violation of their right to due
process arising from the absence of a full-blown trial on a genuine issue of fact that the loan and
mortgage would mature only on the fifth year following its execution on 21 February 1991.[38] The
petition did not question compliance with legal requirements of the foreclosure proceedings or any
part thereof.
On 21 January 2000 the Court of Appeals dismissed the petition and held that the subject
matter thereof was barred by res judicata, referring to CA G.R. SP No. 47325 wherein the appellate
court denied with finality petitioner-spouses' second motion for extension of time to file Petition
for Review.[39] The Court of Appeals also ruled that petitioner-spouses were in no position to ask
for annulment of the Summary Judgment since their negligence denied them the right to avail of
other remedies otherwise open to them, such as appeal, and that the spouses were estopped from
assailing the jurisdiction of the trial court after filing several motions to re-evaluate the assessed
value of the mortgaged property.[40] On 11 July 2000 the appellate court denied reconsideration of
its Decision,[41] hence, the instant petition for review on certiorari.
Petitioner-spouses argue that they were deprived of due process when their defense, i.e., that
the real estate mortgage carries a default interest rate and matures only on the fifth year following
its execution on 21 February 1991, was considered sham and refused full blown trial, contrary to
our ruling in Paz v. Court of Appeals.[42] They further allege in their statement of facts that

On February 2, 1991, plaintiff Guillermo Agbada, being then an official of a security agency
which is a sister company of respondent Inter-Urban Developer and because of financial problem
faced by the couple, arranged with Simeon Lee Ong Tiam (his close compadre, being the
sponsor and god father in the wedding of his daughter and said Ong Tiam being the President of
Inter-Urban Development) obtained a loan from respondent corporation under the agreement, in
view of their relationship, that the loan would only carry legal interest, and would be payable
within a period of 5 years. It is to be noted at this point that Inter-Urban Developers is not a
money lending or financial institution but is engaged in real estate development and the granting
of loans was not part of its principal business. It was clearly understood by petitioners as well as
by the responsible officers of Inter-Urban, particularly, Simeon Lee Ong and the other officers,
who, in fact, have close family ties and relationship with petitioners, that the loan was only an
accommodation, hence, the charging only of nominal interest and its repayment within a period
of 4 (sic) years. Petitioners were convinced to sign what they were then informed was only a
formality, a sham deed of mortgage which on its face purported to show that a rate of interest
different from that initially agreed upon appeared and the period of maturity of the loan was
changed from 5 years to 6 months.[43]

On the other hand, respondent Inter-Urban Developers, Inc. claims that petitioner-spouses did
not deny under oath the authenticity and due execution of the real estate mortgage document,
hence, were barred from setting up the defense that the interest rate and maturity provisions of the

466
loan and mortgage contract were different from those stipulated in the written
agreement.[44] Respondent further argues that the alleged promise made by Simeon Ong Tiam even
if true cannot be enforced against Inter-Urban Developers, Inc. since there is nothing to show that
he was authorized to enter into the alleged contemporaneous agreement. Finally, respondent
asserts that there were other remedies available to petitioners which they failed to exhaust by their
own negligence, thus rendering the petition for annulment of judgment clearly unavailing and that
they voluntarily submitted to the jurisdiction of the trial court by seeking affirmative relief from
the effects of the assailed Summary Judgment.[45]
The petition has no merit. As explained quite frequently, a party may be barred from raising
questions of jurisdiction where estoppel by laches has set in.[46] In a general sense, estoppel by
laches is failure or neglect for an unreasonable and unexplained length of time to do what, by
exercising due diligence, ought to have been done earlier, warranting a presumption that the party
entitled to assert it has either abandoned to defend it or has acquiesced to the correctness and
fairness of its resolution. The doctrine is based on grounds of public policy which for peace of
society requires the discouragement of stale claims and, unlike the statute of limitations, is not a
mere question of time but is principally an issue of inequity or unfairness of permitting a right or
claim to be enforced or espoused. Verily, after voluntarily submitting a cause, it is too late for the
loser to question the jurisdiction or power of the court just so he could escape an adverse decision
on the merits.
In the instant case, the allegation of deprivation of due process took more than four (4) years
of hibernation, so to speak, from 13 January 1995 when the trial court promulgated its Summary
Judgment only to resurrect after failed attempts to thwart the transfer of title over the foreclosed
real estate in favor of respondent Inter-Urban Developers, Inc. Evidently, petitioner-spouses are
barred by laches from assailing the regularity of the Summary Judgment as shown not only by their
silence when they should have defended their alleged right to establish their understanding of the
interest rate and maturity of the loan and mortgage contract, but also by their full and knowing
participation in the proceedings, with the assistance of counsel, leading to the confirmation of the
foreclosure sale in favor of respondent Inter-Urban Developers, Inc.
During the period of their obtrusive reticence, instead of pushing for a full-blown trial where
they could have ventilated their affirmative defense, petitioner-spouses merely disagreed with the
finding of the trial court regarding the appraised value of the foreclosed property, thus strongly
implying their acquiescence to the due and demandable loan, and in fact attempted to write off the
loan completely and recover the foreclosed lot and improvements thereon by filing a Motion to
Tender the Full Obligation of the Defendant Spouses in the form of a cashiers check
worth P6,307,532.66 which the trial court denied in due time for obvious lack of merit.
The foregoing circumstances also show that the due process routine vigorously pursued only
now by petitioner-spouses is a clear-cut afterthought meant to delay the settlement of an otherwise
uncomplicated property dispute. Aside from clogging court dockets, the strategy is deplorably a
common curse resorted to by losing litigants in the hope of evading manifest obligations

A natural question is why anyone should want to plead groundlessly when he should know that
he will not be able to make his pleading good when proof is called for. Unfortunately, there are
reasons. A defendant from whom payment is sought x x x often wants delay. Indeed, that may
well be the very reason why suit had to be brought. And defendant can have delay by the simple

467
device of denying the debt, and perhaps gilding the lily by adding pleas of payment and breach
of warranty a trilogy known in the trade as the last refuge of the deadbeat.[47]

It bears stressing that the proper remedy to seek reversal of judgment in an action for
foreclosure of real estate mortgage is not a petition for annulment of judgment but an appeal from
the judgment itself or from the order confirming the sale of the foreclosed real estate. Since
petitioner-spouses failed to avail of appeal without sufficient justification, they cannot
conveniently resort to the action for annulment for otherwise they would benefit from their own
inaction and negligence.[48]
Granting arguendo that the assailed Summary Judgment is properly brought before this Court,
we nonetheless find nothing irregular in its promulgation to justify its nullification or
reversal. Summary judgment or accelerated judgment is a procedural technique to promptly
dispose of cases where the facts appear undisputed and certain from the pleadings, depositions,
admissions and affidavits on record, or for weeding out sham claims or defenses at an early stage
of the litigation to avoid the expense and loss of time involved in a trial.[49] Its object is to separate
what is formal or pretended in denial or averment from what is genuine and substantial so that only
the latter may subject a party in interest to the burden of trial. In the instant case, it is our conclusion
that there is no basis for protesting the Summary Judgment since the trial court faithfully adhered
to the proper function of accelerated judgment by adjudicating only the character of the issues
raised in the pleadings as genuine, sham or fictitious, and only upon clear determination thereof
did the court a quo proceed to render verdict.
Since the civil action before the trial court was for foreclosure of real estate mortgage, the
material issues were the existence of the debt and its demandability. Petitioner-spouses admitted
the existence of the debt in favor of respondent Inter-Urban Developers, Inc. as well as the
authenticity and due execution of the deed of real estate mortgage. The mortgage deed, which the
spouses duly signed and acknowledged before a notary public, pegged the loans maturity date at
six (6) months from 21 February 1991 at three percent (3%) interest per month.In effect, by the
admission of the due execution of the loan and mortgage deed, petitioner-spouses confessed that
they voluntarily signed it, and by the admission of the genuineness of the document, they also
acknowledged that at the time it was signed it was in the words and figures exactly as set out in
the pleading of respondent Inter-Urban Developers, Inc.
Petitioner-spouses would however claim that a contemporaneous agreement was entered into
between them and Simeon Ong Tiam who was then the president of Inter-Urban Developers,
Inc. that the loan was in reality for a period of five (5) years from 21 February 1991 and, as alleged
in their amended answer, interest-free or contrarily, as stated in their other pleadings, at statutory
rate of interest. The defense would thus not only self-contradict but also appear to override and
discard the simultaneous written formal agreement between the parties.
In the instant case, while petitioner-spouses appear to tender a material issue of fact, i.e.,
demandability and interest rate of the loan, summary judgment would nonetheless be proper where
it is shown that issues tendered are sham, fictitious, contrived, set up in bad faith, or patently
unsubstantial.[50] To forestall summary judgment, it is essential for the non-moving party to
confirm the existence of genuine issues where he has substantial, plausible and fairly arguable
defense, i.e., issues of fact calling for the presentation of evidence upon which a reasonable
findings of fact could return a verdict for the non-moving party although mere scintilla of evidence

468
in support of the party opposing summary judgment will be insufficient to preclude entry
thereof.[51] The proper inquiry would therefore be whether the affirmative defense offered by
petitioner-spouses constitutes genuine issue of fact requiring a full-blown trial.
We rule that the affirmative defense sets up a sham issue which justifies summary
judgment. For one, petitioner-spouses have not explained how their affirmative defense, since it
attempts to vary a written agreement, could be proved by admissible evidence. It would be useless
to avail of a complete trial where the issue proposed by petitioner-spouses could not be resolved
in any manner other than by referring to the explicit terms of the loan and mortgage agreement. To
be sure, where the parties have reduced their agreement in writing, it is presumed that they have
made the writing the only repository and memorial of the truth and whatever is not found in the
writing must be understood to have been waived and abandoned.Specifically, under Sec. 9, Rule
130, Revised Rules of Evidence, the trial court is barred from admitting evidence which proves or
tends to prove the alleged concurrent agreement with Simeon Ong Tiam which alters or varies the
terms of the deed between the parties -

Sec. 9 Evidence of written agreements. - When the terms of an agreement have been reduced to
writing, it is considered as containing all the terms agreed upon and there can be, between the
parties and their successors in interest, no evidence of such terms other than the contents of the
written agreement. However, a party may present evidence to modify, explain or add to the terms
of the written agreement if he puts in issue in his pleading: (a) An intrinsic ambiguity, mistake or
imperfection in the written agreement; (b) The failure of the written agreement to express the
true intent and agreement of the parties thereto; (c) The validity of the written agreement; or (d)
The existence of other terms agreed to by the parties or their successors in interest after the
execution of the written agreement x x x x

While it is true that contracting parties may establish stipulations, clauses, terms and
conditions as they may deem convenient provided they are not contrary to law, morals, good
customs, public order, or public policy, the parol evidence rule forbids any addition to or
contradiction of the terms of an agreement reduced into writing by testimony purporting to show
that, at or before the signing of the document, other or different terms were orally agreed upon by
the parties. As applied herein, the alleged terms of the contemporaneous agreement between
petitioner-spouses and Simeon Ong Tiam cannot be proved for they are not embodied in the
mortgage deed but exist only in their faint recollection. Only the terms of the loan and mortgage
agreement providing for six (6) months maturity from date of execution thereof and the interest
rate of three percent (3%) per month are worth considering and implementing.
The instant case is not unprecedented. In Tarnate v. Court of Appeals[52] involving a case of
foreclosure of real estate mortgage that was resolved by means of summary judgment where
neither the existence of the loans and the mortgage deeds nor the fact of default on the due
repayments was disputed, we rejected as genuine issue the contention of petitioners therein that
they were misled by respondent bank to believe that the loans were long-term accommodations
since the loan documents admittedly executed by the parties clearly contradicted petitioners
asseverations and the parties must have realized that when the terms of the agreement were
unequivocally reduced in writing, they could hardly be controverted by oral evidence to the
contrary. Similarly, in Heirs of Amparo del Rosario v. Santos,[53] where we rejected the alteration
of the conditions imposed in the deed of sale, this Court ruled that appellants therein could not be

469
allowed to introduce evidence of conditions allegedly agreed upon by them other than those
stipulated in the deed of sale because when they reduced their agreement in writing, it is presumed
that they have made the writing the only repository and memorial of truth, and whatever is not
found in the writing must be understood to have been waived and abandoned.
Petitioner-spouses cannot invoke any of the exceptions to the parol evidence rule, more
particularly, the alleged failure of the writing to express the true intent and agreement of the
parties. The exception obtains only where the written contract is so ambiguous or obscure in terms
that the contractual intention of the parties cannot be understood from a mere reading of the
instrument, thus necessitating the reception of relevant extrinsic evidence of the contractual
provision in dispute to enable the court to make a proper interpretation of the
instrument.[54]However, in the case at bar, the loan and mortgage deed is clear and without
ambiguity, mistake or imperfection in specifying the maturity of the loan exactly after six (6)
months from date of execution thereof at interest rate of three percent (3%) per month, and
certainly these unmistakable terms forbid petitioner-spouses from introducing evidence aliunde of
the alleged contemporaneous agreement in violation of the parol evidence rule.
Indeed the literal meaning of the stipulations is bolstered by the intention of the parties as
inferred from their contemporaneous and subsequent acts.[55] It is a matter of record that, without
hesitation, petitioner Guillermo Agbada asked for the postponement of the pre-trial conference
through a one-page handwritten letter addressed to the trial judge admitting liability for the due
and demandable loan: Hindi ko po nais makipaglaban dito sa kasong ito dahilan po itong perang
ito ay dapat ko pong bayaran[56] Furthermore, when proceedings had been ongoing in the trial
court for more than four (4) years, petitioner-spouses plainly assailed the finding of the trial court
vis--vis the appraised value of the foreclosed property, without more, thus strongly implying their
acquiescence to the due and demandable loan, and in fact attempted to pay the loan completely
and recover the foreclosed lot and improvements thereon by tendering a cashiers check
worth P6,307,532.66 through a house help.
Furthermore, for purposes of defeating respondents motion for summary judgment, petitioner-
spouses did not avail of any means to prove prima facie that Simeon Ong Tiam had authority to
change the terms of the real estate mortgage by a contemporaneous agreement or, at the very least,
to corroborate their allegations by means of the verified statements of Simeon Ong Tiam
himself. Verily the spouses were not able to adduce even a single explanation why
respondent Inter-Urban Developers, Inc. would suddenly and conveniently abandon the
formalities which it had gone through in drafting and executing the real estate mortgage in place
of an alleged coincidental and plain verbal novation of the original stipulations on interest rate and
duration of the loan. In the absence of even prima facie basis for inferring authority on the part of
Simeon Ong Tiam or inferring his corroboration of petitioner-spouses affirmative defense, we
cannot bind over Inter-Urban Developers, Inc. to the test of trial to meet the affirmative
defense. In Narra Integrated Corporation v. Court of Appeals[57] we rejected as genuine issue for
lengthy trial the claim that the contractual undertaking of one person was also binding upon another
without first showing a plausible and fairly arguable and substantial circumstance indicating
privity and consent to the contract by the other person upon whom compliance was also sought.
Other circumstances confirm the sham character of petitioner-spouses defense. To be sure,
they failed to offer any counter-affidavit which would have debunked the allegations in the motion
for summary judgment as well as its supporting documents and explained their failure to act swiftly

470
and precisely on the issue. In Heirs of Amparo Del Rosario v. Santos,[58] and Tiu v. Court of
Appeals,[59] we noted that the failure to adduce counter-evidence strongly indicated the absence of
serious factual issue to prevent summary judgment. It has also been said that while parties are not
required to offer affidavits in support of, or in opposition to, summary judgment motions, however,
once a properly supported motion for summary judgment has been filed, an adverse party cannot
rest upon the mere allegations or denials of his pleadings. As colorfully stated in American
jurisprudence, [the rule on summary judgment] x x x say[s] in effectMeet these affidavit facts or
judicially die. The party opposing summary judgment thus must offer either discovery responses
or affidavits that set forth specific facts showing that there is a genuine issue for trial.[60]
The maneuvering of petitioner-spouses before the trial court reinforces our belief that their
claim is unfounded. They contradicted themselves when they claimed that the loan was interest-
free and then in another vein contended that it bore the statutory rate of interest, only to change
their recollection subsequently to a nominal rate of interest. Petitioner-spouses would also
vacillate with respect to the alleged reason for respondent Inter-Urban Developers, Inc. to agree
to different maturity and interest-rate provisions since the answer filed before the trial court would
assign as cause therefor the personal relationship between them and Simeon Ong Tiam although
their memorandum before this Court would assert that the preferential treatment was due to
petitioner Guillermo Agbadas employment as consultant of a sister company of Inter-Urban
Developers, Inc. It is fatal to petitioner-spouses case, not to mention a misuse of precious court
resources, for them not to recall and convey in precise manner the stipulations of the purported
concurrent agreement with Simeon Ong Tiam when the alleged side contract is the very defense
sought to be heard in a full-blown trial.
Moreover, instead of filing opposing affidavits to support their affirmative defenses,
petitioner-spouses absented themselves from the proceedings a quo eventually leading to the
foreclosure sale and its confirmation. They did not pay the debt when, according to their own
affirmative defense, it was already due and demandable on the fifth year counted from 21 February
1991, that is, in any of the months in 1996. If they indeed believed in the worthiness of their claim,
they ought to have offered payment of the loan as it was then already payable according to their
own allegations and if refused by respondent Inter-Urban Developers, Inc. consigned the money
with the trial court. Quite the reverse, petitioner-spouses resorted to irrelevant legal actions, i.e., a
motion for extension of time to file an unspecified petition for review with the Court of Appeals,
which they did not even pursue thus manifesting a regrettable intention to delay the adverse effects
of their prejudicial admissions and to obscure the fact of finality of the Summary Judgment.[61]
The case of Paz v. Court of Appeals[62] cited by petitioner-spouses does not square with the
instant petition. The Paz case involved an action for quieting of title and recovery of possession,
accounting and damages with preliminary mandatory injunction filed by the buyers of several
parcels of land against the defendant who was a co-heir of the vendors thereof. n the defendant's
answer, he alleged that the sale was void since he was not given the opportunity to exercise his
right of pre-emption to buy the property there being no notice of sale having been given to him
and that he was ready and willing to buy the property. Thereafter the defendant filed his own
complaint seeking to annul the sale of the lots in question again invoking his right of pre-emption
which had been denied him as a result of the seemingly deliberate omission of a notice of sale to
him. This Court ruled that summary judgment was improper given a plausible ground of
substantial defense which was fairly arguable -

471
In the case at bar, not only did petitioner herein and defendant in Civil Case No. 54158 assert
genuine issues of fact and law which must be heard and tried, but he even filed Civil Case No.
54408 for the annulment of sale of the controversial lots in favor of the Nepomucenos and also
opposed the survey of the controversial lots in LRC Case No. R-3730. The court a quo failed to
consider that the affidavits of the two vendors Ramon and Luzonica Paz presented to the court by
private respondent only stated that they merely informed their brother Bienvenido of the sale by
way of showing their deeds of sale. The deeds of sale in favor of the Nepomucenos were
already fait accompli when they were shown to the petitioner, hence does not justify a summary
judgment. Petitioner asserts that he was unjustly denied as a co-heir of his right of legal pre-
emption or redemption provided for under Art. 1623 of the Civil Code by the failure of his co-
heirs to give him notice in writing of their intended desire to sell their shares, as well as the
terms/consideration thereof, in order to enable him to match private respondents - Nepomuceno's
offer to buy or his co-heirs' selling price at P450.00 per square meter. Petitioner's allegation of
the lack of written notification to him by all his co-heirs is a factual and legal issue which cannot
justify dispensation of a trial on the merits.[63]

Clearly, Paz differs from the case at bar. Herein petitioner-spouses were grossly negligent in
failing to pursue an affirmative defense which if true would have certainly impelled them to raise
hell the moment that the trial court refused evidence of such allegation. Moreover, the spouses
faced an impenetrable wall barring the alteration of the specific and unambiguous terms of the real
estate mortgage which was not the case in Paz. Indeed, while the defendant in Paz could have
proved the deprivation of his right to legal pre-emption, the petitioners in the instant case could
not do so upon veritable rules of evidence. Lastly, the representations of the defendant in Paz were
fairly arguable since the very evidence offered by the movant for summary judgment showed the
absence of the relevant notice to him. In contrast, we cannot say that the petitioner-spouses here
have adequate basis for claiming an alleged contemporaneous agreement affecting the contractual
right of respondent Inter-Urban Developers, Inc. absent any reasonable showing of the latter's
consent to the alteration of the real estate mortgage contract it had earlier executed. All in
all, Paz presented genuine and material issues of fact while the instant case proffered only one
issue which could properly be characterized as sham.
Finally, we find no merit in petitioner-spouses' claim that the purchase price of the mortgaged
real property was way below its appraised value. To begin with, they deliberately withheld the
presentation of their own evidence which might have proved this matter and thus unfortunately
deprived respondent Inter-Urban Developers, Inc. the opportunity to cross-examine whatever
such evidence would tend to establish. Equally significant, the low purchase price could have
worked in the petitioner-spouses' favor if they promptly exercised their equity of redemption. As
held in Tarnate v. Court of Appeals,[64] "[a]nent the contention that the property has been sold at
an extremely low price, suffice it to say that, if correct, it would have, in fact, favored an easy
redemption of the property. That remedy could have well been availed of but petitioners did not."
With respect to the award of attorneys fees and the reimbursement of advances for real estate
taxes and registration expenses allegedly incurred by respondent Inter-Urban Developers, Inc. we
rule that the determination thereof was done arbitrarily since the evidence on record, particularly
the receipts proving payment of real estate taxes and registration expenses in the names of
petitioner-spouses as payor, does not support the finding.[65] In Warner Barnes & Co. v. Luzon
Surety[66] we held that the trial court cannot impose attorney's fees as well as other charges through

472
summary judgment absent the standard proof of liability for specified amounts truly
owing. Furthermore, since the attorney's fees along with the purported costs for real estate taxes
and registration expenses were unjustifiably satisfied from proceeds of the sale of the mortgaged
property,[67] we must order restitution of the amounts paid in excess of the duly established debt
although the judgment may have become final and executory. In Esler v. de la Cruz[68] we held -

The gist of the appeal is that since the order for the dismissal of the case was issued on August
20, 1960, and said dismissal had become final, the court could no longer issue its order of
December 9, 1960 directing the return of the property. The argument while apparently correct
would be productive of clear injustice. As a matter of principle courts should be authorized, as in
this case, at any time to order the return of property erroneously ordered to be delivered to one
party, if the order was found to have been issued without jurisdiction. Authority for the return of
the property is expressed under the provision of Section 5 of Rule 39, Rules of Court, which
reads as follows:

Sec. 5. Effect of reversal of executed judgment. - Where the judgment executed is reversed
totally or partially on appeal, the trial court, on motion, after the case is remanded to it, may issue
such orders of restitution as equity and justice may warrant under the circumstances.

Under the same principle now expressed in Sec. 5, Rule 39, of the 1997 Rules of Civil
Procedure[69] respondent Inter-Urban Developers, Inc. must return to petitioner-spouses the
amounts of P10,000.00 for attorney's fees, P1,691.15 for registration expenses and P10,582.02 for
real estate taxes, with interest thereon at twelve percent (12%) per annum from promulgation of
this Decision until fully satisfied.[70]
WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision of
the Court of Appeals in CA-G.R. SP No. 54273, "Spouses Guillermo and Maxima Agbada v.
Regional Trial Court, Quezon City, Branch 105, and Inter-Urban Developers, Inc.," which
dismissed the petition for annulment of judgment with preliminary injunction filed by the Spouses
Guillermo and Maxima Agbada to nullify and to set aside the Summary Judgment rendered by the
Regional Trial Court-Br. 105 of Quezon City in its Civil Case No. Q-93-18592 for foreclosure of
real estate mortgage, "Inter-Urban Developers, Inc. (represented by Philip Tiam Lee) v. Spouses
Guillermo and Maxima Agbada," as well as the Resolution of the Court of Appeals denying
reconsideration of the assailed Decision is AFFIRMED, with the MODIFICATION that
respondent Inter-Urban Developers is directed to return to petitioner-spouses Guillermo and
Maxima Agbada the amounts of P10,000.00 for attorney's fees, P1,691.15 for registration
expenses and P10,582.02 for real estate taxes, with interest thereon at twelve percent (12%) per
annum from promulgation of this Decision until satisfied.
Upon finality of this Decision, let this case be REMANDED to the Regional Trial Court -
Branch 105 of Quezon City for prompt completion of the execution proceedings. No
pronouncement as to costs.
SO ORDERED.
Mendoza, Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur

473
[1]
Original Record, pp. 1, 12.
[2]
Id., pp. 5-6, 39-40
[3]
Id., pp. 5-6.
[4]
Id., p. 7.
[5]
Docketed as Civil Case No. Q-93-18592; id., pp. 1-4.
[6]
Id., p. 12.
[7]
Ibid.
[8]
Id., p. 23.
[9]
Id., pp. 29-30.
[10]
Id., pp. 32-33.
[11]
No copy of the opposition is attached to the original record but respondent Inter-Urban
Developers, Inc. admitted receiving a copy thereof to which it filed a reply; id., pp. 55-56.
[12]
Id., pp. 49-52.
[13]
Id., p. 67.
[14]
Decision penned by Judge Benedicto B. Ulep, RTC-Br. 105, Quezon City; id., pp. 68-69.
[15]
Id., p. 69.
[16]
Id., p. 75.
[17]
Id., p. 76.
[18]
Id., pp. 77-78.
[19]
Id., pp. 77-80.
[20]
Id., p. 81.
[21]
Id., pp. 82-83.
[22]
Id., p. 86.
[23]
Id., p. 90.
[24]
Id., p. 144.
[25]
Id., p. 158.
[26]
Id., pp. 100-108.
[27]
Id., p. 175.
[28]
The petition for review was procedurally erroneous since Rule 43 pertains to orders or decisions
of the Regional Trial Court acting in its appellate jurisdiction which certainly was not the case
herein; id., pp. 180-182.

474
[29]
Id., pp. 189-190.
[30]
Id., pp. 185-187.
[31]
Id., p. 196.
[32]
Id., pp. 203-204.
[33]
Id., p. 206.
[34]
Id., p. 260.
[35]
Id., pp. 230-233.
[36]
Id., p. 259.
[37]
Id., p. 261.
[38]
Docketed as CA-G.R. SP No. 54273; CA Record, pp. 5-6.
[39]
Id., p. 150.
[40]
Id., pp. 151-152.
[41]
Id., pp. 185-187.
[42]
G.R. No. 85332, 11 January 1990, 181 SCRA 26; Rollo, pp. 14-18.
[43]
Id., pp. 11-12; see also petitioner-spouses Memorandum, id., pp. 152-153.
[44]
Id., p. 127.
[45]
Id., pp. 127, 131-134.
[46]
Tiham v. Sibonghanoy, G.R. No. L-21450, 15 April 1968, 23 SCRA 29.
[47]
F. James, Jr. and G. Hazard, Jr., Civil Procedure (1977), p. 220.
[48]
I F.D. Regalado, Remedial Law Compendium (1997), p. 557.
[49]
Excelsa Industries, Incorporated v. Court of Appeals, G.R. No. 105455, 23 August 1995, 247
SCRA 560.
[50]
Narra Integrated Corporation v. Court of Appeals, G.R. No. 137915, 15 November 2000, 344
SCRA 781, 786.
[51]
Puyat v. Zabarte, G.R. No. 141536, 26 February 2001; R.L. Dessem, Pre-Trial Litigation: Law,
Policy and Practice (1991), p. 453.
[52]
G.R. No. 100635, 13 February 1995, 241 SCRA 254, 258.
[53]
G.R. No. L-46892, 30 September 1981, 108 SCRA 43.
[54]
Id., p. 58.
[55]
Lola v. Court of Appeals, G.R. No. L-46573, 13 November 1986, 145 SCRA 439.
[56]
Record, p. 23.
[57]
See Note 50.

475
[58]
See Note 53.
[59]
G.R. No. 107481, 18 November 1993, 228 SCRA 51.
[60]
See Note 51, p. 454.
[61]
See Note 49.
[62]
See Note 41.
[63]
See Note 41, pp. 30-31.
[64]
See Note 52, p. 259.
[65]
Record, pp. 42-46.
[66]
95 Phil. 924 (1954); see Central Azucarera de Bais v. Court of Appeals, G.R. No. 87597, 3
August 1990, 188 SCRA 328; Filinvest Credit Corporation v. Mendez, G.R. No. L-66419, 31 July
1987, 152 SCRA 593.
[67]
Sheriffs Return dated 19 November 1996; Rollo, p. 124.
[68]
No. L-18236, 31 January 1964, 10 SCRA 138, 139-140.
[69]
The provision now reads: Where the executed judgment is reversed totally or partially, or
annulled, on appeal or otherwise, the trial court may, on motion, issue such orders of restitution or
reparation of damages as equity and justice may warrant under the circumstances.
[70]
Complaint dated 29 November 1993; Summary Judgment dated 13 January 1995; Rollo, pp.
106, 115; Crismina Garments, Inc. v. Court of Appeals, G.R. No. 128721, 9 March 1999, 304
SCRA 356; Philippine National Bank v. Court of Appeals, G.R. No. 123643, 30 October 1996,
263 SCRA 766.

476
 FIRST DIVISION

MARITIMEINDUSTRY AUTHORITY G.R. No. 173128

(MARINA) and/or ATTY. OSCAR M. SEVILLA,
Petitioners, Present:

CORONA, C.J.,
Chairperson,
- versus - LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

MARC PROPERTIES CORPORATION, Promulgated:

Respondent.
February 15, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 which seeks to reverse the
Decision821 dated June 2, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 80967. The CA
dismissed petitioners appeal questioning the summary judgment rendered by the trial court which
ordered petitioner to reimburse the expenses incurred by the respondent for repair/renovation
works on its building.

The factual antecedents:

On October 23, 2001, petitioner Maritime Industry Authority (MARINA), a government

agency represented by then Administrator and concurrently Vice-Chairman of the Board of
Directors Oscar M. Sevilla, entered into a Contract of Lease822 with respondent Marc Properties
Corporation represented by its Executive Vice-President Ericson M. Marquez. It was agreed that
the MARINA offices will be transferred from PPL Building, Taft Avenue, Manila to an eight-

821
Rollo, pp. 36-44. Penned by Associate Justice Andres B. Reyes, Jr. (now Presiding Justice) with Associate Justices
Regalado E. Maambong and Monina Arevalo-Zenarosa concurring.
822
Records, pp. 122-129.

477
storey commercial building (MARC Building) and Condominium Unit 5 of MARC 2000 Tower
which are both owned by respondent. The parties fixed the monthly rental at P1,263,607.74 (plus
VAT) from January 1, 2002 up to December 31, 2002 and renewable for the same one-year period.
The Contract of Lease also contained the following provisions:

Article II

xxxx

Section 2.01 - The LESSEE, at its own expense, shall have the right and
authority to alter, renovate and introduce in the leased premises such improvement
as it may deem appropriate to render the place suitable for the purpose intended by
the LESSEE, provided, that such alteration, renovation and construction of
additional improvement will not cause any damage to the buildings and such
improvements shall be in accordance with the LESSORs House Rules &
Regulations. The renovation of existing electrical, sanitary/plumbing works,
sprinkler systems, mechanical works, exhaust and ventilation systems, doors, will
be referred to the Administration Office of the LESSOR and will be done only by
the original contractors of the system and cost will be for the account of the
LESSEE. Alternatively, the LESSEE may be allowed to use its own contractor but
subject to close supervision and approval of all works done by the original
contractors of the system and/or the Building Administration. This is to safeguard
the original design intent of the Buildings.

Article IX

Section 9.00 - The LESSEE may pre-terminate the term of this Contract of
Lease by notifying the LESSOR in writing at least ninety (90) days prior to
LESSEES vacating the premises, provided further that the LESSEE shall pay to the
LESSOR a penalty equivalent to two (2) months rental.

Article XI

xxxx

Section 11.13 - This Contract of Lease is subject to the approval of the

Board of Directors of the Maritime Industry Authority and the Office of the
President and shall become binding on both parties only after its approval by the
above-mentioned government offices. The LESSEE shall provide the LESSOR the
written approval of both offices.823

823
Id. at 123, 126 & 128.

478
 On December 14, 2001, respondent received a letter from Administrator Sevilla requesting
for rescission of their Contract of Lease for the reason that the MARINA Board of Directors during
its 158th Regular Meeting resolved to deny the proposed transfer of the MARINA office from its
present address to respondents building.824 In its letter-reply dated December 17, 2001, respondent
expressed disappointment and enumerated those facts and circumstances for which respondent
believes that the Boards decision was unreasonable. Respondent asserted that if the Board will not
reconsider its decision, MARINA must take responsibility for the cost already incurred by
respondent as damages and lost rental opportunity. Thus, respondent said it can only accept the
request for rescission upon reimbursement of P1,055,000.00 representing the amount advanced by
respondent and paid to its Contractors and payment of penalty equivalent to 2 months rental or
P2,527,215.48 in accordance with Art. IX, Sec. 9.00 of the Contract of Lease. With no immediate
response from petitioners, respondent again wrote Administrator Sevilla reiterating its position on
the matter.825

In their letter-reply dated January 23, 2002, petitioners asserted that MARINA is not liable
to pay the penalty considering that the Contract of Lease clearly provides that it is subject to the
approval of the Board and the Office of the President (OP) to become binding on the parties. As
to the actual amount expended for carpentry and electrical works done on the building, petitioners
requested to be furnished with copies of the official receipts so that it may be properly guided in
the disposition thereof. In compliance, respondent furnished petitioners with copies of the letter
and accomplishment reports/official receipts submitted by its contractors. Respondents counsel
faulted Administrator Sevilla for not submitting the Contract of Lease to the Board of Directors
notwithstanding the fact that respondent had filed a motion for reconsideration of the Boards
decision, a clear breach of petitioners contractual obligation which entitles respondent to the
penalty and damages sought. Petitioners asserted that MARINA is not liable for penalty and
damages since the Contract of Lease was not perfected; however, Administrator Sevilla reiterated
MARINAs commitment to pay actual expenses incurred for the works done on the premises based
on [MARINAs] request. Petitioners likewise furnished respondent with copies of the Agenda of
the 160th Regular Meeting of the MARINA Board of Directors held on June 28, 2002 and

824
Id. at 130.
825
Id. at 195-197.

479
Secretarys Certificate dated July 1, 2002 stating the resolution of the MARINA Board not to
approve/ratify the Contract of Lease.826

On July 10, 2002, respondent instituted Civil Case No. 02-104015 in the Regional Trial
Court of Manila (Branch 42) against petitioners MARINA and/or Atty. Oscar M. Sevilla. The
Complaint alleged the following:

xxxx

2. In or about the first week of August 2001 the herein [defendant] Atty.
Oscar M. Sevilla, as MARINA Administrator, represented to Mr. Ericson M.
Marquez, Executive Vice-President of herein [plaintiff] MARC, that the MARINA
has decided to terminate its lease on the 4th, 5th and 6th floors of the PPL Building
and to transfer said principal office to a new location; to this end, he negotiated for
the lease to MARINA of the entire 8-storey Marc Building, located at 1971 Taft
Avenue, Malate, Manila, and Unit #5 of the adjacent Marc 2000 Tower, both of
which belong to herein plaintiff MARC.

3. After about three (3) months of negotiations and after the terms and
conditions of the lease of said properties of herein plaintiff were ironed out with the
understanding that these were with the prior knowledge and consent of the
MARINA, a Contract of Lease on said 8-storey MARC Building and Unit #5 of the
Marc 2000 Tower was executed and signed x x x.

3.a. As a corollary to said contract, herein defendant Atty. Oscar M.

Sevilla wrote a letter, dated October 30, 2001, addressed to Mr. Emilio C.
Yap, informing the latter that Pursuant to Section 4 of the Contract of Lease
for the Fourth, Fifth and Sixth floors of the PPL Bldg., which floors we are
presently occupying, we regret to inform you that MARINA is not renewing
said Lease Contract beginning January 2002.

4. To prepare for the occupancy on January 1, 2002 of the leased properties,

herein defendants requested that alterations/renovations be made on plaintiffs
MARC Building for the account and at the expense of the MARINA, in accordance
with plans prepared and provided by Mr. Roberto C. Arceo, Administrative and
Finance Director of MARINA; and, pursuant to said request alterations/renovations
started on December 5, 2001 and was done by the lowest bidders, JTV Construction
Group, Inc., for civil works/renovations, and NCC Communication Networks, for
wiring and cable installation, for which MARC advanced/paid the sum of
P1,555,170.40.

5. The said Contract of Lease of the MARINA with MARC stipulated in

Sec. 11.13 of Article XI thereof that said contract is subject to the approval of the
826
Id. at 198-207, 212-222.

480
 Board of Directors of the MARINA and the Office of the President of the
Philippines and shall become binding on both parties after its approval by the afore-
mentioned government offices, which stipulation, therefore, carries with it the
obligation on the part of the MARINA Administrator, Atty. Oscar M. Sevilla, to
submit the said contract to the said Board for approval or disapproval; however,
in breach of said stipulation, he did not do so.

5.a. On the contrary, in a letter addressed to Mr. Ericson Marquez,

dated December 14, 2001, the MARINA Administrator, Atty. Oscar M.
Sevilla, requested the rescission of the said Contract of Lease and, as
justification, he falsely asserted, that during yesterdays 158th Regular
Meeting of the MARINA Board held at the MARINA Conference Room,
the Board resolved to DENY the proposed transfer of the MARINA from
its present address to your owned building, when in truth and in fact, neither
the said transfer nor the said Contract of Lease was included in the agenda
or taken up during the said 158th Regular Meeting held on December 13,
2001.

5.b. Neither was said Contract of Lease taken up in said Boards next
regular meeting held on February 21, 2002 notwithstanding the fact that
MARC filed a Motion for Reconsideration, dated February 14, 2002, which
provided the MARINA Administrator with another opportunity to submit
the said contract to the MARINA Board for its consideration; yet, he again
did not do so.

6. The breach on the part of the defendants of the stipulation clearly

provided in the said Contract of Lease, alleged in paragraph 5 hereof, resulted in
damages to the plaintiff which may be compensated with the sum of P2,527,215.48
equivalent to two (2) months rental, - the measure of damages provided for in said
contract.

x x x x827 (Italics supplied.)

Petitioners through the Solicitor General filed their Answer828 specifically denying the
foregoing allegations. Petitioners argued that respondents demand for P2,527,215.48 is based
solely on Art. V, Sec. 5.0 of the Contract of Lease, which provision presupposes the approval of
the contract which is subject to the suspensive condition provided in Art. XI, Sec. 11.13. Petitioners
contended that by claiming that there was no reason to reject the Contract of Lease considering the
clear advantages of approving the same, respondent is effectively imposing its judgment on the
Board of Directors and the OP; this simply cannot be done. Petitioners pointed out that the approval

827
Id. at 2-4.
828
Id. at 40-52.

481
or rejection of the contract is a prerogative lodged solely on the said authorities and respondent is
devoid of any authority to question the wisdom of the Boards rejection of the contract as obviously
there were other considerations -- to which respondent is not privy -- factored in by the Board in
its decision. Lastly, petitioners asserted that this being a suit against the State, it must be dismissed
outright as there was no allegation in the complaint that the State had given its consent to be sued
in this case.

Respondent filed a motion for summary judgment in its favor contending that there is no
genuine issue in this case as to any material fact even as to the amount of damages. Petitioners
filed their opposition alleging the existence of genuine factual issues which can only be resolved
in a full-blown trial on the merits.

On March 5, 2003, the trial court issued an Order829 granting in part the motion for
summary judgment. Citing petitioners admission in the Answer that Administrator Sevilla, as an
act of good faith, offered in behalf of MARINA to shoulder the actual expenses incurred for the
works done on the premises based on their request, as well as the other proofs/official receipts
submitted by respondent and the January 23, 2002, May 13, 2002 and July 1, 2002 letters of
Administrator Sevilla who promised or at least gave the impression that respondent will be
reimbursed by MARINA of the amount of P1,555,170.40, the trial court ruled that summary
judgment for the said claim is proper. Accordingly, the trial court ordered:

WHEREFORE, in view of all the foregoing, the motion for summary

judgment is partly granted. The defendants are directed to jointly and severally pay
the plaintiff the sum of P1,555,170.40 as reimbursement of the expenses it incurred
in the repairs/renovations of the MARC Building with legal interest from the filing
(July 10, 2002) of the complaint. In so far as the other claims of plaintiff, the motion
for summary judgment is denied.

SO ORDERED.830

Respondent then moved to set the case for pre-trial, which was granted. Meanwhile,
petitioners filed a motion for reconsideration831 of the March 5, 2003 Order arguing that while

829
Id. at 250-252. Penned by Judge Guillermo G. Purganan.
830
Id. at 252.
831
Id. at 260-268.

482
admittedly they had offered to pay the respondent reimbursement for the alterations/renovations
made on its building as shown by the afore-mentioned letters of Administrator Sevilla, petitioners
did not admit that such alterations/renovations which respondent claims to have been prosecuted
on the MARC Building were actually made thereon and that such changes were in fact in
accordance with the plans prepared and provided for by MARINA. Petitioners stressed that these
factual matters are still to be determined which can only be done through a full-blown trial; the
reimbursable amount being also subject to verification since petitioners have not yet been given
the opportunity to independently confirm such amount. Further, it was contended that respondents
submission of accomplishment reports on the alterations/renovation works it claims to have been
done and the amount it allegedly expended do not automatically establish petitioners liability for
the same. Petitioners subsequently requested that the scheduled pre-trial be cancelled pending
resolution of their motion for reconsideration of the March 5, 2003 Order.832

In its Order833 dated June 30, 2003, the trial court denied petitioners motion for
reconsideration, as follows:

As correctly observed by the plaintiff the answer raises issues which are
sham or not genuine. In their answer[,] defendants did not specifically allege what
were not done in plaintiffs MARC Building or what were done therein which were
not in accordance with the plan. Neither did defendants specifically alleged in their
answer what amount covered by the receipts of the contractors is not reimbursable.

xxxx

The defendants opted not to file opposing or counter affidavits. Thus, there
is no proof what works were done in the MARC Building which was not in
accordance with the plan submitted by MARINA. Neither is there proof that the
amounts covered by the receipts of the contracts include amounts which were not
for works done in said MARC Building.

Anent the alleged lack of opportunity for defendants to confirm the amount
demanded by the plaintiff. From May 31, 2002 when defendants received copies of
the receipts issued by the contractors up to the time they filed their Answer dated
October 14, 2002, four and a half (4 ) months elapsed, during which defendants
have had full opportunity to verify the correctness of said receipts. Thereafter,
another four (4) months elapsed up to the time plaintiffs motion for summary
judgment was set for hearing on January 10, 2003. There were, therefore, a total of

832
Id. at 301-303.
833
Id. at 312-313.

483
 8 months during which defendants could have verified the correctness of the
amounts covered by said receipts.

WHEREFORE, in view of all the foregoing, the motion for reconsideration

is denied.

SO ORDERED.834

The Office of the Solicitor General received a copy of the above order on July 14, 2003.
On July 18, 2003, the Solicitor General filed a notice of appeal. Said notice of appeal was later
withdrawn upon manifestation by the Solicitor General that since the March 5, 2003 Order is a
partial summary judgment, the same is interlocutory and not appealable, without prejudice to
petitioners availment of the appropriate remedy from the said ruling.835

On the scheduled pre-trial hearing on July 3, 2003, counsel for petitioners appeared but
without a special power of attorney as directed in the Notice of Pre-Trial. On motion of the
respondent, the trial court declared petitioners as in default and allowed the respondent to present
its evidence ex-parte.836 Petitioners filed a motion for reconsideration claiming that the scheduled
pre-trial was premature considering the pendency of their motion for reconsideration of the March
5, 2003 Order, and invoking the liberal policy on setting aside default orders. The trial court,
however denied said motion for reconsideration.837

Petitioners sought relief from the CA by filing a petition for certiorari with prayer for
issuance of TRO and/or writ of preliminary injunction (CA-G.R. SP No. 79343). Petitioners asked
the appellate court to hold in abeyance the proceedings in Civil Case No. 02-104015. Apparently,
however, petitioners urgent motion for the issuance of TRO was not acted upon by the CA. After
admission of the documentary exhibits identified by Ericson Marquez and formally offered in
evidence, and there being no restraining order issued by the appellate court, the case was deemed
submitted for decision.838

834
Id. at 313.
835
Id. at 317, 336-340, 346.
836
Id. at 314.
837
Id. at 323-329, 335.
838
Id. at 353-357, 363-368.

484
 On December 1, 2003, the trial court rendered its Decision839 upholding the March 5, 2003
order granting the prayer for reimbursement but denying the rest of respondents claims. The
dispositive portion thereof reads:

WHEREFORE, premises considered, except for the amount of

Php1,555,170.40 representing reimbursement of the renovations advanced by the
plaintiff which this Court had already awarded in the Order dated March 5, 2003,
the rest of the plaintiffs claims vis--vis unpaid rentals of Php 2,527,215.48 together
with interest thereon at the legal rate as well as attorneys fees are hereby dismissed
for lack of factual and legal basis.

No pronouncement as to costs.

SO ORDERED.840

Both parties appealed the trial courts decision (CA-G.R. CV No. 80967).841However,
respondents appeal was dismissed for non-payment of appellate docket and other legal fees.
Respondent challenged the said dismissal before this Court in a petition for certiorari and
mandamus (G.R. No. 165110). G.R. No. 165110 was likewise dismissed under Resolution dated
October 6, 2004 of this Courts Third Division.842

By Decision dated June 2, 2006, the CA dismissed petitioners appeal holding that the trial
courts rendition of partial summary judgment was inaccord with Section 1, Rule 35 of the 1997
Rules of Civil Procedure, as amended, as it was based on petitioners admission in their Answer.
In rejecting petitioners argument that they raised a genuine factual issue as to the reimbursable
amount for the renovation works, the CA stated:

As to the contention that defendant-appellant is entitled to verify first the

authenticity, genuineness and due execution of the documents (e.g., receipts)
relative to the renovation, suffice it to note that plaintiff-appellee had offered its
evidence on 13 December 2002 or three (3) months prior to the issuance of the
contested order. Yet, defendant-appellant has never lift its finger to challenge the
authenticity, genuineness, and due execution of the said documents. For this failure,
it is established beyond cavil that there is no genuine issue as to any material fact
warranting thereby the issuance of a summary judgment.843

839
Id. at 376-382. Penned by Judge Guillermo G. Purganan.
840
Id. at 382.
841
Id. at 384-394.
842
CA rollo, pp. 26, 52,194-196.
843
Rollo, pp. 43-44.

485
 Hence, this petition raising the sole issue of whether the CA was correct in sustaining the
trial courts order granting the motion for partial summary judgment thereby dispensing with a full
trial on respondents claim for reimbursement of P1,555,170.40, the amount allegedly advanced by
respondent for the repair/renovation works on its building. With the previous dismissal by the CA
of respondents appeal and its petition for certiorari in this Court, the present petition is thus
confined to the propriety of the trial courts partial summary judgment insofar as the aforesaid claim
for reimbursement.

We find the petition meritorious.

Sections 1 and 3, Rule 35 of the 1997 Rules of Civil Procedure, as amended, provide:

SECTION 1. Summary judgment for claimant. A party seeking to recover

upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at
any time after the pleading in answer thereto has been served, move with supporting
affidavits, depositions or admissions for a summary judgment in his favor upon all
or any part thereof.

SECTION 3. Motion and proceedings thereon. The motion shall be served

at least ten (10) days before the time specified for the hearing. The adverse party
may serve opposing affidavits, depositions or admissions at least three (3) days
before the hearing. After the hearing, the judgment sought shall be rendered
forthwith if the pleadings, supporting affidavits, depositions, and admissions on
file, show that, except as to the amount of damages, there is no genuine issue
as to anymaterial fact and that the moving party is entitled to a judgment as a
matter of law. (Emphasis supplied.)

Summary judgment is a procedural device resorted to in order to avoid long drawn out
litigations and useless delays where the pleadings on file show that there are no genuine issues of
fact to be tried.844A genuine issue is such issue of fact which require the presentation of evidence
as distinguished from a sham, fictitious, contrived or false claim.845There can be no summary
judgment where questions of fact are in issue or where material allegations of the pleadings are in
dispute.846 A party who moves for summary judgment has the burden of demonstrating clearly the

844
Solidbank Corporation v. Court of Appeals, G.R. No. 120010, October 3, 2002, 390 SCRA 241, 249.
845
Id., citing Evadel Realty and Development Corporation v. Soriano, G.R. No. 144291, April 20, 2001, 357 SCRA
395, 401.
846
Manufacturers Hanover Trust Co. v. Guerrero, G.R. No. 136804, February 19, 2003, 397 SCRA 709, 715.

486
absence of any genuine issue of fact, or that the issue posed in the complaint is so patently
unsubstantial as not to constitute a genuine issue for trial, and any doubt as to the existence of such
an issue is resolved against the movant.847

Contrary to the findings of the trial court and CA, the Answer filed by petitioners contained
a specific denial of absolute liability for the amount being claimed as actual expenses for
repairs/renovations works done on repondents building after the execution of the Contract of
Lease.

5. SPECIFICALLY DENY the allegation in paragraph 4 of the complaint

that MARINA requested for alterations/renovations in accordance with the plans
prepared by MARINA on the MARC building for the account of and at the expense
of MARINA, the truth being those stated in the Special and Affirmative Defenses
hereof. They likewise SPECIFICALLY DENY the rest of the allegations therein
that said request alterations/renovations started on December 5, 2001 and was done
by the lowest bidders, JTV Construction Group, Inc., for civil works/renovations
and NCC Communication Networks, for wiring and cable installation, for whcih
plaintiff allegedly advanced/paid the sum of P1,555,170.40 for lack of knowledge
or information sufficient to form a belief as to the truth thereof.

xxxx

13. As an act of good faith, Atty. Sevilla, in behalf of MARINA, has offered
to shoulder and pay the actual expenses incurred for the works done on the premises
based on MARINAs request. Moreover, defendants cannot allow plaintiff to collect
from them the additional sum of P2,527,215.48 which is equivalent to two (2)
months rental as penalty simply because there is no justification therefor.

x x x x848

Furthermore, petitioners averred in their Opposition to Plaintiffs Motion for Summary

Judgment in Favor of Plaintiff:

With regard to the claim for reimbursement, plaintiff has yet to conclusively
prove that the alterations/renovations it claims to have been made in its building
were actually made and that the same were actually in accordance with the alleged
request made by MARINA.

847
Go v. Court of Appeals, G.R. No. 120040, January 29, 1996, 252 SCRA 564, 569.
848
Records, pp. 41-42, 49.

487
 The reply-letter dated January 23, 2002 of defendant Sevilla in response to
the letters of Ericson Marquez dated December 17, 2001 and January 18, 2002,
demanding reimbursements of the alterations/renovation allegedly made upon its
building, shows that it merely required Marquez to show proof or receipt of the
expenses plaintiff alleges it had incurred.

Likewise, the letter of defendant Sevilla dated July 1, 2002, this time in
response to a similar demand letter made by plaintiffs counsel, Atty. Antonio
Atienza, simply stated that defendants have committed themselves to pay the actual
expenses incurred by plaintiff as based on MARINAs request. The same offer
was reiterated by defendants in paragraph 13 of their answer to plaintiffs complaint.
It must be noted, however, that said offer specifically pertains only to
alterations/renovations which were actually made on plaintiffs properties in
accordance with MARINAs request.

Verily, defendants have yet to actually acquiesce to the veracity of the

accomplishment reports, receipt, etc. submitted by plaintiff since the same are still
subject to verification which can only be achieved through a full-blown trial.849
(Emphasis and underscoring in the original.)

As can be gleaned, the fact that Administrator Sevilla sent respondent letters wherein
MARINA offered to shoulder actual expenses for works done on the premises based on MARINAs
request does not necessarily mean that petitioners had waived their right to question the
amountbeing claimed by the respondent.850Since the factual basis of the claim for reimbursement
was not admitted by the petitioners, it is clear that the resolution of the question of actual works
done based on MARINAs request, as well as the correctness of the amount actually spent by
respondent for the purpose, required a trial for the presentation of testimonial and documentary
evidence to support such claim. The trial court therefore erred in granting summary judgment for
the respondent. The averments in the answer and opposition clearly pose factual issues and hence
rendition of summary judgment would be improper.

It must be stressed that trial courts have limited authority to render summary judgments
and may do so only when there is clearly no genuine issue as to any material fact. When the facts
as pleaded by the parties are disputed or contested, proceedings for summary judgment cannot take
the place of trial.851As already stated, the burden of demonstrating clearly the absence of genuine

849
Id. at 237-238.
850
See D.M. Consunji, Inc. v. Duvaz Corporation, G.R. No. 155174, August 4, 2009, 595 SCRA 111, 123.
851
Asian Construction and Development Corporation v. Philippine Commercial International Bank, G.R. No.
153827, April 25, 2006, 488 SCRA 192, 203.

488
issues of fact rests upon the movant, in this case the respondent, and not upon petitioners who
opposed the motion for summary judgment. Any doubt as to the propriety of the rendition of a
summary judgment must thus be resolved against the respondent. But here, the partial summary
judgment was premised merely on the trial courts hasty conclusion that respondent is entitled to
the reimbursement sought simply because petitioners failed to point out what particular works
were not done or implemented not in accordance with MARINAs specifications after demands
were made by respondent and the filing of the complaint in court. Precisely, a trial is conducted
after the issues have been joined to enable herein respondent to prove, first, that repair/renovation
works were actually done and such were in accordance with MARINAs request, and second, that
it actually advanced the cost thereof by paying the contractors; and more importantly, to provide
opportunity for the petitioners to scrutinize respondents evidence, cross-examine its witnesses and
present rebuttal evidence. Moreover, the trial court should have been more circumspect in ruling
on the motion for summary judgment, taking into account petitioners concern for judicious
expenditure of public funds in settling its liabilities to respondent.

The partial summary judgment rendered under the trial courts Order dated March 5, 2003
being a nullity, the case should be remanded to saidcourt for the conduct of trial on the issue of the
reimbursement of expenses for repair/renovation works being claimed by the respondent. For this
purpose, petitioners shall be afforded fair opportunity to scrutinize the respondents evidence,
cross-examine its witnesses and present controverting evidence. It is to be noted that the partial
summary judgment was rendered before petitioners were declared non-suited. Petitioners had
promptly challenged the validity of the default order and even sought an injunction against the ex-
parte presentation of evidence by the respondent; however, the CA did not act on the matter until
the rendition of the trial courts December 1, 2003 Decision. Substantial justice in this instance can
best be served if a full opportunity is given to both parties to litigate their dispute and submit the
merits of their respective positions.852

WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated
June 2, 2006 of the Court of Appeals in CA-G.R. CV No. 80967 is REVERSED and SET ASIDE.
The Decision dated December 1, 2003 insofar only as it upheld the Order dated March 5, 2003 of

852
Bahia Shipping Services, Inc. v. Mosquera, G.R. No. 153432, February 18, 2004, 423 SCRA 305, 308.

489
the Regional Trial Court of Manila, Branch 42, is SET ASIDE. The case is hereby REMANDED
to the said court for further proceedings.

No costs.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the conclusions
in the above Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.
490
RENATO C. CORONA
Chief Justice

491
Summary judgment vs. Judgment on the Pleadings; distinctions.

OLIVAREZ REALTY CORPORATION AND DR. PABLO R. OLIVAREZ VS.

BENJAMIN CASTILLO, G.R. No. 196251, July 09, 2014.

x x x.

Summary judgment in this case is proper.

A motion for summary judgment is filed either by the claimant or the defending party. The trial
court then hears the motion for summary judgment. If indeed there are no genuine issues of
material fact, the trial court shall issue summary judgment. Section 3, Rule 35 of the 1997 Rules
of Civil Procedure provides:

SEC. 3. Motion and proceedings thereon. The motion shall be served at least ten (10) days
before the time specified for the hearing. The adverse party may serve opposing affidavits,
depositions, or admission at least three (3) days before the hearing. After the hearing, the
judgment sought shall be rendered forthwith if the pleadings, supporting affidavits, depositions,
and admissions on file, show that, except as to the amount of damages, there is no genuine issue
as to any material fact and that the moving party is entitled to a judgment as a matter of law.

An issue of material fact exists if the answer or responsive pleading filed specifically denies the
material allegations of fact set forth in the complaint or pleading. If the issue of fact requires the
presentation of evidence, it is a genuine issue of fact. However, if the issue could be resolved
judiciously by plain resort to the pleadings, affidavits, depositions, and other papers on file, the
issue of fact raised is sham, and the trial court may resolve the action through summary judgment.

A summary judgment is usually distinguished from a judgment on the pleadings. Under Rule 34
of the 1997 Rules of Civil Procedure, trial may likewise be dispensed with and a case decided
through judgment on the pleadings if the answer filed fails to tender an issue or otherwise admits
the material allegations of the claimants pleading.

Judgment on the pleadings is proper when the answer filed fails to tender any issue, or otherwise
admits the material allegations in the complaint. On the other hand, in a summary judgment, the
answer filed tenders issues as specific denials and affirmative defenses are pleaded, but the issues
raised are sham, fictitious, or otherwise not genuine.

In this case, Olivarez Realty Corporation admitted that it did not fully pay the purchase price as
agreed upon in the deed of conditional sale. As to why it withheld payments from Castillo, it set
up the following affirmative defenses: First, Castillo did not file a case to void the Philippine
Tourism Authoritys title to the property; second, Castillo did not clear the land of the tenants;
third, Castillo allegedly sold the property to a third person, and the subsequent sale is currently
being litigated before a Quezon City court.

492
Considering that Olivarez Realty Corporation and Dr. Olivarezs answer tendered an issue,
Castillo properly availed himself of a motion for summary judgment.

However, the issues tendered by Olivarez Realty Corporation and Dr. Olivarezs answer are not
genuine issues of material fact. These are issues that can be resolved judiciously by plain resort to
the pleadings, affidavits, depositions, and other papers on file; otherwise, these issues are sham,
fictitious, or patently unsubstantial.

493
Kinds of motions (Rules 6, 7 and 8 of the Rules of Court)

1. Motion for bill of particulars - a request by a party for a clearer and more specific statement of
allegations made by the opposing party, to enable him to prepare his responsive pleading or to
prepare for trial. It must point out defects complained of and the details desired.

2. Motion to dismiss - a move by the defendant to dismiss the suit against him based on grounds
like the lack of jurisdiction, no cause of action, etc.

3. Motion for intervention - made by a person who has a legal interest:

(a) in the matter in litigation;

(b) in the success of either party;
(c) an interest against both; or
(d) who will be adversely affected by distribution or disposition of property in the custody of the
court or an officer thereof.
4. Motion for judgment on the pleadings - made by the plaintiff for the court to render a decision
based solely on the pleadings because the defendants answer does not deny the allegations in the
complaint, except damages (this is not allowed for legal separation or annulment cases).

5. Motion for summary judgment - made by any party for the court to render a decision based on
the pleadings (complaint, answer, etc), affidavits, stipulations, and admissions, in cases like
recovery of debts, etc.

494
Summary judgment vs. judgment on the pleadings; cause of action, sufficiency of.
Basbas v. Sayson
(click link)

"x x x.

I. The instant case is proper for the rendition of a summary judgment.

Petitioners principally assail the CAs affirmance of the RTCs Order granting respondents
Motion for Judgment on the Pleadings and/or Summary Judgment.
In Tan v. De la Vega,[52] citing Narra Integrated Corporation v. Court of Appeals,[53] the court
distinguished summary judgment from judgment on the pleadings, viz:
The existence or appearance of ostensible issues in the pleadings, on the one hand,
and their sham or fictitious character, on the other, are what distinguish a proper case for
summary judgment from one for a judgment on the pleadings. In a proper case for
judgment on the pleadings, there is no ostensible issue at all because of the failure of the
defending partys answer to raise an issue. On the other hand, in the case of a summary
judgment, issues apparently exist i.e. facts are asserted in the complaint regarding which
there is as yet no admission, disavowal or qualification; or specific denials or affirmative
defenses are in truth set out in the answer but the issues thus arising from the pleadings
are sham, fictitious or not genuine, as shown by affidavits, depositions, or admissions. x x
x.
Simply stated, what distinguishes a judgment on the pleadings from a summary judgment is the
presence of issues in the Answer to the Complaint. When the Answer fails to tender any issue, that is, if it
does not deny the material allegations in the complaint or admits said material allegations of the adverse
partys pleadings by admitting the truthfulness thereof and/or omitting to deal with them at all, a judgment
on the pleadings is appropriate.[54] On the other hand, when the Answer specifically denies the material
averments of the complaint or asserts affirmative defenses, or in other words raises an issue, a summary
judgment is proper provided that the issue raised is not genuine. A genuine issue means an issue of fact
which calls for the presentation of evidence, as distinguished from an issue which is fictitious or contrived
or which does not constitute a genuine issue for trial.[55]
a) Judgment on the pleadings is not proper because
petitioners Answer tendered issues.
In this case, we note that while petitioners Answer to respondents Complaint practically admitted
all the material allegations therein, it nevertheless asserts the affirmative defenses that the action for revival
of judgment is not the proper action and that petitioners are not the proper parties. As issues obviously arise
from these affirmative defenses, a judgment on the pleadings is clearly improper in this case.

495
 However, before we consider this case appropriate for the rendition of summary judgment, an
examination of the issues raised, that is, whether they are genuine issues or not, should first be made.
b) The issues raised are not genuine issues, hence
rendition of summary judgment is proper.
To resolve the issues of whether a revival of judgment is the proper action and whether respondents
are the proper parties thereto, the RTC merely needed to examine the following: 1) the RTC Order dated
September 13, 1989, to determine whether same is a judgment or final order contemplated under Section
6, Rule 39 of the Rules of Court; and, 2) the pleadings of the parties and pertinent portions of the
records[56] showing, among others, who among the respondents were oppositors to the land registration
case, the heirs of such oppositors and the present occupants of the property. Plainly, these issues could be
readily resolved based on the facts established by the pleadings. A full-blown trial on these issues will only
entail waste of time and resources as they are clearly not genuine issues requiring presentation of evidence.
Petitioners aver that the RTC should not have granted respondents Motion for Judgment on the
Pleadings and/or Summary Judgment because of the controverted stipulations and the first three issues
enumerated in the Pre-trial Order, which, according to them, require the presentation of evidence. These
stipulations and issues, however, when examined, basically boil down to questions relating to the propriety
of the action resorted to by respondents, which is revival of judgment, and to the proper parties thereto
the same questions which we have earlier declared as not constituting genuine issues.
In sum, this Court holds that the instant case is proper for the rendition of a summary judgment,
hence, the CA committed no error in affirming the May 21, 2001 Order of the RTC granting respondents
Motion for Judgment on the Pleadings and/or Summary Judgment.
II. The Complaint states a cause of action.
Petitioners contend that the complaint states no cause of actionsince the
September 13, 1989 Order sought to be revived is not the judgment contemplated under Section 6, Rule 39
of the Rules of Court. They also aver that the RTC erred when it ordered the revival not only of the
September 13, 1989 Order but also of the July 24, 1985 CA Decision, when what was prayed for in the
complaint was only the revival of the former.
This Court, however, agrees with respondents that these matters have already been sufficiently
addressed by the RTC in its Order of May 9, 1997[57] and we quote with approval, viz:
The body of the Complaint as well as the prayer mentioned about the executory decision
of the Court of Appeals promulgated on July 24, 1985 that had to be finally
implemented. So it appears to this Court that the Complaint does not alone invoke or use
as subject thereof the Order of this Court which would implement the decision or judgment
regarding the land in question. The Rules of Court referring to the execution of judgment,
particularly Rule 39, Sec. 6, provides a mechanism by which the judgment that had not
been enforced within five (5) years from the date of its entry or from the date the said
judgment has become final and executory could be enforced. In fact, the rule states:
judgment may be enforced by action.

496
 So in this Complaint, what is sought is the enforcement of a judgment and the
Order of this Court dated September 13, 1989 is part of the process to enforce that
judgment. To the mind of the Court, therefore, the Complaint sufficiently states a cause of
action.[58]
III. Any perceived defect in the SPA would not serve to bar the case from proceeding.
Anent the SPA, we find that given the particular circumstances in the case at bar, an SPA is not even
necessary such that its efficacy or the lack of it would not in any way preclude the case from
proceeding.This is because upon Roberto Sr.s death, Roberto Jr., in succession of his father, became a co-
owner of the subject property together with his mother, Beata. As a co-owner, he may, by himself alone,
bring an action for the recovery of the co-owned property pursuant to the well-settled principle that in a
co-ownership, co-owners may bring actions for the recovery of co-owned property without the necessity
of joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the
benefit of his co-owners.[59]
While we note that the present action for revival of judgment is not an action for recovery, the September
13, 1989 Order sought to be revived herein ordered the petitioners, among others, to vacate the subject
property pursuant to the final and executory judgment of the CA affirming the CFIs adjudication of the
same in favor of respondents. This Order was issued after the failure to enforce the writ of execution and
alias writ of execution due to petitioners refusal to vacate the property. To this Courts mind, respondents
purpose in instituting the present action is not only to have the CA Decision in the land registration case
finally implemented but ultimately, to recover possession thereof from petitioners. This action is therefore
one which Roberto Jr., as co-owner, can bring and prosecute alone, on his own behalf and on behalf of his
co-owner, Beata. Hence, a dismissal of the case with respect to Beata pursuant to Sec. 5,[60]Rule 18 of the
Rules of Court will be futile as the case could nevertheless be continued by Roberto Jr. in behalf of the two
of them.

x x x."

497
Summary judgment vs. judgment on the pleadings; cause of action, sufficiency of.
Basbas v. Sayson
(click link)

"x x x.

I. The instant case is proper for the rendition of a summary judgment.

Petitioners principally assail the CAs affirmance of the RTCs Order granting respondents
Motion for Judgment on the Pleadings and/or Summary Judgment.
In Tan v. De la Vega,[52] citing Narra Integrated Corporation v. Court of Appeals,[53] the court
distinguished summary judgment from judgment on the pleadings, viz:
The existence or appearance of ostensible issues in the pleadings, on the one hand,
and their sham or fictitious character, on the other, are what distinguish a proper case for
summary judgment from one for a judgment on the pleadings. In a proper case for
judgment on the pleadings, there is no ostensible issue at all because of the failure of the
defending partys answer to raise an issue. On the other hand, in the case of a summary
judgment, issues apparently exist i.e. facts are asserted in the complaint regarding which
there is as yet no admission, disavowal or qualification; or specific denials or affirmative
defenses are in truth set out in the answer but the issues thus arising from the pleadings
are sham, fictitious or not genuine, as shown by affidavits, depositions, or admissions. x x
x.
Simply stated, what distinguishes a judgment on the pleadings from a summary judgment is the
presence of issues in the Answer to the Complaint. When the Answer fails to tender any issue, that is, if it
does not deny the material allegations in the complaint or admits said material allegations of the adverse
partys pleadings by admitting the truthfulness thereof and/or omitting to deal with them at all, a judgment
on the pleadings is appropriate.[54] On the other hand, when the Answer specifically denies the material
averments of the complaint or asserts affirmative defenses, or in other words raises an issue, a summary
judgment is proper provided that the issue raised is not genuine. A genuine issue means an issue of fact
which calls for the presentation of evidence, as distinguished from an issue which is fictitious or contrived
or which does not constitute a genuine issue for trial.[55]
a) Judgment on the pleadings is not proper because
petitioners Answer tendered issues.
In this case, we note that while petitioners Answer to respondents Complaint practically admitted
all the material allegations therein, it nevertheless asserts the affirmative defenses that the action for revival
of judgment is not the proper action and that petitioners are not the proper parties. As issues obviously arise
from these affirmative defenses, a judgment on the pleadings is clearly improper in this case.

498
 However, before we consider this case appropriate for the rendition of summary judgment, an
examination of the issues raised, that is, whether they are genuine issues or not, should first be made.
b) The issues raised are not genuine issues, hence
rendition of summary judgment is proper.
To resolve the issues of whether a revival of judgment is the proper action and whether respondents
are the proper parties thereto, the RTC merely needed to examine the following: 1) the RTC Order dated
September 13, 1989, to determine whether same is a judgment or final order contemplated under Section
6, Rule 39 of the Rules of Court; and, 2) the pleadings of the parties and pertinent portions of the
records[56] showing, among others, who among the respondents were oppositors to the land registration
case, the heirs of such oppositors and the present occupants of the property. Plainly, these issues could be
readily resolved based on the facts established by the pleadings. A full-blown trial on these issues will only
entail waste of time and resources as they are clearly not genuine issues requiring presentation of evidence.
Petitioners aver that the RTC should not have granted respondents Motion for Judgment on the
Pleadings and/or Summary Judgment because of the controverted stipulations and the first three issues
enumerated in the Pre-trial Order, which, according to them, require the presentation of evidence. These
stipulations and issues, however, when examined, basically boil down to questions relating to the propriety
of the action resorted to by respondents, which is revival of judgment, and to the proper parties thereto
the same questions which we have earlier declared as not constituting genuine issues.
In sum, this Court holds that the instant case is proper for the rendition of a summary judgment,
hence, the CA committed no error in affirming the May 21, 2001 Order of the RTC granting respondents
Motion for Judgment on the Pleadings and/or Summary Judgment.
II. The Complaint states a cause of action.
Petitioners contend that the complaint states no cause of actionsince the
September 13, 1989 Order sought to be revived is not the judgment contemplated under Section 6, Rule 39
of the Rules of Court. They also aver that the RTC erred when it ordered the revival not only of the
September 13, 1989 Order but also of the July 24, 1985 CA Decision, when what was prayed for in the
complaint was only the revival of the former.
This Court, however, agrees with respondents that these matters have already been sufficiently
addressed by the RTC in its Order of May 9, 1997[57] and we quote with approval, viz:
The body of the Complaint as well as the prayer mentioned about the executory decision
of the Court of Appeals promulgated on July 24, 1985 that had to be finally
implemented. So it appears to this Court that the Complaint does not alone invoke or use
as subject thereof the Order of this Court which would implement the decision or judgment
regarding the land in question. The Rules of Court referring to the execution of judgment,
particularly Rule 39, Sec. 6, provides a mechanism by which the judgment that had not
been enforced within five (5) years from the date of its entry or from the date the said
judgment has become final and executory could be enforced. In fact, the rule states:
judgment may be enforced by action.

499
 So in this Complaint, what is sought is the enforcement of a judgment and the
Order of this Court dated September 13, 1989 is part of the process to enforce that
judgment. To the mind of the Court, therefore, the Complaint sufficiently states a cause of
action.[58]
III. Any perceived defect in the SPA would not serve to bar the case from proceeding.
Anent the SPA, we find that given the particular circumstances in the case at bar, an SPA is not even
necessary such that its efficacy or the lack of it would not in any way preclude the case from
proceeding.This is because upon Roberto Sr.s death, Roberto Jr., in succession of his father, became a co-
owner of the subject property together with his mother, Beata. As a co-owner, he may, by himself alone,
bring an action for the recovery of the co-owned property pursuant to the well-settled principle that in a
co-ownership, co-owners may bring actions for the recovery of co-owned property without the necessity
of joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the
benefit of his co-owners.[59]
While we note that the present action for revival of judgment is not an action for recovery, the September
13, 1989 Order sought to be revived herein ordered the petitioners, among others, to vacate the subject
property pursuant to the final and executory judgment of the CA affirming the CFIs adjudication of the
same in favor of respondents. This Order was issued after the failure to enforce the writ of execution and
alias writ of execution due to petitioners refusal to vacate the property. To this Courts mind, respondents
purpose in instituting the present action is not only to have the CA Decision in the land registration case
finally implemented but ultimately, to recover possession thereof from petitioners. This action is therefore
one which Roberto Jr., as co-owner, can bring and prosecute alone, on his own behalf and on behalf of his
co-owner, Beata. Hence, a dismissal of the case with respect to Beata pursuant to Sec. 5,[60]Rule 18 of the
Rules of Court will be futile as the case could nevertheless be continued by Roberto Jr. in behalf of the two
of them.

x x x."

500
Summary judgment improper; requisites.
G.R. No. 175514

Note:

The common tactic of banks, when they sue clients over loans and mortgages, is to move for
"summary judgment" on the theory that the defendants fail to persent genuine issues of fact and
that they admit the material allegations of facts in the complaint. This is an example.

PHILIPPINE BANK OF G.R. No. 175514

COMMUNICATIONS,
Petitioner,
Present:

- versus -
CARPIO, J.
NACHURA,
SPOUSES JOSE C. GO
PERALTA,
and ELVY T. GO,
ABAD, and
Respondents.
MENDOZA, JJ.

Promulgated:
February 14, 2011

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

DECISION

MENDOZA, J.:

x x x.

501
 RULING OF THE COURT

The Court agrees with the CA that [t]he supposed admission of defendants-appellants on the x x
x allegations in the complaint is clearly not sufficient to justify the rendition of summary judgment
in the case for sum of money, considering that there are other allegations embodied and defenses
raised by the defendants-appellants in their answer which raise a genuine issue as to the material
facts in the action.[36]

The CA correctly ruled that there exist genuine issues as to three material facts, which have to be
addressed during trial: first, the fact of default; second, the amount of the outstanding obligation,
and third, the existence of prior demand.

Under the Rules, following the filing of pleadings, if, on motion of a party and after hearing, the
pleadings, supporting affidavits, depositions and admissions on file show that, except as to the
amount of damages, there is no genuine issue as to any material fact, and that the moving party is
entitled to a judgment as a matter of law, [37] summary judgment may be rendered. This rule was
expounded in Asian Construction and Development Corporation v. Philippine Commercial
International Bank,[38]where it was written:

Under Rule 35 of the 1997 Rules of Procedure, as amended, except as to the amount of
damages, when there is no genuine issue as to any material fact and the moving party is entitled to
a judgment as a matter of law, summary judgment may be allowed.[39]Summary or accelerated
judgment is a procedural technique aimed at weeding out sham claims or defenses at an early stage
of litigation thereby avoiding the expense and loss of time involved in a trial.[40]
Under the Rules, summary judgment is appropriate when there are no genuine issues of
fact which call for the presentation of evidence in a full-blown trial. Even if on their face the
pleadings appear to raise issues, when the affidavits, depositions and admissions show that such
issues are not genuine, then summary judgment as prescribed by the Rules must ensue as a matter
of law. The determinative factor, therefore, in a motion for summary judgment, is the presence or
absence of a genuine issue as to any material fact.
A genuine issue is an issue of fact which requires the presentation of evidence as
distinguished from a sham, fictitious, contrived or false claim. When the facts as pleaded appear
uncontested or undisputed, then there is no real or genuine issue or question as to the facts, and
summary judgment is called for. The party who moves for summary judgment has the burden of
demonstrating clearly the absence of any genuine issue of fact, or that the issue posed in the
complaint is patently unsubstantial so as not to constitute a genuine issue for trial. Trial courts have
limited authority to render summary judgments and may do so only when there is clearly no

502
genuine issue as to any material fact. When the facts as pleaded by the parties are disputed or
contested, proceedings for summary judgment cannot take the place of trial.[41](Underscoring
supplied.)

Juxtaposing the Complaint and the Answer discloses that the material facts here are not undisputed
so as to call for the rendition of a summary judgment. While the denials of Spouses Go could have
been phrased more strongly or more emphatically, and the Answer more coherently and logically
structured in order to overthrow any shadow of doubt that such denials were indeed made, the
pleadings show that they did in fact raise material issues that have to be addressed and threshed
out in a full-blown trial.

PBCom anchors its arguments on the alleged implied admission by Spouses Go resulting from
their failure to specifically deny the material allegations in the Complaint, citing as
precedentPhilippine Bank of Communications v. Court of Appeals,[42] andMorales v. Court of
Appeals. Spouses Go, on the other hand, argue that although admissions were made in the Answer,
the special and affirmative defenses contained therein tendered genuine issues.

Under the Rules, every pleading must contain, in a methodical and logical form, a plain, concise
and direct statement of the ultimate facts on which the party pleading relies for his claim or defense,
as the case may be, omitting the statement of mere evidentiary facts.[43]

To specifically deny a material allegation, a defendant must specify each material allegation of
fact the truth of which he does not admit, and whenever practicable, shall set forth the substance
of the matters upon which he relies to support his denial. Where a defendant desires to deny only
a part of an averment, he shall specify so much of it as is true and material and shall deny only the
remainder. Where a defendant is without knowledge or information sufficient to form a belief as
to the truth of a material averment made in the complaint, he shall so state, and this shall have the
effect of a denial.[44]

Rule 8, Section 10 of the Rules of Civil Procedure contemplates three (3) modes of specific denial,
namely: 1) by specifying each material allegation of the fact in the complaint, the truth of which
the defendant does not admit, and whenever practicable, setting forth the substance of the matters
which he will rely upon to support his denial; (2) by specifying so much of an averment in the
complaint as is true and material and denying only the remainder; (3) by stating that the defendant
is without knowledge or information sufficient to form a belief as to the truth of a material
averment in the complaint, which has the effect of a denial.[45]

503
The purpose of requiring the defendant to make a specific denial is to make him disclose the
matters alleged in the complaint which he succinctly intends to disprove at the trial, together with
the matter which he relied upon to support the denial. The parties are compelled to lay their cards
on the table.[46]

Again, in drafting pleadings, members of the bar are enjoined to be clear and concise in their
language, and to be organized and logical in their composition and structure in order to set forth
their statements of fact and arguments of law in the most readily comprehensible manner possible.
Failing such standard, allegations made in pleadings are not to be taken as stand-alone catchphrases
in the interest of accuracy. They must be contextualized and interpreted in relation to the rest of
the statements in the pleading.

In Spouses Gaza v. Lim, the Court ruled that the CA erred in declaring that the petitioners therein
impliedly admitted respondents' allegation that they had prior and continuous possession of the
property, as petitioners did in fact enumerate their special and affirmative defenses in their Answer.
They also specified therein each allegation in the complaint being denied by them. The Court
therein stated:

The Court of Appeals held that spouses Gaza, petitioners, failed to deny specifically, in
their answer, paragraphs 2, 3 and 5 of the complaint for forcible entry quoted as follows:
xxx xxx xxx
2. That plaintiffs are the actual and joint occupants and in prior continuous physical
possession since 1975 up to Nov. 28, 1993 of a certain commercial compound described as
follows:
A certain parcel of land situated in Bo. Sta. Maria, Calauag, Quezon. Bounded on the N.,
& E., by Julian de Claro; on the W., by Luis Urrutia. Containing an area of 5,270 square meters,
more or less. Declared under Ramon J. Lim's Tax Dec. No. 4576 with an Ass. Value of P26,100.00
3. That plaintiffs have been using the premises mentioned for combined lumber and copra
business. Copies of plaintiffs' Lumber Certificate of Registration No. 2490 and PCA Copra
Business Registration No. 6265/76 are hereto attached as Annexes "A" and "B" respectively; the
Mayor's unnumbered copra dealer's permit dated Dec. 31, 1976 hereto attached as Annex "C";
xxx xxx xxx
5. That defendants' invasion of plaintiffs' premises was accomplished illegally by detaining
plaintiffs' caretaker Emilio Herrera and his daughter inside the compound, then proceeded to saw
the chain that held plaintiffs' padlock on the main gate of the compound and then busted or

504
destroyed the padlock that closes the backyard gate or exit. Later, they forcibly opened the lock in
the upstairs room of plaintiff Agnes J. Lim's quarters and defendants immediately filled it with
other occupants now. Copy of the caretaker's (Emilio Herrera) statement describing in detail is
hereto attached as Annex "D";
xxx xxx xxx.7
The Court of Appeals then concluded that since petitioners did not deny specifically in their
answer the above-quoted allegations in the complaint, they judicially admitted that Ramon and
Agnes Lim, respondents, "were in prior physical possession of the subject property, and the action
for forcible entry which they filed against private respondents (spouses Gaza) must be decided in
their favor. The defense of private respondents that they are the registered owners of the subject
property is unavailing."
We observe that the Court of Appeals failed to consider paragraph 2 of petitioners' answer
quoted as follows:
2. That defendants specifically deny the allegations in paragraph 2 and 3 of the complaint
for want of knowledge or information sufficient to form a belief as to the truth thereof, the truth of
the matter being those alleged in the special and affirmative defenses of the defendants;"8
Clearly, petitioners specifically denied the allegations contained in paragraphs 2 and 3 of
the complaint that respondents have prior and continuous possession of the disputed property
which they used for their lumber and copra business. Petitioners did not merely allege they have
no knowledge or information sufficient to form a belief as to truth of those allegations in the
complaint, but added the following:
SPECIAL AND AFFIRMATIVE DEFENSES
That defendants hereby reiterate, incorporate and restate the foregoing and further allege:
5. That the complaint states no cause of action;
"From the allegations of plaintiffs, it appears that their possession of the subject property
was not supported by any concrete title or right, nowhere in the complaint that they alleged either
as an owner or lessee, hence, the alleged possession of plaintiffs is questionable from all aspects.
Defendants Sps. Napoleon Gaza and Evelyn Gaza being the registered owner of the subject
property has all the right to enjoy the same, to use it, as an owner and in support thereof, a copy of
the transfer certificate of title No. T-47263 is hereto attached and marked as Annex "A-Gaza" and
a copy of the Declaration of Real Property is likewise attached and marked as Annex "B-Gaza" to
form an integral part hereof;
6. That considering that the above-entitled case is an ejectment case, and considering
further that the complaint did not state or there is no showing that the matter was referred to a
Lupon for conciliation under the provisions of P.D. No. 1508, the Revised Rule on Summary
Procedure of 1991, particularly Section 18 thereof provides that such a failure is jurisdictional,
hence subject to dismissal;

505
 7. That the Honorable Court has no jurisdiction over the subject of the action or suit;
The complaint is for forcible entry and the plaintiffs were praying for indemnification in
the sum of P350,000.00 for those copra, lumber, tools, and machinery listed in par. 4 of the
complaint and P100,000.00 for unrealized income in the use of the establishment, considering the
foregoing amounts not to be rentals, Section 1 A (1) and (2) of the Revised Rule on Summary
Procedure prohibits recovery of the same, hence, the Honorable Court can not acquire jurisdiction
over the same. Besides, the defendants Napoleon Gaza and Evelyn Gaza being the owners of those
properties cited in par. 4 of the complaint except for those copra and two (2) live carabaos outside
of the subject premises, plaintiffs have no rights whatsoever in claiming damages that it may suffer,
as and by way of proof of ownership of said properties cited in paragraph 4 of the complaint
attached herewith are bunche[s] of documents to form an integral part hereof;
8. That plaintiffs' allegation that Emilio Herrera was illegally detained together with his
daughter was not true and in support thereof, attached herewith is a copy of said Herrera's statement
and marked as Annex "C-Gaza."
xxx xxx xxx.9
The above-quoted paragraph 2 and Special and Affirmative Defenses contained in
petitioners' answer glaringly show that petitioners did not admit impliedly that respondents have
been in prior and actual physical possession of the property. Actually, petitioners are repudiating
vehemently respondents' possession, stressing that they (petitioners) are the registered owners and
lawful occupants thereof.
Respondents' reliance on Warner Barnes and Co., Ltd. v. Reyes10 in maintaining that
petitioners made an implied admission in their answer is misplaced. In the cited case, the
defendants' answer merely alleged that they were "without knowledge or information sufficient to
form a belief as to the truth of the material averments of the remainder of the complaint" and "that
they hereby reserve the right to present an amended answer with special defenses and
counterclaim."11 In the instant case, petitioners enumerated their special and affirmative
defenses in their answer. They also specified therein each allegation in the complaint being
denied by them. They particularly alleged they are the registered owners and lawful possessors of
the land and denied having wrested possession of the premises from the respondents through force,
intimidation, threat, strategy and stealth. They asserted that respondents' purported possession is
"questionable from all aspects." They also averred that they own all the personal properties
enumerated in respondents' complaint, except the two carabaos. Indeed, nowhere in the answer
can we discern an implied admission of the allegations of the complaint, specifically the allegation
that petitioners have priority of possession.
Thus, the Court of Appeals erred in declaring that herein petitioners impliedly admitted
respondents' allegation that they have prior and continuous possession of the
property.[47](Underscoring supplied.)

506
In this case, as in Gaza, the admissions made by Spouses Go are to be read and taken together with
the rest of the allegations made in the Answer, including the special and affirmative defenses.

For instance, on the fact of default, PBCom alleges in paragraph 8 of the Complaint that
Go defaulted in the payment for both promissory notes, having paid only three interest installments
covering the months of September, November, and December 1999.
In paragraph 6 of the Answer, Spouses Go denied the said allegation, and further alleged in
paragraphs 8 to 13 that Go made substantial payments on his monthly loan amortizations.

The portions of the pleadings referred to are juxtaposed below:

Complaint
8. The defendant defaulted in the
payment of the obligations on the
two (2) promissory notes (Annexes
A and B hereof) as he has paid
only three (3) installments on
interests (sic) payments covering
the months of September,
November and December, 1999, on
both promissory notes, respectively.
As a consequence of the default, the
entire balance due on the
obligations of the defendant to
plaintiff on both promissory notes
immediately became due and
demandable pursuant to the terms
and conditions embodied in the two
(2) promissory notes;[48]
Answer
6. Defendants deny the allegations
in paragraphs 8, 9, 10 and 11 of the
Complaint;
xxx
8. The promissory notes referred to
in the complaint expressly state that
the loan obligation is payable within
the period of ten (10) years. Thus,
from the execution date of
September 30, 1999, its due date
falls on September 3o, 2009 (and
not 2001 as erroneously stated in the
complaint). Thus, prior to
September 30, 2009, the loan
obligations cannot be deemed due
and demandable.
In conditional obligations, the
acquisition of rights, as well as the
extinguishment or loss of those
already acquired, shall depend upon
the happening of the event which
constitutes the condition. (Article
1181, New Civil Code)

507
9. Contrary to the plaintiffs
preference, defendant Jose C. Go
has made substantial payments in
terms of his monthly payments.
There is therefore, a need to do
some accounting works (sic) just to
reconcile the records of both parties.
10. While demand is a necessary
requirement to consider the
defendant to be in delay/default,
such has not been complied with by
the plaintiff since the former is not
aware of any demand made to him
by the latter for the settlement of the
whole obligation.
11. Undeniably, at the time the
pledge of the shares of stocks were
executed, their total value is more
than the amount of the loan, or at the
very least, equal to it. Thus, plaintiff
was fully secured insofar as its
exposure is concerned.[49]
12. And even assuming without
conceding, that the present value of
said shares has went (sic) down, it
cannot be considered as something
permanent since, the prices of
stocks in the market either increases
(sic) or (sic) decreases depending on
the market forces. Thus, it is highly
speculative for the plaintiff to
consider said shares to have
suffered tremendous decrease in its
value. Moreso (sic), it is unfair for
the plaintiff to renounce or abandon
the pledge agreements.
13. As aptly stated, it is not aware of
any termination of the pledge
agreement initiated by the plaintiff.

508
Moreover, in paragraph 10 of the Answer, Spouses Go also denied the existence of prior demand
alleged by PBCom in paragraph 10 of the Complaint. They stated therein that they were not aware
of any demand made by PBCom for the settlement of the whole obligation. Both sections are
quoted below:
Complaint Answer
10. Plaintiff made repeated 10. While demand is a necessary
demands from (sic) defendant for requirement to consider the
the payment of the obligations defendant to be in delay/default,
which the latter acknowledged to such has not been complied with by
have incurred however, defendant the plaintiff since the former is not
imposed conditions such as [that] aware of any demand made to him
his [effecting] payments shall by the latter for the settlement of the
depend upon the lifting of whole obligation.
garnishment effected by the Bangko
Sentral on his accounts.
Photocopies of defendants
communication dated March 3,
2000 and April 7, 2000, with
plaintiff are hereto attached
asAnnexes F and G hereof, as
well as its demand to pay dated
April 18, 2000. Demand by plaintiff
is hereto attached asAnnex
H hereof.[50][Emphases supplied]

Finally, as to the amount of the outstanding obligation, PBCom alleged in paragraph 9 of the
Complaint that the outstanding balance on the couples obligations as of May 31, 2001
wasP21,576,668.64 for the first loan and P95,991,111.11, for the second loan or a total
of P117,567,779.75.
In paragraph 9 of the Answer, however, Spouses Go, without stating any specific amount, averred
that substantial monthly payments had been made, and there was a need to reconcile the accounting
records of the parties.
Complaint Answer
9. Defendants outstanding 9. Contrary to the plaintiffs
obligations under the two (2) preference, defendant Jose C. Go
promissory notes as of May 31, has made substantial payments in
2001 are: P21,576,668.64 (Annex terms of his monthly payments.
A) and P95,991,111.11 (Annex There is therefore, a need to do
B), or a total of P117,567,779.75. some accounting works just to
Copy of the Statement of Account is

509
 hereto attached as Annex reconcile the records of both
E hereof.[51] parties.[52]

Clearly then, when taken within the context of the entirety of the pleading, it becomes apparent
that there was no implied admission and that there were indeed genuine issues to be addressed.
As to the attached March 3, 2000 letter, the Court is in accordwith the CA when it wrote:
The letter dated March 3, 2000 is insufficient to support the material averments in PBComs
complaint for being equivocal and capable of different interpretations. The contents of the letter
do not address all the issues material to the banks claim and thus do not conclusively establish the
cause of action of PBCom against the spouses Go. As regards the letter dated April 7, 2000, the
trial court itself ruled that such letter addressed to PBCom could not be considered against the
defendants-appellants simply because it was not signed by defendant-appellant Jose Go.
Notably, the trial court even agreed with the defendant-appellants on the following points:
The alleged default and outstanding obligations are based on the Statement of Account.
This Court agrees with the defendants that since the substance of the document was not set forth
in the complaint although a copy thereof was attached thereto, or the said document was not set
forth verbatim in the pleading, the rule on implied admission does not apply.[53]

It must also be pointed out that the cases cited by PBCom do not apply to this case. Those two
cases involve denial of lack of knowledge of facts so plainly and necessarily within [the
knowledge of the party making such denial] that such averment of ignorance must be palpably
untrue.[54] Also, in both cases, the documents denied were the same documents or deeds sued
upon or made the basis of, and attached to, the complaint.
In Philippine Bank of Communications v. Court of Appeals,[55]the Court ruled that the defendants
contention that it had no truth or information sufficient to form a belief as to the truth of the deed
of exchange was an invalid or ineffectual denial pursuant to the Rules of Court,[56] as it could have
easily asserted whether or not it had executed the deed of exchange attached to the petition.
Citing Capitol Motors Corporations v. Yabut,[57] the Court stated that:

x x x The rule authorizing an answer to the effect that the defendant has no knowledge or
information sufficient to form a belief as to the truth of an averment and giving such answer the
effect of a denial, does not apply where the fact as to which want of knowledge is asserted, is so
plainly and necessarily within the defendants knowledge that his averment of ignorance must be
palpably untrue.[58]

The Warner Barnes case cited above sprung from a suit for foreclosure of mortgage, where the
document that defendant denied was the deed of mortgage sued upon and attached to the complaint.

510
The Court then ruled that it would have been easy for the defendants to specifically allege in their
answer whether or not they had executed the alleged mortgage.

Similarly, in Capitol Motors, the document denied was the promissory note sued upon and
attached to the complaint. In said case, the Court ruled that although a statement of lack of
knowledge or information sufficient to form a belief as to the truth of a material averment in the
complaint was one of the modes of specific denial contemplated under the Rules, paragraph 2 of
the Answer in the said case was insufficient to constitute a specific denial.[59] Following the ruling
in theWarner Barnes case, the Court held that it would have been easy for defendant to specifically
allege in the Answer whether or not it had executed the promissory note attached to the
Complaint.[60]

In Morales v. Court of Appeals,[61] the matter denied was intervenors knowledge of the plaintiffs
having claimed ownership of the vehicle in contention. The Court therein stated:

Yet, despite the specific allegation as against him, petitioner, in his Answer in Intervention
with Counterclaim and Crossclaim, answered the aforesaid paragraph 11, and other paragraphs,
merely by saying that he has no knowledge or information sufficient to form a belief as to its
truth. While it may be true that under the Rules one could avail of this statement as a means of a
specific denial, nevertheless, if an allegation directly and specifically charges a party to have done,
performed or committed a particular act, but the latter had not in fact done, performed or committed
it, a categorical and express denial must be made. In such a case, the occurrence or non-occurrence
of the facts alleged may be said to be within the partys knowledge. In short, the petitioner herein
could have simply expressly and in no uncertain terms denied the allegation if it were untrue. It
has been held that when the matters of which a defendant alleges of having no knowledge or
information sufficient to form a belief, are plainly and necessarily within his knowledge, his
alleged ignorance or lack of information will not be considered as specific denial. His denial lacks
the element of sincerity and good faith, hence, insufficient.[62]

Borrowing the phraseology of the Court in the Capitol Motorscase, clearly, the fact of the parties
having executed the very documents sued upon, that is, the deed of exchange, deed or mortgage
or promissory note, is so plainly and necessarily within the knowledge of the denying parties that
any averment of ignorance as to such fact must be palpably untrue.

In this case, however, Spouses Go are not disclaiming knowledge of the transaction or the
execution of the promissory notes or the pledge agreements sued upon. The matters in contention
are, as the CA stated, whether or not respondents were in default, whether there was prior demand,

511
and the amount of the outstanding loan. These are the matters that the parties disagree on and by
which reason they set forth vastly different allegations in their pleadings which each will have to
prove by presenting relevant and admissible evidence during trial.

Furthermore, in stark contrast to the cited cases where one of the parties disclaimed knowledge of
something so patently within his knowledge, in this case, respondents Spouses Go categorically
stated in the Answer that there was no prior demand, that they were not in default, and that the
amount of the outstanding loan would have to be ascertained based on official records.

x x x.

512
 THIRD DIVISION

BARSTOWE PHILIPPINES G.R. No. 133110

CORPORATION,
Petitioner,
Present:

YNARES-SANTIAGO,*J.
Chairperson,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,**
- versus- CHICO-NAZARIO, and
NACHURA, JJ.

Promulgated:
REPUBLIC OF THE PHILIPPINES,
Respondent. March 28, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

*
No part.
**
On leave.

513
 Before this Court is a Petition for Review on Certiorari853 under Rule 45 of the Rules of
Court seeking the reversal and setting aside the Decision,854 dated 8 August 1997, and
Resolution,855 dated 18 March 1998, of the Court of Appeals in CA-G.R. CV No. 47522, which in
turn, reversed and set aside the Decision,856 dated 22 December 1992, of the Quezon City Regional
Trial Court (RTC), Branch 80 in Civil Case No. Q-92-11806.

Antecedent Facts

This case involves the conflicting titles to the same parcels of land (subject lots) of
petitioner Barstowe Philippines Corporation (BPC) and the respondent Republic of the
Philippines (Republic). The subject lots have a total area of 111,447 square meters, and are
situated along the northeastern perimeter boundary of the National Government Center in
Payatas, Quezon City.

BPC traces its titles to the subject lots back to Servando Accibal (Servando) who was
supposedly issued on 24 July 1974, at 3:20 p.m., Transfer Certificates of Title (TCTs) No. 200629
and 200630 over the subject lots. TCTs No. 200629 and 200630 were purportedly signed by Nestor
N. Pena, Deputy Register of Deeds of Quezon City. On 10 June 1988, Servando executed a Deed
of Absolute Sale of the subject lots to his son Antonio Accibal (Antonio), with the concurrence of
his other heirs. Despite his prior sale of the subject lots to Antonio, Servando, by virtue of a Deed
of Conveyance, dated 8 February 1989, transferred/conveyed the subject lots to BPC in exchange
for subscription of 51% of the capital stock of BPC, such subscription supposedly amounting to
P6,000,000.00.857 About a year after the death of Servando on 3 October 1989, particularly on 10
October 1990, Antonio executed another Deed of Conveyance of the subject lots in favor of BPC

853
Rollo, 6-34.
854
Penned by Associate Justice Eduardo G. Montenegro with Associate Justices Consuelo Ynares-Santiago
(now Associate Justice of this Court) and Maximiano C. Asuncion, concurring; id. at 38-51.
855
Penned by Associate Justice Eduardo G. Montenegro with Associate Justices Consuelo Ynares-Santiago and
Jesus M. Elbinias (vice Maximiano C. Asuncion), concurring; id. at 52-53.
856
Penned by Judge Efren N. Ambrosio; records, 273-288.
857
Land Registration Authority Report, dated 10 June 1992, prepared by Benjamin A. Flestado; id. at 215-216.

514
in exchange for subscription of 2,450 shares of its capital stock, with an alleged total value of
P49,000,000.00.858 Due to the fire that gutted the Office of the Quezon City Register of Deeds on
11 June 1988 and destroyed many certificates of title kept therein, Antonio sought the
administrative reconstitution of the original copies and owners duplicate copies of TCTs No.
200629 and 200630 with the Land Registration Authority (LRA). On 12 December 1990, the LRA
issued TCTs No. RT-23687 and RT-23688 (reconstituting TCTs No. 200629 and 200630,
respectively), which were transmitted to the Quezon City Register of Deeds and signed by Deputy
Register of Deeds Edgardo Castro on 19 February 1991. Also on 19 February 1991, TCTs No. RT-
23687 and RT-23688 were cancelled and in lieu thereof, TCTs No. 30829, 30830, 30831, and
30832 in the name of BPC were issued. BPC then acquired from the Housing and Land Use
Regulatory Board (HLURB) a permit to develop the subject lots into a residential subdivision.
Subsequently, BPC entered into Joint Venture Agreements with other corporations for the
development of the subject lots into a subdivision called Parthenon Hills.

Meanwhile, according to the Republic, prior to 14 November 1979, the subject lots were
owned by First Philippine Holdings Corporation (FPHC). As evidence of its title to the subject
lots, FPHC was issued TCT No. 257672, on an undetermined date, and TCT No. 275201, on 20
January 1981. Pursuant to a Deed of Sale, dated 14 November 1979, FPHC sold one of the subject
lots, covered by TCT No. 257672, to the Republic for P2,757,360.00. Thus, on 22 January 1981,
TCT No. 257672 was cancelled and TCT No. 275443 was issued in place thereof in the name of
the Republic. FPHC executed another Deed of Sale on 25 March 1982 in which it sold the
remainder of the subject lots, covered by TCT No. 275201, to the Republic for P9,575,920.00. On
31 May 1982, TCT No. 275201 was cancelled and was replaced by TCT No. 288417 issued in the
name of the Republic. Because of the 11 June 1988 fire which razed the Quezon City Office of the
Register of Deeds and destroyed the original copies of TCTs No. 275443 and 288417, the Republic
applied for administrative reconstitution of the same with the LRA. It was then that the Republic
came to know that another party had applied for reconstitution of TCTs No. 200629 and 200630
which also covered the subject lots. This prompted the Republic to file before the RTC on 26

858
Id. at 218.

515
March 1992 a petition for cancellation of title against Antonio, Servando, and BPC, docketed as
Civil Case No. Q-92-11806.

Civil Case No. Q-92-11806

Counsel for Antonio and the late Servando filed two successive Motions for extension of
time to file the proper pleading, dated 17 June 1992 and 1 July 1992, but despite the grant thereof
by the RTC,859 no such responsive pleading on behalf of Antonio and the late Servando was ever
filed. Hence, on 31 July 1992, the RTC issued an Order860 declaring Antonio and the late Servando
in default.

In another Order,861 also dated 31 July 1992, the RTC, upon the motion of BPC, allowed
the latter to continue with the development of the subject lots. It concluded that

Considering the plight of [BPC] and the possible irreparable damage that
may be caused against the residents in the surrounding developed subdivision, even
as said corporation is possessed of a good title, the court in the exercise of its
discretion grants the motion. More importantly, consideration of equity demands
that the titled owner [BPC] herein must be able to exercise all its dominical right
bloosoming [sic] forth from its ownership of the land in suit.

WHEREFORE, under cool reflection and prescinding from the foregoing,

the motion is hereby granted. [BPC] is hereby permitted and allowed to continue
with the improvement and development of the controverted property into a
residential subdivision.862

859
See Orders, dated 1 July 1992 and 9 July 1992, penned by Judge Efren N. Ambrosio; id. at 17, 26.
860
Id. at 53.
861
Id. at 49-52.
862
Id. at 52.

516
 On 12 October 1992, the Republic filed with the Quezon City Register of Deeds a Notice
of Lis Pendens requesting the recording of the pendency of Civil Case No. Q-92-11806 on TCTs
No. 30830, 30831, and 30832, all in the name of BPC.

While Civil Case No. Q-92-11806 was still pending before the RTC, there were two
intervenors.

Gloria Accibal Rettoriano (Gloria) filed with the RTC a Motion for Intervention, with a
Complaint in Intervention, both dated 1 September 1992. Gloria alleged that she was the only child
of Basilia Accibal, Servandos sister; the subject lots were inherited by Basilia, Servando, and their
other siblings from their parents Martin and Mauricia Accibal; upon her mothers death, Gloria
inherited and came into possession of a portion of the subject lots with an area of about 2.5
hectares; Gloria had been possessing, cultivating and improving her portion of the subject lots for
the last 30 years; Servando, through fraudulent means, was able to secure TCTs over all the subject
lots, including Glorias portion therein; the inclusion of Glorias portion in the TCTs of Servando
and, later, in those of BPC, was done through fraud and gross bad faith; and unless the TCTs of
Servando and BPC are declared null and void, Gloria will be deprived of her property without due
process and just compensation. BPC opposed Glorias intervention in Civil Case No. Q-92-11806
considering that she had already instituted Civil Case No. Q-91-10933 before the RTC, Quezon
City, Branch 76, seeking the annulment of TCTs No. 30830, 30831, and 30832 of BPC based on
the very same grounds she raised in her present Complaint in Intervention; on 11 February 1992,
Gloria entered into a Compromise Agreement with BPC in which she waived and renounced any
and all claims whatsoever which she may have over the titles of BPC in consideration of the
payment by the latter of P2,000,000.00; the RTC, Branch 76, after finding that the said
Compromise Agreement was not contrary to law, morals, good customs, public order or public
policy, approved the same, thus putting an end to Civil Case No. Q-91-10933;863 Glorias cause of
action to intervene in Civil Case No. Q-92-11806 was already barred by prior judgment in Civil
Case No. Q-91-10933 and Glorias Complaint in Intervention is tantamount to a collateral attack

863
Decision in Civil Case No. Q-91-10933, dated 26 January 1992, penned by Acting Presiding Judge Efren N.
Ambrosio; id. at 94-95.

517
against a TCT. In rejecting Glorias intervention in Civil Case No. Q-92-11806, the RTC found as
follows

The motion for intervention must be denied and the complaint in

intervention therein attached must be rejected.
For one thing, herein movant Gloria Accibal Rettoriano, was the plaintiff in
the first case (RTC Br. 76 No. Q-91-10933) and with eyes wide open she entered
into a compromise agreement with [BPC], which was the basis of the 26 February
1992 decision rendered therein and it being based on a compromise agreement, said
decision became immediately final and executory.
Whether or not the decision rendered in the first case was satisfied is of no
moment in the present case, as herein movant intervenor has all the remedies to
protect her rights therein.
For another, movant intervenor Gloria Accibal Rettoriano, from her
complaint in intervention would ask for the cancellation of the titles issued to their
[sic] relative Servando Accibal and those titles duly issued and registered in the
name of [BPC]. Certainly, this can not be done, as it constitutes a collateral attack
on the questioned titles which the law and settled jurisprudence do not allow.
Perforce, a separate action against the questioned titles is the remedy available for
intervenor Gloria A. Retoriano [sic].
Accordingly, the Court finds the opposition of [BPC] to be impressed with
merit and the motion for intervention does not inspire confidence.
WHEREFORE, the subject motion for intervention is denied and the
complaint in intervention attached thereto must be rejected.864

Another intervenor in Civil Case No. Q-92-11806 was EL-VI Realty and Development
Corporation (ERDC) which filed with the RTC a Motion for Leave to Intervene, dated 1 September
1992. Subsequently, it filed an Answer in Intervention, dated 15 September 1992, in which, it
alleged that it acquired interest in the subject lots after having entered into a Joint Venture
Agreement dated 16 January 1992, with BPC, for the development of the subject lots into a
residential subdivision; the action initiated by the Republic for the cancellation of the TCTs of
BPC was already barred by laches and estoppel because of the recognition accorded upon the said
TCTs by the instrumentalities of the Republic, particularly the Register of Deeds and the HLURB,
on which the ERDC relied in all good faith when it entered into the Joint Venture Agreement with
BPC; the Republic is liable to ERDC for moral damages and attorneys fees; should the RTC find

864
Order, dated 8 October 1992; id. at 129-130.

518
the TCTs of BPC infirm, rendering the Joint Venture Agreement between ERDC and BPC of no
force and effect, then BPC should be held liable to ERDC, being an innocent third party, for
reimbursement of all expenses incurred by the latter in the development of the subject lots; and
should the RTC find that the TCTs of BPC are spurious, then it should be declared in bad faith
when it entered into the Joint Venture Agreement with ERDC, for which it should be liable for
exemplary damages and attorneys fees. In an Order,865 dated 27 October 1992, the RTC granted
ERDCs Motion to Intervene and admitted its Answer in Intervention.

After all the parties had submitted their respective Pre-Trial Briefs,866 and upon motion by
the BPC,867 the RTC decided the case on 22 December 1992 on summary judgment. 868 Although
it found both the Republic and the BPC as buyers in good faith, it held that the titles of BPC should
prevail. It ratiocinated thus

3. To the third issue, we rule that the title of [BPC] must prevail over
that of the [Republic].

There is no dispute that the titles of the First Philippine Holdings

Corporation, predecessor-in-interest of [Republic] were either issued in the year
1979 and 1981 (Exh. A and B). On the other hand, there is likewise no dispute that
the titles of defaulted defendant Servando Accibal, and predecessor-in-interest of
[BPC], were both issued and registered much earlier on July 24, 1974 (Exhs. F and
G, pp. 210-213, record) and/or a difference of 5 or 6 years in point of time.

MORE, Servando Accibal, the predecessor-in-interest of [BPC] has been in

the actual and peaceful physical possession of the lots in suit before he sold them
to [BPC] on February 08, 1991. Upon registration of the same on February 19,
1991, [BPC], after having subdivided the land into four (4) smaller lots was issued
on 19 February TCT Nos. 30829, 30830, 30831, and 30832 (Exhs. 1, 2, 3 and 4).

865
Id. at 141.
866
Republic of the Philippines; id. at 152-158; Barstowe Philippines Corporation, id. at 163-170; EL-VI Realty
and Development Corporation; id. at 143-147.
867
Id. at 185-186.
868
Id. at 273-288.

519
 It is true [Republic] acquired the land in suit on November 14, 1979 and for
which TCT Nos. 275443 and 288417 were issued in the years 1979 and 1981, but
[Republic] never took assertive steps to take actual possession of the land sold to it
by the First Philippine Holdings Corporation. It is even of grave doubt that the latter
took actual possession of the land before the land in suit was sold to the [Republic].
So much so, that the area had been occupied by several squatters, one of them is
Servando Accibal who by the way, was able to have the land in suit titled in his
name as early as July 24, 1974, under TCT Nos. 200629 and 200630 of the land
records of Quezon City. Further, [Republic] and its predecessor-in-interest were not
able to discover the overlapping of their titles by the titles of Servando Accibal for
a period of eighteen (18) long years starting from July 24, 1974 to about June 10,
1992 when the LRA during a reconstitution of the titles of [Republic] was initiated,
as evidenced by a report of reconstituting officer Benjamin A. Flestado of that
office (Exh. H, pp. 214-258, record).

Simply stated, [Republic] may be guilty of LACHES.

xxxx

Perforce, the claim of [Republic] which was probably originally VALID

became a STALE claim as the years went by. Verily, the titles of [Republic] must
be cancelled and the titles of [BPC] must be upheld and declared as good and valid
titles and [BPC] is entitled to all the rights bloosoming [sic] fourth from its
dominical right of ownership.

More importantly, the predecessor-in-interest of [BPC] had been long in the

actual and physical possession of the lands in suit, while that of the predecessor-in-
interest of [Republic] was not in the actual possession of the land before the sale to
[Republic]. On the other hand, [BPC] immediately after the sale in its favor took
actual, physical and peaceful possession of the land in suit to the exclusion of all
others. It has no knowledge, actual or constructive that said parcels of land were
sold to the [Republic]. When it registered the sale, there was no inscription in the
Land Registry that the same parcels of land were earlier sold to the [Republic].
Hence, there was and is a continuing good faith on the part of [BPC]. (Article 1544,
NCC; Cruz vs Cabana, 129 SCRA 656).

520
 In the same Decision, the RTC found certain irregularities in TCTs No. 200629 and 200630
in the name of Servando and that the said TCTs should be cancelled, without prejudice to the rights
and interests of BPC. The RTC discussed the matter in this wise

We shall now dwell on the validity of the titles TCT Nos. 200629 and
200630, issued in the name of Servando Accibal on July 24, 1974 by the Register
of Deeds of Quezon City. The LRA report dated 10 June 1992 (Exh. H, pp. 214-
258, record) is competent proof that indeed said titles must be cancelled. In short,
the LRA found after due investigation that the said titles of Servando Accibal were
issued with certain irregularities. It recommended the cancellation therefore, of
TCT Nos. 200629 and 200630, to which the court concurs, as said report must be
accorded due respect and in the absence of fraud or irregularities that attended the
investigation, which the Court finds none, the same must be persuasive, if not
conclusive. Moreover, herein defendant Servando Accibal because of his failure to
answer, despite extension of time given him, failed to file his answer. Upon motion
of [Republics] counsel, he was declared as in default and since then, he never asked
the court to lift and set aside the default order. There is no way, his title must be
cancelled. For one thing, he was not able to present evidence to controvert the
recommendation of LRA to cancel his titles. For another, Servando Accibal is
deemed to have impliedly admitted the irregularities that attended the issuance of
his aforestated titles.

However, the cancellation of the titles of Servando Accibal, would not

affect the rights and interests of [BPC] as the latter is declared to be a purchaser in
good faith and for value. MORE, under the circumstances of the case, and even
when the titles of Servando Accibal are cancelled, the titles of [BPC] are still good
and indefeasible titles, as it is settled rule that good titles may be sustained even
when the seller has spurious titles.

As for the intervention of ERDC, the RTC addressed the same as follows

Finally, we shall next discuss the claim of intervenor EL-VI Realty and
Development Corporation. A close reading from the Joint Venture Agreement

521
 dated January 16, 1992, shows that in case of litigation, intervenor Realty
Corporation shall have the right to suspend all development activities and the
development period of 5 years shall automatically be suspended until such time as
the said case is finally settled/decided (Exh. 5 and Annex A answer in intervention
pp. 109-114). Upon the signing of the said agreement the amount of P1,500,000.00
was received by [BPC] as advance payment of the 50-50 sharing basis in the sales
proceeds. During the pre-trial conference, herein intervenor tried to enforce a
supplemental agreement dated October 15, 1992, by filing a motion for a writ of
preliminary injunction with prayer for the issuance of a restraining order.
Resolution of the same was held in abeyance to await the decision to be rendered,
after [BPC] assured intervenor herein that it will abide by and strictly comply with
its commitments arising from the aforesaid agreement, after proper accounting is
made therefore. Herein intervenor admits that another financier-developer has
entered the area due to the delay of the project caused by the filing of the present
case.

MORE, due to the filing of the present case, herein intervenor was reluctant
to further finance the project because of its big exposure already made. Hence,
intervenors works and other activities in the area was suspended in accordance with
their Joint Venture Agreement.

Perforce, there is compelling necessity for a proper accounting, more

particularly its substantial exposure to the project, on a quantum meruit basis, in
fairness to all concerned and involved parties in the project, including but not
limited to the present contractor-developer of the area.

Finally, the RTC concluded that

A FORTIORARI, the environmental setting and factual scenario of the

case, in relation to its legal ambience will show that the great preponderance of
evidence lies in favor of [BPC]. (Section 01, Rule 133, Revised Rules of Court),
and the motion for summary judgment is granted. The hearing as to damages,
including attorneys fees shall be scheduled soonest possible.

522
 WHEREFORE, under cool reflection and prescinding from the foregoing,
judgment is rendered as follows:

1. Ordering the Register of Deeds of Quezon City to cancel

Transfer Certificates of Title No. 275443 and 288417 issued in
the name of the [Republic] covering the lots in suit. However,
[Republic] being a purchaser in good faith, and based on
considerations of equity and justice Barstowe Philippine[s]
Corporation is ordered to re-imburse and pay [Republic], the
sum of P12,333,280.00 representing the purchase price from the
vendor, First Philippine Holdings Corporation soonest possible;

2. Ordering the Register of Deeds of Quezon City to officially and

finally cancel from his records, Transfer Certificates of Title
Nos. 200629 and 200630 issued in the name of Servando
Accibal, on July 24, 1974, covering the same lots in suit (Exh. F
and G, pp. 210-213, record).

3. Declaring herein defendant Barstowe Philippines Corporation as

the absolute owner in fee simple title over the lots in suit, as
evidenced by Transfer Certificates of Title Nos. 30829, 30830,
30831 and 30832 of the land records of Quezon City, all issued
on February 19, 1991 and the said titles are further more
declared valid, existing and indefeasible titles of [BPC] and as
such is entitled to all the dominical rights bloosoming [sic] forth
from its ownership over the lots in suit.

4. Ordering [BPC] to abide by and strictly comply with the terms

and conditions of the supplemental Agreement entered into by it
with herein intervenor EL-VI Realty and Development
Corporation dated October 15, 1992, after proper accounting is
made;

5. Perforce, the Register of Deeds of Quezon City is likewise

ordered to cancel any and all encumbrances annotated on said
titles of defendant corporation including, but not limited to the
lis pendens notice filed by the [Republic], if any;

6. The hearing as to damages, including the claim for attorneys fees

shall be scheduled soonest.

523
 7. Considering the admissions and agreements of the parties during
the pre-trial conference, which are considered judicial
admissions, this decision acquires the nature of one based on a
compromise agreement. Perforce, the Court declares this
decision to be immediately final and executory.

8. No pronouncement as to costs.

Despite the promulgation of the foregoing Decision by the RTC on 22 December 1992, the
proceedings in Q-92-11806 were still far from over; significant developments still took place
thereafter.

ERDC sought the execution of paragraph 4 of the dispositive portion of the RTC Decision
dated 22 December 1992. In an Order,869 dated 13 January 1993, the RTC issued a writ of
execution in favor of ERDC, and a notice of levy on execution was accordingly made on the subject
lots. In a dialogue held between the counsels for BPC and ERDC in the chamber of the RTC Judge
on 26 February 1993, an amicable settlement was reached whereby BPC agreed to settle the claim
of ERDC in the form of developed subdivision lots in Parthenon Hills, subject to proper
accounting.870 BPC offered to ERDC 40 developed subdivision lots in Parthenon Hills, valued at
P18,543,000.00, representing 65% of the total claims (prior to proper accounting) of ERDC, which
amounted to P28,787,306.32. However, ERDC refused the offer of BPC and demanded that it be
paid the total amount of its claims. It also brought to the attention of the RTC that, in violation of
their Joint Venture Agreement, BPC contracted another realty developer for the development of
Parthenon Hills. Thus, ERDC opposed the lifting of the notice of levy on execution on the subject
lots for the protection of its interests. In an Order,871 dated 17 March 1993, the RTC found that
BPC already substantially complied with the terms of its agreement with ERDC and that the rights
and interests of the latter were well-protected and safeguarded. In the same Order, the RTC lifted
and set aside the notice of levy on execution on the subject lots. However, on 20 April 1993, ERDC

869
Id. at 307.
870
Id. at 353.
871
Id. at 435-437.

524
filed a Motion for Contempt872 against BPC and informed the RTC that BPC, fraudulently,
maliciously, and in bad faith, already sold 36 of the 40 subdivision lots it earlier offered to ERDC
by accepting downpayments thereon of only 30% of the selling price. Upon further investigation,
it discovered that of the four remaining lots, two were vacant while the other two were reserved.
ERDC subsequently filed two other motions: (1) A Motion,873 dated 29 April 1993, to set for trial
the claim of ERDC for damages. Said motion was granted, and the RTC set the hearing on 16
September 1993, at 8:30 a.m.,874 but upon the motion of the counsel for BPC, the hearing was reset
to 7 October 1993;875 and (2) A Motion,876 dated 6 September 1993, for the issuance of a partial
writ of execution for the undisputed amount of P18,543,000.00, representing 65% of the total
claims of ERDC. Unfortunately, the records no longer show the succeeding incidents concerning
these motions.

In a Motion for Leave to Intervene877 dated 8 March 1993, and the attached Complaint in
Intervention,878 dated 10 March 1993, Kadakilaan Estate expressed its intent to intervene in Civil
Case No. Q-92-11806. It anchored its claims on the contention that the subject lots were already
registered as private property under the Spanish Mortgage Law since 18 May 1891, and under the
Torrens System of Registration since 31 August 1907, by the predecessors-in-interest of
Kadakilaan Estate. The subject lots were supposedly included in a vast track of land covered by
Titulo de la Propiedad de Terrenos No. 01-4 in the name of Doa Petra Rodriguez, who transferred
the same to her son, Don Gonzalo Yanesa y Rodriguez. Kadakilaan Estate came into ownership
and possession of the vast track of land, including the subject lots, by virtue of its successive sales
from Don Gonzalo Yanesa y Rodriguez to Doa Lourdez Rodriguez Yanesa, and from the latter to
Kadakilaan Estate. Kadakilaan Estate further alleged that the Original Certificate of Title (OCT)
No. 333, from which the TCTs of both BPC and the Republic were ultimately derived, was null
and void ab initio, and that the TCTs of BPC and the Republic were spurious and likewise null

872
Id. at 609-612.
873
Id. at 617.
874
Id. at 627.
875
Id. at 631.
876
Id. at 628-629.
877
Id. at 389-390.
878
Id. at 392-401.

525
and void ab initio, and without any probative value. Kadakilaan Estate prayed for judgment
declaring it the owner of the subject lots; directing the other parties to respect its ownership,
possession, rights and interests over the subject lots; and ordering the other parties to pay just
compensation, damages, and attorneys fees. The RTC, in an Order879 dated 27 April 1993, denied
the Motion for Leave to Intervene and rejected the Complaint in Intervention of Kadakilaan Estate
for the following reasons

New intervenor Kadakilaan Estate alleges that the titles of the [Republic]
and [Antonio, Servando, and BPC] are all falsified, spurious in origin and null and
void ab initio, as the property in question were already registered as private
properties of [Kadakilaan Estates] predecessors-in-interest, under Spanish
Mortgage law since May 18, 1891, and under the Torrens System, Act No. 496, as
amended, in Titulo dela propriedad de Terrenos No. 01-4.

If this is clearly so, then [Kadakilaan Estate] is attacking the validity of the
titles of [Republic] and [Antonio, Servando, and BPC] in this case. It is settled rule
that titles registered under the Torrens System cannot be the subject of a collateral
attack. Perforce, the remedy of [Kadakilaan Estate] is to file a separate action. For,
if the intervention is allowed at this late stage of the proceedings, then it will cause
unnecessary delay in the soonest termination of this case.

MORE, the law and the rules as well as jurisprudence on the matter, will
only allow in the courts discretion, intervention, before or during the trial. Certainly
NOT after the trial and with more reason intervention may no longer be allowed
after the decision has been rendered as in the present case.

In the meantime, on 4 January 1993, the Republic filed a Notice of Appeal880 of the RTC
Decision, dated 22 December 1992. The RTC, in an Order,881 dated 16 February 1993, denied the
same. It reasoned that

879
Id. at 608-608A.
880
Id. at 299.
881
Id. at 321-324.

526
 Considering these judicial dimensions and acquiescence of the [Republic]
in open court during the hearings held and during the pre-trial conference, the court
in its dispositive portion of the questioned decision, declared it to be a judgment
based on a compromise agreement which by operation of law becomes immediately
executory.

It is unfortunate that despite the above declarations of the court [Republic]

failed to ask for a clarification of the said declarations, by way of a motion for
reconsideration of the decision based on fraud, mistake or duress mandated by the
rules.

The notice of appeal must be denied due course.

xxxx

WHEREFORE, prescinding from the foregoing, the notice of appeal filed

by plaintiff is rejected and denied due course.

From the foregoing RTC Order, the Republic filed with the Court of Appeals a Petition for
Certiorari and Mandamus (with Urgent Prayer for Temporary Restraining Order and/or Writ of
Preliminary Injunction), docketed as CA-G.R. SP No. 30647. The Republic primarily questioned
the denial of its Notice of Appeal by the RTC in its Order, dated 16 February 1993, on the basis
that the RTC Decision of 22 December 1992 constitutes a compromise agreement, and is
immediately final and executory. The Court of Appeals issued a writ of preliminary injunction882
enjoining the RTC from implementing and enforcing its Order, dated 16 February 1993, during
the pendency of CA-G.R. SP No. 30647 or until otherwise directed by the appellate court.
Apparently, from the denial by the RTC of its Motion for Leave to Intervene and the rejection of
its Complaint in Intervention in Civil Case No. Q-92-11806, the Kadakilaan Estate again filed a

882
Id. at 632-633.

527
Motion for Leave to Intervene in CA-G.R. SP No. 30647, which in a Resolution,883 dated 13
September 1993, the Court of Appeals also denied on the following grounds

We find the stance of [Republic] and [BPC] well-grounded. Not only is

[Kadakilaan Estate] precluded by estoppel from filing the present motion, after
failing to challenge before this Court or the Supreme Court the trial courts denial
of subject motion for intervention, on April 27, 1993; it is too late for [Kadakilaan
Estate] to come in at this stage of the present litigation. Furthermore, as aptly put
by the [Republic] the alleged rights [Kadakilaan Estate] seeks to protect here can
be amply protected in an appropriate action [Kadakilaan Estate] may later bring.

In a Decision,884 dated 29 June 1994, the Court of Appeals granted the Republics Petition
for Certiorari and Mandamus, ruling in this wise

We rule for [Republic]. Respondent Courts conclusion lost sight of the

nature of a compromise agreement, and the circumstances under which a judgment
based on a compromise may be rendered.

xxxx

Guided by the aforecited law and jurisprudence in point, it can be safely

concluded that neither mere silence or acquiescence by the [Republic] in open court
during the hearing nor [Republics] stipulation of facts, marking of exhibits, alleged
admission of Exhibit 6 which contains [BPCs] offer of compromise during the pre-
trial, be properly considered as a compromise agreement. Had the parties really
intended to enter into a compromise to end their case, they could have executed and
submitted a compromise agreement for the approval of the trial court. But no such
step was taken.

xxxx

883
Penned by Associate Justice Fidel P. Purisima with Associate Justices Justo P. Torres, Jr. and Eduardo G.
Montenegro, concurring; id. at 634-636.
884
Id. at 689-700.

528
 Records readily show that due to lack of an amicable settlement or any
compromise agreement, the respondent judge directed the parties to present their
documentary exhibits so as to facilitate the trial; no longer for the purpose of
settling the case. Evidently, there was no explicit agreement nor any reciprocal
concession between the parties with an end in view of terminating the litigation.
Absence of these essential elements of a compromise inevitably results in the
absence of a valid compromise agreement. (Merced vs. Roman Catholic
Archbishop, L-24614, August 17, 1967, 20 SCRA 1077). Consequently, the
opinion of respondent Judge that his December 22, 1992 Decision had the nature
of a judgment based on compromise, cannot be upheld.

So also, the doctrine relied on by respondents that a compromise agreement

constitutes the law between the parties and a judgment based thereon is
immediately final, executory and not appealable, is inapplicable under the
premises.

xxxx

WHEREFORE, the petition is GRANTED; the questioned order dated 16

February 1993 is SET ASIDE; and respondent court is hereby ordered to give due
course to [Republics] Notice of Appeal in Civil Case No. Q-92-11806. Costs
against [BPC].

This Court, in its Resolution, dated 6 February 1995, issued in G.R. No. 117969, in effect,
sustained the afore-mentioned Decision of the Court of Appeals.

CA-G.R. CV No. 47522

Finally, the Republic was allowed to appeal the RTC Decision, dated 22 December 1992,
in Civil Case No. Q-92-11806, to the Court of Appeals, where it was docketed as CA-G.R. CV

529
No. 47522. In a Decision,885 dated 8 August 1997, the Court of Appeals found in favor of the
Republic, and disposed thus

WHEREFORE, premises considered, plaintiff-appellant Republic of the

Philippines appeal is GRANTED. Except for paragraph 2 of the dispositive portion
of the decision appealed from declaring TCT Nos. 200629 and 200630 in the name
of Servando Accibal null and void and ordering the Register of Deeds of Quezon
City to cancel said TCT Nos. 200629 and 200630, the appealed decision is
REVERSED and SET ASIDE and a new one entered:

(a) declaring and affirming the validity of TCT Nos. 288417 and 275443 of
the Registry of Deeds of Quezon City in the name of appellant Republic of the
Philippines and that appellant Republic has indefeasible title to the property
covered thereby;

(b) declaring TCT Nos. 30829, 30830, 30831 and 30832 also of the
Registry of Deeds of Quezon City in the name of Barstowe Philippines Corporation
null and void and ordering the Register of Deeds of Quezon City to cancel said
titles;

(c) ordering Barstowe Philippines Corporation to surrender to the Register

of Deeds of Quezon City the owners duplicate certificates of title of TCT Nos.
30829, 30830, 30831 and 30832 for cancellation;

(d) enjoining defendant-appellee Barstowe Philippines Corporation and

intervenor EL-VI Realty Development Corporation from exercising any act of
ownership or possession of the land in question; and

(e) remanding the case to the court of origin for further proceedings for
determination of the crossclaim of intervenor EL-VI Realty and Development
Corporation against defendant-appellee Barstowe Philippines Corporation.

There is no pronouncement as to costs.

885
Supra note 2.

530
The Motion for Reconsideration filed by BPC was denied by the Court of Appeals in a
Resolution,886 dated 18 March 1998.

G.R. No. 133110

Aggrieved, BPC came before this Court via a Petition for Review on Certiorari887 under
Rule 45 of the Rules of Court, dated 28 April 1998, raising the sole issue of who between BPC
and the Republic has a better title over the subject lots. BPC prays that this Court rule in its favor,
and reverse and set aside the Court of Appeals Decision, dated 8 August 1997, in CA-G.R. CV
No. 47522, based on the following grounds

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN

NOT CONSIDERING THE GOOD FAITH OF [BPC] THOUGH IT WAS
ADMITTED BY [REPUBLIC] DURING THE PRE-TRIAL CONFERENCE.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN

UPHOLDING THE VALIDITY OF THE TITLE OF [REPUBLIC] OVER THAT
OF [BPC.]

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN

ORDERING [BPC] TO SURRENDER ITS TITLE TO THE REGISTER OF
DEEDS FOR CANCELLATION[.]

THE HONORABLE COURT OF APPEALS ERRED IN ENJOINING [BPC]

FROM EXERCISING ACTS OF OWNERSHIP OVER THE SUBJECT PARCEL
OF LAND[.]

886
Supra note 3.
887
Supra note 1.

531
 THE HONORABLE COURT OF APPEALES [sic] ERRED IN APPLYING THE
CALALANG CASE (231 SCRA 88) AS IT IS NOT APPLICABLE TO THE
CASE AT BAR[.]

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT

FINDING [REPUBLIC] GUILTY OF ESTOPPEL BY LACHES[.]

After the Republic filed its Comment, dated 29 October 1998, several parties again sought to
intervene in the case.

Winnie U. Nicolas (Nicolas), through her sister and attorney-in-fact, Ditas Felicitas Nicolas-
Agbulos (Nicolas-Agbulos), and Edgardo Q. Abesamis (Abesamis), filed their respective
Petitions for Intervention, dated 22 October 1998 and 9 December 1998, respectively.

Nicolas-Agbulos invokes the provisions of the Rules of Court on the joinder of indispensable
parties and necessary parties for the complete determination of all possible issues, not only
between the parties themselves but also as regards to other persons who may be affected by
the judgment. Nicolas-Agbulos contends that she was a buyer in good faith of Lots No. 27
and 28, Block 13, of Parthenon Hills, covered by TCTs No. 76497 and 76498, respectively, of
the Quezon City Register of Deeds, derived from TCTs No. 30830, 30831, and 30832 in the
name of BPC. Nicolas-Agbulos had already partially paid BPC for Lots No. 27 and 28 in the
amount of P1,500,000.00, and the balance of P800,000.00 was already deposited in a trust
account in the name of BPC with the Far East Bank and Trust Company (FEBTC). She
bought Lots No. 27 and 28 after relying on the face of the TCTs of BPC which were intact
and subsisting in the records of the Quezon City Register of Deeds, and on the authority
granted to BPC by several government agencies, such as the HLURB, LRA, and the Register
of Deeds, for the subdivision, development, and sale of the subject lots to private individuals.
She only came to know, through her sister and attorney-in-fact, Nicolas-Agbulos, that the
TCTs of BPC covering the subject lots, which comprised the Parthenon Hills, were being

532
 assailed in Civil Case No. Q-92-11806 pending before the RTC. Nicolas inquiry on the matter
was answered by BPC with an assurance that despite the bad publicity, Parthenon Hills was
an on-going project and that she should continue paying her installments. Acting cautiously,
Nicolas-Agbulos decided that instead of paying the balance of the purchase price for Lots No.
27 and 28 directly to BPC, she would open a trust account with FEBTC in the name of BPC
where she would deposit Nicolas-Agbulos succeeding installment payments. Nicolas-Agbulos
was compelled to intervene in the instant case because BPC made no mention of the fact that
it had already sold numerous subdivision lots in Parthenon Hills to innocent purchasers for
value, either through absolute or installment sales. She thus sought a ruling upholding the title
of BPC, and recognizing and protecting the rights of Nicolas as an innocent purchaser for
value of Lots No. 27 and 28.888

Abesamis seeks to intervene in the present case as an indispensable party since no complete
and conclusive determination can be had therein, which shall be legally binding and effective
on Abesamis, unless he be allowed to intervene. Abesamis claims to have acquired by
purchase Lot No. 16, Block 4, of Parthenon Hills, for the purchase price of P720,000.00, and
evidenced by a Deed of Absolute Sale dated 9 June 1993. BPC processed and secured TCT
No. 92270 covering Lot No. 16 in Abesamis name. He only learned that the subject lots
comprising the Parthenon Hills, including his Lot No. 16, was mired in controversy, when he
attended an emergency meeting of the Homeowners Association of Parthenon Hills. He
asserts that, being a bona fide purchaser and holder of a legitimate and indefeasible title to Lot
No. 16, he had valid and enforceable rights against both BPC and the Republic.889

A third Petition in Intervention, dated 8 February 1999, was filed by spouses Jacinto H.
Santiago, Jr. and Arlene C. Santiago (spouses Santiago). The spouses Santiago aver that,
doing business as ACS Trading, they entered into a supply agreement with Proven
International Development Corporation (PIDC), which had a construction contract with BPC,
for the development of Parthenon Hills. The spouses Santiago agreed to accept lots in

888
Rollo, pp. 90-107.
889
Id. at 142-146.

533
 Parthenon Hills as payment for the construction materials they supplied BPC since the latter
showed them clean TCTs to the subject lots, and HLURB licenses and permits to develop
Parthenon Hills. In payment for the construction materials delivered, and financial assistance
and various other professional services rendered by the spouses Santiago to BPC, the latter
initially executed in their favor 15 Deeds of Assignment for 15 subdivision lots in Parthenon
Hills. The TCTs for the 15 subdivision lots were transferred in the name of the spouses
Santiago free from any lien or encumbrance. The spouses Santiago mortgaged 13 of the
subdivision lots with the Planters Development Bank and sold the remaining two to different
buyers. Thereafter, BPC again executed in favor of the spouses Santigao 71 Deeds of
Assignment over 71 subdivision lots in Parthenon Hills. When the spouses Santiago attempted
to transfer the TCTs covering the 71 subdivision lots to their names, they discovered that the
TCTs of BPC already bore the annotation of the notice of lis pendens. The Quezon City
Register of Deeds cancelled the TCTs of BPC covering the 71 subdivision lots and issued new
ones in the names of the spouses Santiago, still bearing the annotation of the notice of lis
pendens. The spouses Santiago claim that they were unable to intervene earlier in this case
because of the pendency of the case filed by BPC against them, docketed as Civil Case No.
93-18231, with the Quezon City RTC, Branch 84, for the annulment of the last 71 Deeds of
Assignment. This case had since been dismissed. The spouses Santiago invoke that they have
sufficient interest in the present case which would necessarily be affected by the
resolution/decision thereof, and they must necessarily intervene herein to protect their interest.
The spouses Santiago pray for this Court to declare the assignment to them by BPC of the
subdivision lots as valid, and to direct both BPC and the Republic to recognize and respect
their rights and interest.890

BPC supports the intervention in the case by Nicolas-Agbulos and Abesamis. It explains that
its failure to mention that it has already practically sold all the subdivision lots in Parthenon
Hills was not by design, but by mere oversight.891 However, BPC opposes the intervention of
the spouses Santiago claiming that the latter are not indispensable parties to the case; they

890
Id. at 173-186.
891
Id. at 369-370.

534
 acquired their TCTs through fraudulent means; and Civil Case No. 93-18231 which it
instituted against the spouses Santiago was dismissed by the Quezon City RTC, Branch 84,
without prejudice. According to BPC, the supply agreement for construction materials was
between the spouses Santiago and PIDC, so that it could not be enforced against BPC. This
issue, as well as the validity of the 71 Deeds of Assignment over 71 subdivision lots
supposedly executed by BPC in favor of the spouses Santiago, requires the holding of a trial,
not a mere intervention.892

The Republic opposed all efforts of other parties to intervene in the case. The legal interests of
Nicolas-Agbulos, Abesamis, and the spouses Santiago are totally dependent on the alleged
right of ownership of BPC, and the issues they raised are similar to those raised by BPC. The
fact that Nicolas-Agbulos and Abesamis are purchasers in good faith will not render their
titles valid and indefeasible. The titles of Servando from whom BPC acquired its titles and
from whom, in turn, Nicolas-Agbulos and Abesamis, derived their titles, were found to be
spurious; and the spring cannot rise higher than its source.893

In the interim, BPC filed its Reply dated 22 January 1999, to the Comment of the Republic.

This Court, in a Resolution, dated 22 March 1999, granted the motion of the Republic for
the issuance of a temporary restraining order enjoining BPC from selling the remaining unsold
portions of the subject lots and from allowing buyers to enter and occupy portions thereof.894

892
Id. at 353-355.
893
Id. at 373-376, 397-399.
894
Id. at 356.

535
 Thereafter, BPC,895 the Republic,896 spouses Santiago,897 Abesamis,898 and Nicolas-
Agbulos,899 filed their respective Memoranda.

However, even before the case could be submitted for decision, Servandos heirs, namely
Virgilio V. Accibal (Virgilio), Virginia A. Macabudbod (Virginia), and Antonio, filed an Urgent
Ex Parte Motion to Defer Resolution of the same. Soon after, they filed a Petition for New Trial,
dated 23 May 2001.900 Although Servandos heirs concede that the period allowed for the filing of
a motion to set aside the judgment and grant a new trial under Rule 37, Section 1 of the Rules of
Court, had already lapsed, on grounds of justice and equity, they still move that this Court grant
their Petition. Servandos heirs were allegedly prevented from participating in Civil Case No. Q-
92-11806 before the RTC by the fraudulent misrepresentations of Rev. Father Antonio O. Ipo
(Ipo), BPC President, together with the BPC counsel, who convinced the nave Antonio that there
was no need to worry about the case filed by the Republic against them and to hire another counsel
as the BPC counsel shall represent all of them. Unknown to Servandos heirs, the BPC counsel
neither represented them nor included them in the Answer he filed on behalf of BPC, thus,
Servandos heirs were declared in default by the RTC. Because of the extrinsic fraud perpetrated
upon them and their excusable negligence, Servandos heirs should be granted a new trial,
otherwise, they would be deprived of their constitutional right to due process of law. According to
Servandos heirs, neither BPC nor the Republic was a purchaser in good faith who acquired clean
titles to the subject lots. The BPC President Ipo, hoodwinked Antonio into agreeing to convey the
subject lots to BPC in exchange for 51% of its capital stock. However, despite acquiring titles to
the subject lots, BPC failed to transfer the promised 51% of its capital stock. On the other hand,
the TCTs of FPHC, the Republics predecessor-in-interest, were of doubtful origin; and the
Republics acquisition of the subject lots from FPHC was anomalous in the sense that it purchased
the said property through ordinary sale when it could have easily expropriated the same.

895
Dated 18 October 1999; id. at 473-492.
896
Dated 3 November 1999; id. at 428-437.
897
Dated 11 November 1999; id. at 440-455.
898
Dated 19 November 1999; id. at 465-472.
899
Dated 20 January 2000; id. at 497-512.
900
Id. at 580-589.

536
 Without formally intervening in the case at bar, Sariling Sikap Pabahay (SSP), through its
President, Elias V. Esraita, submitted to this Court a letter,901 dated 26 August 2002, together with
other documents to disprove the validity of the titles of Servando and his heirs to the subject lots.
SSP is a cooperative formed by the urban poor to help secure for its members award from the
government of titles to the portions of the subject lots which they are presently occupying. It
presented the affidavit of a certain Edith C. Mantaring,902 who attests that the Accibals are still
misrepresenting themselves as owners of the subject lots and fraudulently selling portions thereof
to unsuspecting buyers.

This Courts Ruling

Ultimately, this Court is called upon to determine which party now has superior title to
the subject lots: the Republic, BPC, the intervenors Abesamis, Nicolas-Agbulos, and spouses
Santiago, or Servandos heirs?

BPC, the intervenors Abesamis, Nicolas-Agbulos, spouses Santiago, and Servandos heirs
derived their title to the subject lots from Servandos TCTs No. 200629 and 200630. This Court
then is compelled to look into the validity, authenticity, and existence of these two TCTs.

It is alleged by BPC and Servandos heirs that Servando was issued TCTs No. 200629 and
200630 on 24 July 1974. However, there is an absolute dearth of information and proof as to how
Servando acquired ownership and came into possession of the subject lots.

901
Id. at 687.
902
Id. at 689-690.

537
 An investigation conducted by the LRA revealed even more irregularities which raised
serious doubts as to the validity and authenticity of TCTs No. 200629 and 200630. The LRA
Report, dated 10 June 1992, submitted by Investigator Benjamin A. Flestado (Flestado), found
the said certificates of titles spurious after a very detailed and exhaustive analysis of the evidence
available.

First, it should be noted that despite letters sent by Investigator Flestado to BPC President
Ipo, Servando, and Antonio, requesting copies of documents to support the issuance of TCTs No.
200629 and 200630, they failed to file a reply and furnish him with the documents requested. A
certain Atty. Justino Z. Benito (Atty. Benito) appeared before Investigator Flestado claiming to be
the counsel for BPC and promising to contact Servandos heirs. Yet, even by the time the LRA
Report was finalized on 10 June 1992, Atty. Benito still failed to submit the documents requested.
Instead, he wrote letters insisting that TCTs No. 200629 and 200630 be returned to the Quezon
City Register of Deeds since these certificates were detached and transferred to [your LRA central]
office for no cogent reason or purpose; and his client, BPC, is a transferee in good faith and for
value, and its titles unchallenged.

Second, although the 109-D forms on which TCTs No. 200629 and 200630 were printed
appeared to be genuine, and determined to have been issued to the Quezon City Register of Deeds
on 5 July 1974, the signature therein of the Quezon City Register of Deeds Atty. Nestor N. Pea
(Atty. Pea) was forged. No less than Atty. Pea himself refuted that the signatures on TCTs No.
200629 and 200630 were his. In his sworn statement, he noted

A. At a glance, I am definitely sure that the signatures appearing here are not
mine. My attention is invited on the loop, on the starting point of the
signature. The loop should be sharp on the last portion of my signature. The
portion going-up starts from a point and is also sharp because that represents
hypen [sic] on letter n. I notice in these titles my surname is typed as PENA
and not PEA. If ever there is no in the typewriter, I used to add hypen [sic]
over the letter n. Besides, my position here is indicated as Deputy Register
of Deeds. I never signed titles as Deputy Register of Deeds, during my time;

538
 and if ever a title was presented indicating my position as Deputy Register
of Deeds, I would erase the word Deputy. Moreso, the pen used here was a
sign-pen. I never used a signpen, as shown in the other 5 titles I identified
earlier.

His employment records revealed that Atty. Pea was appointed as the Quezon City Register of
Deeds on 27 May 1968, and served as such until his retirement in August of 1980, so that at the
time when he supposedly signed TCTs No. 200629 and 200630 on 24 July 1974, he was the
Quezon City Register of Deeds, not the Deputy Register of Deeds.

Third, even the then incumbent Quezon City Register of Deeds Samuel Cleofe (RD Cleofe)
and Deputy Register of Deeds Edgardo Castro (DRD Castro) believed that TCTs No. 200629 and
200630 were spurious. According to RD Cleofe, the size of the area covered by the TCTs made
him highly suspicious of the same. In Quezon City, only a few people own big tracts of land,
namely, the Aranetas, Tuazons, etc. Commonly, ordinary individuals own only 300 to 2,000 square
meters of land. Both RD Cleofe and DRD Castro identified differences in the signatures and
designation of Atty. Pea appearing on the questionable TCTs No. 200629 and 200630 compared
to those on five other admittedly authentic TCTs.903.

Fourth, the National Bureau of Investigation (NBI), upon request of Investigator

Flestado, conducted an examination and issued Questioned Documents Report No. 636-991,
dated 31 March 1992, wherein it noted significant differences in the handwriting characteristics
between the standard/sample signatures of Atty. Pea and those appearing on TCTs No. 200629
and 200630, i.e., in the manner of execution, direction/movement of strokes, and other
identifying details. The NBI concluded that [t]he questioned and the standard/sample signatures
of [N]estor N. Pea were NOT WRITTEN by one and the same person.

903
Transfer Certificates of Title No. 199013, 200427, 200744, 202028, and 202476.

539
 Finally, Investigator Flestado made inquiries with the Land Management Bureau (LMB)
regarding the consolidation-subdivision plan Pcs-2480 and plan Psu-32606 of Lots 34 and 40
(the subject lots) as described in TCTs No. 200629 and 200630. LMB Geodetic Surveys Division
Chief Privadi J.G. Dalire, in a letter, dated 29 November 1991, informed Investigator Flestado
that LMB had no records of Pcs-2480, while the original copy of Psu-32606 is no longer
available as it had been badly damaged. Thus, there was no record in the LMB that Lots 34 and
40, Psu-32606, were in fact consolidated and then subdivided into Lots 3, 4, 5, and 6 pursuant to
plan Pcs-2480, as mentioned in TCTs No. 200629 and 200630.

To rebut the foregoing findings of LRA Investigator Flestado, BPC presented, in support
of the authenticity and validity of TCTs No. 200629 and 200630, the LRA Resolution,904 dated 4
November 1991, in Consulta No. 1957, and NBI Questioned Documents Report No. 585-891,905
dated 2 September 1991. A careful study of the said documents does little to support the position
of BPC.

The LRA Resolution in Consulta No. 1957 merely allowed the registration of the
rescission of a Joint Venture Agreement on TCTs No. 200629 and 200630 despite the initial
adverse finding that the said certificates were of doubtful authenticity. It did not make any
categorical finding as to the authenticity or validity of the TCTs. In fact, the last paragraph of the
said Resolution elucidated that

This resolution, however, should be understood to be limited to the issue

of registrability of the instrument sought to be registered and is without prejudice
to any action, if warranted, that may be filed in court assailing the validity or
authenticity of the certificate of titles. (Emphasis supplied.)

904
Penned by LRA Administrator Teodoro C. Bonifacio; records, pp. 34-40.
905
Id. at 41.

540
 The NBI Questioned Documents Report No. 585-891 was even in accordance with the
finding in the LRA Report that the 109-D forms on which TCTs No. 200629 and 200630 were
printed seemed to be genuine. The NBI concluded that the words 109-D and the serial numbers
printed on the forms were not altered. The NBI did a very limited examination of the
genuineness of the forms on which TCTs No. 200629 and 200630 were printed, but it did not
look into the authenticity of Atty. Peas signature (which was the subject of NBI Questioned
Documents Report No. 636-991, dated 31 March 1992, mentioned in the LRA Report) or the
accuracy of the entries made therein.

The LRA Report, dated 10 June 1992, of Investigator Flestado was submitted as evidence
before the RTC. It must be emphasized that the LRA Report was extensive and thorough. Its
findings are sufficiently supported by independent and reliable proof. The BPC failed to present
evidence to refute the same. The LRA Report deserves great weight sufficient to overcome the
presumption that TCTs No. 200629 and 200630 were genuine, authentic, and indefeasible.906

It having been established that TCTs No. 200629 and 200630 were forged and spurious,
their reconstitution was also attended with grave irregularities. Once more, this Court relies on
the findings in the LRA Report, dated 10 June 1992, of Investigator Flestado. Quezon City RD
Cleofe; the unnamed Chief of the LRA Micrographics and Computer Division; and Records
Officer Viterbo Cahilig of the Quezon City Register of Deeds, all confirmed that there were no
records of any applications for reconstitution of TCTs No. 200629 and 200630 in the name of
Servando. It would seem that an LRA employee, Cartographer Rovil Ruiz (Ruiz), made it appear
that there were applications for reconstitution of TCTs No. 200629 and 200630 filed, and which
were included in Folder 1614. When Folder 1614 was inspected, TCTs No. 200629 and 200630
were not included in its table of contents; and although the said folder did have 44 missing pages,
the missing pages pertain to the supporting documents of other TCTs, and there was no showing
that TCTs No. 200629 and 200630 and the applications for reconstitution thereof were among
these missing pages. Ruiz undertook by himself the computation of the tie-lines of the subject

906
Dolfo v.The Register of Deed of Cavite, 395 Phil. 241, 248-249 (2000).

541
lots as described in TCTs No. 200629 and 200630, the plotting, and examination of the titles.
The LRA Report thus recommended that Ruiz be administratively charged for grave misconduct,
it appearing that he was the one who facilitated the administrative reconstitution of TCTs No.
200629 and 200630.

In contrast, the Republic was able to supply Investigator Flestado with the documents
supporting the transfer of the titles to the subject lots from FPHC to the Republic, among which
were the TCTs of FPHC, the Deeds of Sale executed by FPHC to the Republic, notice to the real
property owners within 300-meter radius from the area, receipts for payment of registration fees,
and payment order for the documentary stamp tax on the sales. TCTs No. 275443 and 288417 in
the name of the Republic were included in LRA Folder No. 1976-B, together with other
certificates of title in the name of the Republic. One of the applications filed by the Republic was
docketed as Application for Reconstitution No. 41869. The Chief of the LRA Micrographics and
Computer Division confirmed that the applications for reconstitution of TCTs No. 275443 and
288417 by the Republic were recorded in the computerized Administrative Reconstitution
System.

BPC was unable to attack the authenticity and validity of the titles of the Republic to the
subject lots, and could only interpose the defense that it was a buyer in good faith. Only
Servandos heirs, in their Petition for New Trial, attempted to raise doubts as to the titles of the
Republic to the subject lots by averring that the transfer thereof from FPHC to the Republic was
highly irregular because the latter could have acquired the property by expropriation. Such an
averment is totally baseless. Expropriation as the means by which the State can acquire private
property is always the remedy of last resort. Expropriation lies only when it is made necessary by
the opposition of the owner of the property to the sale or by the lack of any agreement as to the
price.907 There being, in the present case, valid and subsisting contracts between the FPHC, the
previous owner, and the Republic, the buyer, for the purchase of the subject lots at an agreed
price, there was no reason for the expropriation.

907
Mactan-Cebu International Airport Authority (MCAA) v. Court of Appeals, 399 Phil. 695, 711 (2000); Noble
v. City of Manila, 67 Phil. 1, 6 (1938).

542
 .

In consideration of all the foregoing findings, it is indubitable that TCTs No. 275443 and
288417 of the Republic covering the subject lots are authentic and valid, while TCTs No. 200629
and 200630 of Servando covering the same property are not.

However, BPC maintains that it was a purchaser in good faith, for value and without any
inkling about any flaw from Servandos titles. It points out that it purchased the subject lots from
Servando on 8 February 1989 and registered the same on 19 February 1991, way before the titles
of Servando were declared null by the RTC on 22 December 1992. BPC relies on this Courts
ruling in Tenio-Obsequio v. Court of Appeals,908 to wit

Under Section 55 of the Land Registration Act, as amended by Section 53

of Presidential Decree No. 1529, an original owner of registered land may seek
the annulment of a transfer thereof on the ground of fraud. However, such a
remedy is without prejudice to the rights of any innocent holder for value with a
certificate of title.

A purchaser in good faith and for value is one who buys the property of
another, without notice that some other person has a right to or interest in such
property, and pays a full and fair price for the same at the time of such purchase
or before he has notice of the claim or interest of some other person in the
property. In consonance with this accepted legal definition, petitioner Consorcia
Tenio-Obsequio is a purchaser in good faith. There is no showing whatsoever nor
even an allegation that herein petitioner had any participation, voluntarily or
otherwise, in the alleged forgery.

xxxx

The main purpose of the Torrens system is to avoid possible conflicts of

title to real estate and to facilitate transactions relative thereto by giving the public
the right to rely upon the face of a Torrens certificate of title and to dispense with
the need of inquiring further, except when the party concerned has actual
knowledge of facts and circumstances that should impel a reasonable cautious

908
Tenio-Obsequio v. Court of Appeals, G.R. No. 107967, 1 March 1994, 230 SCRA 550, 555-560.

543
 man to make such further inquiry. Where innocent third persons, relying on the
correctness of the certificate of title thus issued, acquire rights over the property,
the court cannot disregard such rights and order the total cancellation of the
certificate. The effect of such an outright cancellation would be to impair public
confidence in the certificate of title, for everyone dealing with property registered
under the Torrens system would have to inquire in every instance as to whether
the title has been regularly or irregularly issued by the court. Every person dealing
with registered land may safely rely on the correctness of the certificate of title
issued therefor and the law will in no way oblige him to go beyond the certificate
to determine the condition of the property.

xxxx

It has been consistently ruled that a forged deed can legally be the root of
a valid title when an innocent purchaser for value intervenes. A deed of sale
executed by an impostor without the authority of the owner of the land sold is a
nullity, and registration will not validate what otherwise is an invalid document.
However, where the certificate of title was already transferred from the name of
the true owner to the forger and, while it remained that way, the land was
subsequently sold to an innocent purchaser, the vendee had the right to rely upon
what appeared in the certificate and, in the absence of anything to excite
suspicion, was under no obligation to look beyond the certificate and investigate
the title of the vendor appearing on the face of said certificate.

Now the question is whether BPC qualifies as an innocent purchaser for value which
acquired valid titles to the subject lots, despite the fact that the titles of its predecessor-in-interest
were found to be forged and spurious.

This Court finds in the negative.

Foremost is the fact that there seem to be two documents by which titles to the subject
lots were transferred from the Accibals to BPC: (1) A Deed of Conveyance, dated 8 February
1989, executed by Servando in favor of BPC, transferring to the latter titles to the subject lots in
exchange for 51% of its capital stock; and (2) A Deed of Conveyance, dated 10 October 1990,

544
executed by Antonio in favor of BPC, transferring to the latter the very same property in
exchange for 2,450 shares in BPC. It should be noted that even prior to these Deeds of
Conveyance, Servando already transferred the subject lots by way of a Deed of Absolute Sale,
dated 10 June 1988, in favor of his son Antonio, with the concurrence of his other heirs. Thus, by
the time Servando executed the Deed of Conveyance over the subject lots in favor of BPC on 8
February 1989, he no longer had any right to the said property, having sold the same to Antonio.
It was probably to rectify this mistake that a second Deed of Conveyance was executed by
Antonio on 10 October 1990. Comparing all these transfer documents, the LRA Report, dated 10
June 1992, prepared by Investigator Flestado noted that Servandos Tax Account Number (TAN)
in the Deed of Conveyance, dated 8 February 1989, which he executed over the subject lots in
favor of BPC, was A2140-M1746-A-1; while in the Deed of Sale, dated 10 June 1988, which he
executed over the subject lots in favor of Antonio, his TAN was 4110-241-R. Moreover, despite
being executed a year apart, Servando had the same residence certificate (No. 5901393, issued at
Quezon City, on 6 April 1988) appearing in both documents.

Furthermore, BPC cannot really claim that it was a purchaser in good faith which relied
upon the face of Servandos titles. It should be recalled that the Quezon City Register of Deeds
caught fire on 11 June 1988. Presumably, the original copies of TCTs No. 200629 and 200630
were burnt in the said fire. Servandos heirs sought the administrative reconstitution of of TCTs
No. 200629 and 200630 only in December 1990. The two Deeds of Conveyance over the subject
lots were executed in favor of BPC by Servando and Antonio on 8 February 1989 and 10
October 1990, respectively, both prior to the administrative reconstitution of TCTs No. 200629
and 200630. If BPC bought the subject lots after TCTs No. 200629 and 200630 were destroyed
when the Quezon City Register of Deeds burned down, but before the said certificates were
reconstituted, then on the face of what titles did BPC rely on before deciding to proceed with the
purchase of the subject lots? There was no showing that there were surviving owners duplicate
copies of TCTs No. 200629 and 200630, or even if there were, without the original copies of the
said TCTs which were stored in the Quezon City Register of Deeds and purportedly destroyed in
the fire, there would have been no way for BPC to have verified the owners duplicate copies.

545
 In addition, without the original copies and owners duplicate copies of TCTs No. 200629
and 200630, BPC had to rely on the reconstituted certificates, issued on 12 December 1990,
bearing the following numbers: TCTs No. RT-23687 (for TCT No. 200629) and RT-23688 (for
TCT No. 200630). Under section 7 of Republic Act No. 26,909 "Reconstituted titles shall have the
same validity and legal effect as the originals thereof" unless the reconstitution was made
extrajudicially.910 In this case, TCTs No. 200629 and 200630 were reconstituted
administratively, hence, extrajudicially. In contrast to the judicial reconstitution of a lost
certificate of title which is in rem, the administrative reconstitution is essentially ex-parte and
without notice.911 The reconstituted certificates of title do not share the same indefeasible
character of the original certificates of title for the following reason

x x x The nature of a reconstituted Transfer Certificate Of Title of

registered land is similar to that of a second Owner's Duplicate Transfer
Certificate Of Title. Both are issued, after the proper proceedings, on the
representation of the registered owner that the original of the said TCT or the
original of the Owner's Duplicate TCT, respectively, was lost and could not be
located or found despite diligent efforts exerted for that purpose. Both, therefore,
are subsequent copies of the originals thereof. A cursory examination of these
subsequent copies would show that they are not the originals. Anyone dealing
with such copies are put on notice of such fact and thus warned to be extra-
careful. x x x.912

The fact that the TCTs were reconstituted should have alerted BPC and its officers to conduct an
inquiry or investigation as might be necessary to acquaint themselves with the defects in the
titles of Servando.913

What is more, BPC again invokes LRA Resolution, dated 4 November 1991, in Consulta
No. 1957, and NBI Questioned Documents Report No. 585-891, dated 2 September 1991 as

909
An Act Providing a Special Procedure for Reconstitution of Torrens Certificate of Title Lost or Destroyed.
910
Wright, Jr. v. Lepanto Consolidated Mining Co. and Lednicky, 120 Phil. 495, 499 (1964).
911
Gallardo v. Intermediate Appellate Court, G.R. No. L-67742, 29 October 1987, 155 SCRA 248, 260-261.
912
Garcia v. Court of Appeals, G.R. No. 96141, 2 October 1991, 202 SCRA 228, 241-242.
913
Id.; Republic v. Court of Appeals, G.R. Nos. L-46626-27, 27 December 1979, 94 SCRA 865, 872-873.

546
proof that it did inquire or investigate into the validity and authenticity of Servandos titles. But
again, it should be noted that these documents were issued after BPC already acquired the
subject lots from Servando and Antonio.

Lastly, there are serious doubts that BPC acquired the subject lots for value. The
Republic bought the subject lots from FPHC for the combined price of P12,333,280.00. BPC, on
the other hand, supposedly acquired the subject lots from Servando on 8 February 1989 in
exchange for 51% of the capital stock of BPC, with a subscription value of P6,000,000.00. In the
LRA Report, dated 10 June 1992, Investigator Flestado pointed out that in the Articles of
Incorporation, dated 16 January 1989, of BPC, submitted to the Securities and Exchange
Commission (SEC) on 20 January 1989, BPC had an authorized capital stock of only
P1,000,000.00, which was divided into 10,000 shares, with a par value of P100.00 each; and the
amount of capital stock actually subscribed was P250,000.00. Therefore, in 1989, fifty-one
percent of the capital stock of BPC would be 5,100 shares, with an aggregate value of only
P510,000.00. BPC is not saved by the second Deed of Conveyance, executed more than a year
later by Antonio, again transferring to BPC the subject lots in exchange for 2,450 shares in the
latter, with the alleged value of P49,000.000.00. Unless BPC is able to present proof that it
applied for, and the SEC approved, a substantial increase in its capital stock, then this Court can
only assume that its capital stock remained the same as the year before, 2,450 shares in BPC,
with a par value of P100.00 each, amount only to P245,000.00. This Court cannot find a
plausible explanation for the discrepancy in the value of 2,450 shares of BPC between the
P245,000.00 it has hereby computed and the P49,000,000.00 claimed by BPC.

For the above-stated reasons, this Court cannot declare BPC an innocent purchaser for
value, and it acquired no better titles to the subject lots than its predecessors-in-interest,
Servando and Antonio.

547
 At this point, it would seem that the Republic does hold better titles to the subject lots.
Nonetheless, another level of transactions involving the subject lots was brought by intervenors
to the attention of this Court.

From the reconstituted TCTs No. RT-23687 (200629) and RT- 23688 (200630) in the name of
Servando, BPC derived and was issued by the Quezon City Register of Deeds new
certificates, TCTs No. 30829, 30830, 30831 and 30832, in its own name. It was able to secure
the necessary licenses and permits from the appropriate government agencies to subdivide,
develop, and sell the subject lots as Parthenon Hills. The Parthenon Hills project was openly
advertised and marketed, and a substantial portion of the subject lots was already sold by BPC
to the public.

Except for the spouses Santiago, BPC recognizes that the intervenors, Nicolas-Agbulos and
Abesamis, together with other legitimate homeowners in Parthenon Hills, acquired from BPC
titles to their respective subdivided lots in good faith and for value. Even the Republic could
not refute that the individuals who acquired lots in Parthenon Hills from BPC were purchasers
in good faith and for value. It insists, however, that these buyers could not acquire better titles
to the property than its predecessors-in-interest BPC, Servando, and Antonio since the spring
cannot rise higher than its source. The law must protect and prefer the lawful holder of
registered title over the transferee of a vendor bereft of any transmissible rights.914

It is true that the general rule is that a forged deed is a nullity and conveys no title.915 A
forged deed may be defined as an instrument which purports to have been executed by the person
or persons whose signatures appear thereon, but which, in fact, was not executed, and the
signatures thereon had been merely imitated so as to give them the deceptive appearance of
genuineness.916 In the case at bar, it was not any of the deeds of transfer or conveyance of the

914
Calalang v. Register of Deeds, G.R. No. 76265, 11 March 1994, 231 SCRA 88, 104.
915
Director of Lands v. Addison, 49 Phil. 19, 23 (1926).
916
Antonio H. Noblejas and Edilberto H. Noblejas, REGISTRATION OF LAND TITLES AND DEEDS (1992
ed.), 330.

548
subject lots which was forged, but TCTs No. 200629 and 200630 themselves. The forged TCTs,
nevertheless, just as a forged deed, can make it appear that one had title, right, or interest to the
land, when in truth, he had none, to the deprivation of the rightful owner. It has been recognized
that while a forged instrument is null and void and of no effect as between the parties, it may
nevertheless be the root of a good title; so that the title of a registered owner who has taken it
bona fide and for value, is not affected by reason of his claiming through someone, that the
registration was void because it had been procured by the presentation of a forged instrument.917

The forged TCTs No. 200629 and 200630 were later administratively reconstituted, and
although an investigation would show that their reconstitution was also attended with irregularities,
TCTs No. RT-23687 (200629) and RT-23688 (200630) appear, on either face, to have been duly
approved by the LRA and issued by the Quezon City Register of Deeds. With the cancellation of
the reconstituted TCTs and the issuance of new ones, TCTs No. 30829, 30830, 30831, and 30832,
in the name of BPC, any trace of forgery or irregularity as to BPCs titles was eliminated. TCTs
No. 30829, 30830, 30831, and 30832 were clean, at least, until the annotation therein of the notice
of lis pendens of the Republic on 21 October 1992. It is a settled doctrine that one who deals with
property registered under the Torrens system need not go beyond the same, but only has to rely on
the certificates of title. He is charged with notice only of such burdens and claims as are annotated
on the certificates.918 Herein intervenors, Nicolas-Agbulos and Abesamis, before purchasing
subdivision lots in Parthenon Hills, looked into the TCTs of BPC and found nothing on the face
thereof to raise doubts or suspicions as to their validity and authenticity. Besides, BPC was the
holder of licenses and permits to subdivide, develop, and sell the subject lots as Parthenon Hills,
issued by the appropriate government agencies, primarily HLURB.

This is definitely a situation which constitutes an exception to the general rule that estoppel
cannot lie against the government. The Republic v. Court of Appeals,919 provides an illuminating
discourse on when such an exception applies, thus

917
Id. at 331.
918
Sandoval v. Court of Appeals, 329 Phil. 48, 60 (1996).
919
361 Phil. 319, 329-333 (1999).

549
 Is the immunity of the government from laches and estoppel absolute? May
it still recover the ownership of lots sold in good faith by a private developer to
innocent purchasers for value, notwithstanding its approval of the subdivision plan
and its issuance of separate individual certificates of title thereto?
xxxx
The general rule is that the State cannot be put in estoppel by the mistakes
or errors of its officials or agents. However, like all general rules, this is also subject
to exceptions, viz:
"Estoppels against the public are little favored. They should
not be invoked except in rare and unusual circumstances, and may
not be invoked where they would operate to defeat the effective
operation of a policy adopted to protect the public. They must be
applied with circumspection and should be applied only in those
special cases where the interests of justice clearly require it.
Nevertheless, the government must not be allowed to deal
dishonorably or capriciously with its citizens, and must not play an
ignoble part or do a shabby thing; and subject to limitations x x x
the doctrine of equitable estoppel may be invoked against public
authorities as well as against private individuals."
xxxx
Significantly, the other private respondents Spouses Santos, Spouses
Calaguian, Dela Fuente and Madaya bought such "expanded" lots in good faith,
relying on the clean certificates of St. Jude, which had no notice of any flaw in them
either. It is only fair and reasonable to apply the equitable principle of estoppel by
laches against the government to avoid an injustice to the innocent purchasers for
value.
Likewise time-settled is the doctrine that where innocent third persons,
relying on the correctness of the certificate of title, acquire rights over the property,
courts cannot disregard such rights and order the cancellation of the certificate.
Such cancellation would impair public confidence in the certificate of title, for
everyone dealing with property registered under the Torrens system would have to
inquire in every instance whether the title has been regularly issued or not. This
would be contrary to the very purpose of the law, which is to stabilize land titles.
Verily, all persons dealing with registered land may safely rely on the correctness
of the certificate of title issued therefor, and the law or the courts do not oblige,
them to go behind the certificate in order to investigate again the true condition of
the property. They are only charged with notice of the lions and encumbrances on
the property that are noted on the certificate.
When private respondents-purchasers bought their lots from St. Jude, they
did not have to go behind the titles thereto to verify their contents or search for
hidden defects or inchoate rights that could defeat their rights to said lots. Although

550
they were bound by liens and encumbrances annotated on the titles, private
respondents purchasers could not have had notice of defects that only an inquiry
beyond the face of the titles could have satisfied. The rationale for this presumption
has been stated thus:
"The main purpose of the Torrens System is to avoid
possible conflicts of title to real estate and to facilitate transactions,
relative thereto by giving the public the right to rely upon the face
of a Torrens Certificate of Title and to dispense with the need of
inquiring further, except when the party concerned had actual
knowledge of facts and circumstances that should impel a
reasonably cautious man to make such further inquiry (Pascua v.
Capuyoc, 77 SCRA 78). Thus, where innocent third persons relying
on the correctness of the certificate thus issued, acquire rights over
the property, the court cannot disregard such rights (Director of
Land v. Abache, et al., 73 Phil. 606)."
In another case, this Court further said:
"The Torrens System was adopted in this country because it
was believed to be the most effective measure to guarantee the
integrity of land titles and to protect their indefeasibility once the
claim of ownership is established and recognized. If a person
purchases a piece of land on the assurance that the seller's title
thereto is valid, he should not run the risk of being told later that his
acquisition was ineffectual after all. This would not only be unfair
to him. What is worse is that if this were permitted, public
confidence in the system would be eroded and land transactions
would have to be attended by complicated and not necessarily
conclusive investigations and proof of ownership. The further
consequence would be that land conflicts could be even more
abrasive, if not even violent. The Government, recognizing the
worthy purposes of the Torrens System, should be the first to accept
the validity of titles issued thereunder once the conditions laid down
by the law are satisfied. [Italics supplied.]
Petitioner never presented proof that the private respondents who had
bought their lots from St. Jude were buyers in bad faith. Consequently, their claim
of good faith prevails. A purchaser good faith and for value is one who buys the
property of another without notice that some other person has a right to or an
interest in such property; and who pays a full and fair price for the same at the time
of such purchase or before he or she has notice of the claims or interest of some
other person. Good faith is the honest intention to abstain from taking any
unconscientious advantage of another.

551
 It also bears to emphasize that the subject lots covered by TCTs No. 30829, 30830, 30831,
and 30832 were already subdivided, and new TCTs were issued in the names of the buyers of each
subdivision lot. To order the cancellation of all these derivative titles and the return of the
subdivision lots to the Republic shall irrefragably be unjust to the innocent purchasers for value
and shall wreak havoc on the Torrens System.

Anyway, the Republic is not without recourse. It can claim damages from BPC, found
herein not to be a buyer of the subject lots in good faith. For its loss of portions of the subdivision
lots to innocent purchasers from BPC, the Republic may recover from BPC the purchase price it
paid to FPHC corresponding to such subdivision lots, with interest at 6% per annum from 26 March
1992 (the date when the Republic instituted its petition for the cancellation of the TCTs of
Servando, Antonio, and BPC) until finality of this Decision, and 12% per annum thereafter until
fully paid.920

Although this Court allowed in the case at bar the intervention of Nicolas-Agbulos and
Abesamis, and recognized their title to their respective subdivision lots in Parthenon Hills as
purchasers in good faith and for value from BPC, it could not do the same for the spouses
Santiago, for the reason that BPC contested their claim that they had acquired titles to the
subdivision lots in Parthenon Hills in good faith and for value, and further asserted that the
spouses Santiago acquired the said subdivision lots by fraudulent means. The allegations by the
spouses Santiago of good faith, on one hand, and by BPC of fraud, on the other, in the
acquisition by the spouses Santiago of the subdivision lots in question, are factual matters, best
proven and established before the RTC, which could receive evidence in support of each partys
position during trial. Should the RTC find that the spouses Santiago have indeed acquired the
subdivision lots in good faith and for value, then their titles thereto shall, likewise, be valid and
indefeasible even against that of the Republic. However, in a contrary case, should the RTC find
that the spouses Santiago acquired the subdivision lots by fraud, then titles thereto return to BPC.

920
Heirs of Ignacia Aguilar-Reyes v. Mijares, G.R. No. 143826, 28 August 2003, 410 SCRA 97, 112; Liu v.
Loy, Jr., G.R. No. 145982, 3 July 2003, 405 SCRA 316, 338.

552
 Though estoppel by laches may lie against the Republic when titles to the subdivision lots
are already in the names of the respective innocent purchasers for value from BPC, it may not be
used by BPC to defeat the titles of the Republic as regards the subdivision lots which remain
unsold and the titles to which are still in the name of BPC. It must be recalled that BPC is not a
purchaser in good faith. Estoppel, being an equitable principle, may only be invoked by one who
comes to court with clean hands.921

Pertinent provisions of the New Civil Code concerning builders in bad faith provide that

ART. 449. He who builds, plants, or sows in bad faith on the land of
another, loses what is built, planted or sown without right to indemnity.

ART. 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the work, or that the
planting or sowing be removed, in order to replace things in their former
condition at the expense of the person who built, planted or sowed; or he may
compel the builder or planter to pay the price of the land, and the sower the proper
rent.

ART. 451. In cases of the two preceding articles, the landowner is entitled
to damages from the builder, planter or sower.

ART. 452. The builder, planter or sower in bad faith is entitled to

reimbursement for the necessary expenses of preservation of the land.

Hence, as far as the subdivision lots still in the name of BPC are concerned, the Republic has the
option to either (1) recover the said lots and demand that BPC demolish whatever improvements
it has made therein, to return the lots to their former condition, at the expense of BPC; or (2)
compel BPC to pay the price of the land. The choice can only be made by the Republic, as the

921
Pagasa Industrial Corp. v. Court of Appeals, 216 Phil. 533, 535 (1984).

553
rightful owner of the said subject lots. Should the Republic choose the first option, BPC is under
the obligation to return the possession of the subdivision lots to the Republic and surrender its
corresponding TCTs for cancellation and issuance of new ones in the name of the Republic.
Should the Republic select the second option, then BPC shall pay the Republic the purchase
price that the latter had paid to FPHC corresponding to such subdivision lots, with interest at 6%
per annum from 26 March 1992 until finality of this Decision, and 12% per annum thereafter
until fully paid. In either option, the Republic may claim damages from BPC, while BPC cannot
seek indemnity from the Republic for any improvements made on the subdivision lots, except if
these constitute as necessary expenses for the preservation of the land, for which it shall still be
entitled to reimbursement.

As for the Petition for New Trial filed by Servandos heirs, this Court dismisses the same
for lack of legal basis. Section 1, Rule 37 of the Rules of Court reads

SECTION 1. Grounds of and period for filing motion for new trial or
reconsideration. Within the period for taking an appeal, the aggrieved party may
move the trial court to set aside the judgment or final order and grant a new trial
for one or more of the following causes materially affecting the substantial rights
of the said party:

(a) Fraud, accident, mistake or excusable negligence which ordinary

prudence could not have guarded against and by reason of which such aggrieved
party has probably been impaired in his rights; or

(b) Newly discovered evidence, which he could not, with reasonable

diligence, have discovered and produced at the trial, and which if presented would
probably alter the result.

Servandos heirs themselves admit that the period allowed for the filing of a motion to set
aside the judgment and grant a new trial under the afore-quoted provision had already lapsed, but
they still pray that this Court give due course to their Petition on the grounds of justice and equity.

554
 In Malipol v. Lim Tan,922 this Court ruled that

It is within the sound discretion of the court to set aside an order of default
and to permit a defendant to file his answer and to be heard on the merits even after
the reglementary period for the filing of the answer has expired, but it is not error,
or an abuse of discretion, on the part of the court to refuse to set aside its order of
default and to refuse to accept the answer where it finds no justifiable reason for
the delay in the filing of the answer. In the motions for reconsideration of an order
of default, the moving parry has the burden of showing such diligence as would
justify his being excused from not filing the answer within the reglementary period
as provided by the Rules of Court, otherwise these guidelines for an orderly and
expeditious procedure would be rendered meaningless. Unless it is shown clearly
that a party has justifiable reason for the delay, the court will not ordinarily exercise
its discretion in his favor.

In the present case, the late Servando and Antonio were already declared in default by the
RTC on 31 July 1992, after their supposed counsel failed to file an answer to the Republics petition
for cancellation of title. Nothing was heard from Servandos heirs even after the promulgation of
the RTC Decision on 22 December 1992, and the Court of Appeals Decision, dated 8 August 1997,
until they filed their Petition for New Trial, dated 23 May 2001, before this Court, or nine years
from the date they were declared in default.

According to Servandos heirs, due to the extrinsic fraud committed by the President and
counsel of BPC, they were prevented from participating in the proceedings before the trial court.
They allegedly relied on the assurance of the President and counsel of BPC that the latter shall
also represent them and their interests in the subject lots in the case.

922
154 Phil. 193, 199-200 (1974).

555
 This allegation of fraud by Servandos heirs has no leg to stand on. It should be recalled
that the late Servando and Antonio were represented by a counsel at the beginning of the
proceedings before the RTC. Their counsel even submitted two consecutive motions for
extension of time to file the appropriate pleadings. There was no explanation provided as to why,
despite the grant of said motions, the counsel still failed to file an answer to the Republics
petition for cancellation of title. It is also contrary to common human experience that Servandos
heirs, by the mere assurance of the President and counsel of BPC, adopted a totally hands-off
attitude in a case where they supposedly have substantial interest. There is no showing during the
nine years when they were not participating in the court proceedings, that they, at least, inquired
into or followed-up on the status of the case with BPC. Such blind trust in the President and
counsel of BPC is surely difficult to comprehend, especially if this Court takes into account the
contention of Servandos heirs that BPC failed to deliver the shares of stock in exchange for the
subject lots. What is apparent to this Court is not the alleged fraud committed by BPC but, rather,
the inexcusable negligence of Servandos heirs when it came to protecting their titles, rights, and
interests to the subject lots, if indeed, there were still any.

Worth reproducing herein, is the conclusion923 made by the Court of Appeals on

Servandos titles

On the strength of the LRA report, Exhibit H (Record, pp. 214-258), the
court a quo found TCT Nos. 200629 and 200630, in the name of Servando
Accibal and from which the titles of defendant-appellee Barstowe Philippines
Corporation were derived, spurious, and ordered the Register of Deeds of Quezon
City to officially and finally cancel (said titles) from his records (Par. 2,
dispositive portion, Decision, p. 16; Rollo, p. 71). As explained by the court a
quo:

We shall now dwell on the validity of the titles, TCT Nos.

200629 and 200630, issued in the name of Servando Accibal on
July 24, 2974 by the Register of Deeds of Quezon City. The LRA
Report dated 10 June 1992 (Exh. H, pp. 214-258, record) is
competent proof that indeed said titles must be cancelled. In short,
923
Supra note 2, 45-46.

556
 the LRA found after due investigation that the said titles of
Servando Accibal were issued with certain irregularties (sic). It
recommended the cancellation therefore, of TCT Nos. 200629 and
200630, to which the court concurs, as said report must be
accorded due respect and in the absence of fraud or irregularties
(sic) that attended the investigation, which the Court finds none,
the same must be persuasive, if not conclusive. Moreover, herein
defendant Servando Accibal because of his failure to answer,
despite extension of time given him, plaintiffs counsel, he was
declared as in default since then, he never asked the court to lift
and set aside the default order. There is no way, his title may be
cancelled. For one thing, he was not able to present evidence to
controvert the recommendation of the LRA to cancel his titles. For
another, Servando Accibal is deemed to have impliedly admitted
the irregularties (sic) that attended the issuance of his aforestated
titles. (Decision, pp. 14-15; Rollo, pp. 69-70)

This portion of the decision ordering the cancellation of TCT Nos. 200629
and 200630 in the name of Servando Accibal was not appealed nor assigned as a
counter-assigment of error in the brief of Barstowe Philippines Corporation;
hence, is now final.

Thus, the findings of this Court as to the rights of the parties involved in the present case
are summarized as follows

(1) The certificates of title acquired by Servando over the subject lots were forged and
spurious, and such finding made by both the RTC and Court of Appeals is already final and binding
on Servandos heirs;

(2) BPC did not acquire the subject lots in good faith and for value, and its certificates
of title cannot defeat those of the Republics;

(3) As between BPC and the Republic, the latter has better titles to the subject lots
being the purchaser thereof in good faith and for value from FPHC;

557
 (4) However, considering that the subject lots had already been subdivided and the
certificates of title had been issued for each subdivision lot, which were derived from the
certificates of title of BPC, it is more practical, convenient, and in consonance with the stability of
the Torrens System that the certificates of title of BPC and its derivative certificates be maintained,
while those of the Republics be cancelled;

(5) Estoppel lies against the Republic for granting BPC governmental permits and
licenses to subdivide, develop, and sell to the public the subject lots as Parthenon Hills. Relying
on the face of the certificates of title of BPC and the licenses and permits issued to BPC by
government agencies, innocent individuals, including intervenors Nicolas-Agbulos and Abesamis,
purchased subdivision lots in good faith and for value;

(6) The claims of the intervenor spouses Santiago that they acquired portions of the
subject lots in good faith and for value still need to be proven during trial before the court a quo.
Unlike the claims of intervenors Nicolas-Agbulos and Abesamis, which BPC admitted, the claims
of the spouses Santiago were opposed by BPC on the ground of fraud;

(7) Certificates of title over portions of the subject lots, acquired by purchasers in good
faith and for value, from BPC, are valid and indefeasible, even as against the certificates of title of
the Republic. The Republic, however, is entitled to recover from BPC the purchase price the
Republic paid to FPHC for the said portions, plus appropriate interests; and

(8) As portions of the subject lots are still unsold and their corresponding certificates
of title remain in the name of BPC, the Republic may exercise two options: (a) It may recover the
said portions and demand that BPC demolish whatever improvements it has made therein, so as to
return the said portions to their former condition, at the expense of BPC. In such a case, certificates
of title of BPC over the said portions shall be cancelled and new ones issued in the name of the
Republic; or (b) It may surrender the said portions to BPC and just compel BPC to reimburse the

558
Republic for the purchase price the Republic paid to FPHC for the said portions, plus appropriate
interest.

WHEREFORE, premises considered, the instant Petition is hereby PARTLY GRANTED.

The Decision, dated 8 August 1997, of the Court of Appeals in CA-G.R. CV No. 47522 is
hereby REVERSED and SET ASIDE and a new one is hereby entered, as follows:

(1) In view of the finding that the Transfer Certificates of Title No. 200629 and 200630 in
the name of Servando Accibal are forged and spurious, the Quezon City Register of Deeds is
ORDERED to officially and finally cancel the same from his records;

(2) In view of the finding that the respondent Republic of the Philippines was a purchaser in
good faith of the subject lots from Philippine First Holdings Corporation, but also taking into
consideration the functioning and stability of the Torrens System, as well as the superior
rights of subsequent purchasers in good faith and for value of portions of the subject lots
subdivided, developed, and sold as Parthenon Hills from petitioner Barstowe Philippines
Corporation

(a) The Quezon City Register of Deeds is ORDERED to cancel Transfer

Certificates of Title No. 275443 and 288417 in the name of respondent Republic
of the Philippines;

(b) The respondent Republic of the Philippines is ORDERED to respect and

recognize the certificates of title to the subject portions of land in the name of
purchasers of good faith and for value from petitioner Republic of the Philippines;

(c) Petitioner Barstowe Philippines Corporation is ORDERED to pay

respondent Republic of the Philippines for the purchase price the latter paid to

559
 First Philippine Holdings Corporation corresponding to the portions of the subject
lots which are already covered by certificates of title in the name of purchasers in
good faith and for value from petitioner Barstowe Philippines Corporation, plus
appropriate interest;

(d) The respondent Republic of the Philippines is ORDERED to choose one

of the options available to it as regards the portions of the subject lots which
remain unsold and covered by certificates of title in the name of petitioner
Barstowe Philippines Corporation, either (i) To recover the said portions and
demand that petitioner Barstowe Philippines Corporation demolish whatever
improvements it has made therein, so as to return the said portions to their former
condition, at the expense of the latter, or (ii) To surrender the said portions to
petitioner Barstowe Philippines Corporation and compel the latter to reimburse
the respondent Republic of the Philippines for the purchase price it had paid to
First Philippine Holdings Corporation for the said portions, plus appropriate
interest. Regardless of the option chosen by the respondent Republic of the
Philippines, it is ORDERED to reimburse petitioner Barstowe Philippines
Corporation for any necessary expenses incurred by the latter for the said
portions;

(2) In view of the finding that petitioner Barstowe Philippines Corporation is not a
purchaser and builder in good faith, and depending on the option chosen by respondent Republic
of the Philippines concerning the portions of the subject lots which remain unsold and covered by
certificates of title in the name of petitioner Barstowe Philippines Corporation, as enumerated in
paragraph 2(d) hereof

(a) In case the respondent Republic of the Philippines chooses the option
under paragraph 2(d)(i) hereof, petitioner Barstowe Philippines Corporation is
ORDERED to demolish whatever improvements it has made on the said portions,
so as to return the same to their former condition, at its own expense. The Quezon

560
 City Register of Deeds is also ORDERED to cancel the certificates of title of
petitioner Barstowe Philippines Corporation over the said portions and to issue in
lieu thereof certificates of title in the name of respondent Republic of the
Philippines;

(b) In case the respondent Republic of the Philippines chooses the option
under paragraph 2(d)(ii) hereof, petitioner Barstowe Philippines Corporation is
ORDERED to reimburse the petitioner Republic of the Philippines for the
purchase price it had paid to First Philippine Holdings Corporation for the said
portions, plus appropriate interest;

(c) Petitioner Barstowe Philippines Corporaton is ORDERED to pay

appropriate damages to respondent Republic of the Philippines as may be
determined by the trial court;

(3) In view of the finding that intervenors Winnie U. Nicolas-Agbulos and Edgardo Q.
Abesamis are purchasers in good faith and for value of portions of the subject lots subdivided,
developed, and sold as Parthenon Hills from petitioner Barstowe Philippines Corporation, it is
DECLARED that their certificates of title are valid and indefeasible as to all parties;

(4) In view of the finding that the Petition for New Trial filed by the heirs of
Servando Accibal, namely, Virgilio V. Accibal, Virginia A. Macabudbud, and Antonio V.
Accibal, lacks merit, the said Petition is DISMISSED; and

(5) The case is REMANDED to the court of origin for determination of the following

(a) The validity of the claims, and identification of the purchasers, in

good faith and for value, of portions of the subject lots from petitioner Barstowe

561
Philippines Corporation, other than intervenors Winnie U. Nicolas-Agbulos and
Edgardo Q. Abesamis, whose titles are to be declared valid and indefeasible;

(b) The identification of the portions of the subject lots in the possession
and names of purchasers in good faith and for value and those which remain with
petitioner Barstowe Philippines Corporation;

(c) The computation of the amount of the purchase price which

respondent Republic of the Philippines may recover from petitioner Barstowe
Philippines Corporation in consideration of the preceding paragraphs hereof;

(d) The types and computation of the damages recoverable by the

parties; and

(e) The computation and award of the cross-claim of EL-VI Realty and
Development Corporation against petitioner Barstowe Philippines Corporation.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

562
WE CONCUR:

(No part)
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

On leave
MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.
Associate Justice Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice

563
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons
Attestation, it is hereby certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

564
 THIRD DIVISION

HEIRS OF BALDOMERO ROXAS y G.R. No. 146208

HERMANOS, represented by
EDUARDO GONZALES,
Petitioners, Present:

PANGANIBAN, J., Chairman,

- versus - SANDOVAL-GUTIERREZ,

CORONA, and
CARPIO MORALES, JJ

HON. ALFONSO S. GARCIA, Presiding

Judge, Branch 18, RTC, Tagaytay City;
REPUBLIC PLANTERS BANK; &
SOLID BUILDERS, INC., Promulgated:

Respondents.
August 12, 2004
xx------------------------------------------------------------------------------xx

DECISION

CARPIO MORALES, J.:

Assailed via petition for review on certiorari are the Court of Appeals Resolutions924 dated
July 28, 2000 and November 6, 2000 which respectively dismissed petitioners petition for
certiorari and denied their motion for reconsideration of the dismissal.

On Leave.
924
Rollo at 166-169.

565
 Two (2) parcels of land with a total land area of 438,018 square meters, more or less,
situated in Tagaytay City925 were surveyed and approved by the Bureau of Lands on March 29,
1941 under Psu-113427 for the heirs of Baldomero Roxas y Hermanos (Roxas property).926

A parcel of land also situated in Tagaytay was surveyed under Psu-136750 for Martin
Landicho (Landicho property) and was decreed in his name on May 23, 1953927 in LRC Case No.
167, LRC (GLRO) Record No. N-72008. OCT No. 157 was accordingly issued to Landicho.928

Lot No. 2 of the Landicho property was later sold to Porfirio Beljica who was issued TCT
No. 3255.929

Beljica in turn sold Lot No. 2 of the Landicho property to the Taal Development
Corporation which was issued TCT No. 3445.930

The Taal Development Corporation later mortgaged Lot No. 2 of the Landicho property to
the Republic Planters Bank which eventually acquired it on July 7, 1965 following the foreclosure
sale thereof after the former failed to comply with its mortgage obligation. Republic Planters Bank
was then issued TCT No. T-4211.931

On April 11, 1962, Vicente Singson, Jr., husband of one of the children of the spouses
Sixto Roxas and Alejandra Luz heirs of the late Baldomero Roxas (Roxas), filed an application for

925
Id. at 46.
926
Id. at 50.
927
Amended Complaint in Civil Case No. TG-1212, par. 6, Id. at 47.
928
Amended Complaint in Civil Case No. TG-1212, par. 11, Id. at 48.
929
Rollo at 48.
930
Ibid.
931
Answer with Counterclaim of Republic Planters Bank to Amended Complaint in Civil Case No. TG-1212, par. 21,
Id. at 58, 60.

566
registration covering the Roxas property at the then Court of First Instance (CFI) of Cavite,
docketed as Case No. N-249, LRC Record No. 22973.932

By Decision of April 2, 1963, Branch 3 of the Cavite CFI adjudged in Case No. N-249,
LRC Record No. 22973 the registration of the Roxas property in favor of the heirs. By Order of
May 23, 1963, the court declared its April 2, 1963 decision final and accordingly ordered the Land
Registration Commission (LRC) to issue a decree of confirmation and registration.933

The LRC, by Report of October 15, 1963, stated, however, that the confirmation could not
be done due to overlapping claims on the area.934

From a Report dated September 5, 1983 prepared by Geodetic Engineer Basilio Cabrera,
and a later Report dated November 12, 1987 prepared by the Chief of the Surveys Division
Regional Management Bureau who was directed by the court to comment on Engineer Cabreras
report, it is gathered that Psu-136750 (covering the Landicho property) overlapped Psu N-113427
(covering the Roxas property).935

It turned out that in Case No. 167, LRC (GLRO) Record No. N-7208, the alleged
overlapping by Psu-136750 of Psu-113427 was overlooked.

Vicente Singson, Jr., in the meantime, died on April 20, 1965.936

932
Rollo at 50.
933
Amended Complaint, Id. at 44, 50-51.
934
Id at 51.
935
CA Rollo at 45-48.
936
Amended Complaint, par. 23, Id. at 44, 51.

567
 The Heirs of Roxas later filed in Case No. N-249 LRC Record No. 22973 a motion to
intervene dated August 10, 1978937 which was granted. By Order of June 29, 1988, the land
registration court, Branch 17 of the Regional Trial Court (RTC) of Cavite which took over the
cases pending before Branch 3 of the former CFI of Cavite, noting that titles to properties cannot
be collaterally attacked, directed the parties to have Plan PSU-113427 amended to exclude the
portions already titled [in the name of Landicho] without prejudice to filing the corresponding case
for annulment of titles.938

By Order939 of July 2, 1991, the land registration court, resolving two motions to reopen
the decree of registration in LRC Case No. N-249, ruled:

xxx

After evidence pro and con for the reopening of this case to determine the
merits of the report of the Land Registration Commission of October 15, 1963 which
states that there are several overlappings upon the very land subject matter of this
application and which have been adjudicated in previous land registration
proceedings in which said land had been issued corresponding certificates of title
pursuant to the provisions of Act 496 and that only a small portion remains
undecreed, counsel for the parties in open Court this morning, after hearing the
testimony of Isidro R. Cellez, Geodetic Engineer and Chief of the Technical
Standards and Surveys of the Bureau of Lands, DENR, testified that the parcels of
land subject matter of this proceedings and covered by Plan Psu-113427 is [sic]
entirely within the perimeters of the parcel of land surveyed for Martin
Landicho and Librado Catapang under Plan Psu-136750 which was
subsequently decreed and

937
Id., par. 24, Rollo at 51.
938
CA Rollo at 49-50.
939
Id. at 39-40.

568
 titled in case N-167, GLRO Rec. No. N-720[0]8 in the name of Martin Landicho
precursor of oppositor Republic Planters Bank derived its title.

Thus there is nothing more to be adjudicated in the names of the

applicants now the intervenors Heirs of Baldomero Roxas, and only recourse
now is to seek the annulment of the certificates of title issued in [LRC] case no.
167 and the reconveyance of the properties in the proper regional trial court.940

x x x (Emphasis and underscoring supplied)

By the said Order of July 2, 1991, the land registration court thus set aside its April 2, 1963
decision, recalled its order for the issuance of a decree of confirmation and registration, and
dismissed LRC Case No. N-249, without prejudice to the right of the Heirs of Roxas to file the
proper action for annulment and reconveyance [of the Roxas property] in the proper court.941

On October 4, 1991,942 herein petitioners - heirs of Roxas filed before the RTC of Cavite
in Tagaytay City a complaint against the Republic Planters Bank for the cancellation of the latters
title over the Landicho property, TCT No. 4211, to the extent of that portion which overlapped the
[Roxas] property. The complaint, now the subject of the present decision, which was docketed as
Civil Case No. TG-1212, was later amended943 to enumerate the names, addresses and civil status
of all the heirs of Roxas.

Solid Builders Inc., to which a portion of the Landicho property appeared to have been
subsequently sold by Republic Planters Bank and which was allowed to intervene, filed an Answer

940
CA Rollo at 39-40.
941
Id. at 40.
942
Rollo at 77.
943
Id. at 44-54.

569
in Intervention with Counterclaim.944 It later filed a Motion for Summary Judgment945 which was,
by Order of January 21, 1997,946 denied.

Republic Planters Bank then filed its Answer to the Amended Complaint with
Counterclaim.947

Solid Builders Inc. subsequently filed a Second Motion for Summary Judgment948 which
was, by Order of December 17, 1999, 949 granted. In the same Order, Branch 18 of the RTC of
Tagaytay dismissed herein petitioners complaint for lack of merit, it finding that the only basis of
their claim of ownership to the Roxas property, said to have been included in the Landicho title, is
Psu-113427, whereas the subsequent transfer of the Landicho property to Republic Planters Bank
and later to intervenor Solid Builders, Inc. were evidenced by documents including titles, the
existence of which documents petitioners admitted in their Complaint and Amended Complaint.950

Petitioners motion for reconsideration of the dismissal of their complaint having been
denied by Order of April 10, 2000, petitioners filed a petition for certiorari with the Court of
Appeals.951

The appellate court, by Resolution of July 28, 2000,952 dismissed petitioners petition for
certiorari on the ground that the RTC Tagaytays order dismissing their complaint is a final, not an
interlocutory order, hence, a subject of appeal and not certiorari.

944
Id. at 63-76.
945
Id. at 105-107.
946
Id. at 108-109.
947
Id. at 58-76.
948
Id. at 115-118.
949
Id. at 77-82.
950
Id. at 78-79.
951
Id. at 23-41.
952
Id. at 166-167.

570
 Petitioners motion for reconsideration of the appellate courts July 28, 2000 Resolution
having been denied by Resolution of November 6, 2000953 for lack of merit and, in any event, the
petition for certiorari was filed out of time, they lodged the petition for review on certiorari at bar,
submitting the following

xxx

REASONS FOR THE PETITION

A. Respondent Court of Appeals erred in holding that the dismissal of the

complaint by way of granting private respondents motion for summary
judgment is a proper subject of appeal, not certiorari, despite the grave abuse
of discretion committed by public respondent Presiding Judge Alfonso
Garcia of the trial court;

B. Respondent Court of Appeals also committed error of law in applying the

presumption of completeness of service after five (5) days from receipt of the
first notice, considering the actual receipt of the registered mail by the
petitioners;

C. Respondent Court of Appeals gravely abused its discretion in resorting to

strict technicality in dismissing the petition for certiorari.954 (Underscoring
supplied)

The petition fails.

It is settled that an order dismissing a complaint is a final, not an interlocutory order, hence,
a proper subject of appeal. If indeed petitioners received the December 17, 1999 Order of the trial
court dismissing their complaint on February 1, 2000 and filed on February 3, 2000 a motion for
reconsideration thereof, the Order denying which motion they received on May 26, 2000, they had

953
Id. at 168-169.
954
Id. at 15.

571
fifteen days955 or until June 8, 2000 to appeal. They, however, did not appeal and instead filed on
July 24, 2000 before the Court of Appeals the petition for certiorari.

When the remedy of appeal is available but is lost due to petitioners own negligence or
error in the choice of remedies, resort to certiorari is precluded. That is settled.

Even if, in the greater interest of substantial justice, certiorari may be availed of, it must be
shown that the trial court acted with grave abuse of discretion amounting to lack or excess of
jurisdiction, that is, that the trial court exercised its powers in an arbitrary or despotic manner by
reason of passion or personal hostilities, so patent and gross as to amount to an evasion or virtual
refusal to perform the duty enjoined or to act in contemplation of law.956 Petitioners assignment of
errors of the trial court before the appellate court, to wit:

a. PUBLIC RESPONDENT GRAVELY ERRED IN APPLYING THE RULE

ON SUMMARY JUDGMENT IN THE CASE AT BAR, THE SAME
BEING ONE FOR CANCELLATION OF TITLE OR DECLARATION OF
NULLITY OF TITLES, AND THERE BEING SERIOUS AND TRIABLE
ISSUES ON THE MERITS, JOINED AFTER PRIVATE RESPONDENTS
FILED THEIR ANSWERS TO THE AMENDED COMPLAINT;

b. PUBLIC RESPONDENT GRAVELY ABUSED HIS DISCRETION IN

APPLYING THE RULING IN ARMY AND NAVY CLUB OF MANILA,
INC. VS. COURT OF APPEALS, ET AL., G.R. NO. 110223, APRIL 8, 1997;

c. PUBLIC RESPONDENT GRAVELY ABUSED HIS DISCRETION IN

HOLDING THAT PETITIONERS ALLEGATION IN THE COMPLAINT
ABOUT TRANSFERS OF TITLES TO SUPPOSED SUBSEQUENT
PURCHASERS WARRANT DISMISSAL OF THE COMPLAINT
THROUGH SUMMARY JUDGMENT.

d. PUBLIC RESPONDENT GRAVELY ABUSED HIS DISCRETION IN

DENYING PETITIONERS MOTION FOR RECONSIDERATION, BASED

955
Rule 41, Sec. 3, 1997 RULES OF CIVIL PROCEDURE.
956
Intestate Estate of Carmen de Luna, et al. v. Intermediate Appellate Court, 170 SCRA 246, 254 (1989).

572
 ON THE OPPOSITION FILED BY THE INTERVENOR WHOSE ONLY
BASIS FOR INTERVENTION IS A DEED OF PROMISE TO SELL
WHICH HAD BEEN PREVIOUSLY DECLAREED NULL AND VOID BY
ANOTHER COURT OF COMPETENT JURISDICTION.957 (Underscoring
supplied),

shows, however, that what were being assailed were errors not of jurisdiction but of judgment.958

Whether a trial court, which has jurisdiction over the person of the parties to, and the subject
matter of the case, will grant a motion for summary judgment is within its power or authority in
law to perform. Its propriety rests on its sound exercise of discretion959 and judgment. In the event
that it errs in finding that there is no genuine issue to thus call for the rendition of a summary
judgment, the resulting decision may not be set aside either directly or indirectly by petition for
certiorari, but may only be corrected on appeal or other direct review. Parenthetically, contrary to
petitioners argument that the rule on summary judgment applies to only two kinds of action an
action to recover a debt or a liquidated demand for money, and an action for declaratory relief, the
rule is applicable to all kinds of actions. De Leon v. Faustino960 holds so.

It is contended that the procedure of summary judgment is not warranted in

the instant case since it is not an action to recover upon a claim, counterclaim, or
cross-claim. It is argued that section 1 of Rule 36 providing for the remedy of
summary judgment for the claimant contemplates action or cases which are in the
nature of money claims. The contention cannot be sustained. Summary judgment
procedure is a method for promptly disposing of actions in which there is no
genuine issue as to any material fact. Under this definition and from the provision
of section 1 of Rule 36, there would seem to be no limitation as to the type of actions
in which the remedy is available, except, of course, where the material facts alleged
in the complaint are required to be proved. As observed in the note of the Advisory
Committee of the United States Supreme Court, quoted by former Chief Justice
Moran in his comments on the Rules of Court (Vol. I, 1957 ed., p. 497)

957
Rollo at 31-32.
958
II J. FERIA AND M. S. NOCHE, CIVIL PROCEDURE ANNOTATED 456 (2001).
959
I J. FERIA AND M. S. NOCHE, CIVIL PROCEDURE ANNOTATED 606 (2001).
960
110 Phil. 249 (1960).

573
 xxx

In England it was first employed only in cases of liquidation claims,

but there has been a steady enlargement of the scope of the remedy until
it is now used in actions to recover land or chattels and in all other actions
at law, for liquidated or unliquidated claims, except for a few designated
torts and breach of promise of marriage.961 (Underscoring supplied)

The foregoing discussions leave it unnecessary to pass on the second reason proffered for
the petition, that bearing on the timeliness of the filing of the petition for certiorari before the
appellate court.

At all events, the remedy of one who has established his ownership over a property but
which property has been wrongfully or erroneously registered through fraud or mistake in anothers
name is, after the lapse of one year from the date of issuance of the questioned decree, not to set
aside the decree, it having become incontrovertible and no longer open to review, but to institute
an ordinary action in the ordinary court of justice for reconveyance.962

If the property, however, has already passed into the hands of an innocent purchaser for
value, the remedy is to file an action for damages from the person who allegedly registered the
property through fraud,963 or if he had become insolvent or if the action is barred by prescription,
to file an action for recovery against the Assurance Fund under Section 95 of P.D. No. 1529964 (the

961
Supra at 253-254.
962
Vda. de Recinto v. Inciong, 77 SCRA 196, 201 (1977).
963
Ibid.
964
P.D. No. 1529, Sec. 95. Action for compensation from funds. A person who, without negligence on his part,
sustains loss or damage, or is deprived of land or any estate or interest therein in consequence of the bringing
of the land under the operation of the Torrens system of arising after original registration of land, through fraud
or in consequence of any error, omission, mistake or misdescription in any entry or memorandum in the
registration book, and who by the provisions of this Decree is barred or otherwise precluded under the provision
of any law from bringing an action for the recovery of such land or the estate or interest therein, may bring an
action in any court of competent jurisdiction for the recovery of damages to be paid out of the Assurance Fund.

574
Property Registration Decree) within a period of six years from the time the right to bring such
action accrues.965

WHEREFORE, the petition is hereby DISMISSED for lack of merit.

SO ORDERED.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Associate Justice
Chairman

965
Section 102, P.D. 1529.

575
 (ON LEAVE)
ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA
Associate Justice Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Associate Justice
Chairman

576
 CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairmans
Attestation, it is hereby certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the Court.

HILARIO G. DAVIDE, JR.

Chief Justice

577
 EN BANC

G.R. No. L-42636 August 1, 1985

MARIA LUISA DE LEON ESCALER and ERNESTO ESCALER, CECILIA J. ROXAS

and PEDRO ROXAS, Petitioners, vs. COURT OF APPEALS, JOSE L. REYNOSO, now
deceased, to be substituted by his heirs or legal representatives and AFRICA V.
REYNOSO, Respondents.

Avancea Law Office for petitioners.chanrobles virtual law library

Bauza, Ampil, Suarez, and Paredes Law Office for respondent Africa V. Reynoso.

CUEVAS, J.:

This is a Petition for Review on certiorari of the Decision of the then Court of Appeals (now the
Intermediate Appellate Court) and of its Resolution denying petitioners' Motion for
Reconsideration, in CA G.R. No. 41953-R, which was an appeal from the judgment of the Court
of First Instance of Rizal in Civil Case No. 9014 entitled "Maria Luisa de Leon Escaler, et al vs.
Jose L. Reynoso and Africa Reynoso."chanrobles virtual law library

The following are the pertinent background facts:chanrobles virtual law library

On March 7, 1958, the spouses Africa V. Reynoso and Jose L, Reynoso sold to petitioners
several others, a parcel of land, situated in Antipolo, Rizal with an area of 239,479 square meters
and covered by TCT No. 57400 of the Register of Deeds of the Province of Rizal. The Deed of
Sale 1 contained the following covenant against eviction, to wit:

That the VENDOR is the absolute owner of a parcel of land ... the ownership thereof being
evidenced by an absolute deed of sale executed in her favor by registered owner ANGELINA C.
REYNOSO, ...;chanrobles virtual law library

That the VENDOR warrants valid title to and ownership of said parcel of land and further,
warrant to defend the property herein sold and conveyed, unto the VENDEES, their heirs, and
assignees, from any and all claims of any persons whatsoever.

On April 21, 1961, the Register of Deeds of Rizal and A. Doronilla Resources Development, Inc.
filed Case No. 4252 before the Court of First Instance of Rizal for the cancellation of OCT No.
1526 issued in the name of Angelina C. Reynoso (predecessor-in-interest of private respondents-
vendors) on February 26, 1958 under Decree No. 62373, LRC Record No. N-13783, on the
ground that the property covered by said title is already previously registered under Transfer
Certificate of Title No. 42999 issued in the name of A. Doronilla Development, Inc. Petitioners
as vendees filed their opposition to the said petition.chanroblesvirtualawlibrarychanrobles virtual
law library

On June 10, 1964, an Order 2 was issued in the said case, the dispositive portion of which reads:

578
IN VIEW OF THE ABOVE CONSIDERATIONS, this Court is constrained to set aside Decree
No. 62373 issued in LRC. Rec. No. N-13783 and the Register of Deeds of Rizal is directed to
cancel OCT No. 1526 of his office and all Transfer Certificates of Title issued subsequently
thereafter to purchaser of said property or portions thereof, the same being null and void, the
expenses for such cancellation to be charged to spouses Angelina Reynoso and Floro Reynoso.
The owner's duplicates in the possession of the transferees of the property covered by OCT No.
1526 are declared null and void and said transferees are directed to surrender to the Register of
Deeds of Rizal, said owner's duplicates for cancellation.chanroblesvirtualawlibrarychanrobles
virtual law library

The other reliefs sought for by the party oppositors are denied the same not falling within the
jurisdiction of this Court under this proceeding.chanroblesvirtualawlibrarychanrobles virtual law
library

SO ORDERED.

On August 31, 1965, herein petitioners, spouses Maria de Leon Escaler and Ernesto Escaler and
spouses Cecilia J. Roxas and Pedro Roxas, filed Civil Case No. 9014 before the Court of First
Instance of Rizal against their vendors, herein private respondents, spouses Jose L. Reynoso and
Africa Reynoso for the recovery of the value of the property sold to them plus damages on the
ground that the latter have violated the vendors' "warranty against eviction."chanrobles virtual
law library

The complaint among others, alleged that the Order issued in Case No. 4252 which cancelled the
title of Angelina C. Reynoso and all subsequent Transfer Certificates of Title derived and/or
emanating therefrom and which includes the titles of petitioners, is now final, and by reason
thereof petitioners lost their right over the property sold; and that in said Case No. 4252, the
respondents were summoned and/or given their day in court at the instance of the petitioners.
3chanrobles virtual law library

The respondents, as defendants, filed their answer alleging, among others, by way of affirmative
defenses that "the cause of action, if any, of plaintiffs against defendants have been fully
adjudicated in Case No. 4252 when plaintiffs failed to file a third-party complaint against
defendants." 4chanrobles virtual law library

On August 18, 1967, petitioners, as plaintiffs, filed a Motion for Summary Judgment, alleging
the facts already averred in the complaint, and further alleging that the defendants were
summoned and were given their day in court at the instance of plaintiffs in Case No. 4252. In
support of their said motion, the plaintiffs attached the affidavit of Atty. Alberto R. Avancea
who had represented the plaintiffs in Case No. 4252 and had filed a joint opposition in behalf of
all the vendees. The pertinent portion of that affidavit, states-

4. That he has furnished a copy of said joint opposition to Africa Reynoso, wife of Jose L.
Reynoso, at her given address at c/o Antipolo Enterprises, Antipolo, Rizal and the latter had
received the same, as evidenced by the photostatic copy of the Registry Return Receipt thereto
affixed as Annex "C-l";chanrobles virtual law library

579
xxx xxx xxxchanrobles virtual law library

6. That he hereby executed this Affidavit to prove that said defendants Africa Reynoso and Jose
L. Reynoso were given their day in Court and/or were afforded their opportunity to be heard in
Case No. 4252 aforecited.

On September 27, 1967, judgment was rendered by the trial court, the pertinent portion of which
reads-

Considering the foregoing motion for summary judgment and it appearing that the defendants
under a Deed of Absolute Sale (Annex "C") have expressly warranted their valid title and
ownership of the said parcel of land and further warranted to defend said property from any and
all claims of any persons whomever in favor of plaintiffs; that the said warranties were violated
when on June 10, 1964, an Order was promulgated by the Court of First Instance of Rizal in
Case No. 4252 (Related to LRC Case No. 1559, LRC Record No. N13293). In Re: Petition for
Cancellation of Original Registration, etc., covering the parcel of land in question; that said order
of June 10, 1964 has become final and executory there being no appeal interposed thereto and
defendants were summoned and were given a day in court at the instance of the plaintiffs in Case
No. 4252, the Court hereby grants the motion for summary judgment, and hereby orders the
defendants to jointly and severally return to the plaintiffs Maria Luisa de Leon Escaler and
Ernesto Escaler, Cecilia J. Roxas and Pedro Roxas, the value of the property sold to them at the
time of eviction which is not to be less than P5,500.00 to reimburse to each one of the plaintiffs
the expenses of contract and litigation and the amount of P2,250.00 to pay the attorney's fees of
P1,000.00 plus the costs of suit.chanroblesvirtualawlibrarychanrobles virtual law library

SO ORDERED.

Private respondents appealed the aforesaid decision to the then Court of Appeals 5 assigning as
sole error-that the lower court erred in finding that they were summoned and were given their
day in court at the instance of petitioners-plaintiffs in Case No.
4252.chanroblesvirtualawlibrarychanrobles virtual law library

In reversing the decision of the trial court and dismissing the case, the then Court of Appeals
found and so ruled that petitioners as vendees had not given private respondents-vendors, formal
notice of the eviction case as mandated by Arts. 1558 and 1559 of the New Civil
Code.chanroblesvirtualawlibrarychanrobles virtual law library

Hence, the instant recourse, petitioners contending -

1) that the Court of Appeals erred in applying strictly to the instant case the provisions of
Articles 1558 and 1559 of the new Civil Code; and chanrobles virtual law library

2) that the decision of the Court of First Instance of Rizal should have been affirmed by the
Court of Appeals or at least, the, Court of Appeals should have remanded the case to the trial
court, for hearing on the merits.

580
The petition is devoid of merit. Consequently, it must be
dismissed.chanroblesvirtualawlibrarychanrobles virtual law library

Article 1548, in relation to Articles 1558. and 1559 of the New Civil Code reads as follows:

Art. 1548, Eviction shall take place whenever by a final judgment based on a right prior to the
sale or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the
thing purchased.chanroblesvirtualawlibrary chanrobles virtual law library

The vendor shall answer for the eviction even though nothing has been said in the contract on the
subject.chanroblesvirtualawlibrarychanrobles virtual law library

The contracting parties, however, may increase, diminish, or suppress this legal obligation of the
vendor.chanroblesvirtualawlibrarychanrobles virtual law library

Art. 1558. The vendor shall not be obliged to make good the proper warranty, unless he is
summoned in the suit for eviction at the instance of the vendee. (emphasis supplied) chanrobles
virtual law library

Art. 1559. The defendant vendee shall ask, within the time fixed in the Rules of Court for
answering the complaint that the vendor be made as co-defendant.

In order that a vendor's liability for eviction may be enforced, the following requisites must
concur-a) there must be a final judgment; b) the purchaser has been deprived of the whole or part
of the thing sold; c) said deprivation was by virtue of a right prior to the sale made by the vendor;
and d) the vendor has been summoned and made co-defendant in the suit for eviction at the
instance of the vendee. 6chanrobles virtual law library

In the case at bar, the fourth requisite-that of being summoned in the suit for eviction (Case No.
4252) at the instance of the vendee-is not present. All that the petitioners did, per their very
admission, was to furnish respondents, by registered mail, with a copy of the opposition they
(petitioners filed in the eviction suit. Decidedly, this is not the kind of notice prescribed by the
aforequoted Articles 1558 and 1559 of the New Civil Code. The term "unless he is summoned in
the suit for eviction at the instance of the vendee" means that the respondents as vendor/s should
be made parties to the suit at the instance of petitioners-vendees, either by way of asking that the
former be made a co-defendant or by the filing of a third-party complaint against said vendors.
Nothing of that sort appeared to have been done by the petitioners in the instant
case.chanroblesvirtualawlibrarychanrobles virtual law library

IN VIEW OF THE FOREGOING CONSIDERATIONS, the petition is DISMISSED and the

appealed decision of the then Court of Appeals is
AFFIRMED.chanroblesvirtualawlibrarychanrobles virtual law library

No pronouncement as to costs.chanroblesvirtualawlibrarychanrobles virtual law library

SO ORDERED.

581
Concepcion, Jr., Abad Santos, Plana, Escolin, Relova, Gutierrez, Jr. and De la Fuente, JJ.,
concur.

chanrobles virtual law library

Separate Opinions

AQUINO, J., dissenting:chanrobles virtual law library

In 1958 Cecilia Roxas and Maria Luisa de Leon Escaler and ten other persons bought for
P12,000 from Africa V Reynoso, 23.9 hectares of land located at Barrio San Isidro, Antipolo,
Rizal covered by OCT No. 1526 in the name of Angelina C. Reynoso. Africa had purchased the
land from Angelina (9-12, Record on Appeal). Escaler and Roxas obtained TCT Nos. 58389 and
58393, respectively.chanroblesvirtualawlibrarychanrobles virtual law library

On April 21, 1961 the register of deeds of Rizal in Civil Case No. 4252, LRC Case No. 1559,
Rec. No. 13793, filed a petition for the cancellation of Decree No. N-62373 and OCT No. 1526
issued in the name of Angelina C. Reynoso because the 23.9 hectare land covered by said decree
and title had been previously registered in the name of A. Doronilla Resources Development,
Inc. since February 20, 1956. Angelina was furnished a copy of the petition by registered mail,
Registry Receipt No. 6883. The petition was set for hearing on May 20,
1961.chanroblesvirtualawlibrarychanrobles virtual law library

It was alleged in paragraph 5 of the petition that Angelina transferred to Africa V. Reynoso the
said land. Among the 20 persons furnished copies of the petition for cancellation were Escaler
and Roxas. Escaler and Roxas filed a joint opposition to the petition for cancellation. Their
lawyer, Alberto P. Avancea, furnished Africa Reynoso and A Angelina C. Reynoso by
registered mail with copies of said opposition sent at their common Postal address, care of
Antipolo Enterprises, Antipolo, Rizal, as shown in Registry Receipts Nos. 58558 and 58559
dated June 24, 1961 (p. 85, Record of Civil Case No.
4252).chanroblesvirtualawlibrarychanrobles virtual law library

In said joint opposition, it was alleged that Escaler and Roxas were innocent purchasers for
value, that the court, as a land registration court, had no jurisdiction over the controversy and that
should the titles of Escaler and Roxas be nullified, they are entitled to relief from the Assurance
Fund.chanroblesvirtualawlibrarychanrobles virtual law library

After hearing, which lasted for three years, Judge Muoz Palma in her order of June 10, 1964
found that the land covered by Angelina Reynoso's title, OCT No. 1526, had been previously
registered in 1907 under OCT No. 301, which was cancelled by subsequent transfer certificates
of title, the latest of which is TCT No. 42999 in the name of A. Doronilla Resources
Development, Inc.chanroblesvirtualawlibrarychanrobles virtual law library

She declared void Decree No. 62373 and Angelina Reynoso's title and those derived therefrom,
like the titles of Escaler and Roxas, in accordance with the rule that the prior registration prevails

582
over the later registration (Legarda and Prieto vs. Saleeby, 31 Phil.
590).chanroblesvirtualawlibrarychanrobles virtual law library

The titles of Angelina and Africa (maybe relatives by affinity) were void because they were
issued for lands already registered. The titles of Angelina and Africa may be regarded as a form
of land-grabbing. The purchasers were speculators in Antipolo
lots.chanroblesvirtualawlibrarychanrobles virtual law library

More than a year later, or on August 31, 1965, Escaler and Roxas in Civil Case No. 9014 sued
Africa Reynoso to enforce the warranty against eviction contained in the deed of sale executed
by Africa in 1958 in their favor. They prayed for the return to each of the plaintiffs of P5,500 as
the value of the land and P4,750 as reimbursement of "expenses of contract", attorney's fees and
litigation expenses.chanroblesvirtualawlibrarychanrobles virtual law library

Africa Reynoso in her answer alleged that Escaler and Roxas failed to file a third- party
complaint against her when the latter were sued in Civil Case No. 4252, that their action had
prescribed, that they should claim from Angelina C. Reynoso reimbursement for the expenses of
cancellation of title and that their claim is against the Assurance
Fund.chanroblesvirtualawlibrarychanrobles virtual law library

Africa Reynoso filed a third-party complaint against Angelina C. Reynoso. No summons was
issued. Escaler and Roxas filed a motion for summary
judgment.chanroblesvirtualawlibrarychanrobles virtual law library

On September 27, 1967, Judge Navarro ordered the spouses Africa Reynoso and Jose Reynoso to
return solidarity to the Escalers and the Roxases the value of the land amounting to P5,500, to
reimburse to each one of the plaintiffs the "expenses of contract" and litigation in the sum of
P2,250 and attorney's fees of P1,000 (61, Record on
Appeal).chanroblesvirtualawlibrarychanrobles virtual law library

The Reynoso spouses appealed to the Court of Appeals which reversed the trial court's decision.
The Appellate Court held that because Escaler and Roxas did not make Africa Reynoso a co-
defendant in the eviction case, as required in articles 1558 and 1559 of the Civil Code, they
could not later on enforce the warranty against Africa. Escaler and Roxas appealed to this
Court.chanroblesvirtualawlibrarychanrobles virtual law library

In my opinion, it was not possible for Escaler and Roxas to comply strictly with articles 1558
and 1559. The eviction took place, not in an ordinary suit wherein the vendor can be made a co-
defendant, but as an incident in the cancellation of title in a land registration
proceeding.chanroblesvirtualawlibrarychanrobles virtual law library

In such a case, the furnishing of the vendor with a copy of the opposition was a substantial
compliance with articles 1558 and 1559. It was a notice to the vendor. Africa's vendor, Angelina,
was first notified of the cancellation proceeding.chanroblesvirtualawlibrarychanrobles virtual
law library

583
At least, Escaler and Roxas complied with article 1481 of the old Civil Code which requires
notice to the vendor. It was not the fault of the petitioners that the eviction case assumed the
shape of a mere incident in the land registration proceeding and not that of an ordinary
contentious civil action. Africa Reynoso could not be made a co- defendant in that incident for
cancellation of title, a summary proceeding.chanroblesvirtualawlibrarychanrobles virtual law
library

A contrary view would enable Africa Reynoso to enrich herself unjustly at the expense of the
petitioners.

Makasiar, C.J., Teehankee, Melencio-Herrera, Alampay, JJ., concur.

Separate Opinions

AQUINO, J., dissenting:

In 1958 Cecilia Roxas and Maria Luisa de Leon Escaler and ten other persons bought for
P12,000 from Africa V Reynoso, 23.9 hectares of land located at Barrio San Isidro, Antipolo,
Rizal covered by OCT No. 1526 in the name of Angelina C. Reynoso. Africa had purchased the
land from Angelina (9-12, Record on Appeal). Escaler and Roxas obtained TCT Nos. 58389 and
58393, respectively.chanrobles virtual law library

On April 21, 1961 the register of deeds of Rizal in Civil Case No. 4252, LRC Case No. 1559,
Rec. No. 13793, filed a petition for the cancellation of Decree No. N-62373 and OCT No. 1526
issued in the name of Angelina C. Reynoso because the 23.9 hectare land covered by said decree
and title had been previously registered in the name of A. Doronilla Resources Development,
Inc. since February 20, 1956. Angelina was furnished a copy of the petition by registered mail,
Registry Receipt No. 6883. The petition was set for hearing on May 20, 1961.chanrobles virtual
law library

It was alleged in paragraph 5 of the petition that Angelina transferred to Africa V. Reynoso the
said land. Among the 20 persons furnished copies of the petition for cancellation were Escaler
and Roxas. Escaler and Roxas filed a joint opposition to the petition for cancellation. Their
lawyer, Alberto P. Avancea, furnished Africa Reynoso and A Angelina C. Reynoso by
registered mail with copies of said opposition sent at their common Postal address, care of
Antipolo Enterprises, Antipolo, Rizal, as shown in Registry Receipts Nos. 58558 and 58559
dated June 24, 1961 (p. 85, Record of Civil Case No. 4252).chanrobles virtual law library

In said joint opposition, it was alleged that Escaler and Roxas were innocent purchasers for
value, that the court, as a land registration court, had no jurisdiction over the controversy and that
should the titles of Escaler and Roxas be nullified, they are entitled to relief from the Assurance
Fund.chanrobles virtual law library

After hearing, which lasted for three years, Judge Muoz Palma in her order of June 10, 1964
found that the land covered by Angelina Reynoso's title, OCT No. 1526, had been previously
registered in 1907 under OCT No. 301, which was cancelled by subsequent transfer certificates

584
of title, the latest of which is TCT No. 42999 in the name of A. Doronilla Resources
Development, Inc.chanrobles virtual law library

She declared void Decree No. 62373 and Angelina Reynoso's title and those derived therefrom,
like the titles of Escaler and Roxas, in accordance with the rule that the prior registration prevails
over the later registration (Legarda and Prieto vs. Saleeby, 31 Phil. 590).chanrobles virtual law
library

The titles of Angelina and Africa (maybe relatives by affinity) were void because they were
issued for lands already registered. The titles of Angelina and Africa may be regarded as a form
of land-grabbing. The purchasers were speculators in Antipolo lots.chanrobles virtual law library

More than a year later, or on August 31, 1965, Escaler and Roxas in Civil Case No. 9014 sued
Africa Reynoso to enforce the warranty against eviction contained in the deed of sale executed
by Africa in 1958 in their favor. They prayed for the return to each of the plaintiffs of P5,500 as
the value of the land and P4,750 as reimbursement of "expenses of contract", attorney's fees and
litigation expenses.chanrobles virtual law library

Africa Reynoso in her answer alleged that Escaler and Roxas failed to file a third- party
complaint against her when the latter were sued in Civil Case No. 4252, that their action had
prescribed, that they should claim from Angelina C. Reynoso reimbursement for the expenses of
cancellation of title and that their claim is against the Assurance Fund.chanrobles virtual law
library

Africa Reynoso filed a third-party complaint against Angelina C. Reynoso. No summons was
issued. Escaler and Roxas filed a motion for summary judgment.chanrobles virtual law library

On September 27, 1967, Judge Navarro ordered the spouses Africa Reynoso and Jose Reynoso to
return solidarity to the Escalers and the Roxases the value of the land amounting to P5,500, to
reimburse to each one of the plaintiffs the "expenses of contract" and litigation in the sum of
P2,250 and attorney's fees of P1,000 (61, Record on Appeal).chanrobles virtual law library

The Reynoso spouses appealed to the Court of Appeals which reversed the trial court's decision.
The Appellate Court held that because Escaler and Rxas did not make Africa Reynoso a co-
defendant in the eviction case, as required in articles 1558 and 1559 of the Civil Code, they
could not later on enforce the warranty against Africa. Escaler and Roxas appealed to this
Court.chanrobles virtual law library

In my opinion, it was not possible for Escaler and Roxas to comply strictly with articles 1558
and 1559. The eviction took place, not in an ordinary suit wherein the vendor can be made a co-
defendant, but as an incident in the cancellation of title in a land registration
proceeding.chanrobles virtual law library

In such a case, the furnishing of the vendor with a copy of the opposition was a substantial
compliance with articles 1558 and 1559. It was a notice to the vendor. Africa's vendor, Angelina,
was first notified of the cancellation proceeding.chanrobles virtual law library

585
At least, Escaler and Roxas complied with article 1481 of the old Civil Code which requires
notice to the vendor. It was not the fault of the petitioners that the eviction case assumed the
shape of a mere incident in the land registration proceeding and not that of an ordinary
contentious civil action. Africa Reynoso could not be made a co- defendant in that incident for
cancellation of title, a summary proceeding.chanrobles virtual law library

A contrary view would enable Africa Reynoso to enrich herself unjustly at the expense of the
petitioners.

Makasiar, C.J., Teehankee, Melencio-Herrera, Alampay, JJ., concur.

Endnotes:

1 Annex "A", pp. 7- 12, Record on Appeal, Page 29, Rollo.chanrobles virtual law library

2 pp. 13-21 Record on Appeal, p. 29 Rollo.chanrobles virtual law library

3 pp. 1-7, Record on Appeal, p. 29, Rollo.chanrobles virtual law library

4 pp. 25-26, Record on Appeal, p. 29, Rollo.chanrobles virtual law library

5 CA-G.R. No. 41953.chanrobles virtual law library

6 Bautista et al vs. Laserna, et al, 72 Phil. 506; Jovellano, et al vs. Lualhati, 47 Phil. 371;
Canizares Tiana vs. Torrejos, 21 Phil. 127.

586
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 176791 November 14, 2012

COMMUNITIES CAGAYAN, INC., Petitioner,

vs.
SPOUSES ARSENIO (Deceased) and ANGELES NANOL AND ANYBODY CLAIMING RIGHTS UNDER THEM,
Respondents.

DECISION

DEL CASTILLO, J.:

LAWS fill the gap in a contract.

This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the December 29. 2006 Decision2 and
the February 12, 2007 Order3 of the Regional Trial Court (RTC), Cagayan De Oro City, Branch 18, in Civil Case No. 2005-
158.

Factual Antecedents

Sometimes in 1994, respondent-spouses Arsenio and Angeles Nanol entered into a Contract to Sell4 with petitioner
Communities Cagayan, Inc.,5 whereby the latter agreed to sell to respondent-spouses a house and Lots 17 and 196 located at
Block 16, Camella Homes Subdivision, Cagayan de Oro City, 7 for the price of P368,000.00.8 Respondent-spouses,
however, did not avail of petitioners inhouse financing due to its high interest rates.9 Instead, they obtained a loan from
Capitol Development Bank, a sister company of petitioner, using the property as collateral.10 To facilitate the loan, a
simulated sale over the property was executed by petitioner in favor of respondent-spouses.11 Accordingly, titles were
transferred in the names of respondent-spouses under Transfer Certificates of Title (TCT) Nos. 105202 and 105203, and
submitted to Capitol Development Bank for loan processing.12 Unfortunately, the bank collapsed and closed before it could
release the loan.13

Thus, on November 30, 1997, respondent-spouses entered into another Contract to Sell14 with petitioner over the same
property for the same price of P368,000.00.15 This time, respondent-spouses availed of petitioners in-house financing16thus,
undertaking to pay the loan over four years, from 1997 to 2001.17

Sometime in 2000, respondent Arsenio demolished the original house and constructed a three-story house allegedly valued
at P3.5 million, more or less.18

In July 2001, respondent Arsenio died, leaving his wife, herein respondent Angeles, to pay for the monthly amortizations.19

587
On September 10, 2003, petitioner sent respondent-spouses a notarizedNotice of Delinquency and Cancellation of Contract
to Sell20 due to the latters failure to pay the monthly amortizations.

In December 2003, petitioner filed before Branch 3 of the Municipal Trial Court in Cities of Cagayan de Oro City, an action
for unlawful detainer, docketed as C3-Dec-2160, against respondent-spouses.21 When the case was referred for mediation,
respondent Angeles offered to pay P220,000.00 to settle the case but petitioner refused to accept the payment.22 The case
was later withdrawn and consequently dismissed because the judge found out that the titles were already registered under the
names of respondent-spouses.23

Unfazed by the unfortunate turn of events, petitioner, on July 27, 2005, filed before Branch 18 of the RTC, Cagayan de Oro
City, a Complaint for Cancellation of Title, Recovery of Possession, Reconveyance and Damages,24 docketed as Civil Case
No. 2005-158, against respondent-spouses and all persons claiming rights under them. Petitioner alleged that the transfer of
the titles in the names of respondent-spouses was made only in compliance with the requirements of Capitol Development
Bank and that respondent-spouses failed to pay their monthly amortizations beginning January 2000.25 Thus, petitioner
prayed that TCT Nos. T-105202 and T-105203 be cancelled, and that respondent Angeles be ordered to vacate the subject
property and to pay petitioner reasonable monthly rentals from January 2000 plus damages.26

In her Answer,27 respondent Angeles averred that the Deed of Absolute Sale is valid, and that petitioner is not the proper
party to file the complaint because petitioner is different from Masterplan Properties, Inc.28 She also prayed for damages by
way of compulsory counterclaim.29

In its Reply,30 petitioner attached a copy of its Certificate of Filing of Amended Articles of Incorporation31 showing that
Masterplan Properties, Inc. and petitioner are one and the same. As to the compulsory counterclaim for damages, petitioner
denied the same on the ground of "lack of knowledge sufficient to form a belief as to the truth or falsity of such
allegation."32

Respondent Angeles then moved for summary judgment and prayed that petitioner be ordered to return the owners
duplicate copies of the TCTs.33

Pursuant to Administrative Order No. 59-2005, the case was referred for mediation.34 But since the parties failed to arrive at
an amicable settlement, the case was set for preliminary conference on February 23, 2006.35

On July 7, 2006, the parties agreed to submit the case for decision based on the pleadings and exhibits presented during the
preliminary conference.36

Ruling of the Regional Trial Court

On December 29, 2006, the RTC rendered judgment declaring the Deed of Absolute Sale invalid for lack of consideration.37
Thus, it disposed of the case in this wise:

WHEREFORE, the Court hereby declares the Deed of Absolute Sale VOID. Accordingly, Transfer Certificates of Title
Nos. 105202 and 105203 in the names of the [respondents], Arsenio (deceased) and Angeles Nanol, are ordered
CANCELLED. The [respondents] and any person claiming rights under them are directed to turn-over the possession of the
house and lot to [petitioner], Communities Cagayan, Inc., subject to the latters payment of their total monthly installments
and the value of the new house minus the cost of the original house.

588
SO ORDERED.38

Not satisfied, petitioner moved for reconsideration of the Decision but the Motion39 was denied in an Order40 dated February
12, 2007.

Issue

Instead of appealing the Decision to the Court of Appeals (CA), petitioner opted to file the instant petition directly with this
Court on a pure question of law, to wit:

WHETHER X X X THE ACTION OF THE RTC BRANCH 18 X X X IN ORDERING THE RECOVERY OF

POSSESSION BY PETITIONER subject to the latters payment of their total monthly installments and the value of the
new house minus the cost of the original house IS CONTRARY TO LAW AND JURISPRUDENCE X X X.41

Petitioners Arguments

Petitioner seeks to delete from the dispositive portion the order requiring petitioner to reimburse respondent-spouses the
total monthly installments they had paid and the value of the new house minus the cost of the original house.42 Petitioner
claims that there is no legal basis for the RTC to require petitioner to reimburse the cost of the new house because
respondent-spouses were in bad faith when they renovated and improved the house, which was not yet their own.43
Petitioner further contends that instead of ordering mutual restitution by the parties, the RTC should have applied Republic
Act No. 6552, otherwise known as the Maceda Law,44 and that instead of awarding respondent-spouses a refund of

all their monthly amortization payments, the RTC should have ordered them to pay petitioner monthly rentals.45

Respondent Angeles Arguments

Instead of answering the legal issue raised by petitioner, respondent Angeles asks for a review of the Decision of the RTC
by interposing additional issues.46 She maintains that the Deed of Absolute Sale is valid.47 Thus, the RTC erred in cancelling
TCT Nos. 105202 and 105203.

Our Ruling

The petition is partly meritorious.

At the outset, we must make it clear that the issues raised by respondent Angeles may not be entertained. For failing to file
an appeal, she is bound by the Decision of the RTC. Well entrenched is the rule that "a party who does not appeal from a
judgment can no longer seek modification or reversal of the same. He may oppose the appeal of the other party only on
grounds consistent with the judgment."48 For this reason, respondent Angeles may no longer question the propriety and
correctness of the annulment of the Deed of Absolute Sale, the cancellation of TCT Nos. 105202 and 105203, and the order
to vacate the property.

Hence, the only issue that must be resolved in this case is whether the RTC erred in ordering petitioner to reimburse
respondent-spouses the "total monthly installments and the value of the new house minus the cost of the original house."49
Otherwise stated, the issues for our resolution are:

589
 1) Whether petitioner is obliged to refund to respondent-spouses all the monthly installments paid; and

2) Whether petitioner is obliged to reimburse respondent-spouses the value of the new house minus the cost of the
original house.

Respondent-spouses are entitled to the

cash surrender value of the payments
on the property equivalent to 50% of the
total payments made.

Considering that this case stemmed from a Contract to Sell executed by the petitioner and the respondent-spouses, we agree
with petitioner that the Maceda Law, which governs sales of real estate on installment, should be applied.

Sections 3, 4, and 5 of the Maceda Law provide for the rights of a defaulting buyer, to wit:

Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including
residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic
Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine,
where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in
the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which
is hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided,
That this right shall be exercised by the buyer only once in every five years of the life of the contract and its
extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on
the property equivalent to fifty percent of the total payments made, and, after five years of installments, an
additional five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the
actual cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender
value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total number of installment
payments made. (Emphasis supplied.)

Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not
less than sixty days from the date the installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after
thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial
act.

590
Section 5. Under Sections 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to
reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The
deed of sale or assignment shall be done by notarial act.

In this connection, we deem it necessary to point out that, under the Maceda Law, the actual cancellation of a contract to sell
takes place after 30 days from receipt by the buyer of the notarized notice of cancellation,50 and upon full payment of the
cash surrender value to the buyer.51 In other words, before a contract to sell can be validly and effectively cancelled, the
seller has (1) to send a notarized notice of cancellation to the buyer and (2) to refund the cash surrender value.52 Until and
unless the seller complies with these twin mandatory requirements, the contract to sell between the parties remains valid and
subsisting.53 Thus, the buyer has the right to continue occupying the property subject of the contract to sell,54 and may "still
reinstate the contract by updating the account during the grace period and before the actual cancellation"55 of the contract.

In this case, petitioner complied only with the first condition by sending a notarized notice of cancellation to the respondent-
spouses. It failed, however, to refund the cash surrender value to the respondent-spouses. Thus, the Contract to Sell remains
valid and subsisting and supposedly, respondent-spouses have the right to continue occupying the subject property.
Unfortunately, we cannot reverse the Decision of the RTC directing respondent-spouses to vacate and turnover possession
of the subject property to petitioner because respondent-spouses never appealed the order. The RTC Decision as to
respondent-spouses is therefore considered final.

In addition, in view of respondent-spouses failure to appeal, they can no longer reinstate the contract by updating the
account. Allowing them to do so would be unfair to the other party and is offensive to the rules of fair play, justice, and due
process. Thus, based on the factual milieu of the instant case, the most that we can do is to order the return of the cash
surrender value. Since respondent-spouses paid at least two years of installment,56 they are entitled to receive the cash
surrender value of the payments they had made which, under Section 3(b) of the Maceda Law, is equivalent to 50% of the
total payments made.

Respondent-spouses are entitled to

reimbursement of the improvements
made on the property.

Petitioner posits that Article 448 of the Civil Code does not apply and that respondent-spouses are not entitled to
reimbursement of the value of the improvements made on the property because they were builders in bad faith. At the outset,
we emphasize that the issue of whether respondent-spouses are builders in good faith or bad faith is a factual question,
which is beyond the scope of a petition filed under Rule 45 of the Rules of Court.57 In fact, petitioner is deemed to have
waived all factual issues since it appealed the case directly to this Court,58 instead of elevating the matter to the CA. It has
likewise not escaped our attention that after their failed preliminary conference, the parties agreed to submit the case for
resolution based on the pleadings and exhibits presented. No trial was conducted. Thus, it is too late for petitioner to raise at
this stage of the proceedings the factual issue of whether respondent-spouses are ilders in bad faith. Hence, in view of the
special circumstances obtaining in this case, we are constrained to rely on the presumption of good faith on the part of the
respondent-spouses which the petitioner failed to rebut. Thus, respondent-spouses being presumed builders in good faith, we
now rule on the applicability of Article 448 of the Civil Code.

As a general rule, Article 448 on builders in good faith does not apply where there is a contractual relation between the
parties,59 such as in the instant case. We went over the records of this case and we note that the parties failed to attach a copy
of the Contract to Sell. As such, we are constrained to apply Article 448 of the Civil Code, which provides viz:

591
ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548,
or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the
terms thereof.

Article 448 of the Civil Code applies when the builder believes that he is the owner of the land or that by some title he has
the right to build thereon,60 or that, at least, he has a claim of title thereto.61 Concededly, this is not present in the instant
case. The subject property is covered by a Contract to Sell hence ownership still remains with petitioner being the seller.
Nevertheless, there were already instances where this Court applied Article 448 even if the builders do not have a claim of
title over the property. Thus:

This Court has ruled that this provision covers only cases in which the builders, sowers or planters believe themselves to be
owners of the land or, at least, to have a claim of title thereto. It does not apply when the interest is merely that of a holder,
such as a mere tenant, agent or usufructuary. From these pronouncements, good faith is identified by the belief that the land
is owned; or that by some title one has the right to build, plant, or sow thereon.

However, in some special cases, this Court has used Article 448 by recognizing good faith beyond this limited definition.
Thus, in Del Campo v. Abesia, this provision was applied to one whose house despite having been built at the time he was
still co-owner overlapped with the land of another. This article was also applied to cases wherein a builder had constructed
improvements with the consent of the owner. The Court ruled that the law deemed the builder to be in good faith. In
Sarmiento v. Agana, the builders were found to be in good faith despite their reliance on the consent of another, whom they
had mistakenly believed to be the owner of the land.62

The Court likewise applied Article 448 in Spouses Macasaet v. Spouses Macasaet63 notwithstanding the fact that the
builders therein knew they were not the owners of the land. In said case, the parents who owned the land allowed their son
and his wife to build their residence and business thereon. As found by this Court, their occupation was not by mere
tolerance but "upon the invitation of and with the complete approval of (their parents), who desired that their children would
occupy the premises. It arose from familial love and a desire for family solidarity x x x."64 Soon after, conflict between the
parties arose. The parents demanded their son and his wife to vacate the premises. The Court thus ruled that as owners of the
property, the parents have the right to possession over it. However, they must reimburse their son and his wife for the
improvements they had introduced on the property because they were considered builders in good faith even if they knew
for a fact that they did not own the property, thus:

Based on the aforecited special cases, Article 448 applies to the present factual milieu. The established facts of this case
show that respondents fully consented to the improvements introduced by petitioners. In fact, because the children occupied
the lots upon their invitation, the parents certainly knew and approved of the construction of the improvements introduced
thereon. Thus, petitioners may be deemed to have been in good faith when they built the structures on those lots.

The instant case is factually similar to Javier v. Javier. In that case, this Court deemed the son to be in good faith for
building the improvement (the house) with the knowledge and consent of his father, to whom belonged the land upon which
it was built. Thus, Article 448 was applied.65

592
In fine, the Court applied Article 448 by construing good faith beyond its limited definition. We find no reason not to apply
the Courts ruling in Spouses Macasaet v. Spouses Macasaet in this case. We thus hold that Article 448 is also applicable to
the instant case. First, good faith is presumed on the part of the respondent-spouses. Second, petitioner failed to rebut this
presumption. Third, no evidence was presented to show that petitioner opposed or objected to the improvements introduced
by the respondent-spouses. Consequently, we can validly presume that petitioner consented to the improvements being
constructed. This presumption is bolstered by the fact that as the subdivision developer, petitioner must have given the
respondent-spouses permits to commence and undertake the construction. Under Article 453 of the Civil Code, "it is
understood that there is bad faith on the part of the landowner whenever the act was done with his knowledge and without
opposition on his part."

In view of the foregoing, we find no error on the part of the RTC in requiring petitioner to pay respondent-spouses the value
of the new house minus the cost of the old house based on Article 448 of the Civil Code, subject to succeeding discussions.

Petitioner has two options under Article

448 and pursuant to the ruling in
Tuatis v. Escol.66

In Tuatis, we ruled that the seller (the owner of the land) has two options under Article 448: (1) he may appropriate the
improvements for himself after reimbursing the buyer (the builder in good faith) the necessary and useful expenses under
Articles 54667 and 54868 of the Civil Code; or (2) he may sell the land to the buyer, unless its value is considerably more
than that of the improvements, in which case, the buyer shall pay reasonable rent.69 Quoted below are the pertinent portions
of our ruling in that case:

Taking into consideration the provisions of the Deed of Sale by Installment and Article 448 of the Civil Code, Visminda has
the following options:

Under the first option, Visminda may appropriate for herself the building on the subject property after indemnifying
Tuatis for the necessary and useful expenses the latter incurred for said building, as provided in Article 546 of the
Civil Code.

It is worthy to mention that in Pecson v. Court of Appeals, the Court pronounced that the amount to be refunded to the
builder under Article 546 of the Civil Code should be the current market value of the improvement, thus:

xxxx

Until Visminda appropriately indemnifies Tuatis for the building constructed by the latter, Tuatis may retain possession of
the building and the subject property.

Under the second option, Visminda may choose not to appropriate the building and, instead, oblige Tuatis to pay the
present or current fair value of the land. The P10,000.00 price of the subject property, as stated in the Deed of Sale on
Installment executed in November 1989, shall no longer apply, since Visminda will be obliging Tuatis to pay for the price of
the land in the exercise of Vismindas rights under Article 448 of the Civil Code, and not under the said Deed. Tuatis
obligation will then be statutory, and not contractual, arising only when Visminda has chosen her option under Article 448
of the Civil Code.

593
Still under the second option, if the present or current value of the land, the subject property herein, turns out to be
considerably more than that of the building built thereon, Tuatis cannot be obliged to pay for the subject property,
but she must pay Visminda reasonable rent for the same. Visminda and Tuatis must agree on the terms of the lease;
otherwise, the court will fix the terms.

Necessarily, the RTC should conduct additional proceedings before ordering the execution of the judgment in Civil Case
No. S-618. Initially, the RTC should determine which of the aforementioned options Visminda will choose. Subsequently,
the RTC should ascertain: (a) under the first option, the amount of indemnification Visminda must pay Tuatis; or (b) under
the second option, the value of the subject property vis--vis that of the building, and depending thereon, the price of, or the
reasonable rent for, the subject property, which Tuatis must pay Visminda.

The Court highlights that the options under Article 448 are available to Visminda, as the owner of the subject property.
There is no basis for Tuatis demand that, since the value of the building she constructed is considerably higher than the
subject property, she may choose between buying the subject property from Visminda and selling the building to Visminda
for P502,073.00. Again, the choice of options is for Visminda, not Tuatis, to make. And, depending on Vismindas choice,
Tuatis rights as a builder under Article 448 are limited to the following: (a) under the first option, a right to retain the
building and subject property until Visminda pays proper indemnity; and (b) under the second option, a right not to be
obliged to pay for the price of the subject property, if it is considerably higher than the value of the building, in which case,
she can only be obliged to pay reasonable rent for the same.

The rule that the choice under Article 448 of the Civil Code belongs to the owner of the land is in accord with the principle
of accession, i.e., that the accessory follows the principal and not the other way around. Even as the option lies with the
landowner, the grant to him, nevertheless, is preclusive. The landowner cannot refuse to exercise either option and compel
instead the owner of the building to remove it from the land.

The raison detre for this provision has been enunciated thus: Where the builder, planter or sower has acted in good faith, a
conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without
causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law
has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the
proper indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to
exercise either option. It is the owner of the land who is authorized to exercise the option, because his right is older, and
because, by the principle of accession, he is entitled to the ownership of the accessory thing.

Vismindas Motion for Issuance of Writ of Execution cannot be deemed as an expression of her choice to recover
possession of the subject property under the first option, since the options under Article 448 of the Civil Code and their
respective consequences were also not clearly presented to her by the 19 April 1999 Decision of the RTC. She must then be
given the opportunity to make a choice between the options available to her after being duly informed herein of her rights
and obligations under both.70 (Emphasis supplied.)

In conformity with the foregoing pronouncement, we hold that petitioner, as landowner, has two options. It may appropriate
the new house by reimbursing respondent Angeles the current market value thereof minus the cost of the old house. Under
this option, respondent Angeles would have "a right of retention which negates the obligation to pay rent."71 In the
alternative, petitioner may sell the lots to respondent Angeles at a price equivalent to the current fair value thereof. However,
if the value of the lots is considerably more than the value of the improvement, respondent Angeles cannot be compelled to
purchase the lots. She can only be obliged to pay petitioner reasonable rent.

594
In view of the foregoing disquisition and in accordance with Depra v. Dumlao72 and Technogas Philippines Manufacturing
Corporation v. Court of Appeals,73 we find it necessary to remand this case to the court of origin for the purpose of
determining matters necessary for the proper application of Article 448, in relation to Articles 546 and 548 of the Civil
Code.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The assailed Decision dated December 29, 2006 and the
Order dated February 12, 2007 of the Regional Trial Court, Cagayan de Oro City, Branch 18, in Civil Case No. 2005-158
are hereby AFFIRMED with MODIFICATION that petitioner Communities Cagayan, Inc. is hereby ordered to RETURN
the cash surrender value of the payments made by respondent-spouses on the properties, which is equivalent to 50% of the
total payments made, in ccordance with Section 3(b) of Republic Act No. 6552, otherwise known as the Maceda Law.

The case is hereby REMANDED to the Regional Trial Court, Cagayan de Oro City, Branch 18, for further proceedings
consistent with the proper application of Articles 448, 546 and 548 of the Civil Code, as follows:

1. The trial court shall determine:

a) the present or current fair value of the lots;

b) the current market value of the new house;

c) the cost of the old house; and

d) whether the value of the lots is considerably more than the current market value of the new house minus the cost
of the old house.

2. After said amounts shall have been determined by competent evidence, the trial court shall render judgment as follows:

a) Petitioner shall be granted a period of 15 days within which to exercise its option under the law (Article 448, Civil
Code), whether to appropriate the new house by paying to respondent Angeles the current market value of the new
house minus the cost of the old house, or to oblige respondent Angeles to pay the price of the lots. The amounts to be
respectively paid by the parties, in accordance with the option thus exercised by written notice to the other party and
to the court, shall be paid by the obligor within 15 days from such notice of the option by tendering the amount to the
trial court in favor of the party entitled to receive it.

b) If petitioner exercises the option to oblige respondent Angeles to pay the price of the lots but the latter rejects such
purchase because, as found by the trial court, the value of the lots is considerably more than the value of the new
house minus the cost of the old house, respondent Angeles shall give written notice of such rejection to petitioner
and to the trial court within 15 days from notice of petitioners option to sell the land. In that event, the parties shall
be given a period of 15 days from such notice of rejection within which to agree upon the terms of the lease, and give
the trial court formal written notice of the agreement and its provisos. If no agreement is reached by the parties, the
trial court, within 15 days from and after the termination of the said period fixed for negotiation, shall then fix the
period and terms of the lease, including the monthly rental, which shall be payable within the first five days of each
calendar month. Respondent Angeles shall not make any further constructions or improvements on the building.
Upon expiration of the period, or upon default by respondent Angeles in the payment of rentals for two consecutive

595
 months, petitioner shall be entitled to terminate the forced lease, to recover its land, and to have the new house
removed by respondent Angeles or at the latters expense.

c) In any event, respondent Angeles shall pay petitioner reasonable compensation for the occupancy of the property
for the period counted from the time the Decision dated December 29, 2006 became final as to respondent Angeles
or 15 days after she received a copy of the said Decision up to the date petitioner serves notice of its option to
appropriate the encroaching structures, otherwise up to the actual transfer of ownership to respondent Angeles or, in
case a forced lease has to be imposed, up to the commencement date of the forced lease referred to in the preceding
paragraph.1wphi1

d) The periods to be fixed by the trial court in its decision shall be nonextendible, and upon failure of the party
obliged to tender to the trial court the amount due to the obligee, the party entitled to such payment shall be entitled
to an order of execution for the enforcement of payment of the amount due and for compliance with such other acts
as may be required by the prestation due the obligee.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

ARTURO D. BRION JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.

596
MARIA LOURDES P. A. SERENO
Chief justice

Footnotes
1
Rollo, pp 17-29.
2
Id at 30-35, penned by Presiding Judge Edgardo T. Lloren.
3
Id at 38.
4
Only the first page of the Contract to Sell was attached; id at 176.
5
Formerly Masterplan Properties Inc.; id at 31.
6
Covered by Transfer Certificate of Title Nos. T-74974 and T-74949; id at 180 and 182.
7
Id. at 31.
8
Id. at 142-143.
9
Id. at 50.
10
Id. at 31.
11
Id. at 31-32.
12
Id.
13
Id. at 32.
14
Both petitioner and respondent-spouses failed to attach a copy of the Contract to Sell in the pleadings they filed
before the RTC and the Supreme Court.
15
Rollo, p. 32 and Records, p. 186.
16
Rollo, p. 51.
17
Records, p. 186.
18
Rollo, p. 145.
19
Id. at 133.

597
20
Records, p. 201.
21
Rollo, p. 133.
22
Id. at 193-194.
23
Id. at 134.
24
Id. at 49-56.
25
Id. at 50-51.
26
Id. at 55.
27
Id. at 190-205.
28
Id. at 196-197.
29
Id. at 202-203.
30
Records, pp. 57-59.
31
Id. at 60.
32
Id. at 58.
33
Id. at 76-84.
34
Id. at 89.
35
Id. at 92.
36
Id. at 160.
37
Rollo, p. 34.
38
Id. at 35.
39
Id. at 36-37.
40
Id. at 38.
41
Id. at 136.
42
Id. at 130.

598
43
Id. at 137.
44
Id. at 24-25.
45
Id. at 136.
46
Id. at 152.
47
Id. at 156.
48
Raquel-Santos v. Court of Appeals, G.R. Nos. 174986, 175071 & 181415, July 7, 2009, 592 SCRA 169, 190-191.
49
Rollo, p. 35.
50
An action for annulment of contract is a kindred concept of rescission by notarial act (Pagtalunan v. Dela Cruz
Vda. de Manzano, G.R. No. 147695, September 13, 2007, 533 SCRA 242, 254).
51
Id. at 253.
52
Active Realty & Development Corp. v. Daroya, 431 Phil. 753, 761-762 (2002).
53
Id. at 763.
54
Pagtalunan v. DelaCruz Vda. de Manzano, supra at 254-255.
55
Leao v. Court of Appeals, 420 Phil. 836, 847 (2001).
56
Records, p. 202.
57
Fuentes v. Court of Appeals, 335 Phil. 1163, 1169 (1997).
58
Aballe v. Santiago, 117 Phil. 936, 938-939 (1963).
59
Arturo M. Tolentino, CIVIL CODE OF THE PHILIPPINES, Vol II, 116 (1998).
60
Rosales v. Castelltort, 509 Phil. 137, 147 (2005).
61
Briones v. Macabagdal, G.R. No. 150666, August 3, 2010, 626 SCRA 300, 307.
62
Spouses Macasaet v. Spouses Macasaet, 482 Phil. 853, 871-872 (2004).
63
Id.
64
Id. at 865.

599
65
Id. at 873.
66
G.R. No. 175399, October 27, 2009, 604 SCRA 471.
67
ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may
retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in
good faith with the same right of retention, the person who has defeated him in the possession having the option of
refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason
thereof.
68
ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he
may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if
his successor in the possession does not prefer to refund the amount expended.
69
Tuatis v. Escol, supra at 488.
70
Id. at 492-495.
71
Technogas Philippines Manufacturing Corp. v. Court of Appeals, 335 Phil. 471, 487 (1997).
72
221 Phil. 168 (1985).
73
Supra.

600
 THIRD DIVISION

AMANDO S. SAN JUAN, CARMEN V. G.R. No. 143217

PINEDA, NISSAN COMMONWEALTH,
INC., METROPOLITAN BANK AND
TRUST COMPANY, INC. and THE
REGISTER OF DEEDS OF QUEZON Present:
CITY,
Petitioners,
PANGANIBAN, J., Chairman,
SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES, and
- versus -
GARCIA, JJ.

Promulgated:

MIGUEL L. ARAMBULO, SR.,

Respondent.
December 14, 2005

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

DECISION

SANDOVAL-GUTIERREZ, J.:

601
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the Decision[1] dated November 29, 1999 and Resolution[2] dated April 24,

2000 rendered by the Court of Appeals in CA-G.R. CV No. 56481, entitled Miguel L. Arambulo,
Sr. vs. Amando S. San Juan et al.

The factual antecedents as borne by the records are:

On April 12, 1996, Miguel L. Arambulo, Sr., respondent, filed with the Regional Trial
Court (RTC), Branch 104, Quezon City, a complaint for damages with prayer for the issuance of

a writ of preliminary mandatory injunction,[3] docketed as Civil Case No. Q-96-27127. Impleaded
as defendants were Sunny Motors Sales, Inc. and Amando San Juan, one of herein petitioners.

Before Amando could file an answer, respondent, on July 2, 1996, filed a motion to

withdraw his complaint which was granted in an Order dated October 8, 1996. This Order became
final and executory.

On July 2, 1996, or on the day when respondent filed a motion to withdraw his complaint

in Civil Case No. Q-96-27127, he filed with the RTC, Branch 216, Quezon City, Civil Case No.
Q-96-27964 for cancellation of title, reconveyance, damages with prayer for issuance of a writ of
preliminary injunction[4] against Amando San Juan and the other above-named petitioners.

Instead of filing an answer, petitioners filed a motion to dismiss the complaint on the
grounds of litis pendentia and forum shopping. Eventually, Branch 216 issued an Order dated

602
October 8, 1996 dismissing the complaint on the ground of forum- shopping. Respondent then
filed a motion for reconsideration but was denied in an Order dated January 23, 1997.

On appeal, the Court of Appeals rendered its Decision dated November 29, 1999

reversing the trial courts Order dismissing the complaint. The Appellate Court, in holding that

respondent did not violate the rule against forum-shopping, held that Civil Cases Nos. Q-96-

27127 and Q-96-27964 involve different parties and raise distinct causes of action, subject

matter and issues.

From the said Decision, petitioners filed a motion for reconsideration but it was denied.

Hence, this petition for review on certiorari. Petitioners contend that the Court of

Appeals erred in declaring that respondent did not resort to forum-shopping.

The decisive issue posed by petitioners is whether respondents filing of the complaint for

cancellation of title, reconveyance, damages with prayer for the issuance of a writ of preliminary
injunction, docketed as Civil Case No. Q-96-27964, in the RTC, Branch 216, Quezon City,

constitutes forum-shopping. It may be recalled that on the same day he filed this complaint, he

moved to withdraw his complaint in Civil Case No. Q-96-27127, which was granted on October
8, 1996 by the RTC, Branch 104.

The petition is bereft of merit.

Forum shopping is the filing of multiple suits involving the same parties for the same

cause of action, either simultaneously or successively, for the purpose of obtaining a favorable

603
judgment. A party violates the rule against forum shopping if the elements of litis pendentia are

present; or if a final judgment in one case would amount to res judicata in the other. [5]

There is forum shopping when the following elements are present: (a) identity of parties,

or at least such parties as represent the same interests in both actions; (b) identity of rights

asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity of

the two preceding particulars, is such that any judgment rendered in the other action will,

regardless of which party is successful, amount to res judicata in the action under

consideration; said requisites [are] also constitutive of the requisites for auter action

pendant or lis pendens.[6]

As correctly found by the Court of Appeals, the two complaints refer to different cases,

thus:

(1) As to parties In Civil Case No. 96-27127 for Damages with Writ of
Preliminary Mandatory Injunction, the plaintiff is Miguel S. Arambulo, Sr. against
defendants Sunny Motors Inc. and Amando S. San Juan; whereas in Civil Case NO.
96-27964 for Cancellation of Title, Reconveyance, Damages and Prayer for a Writ
of Preliminary Injunction, the plaintiff is Miguel S. Arambulo, Sr. against
defendants Amando S. San Juan, Carmen V. Pineda, Nissan Commonwealth, Inc.,
Metropolitan Bank and Trust Company and the Register of Deeds of Quezon City;

(2) As to facts and circumstances In the former case, the plaintiff-

appellant alleged that the defendants-appellees encroached on a certain portion of
the formers lot described as Transfer Certificate of Title No. RT-110304 (223887)
and as a consequence of which, he sued for damages because he was allegedly
deprived of its use and enjoyment (Complaint for Damages, p. 2; Record, p. 45);
whereas in the latter case, plaintiff-appellant alleged that he is the lawful and
registered owner of a parcel of land located at Commonwealth Avenue, Quezon
City, covered by Transfer Certificate of Title No. RT-110304 (223877) identified
as lot 43-C-10 of the subdivision plan Psd-36810 issued by the Register of Deeds,
Quezon City (Complaint for Cancellation of Title, p. 2; Record, p. 4); that plaintiff-
appellant found out that a substantial portion of his lot identified as Lot 43-C-10

604
covered by said title was maliciously and fraudulently included as appearing on the
face of Transfer Certificate of Title Nos. N-136482 and N-136483 (formerly TCT
Nos. 121402 and 121403) of defendants-appellees Amando S. San Juan and
Carmen V. Pineda, thus, the Register of Deeds of Quezon City was impleaded as a
necessary party thereto; and since the subject properties owned by defendants-
appellees were mortgaged to MetroBank, the latter was also impleaded for being a
necessary party (Record, pp. 2-5);

(3) As to cause of action In the former case, it involves damages due to the alleged
encroachment of Amando San Juan to plaintiff-appellants lot; whereas in the latter
case, it involves the unlawful and/or illegal inclusion of a substantial portion of
plaintiff-appellants lot in the description of the Transfer Certificate of Title of
defendants Amando San Juan and Carmen V. Pineda;

(4) As to subject matter and issues In the former case, it involves a question of
award of damages due to the alleged encroachment; whereas in the latter case, it
involves a question of ownership thus invoking a remedy of cancellation of title,
reconveyance with damages.

From the foregoing discussions, the two cases clearly raised distinct cause
of action and issues considering that the facts and circumstances involve therein are
different. In short, there are no identical causes of action, subject matter and issue
in the said two cases.

Importantly, the Complaint for Damages (Civil Case No. Q-96-27127) was
withdrawn (Record, p. 93) by the plaintiff-appellant before the Complaint for
Cancellation of Title and Damages (Civil Case No. Q-96-27964) was filed (Record,
pp. 58, 69, 90, 96), in accordance with Section 1, Rule 17 of the 1997 Rules on
Civil Procedure which provides:

SECTION 1. Dismissal upon notice by plaintiff. A

complaint may be dismissed by the plaintiff by filing a notice of
dismissal at any time before service of the answer or of a motion for
summary judgment. Upon such notice being filed, the court shall
issue an order confirming the dismissal. Unless otherwise stated in
the notice, the dismissal is without prejudice, except that a notice
operates as an adjudication upon the merits when filed by a plaintiff
who has once dismissed in a competent court an action based on or
including the same claim.

thus, forum shopping cannot be said to have existed in the case at bench.

605
 WHEREFORE, premises considered, the Omnibus Order dated October 8,
1996 and the Order dated January 23, 1997 are ANNULLED and SET ASIDE and
the Complaint in Civil Case No. Q-96-27964 is REINSTATED. The Regional Trial
Court of Quezon City, Branch 216 is ordered to proceed with the trial of this case
and terminate the proceeding with dispatch.

Let the original record of this case be remanded to the said court for the said
purpose.

SO ORDERED.

Moreover, in Young vs. Keng Seng,[7] we held that forum shopping is committed by a

party who, having received an adverse judgment in one forum, seeks another opinion in another

court, other than by appeal or the special civil action of certiorari.

Here, there is no adverse decision against respondent in Civil Case No. Q-96-27127. In

fact, upon respondents motion, the RTC, Branch 104 dismissed the complaint for damages with

prayer for issuance of a writ of preliminary mandatory injunction pursuant to Section 1, Rule

17 of the 1997 Rules of Civil Procedure, as amended.[8] We, therefore, agree with the Court of

Appeals in holding that the trial court (RTC, Branch 216, Quezon City) erred in dismissing

respondents complaint in Civil Case No. Q-96-27964 on the ground of forum-shopping.

WHEREFORE, the instant petition is hereby DENIED. The assailed Decision and Resolution of
the Court of Appeals in CA-G.R. CV No. 56481 are AFFIRMED. Costs against petitioners.

SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

606
WE CONCUR:

ARTEMIO V. PANGANIBAN
Associate Justice
Chairman

RENATO C. CORONA CONCHITA CARPIO MORALES

Associate Justice Associate Justice

CANCIO C. GARCIA
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

ARTEMIO V. PANGANIBAN
Associate Justice
Chairman, Third Division
Ws2CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman's
Attestation, it is hereby certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the Court.

607
 HILARIO G. DAVIDE, JR.
Chief Justice

[1]
Penned by Justice B.A. Adefuin-Dela Cruz (retired) and concurred in by Justice Fermin A.
Martin, Jr. (retired) and Justice Presbitero J. Velasco, Jr, (now Court Administrator), Annex A
of the Petition for Review, Rollo at 19-26.
[2]
Annex D, id. at 30-31.
[3]
The complaint alleges that respondent is the registered owner of lot 43-C-10 situated at
Commonwealth Avenue, Quezon City, covered by Transfer Certificate of Title No. RT-110304
of the Registry of Deeds, same city. Subsequently, respondent found that Sunny Motors Sales,
Inc. and petitioner Amando San Juan encroached on a portion his lot, thereby, depriving him
of its possession. This prompted respondent to file the above complaint praying for an award
of damages.

[4]
The complaint alleges that respondent is the registered owner of a lot 43-C-10 situated at
Commonwealth Avenue, Quezon City, covered by Transfer Certificate of Title No. RT-110304
of the Registry of Deeds, same city. Subsequently, respondent found that a substantial portion
of the above lot was maliciously and fraudulently included and covered by Transfer
Certificates of Title No. N-136482 and N-136483 in the names of Amando S. San Juan and
Carmen V. Pineda. Respondent thus prays for the cancellation of title, reconveyance and
damages.

[5]
Mondragon Leisure and Resorts Corporation vs. United Coconut Planters Bank, G.R. No.
154187, April 14, 2004, 427 SCRA 585; Davao Sunrise Investment and Development
Corporation, et al .vs. Spouses Robert Alan Limso and Nancy Lee Limso, G.R. No. 162516,
Resolution dated July 13, 2005.
[6]
Ibid.
[7]
G.R. No. 143464, March 5, 2003, 398 SCRA 629, 636, citing Executive Secretary vs. Gordon,
298 SCRA 736 (1998).
[8]
SECTION 1. Dismissal upon notice by plaintiff. A complaint may be dismissed by the plaintiff
by filing a notice of dismissal at any time before service of the answer or of a motion for
summary judgment. Upon such notice being filed, the court shall issue an order confirming the
dismissal. Unless otherwise stated in the notice, the dismissal is without prejudice, except that
a notice operates as an adjudication upon the merits when filed by a plaintiff who has once
dismissed in a competent court an action based on or including the same claim.

608
 FIRST DIVISION

[G.R. No. L-15804. November 29, 1960.]

SANCHO B. DE LEON, plaintiff and appellee, v. ESTANISLAO FAUSTINO, defendant

and Appellant.

Jos Dacquel for Appellee.

Melanio T. Singson for Appellant.

SYLLABUS

1. REGISTRATION OF LAND TITLES; CERTIFICATE OF TITLE AS EVIDENCE OF

INDEFEASIBILITY; EFFECT. "When a title is registered in the first instance, or under a
transfer from the last registered owner, the statue declares the certificate to be evidence of an
indefeasible title to the interest or estate registered, and the effect of this is that the issue of the
certificate ipso facto divests any interest or estate which may exist in any other and vest it in the
person registered as owner . . . ." (Niblack, Analysis of Torrens System, Sec. 4, p. 6.)

2. IMITATION OF ACTION; RECOVERY OF OWNERSHIP AND POSSESSION; WHEN

NOT BARRED BY LACHES. Where the length of time from the date of plaintiffs
acquisition of a parcel of land to the date of his filing an action for recovery of ownership and
possession is not more than 4 years, it cannot validly be claimed that plaintiffs complaint is
already barred by prescription or laches.

3. JUDGMENT; SUMMARY JUDGMENTS; NATURE OF THE METHOD; NO

LIMITATION AS TO TYPE OF ACTIONS IN WHICH THE REMEDY IS AVAILABLE.
Summary judgment procedure is a method for promptly disposing of actions is which there is no
genuine issue as to any material fact. Under this definition and from the provision of section 1 of
Rule 36, there would seem to be no limitation as to the type of actions in which the remedy is
available, except where the material facts alleged in the complaint are required to be proved.

DECISION

GUTIERREZ DAVID, J.:

On March 2, 1957, plaintiff Sancho B. de Leon through counsel filed a complaint against
Estanislao Faustino to vindicate title and to recover possession of real property, plus damages.
The complaint in substance alleges that the property in question was acquired by plaintiff by
virtue of a deed of sale dated April 21, 1953 executed in his favor by Alberto Jimenez, its former

609
registered owner; that on or about June 12, 1953, plaintiff demanded possession of the land from
defendant, but he latter refused and instead instituted Civil Case No. 588 against him and two
others in the same court, asking for the cancellation of his (plaintiffs) Transfer Certificate of
Title No. 4368; that on November 29, 1955, the Court of First Instance of Isabela rendered its
decision dismissing the complaint, sustaining in effect plaintiffs title to the land; and that
sometime after the said decision was promulgated, plaintiff again demanded possession of the
land from the defendant but the latter refused and still refuses causing plaintiff to suffer
damages.

In his answer, the defendant admits and denies certain facts pleaded in the complaint. He claims
that he was the registered owner of the land in question and by way of affirmative defenses
alleges that he has not sold, conveyed or ceded the land to any person; that it he has executed any
deed of sale, the same has been secured by means of fraud and therefore null and void; that when
Alberto Jimenez bought the land (from one Margarita A. de Peralta) and plaintiff, in turn,
purchased it from Jimenez, defendant has been in the open, continuous and adverse possession of
the land; and that plaintiffs cause of action is already barred by prescription or laches.

On August 29, 1957, alleging that there are no genuine issues as to the material facts alleged in
the complaint and that judgment could be rendered forthwith on the pleadings already filed,
plaintiff moved for summary judgment, attaching to his motion in support thereof his affidavit
and that of his overseer.

After hearing on the motion for summary judgment was postponed, plaintiff was allowed by the
court below in its order dated September 13, 1957 to file within 5 days a certified true copy of
the decision in Civil Case No. 588, entitled Estanislao Faustino v. Sancho B. de Leon, Et. Al."
and a certificate of the clerk of court to the effect that the said decision has already become final.

On October 9, 1957, the defendant filed an opposition to the motion for summary judgment on
the grounds that (1) the case is not an action "to recover upon a claim" ; (2) that there are genuine
issues of fact; (3) that plaintiffs cause of action is barred by prescription or laches; (4) that
defendant has acquired ownership and title over the land by acquisitive prescription; and (5) that
the decision in Case No. 588 does not constitute res judicata. In support of the opposition, the
joint affidavit of defendant and his wife was presented in court.

Overruling the opposition, the court below granted plaintiffs motion and on January 15, 1958
rendered a summary judgment, declaring him the absolute owner of the land described in the
complaint and in his Transfer Certificate of Title No. T-4368, and ordering the defendant of
vacate the same and to pay the costs. From this judgment, defendant appealed. The appeal was
taken to the Court of Appeals but that court has certified the case to us on the ground that the
questions involved are purely legal.

The appeal is without merit.

The material averments of the complaint that plaintiff acquired the land in question from its
former registered owner Alberto Jimenez by virtue of a contract of sale and that the Torrens title
to the land is now in the name of plaintiff, the validity of which had been confirmed in a prior

610
civil case filed by defendant against plaintiff and two others are not disputed. The only issues of
fact which served as basis for opposition to the summary judgment are those raised in the
affirmative defenses wherein defendant claimed that the sale of the land to plaintiff was tainted
with fraud; that defendant has been in continuous, open and adverse possession of the land since
1933; and that plaintiffs cause of action is already barred by prescription or laches. An
examination, however, of the pleadings together with the affidavits presented by the parties and
the documents on file show the non-existence of defendants claims or defenses. Thus, without
mentioning the fact that defendant, in alleging fraud, failed to state the circumstances
constituting the fraud, as required by section 12 of Rule 15, it is on record that in Civil Case No.
588 wherein defendant prayed, among other things, for the annulment of plaintiffs certificate of
title, no fraud or bad faith was alleged as against said plaintiff in his acquisition of the land and
for that reason the complaint was dismissed as against him. With respect to the claim that
defendant has acquired the land by prescription, it is also on record that Transfer Certificate of
Title No. 1519 covering the land in question was issued in the name of Margarita A. de Peralta
on July 5, 1939; that this title was subsequently cancelled and a new one, Transfer Certificate of
Title No. 2359, was issued in the name of Alberto Jimenez on February 11, 1946; and that on
June 3, 1953 Transfer Certificate of Title No. 4368 was issued in plaintiffs name. These
circumstances negative defendants claim that he has acquired the land thru acquisitive
prescription.

"When a title is registered in the first instance, or under a transfer from the last registered owner,
the statute declares the certificate to be evidence of an indefeasible title to the interest or estate
registered, and the effect of this is that the issue of the certificate ipso facto divests any interest
or estate which may exist in any other person and vest it in the person registered as owner . . . ."
(Niblack, Analysis of Torrens Systems, Sec. 4, p. 6.)

Finally, as to the allegation that plaintiffs cause of action is already barred by prescription or
laches, it is not disputed that plaintiff acquired the land in question on April 21, 1953, demanded
possession on June 12, 1953 and filed the present case to recover ownership and possession on
March 2, 1957. The length of time from the date of acquisition to the date of the filing the action
not being more than 4 years, it cannot validly be claimed that plaintiffs complaint is already
barred by prescription or laches. Under the circumstances of the case, we hold that the lower
court committed no error in rendering a summary judgment on the merits of the case.

It is a contended that the procedure of summary judgment is not warranted in the instant case
since it is not an action "to recover upon a claim, counterclaim, or crossclaim." It is argued that
section 1 of Rule 36 providing for the remedy of summary judgment for the claimant
contemplates action or cases which are in the nature of money claims. The contention cannot be
sustained. Summary judgment procedure is a method for promptly disposing of actions in which
there is no genuine issue as to any material fact. Under this definition and from the provision of
section 1 of Rule 36, there would seem to be no limitation as to the type of action which the
remedy is available, except, or course, where the material facts alleged in the complaint are
required to be proved. As observed in the note of the Advisory Committee of the United State
Supreme Court, quoted by former Chief Justice Moran in his comments on the Rules of Court
(Vol. I, 1957 ed., p. 497)

611
"This rule (on summary judgment procedure) is applicable to all actions, including those against
the United States or an officer or agency thereof.

x x x

"In England it was first employed only in cases of liquidated claims, but there has been a steady
enlargement of the scope of the remedy until it is now used in actions to recover land or chattels
and in all other actions at law, for liquidated or unliquidated claims, except for a few designated
torts and breach of promise or marriage . . . ."cralaw virtua1aw library

The case of Roque v. Encarnacion (95 Phil. 643; 50 Off. Gaz., [9] 4193) cited by defendant as an
authority to support his theory that a summary judgment could be rendered only in actions
involving money claims, is not applicable to the case at bar. That case refers to an action for
annulment of marriage where the material facts alleged in the complaint are required to be
proved at the trial (Sec. 10, Rule 35) in order to prevent collusion between the parties.

It is also argued by defendant that while res judicata may be a ground for dismissal, it cannot be
the legal basis for a summary judgment. Without questioning the correctness of this argument, it
will be noted that the lower court did not base its summary judgment upon the doctrine of res
judicata but on its finding that there was no genuine triable issue of fact. The doctrine of res
judicata was considered by the court below merely in support of that finding, the defendant
having tried to raise issues which have already been decided and settled in a previous case
involving the same parties.

In view of the foregoing, the decision appealed from is affirmed, with costs against defendant-
appellant.

Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcin, Reyes, J.B.L., Barrera, Paredes
and Dizon, JJ., concur.

612
 THIRD DIVISION

BARSTOWE PHILIPPINES G.R. No. 133110

CORPORATION,
Petitioner,
Present:

YNARES-SANTIAGO,*J.

Chairperson,
- versus-
AUSTRIA-MARTINEZ,
CALLEJO, SR.,**
CHICO-NAZARIO, and
NACHURA, JJ.

REPUBLIC OF THE PHILIPPINES,

Respondent.
Promulgated:

March 28, 2007

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

DECISION

CHICO-NAZARIO, J.:

613
 Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of
Court seeking the reversal and setting aside the Decision,[2] dated 8 August 1997, and
Resolution,[3] dated 18 March 1998, of the Court of Appeals in CA-G.R. CV No. 47522, which in
turn, reversed and set aside the Decision,[4] dated 22 December 1992, of the Quezon City Regional
Trial Court (RTC), Branch 80 in Civil Case No. Q-92-11806.

Antecedent Facts

This case involves the conflicting titles to the same parcels of land (subject lots) of
petitioner Barstowe Philippines Corporation (BPC) and the respondent Republic of
the Philippines (Republic). The subject lots have a total area of 111,447 square meters, and are
situated along the northeastern perimeter boundary of the National Government Center
in Payatas, Quezon City.

BPC traces its titles to the subject lots back to Servando Accibal (Servando) who was
supposedly issued on 24 July 1974, at 3:20 p.m., Transfer Certificates of Title (TCTs)
No. 200629 and 200630 over the subject lots. TCTs No. 200629 and 200630 were purportedly
signed by Nestor N. Pena, Deputy Register of Deeds of Quezon City. On 10 June
1988, Servando executed a Deed of Absolute Sale of the subject lots to his son
Antonio Accibal (Antonio), with the concurrence of his other heirs. Despite his prior sale of the
subject lots to Antonio, Servando, by virtue of a Deed of Conveyance, dated 8 February 1989,
transferred/conveyed the subject lots to BPC in exchange for subscription of 51% of the capital
stock of BPC, such subscription supposedly amounting to P6,000,000.00.[5] About a year after the
death of Servando on 3 October 1989, particularly on 10 October 1990, Antonio executed another
Deed of Conveyance of the subject lots in favor of BPC in exchange for subscription of 2,450
shares of its capital stock, with an alleged total value of P49,000,000.00.[6] Due to the fire that
gutted the Office of the Quezon City Register of Deeds on 11 June 1988 and destroyed many
certificates of title kept therein, Antonio sought the administrative reconstitution of the original
copies and owners duplicate copies of TCTs No. 200629 and 200630 with the Land Registration
Authority (LRA).On 12 December 1990, the LRA issued TCTs No. RT-23687 and RT-
23688 (reconstituting TCTs No. 200629 and 200630, respectively), which were transmitted to

614
the QuezonCity Register of Deeds and signed by Deputy Register of Deeds Edgardo Castro on 19
February 1991. Also on 19 February 1991, TCTs No. RT-23687 and RT-23688 were cancelled
and in lieu thereof, TCTs No. 30829, 30830, 30831, and 30832 in the name of BPC were
issued. BPC then acquired from the Housing and Land Use Regulatory Board (HLURB) a permit
to develop the subject lots into a residential subdivision. Subsequently, BPC entered into Joint
Venture Agreements with other corporations for the development of the subject lots into a
subdivision called Parthenon Hills.

Meanwhile, according to the Republic, prior to 14 November 1979, the subject lots were owned
by First Philippine Holdings Corporation (FPHC). As evidence of its title to the subject lots, FPHC
was issued TCT No. 257672, on an undetermined date, and TCT No. 275201, on 20 January
1981. Pursuant to a Deed of Sale, dated 14 November 1979, FPHC sold one of the subject lots,
covered by TCT No. 257672, to the Republic for P2,757,360.00. Thus, on 22 January 1981, TCT
No. 257672 was cancelled and TCT No. 275443 was issued in place thereof in the name of the
Republic. FPHC executed another Deed of Sale on 25 March 1982 in which it sold the remainder
of the subject lots, covered by TCT No. 275201, to the Republic for P9,575,920.00. On 31 May
1982, TCT No. 275201 was cancelled and was replaced by TCT No. 288417 issued in the name
of the Republic. Because of the 11 June 1988 fire which razed the Quezon City Office of the
Register of Deeds and destroyed the original copies of TCTs No. 275443 and 288417, the Republic
applied for administrative reconstitution of the same with the LRA. It was then that the Republic
came to know that another party had applied for reconstitution of TCTs No. 200629 and 200630
which also covered the subject lots. This prompted the Republic to file before the RTC on 26
March 1992 a petition for cancellation of title against Antonio, Servando, and BPC, docketed as
Civil Case No. Q-92-11806.

Civil Case No. Q-92-11806

Counsel for Antonio and the late Servando filed two successive Motions for extension of time to
file the proper pleading, dated 17 June 1992 and 1 July 1992, but despite the grant thereof by the
RTC,[7] no such responsive pleading on behalf of Antonio and the late Servando was ever
filed. Hence, on 31 July 1992, the RTC issued an Order[8]declaring Antonio and the
late Servando in default.

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In another Order,[9] also dated 31 July 1992, the RTC, upon the motion of BPC, allowed the latter
to continue with the development of the subject lots. It concluded that

Considering the plight of [BPC] and the possible irreparable damage that
may be caused against the residents in the surrounding developed subdivision, even
as said corporation is possessed of a good title, the court in the exercise of its
discretion grants the motion. More importantly, consideration of equity demands
that the titled owner [BPC] herein must be able to exercise all its dominical
right bloosoming [sic] forth from its ownership of the land in suit.

WHEREFORE, under cool reflection and prescinding from the foregoing,

the motion is hereby granted. [BPC] is hereby permitted and allowed to continue
with the improvement and development of the controverted property into a
residential subdivision.[10]

On 12 October 1992, the Republic filed with the Quezon City Register of Deeds a Notice
of Lis Pendens requesting the recording of the pendency of Civil Case No. Q-92-11806
on TCTs No. 30830, 30831, and 30832, all in the name of BPC.

While Civil Case No. Q-92-11806 was still pending before the RTC, there were two intervenors.

Gloria Accibal Rettoriano (Gloria) filed with the RTC a Motion for Intervention, with a
Complaint in Intervention, both dated 1 September 1992. Gloria alleged that she was the only child
of Basilia Accibal, Servandos sister; the subject lots were inherited by Basilia, Servando, and their
other siblings from their parents Martin and MauriciaAccibal; upon her mothers death, Gloria
inherited and came into possession of a portion of the subject lots with an area of about 2.5
hectares; Gloria had been possessing, cultivating and improving her portion of the subject lots for
the last 30 years; Servando, through fraudulent means, was able to secure TCTs over all the subject
lots, including Glorias portion therein; the inclusion of Glorias portion in
the TCTs of Servando and, later, in those of BPC, was done through fraud and gross bad faith; and
unless the TCTs of Servando and BPC are declared null and void, Gloria will be deprived of her
property without due process and just compensation. BPC opposed Glorias intervention in Civil

616
Case No. Q-92-11806 considering that she had already instituted Civil Case No. Q-91-10933
before the RTC, Quezon City, Branch 76, seeking the annulment of TCTs No. 30830, 30831, and
30832 of BPC based on the very same grounds she raised in her present Complaint in Intervention;
on 11 February 1992, Gloria entered into a Compromise Agreement with BPC in which she waived
and renounced any and all claims whatsoever which she may have over the titles of BPC in
consideration of the payment by the latter of P2,000,000.00; the RTC, Branch 76, after finding that
the said Compromise Agreement was not contrary to law, morals, good customs, public order or
public policy, approved the same, thus putting an end to Civil Case No. Q-91-10933;[11] Glorias
cause of action to intervene in Civil Case No. Q-92-11806 was already barred by prior judgment
in Civil Case No. Q-91-10933 and Glorias Complaint in Intervention is tantamount to a collateral
attack against a TCT. In rejecting Glorias intervention in Civil Case No. Q-92-11806, the RTC
found as follows

The motion for intervention must be denied and the complaint in

intervention therein attached must be rejected.
For one thing, herein movant Gloria Accibal Rettoriano, was the plaintiff in
the first case (RTC Br. 76 No. Q-91-10933) and with eyes wide open she entered
into a compromise agreement with [BPC], which was the basis of the 26 February
1992 decision rendered therein and it being based on a compromise agreement, said
decision became immediately final and executory.
Whether or not the decision rendered in the first case was satisfied is of no
moment in the present case, as herein movant intervenor has all the remedies to
protect her rights therein.
For another, movant intervenor Gloria Accibal Rettoriano, from her
complaint in intervention would ask for the cancellation of the titles issued to their
[sic] relative Servando Accibal and those titles duly issued and registered in the
name of [BPC]. Certainly, this can not be done, as it constitutes a collateral attack
on the questioned titles which the law and settled jurisprudence do not
allow. Perforce, a separate action against the questioned titles is the remedy
available for intervenor Gloria A. Retoriano [sic].
Accordingly, the Court finds the opposition of [BPC] to be impressed with
merit and the motion for intervention does not inspire confidence.
WHEREFORE, the subject motion for intervention is denied and the
complaint in intervention attached thereto must be rejected.[12]

617
 Another intervenor in Civil Case No. Q-92-11806 was EL-VI Realty and Development
Corporation (ERDC) which filed with the RTC a Motion for Leave to Intervene, dated 1
September 1992. Subsequently, it filed an Answer in Intervention, dated 15 September 1992, in
which, it alleged that it acquired interest in the subject lots after having entered into a Joint Venture
Agreement dated 16 January 1992, with BPC, for the development of the subject lots into a
residential subdivision; the action initiated by the Republic for the cancellation of the TCTs of
BPC was already barred by laches and estoppel because of the recognition accorded upon the
said TCTs by the instrumentalities of the Republic, particularly the Register of Deeds and the
HLURB, on which the ERDC relied in all good faith when it entered into the Joint Venture
Agreement with BPC; the Republic is liable to ERDC for moral damages and attorneys fees;
should the RTC find the TCTs of BPC infirm, rendering the Joint Venture Agreement between
ERDC and BPC of no force and effect, then BPC should be held liable to ERDC, being an innocent
third party, for reimbursement of all expenses incurred by the latter in the development of the
subject lots; and should the RTC find that the TCTs of BPC are spurious, then it should be declared
in bad faith when it entered into the Joint Venture Agreement with ERDC, for which it should be
liable for exemplary damages and attorneys fees. In an Order,[13] dated 27 October 1992, the RTC
granted ERDCs Motion to Intervene and admitted its Answer in Intervention.

After all the parties had submitted their respective Pre-Trial Briefs,[14] and upon motion by the
BPC,[15] the RTC decided the case on 22 December 1992 on summary judgment.[16] Although it
found both the Republic and the BPC as buyers in good faith, it held that the titles of BPC should
prevail. It ratiocinated thus

3. To the third issue, we rule that the title of [BPC] must prevail over that
of the [Republic].

There is no dispute that the titles of the First Philippine Holdings

Corporation, predecessor-in-interest of [Republic] were either issued in the year
1979 and 1981 (Exh. A and B). On the other hand, there is likewise no dispute that
the titles of defaulted defendant Servando Accibal, and predecessor-in-interest of
[BPC], were both issued and registered much earlier on July 24, 1974 (Exhs. F and
G, pp. 210-213, record) and/or a difference of 5 or 6 years in point of time.

618
 MORE, Servando Accibal, the predecessor-in-interest of [BPC] has been in
the actual and peaceful physical possession of the lots in suit before he sold them
to [BPC] on February 08, 1991. Upon registration of the same on February 19,
1991, [BPC], after having subdivided the land into four (4) smaller lots was issued
on 19 February TCT Nos. 30829, 30830, 30831, and 30832 (Exhs. 1, 2, 3 and 4).

It is true [Republic] acquired the land in suit on November 14, 1979 and for
which TCT Nos. 275443 and 288417 were issued in the years 1979 and 1981, but
[Republic] never took assertive steps to take actual possession of the land sold to it
by the First Philippine Holdings Corporation. It is even of grave doubt that the latter
took actual possession of the land before the land in suit was sold to the
[Republic]. So much so, that the area had been occupied by several squatters, one
of them is Servando Accibal who by the way, was able to have the land in suit titled
in his name as early as July 24, 1974, under TCT Nos. 200629 and 200630 of the
land records of Quezon City. Further, [Republic] and its predecessor-in-interest
were not able to discover the overlapping of their titles by the titles
of Servando Accibal for a period of eighteen (18) long years starting from July 24,
1974 to about June 10, 1992 when the LRA during a reconstitution of the titles of
[Republic] was initiated, as evidenced by a report of reconstituting officer
Benjamin A. Flestado of that office (Exh. H, pp. 214-258, record).

Simply stated, [Republic] may be guilty of LACHES.

xxxx

Perforce, the claim of [Republic] which was probably

originally VALID became a STALE claim as the years went by. Verily, the titles
of [Republic] must be cancelled and the titles of [BPC] must be upheld and declared
as good and valid titles and [BPC] is entitled to all the rights bloosoming [sic]
fourth from its dominical right of ownership.

More importantly, the predecessor-in-interest of [BPC] had been long in the

actual and physical possession of the lands in suit, while that of the predecessor-in-
interest of [Republic] was not in the actual possession of the land before the sale to
[Republic]. On the other hand, [BPC] immediately after the sale in its favor took
actual, physical and peaceful possession of the land in suit to the exclusion of all
others. It has no knowledge, actual or constructive that said parcels of land were
sold to the [Republic]. When it registered the sale, there was no inscription in the

619
 Land Registry that the same parcels of land were earlier sold to the
[Republic]. Hence, there was and is a continuing good faith on the part of [BPC].
(Article 1544, NCC; Cruz vs Cabana, 129 SCRA 656).

In the same Decision, the RTC found certain irregularities in TCTs No. 200629 and 200630 in the
name of Servando and that the said TCTs should be cancelled, without prejudice to the rights and
interests of BPC. The RTC discussed the matter in this wise

We shall now dwell on the validity of the titles TCT Nos. 200629 and
200630, issued in the name of Servando Accibal on July 24, 1974 by the Register
of Deeds of Quezon City. The LRA report dated 10 June 1992 (Exh. H, pp. 214-
258, record) is competent proof that indeed said titles must be cancelled. In short,
the LRA found after due investigation that the said titles of Servando Accibal were
issued with certain irregularities. It recommended the cancellation therefore, of
TCT Nos. 200629 and 200630, to which the court concurs, as said report must be
accorded due respect and in the absence of fraud or irregularities that attended the
investigation, which the Court finds none, the same must be persuasive, if not
conclusive. Moreover, herein defendant Servando Accibal because of his failure to
answer, despite extension of time given him, failed to file his answer. Upon motion
of [Republics] counsel, he was declared as in default and since then, he never asked
the court to lift and set aside the default order. There is no way, his title must be
cancelled. For one thing, he was not able to present evidence to controvert the
recommendation of LRA to cancel his titles. For another, Servando Accibal is
deemed to have impliedly admitted the irregularities that attended the issuance of
his aforestated titles.

However, the cancellation of the titles of Servando Accibal, would not

affect the rights and interests of [BPC] as the latter is declared to be a purchaser in
good faith and for value. MORE, under the circumstances of the case, and even
when the titles of Servando Accibal are cancelled, the titles of [BPC] are still good
and indefeasible titles, as it is settled rule that good titles may be sustained even
when the seller has spurious titles.

As for the intervention of ERDC, the RTC addressed the same as follows

620
 Finally, we shall next discuss the claim of intervenor EL-VI Realty and
Development Corporation. A close reading from the Joint Venture Agreement
dated January 16, 1992, shows that in case of litigation, intervenor Realty
Corporation shall have the right to suspend all development activities and the
development period of 5 years shall automatically be suspended until such time as
the said case is finally settled/decided (Exh. 5 and Annex A answer in intervention
pp. 109-114). Upon the signing of the said agreement the amount of P1,500,000.00
was received by [BPC] as advance payment of the 50-50 sharing basis in the sales
proceeds. During the pre-trial conference, herein intervenor tried to enforce a
supplemental agreement dated October 15, 1992, by filing a motion for a writ of
preliminary injunction with prayer for the issuance of a restraining
order. Resolution of the same was held in abeyance to await the decision to be
rendered, after [BPC] assured intervenor herein that it will abide by and strictly
comply with its commitments arising from the aforesaid agreement, after proper
accounting is made therefore. Herein intervenor admits that another financier-
developer has entered the area due to the delay of the project caused by the filing
of the present case.

MORE, due to the filing of the present case, herein intervenor was reluctant
to further finance the project because of its big exposure already
made. Hence, intervenorsworks and other activities in the area was suspended in
accordance with their Joint Venture Agreement.

Perforce, there is compelling necessity for a proper accounting, more

particularly its substantial exposure to the project, on a quantum meruit basis, in
fairness to all concerned and involved parties in the project, including but not
limited to the present contractor-developer of the area.

Finally, the RTC concluded that

A FORTIORARI, the environmental setting and factual scenario of the

case, in relation to its legal ambience will show that the great preponderance of
evidence lies in favor of [BPC]. (Section 01, Rule 133, Revised Rules of Court),
and the motion for summary judgment is granted. The hearing as to damages,
including attorneys fees shall be scheduled soonest possible.

621
 WHEREFORE, under cool reflection and prescinding from the foregoing,
judgment is rendered as follows:

1. Ordering the Register of Deeds of Quezon City to cancel

Transfer Certificates of Title No. 275443 and 288417 issued in
the name of the [Republic] covering the lots in suit. However,
[Republic] being a purchaser in good faith, and based on
considerations of equity and justice Barstowe Philippine[s]
Corporation is ordered to re-imburse and pay [Republic], the
sum of P12,333,280.00 representing the purchase price from the
vendor, First Philippine Holdings Corporation soonest possible;

2. Ordering the Register of Deeds of Quezon City to officially

and finally cancel from his records, Transfer Certificates of Title
Nos. 200629 and 200630 issued in the name
of Servando Accibal, on July 24, 1974, covering the same lots
in suit (Exh. F and G, pp. 210-213, record).

3. Declaring herein defendant Barstowe Philippines Corporation

as the absolute owner in fee simple title over the lots in suit, as
evidenced by Transfer Certificates of Title Nos. 30829, 30830,
30831 and 30832 of the land records of Quezon City, all issued
on February 19, 1991 and the said titles are further more
declared valid, existing and indefeasible titles of [BPC] and as
such is entitled to all the dominical rights bloosoming [sic] forth
from its ownership over the lots in suit.

4. Ordering [BPC] to abide by and strictly comply with the terms

and conditions of the supplemental Agreement entered into by it
with herein intervenor EL-VI Realty and Development
Corporation dated October 15, 1992, after proper accounting is
made;

5. Perforce, the Register of Deeds of Quezon City is likewise

ordered to cancel any and all encumbrances annotated on said

622
 titles of defendant corporation including, but not limited to
the lis pendens notice filed by the [Republic], if any;

6. The hearing as to damages, including the claim for attorneys

fees shall be scheduled soonest.

7. Considering the admissions and agreements of the parties

during the pre-trial conference, which are considered judicial
admissions, this decision acquires the nature of one based on a
compromise agreement. Perforce, the Court declares this
decision to be immediately final and executory.

8. No pronouncement as to costs.

Despite the promulgation of the foregoing Decision by the RTC on 22 December 1992, the
proceedings in Q-92-11806 were still far from over; significant developments still took place
thereafter.

ERDC sought the execution of paragraph 4 of the dispositive portion of the RTC Decision
dated 22 December 1992. In an Order,[17] dated 13 January 1993, the RTC issued a writ of
execution in favor of ERDC, and a notice of levy on execution was accordingly made on the subject
lots. In a dialogue held between the counsels for BPC and ERDC in the chamber of the RTC Judge
on 26 February 1993, an amicable settlement was reached whereby BPC agreed to settle the claim
of ERDC in the form of developed subdivision lots in Parthenon Hills, subject to proper
accounting.[18] BPC offered to ERDC 40 developed subdivision lots in Parthenon Hills, valued
at P18,543,000.00, representing 65% of the total claims (prior to proper accounting) of ERDC,
which amounted to P28,787,306.32. However, ERDC refused the offer of BPC and demanded that
it be paid the total amount of its claims. It also brought to the attention of the RTC that, in violation
of their Joint Venture Agreement, BPC contracted another realty developer for the development
of Parthenon Hills. Thus, ERDC opposed the lifting of the notice of levy on execution on the
subject lots for the protection of its interests. In an Order,[19] dated 17 March 1993, the RTC found
that BPC already substantially complied with the terms of its agreement with ERDC and that the

623
rights and interests of the latter were well-protected and safeguarded. In the same Order, the RTC
lifted and set aside the notice of levy on execution on the subject lots. However, on 20 April 1993,
ERDC filed a Motion for Contempt[20] against BPC and informed the RTC that BPC, fraudulently,
maliciously, and in bad faith, already sold 36 of the 40 subdivision lots it earlier offered to ERDC
by accepting downpayments thereon of only 30% of the selling price. Upon further investigation,
it discovered that of the four remaining lots, two were vacant while the other two were
reserved. ERDC subsequently filed two other motions: (1) A Motion,[21] dated 29 April 1993, to
set for trial the claim of ERDC for damages. Said motion was granted, and the RTC set the hearing
on 16 September 1993, at 8:30 a.m.,[22] but upon the motion of the counsel for BPC, the hearing
was reset to 7 October 1993;[23] and (2) A Motion,[24]dated 6 September 1993, for the issuance of
a partial writ of execution for the undisputed amount of P18,543,000.00, representing 65% of the
total claims of ERDC.Unfortunately, the records no longer show the succeeding incidents
concerning these motions.

In a Motion for Leave to Intervene[25] dated 8 March 1993, and the attached Complaint in
Intervention,[26] dated 10 March 1993, Kadakilaan Estate expressed its intent to intervene in Civil
Case No. Q-92-11806. It anchored its claims on the contention that the subject lots were already
registered as private property under the Spanish Mortgage Law since 18 May 1891, and under the
Torrens System of Registration since 31 August 1907, by the predecessors-in-interest
of Kadakilaan Estate. The subject lots were supposedly included in a vast track of land covered
by Titulo de la Propiedad de Terrenos No. 01-4 in the name of Doa Petra Rodriguez, who
transferred the same to her son, Don Gonzalo Yanesa y Rodriguez. Kadakilaan Estate came into
ownership and possession of the vast track of land, including the subject lots, by virtue of its
successive sales from Don Gonzalo Yanesa y Rodriguez to Doa Lourdez Rodriguez Yanesa, and
from the latter to Kadakilaan Estate. Kadakilaan Estate further alleged that the Original Certificate
of Title (OCT) No. 333, from which the TCTs of both BPC and the Republic were ultimately
derived, was null and void ab initio, and that the TCTs of BPC and the Republic were spurious
and likewise null and void ab initio, and without any probative value. Kadakilaan Estate prayed
for judgment declaring it the owner of the subject lots; directing the other parties to respect its
ownership, possession, rights and interests over the subject lots; and ordering the other parties to
pay just compensation, damages, and attorneys fees.The RTC, in an Order[27] dated 27 April 1993,
denied the Motion for Leave to Intervene and rejected the Complaint in Intervention
of Kadakilaan Estate for the following reasons

624
 New intervenor Kadakilaan Estate alleges that the titles of the [Republic]
and [Antonio, Servando, and BPC] are all falsified, spurious in origin and null and
void ab initio, as the property in question were already registered as private
properties of [Kadakilaan Estates] predecessors-in-interest, under Spanish
Mortgage law since May 18, 1891, and under the Torrens System, Act No. 496, as
amended, in Titulo dela propriedad de Terrenos No. 01-4.

If this is clearly so, then [Kadakilaan Estate] is attacking the validity of the
titles of [Republic] and [Antonio, Servando, and BPC] in this case. It is settled rule
that titles registered under the Torrens System cannot be the subject of a collateral
attack. Perforce, the remedy of [Kadakilaan Estate] is to file a separate action. For,
if the intervention is allowed at this late stage of the proceedings, then it will cause
unnecessary delay in the soonest termination of this case.

MORE, the law and the rules as well as jurisprudence on the matter, will
only allow in the courts discretion, intervention, before or during the trial. Certainly
NOT after the trial and with more reason intervention may no longer be allowed
after the decision has been rendered as in the present case.

In the meantime, on 4 January 1993, the Republic filed a Notice of Appeal[28] of the RTC
Decision, dated 22 December 1992. The RTC, in an Order,[29] dated 16 February 1993, denied the
same. It reasoned that
Considering these judicial dimensions and acquiescence of the [Republic]
in open court during the hearings held and during the pre-trial conference, the court
in its dispositive portion of the questioned decision, declared it to be a judgment
based on a compromise agreement which by operation of law becomes
immediately executory.

It is unfortunate that despite the above declarations of the court [Republic]

failed to ask for a clarification of the said declarations, by way of a motion for
reconsideration of the decision based on fraud, mistake or duress mandated by the
rules.

The notice of appeal must be denied due course.

625
 xxxx

WHEREFORE, prescinding from the foregoing, the notice of appeal filed

by plaintiff is rejected and denied due course.

From the foregoing RTC Order, the Republic filed with the Court of Appeals a Petition
for Certiorari and Mandamus (with Urgent Prayer for Temporary Restraining Order and/or Writ
of Preliminary Injunction), docketed as CA-G.R. SP No. 30647. The Republic primarily
questioned the denial of its Notice of Appeal by the RTC in its Order, dated 16 February 1993, on
the basis that the RTC Decision of 22 December 1992 constitutes a compromise agreement, and
is immediately final and executory. The Court of Appeals issued a writ of preliminary
injunction[30] enjoining the RTC from implementing and enforcing its Order, dated 16 February
1993, during the pendency of CA-G.R. SP No. 30647 or until otherwise directed by the appellate
court. Apparently, from the denial by the RTC of its Motion for Leave to Intervene and the
rejection of its Complaint in Intervention in Civil Case No. Q-92-11806, the Kadakilaan Estate
again filed a Motion for Leave to Intervene in CA-G.R. SP No. 30647, which in a
Resolution,[31] dated 13 September 1993, the Court of Appeals also denied on the following
grounds
We find the stance of [Republic] and [BPC] well-grounded. Not only is
[Kadakilaan Estate] precluded by estoppel from filing the present motion, after
failing to challenge before this Court or the Supreme Court the trial courts denial
of subject motion for intervention, on April 27, 1993; it is too late for
[Kadakilaan Estate] to come in at this stage of the present litigation. Furthermore,
as aptly put by the [Republic] the alleged rights [Kadakilaan Estate] seeks to protect
here can be amply protected in an appropriate action [Kadakilaan Estate] may later
bring.

In a Decision,[32] dated 29 June 1994, the Court of Appeals granted the Republics Petition
for Certiorari and Mandamus, ruling in this wise

626
 We rule for [Republic]. Respondent Courts conclusion lost sight of the
nature of a compromise agreement, and the circumstances under which a judgment
based on a compromise may be rendered.

xxxx

Guided by the aforecited law and jurisprudence in point, it can be safely

concluded that neither mere silence or acquiescence by the [Republic] in open court
during the hearing nor [Republics] stipulation of facts, marking of exhibits, alleged
admission of Exhibit 6 which contains [BPCs] offer of compromise during the pre-
trial, be properly considered as a compromise agreement. Had the parties really
intended to enter into a compromise to end their case, they could have executed and
submitted a compromise agreement for the approval of the trial court. But no such
step was taken.

xxxx

Records readily show that due to lack of an amicable settlement or any

compromise agreement, the respondent judge directed the parties to present their
documentary exhibits so as to facilitate the trial; no longer for the purpose of
settling the case. Evidently, there was no explicit agreement nor any reciprocal
concession between the parties with an end in view of terminating the
litigation. Absence of these essential elements of a compromise inevitably results
in the absence of a valid compromise agreement. (Merced vs. Roman Catholic
Archbishop, L-24614, August 17, 1967, 20 SCRA 1077). Consequently, the
opinion of respondent Judge that his December 22, 1992 Decision had the nature
of a judgment based on compromise, cannot be upheld.

So also, the doctrine relied on by respondents that a compromise agreement

constitutes the law between the parties and a judgment based thereon is
immediately final, executory and not appealable, is inapplicable under the
premises.

xxxx

627
 WHEREFORE, the petition is GRANTED; the questioned order dated 16
February 1993 is SET ASIDE; and respondent court is hereby ordered to give due
course to [Republics] Notice of Appeal in Civil Case No. Q-92-11806. Costs
against [BPC].

This Court, in its Resolution, dated 6 February 1995, issued in G.R. No. 117969, in effect,
sustained the afore-mentioned Decision of the Court of Appeals.

CA-G.R. CV No. 47522

Finally, the Republic was allowed to appeal the RTC Decision, dated 22 December 1992, in Civil
Case No. Q-92-11806, to the Court of Appeals, where it was docketed as CA-G.R. CV No.
47522. In a Decision,[33] dated 8 August 1997, the Court of Appeals found in favor of the Republic,
and disposed thus

WHEREFORE, premises considered, plaintiff-appellant Republic of

the Philippines appeal is GRANTED. Except for paragraph 2 of
the dispositive portion of the decision appealed from declaring TCT Nos. 200629
and 200630 in the name of Servando Accibal null and void and ordering the
Register of Deeds of Quezon City to cancel said TCT Nos. 200629 and 200630, the
appealed decision is REVERSED and SET ASIDE and a new one entered:

(a) declaring and affirming the validity of TCT Nos. 288417 and 275443 of
the Registry of Deeds of Quezon City in the name of appellant Republic of the
Philippines and that appellant Republic has indefeasible title to the property
covered thereby;

(b) declaring TCT Nos. 30829, 30830, 30831 and 30832 also of the
Registry of Deeds of Quezon City in the name of Barstowe Philippines Corporation
null and void and ordering the Register of Deeds of Quezon City to cancel said
titles;

628
 (c) ordering Barstowe Philippines Corporation to surrender to the Register
of Deeds of Quezon City the owners duplicate certificates of title of TCT Nos.
30829, 30830, 30831 and 30832 for cancellation;

(d) enjoining defendant-appellee Barstowe Philippines Corporation

and intervenor EL-VI Realty Development Corporation from exercising any act of
ownership or possession of the land in question; and

(e) remanding the case to the court of origin for further proceedings for
determination of the crossclaim of intervenor EL-VI Realty and Development
Corporation against defendant-appellee Barstowe Philippines Corporation.

There is no pronouncement as to costs.

The Motion for Reconsideration filed by BPC was denied by the Court of Appeals in a
Resolution,[34] dated 18 March 1998.

G.R. No. 133110

Aggrieved, BPC came before this Court via a Petition for Review on Certiorari[35] under Rule 45
of the Rules of Court, dated 28 April 1998, raising the sole issue of who between BPC and the
Republic has a better title over the subject lots. BPC prays that this Court rule in its favor, and
reverse and set aside the Court of Appeals Decision, dated 8 August 1997, in CA-G.R. CV No.
47522, based on the following grounds

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN

NOT CONSIDERING THE GOOD FAITH OF [BPC] THOUGH IT WAS
ADMITTED BY [REPUBLIC] DURING THE PRE-TRIAL CONFERENCE.

629
 THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN
UPHOLDING THE VALIDITY OF THE TITLE OF [REPUBLIC] OVER THAT
OF [BPC.]

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR IN

ORDERING [BPC] TO SURRENDER ITS TITLE TO THE REGISTER OF
DEEDS FOR CANCELLATION[.]

THE HONORABLE COURT OF APPEALS ERRED IN ENJOINING [BPC]

FROM EXERCISING ACTS OF OWNERSHIP OVER THE SUBJECT PARCEL
OF LAND[.]

THE HONORABLE COURT OF APPEALES [sic] ERRED IN APPLYING THE

CALALANG CASE (231 SCRA 88) AS IT IS NOT APPLICABLE TO THE
CASE AT BAR[.]

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT

FINDING [REPUBLIC] GUILTY OF ESTOPPEL BY LACHES[.]

After the Republic filed its Comment, dated 29 October 1998, several parties again
sought to intervene in the case.

Winnie U. Nicolas (Nicolas), through her sister and attorney-in-

fact, Ditas Felicitas Nicolas-Agbulos (Nicolas-Agbulos),
and Edgardo Q. Abesamis (Abesamis), filed their respective Petitions for Intervention, dated
22 October 1998 and 9 December 1998, respectively.

Nicolas-Agbulos invokes the provisions of the Rules of Court on the joinder of

indispensable parties and necessary parties for the complete determination of all possible issues,
not only between the parties themselves but also as regards to other persons who may be
affected by the judgment. Nicolas-Agbulos contends that she was a buyer in good faith of Lots

630
No. 27 and 28, Block 13, of Parthenon Hills, covered by TCTs No. 76497 and 76498,
respectively, of the Quezon City Register of Deeds, derived from TCTs No. 30830, 30831, and
30832 in the name of BPC. Nicolas-Agbulos had already partially paid BPC for Lots No. 27
and 28 in the amount of P1,500,000.00, and the balance of P800,000.00 was already deposited
in a trust account in the name of BPC with the Far East Bank and Trust Company (FEBTC). She
bought Lots No. 27 and 28 after relying on the face of the TCTs of BPC which were intact and
subsisting in the records of the Quezon City Register of Deeds, and on the authority granted to
BPC by several government agencies, such as the HLURB, LRA, and the Register of Deeds,
for the subdivision, development, and sale of the subject lots to private individuals. She only
came to know, through her sister and attorney-in-fact, Nicolas-Agbulos, that the TCTs of BPC
covering the subject lots, which comprised the Parthenon Hills, were being assailed in Civil
Case No. Q-92-11806 pending before the RTC. Nicolas inquiry on the matter was answered by
BPC with an assurance that despite the bad publicity, Parthenon Hills was an on-going project
and that she should continue paying her installments. Acting cautiously, Nicolas-
Agbulos decided that instead of paying the balance of the purchase price for Lots No. 27 and
28 directly to BPC, she would open a trust account with FEBTC in the name of BPC where she
would deposit Nicolas-Agbulos succeeding installment payments. Nicolas-Agbulos was
compelled to intervene in the instant case because BPC made no mention of the fact that it had
already sold numerous subdivision lots in Parthenon Hills to innocent purchasers for value,
either through absolute or installment sales. She thus sought a ruling upholding the title of BPC,
and recognizing and protecting the rights of Nicolas as an innocent purchaser for value of Lots
No. 27 and 28.[36]

Abesamis seeks to intervene in the present case as an indispensable party since no

complete and conclusive determination can be had therein, which shall be legally binding and
effective on Abesamis, unless he be allowed to intervene. Abesamis claims to have acquired by
purchase Lot No. 16, Block 4, of Parthenon Hills, for the purchase price of P720,000.00, and
evidenced by a Deed of Absolute Sale dated 9 June 1993. BPC processed and secured TCT No.
92270 covering Lot No. 16 in Abesamis name. He only learned that the subject lots comprising
the Parthenon Hills, including his Lot No. 16, was mired in controversy, when he attended an

631
emergency meeting of the Homeowners Association of Parthenon Hills. He asserts that, being
a bona fide purchaser and holder of a legitimate and indefeasible title to Lot No. 16, he had
valid and enforceable rights against both BPC and the Republic.[37]

A third Petition in Intervention, dated 8 February 1999, was filed by spouses Jacinto H.
Santiago, Jr. and Arlene C. Santiago (spouses Santiago). The spouses Santiago aver that, doing
business as ACS Trading, they entered into a supply agreement with Proven International
Development Corporation (PIDC), which had a construction contract with BPC, for the
development of Parthenon Hills. The spouses Santiago agreed to accept lots in Parthenon Hills
as payment for the construction materials they supplied BPC since the latter showed them
clean TCTs to the subject lots, and HLURB licenses and permits to develop Parthenon Hills. In
payment for the construction materials delivered, and financial assistance and various other
professional services rendered by the spouses Santiago to BPC, the latter initially executed in
their favor 15 Deeds of Assignment for 15 subdivision lots in Parthenon Hills. The TCTs for
the 15 subdivision lots were transferred in the name of the spouses Santiago free from any lien
or encumbrance. The spouses Santiago mortgaged 13 of the subdivision lots with the Planters
Development Bank and sold the remaining two to different buyers. Thereafter, BPC again
executed in favor of the spouses Santigao 71 Deeds of Assignment over 71 subdivision lots in
Parthenon Hills. When the spouses Santiago attempted to transfer the TCTs covering the 71
subdivision lots to their names, they discovered that the TCTs of BPC already bore the
annotation of the notice of lis pendens. The Quezon City Register of Deeds cancelled
the TCTs of BPC covering the 71 subdivision lots and issued new ones in the names of the
spouses Santiago, still bearing the annotation of the notice of lis pendens. The spouses Santiago
claim that they were unable to intervene earlier in this case because of the pendency of the case
filed by BPC against them, docketed as Civil Case No. 93-18231, with the Quezon City RTC,
Branch 84, for the annulment of the last 71 Deeds of Assignment. This case had since been
dismissed. The spouses Santiago invoke that they have sufficient interest in the present case
which would necessarily be affected by the resolution/decision thereof, and they must
necessarily intervene herein to protect their interest. The spouses Santiago pray for this Court

632
 to declare the assignment to them by BPC of the subdivision lots as valid, and to direct both
BPC and the Republic to recognize and respect their rights and interest.[38]

BPC supports the intervention in the case by Nicolas-Agbulos and Abesamis. It

explains that its failure to mention that it has already practically sold all the subdivision lots in
Parthenon Hills was not by design, but by mere oversight.[39] However, BPC opposes the
intervention of the spouses Santiago claiming that the latter are not indispensable parties to the
case; they acquired their TCTs through fraudulent means; and Civil Case No. 93-18231 which
it instituted against the spouses Santiago was dismissed by the Quezon City RTC, Branch 84,
without prejudice. According to BPC, the supply agreement for construction materials was
between the spouses Santiago and PIDC, so that it could not be enforced against BPC. This
issue, as well as the validity of the 71 Deeds of Assignment over 71 subdivision lots supposedly
executed by BPC in favor of the spouses Santiago, requires the holding of a trial, not a mere
intervention.[40]

The Republic opposed all efforts of other parties to intervene in the case. The legal
interests of Nicolas-Agbulos, Abesamis, and the spouses Santiago are totally dependent on the
alleged right of ownership of BPC, and the issues they raised are similar to those raised by
BPC. The fact that Nicolas-Agbulos and Abesamis are purchasers in good faith will not render
their titles valid and indefeasible. The titles of Servando from whom BPC acquired its titles and
from whom, in turn, Nicolas-Agbulos and Abesamis, derived their titles, were found to be
spurious; and the spring cannot rise higher than its source.[41]

In the interim, BPC filed its Reply dated 22 January 1999, to the Comment of the
Republic.

This Court, in a Resolution, dated 22 March 1999, granted the motion of the Republic for
the issuance of a temporary restraining order enjoining BPC from selling the remaining unsold
portions of the subject lots and from allowing buyers to enter and occupy portions thereof.[42]

633
Thereafter, BPC,[43] the Republic,[44] spouses Santiago,[45] Abesamis,[46] and Nicolas-
[47]
Agbulos, filed their respective Memoranda.

However, even before the case could be submitted for decision, Servandos heirs,
namely Virgilio V. Accibal (Virgilio), Virginia A. Macabudbod (Virginia), and Antonio, filed an
Urgent Ex Parte Motion to Defer Resolution of the same. Soon after, they filed a Petition for New
Trial, dated 23 May 2001.[48] Although Servandos heirs concede that the period allowed for the
filing of a motion to set aside the judgment and grant a new trial under Rule 37, Section 1 of the
Rules of Court, had already lapsed, on grounds of justice and equity, they still move that this Court
grant their Petition. Servandos heirs were allegedly prevented from participating in Civil Case No.
Q-92-11806 before the RTC by the fraudulent misrepresentations of Rev. Father Antonio
O. Ipo (Ipo), BPC President, together with the BPC counsel, who convinced the nave Antonio that
there was no need to worry about the case filed by the Republic against them and to hire another
counsel as the BPC counsel shall represent all of them. Unknown to Servandos heirs, the BPC
counsel neither represented them nor included them in the Answer he filed on behalf of BPC,
thus, Servandos heirs were declared in default by the RTC. Because of the extrinsic fraud
perpetrated upon them and their excusable negligence, Servandos heirs should be granted a new
trial, otherwise, they would be deprived of their constitutional right to due process of
law. According to Servandos heirs, neither BPC nor the Republic was a purchaser in good faith
who acquired clean titles to the subject lots. The BPC President Ipo, hoodwinked Antonio into
agreeing to convey the subject lots to BPC in exchange for 51% of its capital stock. However,
despite acquiring titles to the subject lots, BPC failed to transfer the promised 51% of its capital
stock. On the other hand, the TCTs of FPHC, the Republics predecessor-in-interest, were of
doubtful origin; and the Republics acquisition of the subject lots from FPHC was anomalous in
the sense that it purchased the said property through ordinary sale when it could have easily
expropriated the same.

Without formally intervening in the case at bar, Sariling Sikap Pabahay (SSP), through its
President, Elias V. Esraita, submitted to this Court a letter,[49] dated 26 August 2002, together with
other documents to disprove the validity of the titles of Servando and his heirs to the subject
lots. SSP is a cooperative formed by the urban poor to help secure for its members award from the
government of titles to the portions of the subject lots which they are presently occupying. It
presented the affidavit of a certain Edith C. Mantaring,[50] who attests that the Accibals are still

634
misrepresenting themselves as owners of the subject lots and fraudulently selling portions thereof
to unsuspecting buyers.

This Courts Ruling

Ultimately, this Court is called upon to determine which party now has superior title to the subject
lots: the Republic, BPC, the intervenors Abesamis, Nicolas-Agbulos, and spouses Santiago,
or Servandos heirs?

BPC, the intervenors Abesamis, Nicolas-Agbulos, spouses Santiago, and Servandos heirs derived
their title to the subject lots from Servandos TCTs No. 200629 and 200630. This Court then is
compelled to look into the validity, authenticity, and existence of these two TCTs.
It is alleged by BPC and Servandos heirs that Servando was issued TCTs No. 200629 and 200630
on 24 July 1974. However, there is an absolute dearth of information and proof as to
how Servando acquired ownership and came into possession of the subject lots.

An investigation conducted by the LRA revealed even more irregularities which raised serious
doubts as to the validity and authenticity of TCTs No. 200629 and 200630. The LRA Report,
dated 10 June 1992, submitted by Investigator Benjamin A. Flestado (Flestado), found the said
certificates of titles spurious after a very detailed and exhaustive analysis of the evidence available.

First, it should be noted that despite letters sent by Investigator Flestado to BPC
President Ipo, Servando, and Antonio, requesting copies of documents to support the issuance
of TCTs No. 200629 and 200630, they failed to file a reply and furnish him with the documents
requested. A certain Atty. Justino Z. Benito (Atty. Benito) appeared before
Investigator Flestado claiming to be the counsel for BPC and promising to
contact Servandos heirs. Yet, even by the time the LRA Report was finalized on 10 June 1992,
Atty. Benito still failed to submit the documents requested. Instead, he wrote letters insisting
that TCTs No. 200629 and 200630 be returned to the Quezon City Register of Deeds since these
certificates were detached and transferred to [your LRA central] office for no cogent reason or
purpose; and his client, BPC, is a transferee in good faith and for value, and its titles unchallenged.
635
Second, although the 109-D forms on which TCTs No. 200629 and 200630 were printed appeared
to be genuine, and determined to have been issued to the Quezon City Register of Deeds on 5 July
1974, the signature therein of the Quezon City Register of Deeds Atty. Nestor N. Pea (Atty. Pea)
was forged. No less than Atty. Pea himself refuted that the signatures on TCTs No. 200629 and
200630 were his. In his sworn statement, he noted

A. At a glance, I am definitely sure that the signatures appearing here are not
mine. My attention is invited on the loop, on the starting point of the
signature. The loop should be sharp on the last portion of my signature. The
portion going-up starts from a point and is also sharp because that
represents hypen [sic] on letter n. I notice in these titles my surname is typed
as PENA and not PEA. If ever there is no in the typewriter, I used to
add hypen [sic] over the letter n. Besides, my position here is indicated as
Deputy Register of Deeds. I never signed titles as Deputy Register of Deeds,
during my time; and if ever a title was presented indicating my position as
Deputy Register of Deeds, I would erase the word Deputy. Moreso, the pen
used here was a sign-pen. I never used a signpen, as shown in the other 5
titles I identified earlier.

His employment records revealed that Atty. Pea was appointed as the Quezon City Register of
Deeds on 27 May 1968, and served as such until his retirement in August of 1980, so that at the
time when he supposedly signed TCTs No. 200629 and 200630 on 24 July 1974, he was
the Quezon City Register of Deeds, not the Deputy Register of Deeds.

Third, even the then incumbent Quezon City Register of Deeds Samuel Cleofe (RD Cleofe) and
Deputy Register of Deeds Edgardo Castro (DRD Castro) believed that TCTs No. 200629 and
200630 were spurious. According to RD Cleofe, the size of the area covered by the TCTs made
him highly suspicious of the same. In Quezon City, only a few people own big tracts of land,
namely, the Aranetas, Tuazons, etc. Commonly, ordinary individuals own only 300 to 2,000
square meters of land. Both RD Cleofe and DRD Castro identified differences in the signatures
and designation of Atty. Pea appearing on the questionable TCTs No. 200629 and 200630
compared to those on five other admittedly authentic TCTs.[51].

636
 Fourth, the National Bureau of Investigation (NBI), upon request of Investigator Flestado,
conducted an examination and issued Questioned Documents Report No. 636-991, dated 31 March
1992, wherein it noted significant differences in the handwriting characteristics between the
standard/sample signatures of Atty. Pea and those appearing on TCTs No. 200629 and
200630, i.e., in the manner of execution, direction/movement of strokes, and other identifying
details. The NBI concluded that [t]he questioned and the standard/sample signatures of
[N]estor N. Pea were NOT WRITTEN by one and the same person.

Finally, Investigator Flestado made inquiries with the Land Management Bureau (LMB)
regarding the consolidation-subdivision plan Pcs-2480 and plan Psu-32606 of Lots 34 and 40 (the
subject lots) as described in TCTs No. 200629 and 200630. LMB Geodetic Surveys Division
Chief Privadi J.G. Dalire, in a letter, dated 29 November 1991, informed Investigator Flestado that
LMB had no records of Pcs-2480, while the original copy of Psu-32606 is no longer available as
it had been badly damaged. Thus, there was no record in the LMB that Lots 34 and 40, Psu-32606,
were in fact consolidated and then subdivided into Lots 3, 4, 5, and 6 pursuant to plan Pcs-2480,
as mentioned in TCTs No. 200629 and 200630.

To rebut the foregoing findings of LRA Investigator Flestado, BPC presented, in support
of the authenticity and validity of TCTs No. 200629 and 200630, the LRA Resolution,[52] dated 4
November 1991, in Consulta No. 1957, and NBI Questioned Documents Report No. 585-
891,[53] dated 2 September 1991. A careful study of the said documents does little to support the
position of BPC.

The LRA Resolution in Consulta No. 1957 merely allowed the registration of the rescission
of a Joint Venture Agreement on TCTs No. 200629 and 200630 despite the initial adverse finding
that the said certificates were of doubtful authenticity. It did not make any categorical finding as
to the authenticity or validity of the TCTs. In fact, the last paragraph of the said Resolution
elucidated that

This resolution, however, should be understood to be limited to the issue

of registrability of the instrument sought to be registered and is without

637
 prejudice to any action, if warranted, that may be filed in court assailing the validity
or authenticity of the certificate of titles. (Emphasis supplied.)

The NBI Questioned Documents Report No. 585-891 was even in accordance with the
finding in the LRA Report that the 109-D forms on which TCTs No. 200629 and 200630 were
printed seemed to be genuine. The NBI concluded that the words 109-D and the serial numbers
printed on the forms were not altered. The NBI did a very limited examination of the genuineness
of the forms on which TCTs No. 200629 and 200630 were printed, but it did not look into the
authenticity of Atty. Peas signature (which was the subject of NBI Questioned Documents Report
No. 636-991, dated 31 March 1992, mentioned in the LRA Report) or the accuracy of the entries
made therein.

The LRA Report, dated 10 June 1992, of Investigator Flestado was submitted as evidence
before the RTC. It must be emphasized that the LRA Report was extensive and thorough. Its
findings are sufficiently supported by independent and reliable proof. The BPC failed to present
evidence to refute the same. The LRA Report deserves great weight sufficient to overcome the
presumption that TCTs No. 200629 and 200630 were genuine, authentic, and indefeasible.[54]

It having been established that TCTs No. 200629 and 200630 were forged and spurious,
their reconstitution was also attended with grave irregularities. Once more, this Court relies on the
findings in the LRA Report, dated 10 June 1992, of Investigator Flestado. Quezon City
RD Cleofe; the unnamed Chief of the LRA Micrographics and Computer Division; and Records
Officer Viterbo Cahilig of the Quezon City Register of Deeds, all confirmed that there were no
records of any applications for reconstitution of TCTs No. 200629 and 200630 in the name
of Servando. It would seem that an LRA employee, Cartographer Rovil Ruiz (Ruiz), made it
appear that there were applications for reconstitution of TCTs No. 200629 and 200630 filed, and
which were included in Folder 1614. When Folder 1614 was inspected, TCTs No. 200629 and
200630 were not included in its table of contents; and although the said folder did have 44 missing
pages, the missing pages pertain to the supporting documents of other TCTs, and there was no
showing that TCTs No. 200629 and 200630 and the applications for reconstitution thereof were
among these missing pages. Ruiz undertook by himself the computation of the tie-lines of the
638
subject lots as described in TCTs No. 200629 and 200630, the plotting, and examination of the
titles. The LRA Report thus recommended that Ruiz be administratively charged for grave
misconduct, it appearing that he was the one who facilitated the administrative reconstitution
of TCTs No. 200629 and 200630.

In contrast, the Republic was able to supply Investigator Flestado with the documents
supporting the transfer of the titles to the subject lots from FPHC to the Republic, among which
were the TCTs of FPHC, the Deeds of Sale executed by FPHC to the Republic, notice to the real
property owners within 300-meter radius from the area, receipts for payment of registration fees,
and payment order for the documentary stamp tax on the sales. TCTs No. 275443 and 288417 in
the name of the Republic were included in LRA Folder No. 1976-B, together with other certificates
of title in the name of the Republic. One of the applications filed by the Republic was docketed as
Application for Reconstitution No. 41869. The Chief of the LRA Micrographics and Computer
Division confirmed that the applications for reconstitution of TCTs No. 275443 and 288417 by
the Republic were recorded in the computerized Administrative Reconstitution System.

BPC was unable to attack the authenticity and validity of the titles of the Republic to the
subject lots, and could only interpose the defense that it was a buyer in good
faith.Only Servandos heirs, in their Petition for New Trial, attempted to raise doubts as to the titles
of the Republic to the subject lots by averring that the transfer thereof from FPHC to the Republic
was highly irregular because the latter could have acquired the property by expropriation. Such an
averment is totally baseless. Expropriation as the means by which the State can acquire private
property is always the remedy of last resort. Expropriation lies only when it is made necessary by
the opposition of the owner of the property to the sale or by the lack of any agreement as to the
price.[55] There being, in the present case, valid and subsisting contracts between the FPHC, the
previous owner, and the Republic, the buyer, for the purchase of the subject lots at an agreed price,
there was no reason for the expropriation.
.

639
 In consideration of all the foregoing findings, it is indubitable that TCTs No. 275443 and
288417 of the Republic covering the subject lots are authentic and valid, while TCTs No. 200629
and 200630 of Servando covering the same property are not.

However, BPC maintains that it was a purchaser in good faith, for value and without any
inkling about any flaw from Servandos titles. It points out that it purchased the subject lots
from Servando on 8 February 1989 and registered the same on 19 February 1991, way before the
titles of Servando were declared null by the RTC on 22 December 1992. BPC relies on this Courts
ruling in Tenio-Obsequio v. Court of Appeals,[56] to wit

Under Section 55 of the Land Registration Act, as amended by Section 53

of Presidential Decree No. 1529, an original owner of registered land may seek the
annulment of a transfer thereof on the ground of fraud. However, such a remedy is
without prejudice to the rights of any innocent holder for value with a certificate of
title.

A purchaser in good faith and for value is one who buys the property of
another, without notice that some other person has a right to or interest in such
property, and pays a full and fair price for the same at the time of such purchase or
before he has notice of the claim or interest of some other person in the property. In
consonance with this accepted legal definition, petitioner Consorcia Tenio-
Obsequio is a purchaser in good faith. There is no showing whatsoever nor even an
allegation that herein petitioner had any participation, voluntarily or otherwise, in
the alleged forgery.

xxxx

The main purpose of the Torrens system is to avoid possible conflicts of

title to real estate and to facilitate transactions relative thereto by giving the public
the right to rely upon the face of a Torrens certificate of title and to dispense with
the need of inquiring further, except when the party concerned has actual
knowledge of facts and circumstances that should impel a reasonable cautious man
to make such further inquiry. Where innocent third persons, relying on the
correctness of the certificate of title thus issued, acquire rights over the property,
the court cannot disregard such rights and order the total cancellation of the
certificate. The effect of such an outright cancellation would be to impair public
confidence in the certificate of title, for everyone dealing with property registered
under the Torrens system would have to inquire in every instance as to whether the
title has been regularly or irregularly issued by the court. Every person dealing with

640
 registered land may safely rely on the correctness of the certificate of title
issued therefor and the law will in no way oblige him to go beyond the certificate
to determine the condition of the property.

xxxx

It has been consistently ruled that a forged deed can legally be the root of a
valid title when an innocent purchaser for value intervenes. A deed of sale executed
by an impostor without the authority of the owner of the land sold is a nullity, and
registration will not validate what otherwise is an invalid document. However,
where the certificate of title was already transferred from the name of the true owner
to the forger and, while it remained that way, the land was subsequently sold to an
innocent purchaser, the vendee had the right to rely upon what appeared in the
certificate and, in the absence of anything to excite suspicion, was under no
obligation to look beyond the certificate and investigate the title of the vendor
appearing on the face of said certificate.

Now the question is whether BPC qualifies as an innocent purchaser for value which acquired
valid titles to the subject lots, despite the fact that the titles of its predecessor-in-interest were found
to be forged and spurious.

This Court finds in the negative.

Foremost is the fact that there seem to be two documents by which titles to the subject lots were
transferred from the Accibals to BPC: (1) A Deed of Conveyance, dated 8 February 1989, executed
by Servando in favor of BPC, transferring to the latter titles to the subject lots in exchange for 51%
of its capital stock; and (2) A Deed of Conveyance, dated 10 October 1990, executed by Antonio
in favor of BPC, transferring to the latter the very same property in exchange for 2,450 shares in
BPC. It should be noted that even prior to these Deeds of Conveyance, Servando already
transferred the subject lots by way of a Deed of Absolute Sale, dated 10 June 1988, in favor of his
son Antonio, with the concurrence of his other heirs. Thus, by the time Servando executed the
Deed of Conveyance over the subject lots in favor of BPC on 8 February 1989, he no longer had
any right to the said property, having sold the same to Antonio. It was probably to rectify this
mistake that a second Deed of Conveyance was executed by Antonio on 10 October
1990.Comparing all these transfer documents, the LRA Report, dated 10 June 1992, prepared by

641
Investigator Flestado noted that Servandos Tax Account Number (TAN) in the Deed of
Conveyance, dated 8 February 1989, which he executed over the subject lots in favor of BPC, was
A2140-M1746-A-1; while in the Deed of Sale, dated 10 June 1988, which he executed over the
subject lots in favor of Antonio, his TAN was 4110-241-R. Moreover, despite being executed a
year apart, Servando had the same residence certificate (No. 5901393, issued at Quezon City, on
6 April 1988) appearing in both documents.
Furthermore, BPC cannot really claim that it was a purchaser in good faith which relied upon the
face of Servandos titles. It should be recalled that the Quezon City Register of Deeds caught fire
on 11 June 1988. Presumably, the original copies of TCTs No. 200629 and 200630 were burnt in
the said fire. Servandos heirs sought the administrative reconstitution of of TCTs No. 200629 and
200630 only in December 1990. The two Deeds of Conveyance over the subject lots were executed
in favor of BPC by Servando and Antonio on 8 February 1989 and 10 October 1990, respectively,
both prior to the administrative reconstitution of TCTs No. 200629 and 200630. If BPC bought
the subject lots after TCTs No. 200629 and 200630 were destroyed when the Quezon City Register
of Deeds burned down, but before the said certificates were reconstituted, then on the face of what
titles did BPC rely on before deciding to proceed with the purchase of the subject lots? There was
no showing that there were surviving owners duplicate copies of TCTsNo. 200629 and 200630, or
even if there were, without the original copies of the said TCTs which were stored in
the Quezon City Register of Deeds and purportedly destroyed in the fire, there would have been
no way for BPC to have verified the owners duplicate copies.

In addition, without the original copies and owners duplicate copies of TCTs No. 200629
and 200630, BPC had to rely on the reconstituted certificates, issued on 12 December 1990,
bearing the following numbers: TCTs No. RT-23687 (for TCT No. 200629) and RT-23688 (for
TCT No. 200630). Under section 7 of Republic Act No. 26,[57]"Reconstituted titles shall have the
same validity and legal effect as the originals thereof" unless the reconstitution was
made extrajudicially.[58] In this case, TCTs No. 200629 and 200630 were reconstituted
administratively, hence, extrajudicially. In contrast to the judicial reconstitution of a lost certificate
of title which is in rem, the administrative reconstitution is essentially ex-parte and without

642
notice.[59] The reconstituted certificates of title do not share the same indefeasible character of the
original certificates of title for the following reason

x x x The nature of a reconstituted Transfer Certificate Of Title of registered land

is similar to that of a second Owner's Duplicate Transfer Certificate Of Title. Both
are issued, after the proper proceedings, on the representation of the registered
owner that the original of the said TCT or the original of the Owner's Duplicate
TCT, respectively, was lost and could not be located or found despite diligent
efforts exerted for that purpose. Both, therefore, are subsequent copies of the
originals thereof. A cursory examination of these subsequent copies would show
that they are not the originals. Anyone dealing with such copies are put on notice
of such fact and thus warned to be extra-careful. x x x.[60]

The fact that the TCTs were reconstituted should have alerted BPC and its officers to conduct an
inquiry or investigation as might be necessary to acquaint themselves with the defects in the titles
of Servando.[61]

What is more, BPC again invokes LRA Resolution, dated 4 November 1991, in Consulta No.
1957, and NBI Questioned Documents Report No. 585-891, dated 2 September 1991 as proof that
it did inquire or investigate into the validity and authenticity of Servandos titles. But again, it
should be noted that these documents were issued after BPC already acquired the subject lots
from Servando and Antonio.

Lastly, there are serious doubts that BPC acquired the subject lots for value. The Republic bought
the subject lots from FPHC for the combined price of P12,333,280.00. BPC, on the other hand,
supposedly acquired the subject lots from Servando on 8 February 1989 in exchange for 51% of
the capital stock of BPC, with a subscription value of P6,000,000.00. In the LRA Report, dated 10
June 1992, Investigator Flestado pointed out that in the Articles of Incorporation, dated 16 January
1989, of BPC, submitted to the Securities and Exchange Commission (SEC) on 20 January 1989,
BPC had an authorized capital stock of only P1,000,000.00, which was divided into 10,000 shares,
with a par value of P100.00 each; and the amount of capital stock actually subscribed
was P250,000.00. Therefore, in 1989, fifty-one percent of the capital stock of BPC would be 5,100
shares, with an aggregate value of only P510,000.00. BPC is not saved by the second Deed of

643
Conveyance, executed more than a year later by Antonio, again transferring to BPC the subject
lots in exchange for 2,450 shares in the latter, with the alleged value of P49,000.000.00. Unless
BPC is able to present proof that it applied for, and the SEC approved, a substantial increase in its
capital stock, then this Court can only assume that its capital stock remained the same as the year
before, 2,450 shares in BPC, with a par value of P100.00 each, amount only to P245,000.00. This
Court cannot find a plausible explanation for the discrepancy in the value of 2,450 shares of BPC
between the P245,000.00 it has hereby computed and the P49,000,000.00 claimed by BPC.

For the above-stated reasons, this Court cannot declare BPC an innocent purchaser for
value, and it acquired no better titles to the subject lots than its predecessors-in-
interest, Servando and Antonio.

At this point, it would seem that the Republic does hold better titles to the subject
lots. Nonetheless, another level of transactions involving the subject lots was brought
by intervenors to the attention of this Court.

From the reconstituted TCTs No. RT-23687 (200629) and RT- 23688 (200630) in the
name of Servando, BPC derived and was issued by the Quezon City Register of Deeds new
certificates, TCTs No. 30829, 30830, 30831 and 30832, in its own name. It was able to secure
the necessary licenses and permits from the appropriate government agencies to subdivide,
develop, and sell the subject lots as Parthenon Hills. The Parthenon Hills project was openly
advertised and marketed, and a substantial portion of the subject lots was already sold by BPC
to the public.

Except for the spouses Santiago, BPC recognizes that the intervenors, Nicolas-
Agbulos and Abesamis, together with other legitimate homeowners in Parthenon Hills,
acquired from BPC titles to their respective subdivided lots in good faith and for value. Even
the Republic could not refute that the individuals who acquired lots in Parthenon Hills from
BPC were purchasers in good faith and for value. It insists, however, that these buyers could
not acquire better titles to the property than its predecessors-in-interest BPC, Servando, and

644
 Antonio since the spring cannot rise higher than its source. The law must protect and prefer the
lawful holder of registered title over the transferee of a vendor bereft of any transmissible
rights.[62]

It is true that the general rule is that a forged deed is a nullity and conveys no title.[63] A
forged deed may be defined as an instrument which purports to have been executed by the person
or persons whose signatures appear thereon, but which, in fact, was not executed, and the
signatures thereon had been merely imitated so as to give them the deceptive appearance of
genuineness.[64] In the case at bar, it was not any of the deeds of transfer or conveyance of the
subject lots which was forged, but TCTs No. 200629 and 200630 themselves. The forged TCTs,
nevertheless, just as a forged deed, can make it appear that one had title, right, or interest to the
land, when in truth, he had none, to the deprivation of the rightful owner. It has been recognized
that while a forged instrument is null and void and of no effect as between the parties, it may
nevertheless be the root of a good title; so that the title of a registered owner who has taken it bona
fide and for value, is not affected by reason of his claiming through someone, that the registration
was void because it had been procured by the presentation of a forged instrument.[65]

The forged TCTs No. 200629 and 200630 were later administratively reconstituted, and
although an investigation would show that their reconstitution was also attended with
irregularities, TCTs No. RT-23687 (200629) and RT-23688 (200630) appear, on either face, to
have been duly approved by the LRA and issued by the Quezon City Register of Deeds. With the
cancellation of the reconstituted TCTs and the issuance of new ones, TCTs No. 30829, 30830,
30831, and 30832, in the name of BPC, any trace of forgery or irregularity as to BPCs titles was
eliminated. TCTs No. 30829, 30830, 30831, and 30832 were clean, at least, until the annotation
therein of the notice of lis pendens of the Republic on 21 October 1992. It is a settled doctrine that
one who deals with property registered under the Torrens system need not go beyond the same,
but only has to rely on the certificates of title. He is charged with notice only of such burdens and
claims as are annotated on the certificates.[66] Herein intervenors, Nicolas-Agbulos and Abesamis,
before purchasing subdivision lots in Parthenon Hills, looked into the TCTs of BPC and found
nothing on the face thereof to raise doubts or suspicions as to their validity and
authenticity. Besides, BPC was the holder of licenses and permits to subdivide, develop, and sell
the subject lots as Parthenon Hills, issued by the appropriate government agencies, primarily
HLURB.

645
 This is definitely a situation which constitutes an exception to the general rule
that estoppel cannot lie against the government. The Republic v. Court of Appeals,[67]provides an
illuminating discourse on when such an exception applies, thus

Is the immunity of the government from laches and estoppel absolute? May
it still recover the ownership of lots sold in good faith by a private developer to
innocent purchasers for value, notwithstanding its approval of the subdivision plan
and its issuance of separate individual certificates of title thereto?
xxxx
The general rule is that the State cannot be put in estoppel by the mistakes
or errors of its officials or agents. However, like all general rules, this is also subject
to exceptions, viz:
"Estoppels against the public are little favored. They should
not be invoked except in rare and unusual circumstances, and may
not be invoked where they would operate to defeat the effective
operation of a policy adopted to protect the public. They must be
applied with circumspection and should be applied only in those
special cases where the interests of justice clearly require it.
Nevertheless, the government must not be allowed to deal
dishonorably or capriciously with its citizens, and must not play an
ignoble part or do a shabby thing; and subject to limitations x x x the
doctrine of equitable estoppel may be invoked against public
authorities as well as against private individuals."
xxxx
Significantly, the other private respondents Spouses Santos,
Spouses Calaguian, Dela Fuente and Madaya bought such "expanded" lots in good
faith, relying on the clean certificates of St. Jude, which had no notice of any flaw
in them either. It is only fair and reasonable to apply the equitable principle
of estoppel by laches against the government to avoid an injustice to the innocent
purchasers for value.
Likewise time-settled is the doctrine that where innocent third persons,
relying on the correctness of the certificate of title, acquire rights over the property,
courts cannot disregard such rights and order the cancellation of the certificate.
Such cancellation would impair public confidence in the certificate of title, for
everyone dealing with property registered under the Torrens system would have to
inquire in every instance whether the title has been regularly issued or not. This
would be contrary to the very purpose of the law, which is to stabilize land titles.
Verily, all persons dealing with registered land may safely rely on the correctness
of the certificate of title issued therefor, and the law or the courts do not oblige,

646
them to go behind the certificate in order to investigate again the true condition of
the property. They are only charged with notice of the lions and encumbrances on
the property that are noted on the certificate.
When private respondents-purchasers bought their lots from St. Jude, they
did not have to go behind the titles thereto to verify their contents or search for
hidden defects or inchoate rights that could defeat their rights to said lots. Although
they were bound by liens and encumbrances annotated on the titles, private
respondents purchasers could not have had notice of defects that only an inquiry
beyond the face of the titles could have satisfied. The rationale for this presumption
has been stated thus:
"The main purpose of the Torrens System is to avoid
possible conflicts of title to real estate and to facilitate transactions,
relative thereto by giving the public the right to rely upon the face
of a Torrens Certificate of Title and to dispense with the need of
inquiring further, except when the party concerned had actual
knowledge of facts and circumstances that should impel a
reasonably cautious man to make such further inquiry
(Pascua v. Capuyoc, 77 SCRA 78). Thus, where innocent third
persons relying on the correctness of the certificate thus issued,
acquire rights over the property, the court cannot disregard such
rights (Director of Land v. Abache, et al., 73 Phil. 606)."
In another case, this Court further said:
"The Torrens System was adopted in this country because it
was believed to be the most effective measure to guarantee the
integrity of land titles and to protect their indefeasibility once the
claim of ownership is established and recognized. If a person
purchases a piece of land on the assurance that the seller's title
thereto is valid, he should not run the risk of being told later that his
acquisition was ineffectual after all. This would not only be unfair
to him. What is worse is that if this were permitted, public
confidence in the system would be eroded and land transactions
would have to be attended by complicated and not necessarily
conclusive investigations and proof of ownership. The further
consequence would be that land conflicts could be even more
abrasive, if not even violent. The Government, recognizing the
worthy purposes of the Torrens System, should be the first to accept
the validity of titles issued thereunder once the conditions laid down
by the law are satisfied. [Italics supplied.]
Petitioner never presented proof that the private respondents who had
bought their lots from St. Jude were buyers in bad faith. Consequently, their claim
of good faith prevails. A purchaser good faith and for value is one who buys the
property of another without notice that some other person has a right to or an
interest in such property; and who pays a full and fair price for the same at the time

647
 of such purchase or before he or she has notice of the claims or interest of some
other person. Good faith is the honest intention to abstain from taking
any unconscientious advantage of another.

It also bears to emphasize that the subject lots covered by TCTs No. 30829, 30830, 30831,
and 30832 were already subdivided, and new TCTs were issued in the names of the buyers of each
subdivision lot. To order the cancellation of all these derivative titles and the return of the
subdivision lots to the Republic shall irrefragably be unjust to the innocent purchasers for value
and shall wreak havoc on the Torrens System.

Anyway, the Republic is not without recourse. It can claim damages from BPC, found
herein not to be a buyer of the subject lots in good faith. For its loss of portions of the subdivision
lots to innocent purchasers from BPC, the Republic may recover from BPC the purchase price it
paid to FPHC corresponding to such subdivision lots, with interest at 6% per annum from 26 March
1992 (the date when the Republic instituted its petition for the cancellation of
the TCTs of Servando, Antonio, and BPC) until finality of this Decision, and 12% per annum
thereafter until fully paid.[68]

Although this Court allowed in the case at bar the intervention of Nicolas-
Agbulos and Abesamis, and recognized their title to their respective subdivision lots in Parthenon
Hills as purchasers in good faith and for value from BPC, it could not do the same for the spouses
Santiago, for the reason that BPC contested their claim that they had acquired titles to the
subdivision lots in Parthenon Hills in good faith and for value, and further asserted that the spouses
Santiago acquired the said subdivision lots by fraudulent means.The allegations by the
spouses Santiago of good faith, on one hand, and by BPC of fraud, on the other, in the acquisition
by the spouses Santiago of the subdivision lots in question, are factual matters, best proven and
established before the RTC, which could receive evidence in support of each partys position during
trial. Should the RTC find that the spouses Santiago have indeed acquired the subdivision lots in
good faith and for value, then their titles thereto shall, likewise, be valid and indefeasible even

648
against that of the Republic. However, in a contrary case, should the RTC find that the
spouses Santiago acquired the subdivision lots by fraud, then titles thereto return to BPC.

Though estoppel by laches may lie against the Republic when titles to the subdivision lots
are already in the names of the respective innocent purchasers for value from BPC, it may not be
used by BPC to defeat the titles of the Republic as regards the subdivision lots which remain unsold
and the titles to which are still in the name of BPC. It must be recalled that BPC is not a purchaser
in good faith. Estoppel, being an equitable principle, may only be invoked by one who comes to
court with clean hands.[69]

Pertinent provisions of the New Civil Code concerning builders in bad faith provide that

ART. 449. He who builds, plants, or sows in bad faith on the land of
another, loses what is built, planted or sown without right to indemnity.

ART. 450. The owner of the land on which anything has been built, planted
or sown in bad faith may demand the demolition of the work, or that the planting
or sowing be removed, in order to replace things in their former condition at the
expense of the person who built, planted or sowed; or he may compel the builder
or planter to pay the price of the land, and the sower the proper rent.

ART. 451. In cases of the two preceding articles, the landowner is entitled
to damages from the builder, planter or sower.

ART. 452. The builder, planter or sower in bad faith is entitled to

reimbursement for the necessary expenses of preservation of the land.

Hence, as far as the subdivision lots still in the name of BPC are concerned, the Republic has the
option to either (1) recover the said lots and demand that BPC demolish whatever improvements
it has made therein, to return the lots to their former condition, at the expense of BPC; or (2)
compel BPC to pay the price of the land. The choice can only be made by the Republic, as the
rightful owner of the said subject lots. Should the Republic choose the first option, BPC is under
the obligation to return the possession of the subdivision lots to the Republic and surrender its
corresponding TCTs for cancellation and issuance of new ones in the name of the
Republic. Should the Republic select the second option, then BPC shall pay the Republic the

649
purchase price that the latter had paid to FPHC corresponding to such subdivision lots, with interest
at 6% per annum from 26 March 1992 until finality of this Decision, and 12% per annum thereafter
until fully paid. In either option, the Republic may claim damages from BPC, while BPC cannot
seek indemnity from the Republic for any improvements made on the subdivision lots, except if
these constitute as necessary expenses for the preservation of the land, for which it shall still be
entitled to reimbursement.

As for the Petition for New Trial filed by Servandos heirs, this Court dismisses the same
for lack of legal basis. Section 1, Rule 37 of the Rules of Court reads

SECTION 1. Grounds of and period for filing motion for new trial or
reconsideration. Within the period for taking an appeal, the aggrieved party may
move the trial court to set aside the judgment or final order and grant a new trial for
one or more of the following causes materially affecting the substantial rights of
the said party:

(a) Fraud, accident, mistake or excusable negligence which ordinary

prudence could not have guarded against and by reason of which such aggrieved
party has probably been impaired in his rights; or

(b) Newly discovered evidence, which he could not, with reasonable

diligence, have discovered and produced at the trial, and which if presented would
probably alter the result.

Servandos heirs themselves admit that the period allowed for the filing of a motion to set
aside the judgment and grant a new trial under the afore-quoted provision had already lapsed, but
they still pray that this Court give due course to their Petition on the grounds of justice and equity.

In Malipol v. Lim Tan,[70] this Court ruled that

It is within the sound discretion of the court to set aside an order of default
and to permit a defendant to file his answer and to be heard on the merits even after
the reglementary period for the filing of the answer has expired, but it is not error,
or an abuse of discretion, on the part of the court to refuse to set aside its order of
default and to refuse to accept the answer where it finds no justifiable reason for

650
 the delay in the filing of the answer. In the motions for reconsideration of an order
of default, the moving parry has the burden of showing such diligence as would
justify his being excused from not filing the answer within the reglementary period
as provided by the Rules of Court, otherwise these guidelines for an orderly and
expeditious procedure would be rendered meaningless. Unless it is shown clearly
that a party has justifiable reason for the delay, the court will not ordinarily exercise
its discretion in his favor.

In the present case, the late Servando and Antonio were already declared in default by the
RTC on 31 July 1992, after their supposed counsel failed to file an answer to the Republics petition
for cancellation of title. Nothing was heard from Servandos heirs even after the promulgation of
the RTC Decision on 22 December 1992, and the Court of Appeals Decision, dated 8 August 1997,
until they filed their Petition for New Trial, dated 23 May 2001, before this Court, or nine years
from the date they were declared in default.

According to Servandos heirs, due to the extrinsic fraud committed by the President and
counsel of BPC, they were prevented from participating in the proceedings before the trial
court. They allegedly relied on the assurance of the President and counsel of BPC that the latter
shall also represent them and their interests in the subject lots in the case.

This allegation of fraud by Servandos heirs has no leg to stand on. It should be recalled that
the late Servando and Antonio were represented by a counsel at the beginning of the proceedings
before the RTC. Their counsel even submitted two consecutive motions for extension of time to
file the appropriate pleadings. There was no explanation provided as to why, despite the grant of
said motions, the counsel still failed to file an answer to the Republics petition for cancellation of
title. It is also contrary to common human experience that Servandos heirs, by the mere assurance
of the President and counsel of BPC, adopted a totally hands-off attitude in a case where they
supposedly have substantial interest. There is no showing during the nine years when they were
not participating in the court proceedings, that they, at least, inquired into or followed-up on the
status of the case with BPC. Such blind trust in the President and counsel of BPC is surely difficult
to comprehend, especially if this Court takes into account the contention of Servandos heirs that

651
BPC failed to deliver the shares of stock in exchange for the subject lots. What is apparent to this
Court is not the alleged fraud committed by BPC but, rather, the inexcusable negligence
of Servandos heirs when it came to protecting their titles, rights, and interests to the subject lots,
if indeed, there were still any.

Worth reproducing herein, is the conclusion[71] made by the Court of Appeals

on Servandos titles

On the strength of the LRA report, Exhibit H (Record, pp. 214-258), the
court a quo found TCT Nos. 200629 and 200630, in the name
of Servando Accibal and from which the titles of defendant-
appellee Barstowe Philippines Corporation were derived, spurious, and ordered the
Register of Deeds of Quezon City to officially and finally cancel (said titles) from
his records (Par. 2, dispositive portion, Decision, p. 16; Rollo, p. 71). As explained
by the court a quo:

We shall now dwell on the validity of the titles, TCT Nos.

200629 and 200630, issued in the name
of Servando Accibal on July 24, 2974 by the Register of Deeds
of Quezon City. The LRA Report dated 10 June 1992 (Exh. H, pp.
214-258, record) is competent proof that indeed said titles must be
cancelled. In short, the LRA found after due investigation that the
said titles of Servando Accibal were issued with
certain irregularties (sic). It recommended the cancellation
therefore, of TCT Nos. 200629 and 200630, to which the court
concurs, as said report must be accorded due respect and in the
absence of fraud or irregularties (sic) that attended the investigation,
which the Court finds none, the same must be persuasive, if not
conclusive. Moreover, herein defendant Servando Accibal because
of his failure to answer, despite extension of time given him,
plaintiffs counsel, he was declared as in default since then, he never
asked the court to lift and set aside the default order. There is no
way, his title may be cancelled. For one thing, he was not able to
present evidence to controvert the recommendation of the LRA to
cancel his titles. For another, Servando Accibal is deemed to have
impliedly admitted the irregularties (sic) that attended the issuance
of his aforestated titles. (Decision, pp. 14-15; Rollo, pp. 69-70)

This portion of the decision ordering the cancellation of TCT Nos. 200629
and 200630 in the name of Servando Accibal was not appealed nor assigned as a

652
 counter-assigment of error in the brief of Barstowe Philippines Corporation; hence,
is now final.

Thus, the findings of this Court as to the rights of the parties involved in the present case
are summarized as follows

(1) The certificates of title acquired by Servando over the subject lots were
forged and spurious, and such finding made by both the RTC and Court of Appeals is already
final and binding on Servandos heirs;

(2) BPC did not acquire the subject lots in good faith and for value, and its
certificates of title cannot defeat those of the Republics;

(3) As between BPC and the Republic, the latter has better titles to the subject
lots being the purchaser thereof in good faith and for value from FPHC;

(4) However, considering that the subject lots had already been subdivided and
the certificates of title had been issued for each subdivision lot, which were derived from the
certificates of title of BPC, it is more practical, convenient, and in consonance with the stability
of the Torrens System that the certificates of title of BPC and its derivative certificates be
maintained, while those of the Republics be cancelled;

(5) Estoppel lies against the Republic for granting BPC governmental permits
and licenses to subdivide, develop, and sell to the public the subject lots as Parthenon
Hills. Relying on the face of the certificates of title of BPC and the licenses and permits issued
to BPC by government agencies, innocent individuals, including intervenorsNicolas-
Agbulos and Abesamis, purchased subdivision lots in good faith and for value;

(6) The claims of the intervenor spouses Santiago that they acquired portions of
the subject lots in good faith and for value still need to be proven during trial before the court a

653
quo. Unlike the claims of intervenors Nicolas-Agbulos and Abesamis, which BPC admitted,
the claims of the spouses Santiago were opposed by BPC on the ground of fraud;

(7) Certificates of title over portions of the subject lots, acquired by purchasers
in good faith and for value, from BPC, are valid and indefeasible, even as against the certificates
of title of the Republic. The Republic, however, is entitled to recover from BPC the purchase
price the Republic paid to FPHC for the said portions, plus appropriate interests; and

(8) As portions of the subject lots are still unsold and their corresponding
certificates of title remain in the name of BPC, the Republic may exercise two options: (a) It
may recover the said portions and demand that BPC demolish whatever improvements it has
made therein, so as to return the said portions to their former condition, at the expense of
BPC. In such a case, certificates of title of BPC over the said portions shall be cancelled and
new ones issued in the name of the Republic; or (b) It may surrender the said portions to BPC
and just compel BPC to reimburse the Republic for the purchase price the Republic paid to
FPHC for the said portions, plus appropriate interest.

WHEREFORE, premises considered, the instant Petition is hereby PARTLY

GRANTED. The Decision, dated 8 August 1997, of the Court of Appeals in CA-G.R. CV No.
47522 is hereby REVERSED and SET ASIDE and a new one is hereby entered, as follows:

(1) In view of the finding that the Transfer Certificates of Title No. 200629 and 200630
in the name of Servando Accibal are forged and spurious, the Quezon City Register of Deeds
is ORDERED to officially and finally cancel the same from his records;

(2) In view of the finding that the respondent Republic of the Philippines was a
purchaser in good faith of the subject lots from Philippine First Holdings Corporation, but also
taking into consideration the functioning and stability of the Torrens System, as well as the
superior rights of subsequent purchasers in good faith and for value of portions of the subject

654
lots subdivided, developed, and sold as Parthenon Hills from petitioner Barstowe Philippines
Corporation

(a) The Quezon City Register of Deeds is ORDERED to cancel Transfer

Certificates of Title No. 275443 and 288417 in the name of respondent Republic of
the Philippines;

(b) The respondent Republic of the Philippines is ORDERED to respect

and recognize the certificates of title to the subject portions of land in the name of
purchasers of good faith and for value from petitioner Republic of the Philippines;

(c) Petitioner Barstowe Philippines Corporation is ORDERED to pay

respondent Republic of the Philippines for the purchase price the latter paid to First
Philippine Holdings Corporation corresponding to the portions of the subject lots
which are already covered by certificates of title in the name of purchasers in good
faith and for value from petitioner Barstowe Philippines Corporation, plus
appropriate interest;
(d) The respondent Republic of the Philippines is ORDERED to choose
one of the options available to it as regards the portions of the subject lots which
remain unsold and covered by certificates of title in the name of
petitioner Barstowe Philippines Corporation, either (i) To recover the said portions
and demand that petitioner Barstowe Philippines Corporation demolish whatever
improvements it has made therein, so as to return the said portions to their former
condition, at the expense of the latter, or (ii) To surrender the said portions to
petitioner Barstowe Philippines Corporation and compel the latter to reimburse the
respondent Republic of the Philippines for the purchase price it had paid to First
Philippine Holdings Corporation for the said portions, plus appropriate
interest. Regardless of the option chosen by the respondent Republic of
the Philippines, it is ORDERED to reimburse petitioner Barstowe Philippines
Corporation for any necessary expenses incurred by the latter for the said portions;

655
 (2) In view of the finding that petitioner Barstowe Philippines Corporation is
not a purchaser and builder in good faith, and depending on the option chosen by respondent
Republic of the Philippines concerning the portions of the subject lots which remain unsold and
covered by certificates of title in the name of petitioner BarstowePhilippines Corporation, as
enumerated in paragraph 2(d) hereof

(a) In case the respondent Republic of the Philippines chooses the option
under paragraph 2(d)(i) hereof, petitioner Barstowe Philippines Corporation
is ORDERED to demolish whatever improvements it has made on the said
portions, so as to return the same to their former condition, at its own
expense. The QuezonCity Register of Deeds is also ORDERED to cancel the
certificates of title of petitioner Barstowe Philippines Corporation over the said
portions and to issue in lieuthereof certificates of title in the name of respondent
Republic of the Philippines;

(b) In case the respondent Republic of the Philippines chooses the option
under paragraph 2(d)(ii) hereof, petitioner Barstowe Philippines Corporation
is ORDERED to reimburse the petitioner Republic of the Philippines for the
purchase price it had paid to First Philippine Holdings Corporation for the said
portions, plus appropriate interest;

(c) Petitioner Barstowe Philippines Corporaton is ORDERED to pay

appropriate damages to respondent Republic of the Philippines as may be
determined by the trial court;

(3) In view of the finding that intervenors Winnie U. Nicolas-

Agbulos and Edgardo Q. Abesamis are purchasers in good faith and for value of portions of the
subject lots subdivided, developed, and sold as Parthenon Hills from

656
petitioner Barstowe Philippines Corporation, it is DECLARED that their certificates of title
are valid and indefeasible as to all parties;

(4) In view of the finding that the Petition for New Trial filed by the heirs
of Servando Accibal, namely, Virgilio V. Accibal, Virginia A. Macabudbud, and Antonio
V. Accibal, lacks merit, the said Petition is DISMISSED; and

(5) The case is REMANDED to the court of origin for determination of the following

(a) The validity of the claims, and identification of the purchasers, in good
faith and for value, of portions of the subject lots from
petitioner BarstowePhilippines Corporation, other than intervenors Winnie U.
Nicolas-Agbulos and Edgardo Q. Abesamis, whose titles are to be declared valid
and indefeasible;

(b) The identification of the portions of the subject lots in the possession
and names of purchasers in good faith and for value and those which remain with
petitioner Barstowe Philippines Corporation;

(c) The computation of the amount of the purchase price which respondent
Republic of the Philippines may recover from petitioner Barstowe Philippines
Corporation in consideration of the preceding paragraphs hereof;

(d) The types and computation of the damages recoverable by the parties;
and

(e) The computation and award of the cross-claim of EL-VI Realty and
Development Corporation against petitioner Barstowe Philippines Corporation.

657
 SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

(No part)
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

On leave
MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.
Associate Justice Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

658
 ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation,
it is hereby certified that the conclusions in the above Decision were reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

*
No part.

659
**
On leave.
[1]
Rollo, 6-34.
[2]
Penned by Associate Justice Eduardo G. Montenegro with Associate Justices Consuelo Ynares-
Santiago (now Associate Justice of this Court) and Maximiano C. Asuncion, concurring;
id. at 38-51.
[3]
Penned by Associate Justice Eduardo G. Montenegro with Associate Justices Consuelo Ynares-
Santiago and Jesus M. Elbinias (vice Maximiano C. Asuncion), concurring; id. at 52-53.
[4]
Penned by Judge Efren N. Ambrosio; records, 273-288.
[5]
Land Registration Authority Report, dated 10 June 1992, prepared by Benjamin A. Flestado; id.
at 215-216.
[6]
Id. at 218.
[7]
See Orders, dated 1 July 1992 and 9 July 1992, penned by Judge Efren N. Ambrosio; id. at 17,
26.
[8]
Id. at 53.
[9]
Id. at 49-52.
[10]
Id. at 52.
[11]
Decision in Civil Case No. Q-91-10933, dated 26 January 1992, penned by Acting Presiding
Judge Efren N. Ambrosio; id. at 94-95.
[12]
Order, dated 8 October 1992; id. at 129-130.
[13]
Id. at 141.
[14]
Republic of the Philippines; id. at 152-158; Barstowe Philippines Corporation, id. at 163-170;
EL-VI Realty and Development Corporation; id. at 143-147.
[15]
Id. at 185-186.
[16]
Id. at 273-288.
[17]
Id. at 307.
[18]
Id. at 353.
[19]
Id. at 435-437.
[20]
Id. at 609-612.
[21]
Id. at 617.
[22]
Id. at 627.
[23]
Id. at 631.
[24]
Id. at 628-629.
[25]
Id. at 389-390.
[26]
Id. at 392-401.
[27]
Id. at 608-608A.
[28]
Id. at 299.
[29]
Id. at 321-324.
[30]
Id. at 632-633.
[31]
Penned by Associate Justice Fidel P. Purisima with Associate Justices Justo P. Torres, Jr. and
Eduardo G. Montenegro, concurring; id. at 634-636.
[32]
Id. at 689-700.
[33]
Supra note 2.
[34]
Supra note 3.
[35]
Supra note 1.
[36]
Rollo, pp. 90-107.

660
[37]
Id. at 142-146.
[38]
Id. at 173-186.
[39]
Id. at 369-370.
[40]
Id. at 353-355.
[41]
Id. at 373-376, 397-399.
[42]
Id. at 356.
[43]
Dated 18 October 1999; id. at 473-492.
[44]
Dated 3 November 1999; id. at 428-437.
[45]
Dated 11 November 1999; id. at 440-455.
[46]
Dated 19 November 1999; id. at 465-472.
[47]
Dated 20 January 2000; id. at 497-512.
[48]
Id. at 580-589.
[49]
Id. at 687.
[50]
Id. at 689-690.
[51]
Transfer Certificates of Title No. 199013, 200427, 200744, 202028, and 202476.
[52]
Penned by LRA Administrator Teodoro C. Bonifacio; records, pp. 34-40.
[53]
Id. at 41.
[54]
Dolfo v.The Register of Deed of Cavite, 395 Phil. 241, 248-249 (2000).
[55]
Mactan-Cebu International Airport Authority (MCAA) v. Court of Appeals, 399 Phil. 695, 711
(2000); Noble v. City of Manila, 67 Phil. 1, 6 (1938).
[56]
Tenio-Obsequio v. Court of Appeals, G.R. No. 107967, 1 March 1994, 230 SCRA 550, 555-
560.
[57]
An Act Providing a Special Procedure for Reconstitution of Torrens Certificate of Title Lost
or Destroyed.
[58]
Wright, Jr. v. Lepanto Consolidated Mining Co. and Lednicky, 120 Phil. 495, 499 (1964).
[59]
Gallardo v. Intermediate Appellate Court, G.R. No. L-67742, 29 October 1987, 155 SCRA
248, 260-261.
[60]
Garcia v. Court of Appeals, G.R. No. 96141, 2 October 1991, 202 SCRA 228, 241-242.
[61]
Id.; Republic v. Court of Appeals, G.R. Nos. L-46626-27, 27 December 1979, 94 SCRA 865,
872-873.
[62]
Calalang v. Register of Deeds, G.R. No. 76265, 11 March 1994, 231 SCRA 88, 104.
[63]
Director of Lands v. Addison, 49 Phil. 19, 23 (1926).
[64]
Antonio H. Noblejas and Edilberto H. Noblejas, REGISTRATION OF LAND TITLES AND
DEEDS (1992 ed.), 330.
[65]
Id. at 331.
[66]
Sandoval v. Court of Appeals, 329 Phil. 48, 60 (1996).
[67]
361 Phil. 319, 329-333 (1999).
[68]
Heirs of Ignacia Aguilar-Reyes v. Mijares, G.R. No. 143826, 28 August 2003, 410 SCRA 97,
112; Liu v. Loy, Jr., G.R. No. 145982, 3 July 2003, 405 SCRA 316, 338.
[69]
Pagasa Industrial Corp. v. Court of Appeals, 216 Phil. 533, 535 (1984).
[70]
154 Phil. 193, 199-200 (1974).
[71]
Supra note 2, 45-46.

661
 SECOND DIVISION

[G.R. No. 128354. April 26, 2005]

HOME BANKERS SAVINGS & TRUST CO., petitioner, vs. THE HONORABLE COURT
OF APPEALS, PABLO N. AREVALO, FRANCISCO A. UY, SPOUSES LEANDRO
A. SORIANO, JR. and LILIAN SORIANO, ALFREDO LIM and FELISA CHI
LIM/ALFREDO LIM, respondents.

DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
annul the Decision[1] of the Court of Appeals (CA) dated November 28, 1996 in CA-G.R. SP No.
40892 and its Resolution dated February 19, 1997 denying petitioners motion for reconsideration.
Each of private respondents entered into separate contracts to sell with TransAmerican Sales
and Exposition (TransAmerican) through the latters Owner/General Manager, Engr. Jesus Garcia,
involving certain portions of land covered by Transfer Certificate of Title (TCT) No. 19155,
located at No. 45 Gen. Lim Street, Heroes Hill, Quezon City, together with one unit three-storey
townhouse to be built on each portion, as follows:

Respondent Pablo N. Arevalo purchased the portion of land denominated as Unit No. 5[2] for the
amount of P750,000.00 on August 21, 1988 and had already fully paid the purchase price on
September 3, 1988;

Respondent Alfredo Lim purchased the portion of land denominated as Unit No. 1[3] for the
amount of P800,000.00 on December 22, 1988 and fully paid the same upon execution of the
agreement on the same day;

Respondent Francisco A. Uy purchased the portion of land denominated as Unit No. 6[4] on
October 29, 1988 in the amount of P800,000.00 payable in installments and had allegedly made a
total payment of P581,507.41. He ordered to stop the payment of all [postdated] checks from
September 1990 to November 1995 on the ground of non-completion of his unit and had later
learned of the foreclosure of the property;

Respondent spouses Leandro A. Soriano, Jr. and Lilian Soriano purchased the portion of land
denominated as Unit No. 3[5] on February 15, 1990 in the amount of P1,600,000.00 and had
allegedly made a payment of P669,960.00. They had stopped paying because of non-completion
of the project and had later learned of the foreclosure of the property;

Respondents Alfredo Lim and Santos Lim purchased the portion of land denominated as Unit
No. 7[6] for P700,000.00 on October 1988 and had been fully paid as of March 18, 1989; Santos

662
Lim subsequently sold and assigned his share of the property to private respondent Felisa Chi
Lim on May 12, 1989.

It is stipulated in their respective contracts that their individual townhouses will be fully completed
and constructed as per plans and specifications and the respective titles thereto shall be delivered
and transferred to private respondents free from all liens and encumbrances upon their full payment
of the purchase price. However, despite repeated demands, Garcia/TransAmerican failed to
comply with their undertakings.
On May 30, 1989, Engr. Garcia and his wife Lorelie Garcia obtained from petitioner Home
Bankers Savings and Trust Company (formerly Home Savings Bank and Trust Company) a loan
in the amount of P4,000,000.00 and without the prior approval of the Housing and Land Use
Regulatory Board (HLURB), the spouses mortgaged[7] eight lots covered by TCT Nos. 3349 to
3356 as collateral. Petitioner registered its mortgage on these titles without any other encumbrance
or lien annotated therein. The proceeds of the loan were intended for the development of the lots
into an eight-unit townhouse project. However, five out of these eight titles turned out to be private
respondents townhouses subject of the contracts to sell with Garcia/TransAmerican.
When the loan became due, Garcia failed to pay his obligation to petitioner. Consequently,
petitioner instituted an extrajudicial foreclosure[8] on the subject lots and being the highest bidder
in the public auction, a certificate of sale[9] in its favor was issued by the sheriff on February 26,
1990. Subsequently, the sheriffs certificate of sale was registered and annotated on the titles of the
subject lots in the Register of Deeds of Quezon City.
On November 8, 1990, private respondents filed a complaint with the Office of Appeals,
Adjudication and Legal Affairs (OAALA), HLURB, against Garcia/TransAmerican as
seller/developer of the property and petitioner, as indispensable party, for non-delivery of titles
and non-completion of the subdivision project.[10] They prayed for the completion of the units,
annulment of the mortgage in favor of petitioner, release of the mortgage on the lots with fully
paid owners and delivery of their titles, and for petitioner to compute individual loan values of
amortizing respondents and to accept payments from them and damages.
Petitioner filed its Answer contending that private respondents have no cause of action against
it; that at the time of the loan application and execution of the promissory note and real estate
mortgage by Garcia, there were no known individual buyers of the subject land nor annotation of
any contracts, liens or encumbrances of third persons on the titles of the subject lots; that the loan
was granted and released without notifying HLURB as it was not necessary.
Private respondents filed their Reply and a motion for the judgment on the pleadings.
Petitioner did not file a rejoinder. Private respondents filed a manifestation reiterating for a
judgment on their pleadings and asked that the reliefs prayed for be rendered as far as petitioner
was concerned. Upon motion of private respondents, the case against Garcia/TransAmerican was
archived for failure to serve summons on him/it despite efforts to locate his whereabouts or its
office. The case was then considered submitted for decision.
On August 16, 1991, OAALA rendered its Decision,[11] the dispositive portion of which reads:

WHEREFORE, Judgment is hereby rendered as follows:

663
1. Declaring the mortgage executed by and between respondents Engr. Jesus
Garcia/TransAmerican Sales and Exposition and Home Bankers Savings and Trust Company
(formerly Home Savings Bank and Trust Company) to be unenforceable as against all the
complainants;

2. Ordering the Register of Deeds of Quezon City to cancel the annotations of the mortgage
indebtedness between respondents Engr. Jesus Garcia and Home Bankers Savings and Trust
Company (formerly Home Savings Bank and Trust Company);

3. Ordering, likewise the Register of Deeds of Quezon City to cancel the annotation of the
Certificate of Sale in favor of the respondent Home Bankers Savings and Trust Company on the
following Transfer Certificates of Title to wit:

1) TCT No. 3350

2) TCT No. 3351
3) TCT No. 3352
4) TCT No. 3354
5) TCT No. 3356

4. Ordering respondent Home Bankers Savings and Trust Company (formerly Home Savings
Bank and Trust Company) to:

4.1. AS TO THE FIRST CAUSE OF ACTION

Deliver to Complainant Pablo N. Arevalo TCT No. 3352 free from all
liens and encumbrances.
4.2. AS TO THE SECOND CAUSE OF ACTION
Deliver to Complainant Alfredo Lim TCT No. 3356 free from all liens
and encumbrances.
4.3. AS TO THE THIRD CAUSE OF ACTION
To compute and/or determine the loan value of complainant Francisco
A. Uy who was not able to complete or make full payment and to accept
payment and/or receive amortization from said complainant Francisco
A. Uy and upon full payment to deliver TCT No. 3351 free from all
liens and encumbrances.
4.4. AS TO THE FOURTH CAUSE OF ACTION
To compute and/or determine the loan value of Complainant Spouses
Leandro A. Soriano, Jr. and Lilian Soriano who were not able to
complete or make full payment and to accept and/or receive
amortization from said Complainants Soriano and upon full payment
to deliver TCT No. 3354 free from all liens and encumbrances.
4.5. AS TO THE FIFTH CAUSE OF ACTION

664
 Deliver to complainant Alfredo Lim and Felisa Chi Lim TCT No. 3350
free from all liens and encumbrances.

without prejudice to its right to require respondent Engr. Jesus Garcia/TransAmerican to

constitute new collaterals in lieu of the said titles sufficient in value to cover the mortgage
obligation.[12]

Petitioner filed an appeal with the Board of Commissioners of the HLURB which dismissed
the same in a decision dated June 15, 1992.[13] Petitioner then elevated the case to the Office of the
President which rendered a decision dated June 30, 1995[14] dismissing the appeal and affirming
the June 15, 1992 decision of the HLURB. Petitioners motion for reconsideration was also denied
in a Resolution dated May 7, 1996.[15]
Petitioner filed a petition for review with the CA which, in the herein assailed decision dated
November 28, 1996, denied the petition and affirmed the decision of the Office of the President.
The CA applied the case of Union Bank of the Philippines vs. HLURB, et al.,[16] where it was held
that the act of a subdivision developer of mortgaging the subdivision without the knowledge and
consent of a unit buyer and without the approval of the National Housing Authority (NHA, now
HLURB) is violative of Section 18 of P.D. No. 957 thus, falling under the exclusive jurisdiction
of HLURB.
The CA upheld the findings of the OAALA, HLURB that private respondents had already
entered into separate contracts to sell with TransAmerican as early as 1988 while it was only in
1989 that spouses Garcia applied for a loan with petitioner and executed a mortgage contract over
the subject lots; that the proceeds of the loan were purposely intended for the development of a
property which was the same property subject of the contracts to sell; that despite the contracts to
sell, Garcia/TransAmerican did not apprise petitioner of the existence of these contracts nor did
petitioner exhaust any effort to inquire into their existence since petitioner merely relied on the
purported clean reconstituted titles in the name of Garcia; that the mortgage of the subject lots
without the consent of the buyers and the authorization of the HLURB is a clear violation of P.D.
No. 957; that the mortgage contract is void and unenforceable against private respondents.
Petitioners motion for reconsideration was denied by the CA in its Resolution dated February
19, 1997.[17]
Petitioner is now before us raising the following grounds in support of its petition:
A. THE OFFICE OF THE PRESIDENT ERRED IN RULING THAT THE HLURB HAS
JURISDICTION TO NULLIFY OR DECLARE UNENFORCEABLE THE REAL
ESTATE MORTGAGE VALIDLY CONSTITUTED BY THE OWNER.
B. ASSUMING ARGUENDO THAT THE HLURB HAS JURISDICTION,
RESPONDENT COURT MANIFESTLY ERRED IN FINDING THE REAL
ESTATE MORTGAGE IN FAVOR OF HOME AS INVALID AND
UNENFORCEABLE AGAINST RESPONDENTS.
C. IN THE EVENT THAT THE DECISION OF THE RESPONDENT COURT
FINDING THE REAL ESTATE MORTGAGE IN FAVOR OF HOME AS INVALID
AND UNENFORCEABLE AGAINST RESPONDENTS IS UPHELD, THE
UNREGISTERED CONTRACTS TO SELL IN FAVOR OF RESPONDENTS

665
 SHOULD ALSO BE HELD VALID ONLY AS TO THE PARTIES THERETO BUT
UNENFORCEABLE AGAINST PETITIONER.
Private respondents filed their Comment and petitioner filed its Reply thereto.
In a Resolution dated February 23, 2004, we gave due course to the petition and required the
parties to submit their respective memoranda which they complied with.
The petition is devoid of merit.
Notably, the issues raised are mere rehash of the issues already passed upon by the HLURB,
the Office of the President and the CA which we uphold as we find no reversible errors committed.
Petitioner claims that HLURB has no power to declare the mortgage contract over real
property executed between a real estate developer and petitioner, a banking institution, void or
unenforceable, as it is properly within the jurisdiction of the Regional Trial Court. Petitioner
asserts that being a mortgagee of the subject lots and a purchaser in good faith, it is not a project
owner, developer, or dealer contemplated under P.D. No. 1344, the law which expanded the
jurisdiction of the NHA; and that since there is no seller-buyer relationship existing between it and
private respondents, HLURB has no jurisdiction to rule on the validity of the mortgage and to
annul foreclosure proceedings.
The argument is untenable.
The CA did not err in affirming the decision of the Office of the President that HLURB has
jurisdiction to declare invalid the mortgage contract executed between Garcia/TransAmerican and
petitioner over the subject lots insofar as private respondents are concerned. It correctly relied
on Union Bank of the Philippines vs. HLURB, et al.[18] where we squarely ruled on the question of
HLURBs jurisdiction to hear and decide a condominium buyers complaint for: (a) annulment of a
real estate mortgage constituted by the project owner without the consent of the buyer and without
the prior written approval of the NHA; (b) annulment of the foreclosure sale; and (c) annulment of
the condominium certificate of title that was issued to the highest bidder at the foreclosure sale,
thus:

. . . The issue in HLURB Case No. REM-062689-4077 is the validity of the real estate mortgage
of Davids condominium unit that FRDC executed in favor of the Union Bank and Far East Bank
without prior approval of the National Housing Authority and the legality of the title which the
mortgage banks acquired as highest bidder therefore in the extrajudicial foreclosure sale. The
applicable provisions of P.D. No. 957, otherwise known as The Subdivision and Condominium
Buyers Protective Decree are quoted hereunder as follows:

Sec. 3. NATIONAL HOUSING AUTHORITY. The National Housing Authority shall have
exclusive jurisdiction to regulate the real estate trade and business in accordance with the
provisions of this Decree.

Section 18. Mortgages No mortgage on any unit or lot shall be made by the owner or developer
without prior written approval of the authority. Such approval shall not be granted unless it is
shown that the proceeds of the mortgage loan shall be used for the development of the
condominium or subdivision project and effective measures have been provided to ensure such
utilization. The loan value of each lot or unit covered by the mortgage shall be determined and

666
the buyer thereof if any shall be notified before the release of the loan. The buyer may, at his
option, pay his installment for the lot or unit directly to the mortgagee who shall apply the
payments to the corresponding mortgage indebtedness secured by the particular lot or unit being
paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly after full
payment thereof.

P.D. No. 1344 of April 2, 1978 expanded the jurisdiction of the National Housing Authority to
include the following:

Sec. 1. In the exercise of its function to regulate the real estate trade and business and in addition
to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall
have exclusive jurisdiction to hear and decide cases of the following nature:

A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer,
broker or salesman; and
C. Cases involving specific performance of contractual and statutory obligations
filed by buyers of subdivision lot or condominium unit against the
owner, developer, broker or salesman.

On February 7, 1981, Executive Order No. 648 transferred the regulatory and quasi-judicial
functions of the NHA to the Human Settlements Regulatory Commission.

Sec. 8. TRANSFER OF FUNCTIONS. The regulatory functions of the National Housing

Authority pursuant to Presidential Decree Nos. 957, 1216, 1344 and other related laws are
hereby transferred to the Commission, together with such applicable personnel, appropriation,
records, equipment and property necessary for the enforcement and implementation of such
functions. Among these regulatory functions are:

1. Regulation of the real estate trade and business:

...
7. Approval of mortgage on any subdivision lot or condominium unit made
by the owner or developer;
...
11. Hear and decide cases on unsound real estate business practices; claims
involving refund filed against project owners, developers, dealers,
brokers, or salesmen; and cases of specific performance.

Executive Order No. 90 dated December 17, 1986 changed the name of the Human Settlements
Regulatory Commission to Housing and Land Use Regulatory Board (HLURB).

667
Clearly, FRDCs act of mortgaging the condominium project to Bancom and FEBTC, without the
knowledge and consent of David as buyer of a unit therein, and without the approval of the NHA
(now HLURB) as required by P.D. No. 957, was not only an unsound real estate business
practice but also highly prejudicial to the buyer. David, who has a cause of action for annulment
of the mortgage, the mortgage foreclosure sale, and the condominium certificate of title that was
issued to the UBP and FEBTC as the highest bidders at the sale. The case falls within the
exclusive jurisdiction of the NHA (now HLURB) as provided in P.D. No. 957 of 1976 and P.D.
No. 1344 of 1978.

...

We hold that the jurisdiction of the HLURB to regulate the real estate trade is broad enough to
include jurisdiction over complaints for specific performance of the sale, or annulment of the
mortgage, of a condominium unit, with damages.[19]

Petitioner avers that the Union Bank ruling is not applicable in its case, since it had no
knowledge of any buyer of the subject lots at the time the mortgage was constituted; that there was
no construction in the subject lots at the time petitioner accepted the same as collateral; that the
title to the subject property was still in the process of being reconstituted and the loan was in fact
meant for the development of the subject lots into an eight-unit townhouse project.
We are not persuaded.
Contrary to petitioners claim that there were no buyers of the subject lots at the time of the
constitution of the mortgage, records show that private respondents Arevalo, Uy, Alfredo Lim and
Santos Lim had entered into contracts to sell with Garcia/TransAmerican as early as 1988 for their
respective lots. In fact, they, except for Uy, had already fully paid their townhouse units in 1988
without the certificates of title being delivered to them. Garcia mortgaged the subject lots without
their knowledge and consent.
While private respondents spouses Soriano bought the subject lots after the constitution of the
mortgage in favor of petitioner, the subject lots are, as early as 1988, subdivision lots which as
defined under Section 2(e) of P.D. No. 957 to mean any of the lots, whether residential,
commercial, industrial, or recreational in a subdivision project[20] are entitled to the protection of
P.D. No. 957.
Under Section 18 of P.D. No. 957, it is provided that no mortgage on any unit or lot shall be
made by the owner or developer without prior written approval of the authority. Such approval
shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the
development of the condominium or subdivision project and effective measures have been
provided to ensure such utilization. As in the Union Bank, the mortgage was constituted on the
subject lots in favor of petitioner without the prior written approval from the HLURB, thus
HLURB has jurisdiction to rule on the validity of the mortgage.
Notwithstanding that petitioner became the owner of the subject lots by being the highest
bidder in the extrajudicial foreclosure sale, it must be remembered that it was first a mortgagee of
the same. Since the lot was mortgaged in violation of Section 18 of P.D. No. 957, HLURB has
jurisdiction to declare the mortgage void insofar as private respondents are concerned and to annul

668
the foreclosure sale. In Far East Bank and Trust Co. vs. Marquez,[21] we held that Section 18 of
P.D. No. 957 is a prohibitory law, and acts committed contrary to it are void. We said:

In determining whether a law is mandatory, it is necessary to ascertain the legislative intent, as

stated by Sen. Arturo M. Tolentino, an authority on civil law:

There is no well-defined rule by which a mandatory or prohibitory law may, in all circumstances,
be distinguished from one which is directory, suppletory, or permissive. In the determination of
this question, the prime object is to ascertain the legislative intention. Generally speaking, those
provisions which are mere matter of form, or which are not material, do not affect any substantial
right, and do not relate to the essence of the thing to be done, so that compliance is a matter of
convenience rather than substance, are considered to be directory. On the other hand, statutory
provisions which relate to matters of substance, affect substantial rights and are the very essence
of the thing required to be done, are regarded as mandatory.

In Philippine National Bank vs. Office of the President, we had occasion to mull over the intent
of P.D. No. 957 thus:

. . . [T]he unmistakable intent of the law [is] to protect innocent lot buyers from scheming
subdivision developers. As between these small lot buyers and the gigantic financial institutions
which the developers deal with, it is obvious that the law as an instrument of social justice must
favor the weak. Indeed, the petitioner Bank had at its disposal vast resources with which it could
adequately protect its loan activities, and therefore is presumed to have conducted the usual due
diligence checking and ascertaining (whether thru ocular inspection or other modes of
investigation) the actual status, condition, utilization and occupancy of the property offered as
collateral, . . . On the other hand, private respondents obviously were powerless to discover
attempt of the land developer to hypothecate the property being sold to them. It was precisely in
order to deal with this kind of situation that P.D. No. 957 was enacted, its very essence and
intendment being to provide a protective mantle over helpless citizens who may fall prey to the
razzmatazz of what P.D. No. 957 termed unscrupulous subdivision and condominium sellers.

Concededly, P.D. No. 957 aims to protect innocent lot buyers. Section 18 of the decree directly
addresses the problem of fraud committed against buyers when the lot they have contracted to
purchase, and which they have religiously paid for, is mortgaged without their knowledge. The
avowed purpose of P.D. No. 957 compels the reading of Section 18 as prohibitory acts
committed contrary to it are void. Such construal ensures the attainment of the purpose of the
law: to protect lot buyers, so that they do not end up still homeless despite having fully paid for
their home lots with their hard-earned cash.[22]

Since the mortgage is void, HLURBs orders of the cancellation of the sheriffs certificate of sale,
release of the mortgaged lots and delivery of the corresponding titles to respondents who had fully
paid the purchase price of the units are but the necessary consequences of the invalidity of the
mortgage for the protection of private respondents.
Anent the second issue, petitioner contends that since the titles on their face were free from
any claims, liens and encumbrances at the time of the mortgage, it is not obliged under the law to

669
go beyond the certificates of title registered under the Torrens system and had every reason to rely
on the correctness and validity of those titles.
We are not convinced.
While the cases[23] cited by petitioner held that the mortgagee is not under obligation to look
beyond the certificate of title when on its face, it was free from lien or encumbrances, the
mortgagees therein were considered in good faith as they were totally innocent and free from
negligence or wrongdoing in the transaction. In this case, petitioner knew that the loan it was
extending to Garcia/TransAmerican was for the purpose of the development of the eight-unit
townhouses. Petitioners insistence that prior to the approval of the loan, it undertook a thorough
check on the property and found the titles free from liens and encumbrances would not suffice. It
was incumbent upon petitioner to inquire into the status of the lots which includes verification on
whether Garcia had secured the authority from the HLURB to mortgage the subject lots. Petitioner
failed to do so. We likewise find petitioner negligent in failing to even ascertain from Garcia if
there are buyers of the lots who turned out to be private respondents. Petitioners want of knowledge
due to its negligence takes the place of registration, thus it is presumed to know the rights of
respondents over the lot. The conversion of the status of petitioner from mortgagee to buyer-owner
will not lessen the importance of such knowledge.[24]Neither will the conversion set aside the
consequence of its negligence as a mortgagee.[25]
Judicial notice can be taken of the uniform practice of banks to investigate, examine and assess
the real estate offered as security for the application of a loan. We cannot overemphasize the fact
that the Bank cannot barefacedly argue that simply because the title or titles offered as security
were clean of any encumbrances or lien, that it was thereby relieved of taking any other step to
verify the over-reaching implications should the subdivision be auctioned on foreclosure.[26] We
find apropos to cite our ruling in Far East Bank and Trust Co. vs. Marquez, thus:[27]

Petitioner argues that it is an innocent mortgagee whose lien must be respected and protected,
since the title offered as security was clean of any encumbrances or lien. We do not agree.

. . . As a general rule, where there is nothing on the certificate of title to indicate any cloud or
vice in the ownership of the property, or any encumbrance thereon, the purchaser is not required
to explore further than what the Torrens Title upon its face indicates in quest for any hidden
defect or inchoate right that may subsequently defeat his right thereto. This rule, however, admits
of an exception as where the purchaser or mortgagee has knowledge of a defect or lack of title in
the vendor, or that he was aware of sufficient facts to induce a reasonably prudent man to inquire
into the status of the property in litigation.

Petitioner bank should have considered that it was dealing with a [townhouse] project that was
already in progress. A reasonable person should have been aware that, to finance the project,
sources of funds could have been used other than the loan, which was intended to serve the
purpose only partially. Hence, there was need to verify whether any part of the property was
already the subject of any other contract involving buyers or potential buyers. In granting the
loan, petitioner bank should not have been content merely with a clean title, considering the
presence of circumstances indicating the need for a thorough investigation of the existence of
buyers like respondent. Having been wanting in care and prudence, the latter cannot be deemed
to be an innocent mortgagee.

670
Petitioner cannot claim to be a mortgagee in good faith. Indeed it was negligent, as found by the
Office of the President and by the CA. Petitioner should not have relied only on the
representation of the mortgagor that the latter had secured all requisite permits and licenses from
the government agencies concerned. The former should have required the submission of certified
true copies of those documents and verified their authenticity through its own independent effort.

Having been negligent in finding out what respondents rights were over the lot, petitioner must
be deemed to possess constructive knowledge of those rights.

As to the third issue, petitioner contends that private respondents were negligent in failing to
register their contracts to sell in accordance with Section 17 of P.D. No. 957; that private
respondents unregistered contracts to sell are binding only on them and Garcia/TransAmerican but
not on petitioner which had no actual or constructive notice of the sale at the time the mortgage
was constituted.
We disagree.
Section 17 of P.D. No. 957[28] provides that the seller shall register the contracts to sell with
the Register of Deeds of Quezon City. Thus, it is Garcias responsibility as seller to register the
contracts and petitioner should not blame private respondents for not doing so. As we have said
earlier, considering petitioners negligence in ascertaining the existence or absence of authority
from HLURB for Garcia/TransAmerican to mortgage the subject lots, petitioner cannot claim to
be an innocent purchaser for value and in good faith. Petitioner is bound by private respondents
contracts to sell executed with Garcia/TransAmerican.
The last paragraph of Section 18 of P.D. No. 957 provides that respondents who have not yet
paid in full have the option to pay their installment for the lot directly to the mortgagee (petitioner)
who is required to apply such payments to the corresponding mortgage indebtedness secured by
the particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the
lot or unit promptly after full payment thereof. Thus, petitioner is obliged to accept the payment
of remaining unpaid amortizations, without prejudice to petitioner banks seeking relief against the
subdivision developer.[29]
Notably, although no issue was taken on the fact that the case against Garcia/TransAmerican,
the developer/seller and mortgagor of the subject lots, was archived for failure to serve summons
on him/it as his whereabouts or the office could not be located, it must be stated that
Garcia/TransAmerican is not an indispensable party since a final determination on the validity of
the mortgage over the subject lots can be rendered against petitioner. Thus, the absence of
Garcia/TransAmerican did not hamper the OAALA from resolving the dispute between private
respondents and petitioner.
In China Bank vs. Oliver,[30] we held that the mortgagor, who allegedly misrepresented herself
to be Mercedes M. Oliver, the registered owner of TCT No. S-50195, is not an indispensable party
in a case filed by a person claiming to be the true registered owner, for annulment of mortgage and
cancellation of title against the mortgagee, China Bank. We found therein that even without the
mortgagor, the true Mercedes Oliver can prove in her complaint that she is the real person referred
in the title and she is not the same person using the name who entered into a deed of mortgage
with the mortgagee, China Bank.

671
 In the present case, private respondents, in their complaint, alleged that the mortgage was
constituted without the prior written approval of the HLURB which is in violation of Section 18
of P.D. No. 957. Petitioners admission that it granted and released the loan without notifying the
HLURB because of its belief that it was not necessary to do so, is fatal to petitioners defense. As
a consequence thereof, the mortgage constituted in favor of petitioner can be declared invalid as
against private respondents even without the presence of Garcia/TransAmerican. It is worthy to
mention that the assailed decision was rendered merely against petitioner and had not made any
pronouncement as to Garcia/TransAmericans liability to private respondents for the non-
completion of the projects; or to herein petitioner, as mortgagee.
The present case merely involves the liability of petitioner bank to private respondents as
buyers of the lots and townhouse units.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.

[1]
Rollo, pp. 36-44; Penned by Justice Romeo A. Brawner (now Presiding Justice), concurred in
by Justices Emeterio C. Cui (retired) and Lourdes K. Tayao-Jaguros (retired).
[2]
TCT No. 3352.
[3]
TCT No. 3356.
[4]
TCT No. 3351.
[5]
TCT No. 3354.
[6]
TCT No. 3350.
[7]
Rollo, pp. 51-54.
[8]
Rollo, p. 55.
[9]
Id., p. 62.
[10]
HLURB Case No. REM-011890-4627.
[11]
Per Arbiter Abraham N. Vermudez.
[12]
Rollo, pp. 77-79.
[13]
Id., pp. 81-83; Docketed as HLURB Case No. REM-A-1072; Per Commissioner Amado B.
Deloria, concurred in by Ex-Officio Commissioners Harry H. Pasimio and Victoria Isabel
A. Paredes.
[14]
Id., pp. 84-97; Docketed as O.P. Case No. 5018; Penned by then Assistant Executive Secretary
for Legal Affairs, Renato C. Corona (now an Associate Justice of this Court).
[15]
Id., p. 98.

672
[16]
210 SCRA 558.
[17]
Id., p. 46.
[18]
See footnote 16.
[19]
Union Bank vs. HLURB, 210 SCRA 558, 561-564.
[20]
Section 2(d) of P.D. No. 957
(d) Subdivision project Subdivision project shall mean a tract or parcel of land registered
under Act No. 496 which is partitioned primarily for residential purposes into individual
lots with or without improvements thereon, and offered, to the public for sale, in cash or in
installment terms. It shall include all residential, commercial, industrial and recreational
areas, as well as open spaces and other community and public areas in the project.
[21]
420 SCRA 349.
[22]
Id, pp. 354-355.
[23]
PNB vs. CA, 187 SCRA 735; Planters Development Bank vs. CA, 197 SCRA 698.
[24]
Far East Bank and Trust Co. vs. Marquez, supra.
[25]
Ibid.
[26]
PNB vs. Office of the President, 252 SCRA 5, 15, citing Breta and Hamor vs. Lao, et al., CA-
G.R. No. 8728-R promulgated on November 11, 1981.
[27]
Supra, pp. 356-357.
[28]
Sec. 17. Registration. All contracts to sell, deeds of sale and other similar instruments relative
to the sale or conveyance of the subdivision lots and condominium units, whether or not
the purchase price is paid in full, shall be registered by the seller in the Office of the
Register of Deeds of the province or city where the property is situated.
...
[29]
PNB vs. Office of the President, 252 SCRA 5, 16.
[30]
390 SCRA 263.

673
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 173386 February 11, 2014

DEPARTMENT OF AGRARIAN REFORM, now represented by OIC-SEC. NASSER

PANGANDAMAN, Petitioner,
vs.
TRINIDAD VALLEY REALTY & DEVELOPMENT CORPORATION, FRANNIE
GREENMEADOWS PASTURES, INC., ISABEL GREENLAND AGRI-BASED
RESOURCES, INC., ISABEL GREENMEADOWS QUALITY PRODUCTS, INC.,
ERNESTO BARICUATRO, CLAUDIO VILLO and EFREN NUEVO, Respondents.

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

G.R. No. 174162

GRACE B. FUA, in her capacity as the PROVINCIAL AGRARIAN REFORM OFFICER

OF NEGROS ORIENTAL, JOSELIDO S. DAYOHA, JESUS S. DAYOHA and
RODRIGO S. LICANDA, Petitioners,
vs.
TRINIDAD VALLEY REALTY AND DEVELOPMENT CORPORATION, FRANNIE
GREENMEADOWS PASTURES, INC., ISABEL GREENLAND AGRI-BASED
RESOURCES, INC., ISABEL EVERGREEN PLANTATIONS INC., MICHELLE
FARMS, INC. ISABEL GREENMEADOWS QUALITY PRODUCTS, INC., ERNESTO
BARICUATRO, CLAUDIO VILLO and EFREN NUEVO, Respondents.

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

G.R. No.183191

TRINIDAD VALLEY REALTY & DEVELOPMENT CORPORATION, FRANNIE

GREENMEADOWS PASTURES, INC., ISABEL GREENLAND AGRI-BASED
RESOURCES, INC., ISABEL GREENMEADOWS QUALITY PRODUCTS, INC.,
ERNESTO BARICUATRO,CLAUDIO VILLO and EFREN NUEVO, Petitioners,
vs.
THE REPUBLIC OF THE PHILIPPINES and THE LAND REGISTRATION
AUTHORITY, Respondents.

DECISION

VILLARAMA, JR., J.:

674
The consolidated petitions before us raise intertwined issues of jurisdiction over cases involving
the implementation of Republic Act No. 6657, otherwise known as the "Comprehensive
Agrarian Reform Law of 1988" (hereinafter, RA 6657). The petitions likewise question whether
a regional trial court may exercise jurisdiction if the case also assails the constitutionality of
administrative orders, regulations and other related issuances implementing the said law.

The following facts are common to the three cases under consolidation:

Trinidad Valley Realty and Development Corporation, Frannie Greenmeadows Pastures, Inc.,
Isabel Greenland Agri-based Resources, Inc., Isabel Evergreen Plantations, Inc., Michelle Farms,
Inc., Isabel Greenmeadows Quality Products, Inc., Ernesto Baricuatro, Claudio Villo, and Efren
Nuevo (hereinafter, Trinidad Valley Realty and Development Corporation, et al.) are the
registered owners of a parcel of land in Vallehermoso,1 Negros Oriental. The landholding
consists of a total area of 641. 7895 hectares - about 200 hectares thereof are devoted to the
cultivation of sugar cane. The Department of Agrarian Reform (DAR) placed 479.8905 hectares
of the said landholding under the coverage of RA 6657 between March 1995 and July 2000.
Certificates of Land Ownership Award (CLOAs) and Transfer Certificates of Title (TCTs) were
subsequently issued in favor of the agrarian reform beneficiaries.2

On June 10, 2004, Trinidad Valley Realty and Development Corporation, et al. filed before the
Regional Trial Court (RTC), Branch 64, Guihulngan, Negros Oriental, a Petition for Declaration
of Unconstitutionality Through Certiorari, Prohibition and Mandamus with Prayer for
Preliminary Prohibitory Injunction and Restraining Order3 against the Land Registration
Authority (LRA), the DAR, and the beneficiaries under the Comprehensive Agrarian Reform
Program (CARP), docketed as Special Civil Action No. 04-02-V. In their Petition, Trinidad
Valley Realty and Development Corporation, et al. made the following main allegations:

1. That the DAR committed grave abuse of discretion amounting to lack of jurisdiction
when it committed the following acts: it passed Administrative Order No. 12, Series of
1989 and other related issuances which allowed the DAR to unilaterally choose
beneficiaries other than those intended by the Constitution as beneficiaries; it subjected
Trinidad Valley Realty and Development Corporation, et al.' s properties to compulsory
acquisition, when it ordered the Land Bank to determine the valuation of Trinidad Valley
Realty and Development Corporation, et al.' s land without any judicial pronouncement
on just compensation; and, it unilaterally ordered the cancellation of petitioner's title
without court intervention when it issued final CLOAs to beneficiaries who are not yet
owners of the land and without any court proceeding.

2. The valuation by Land Bank is not just compensation.

3. The Register of Deeds cannot cancel Trinidad Valley Realty and Development
Corporation, et al.'s title without a court order.

4. The Land Bank, the LRA and the Register of Deeds also committed grave abuse of
discretion when they cooperated to commit the aforementioned acts.4

675
The DAR5 filed its Answer6 asserting that (a) jurisdiction over all agrarian reform matters is
exclusively vested in the DAR; (b) the Department of Agrarian Reform Adjudication Board
(DARAB) Rules provides that the power to cancel or annul CLOAs is vested in the DARAB;
and the jurisdiction of the R TC in agrarian reform matters is limited only to the determination of
just compensation and prosecution of all criminal offenses under RA 6657; (c) the RTC has no
jurisdiction over petitions for certiorari, prohibition and mandamus in agrarian reform cases,
which is vested by Section 54 of RA 6657, in the Court of Appeals (CA); (d) the transfer of
ownership and physical installation of the beneficiaries is authorized by RA 6657 as laid down in
Association of Small Landowners in the Phils., Inc. v. Hon. Secretary of Agrarian Reform;7 (e)
the petition is defective in form and substance; and (f) the CLOAs partake of the nature of a
Torrens Title and their validity cannot be collaterally attacked.

Subsequently, Trinidad Valley Realty and Development Corporation, et al. filed a Motion for
Leave to Amend Petition and for Admission of the Amended Petition8 in order to change the
nature of the action from a special civil action of certiorari, prohibition and mandamus to an
ordinary action of annulment of land titles. The DAR, et al. opposed the motion in its
Opposition9 dated July 28, 2004.

On August 13, 2004, the RTC conducted a hearing on the propriety of admitting the amended
petition. On October 26, 2004, it issued the assailed Order10 admitting the amended petition and
ruling that it had jurisdiction over the case, viz.:

WHEREFORE, this Court rules and so holds that:

1. This Court has jurisdiction over the instant case;

2. The Amended Petition is admitted and defendants may file responsive pleadings or
amendments to their original answers within ten [10] days from receipt hereof; and

3. The plaintiffs have not made out a case for the issuance of a temporary restraining
order and/or the writ of preliminary prohibitory injunction, and therefore the plaintiffs'
prayer for its issuance is denied.

SO ORDERED.11

In an Urgent Omnibus Motion12 dated December 2, 2004, LRA, et al. moved for reconsideration
on the ground of lack of merit and jurisdiction. The DAR similarly filed a Motion for
Reconsideration13 dated December 8, 2004 on the same ground of lack of jurisdiction. Both
motions were denied by the RTC in its Order14 dated January 7, 2005.

In a petition for certiorari15 filed with the CA, the Republic of the Philippines, represented by the
Solicitor General, and the LRA sought to annul the subject Order of the R TC on the following
grounds: (1) the RTC does not have jurisdiction over the petition and amended petition of
Trinidad Valley Realty and Development Corporation, et al. in view of Section 54 of RA 6657;
(2) the RTC committed grave abuse of discretion in admitting the amended petition; and (3) the

676
R TC did not acquire jurisdiction over the amended petition as the correct docket and other legal
fees had not been paid.

By Decision16 and Resolution17 dated June 28, 2007 and May 21, 2008, respectively, the CA
reversed and set aside the Order of the RTC, viz.:

WHEREFORE, in view of all the foregoing, the instant Petition is hereby GRANTED and the
assailed Order of the court a quo is hereby ANNULLED AND SET ASIDE. The court a quo is
hereby directed to DISMISS Civil Action No. 04-02-V, entitled "Trinidad Valley Realty and
Development Corporation, et al. vs. The Honorable Jose Mari B. Ponce, et al." for lack of
jurisdiction over the subject matter.

SO ORDERED.18

The CA ratiocinated that the R TC did not have jurisdiction over both the petition and amended
petition filed by Trinidad Valley Realty and Development Corporation, et al. in view of Section
54 of RA 6657 which clearly provides that it is the CA, and not the RTC, which has jurisdiction
over the case.19 The CA also reiterated the ruling of this Court in the landmark case of
Association of Small Landowners in the Phils., Inc. v. Hon. Secretary of Agrarian
Reform20 declaring the "Comprehensive Agrarian Reform Law" constitutional. Quoting the
following portion of the landmark decision, the CA stressed that the ruling therein has, in effect,
foreclosed any possible attack on the constitutionality of the law, viz.:

By the decision we reach today, all major legal obstacles to the comprehensive agrarian reform
program are removed, to clear the way for the true freedom of the farmer. We may now glimpse
the day he will be released not only from want but also from the exploitation and disdain of the
past and from his own feelings of inadequacy and helplessness. At last his servitude will be
ended forever. At last the farm on which he toils will be his farm. It will be his portion of the
Mother Earth that will give him not only the staff of life but also the joy of living. And where
once it bred for him only deep despair, now can he see in it the fruition of his hopes for a more
fulfilling future. Now at last can he banish from his small plot of earth his insecurities and dark
resentments and 'rebuild in it the music and the dream.'21

On the issue of whether the RTC committed grave abuse of discretion in admitting the amended
petition, the CA declared that while the Rules of Court allow amendments which substantially
alter the nature of the cause of action in order to serve the higher interest of substantial justice,
prevent delay and promote the objective of the Rules to secure a just, speedy and inexpensive
disposition of every action and proceeding, the admission by the RTC of the amended petition
was not proper and should have been denied.22 Prescinding from its ruling that the RTC did not
have jurisdiction over the original petition, the CA held that the RTC consequently did not have
authority to order the admission of Trinidad Valley Realty and Development Corporation, et al.'
s amended complaint in order for it to acquire jurisdiction over the subject matter.23 In view of
these dispositions, the CA deemed it unnecessary to discuss the third issue.

Trinidad Valley Realty and Development Corporation, et al. moved for reconsideration24 and
reiterated that judicial review was within the jurisdiction of the lower court and that the

677
requirements for raising the constitutionality issues had been complied with. It also stressed that
the amendment of the complaint did not change the cause of the action of unconstitutionality and
that the case was already pending before this Court.

The CA denied the motion for reconsideration on the ground that no new arguments were raised
to warrant a reexamination of its ruling on the issue of the lack of jurisdiction of the RTC.25 As
to the averment of Trinidad Valley Realty and Development Corporation, et al. that the CA' s
assailed June 28, 2007 Decision was already rendered moot and academic by a judgment of the
RTC dated October 17, 2005 in Civil Case No. 04-013-V, entitled "Trinidad Valley Realty and
Development Corporation, et al. v. The Honorable Rene Villa, in his capacity as Secretary of
DAR, et al.," the CA pointed out that what was challenged in the petition filed before it was
Special Civil Action No. 04-02-V, entitled "Trinidad Valley Realty and Development
Corporation, et al. v. Jose Mari B. Ponce, in his capacity as Secretary of DAR, et al."26 The CA
further stated in its assailed Resolution, viz.:

Be that as it may, it must be emphasized that the subject matter of the instant petition is the
jurisdiction of the court a quo to try and hear [Special Civil Action] No. 04-02-V. Accordingly,
this Court ruled that the court a quo does not have jurisdiction to try the case.

Granting arguendo that Civil Case No. 04-013-V and [Special Civil Action] No. 04-02-V are the
same, the June 28, 2007 Decision of this Court cannot be rendered moot and academic by the
judgment of the court a quo in Civil Case No. 04-013-V. As correctly pointed out by the Office
of the Solicitor General, a decision rendered by a court or tribunal without jurisdiction is null and
void; hence, it's as if no decision was ever rendered by the court a quo.

Accordingly, the instant Motion for Reconsideration is hereby DENIED.27

Trinidad Valley Realty and Development Corporation, et al. now appeals to this Court by way of
Petition for Review on Certiorari28 raising substantially the principal issue of whether the RTC
has jurisdiction over the original and amended petitions.

We shall resolve this issue in consolidation with two other petitions filed before this Court - G.R.
No. 173386 (DAR, et al. v. Trinidad Valley Realty & Development Corporation, et al.) and G.R.
No. 174162 (Grace B. Fua, in her capacity as Provincial Reform Officer of Negros Oriental, et
al. v. Trinidad Valley Realty & Development Corporation, et al.). Both petitions stemmed from
the assailed Decision29 later issued by the RTC dated October 17, 2005 - the same RTC Decision
that Trinidad Valley Realty and Development Corporation, et al. had brought to the attention of
the CA in their motion for reconsideration. The RTC Decision was reached after it issued its
assailed Order in Special Civil Action No. 04-02-V - ruling that it had jurisdiction over the
original petition (special civil action of certiorari, prohibition and mandamus) and therefore had
the authority to admit the amended petition (ordinary action of annulment of land titles). Pre-trial
proceeded in the ordinary action which was re-docketed as Civil Case No. 04-013-V. There
being no factual issue involved, the case was submitted for judgment based on the pleadings. The
resulting assailed judgment on the pleadings declared as unconstitutional and void the following
administrative issuances of the DAR and the LRA, Executive Order No. 405, and other related
issuances, viz.:

678
 i. Administrative Order No. 10, Series of 1989 - Registration/Selection of Beneficiaries -
DAR chooses beneficiaries under A.O. No. 10, Series of 1989 using as its basis, Section
22 of RA 6657 allowing farmers, farmworkers, or any person who is landless to become
a beneficiary of any private agricultural land. Under this Administrative Order, not only
farmworkers or farmers working on a particular land are entitled to become beneficiaries,
but any person who is landless, in short a non-tiller of the land, as long as he is capable
and willing to become such a beneficiary.

ii. Administrative Orders No. 12, Series of 1989, No. 9, Series of 1990 and No. 2, Series
of 1996 allows DAR to place under compulsory coverage all private agricultural land by
merely sending a notice of coverage; these administrative orders covering the same
subjects, supersede one another from its earliest which is A.O. 12, Series of 1989,
through Administrative Order No. 9, and polished into its last reincarnation,
Administrative Order No 2, Series of 1996. Under these Orders, DAR granted itself the
following powers which it has enforced: [1] to compulsorily acquire all private
agricultural lands; [2] to order Land Bank to determine just compensation; and [3] to
cancel the landowner's title and transfer the land to the Republic of the Philippines [RP];

iii. Administrative Order No. 10, Series of 1990 authorizes DAR to cancel the RP title
and issue final titles called Certificate of Land Ownership Award [CLO As] which in turn
it uses as basis to distribute private agricultural lands covered to beneficiaries;

iv. Joint DAR-LRA Memorandum Circular No. 20, Series of 1997 and all other previous
DAR-LRA Memorandum Circulars are a series of agreements whereby DAR and the
LRA agreed that the Registers of Deeds under LRA shall cancel landowners' titles upon
the request or directive of DAR. and thereafter register final titles to beneficiaries called
Certificates of Land Ownership A ward;

v. Executive Order No. 405 promulgated by President Aquino which is interpreted by

DAR as authorizing Land Bank to determine just compensation;

vi. All other Administrative Orders and related issuances that prescribe substantially the
same procedure as the above-foregoing Orders and Regulations existing or to be issued
by the DAR with the same intent and effect in prescribing a non-judicial process of land
acquisition.30

The RTC also annulled the CLOAs issued by the DAR and issued a permanent prohibitory
injunction31 restraining private defendant beneficiaries, DAR defendants and other entities from
exercising acts of possession, dispossession or ownership over any portion of the subject
property, and preventing the DAR from subjecting the landholdings of Trinidad Valley Realty
and Development Corporation, et al. under the coverage of agrarian reform through the
implementation of the administrative orders and issuances.32

Hence, the Petitions for Review on Certiorari filed in G.R. Nos. 17338633 and 17416234 posing
the same intersecting jurisdictional question in these consolidated cases: Whether the RTC had

679
jurisdiction over the original and amended petitions filed by Trinidad Valley Realty and
Development Corporation, et al.

It is a cardinal principle in remedial law that the jurisdiction of a court over the subject matter of
an action is determined by the law in force at the time of the filing of the complaint and the
allegations of the complaint.35Jurisdiction is determined exclusively by the Constitution and the
law and cannot be conferred by the voluntary act or agreement of the parties. It cannot also be
acquired through or waived, enlarged or diminished by their act or omission, nor conferred by
the acquiescence of the court. It is neither for the court nor the parties to violate or disregard the
rule, this matter being legislative in character.36 The nature of an action, as well as which court or
body has jurisdiction over it, is determined based on the allegations contained in the complaint of
the plaintiff, irrespective of whether or not the plaintiff is entitled to recover upon all or some of
the claims asserted therein. The averments in the complaint and the character of the relief sought
are the ones to be consulted. Once vested by the allegations in the complaint, jurisdiction also
remains vested irrespective of whether or not the plaintiff is entitled to recover upon all or some
of the claims asserted therein.37

In the case at bar, the CA has correctly and succinctly synthesized that both the original petition
for the "Declaration of Unconstitutionality Through Certiorari, Prohibition and Mandamus with
Prayer for Preliminary Prohibitory Injunction and Restraining Order" and the amended petition
for "Judicial Review Through an Action to Annul Titles, and Mandatory and Prohibitory
Injunctions with Prayer for Preliminary Prohibitory Injunction and Restraining Order" contain
the same allegations, viz.:

x x x that beneficiaries are not those intended by the Constitution as beneficiaries; that subject
properties cannot be subjected to compulsory acquisition because its farm operations are under
labor administration; that the valuation of the land was not judicially determined; that the
cancellation of petitioners' title over the subject properties and the issuance of Certificates of
Land Ownership A ward were effected without any court intervention; that a case for
expropriation should have been filed in court; and that certain DAR Administrative Orders are
unconstitutional.38

We also agree with the assessment of the appellate court that these allegations assail the acts of
the DAR in awarding the CLOAs to the beneficiaries and question the procedure in fixing the
compensation - acts which pertain to the very "application, implementation, enforcement or
interpretation"39 of RA 6657 or the agrarian reform law and other pertinent laws on agrarian
reform.

Section 54 of RA 6657 leaves no room for doubt that decisions, orders, awards or rulings of the
DAR may be brought to the CA by certiorari and not with the RTC through an ordinary action
for cancellation of title, as in the instant case:

SECTION 54. Certiorari. - Any decision, order, award or ruling of the DAR on any agrarian
dispute or on any matter pertaining to the application, implementation, enforcement, or
interpretation of this Act and other pertinent laws on agrarian reform may be brought to the

680
Court of Appeals by certiorari except as otherwise provided in this Act within fifteen (15) days
from the receipt of a copy thereof.

The findings of fact of the DAR shall be final and conclusive if based on substantial evidence.
(Emphasis and underscoring supplied.)

An examination of the records40 in the instant case would show that Trinidad Valley Realty and
Development Corporation had actually brought the matter to the DAR prior to its filing of the
original and amended petitions with the RTC. The following incidents on record reveal an
acknowledgment by Trinidad Valley Realty and Development Corporation that the case indeed
involves issues relating to the application, implementation, enforcement or interpretation of RA
6657, viz.:

1. Trinidad Valley Realty and Development Corporation had originally filed a case with
the DARAB for Cancellation of CLOA, Injunction and Damages with prayer for the
issuance of a Temporary Restraining Order. The subject property covered the same
landholding in the instant case covering the same area of 641. 7895 hectares. The case
was dismissed by the DAR Provincial Adjudicator in an Order dated March 31, 1997 on
the ground that the matters raised by Trinidad Valley Realty and Development
Corporation involved the administrative implementation of RA 6657. The case was then
treated as a protest against CARP coverage. It was again dismissed in an Order dated
November 19, 1997 for lack ofmerit.41

2. A Motion for Reconsideration dated December 15, 1997 was filed seeking for a
reversal and exemption of those areas with a slope of 18% and above from CARP
coverage. An addendum to the Motion for Reconsideration dated February 2, 1998 was
also filed wherein Trinidad Valley Realty and Development Corporation manifested,
among others, its voluntary offer to sell to the government a one hundred-hectare portion
of the subject land. For utter lack of merit, both motions were dismissed by the DAR
Regional Director on August 7, 1998 and the order dated November 19, 1997 was
affirmed.42

3. On September 25, 1998, an appeal was filed before the Office of the Secretary. An
Appeal Memorandum later filed on November 10, 1998 raised the following issue on
whether the subject landholding was properly subjected to CARP coverage. The Office of
the Secretary denied the appeal for lack of merit in an Order dated March 17, 2004. The
Order stated that the subject lands have a slope of 18% and were already developed as of
June 15, 1988. Furthermore, the Order also stated that at the time of the resolution of the
Appeal therein, the subject land was already being occupied by farmer-beneficiaries with
their respective CLOAs which cannot be attacked collaterally. The Order also held that
Trinidad Valley Realty and Development Corporation failed to prove, by substantial
evidence, that the areas that it wanted to be exempted from CARP coverage due to the
18% slope limitation are non-productive and less suitable for agricultural use.43

This Order which was issued by the then DAR OIC-Secretary was not appealed by protestant
Trinidad Valley Realty and Development Corporation to the CA. This Order is exactly in the

681
nature of any such "decision, order, award or ruling" of the DAR on any agrarian dispute or on
any matter pertaining to the application, implementation, enforcement, or interpretation of this
Act and other pertinent laws on agrarian reform which may be brought to the CA by certiorari,
except as otherwise provided in RA 6657, within fifteen (15) days from receipt thereof - and not
to the RTC. It is also significant to note that in the proceedings before the DAR involving the
protest of Trinidad Valley Realty and Development Corporation, the issue on the
unconstitutionality of the subject administrative issuances promulgated to implement RA 6657
was never raised - an issue that must have been raised at the earliest possible opportunity.

The jurisdictional shifts on the authority to hear and decide agrarian reform matters is instructive:

x x x in 1980, upon the passage of Batas Pambansa Blg. 129, otherwise known as the Judiciary
Reorganization Act, the Courts of Agrarian Relations were integrated into the Regional Trial
Courts and the jurisdiction of the former was vested in the latter courts.

However, with the enactment of Executive Order No. 229, which took effect on August 29,
1987, the Regional Trial Courts were divested of their general jurisdiction to try agrarian reform
matters. The said jurisdiction is now vested in the Department of Agrarian Reform.

Republic Act No. 6657, the Comprehensive Agrarian Reform Law, which took effect on June 15,
1988, contains provisions which evince and support the intention of the legislature to vest in the
Department of Agrarian Reform exclusive jurisdiction over all agrarian reform matters.

Section 50, of said law substantially reiterates Section 17, of Executive Order No. 229, vesting in
the Department of Agrarian Reform exclusive and original jurisdiction over all matters involving
the implementation of agrarian reform, to wit:

"SECTION 50. Quasi-Judicial Powers of the DAR. The DAR is hereby vested with primary
jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive original
jurisdiction over all matters involving the implementation of agrarian reform, except those
falling under the exclusive jurisdiction of the Department of Agriculture (DA) and the
Department of Environment and Natural Resources (DENR)."

In addition, Sections 56 and 57, thereof provide for the designation by the Supreme Court of at
least one (1) branch of the Regional Trial Court within each province to act as a special agrarian
court. The said special court shall have original and exclusive jurisdiction only over petitions for
the determination of just compensation to landowners and the prosecution of criminal offenses
under said Act. Said provisions thus delimit the jurisdiction of the Regional Trial Courts in
agrarian cases only to these two instances. Thus:

"SEC. 56. Special Agrarian Court. - The Supreme Court shall designate at least one (1) branch of
the Regional Trial Court (RTC) within each province to act as a Special Agrarian Court.

"The Supreme Court may designate more branches to constitute such additional Special Agrarian
Courts as may be necessary to cope with the number of agrarian cases in each province. In the
designation, the Supreme Court shall give preference to the Regional Trial Courts which have

682
been assigned to handle agrarian cases or whose presiding judges were former judges of the
defunct Court of Agrarian Relations.xx x."

"SEC. 57. Special Jurisdiction. - The Special Agrarian Courts shall have original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners, and the
prosecution of all criminal offenses under this Act. The Rules of Court shall apply to all
proceedings before the Special Agrarian Courts unless modified by this Act.1wphi1

"The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction
within thirty (30) days from submission of the case for decision."44

The case at bar deals with acts of the DAR and the application, implementation, enforcement, or
interpretation of RA 6657 - issues which do not involve the "special jurisdiction" of the RTC
acting as a Special Agrarian Court. Hence, when the court a quo heard and decided the instant
case, it did so without jurisdiction.

The Court likewise ruled in the similar case of DAR v. Cuenca45 that "[a]ll controversies on the
implementation of the Comprehensive Agrarian Reform Program (CARP) fall under the
jurisdiction of the Department of Agrarian Reform (DAR), even though they raise questions that
are also legal or constitutional in nature." In said case, it was noted that the main thrust of the
allegations in the Complaint was the propriety of the Notice of Coverage and "not x x x the 'pure
question of law' spawned by the alleged unconstitutionality of EO 405 - but x x x the annulment
of the DAR' s Notice of Coverage."46 The Court thus held that:

To be sure, the issuance of the Notice of Coverage constitutes the first necessary step towards the
acquisition of private land under the CARP. Plainly then, the propriety of the Notice relates to
the implementation of the CARP, which is under the quasi-judicial jurisdiction of the DAR.
Thus, the DAR could not be ousted from its authority by the simple expediency of appending an
allegedly constitutional or legal dimension to an issue that is clearly agrarian.47(Emphasis
supplied)

The legal recourse undertaken by Trinidad Valley Realty and Development Corporation, et al. is
on all-fours with the remedy adopted by the private respondents in Cuenca. In this case, Trinidad
Valley Realty and Development Corporation, et al. cloaked the issue as a constitutional question
- assailing the constitutionality of administrative issuances promulgated to implement the
agrarian reform law - in order to annul the titles issued therein. In Cuenca, private respondents
assailed the constitutionality of EO 45 in order to annul the Notice of Coverage issued therein.
The only difference is that in Cuenca, private respondents directly filed with the R TC their
complaint to obtain the aforesaid reliefs while in this case, Trinidad Valley Realty and
Development Corporation, et al. filed their original petition for certiorari with the R TC after the
protest of Trinidad Valley Realty and Development Corporation against the coverage of its
landholding under CARP was dismissed by the DAR Regional Director and such dismissal was
affirmed by DAR OIC Secretary Jose Mari B. Ponce. But in both cases, it is evident that the
constitutional angle was an attempt to exclude the cases from the ambit of the jurisdictional
prescriptions under RA 6657.

683
The Court further stated in Cuenca that "in case of doubt, the jurisprudential trend is for courts to
refrain from resolving a controversy involving matters that demand the special competence of
administrative agencies, 'even if the question[s] involved [are] also judicial in character."'48 In
the instant case, however, there is hardly any doubt that the RTC had no jurisdiction over the
subject matter of the case. Consequently, it did not have authority to perform any of the
following: order the admission of the amended petition of Trinidad Valley Realty and
Development Corporation, et al., decide the amended petition on the merits, or issue a permanent
prohibitory injunction. In any case, such injunction issued by the RTC is a nullity in view of the
express prohibitory provisions of the CARP and this Court's Administrative Circular Nos. 29-
2002 and 38-2002 enjoining all trial judges to strictly observe Section 68 of RA 6657, viz.:

SECTION 68. Immunity of Government Agencies from Undue Interference. - No injunction,

restraining order, prohibition or mandamus shall be issued by the lower courts against the
Department of Agrarian Reform (DAR), the Department of Agriculture (DA), the Department of
Environment and Natural Resources (DENR), and the Department of Justice (DOJ) in their
implementation of the program.

Given our ruling that the R TC lacked jurisdiction over the instant case, we find no necessity to
address the other issues raised in the three consolidated petitions.

WHEREFORE, the Petition in G.R. No. 183191 is DENIED for lack of merit. The assailed
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 88512 dated June 28, 2007
and May 21, 2008, respectively, are hereby AFFIRMED. The Petitions in G.R. Nos. 173386 and
174162 are hereby GRANTED. The challenged Order in Special Civil Action No. 04-02-V,
entitled Trinidad Valley Realty and Development Corporation, et al. v. Jose Mari B. Ponce, in
his capacity as Secretary of DAR, et al. dated October 26, 2004 and the Decision in Civil Case
No. 04-013-V, entitled Trinidad Valley Realty and Development Corporation, et al. v. The
Honorable Rene Villa, in his capacity as Secretary of DAR, et al. dated October 1 7, 2005 of the
Regional Trial Court, Branch 64, Guihulngan, Negros Oriental are hereby ANNULLED and SET
ASIDE for lack of jurisdiction. The Regional Trial Court, Branch 64, Guihulngan, Negros
Oriental is likewise ordered to DISMISS herein Special Civil Action No. 04-02-V and Civil Case
No. 04-013-V for lack of jurisdiction. The Writ of Permanent Prohibitory Injunction dated April
18, 2006 issued by the said court by virtue of its Order on even date is hereby LIFTED and SET
ASIDE.

With costs against the petitioners in G .R. No. 183191.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice

684
 ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.
Associate Justice Associate Justice

TERSITA J. LEONARDO-DE
ARTURO D. BRION
CASTRO
Associate Justice
Associate Justice

DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA

Associate Justice Associate Justice

BIENVENIDO L. REYES ESTELA M. PERLAS-BERNABE

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the 1987 Constitution, it is hereby certified that the
conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes
1
Also referred to as Villahermoso in some parts of the records.
2
Rollo (G.R. No. 183191), p. 121.

685
3
Records, Vol. 1, pp. 7-77.
4
Id. at 42-43.
5
Joined by private respondents.
6
Answer with Affirmative Defenses of Lack of Jurisdiction, Etc., records, Vol. 2, pp.
452-463.
7
256 Phil. 777 ( 1989).
8
Records, Vol. 2, pp. 508-587. Received by DAR, et al. on July 26, 2004.
9
Records, Vol. 3, pp. 942-945.
10
Id. at 1232-1244. Penned by Presiding Judge Mario 0. Trinidad.
11
Id.atl244.
12
Id. at 1332-1343.
13
Id. at 1346-1358.
14
Records, Vol. 4, pp. 1573-1574.
15
Rollo (G.R. No. 183191), pp. 355-388.
16
Id. at 120-132.
17
Id. at 24-27.
18
Id. at 131.
19
Id. at 124-129.
20
Supra note 7.
21
Rollo (G.R. No. 183191), p. 124.
22
Id. at 129-130.
23
Id. at 130.
24
Id. at 462-491.
25
Id. at 24-27.

686
26
Id. at 25-26.
27
Id. at 26.
28
Id. at 33-106.
29
Id. at 492-605.
30
Id. at 603-604.
31
In an Order dated April 18, 2006, the RTC granted an Ex-Parte Motion for
Enforcement of Writ of Permanent Injunction filed by Trinidad Valley Realty and
Development Corporation, et al. Original Records, Vol. 1, pp. 1-5.
32
Rollo (G.R. No. 183191), pp. 600-605.
33
In G.R. No. 173386, petitioners raised two main issues: that the RTC has no
jurisdiction over petitions for certiorari involving acts of the DAR; and, that the RTC
erred in ruling that Trinidad Valley Realty and Development Corporation, et al. did not
resort to forum shopping.
34
In G.R. No. 174162, petitioners raised the same issues posited in G.R. No. 173386.
35
DAR v. Paramount Holdings Equities, Inc., et al., G.R. No. 176838, June 13, 2013, p.
8; Padlan v. Dinglasan, G.R. No. 180321, March 20, 2013, 694 SCRA 91, 98-99; Bank of
Commerce v. Planters Development Bank, G.R. Nos. 154470-71 and G.R. Nos. 154589-
90, September 24, 2012, 681 SCRA 521, 548-549; Mendoza v. Germino, G.R. No.
165676, November 22, 2010, 635 SCRA 537, 544. Citations omitted.
36
Mendoza v. Germino and Germino, id., citing Oca v .. Court of Appeals, 428 Phil. 696,
701-702 (2002).
37
Pad/an v. Dinglasan, supra note 35, citing City of Dumaguete v. Philippine Ports
Authority, G.R. No. 168973, August 24, 2011, 656 SCRA 102, 119.
38
Rollo(G.R. No.183191),p.125.
39
Sec. 54, RA 6657.
40
See Order dated March 17, 2004, issued by then OIC-Secretary Jose Mari B. Ponce,
rollo (G.R. No. 174162), Vol. I, pp. 297-302.
41
Id. at 298.
42
Id. at 298-299.

687
43
Id. at 299-301.
44
Rollo (G.R. No. 183191), pp. 127-128.
45
482 Phil. 208, 211 (2004).
46
Id. at 223.
47
Id. at 226.
48
Id.

688
 Republic of the Philippines
Supreme Court
Manila

FIRST DIVISION

ANICETO CALUBAQUIB, G.R. No. 170658

WILMA CALUBAQUIB,
EDWIN CALUBAQUIB, Present:
ALBERTO CALUBAQUIB,
and ELEUTERIO FAUSTINO CORONA, C.J., Chairperson,
CALUBAQUIB, LEONARDO-DE CASTRO,
Petitioners, DEL CASTILLO,
PEREZ, and
- versus - MENDOZA, JJ.

REPUBLIC OF THE PHILIPPINES, Promulgated:

Respondent. June 22, 2011
x--------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

Due process rights are violated by a motu proprio rendition of a summary judgment.

Before the Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assailing the
September 21, 2005 Decision,[2] as well as the November 30, 2005 Resolution,[3]of the Court of Appeals
(CA) in CA-G.R. CV No. 83073. The two issuances of the appellate court ruled against petitioners and
ordered them to reconvey the subject properties to respondent Republic of the Philippines (Republic). The
CA upheld the April 26, 2004 Decision[4] of Branch 1 of the Regional Trial Court (RTC) of Tuguegarao
City, the dispositive portion of which decreed as follows:
WHEREFORE, in the light of the foregoing, the Court declares that the Republic of the
Philippines is the owner of that certain property denominated as Lot No. 2470 of the
Cadastral Survey of Tuguegarao with an area of three hundred ninety two thousand nine
hundred ninety six (392,996) square meters which is registered in its name as evidenced
by Original Certificate No. 13562, and as such, is entitled to the possession of the same,
and that the defendants illegally occupied a five (5) hectare portion thereof since 1992.

Defendants are then ordered to vacate the portion so occupied by them, and pay to the
national government the amount of Five Thousand Pesos (P5,000.00) per year of
occupancy, from 1992 up to the time the property is vacated by them.

689
 Defendants counterclaim is dismissed.

No pronouncement as to cost.

IT IS SO ORDERED.[5]

Factual Antecedents

On August 17, 1936, President Manuel L. Quezon issued Proclamation No. 80,[6] which declared a
39.3996-hectare landholding located at Barangay Caggay, Tuguegarao, Cagayan, a military reservation
site. The proclamation expressly stated that it was being issued subject to private rights, if any there
be. Accordingly, the respondent obtained an Original Certificate of Title No. 13562[7] over the property,
which is more particularly described as follows:

A parcel of land (Lot No. 2470 of the Cadastral Survey of Tuguegarao), situated in the
barrio of Caggay, Municipality of Tuguegarao. Bounded on the E. by Lot No. 2594: on the
SE, by the Provincial Road: on the SW by Lot Nos. 2539, 2538, and 2535: and on NW, by
Lot Nos. 2534, 2533, 2532, 2478 and 2594.

On January 16, 1995, respondent[8] filed before the RTC of Tuguegarao, Cagayan a complaint for recovery
of possession[9] against petitioners alleging that sometime in 1992, petitioners unlawfully entered the
military reservation through strategy and stealth and took possession of a five-hectare portion (subject
property) thereof. Petitioners allegedly refused to vacate the subject property despite repeated demands to
do so.[10] Thus, respondent prayed that the petitioners be ordered to vacate the subject property and to pay
rentals computed from the time that they unlawfully withheld the same from the respondent until the latter
is restored to possession.[11]

Petitioners filed an answer denying the allegation that they entered the subject property through stealth and
strategy sometime in 1992.[12] They maintained that they and their predecessor-in-interest, Antonio
Calubaquib (Antonio), have been in open and continuous possession of the subject property since the early
1900s.[13] Their occupation of the subject property led the latter to be known in the area as the Calubaquib
Ranch. When Antonio died in 1918, his six children acknowledged inheriting the subject property from
him in a private document entitled Convenio.In 1926, Antonios children applied for a homestead patent but
the same was not acted upon by the Bureau of Lands.[14] Nevertheless, these children continued cultivating
the subject property.

690
Petitioners acknowledged the issuance of Proclamation No. 80 on August 17, 1936, but maintained that the
subject property (the 5-hectare portion allegedly occupied by them since 1900s) was excluded from its
operation. Petitioners cite as their basis a proviso in Proclamation No. 80, which exempts from the military
reservation site private rights, if any there be.[15] Petitioners prayed for the dismissal of the complaint against
them.

The pre-trial conference conducted on August 21, 1995 yielded the following admissions of fact:

1. Lot No. 2470 of the Tuguegarao Cadastre is a parcel of land situated in Alimanao,
Tuguegarao, Cagayan with an area of 392,996 square meters. On August 17, 1936, the
President of the Philippines issued Proclamation No. 80 reserving the lot for military
purposes. On the strength of this Proclamation, OCT No. 13562 covering said lot was
issued in the name of the Republic of the Philippines.

2. The defendants are in actual possession of a 5-hectare portion of said property.

3. The Administrator of the Camp Marcelo Adduru Military Reservation demanded the
defendants to vacate but they refused.

4. The defendants sought presidential assistance regarding their status on the land covered
by the title in the name of the Republic of the Philippines. The Office of the President has
referred the matter to the proper administrative agencies and up to now there has been no
definite action on said request for assistance.[16]

Given the trial courts opinion that the basic facts of the case were undisputed, it advised the parties to file a
motion for summary judgment.[17] Neither party filed the motion. In fact, respondent expressed on two
occasions[18] its objection to a summary judgment. It explained that summary judgment is improper given
the existence of a genuine and vital factual issue, which is the petitioners claim of ownership over the subject
property. It argued that the said issue can only be resolved by trying the case on the merits.

On January 31, 2001, the RTC issued an Order thus:

The Court noticed that the defendants in this case failed to raise any issue. For this reason,
a summary judgment is in order.

Let this case be submitted for summary judgment.

SO ORDERED.[19]
Ruling of the Regional Trial Court[20]

691
Subsequently, without any trial, the trial court rendered its April 26, 2004 Decision[21] dismissing petitioners
claim of possession of the subject property in the concept of owner. The trial court held that while
Proclamation No. 80 recognized and respected the existence of private rights on the military reservation,
petitioners position could not be sustained, as there was no right of [petitioners] to speak of that was
recognized by the government.[22]

Ruling of the Court of Appeals[23]

Petitioners appealed[24] to the CA, which affirmed the RTC Decision, in this wise:

WHEREFORE, premises considered, the present appeal is hereby DISMISSED

for lack of merit. The appealed decision dated April 26, 2004 of the Regional Trial Court
of Tuguegarao City, Cagayan Branch 1 in Civil Case No. 4846 is hereby AFFIRMED and
UPHELD.

SO ORDERED.[25]

The CA explained that, in order to segregate the subject property from the mass of public land, it was
imperative for petitioners to prove their and their predecessors-in-interests occupation and cultivation of the
subject property for more than 30 years prior to the issuance of the proclamation.[26] There must be clear,
positive and absolute evidence that they had complied with all the requirements of the law for confirmation
of an imperfect title before the property became a military reservation site.[27] Based on these standards,
petitioners failed to establish any vested right pertaining to them with respect to the subject property.[28] The
CA further held that petitioners did not say what evidence they had of an imperfect title under the Public
Land Act.[29]

The CA denied reconsideration of its Decision, hence petitioners appeal to this Court.

Petitioners Arguments

Petitioners maintain that the subject property was alienable land when they, through their ancestors, began
occupying the same in the early 1900s. By operation of law, they became owners of the subject parcel of
land by extraordinary acquisitive prescription. Thus, when Proclamation No. 80 declared that existing
private rights, if there be any are exempt from the military reservation site, the subject property remained
private property of the petitioners.

692
Petitioners then ask that the case be remanded to the trial court for the reception of evidence. They maintain
that the case presents several factual issues, such as the determination of the nature of the property (whether
alienable or inalienable) prior to 1936 and of the veracity of petitioners claim of prior and adverse
occupation of the subject property.[30]

Respondents Arguments

Respondent, through the Office of the Solicitor General, argues that petitioners were not able to prove that
they had a vested right to the subject property prior to the issuance of Proclamation No. 80. As petitioners
themselves admit, their application for homestead patent filed in 1926 was not acted upon, hence they did
not acquire any vested right to the subject property. Likewise, petitioners did not prove their occupation
and cultivation of the subject property for more than 30 years prior to August 17, 1936, the date when
Proclamation No. 80 took effect.[31]

Issue[32]

The crux of the case is the propriety of rendering a summary judgment.

Our Ruling

The petition has merit.

Summary judgments are proper when, upon motion of the plaintiff or the defendant, the court finds that
the answer filed by the defendant does not tender a genuine issue as to any material fact and that one party
is entitled to a judgment as a matter of law.[33] A deeper understanding of summary judgments is found
in Viajar v. Estenzo:[34]

Relief by summary judgment is intended to expedite or promptly dispose of cases where

the facts appear undisputed and certain from the pleadings, depositions, admissions and
affidavits. But if there be a doubt as to such facts and there be an issue or issues of fact
joined by the parties, neither one of them can pray for a summary judgment. Where the
facts pleaded by the parties are disputed or contested, proceedings for a summary judgment
cannot take the place of a trial.

An examination of the Rules will readily show that a summary judgment is by no means a
hasty one. It assumes a scrutiny of facts in a summary hearing after the filing of a motion
for summary judgment by one party supported by affidavits, depositions, admissions, or
other documents, with notice upon the adverse party who may file an opposition to the

693
 motion supported also by affidavits, depositions, or other documents x x x. In spite of its
expediting character, relief by summary judgment can only be allowed after compliance
with the minimum requirement of vigilance by the court in a summary hearing considering
that this remedy is in derogation of a party's right to a plenary trial of his case. At any rate,
a party who moves for summary judgment has the burden of demonstrating clearly the
absence of any genuine issue of fact, or that the issue posed in the complaint is so patently
unsubstantial as not to constitute a genuine issue for trial, and any doubt as to the existence
of such an issue is resolved against the movant.[35]

A summary judgment is permitted only if there is no genuine issue as to any material fact and [the] moving
party is entitled to a judgment as a matter of law.[36] The test of the propriety of rendering summary
judgments is the existence of a genuine issue of fact,[37] as distinguished from a sham, fictitious, contrived
or false claim.[38] [A] factual issue raised by a party is considered as sham when by its nature it is evident
that it cannot be proven or it is such that the party tendering the same has neither any sincere intention
nor adequate evidence to prove it. This usually happens in denials made by defendants merely for the sake
of having an issue and thereby gaining delay, taking advantage of the fact that their answers are not under
oath anyway.[39]

In determining the genuineness of the issues, and hence the propriety of rendering a summary judgment,
the court is obliged to carefully study and appraise, not the tenor or contents of the pleadings, but the facts
alleged under oath by the parties and/or their witnesses in the affidavits that they submitted with the motion
and the corresponding opposition. Thus, it is held that, even if the pleadings on their face appear to raise
issues, a summary judgment is proper so long as the affidavits, depositions, and admissions presented by
the moving party show that such issues are not genuine.[40]

The filing of a motion and the conduct of a hearing on the motion are therefore important because these
enable the court to determine if the parties pleadings, affidavits and exhibits in support of, or against, the
motion are sufficient to overcome the opposing papers and adequately justify the finding that, as a matter
of law, the claim is clearly meritorious or there is no defense to the action.[41] The non-observance of the
procedural requirements of filing a motion and conducting a hearing on the said motion warrants the setting
aside of the summary judgment.[42]

In the case at bar, the trial court proceeded to render summary judgment with neither of the parties filing a
motion therefor. In fact, the respondent itself filed an opposition when the trial court directed it to file the
motion for summary judgment. Respondent insisted that the case involved a genuine issue of fact. Under
these circumstances, it was improper for the trial court to have persisted in rendering summary

694
judgment. Considering that the remedy of summary judgment is in derogation of a party's right to a plenary
trial of his case, the trial court cannot railroad the parties rights over their objections.

More importantly, by proceeding to rule against petitioners without any trial, the trial and appellate courts
made a conclusion which was based merely on an assumption that petitioners defense of acquisitive
prescription was a sham, and that the ultimate facts pleaded in their Answer (e.g., open and continuous
possession of the property since the early 1900s) cannot be proven at all.This assumption is as baseless as
it is premature and unfair. No reason was given why the said defense and ultimate facts cannot be proven
during trial. The lower courts merely assumed that petitioners would not be able to prove their defense and
factual allegations, without first giving them an opportunity to do so.

It is clear that the guidelines and safeguards for the rendition of a summary judgment were all ignored by
the trial court. The sad result was a judgment based on nothing else but an unwarranted assumption and a
violation of petitioners due process right to a trial where they can present their evidence and prove their
defense.
WHEREFORE, premises considered, the petition is GRANTED. The April 26, 2004 summary judgment
rendered by the Regional Trial Court of Tuguegarao City, Branch 1, and affirmed by the Court of Appeals,
is SET ASIDE. The case is REMANDED to the Regional Trial Court of Tuguegarao City, Branch 1, for
trial. The Presiding Judge is directed to proceed with dispatch.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice
WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

695
 Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.

RENATO C. CORONA
Chief Justice

Per Special Order No. 1022 dated June 10, 2011.

[1]
Rollo, pp. 18- 37.
[2]
Id. at 45-56; penned by Associate Justice Martin S. Villarama, Jr. (now a Member of this Court)
and concurred in by Associate Justices Edgardo F. Sundiam and Japar B. Dimaampao.
[3]
Id. at 57.
[4]
Id. at 39-44; penned by Judge Jimmy H.F. Luczon, Jr.
[5]
RTC Decision, pp. 5-6; id. at 43-44.
[6]
Records, pp. 50-51.
[7]
Id. at 2.
[8]
The Republic was represented by Commander Abelardo Arugay, who was appointed as
Administrator of Camp Marcelo Adduru Military Reservation on April 15, 1994 (id. at 49).
[9]
Id. at 1-6. The case was docketed as Civil Case No. 4846 (95-Tug.) and raffled to Branch 1 of
the Regional Trial Court of Tuguegarao, Cagayan.
[10]
Id. at 3.
[11]
Id. at 4.
[12]
Answer, pp. 1-2; id. at 17-18.
[13]
Id. at 2; id. at 18.
[14]
Id. at 3; id. at 19.
[15]
Id. at 1; id. at 17.
[16]
Records, pp. 58-59.
[17]
Id. at 61.
[18]
Manifestation and Compliance dated July 28, 1999 (id. at 95) and Plaintiffs Memorandum
dated November 18, 1999 (id. at 111-112).
[19]
Id. at 124.
[20]
Id. at 125-130.
[21]
Rollo, pp. 39-44.
[22]
Id. at 42.

696
[23]
Rollo, pp. 45-56.
[24]
CA rollo, pp. 18-21.
[25]
CA Decision, p. 11; rollo, p. 55.
[26]
Id. at 7-8; id. at 51-52.
[27]
Id. at 10; id. at 54.
[28]
Id.; id.
[29]
Id. at 9; id. at 53.
[30]
Petitioners Memorandum, pp. 27-31; id. at 141-145.
[31]
Respondents Memorandum, pp. 5-8; id. at 100-103.
[32]
Petition for Review, pp. 8-9; id. at 25-26.
[33]
RULES OF COURT, Rule 35.
[34]
178 Phil. 561 (1979).
[35]
Id. at 572-573. Citations omitted.
[36]
Eland Philippines, Inc. v. Garcia, G.R. No. 173289, February 17, 2010, 613 SCRA 66, 81-82.
[37]
Estrada v. Consolacion, 163 Phil. 540, 549 (1976).
[38]
Eland Philippines, Inc. v. Garcia, supra at 88.
[39]
Concurring Opinion of Justice Barredo in Estrada v. Consolacion, supra at 554. Emphasis
supplied.
[40]
Eland Philippines, Inc. v. Garcia, surpa at 82. Emphasis supplied.
[41]
Estrada v. Consolacion, supra note 37 at 550.
[42]
Caridao v. Hon. Estenzo, 217 Phil. 93, 101-102 (1984).

Republic of the Philippines

Supreme Court
Baguio City

SECOND DIVISION

697
ASIAN CONSTRUCTION AND G.R. No. 153827
DEVELOPMENT CORPORATION,
Petitioner,
Present:

PUNO, J., Chairperson,*

SANDOVAL-GUTIERREZ,**
CORONA,
AZCUNA, and
- versus -
GARCIA, JJ.

Promulgated:
PHILIPPINE COMMERCIAL
INTERNATIONAL BANK,
Respondent.
April 25, 2006
x-----------------------------------------------------------------------------------x

DECISION

GARCIA, J.:

In this petition for review under Rule 45 of the Rules of Court, petitioner Asian
Construction and Development Corporation or ASIAKONSTRUKT, seeks the reversal and setting

*
On leave.
**
Acting Chairperson.

698
aside of the decision966dated March 15, 2002 and the Resolution967 dated June 3, 2002 of the Court
of Appeals (CA) in CA-G.R. CV No. 68189. The assailed decision affirm with modification the
Summary Judgment rendered by the Regional Trial Court (RTC) of Makati City in an action for
a sum of money thereat commenced by the herein respondent, Philippine Commercial International
Bank (PCIBANK) against the petitioner, while the challenged resolution denied petitioners motion
for reconsideration.

The facts:

On February 24, 1999, in the RTC of Makati City, respondent PCIBANK filed a
complaint968 for a sum of money with prayer for a writ of preliminary attachment against petitioner
ASIAKONSTRUKT. Docketed as Civil Case No. 99-432, the complaint alleged, inter alia, as
follows:

FIRST CAUSE OF ACTION

2.01 On various occasions, ASIAKONSTRUKT obtained U.S. dollar

denominated credit accommodations from PCIBANK in the amount
of Four Million Four Hundred Eighty Seven Thousand U.S. dollars
(US$4,487,000.00), exclusive of interests, charges and fees thereon
and the cost of collecting the same. These credit accommodations
are covered by the following promissory notes:

xxx xxx xxx

2.02 Prompt and faithful payment of all the foregoing promissory notes
was secured by the following deeds of assignment executed by
ASIAKONSTRUKT in favor of PCIBANK:
966
Penned by then Associate Justice Romeo J. Callejo, Sr. (now a member of this Court), with Associate Justices
Remedios J. Salazar-Fernando and Perlita Tirona, (ret.), concurring; Rollo, pp. 34-58.
967
Id. at 59.
968
Id. at 61-69.

699
 (a) Deed of Assignment of Receivables/Contract
Proceeds dated 20 July 1994 where
ASIAKONSTRUKT assigned its receivables
from its Contract with the National Power
Corporation (NPC) in the amount of
.P54,500,000;

(b) Deed of Assignment of Receivables dated 28

June 1995 where ASIAKONSTRUKT assigned
its receivables from its Contract with the NPC in
the amount of P26,281,000.00;

(c) Deed of Assignment of Receivables dated 28

August 1995 where ASIAKONSTRUKT
assigned its receivables from its Sub-Contract
with ABB Power, Inc., in the amount of
P43,000,000.00;

(d) Deed of Assignment of Contract Proceeds dated

27 March 1996 where ASIAKONSTRUKT
assigned its receivables from its contracts with
PNOC in the aggregate amount of
P46,000,000.00; and

(e) Deed of Assignment of Contract Proceeds dated

20 February 1997 where ASIAKONSTRUKT
assigned its receivables from the Ormat
Philippines, Inc., in the aggregate amount of
US$3,350,000.00;

2.03 All the foregoing deeds of assignments stipulate, among others, the
following terms and conditions:

a) The assignment is for the purpose of securing

payment of the principal amount and the
interests and bank charges accruing thereon,
the costs of collecting the same and all other
expenses which PCIBANK may be put in

700
 connection with or as an incident of the
assignment;

b) That the assignment secures also any

extension or renewal of the credit which is
the subject thereof as any and all other
obligations of ASIAKONSTRUKT of
whatever kind and nature as appear in the
records of PCIBANK, which
ASIAKONSTRUKT accepts as the final and
conclusive evidence of such obligations to
PCIBANK, whether contracted before,
during or after the constitution of [the
assignment agreement];

c) That PCIBANK authorizes

ASIAKONSTRUKT, at the latters expense,
to collect and receive for [PCIBANK] all the
Receivables; and

d) That ASIAKONSTRUKT shall have no

right, and agrees not to use any of the
proceeds of any collections, it being agreed
by the parties that [ASIAKONSTRUKT]
divests itself of all the rights, title and interest
in said Receivables and the proceeds of the
collection received thereon.

2.04 The promissory notes have remained not fully paid despite their
having become due and demandable. Repeated verbal and written
demands were made upon ASIAKONSTRUKT, but to no avail. It
has failed and refused, and continues to fail and refuse, to pay its
outstanding obligations to PCIBANK;

2.05 As a result of ASIAKONSTRUKTs refusal to pay its outstanding

obligations, PCIBANK was constrained to refer the matter to
counsel and thus incur attorneys fees and legal costs.

2.06 The aggregate unpaid obligation of ASIAKONSTRUKT to

PCIBANK, as of 31 December 1998, amounts to US$4,553,446.06,
broken down as follows:

701
 Principal US$ 4,067,867.23
Interest US$ 291,263.27
Penalties US$ 194,315.56
TOTAL US$ 4,553,446.06

For its second cause of action, PCIBANK alleged in the same complaint as follows:

SECOND CAUSE OF ACTION

4.02 as a result of the fraudulent acts of ASIAKONSTRUKT, PCIBANK

suffered the following damages, all of which ASIAKONSTRUKT
must be held to pay PCIBANK:

4.02.1 Exemplary damages, in the interest of

public good and purposes of correction, in
the amount of not less than .P50,000.00;

4.02.2 Attorneys fees in the amount of not less than

. P1,800,000.00; and

4.02.3 Costs of suit.

In support of its prayer for a writ of preliminary attachment embodied in the

complaint, plaintiff PCIBANK alleges the following:

3.02 ASIAKONSTRUKT is guilty of fraud in contracting the debt, in the

performance thereof, or both, xxx;

303. PCIBANK agreed to enter into the above-mentioned credit

accommodations primarily because of the existence of the deeds of
assignment listed above. However, from telephone inquiries made
with responsible officers of the National Power Corporation, ABB
Power, Inc., PNOC and Ormat Philippines, Inc., PCIBANK was

702
 surprised to learn that ASIAKONSTRUKT had long ago collected
the contract proceeds, or portions thereof, which were previously
assigned to PCIBANK. However, to date, it has yet to turn over
these proceeds to PCIBANK. Worse, PCIBANK learned that the
contract proceeds were used by ASIAKONSTRUKT for its own
purposes clear evidence of fraud, which has deprived PCIBANK of
its security. ASIAKONSTRUKTs unauthorized use of the contract
proceeds for its own purposes was subsequently confirmed by Mr.
Napoleon Garcia, Vice President for Finance of
ASIAKONSTRUKT, in a telephone discussion on 12 January 1999
with Ms. Maricel E. Salaveria of PCIBANK. xxx Needless to say,
ASIAKONSTRUKT has fraudulently collected such receivables to
the prejudice of PCIBANK.

3.04 it is evident that ASIAKONSTRUKT never had any intention of

complying with the deeds of assignment. ASIAKONSTRUKT only
misled PCIBANK into believing that it had sufficient security to
ensure payment of its loan obligations.

3.05 Alternatively, granting, in argumenti gratia, that

ASIAKONSTRUKT, at the time it executed the foregoing deeds of
assignment, really intended to abide by their terms and conditions,
it nevertheless committed manifest fraud when it collected the
contract proceeds, and instead of remitting them to PCIBANK, used
them for its own purposes.

In an order969 dated April 13, 1999, the trial court, after receiving ex parte PCIBANKs
evidence in support of its prayer for preliminary attachment, directed the issuance of the desired
writ, thus:

WHEREFORE, let a writ of preliminary attachment issue against all the

property of defendant not exempt from execution or so much thereof as may be
sufficient to satisfy plaintiffs principal claim of US$4,553,446.06, representing the
alleged unpaid obligation of defendant, inclusive of interest and penalty charges, as
of December 31, 1998, which is equivalent to P174,260,380.72, upon plaintiffs

969
Original Records, p. 320.

703
 filing of a bond in an equal amount to answer for all it may sustain by reason of the
attachment if the Court shall finally adjudge that plaintiff was not entitled thereto.

SO ORDERED.

With plaintiff PCIBANK having posted the requisite bond, a writ of preliminary attachment
was thereafter issued by the trial court. Per records, defendant ASIAKONSTRUKT did not file
any motion for the quashal or dissolution of the writ.

Meanwhile, on August 27, 1999, defendant ASIAKONSTRUKT filed its Answer,970

thereunder making admissions and denials. Defendant admits, subject to its defenses, the material
allegations of the Complaint as regards its indebtedness to plaintiff PCIBANK and its execution
of the various deeds of assignment enumerated therein. It, however, denies, for lack of knowledge
sufficient to form a belief as to the truth thereof, the averments in the Complaint that it has not
paid, despite demands, its due and demandable obligations, as well as the amounts due the plaintiff
as itemized in paragraph 2.06, supra, of the Complaint. It likewise denies PCIBANKs allegations
in the same Complaint in support of its prayer for a writ of preliminary attachment, particularly its
having fraudulently misappropriated for its own use the contract proceeds/receivables under the
contracts mentioned in the several deeds of assignments, claiming in this respect that it has still
remaining receivables from those contracts.

By way of defenses, defendant pleads in its Answer the alleged severe financial and
currency crisis which hit the Philippines in July 1997, which adversely affected and ultimately put
it out of business. Defendant adds that the deeds of assignments it executed in favor of PCIBANK
were standard forms proposed by the bank as pre-condition for the release of the loans and therefore
partake of the nature of contracts of adhesion, leaving the defendant to the alternative of taking it

970
Rollo, pp. 70-75.

704
or leaving it. By way of counterclaim, defendant prayed for an award of P1,000,000.00 as and for
attorneys fees and P200,000.00 as litigation expenses.

On January 24, 2000, plaintiff PCIBANK filed a verified Motion for Summary Judgment,971
therein contending that the defenses interposed by the defendant are sham and contrived, that the
alleged financial crisis pleaded in the Answer is not a fortuitous event that would excuse debtors
from their loan obligations, nor is it an exempting circumstance under Article 1262 of the New
Civil Code where, as here, the same is attended by bad faith. In the same motion, PCIBANK also
asserts that the deeds of assignments executed in its favor are not contracts of adhesion, and even
if they were, the same are valid.

To the Motion for Summary Judgment, defendant interposed an Opposition972 insisting that
its Answer tendered or raised genuine and substantial issues of material facts which require full-
blown trial, namely:

1. Whether or not defendant received all or part of the

proceeds/receivables due from the contracts mentioned in the deeds of assignment
at the time the complaint was filed;

2. Granting that defendant received those proceeds/receivables,

whether or not defendant fraudulently misappropriated the same;

3. Whether or not defendant is virtually insolvent as a result of the

regionwide economic crisis that hit Asia, causing the Philippine peso to depreciate
drastically; and

971
Rollo, pp. 78-85.
972
Id. at pp. 88-94.

705
 4. Whether the parties dealt with each other on equal footing with
respect to the execution of the deeds of assignment as to give the defendant an
honest opportunity to reject the onerous terms imposed therein.

Significantly, defendant did not append to its aforementioned Opposition any affidavit in
support of the alleged genuine issues of material facts mentioned therein.

Before the pending incident (motion for summary judgment) could be resolved by the trial
court, plaintiff PCIBANK waived its claim for exemplary damages and agreed to reduce its claim
for attorneys fees from P1,800,000.00 to P1,260,000.00, but made it clear that its waiver of
exemplary damages and reduction of attorneys fees are subject to the condition that a full and final
disposition of the case is obtained via summary judgment.

On May 16, 2000, the trial court, acting favorably on PCIBANKs motion for summary
judgment, came out with its Summary Judgment,973 the decretal portion of which reads:

WHEREFORE, judgment is hereby rendered ordering defendant to pay

plaintiff:

1. the sum of US$4,553,446.06, or its equivalent in Philippine

currency at the time of payment, with interest thereon at the
rate of 8.27% per annum from February 24, 1999 until fully
paid;

2. P1,260,000.00 as and for attorneys fees; and

3. the costs of suit.

SO ORDERED.

Explains the trial court in rendering its Summary Judgment:

973
Id. at 102-107.

706
 A thorough examination of the parties pleadings and their respective stand
in the foregoing motion, the court finds that indeed with defendants admission of
the first cause of action there remains no question of facts in issue. Further, the
proffered defenses are worthless, unsubstantial, sham and contrived.

Considering that there is no more issue to be resolved, the court hereby

grants plaintiffs Motion and renders Judgment in favor of the plaintiff against the
defendant based on their respective pleadings in accordance with Section 4, Rule
35 of the Rules of Court.

In time, petitioner went to the CA whereat its appellate recourse was docketed as CA-G.R.
CV No. 68189. As stated at the threshold hereof, the CA, in its decision974 of May 15, 2002,
affirmed with modification the Summary Judgment rendered by the trial court, the modification
being as regards the award for attorneys fees which the CA reduced to P1,000,000.00, to wit:

IN THE LIGHT OF ALL THE FOREGOING, the appeal is PARTIALLY

GRANTED. The Decision appealed from is AFFIRMED with the
MODIFICATION THAT THE AWARD FOR ATTORNEYS FEES is reduced to
P1,000,000.00.

SO ORDERED.

With its motion for reconsideration having been denied by the CA in its Resolution975 of
June 3, 2002, petitioner is now with us via the present recourse, raising the following issues:

I WHETHER OR NOT THERE IS A GENUINE ISSUE AS TO A

MATERIAL FACT WHICH RULES OUT THE PROPRIETY OF
A SUMMARY JUDGMENT.

II WHETHER OR NOT THE AWARD OF ATTORNEYS FEES IS

EXORBITANT OR UNCONSCIONABLE.

974
Rollo, pp. 34-58.
975
Rollo, p. 59.

707
 We DENY.

As in the two courts below, it is petitioners posture that summary judgment is improper in
this case because there are genuine issues of fact which have to be threshed out during trial, to wit:
(a) whether or not petitioner was able to collect only a portion of the contract proceeds/receivables
it was bound to deliver, remit and tender to respondent under the several deeds of assignment it
executed in favor of the latter; and (b) whether or not petitioner fraudulently misappropriated and
used for its benefit the said proceeds/receivables. Ergo, so petitioner maintains, genuine triable
issues of fact are present in this case, which thereby precludes rendition of summary judgment.

We are not persuaded.

Under Rule 35 of the 1997 Rules of Procedure, as amended, except as to the amount of
damages, when there is no genuine issue as to any material fact and the moving party is entitled to
a judgment as a matter of law, summary judgment may be allowed.976 Summary or accelerated
judgment is a procedural technique aimed at weeding out sham claims or defenses at an early stage
of litigation thereby avoiding the expense and loss of time involved in a trial.977

Under the Rules, summary judgment is appropriate when there are no genuine issues of
fact which call for the presentation of evidence in a full-blown trial. Even if on their face the
pleadings appear to raise issues, when the affidavits, depositions and admissions show that such
issues are not genuine, then summary judgment as prescribed by the Rules must ensue as a matter
of law. The determinative factor, therefore, in a motion for summary judgment, is the presence or
absence of a genuine issue as to any material fact.

976
Northwest Airlines vs. CA, G.R. No. 120337, January 20, 1998, 284 SCRA 408.
977
Excelsa Industries, Inc, vs. CA,G.R. No. 105455, August 23, 1995, 247 SCRA 560.

708
 A genuine issue is an issue of fact which requires the presentation of evidence as
distinguished from a sham, fictitious, contrived or false claim. When the facts as pleaded appear
uncontested or undisputed, then there is no real or genuine issue or question as to the facts, and
summary judgment is called for. The party who moves for summary judgment has the burden of
demonstrating clearly the absence of any genuine issue of fact, or that the issue posed in the
complaint is patently unsubstantial so as not to constitute a genuine issue for trial. Trial courts have
limited authority to render summary judgments and may do so only when there is clearly no
genuine issue as to any material fact. When the facts as pleaded by the parties are disputed or
contested, proceedings for summary judgment cannot take the place of trial.978

The CA, in its challenged decision, stated and we are in full accord with it:

In the present recourse, the [petitioner] relied not only on the judicial
admissions in its pleadings, more specifically its Answer to the complaint, the
testimony of Maricel Salaveria as well as Exhibits A to T-3, adduced in evidence
by the [respondent], during the hearing on its plea for the issuance, by the Court a
quo, of a writ of preliminary attachment. Significantly, the [petitioner] did not
bother filing a motion for the quashal of the Writ issued by the Court a quo.

It must be borne in mind, too, that the [petitioner] admitted, in its Answer
the due execution and authenticity of the documents appended to the complaint .
The [petitioner] did not deny its liability for the principal amount claimed by the
[respondent] in its complaint. The [petitioner] merely alleged, by way of defenses,
that it failed to pay its account because of the region-wide economic crisis that
engulfed Asia, in July, 1997, and the Deeds of Assignment executed by it in favor
of the [respondent] were contracts of adhesion:

xxx xxx xxx

978
Evadel Realty and Development Corporation vs. Soriano, G.R. No. 144291, April 20, 2001, 357 SCRA 395,
401.

709
 The [petitioner] elaborated on and catalogued its defenses in its Appellants
Brief what it believed, as genuine issues.

(i) Whether or not [petitioner] received all or part of the

proceeds/receivables due from the construction contracts at the time
the civil action was filed;

(ii) Granting that [petitioner] received the proceeds/receivables from the

construction contracts, whether or not [petitioner] fraudulently
misappropriated the same;

(iii) Whether or not [petitioner] had become virtually insolvent as a

result of the region-wide economic crisis that hit Asia, causing the
Philippine peso to depreciate dramatically; and

(iv) Whether or not [respondent] and [petitioner] dealt with each other
on equal footing with respect to the execution of the deeds of
assignment of receivables as to give [petitioner] an honest
opportunity to reject the onerous terms imposed on it.

However, the [petitioner] failed to append, to its Opposition to the Motion

for Summary Judgment, Affidavits showing the factual basis for its defenses of
extraordinary deflation, including facts, figures and data showing its financial
condition before and after the economic crisis and that the crisis was the proximate
cause of its financial distress. It bears stressing that the [petitioner] was burdened
to demonstrate, by its Affidavits and documentary evidence, that, indeed, the
Philippines was engulfed in an extraordinary deflation of the Philippine Peso and
that the same was the proximate cause of the financial distress, it claimed, it
suffered.

xxx xxx xxx

Where, on the basis of the records, inclusive of the pleadings of the parties,
and the testimonial and documentary evidence adduced by the [respondent],
supportive of its plea for a writ of preliminary attachment, the [respondent] had
causes of action against the [petitioner], it behooved the [petitioner] to controvert

710
the same with affidavits/documentary evidence showing a prima facie genuine
defense. As the Appellate Court of Illinois so aptly declared:

The defendant must show that he has a bona fide defense to

the action, one which he may be able to establish. It must be a
plausible ground of defense, something fairly arguable and of a
substantial character. This he must show by affidavits or other proof.

The trial court, of course, must determine from the affidavits

filed whether the defendant has interposed a sufficiently good
defense to entitle it to defend, but where defendants affidavits
present no substantial triable issues of fact, the court will grant the
motion for summary judgment.

xxx xxx xxx

The failure of the [petitioner] to append to its Opposition any Affidavits

showing that its defenses were not contrived or cosmetic to delay judgment created
a presumption that the defenses of the [petitioner] were not offered in good faith
and that the same could not be sustained (Unites States versus Fiedler, et al.,
Federal Reported, 2nd, 578).

If, indeed, the [petitioner] believed it that was prevented from complying
with its obligations to the [respondent], under its contracts, it should have
interposed a counterclaims for rescission of contracts, conformably with the
pronouncement of our Supreme Court, thus:

xxx xxx xxx

The [petitioner] did not. This only exposed the barrenness of the pose of the
[petitioner].

711
 The [petitioner] may have experienced financial difficulties because of the
1997 economic crisis that ensued in Asia. However, the same does not constitute a
valid justification for the [petitioner] to renege on its obligations to the
[respondent]. The [petitioner] cannot even find solace in Articles 1266 and 1267 of
the New Civil Code for, as declared by our Supreme Court:

It is a fundamental rule that contracts, once perfected, bind

both contracting parties, and obligations arising therefrom have the
force of law between the parties and should be complied with in
good faith. But the law recognizes exceptions to the principle of the
obligatory force of contracts. One exception is laid down in Article
1266 of the Civil Code, which reads: The debtor in obligations to do
shall also be released when the prestation becomes legally or
physically impossible without the fault of the obligor.

Petitioner cannot, however, successfully take refuge in the said article, since
it is applicable only to obligations to do, and not obligations to give. An obligation
to do includes all kinds of work or service; while an obligation to give is a prestation
which consists in the delivery of a movable or an immovable thing in order to create
a real right, or for the use of the recipient, or for its simple possession, or in order
to return it to its owner.

xxx xxx xxx

In this case, petitioner wants this Court to believe that the abrupt change in
the political climate of the country after the EDSA Revolution and its poor financial
condition rendered the performance of the lease contract impractical and inimical
to the corporate survival of the petitioner. (Philippine National Construction
Corporation versus Court of Appeals, et al., 272 SCRA 183, at pages 191-192,
supra)

The [petitioner] even failed to append any Affidavit to its Opposition

showing how much it had received from its construction contracts and how and to
whom the said collections had been appended. The [petitioner] had personal and
sole knowledge of the aforesaid particulars while the [respondent] did not.

712
 In fine, we rule and so hold that the CA did not commit any reversible error in affirming
the summary judgment rendered by the trial court as, at bottom, there existed no genuine issue as
to any material fact. We also sustain the CAs reduction in the award of attorneys fees to only
P1,000,000.00, given the fact that there was no full-blown trial.

WHEREFORE, the assailed CA decision is AFFIRMED in toto and this petition is

DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.

CANCIO C. GARCIA
Associate Justice

WE CONCUR:

(On leave)
REYNATO S. PUNO

713
 Associate Justice
Chairperson

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Associate Justice

ADOLFO S. AZCUNA
Associate Justice

714
 ATTESTATION

I attest that the conclusions in the above decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
Acting Chairperson, Second Division

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's
Attestation, it is hereby certified that the conclusions in the above decision were reached in
consultation before the case was assigned to the writer of the opinion of the Court.

-
ARTEMIO V. PANGANIBAN
Chief Justice

715
 SECOND DIVISION
G.R. NO. 145844, August 10, 2006
RICARDO G. ENRIQUEZ, SR., PETITIONER, VS. HEIRS OF SPOUSES NIEVES AND
ALFREDO BALDONADO, RESPONDENTS.

DECISION

CORONA, J.:

This petition filed under Rule 45 seeks a review of the judgment and resolution of the Court of
Appeals (CA) in CA-G.R. CV No.49825. The controversy is rooted in the following facts.

In consideration of a loan extended by Ricardo Enriquez Sr., Nieves Basaca, wife of Alfredo
Baldonado, executed a real estate mortgage on May 3, 1990. Among the terms of the contract
were as follows.
This AGREEMENT executed by and between Nieves Basaca, of legal age, married, resident of
Bigaa, Cabuyao, Laguna, hereinafter known as the MORTGAGOR, and RICARDO
ENRIQUEZ, of legal age, [F]ilipino, married, resident of Dita, Sta. Rosa, Laguna, hereinafter
known as the MORTGAGEE in the sum of THIRTY SIX THOUSAND (P36.000.00) PESOS,
Philippine Currency, payable within a period of SIX MONTHS (6):

That for and in consideration of said indebtedness the MORTGAGOR does hereby convey and
deliver by way of MORTGAGE unto said MORTGAGEE and the latter's heirs and assigns, the
following realty together with all the improvements thereon and situated at Bigaa, Cabuyao,
Laguna, and more particularly described [in Tax Declaration No. 12258].

xxx xxx xxx[1]

Due to additional loans, the parties entered into another agreement on June 27, 1990. The
pertinent provisions of the agreement read:
WHEREAS, the First Party [Ricardo Enriquez] has extended to the Second Party [Nieves
Basaca] various loans secured by a house and lot situated at Bigaa, Cabuyao, Laguna covered by
Tax Declaration No. 12258, issued by the Assessor's Office, Municipality of Cabuyao, Laguna in
the total amount of P153,000.00;

xxx xxx xxx

NOW THEREFORE, for and in consideration of the foregoing premises[,] the parties [agree] on
the following:

1. The Second Party has agreed to settle the loan as they become due including interest
thereon;

716
 2. The Second Party however may elect to sell the property on her option and for which
case the price of the sale would be the value of the property at P250,000.00 less the
amount of loan of P153,000.00 including interest [thereon].[2]

The spouses Baldonado made payments amounting to P42,000 from July 14 to 25, 1990.

On August 1, 1990, Nieves Basaca as nagbili (vendor) and Ricardo Enriquez as bumili (vendee)
entered into an agreement denominated as Pagbibili na may Sanglaan (sale with mortgage) over
the property subject of Tax Declaration No. 12258. The pertinent portions of the document read:
Na ALANG-ALANG SA HALAGANG DALAWANG DAAN AT LIMAMPUNG LIBO
(P250,000.00) salaping Pilipino, na ang paunang kabayaran sa halagang _________ ay
pinatunayang tinanggap ngayon ng NAGBILI nang buong kasiyahang-loob mula sa BUMILI,
ang NAGBILI ay NAGBIBILI, NAGLILIPAT at NAGSASALIN sa BUMILI at sa kanyang
tagapagmana at kahalili ng lupang nasasaad sa itaas nito, kasama ng lahat ng mga kagalingang
matatagpuan doon, ligtas sa anumang sagutin at pananagutan, maliban sa nasasaad sa ibaba
nito:

Na ang mga panig ay nagkasundo na ang natitirang huling hulog sa halagang Dalawang Daan
at Limampung [Libong] Piso (P250,000.00) ay babayaran sa pamamagitan ng sumusunod:

1. Na ang halagang P250,000.00 ay babayaran sa loob ng (6) na buwan kasama ang

interest o tubo na P75,000.00 sa 5 porsiyento isang buwan simula sa petsang nakasaad
dito;

2. Na kung tutubusin ay may halagang P325,000.00;

Na upang matiyak ang pagbabayad ng mga hulog sa mga araw na nabanggit sa itaas, at
hanggang yaon ay hindi nababayarang lahat, ay ISINASANGLA ng BUMILI ang lupang
isinasaysay sa itaas, sa NAGBILI sa ilalim ng pasubali ng kung sakali at mabayaran o
maigawad ng BUMILI sa NAGBILI.[3]
Ten days later, on August 10, 1990, the same parties and their respective spouses executed an
agreement known as Kasulatan ng Bilihang Muling Mabibili (sale with right of repurchase). The
Kasulatan provided:
Na ang NAGBILI ang siyang nakatalang may-ari ng [mga parsela ng] lupa, na lalong
makikilala sa pamamagitan ng sumusunod [na Tax Declaration No. 12258 at TCT No. T-
161470[4]].

Na [ALANG-ALANG] SA HALAGANG TATLONG DAAN AT LIMAMPUNG LIBONG PISO

(P350,000.00), salaping Pilipino, na ibinayad ng BUMILI at sumakamay nang buong kasiyahan-
loob ng NAGBILI, itong huli ay NAGBIBILI, NAGLILIPAT AT NAGSASALIN sa pamamagitan
nang BILIHANG MABIBILI MULI, sa BUMILI, at sa kanyang tagapagmana at kahalili, ng
lupang isinaad sa itaas, kasama na ang lahat ng kagalingang naroroon, ligtas sa lahat ng

717
pagkakautang o sagutin;

Na INILAAN ng NAGBILI sa kanyang sarili, at sa kanyang tagapagmana at kahalili ang

karapatang MULING BILHIN ang lupang binabanggit sa itaas pagkaraan ng taning na simula
MAYO 17 hanggang NOBYEMBRE 17, 1990, mula sa pagsasagawa ng KASULATANG ito, sa
katulad ding halagang TATLONG DAAN AT LIMAMPUNG LIBONG PISO (P350,000.00)
salaping Pilipino, at ang BUMILI ay sumasang-ayon na kanyang IPAGBIBILING MULI sa
NAGBILI, at sa kanyang tagapagmana at kahalili ang lupang isinasaad sa itaas, pagkaraan ng
taning na panahon sa katulad ding halagang tatlong daan at limampung libong piso
(P350,000.00) salaping Pilipino;

Na kung [sakali't] hindi mabiling muli ng NAGBILI ang lupang nabanggit sa itaas pagkaraan ng
pinagkasunduang taning na panahon, ang BUMILI ay may karapatang gawin ang
kinakailangang hakbang upang maging ganap ang kanyang pagkamay-ari sa lupa, nang naayon
sa itinatadhana ng batas at palakad ng hukuman.

Na ang lupang ito ay hindi sakop ng Batas ukol sa Reporma sa Lupa at ng mga kaugnay na
Kautusang Pangpanguluhan at palibot-kalatas.[5]
The records reveal that, prior to and about the time of the execution of the Kasulatan, the
spouses Baldonado were in dire need of money to defray Nieves' hospitalization expenses.[6]

Due to the failure of the spouses Baldonado to exercise their right of repurchase, petitioner, on
January 10, 1991, filed a case in the Regional Trial Court, Branch XXIV, Bian, Laguna for
consolidation of ownership of the two properties mentioned in the Kasulatan: (1) an untitled
parcel of land covered by Tax Declaration No. 12258 and (2) a registered lot covered by Transfer
Certificate of Title (TCT) No. T-161470. This was docketed as (special civil action) Case No. B-
3461.

In an answer dated January 23, 1991, the spouses Baldonado admitted the allegations in the
petition as to the execution of the Kasulatan but denied that it was a true sale with right of
repurchase. They averred that the document was only a contract of loan with mortgage on the
properties described therein.

Petitioner filed an amended petition on April 15, 1991, alleging that the redemption period had
already expired and respondents no longer had the right to hold on to the properties.

On November 25, 1994, the trial court rendered summary judgment[7] in Case No. B-3461, the
dispositive portion of which read:
WHEREFORE, premises considered, summary judgment is hereby rendered in favor of
petitioner and against respondents as follows:

718
 1. Declaring the petitioner as the absolute owner of the real properties, including the
improvements existing thereon, and more particularly described in the document
denominated as "Kasulatan ng Bilihang Muling Mabibili" dated August 10, 1990;

2. Ordering the Register of Deeds, Laguna, Calamba Branch, to cancel TCT No. T-161470
in the name of respondents and to issue another one in the name of petitioner;

3. Ordering the Municipal Assessor of Cabuyao, Laguna, to cancel Tax. Decl. No. 12258 in
the name of respondents and to issue a new one in the name of petitioner;

4. Ordering the respondents to deliver the duplicate copy of the aforesaid document and title
to the Municipal Assessor of Cabuyao, Laguna and the Register of Deeds of Laguna,
Calamba Branch;

5. Ordering the respondents to deliver to petitioner the possession of the subject real
properties, including the improvements thereon; and

6. Ordering the respondents to pay petitioner the sum of P30,000.00 [for] attorney's fees and
the sum of P6,000.00 as litigation expenses plus the sum of P500.00 per appearance in
court including the costs of this suit.

Petitioner's claim for moral and exemplary damages is hereby dismissed for want of evidence.

Soon after the finality of the summary judgment, let a writ of execution and a writ of possession
be issued accordingly.

SO ORDERED.
On appeal, the CA held:
WHEREFORE, the decision appealed from is hereby SET ASIDE. The "KASULATAN NG
BILIHANG MULING MABIBILI" is hereby declared as an equitable mortgage and
respondents are declared entitled to redeem the mortgaged properties, which shall be
effected upon payment by them of their outstanding indebtedness to petitioner with legal rate of
interest from November 17, 1990, the time [when] the loan matured, until it is fully paid.

SO ORDERED.[8] (emphasis ours)

Petitioner's motion for reconsideration was denied but the CA ruled on the point that, having
already found the contract to be one of equitable mortgage, the CA should have proceeded to fix
the redemption period. The appellate court stated:
[W]e need only to cite the rule enunciated by the Supreme Court in the case of Gloria-Diaz v.
Court of Appeals, 84 SCRA 483 [at 490] (1978), where it held that when a contract purporting to
be a sale with right to repurchase is construed as one of equitable mortgage, the vendor has a

719
period of thirty (30) days within which to redeem the subject property from the finality of the
judgment rendered in the civil action.
Petitioner submits the following issues for our consideration:
1) WHETHER OR NOT RESPONDENT COURT GRAVELY ERRED IN SETTING ASIDE
THE SUMMARY JUDGMENT RENDERED BY THE COURT A QUO WHEN ITS
DECISION ITSELF ... CATEGORICALLY STATES THAT IT SUPPORTS THE TRIAL
COURT'S ACTION IN RENDERING A SUMMARY JUDGMENT[;]

2) WHETHER OR NOT THE RESPONDENT COURT GRAVELY ERRED IN DECLARING

THE AGREEMENT BETWEEN THE PARTIES AS ONE OF EQUITABLE MORTGAGE
WHEN THE ONLY ISSUE TO BE RESOLVED IS WHETHER OR NOT THE RIGHT OF
THE RESPONDENTS TO REDEEM UNDER THEIR AGREEMENT ... [EXPIRED] AND
CONSEQUENTLY WHETHER OR NOT BY OPERATION OF LAW PETITIONER IS
ENTITLED TO ASK FOR THE CONSOLIDATION OF THE TITLE IN HIS NAME[;]

3) WHETHER OR NOT THE RESPONDENT COURT GRAVELY ERRED IN NOT

CONFIRMING THE AWARD OF DAMAGES IN FAVOR OF PETITIONER[.][10]
First of all, the issue of procedure.

Section 3, Rule 35 of the Rules of Court provides:

Sec. 3. Motion and proceedings thereon. xxx After the hearing, the judgment sought shall be
rendered forthwith if the pleadings, supporting affidavits, depositions, and admissions on file,
show that, except as to the amount of damages, there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law. (emphasis supplied)
The trial court may render summary judgment as justice may require if, at the pre-trial, it finds
that facts exist warranting such judgment. But there can be no summary judgment where
questions of fact are in issue or where material allegations of the pleadings are in dispute.[11]

Respondents' answer to petitioner's complaint raised a genuine issue regarding the true nature of
their contract. The trial court should have thus heard the case on the merits. To this extent, the
CA erred in upholding the trial court's recourse to summary judgment.

It is settled jurisprudence that the clarity of contractual terms and the name given to the contract
do not bar the courts from determining the true intent of the parties. Respondents' admissions on
the existence, execution and authenticity of the Kasulatan never conceded that the denomination
of the contract defined the legal relationship between them and petitioner. Indeed, in Zamora v.
Court of Appeals, we said that:
[i]n determining the nature of a contract, courts are not bound by the title or name given by the
parties. The decisive factor in evaluating such agreement is the intention of the parties, as shown
not necessarily by the terminology used in the contract but by their conduct, words, actions and
720
deeds prior to, during and immediately after executing the agreement. As such therefore,
documentary and parol evidence may be submitted and admitted to prove such intention.[12]
The petition mainly asks why an alleged sale with right to repurchase should be treated as an
equitable mortgage. On this substantive point, we are not inclined to reverse the CA decision and
resolution finding the transaction between the parties to be an equitable mortgage and not a sale.

A contract of sale with right to repurchase is frequently used to conceal the true agreement which
is one of loan with mortgage.[13] The existence of any of the circumstances in Article 1602 of the
Civil Code is sufficient basis to declare a contract of sale with right to repurchase as an equitable
mortgage.

Article 1602 provides:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following
cases:

(1) When the price of a sale with the right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as
rent or otherwise shall be considered as interest which shall be subject to the usury laws.
(emphases supplied)
The presumption in Article 1602 that an alleged contract of sale is, in reality, an equitable
mortgage jibes with the rule that the law favors the least transmission of property rights. It is the
existence of any of the conditions under Article 1602, not a concurrence nor an overwhelming
number, which creates the presumption that the contract is an equitable mortgage.[14]

The circumstances in this case defy the logic of petitioner's arguments. Even prior to the
execution of the Kasulatan on August 10, 1990, various agreements clearly manifesting the
intention to secure the spouses Baldonado's loans had been entered into by the parties. The
original loan secured by a real estate mortgage on the properties subject of this case was renewed
several times in barely four months, until its "reincarnation" as a sale with right to repurchase.

Petitioner never contradicted respondents' allegations that from the date of execution of the
Kasulatan to the present: (1) respondents (or their heirs) remained in possession of the subject
properties; (2) they continued to pay the realty taxes on the land and (3) they enjoyed the fruits of

721
the properties to the exclusion of the petitioner. Neither did petitioner challenge respondents'
contention that the supposed purchase price of P350,000 in the Kasulatan was unusually
inadequate for the two lots, considering that one had an area of 1,209 square meters and the
other, 361 square meters.

More revealing of the true intention of the parties was the undisputed creditor-debtor relationship
between Enriquez and the spouses Baldonado. This circumstance, taken together with the others
already discussed, convinces this Court that the sale with right to repurchase was executed to
serve merely as additional security for the loans extended to the spouses Baldonado.[15]

Reyes v. Court of Appeals echoes our sentiments:

In determining whether a deed absolute in form is a mortgage, the court is not limited to the
written memorials of the transaction. The decisive factor in evaluating such agreement is the
intention of the parties, as shown not necessarily by the terminology used in the contract
but by all the surrounding circumstances, such as the relative situation of the parties at
that time, the attitude, acts, conduct, declarations of the parties, the negotiations between
them leading to the deed, and generally, all pertinent facts having a tendency to fix and
determine the real nature of their design and understanding.[16] (emphasis and underscoring
ours)

WHEREFORE, the petition is hereby DENIED.

Costs against petitioner.

SO ORDERED.

Puno, (Chairperson), Sandoval-Gutierrez, Azcuna, and Garcia, JJ., concur.

[1]
Rollo, p. 114.

[2]
Id., p. 53.

[3]
Id., pp. 116-117.

[4]
As noted in the Kasulatan, full technical description of the parcel of land covered by TCT No.
T-161470 appears on a separate sheet of paper.

[5]
Rollo, pp. 41-42.

[6]
Nieves Baldonado passed away on March 9, 1992 while the case was being heard by the RTC.

722
Alfredo Baldonado passed away on December 3, 1996 during the pendency of the appeal.

[7]
Penned by Judge Rodrigo Cosico, RTC-Laguna, Br. 24, rollo, pp. 84-86.

[8]
Decision in CA-G.R. CV No. 49825, penned by Associate Justice Oswaldo D. Agcaoili
(retired) and concurred in by Associate Justices Eugenio S. Labitoria (retired) and Andres B.
Reyes, Jr. of the Tenth Division of the Court of Appeals; id., p. 36.

[9]
Resolution penned by Associate Justice Oswaldo D. Agcaoili (retired) and concurred in by
Associate Justices Eugenio S. Labitoria (retired) and Andres B. Reyes, Jr. of the Former Tenth
Division of the Court of Appeals; id., pp. 38-40.

[10]
Id., pp. 13-14.

[11]
Manufacturers Hanover Trust Co. v. Guerrero, 445 Phil. 772 (2003).

[12]
G.R. No. 102557, 30 July 1996, 260 SCRA 10, 18-19.

[13]
Tolentino, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE
PHILIPPINES (1992), pp. 156, citing Ramos v. Court of Appeals, G.R. No. 42108, 29 December
1989, 180 SCRA 635.

[14]
Aguirre v. Court of Appeals, G.R. No. 131520, 28 January 2000, 323 SCRA 771, 775.

[15]
Taopo-Banga v. Spouses Bello, G.R. No. 156705, 28 September 2005, 471 SCRA 653.

[16]
G.R. No. 134166, 25 August 2000, 339 SCRA 97, 103.

723
 FIRST DIVISION

EQUITABLE PCI BANK (the Banking G.R. No. 156207

Entity into which Philippine Commercial
International Bank was merged),
Petitioner, Present:

PANGANIBAN, C.J.
Chairperson,
YNARES-SANTIAGO,
- versus -
AUSTRIA-MARTINEZ,
CALLEJO, SR. and
CHICO-NAZARIO, JJ.

ROWENA ONG,
Respondent. Promulgated:

September 15, 2006

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

DECISION

CHICO-NAZARIO, J.:

On 29 November 1991, Warliza Sarande deposited in her account at Philippine

Commercial International (PCI) Bank Magsaysay Avenue, Santa Ana District, Davao City Branch,

724
under Account No. 8502-00347-6, a PCI Bank General Santos City Branch, TCBT979 Check No.
0249188 in the amount of P225,000.00. Upon inquiry by Serande at PCI Bank on 5 December
1991 on whether TCBT Check No. 0249188 had been cleared, she received an affirmative answer.
Relying on this assurance, she issued two checks drawn against the proceeds of TCBT Check No.
0249188. One of these was PCI Bank Check No. 073661 dated 5 December 1991 for P132,000.00
which Sarande issued to respondent Rowena Ong Owing to a business transaction. On the same
day, Ong presented to PCI Bank Magsaysay Avenue Branch said Check No. 073661, and instead
of encashing it, requested PCI Bank to convert the proceeds thereof into a managers check, which
the PCI Bank obliged. Whereupon, Ong was issued PCI Bank Managers Check No. 10983 dated
5 December 1991 for the sum of P132,000.00, the value of Check No. 073661.

The next day, 6 December 1991, Ong deposited PCI Bank Managers Check No. 10983 in
her account with Equitable Banking Corporation Davao City Branch. On 9 December 1991, she
received a check return-slip informing her that PCI Bank had stopped the payment of the said
check on the ground of irregular issuance. Despite several demands made by her to PCI Bank for
the payment of the amount in PCI Bank Managers Check No. 10983, the same was met with
refusal; thus, Ong was constrained to file a Complaint for sum of money, damages and attorneys
fees against PCI Bank.980

From PCI Banks version, TCBT-General Santos City Check No. 0249188 was returned on
5 December 1991 at 5:00 pm on the ground that the account against which it was drawn was
already closed. According to PCI Bank, it immediately gave notice to Sarande and Ong about the
return of Check No. 0249188 and requested Ong to return PCI Bank Managers Check No. 10983
inasmuch as the return of Check No. 0249188 on the ground that the account from which it was
drawn had already been closed resulted in a failure or want of consideration for the issuance of
PCI Bank Managers Check No. 10983.981

979
The Consolidated Bank and Trust Corporation.
980
Docketed as Civil Case No. 21458-92 filed before the Regional Trial Court of Davao City Branch 14.
981
Records, p. 25.

725
 After the pre-trial conference, Ong filed a motion for summary judgment.982 Though they
were duly furnished with a copy of the motion for summary judgment, PCI Bank and its counsel
failed to appear at the scheduled hearing.983 Neither did they file any written comment or
opposition thereto. The trial court thereafter ordered Ong to formally offer her exhibits in writing,
furnishing copies of the same to PCI Bank which was directed to file its comment or objection.984

Ong complied with the Order of the trial court, but PCI Bank failed to file any comment or
objection within the period given to it despite receipt of the same order.985 The trial court then
granted the motion for summary judgment and in its Order dated 2 March 1995, it held:

IN THE LIGHT OF THE FOREGOING, the motion for summary judgment

is GRANTED, ordering defendant Philippine Commercial International Bank to
pay the plaintiff the amount of ONE HUNDRED THIRTY-TWO THOUSAND
PESOS (P132,000.00) equivalent to the amount of PCIB Managers Check No.
10983.

Set the reception of the plaintiffs evidence with respect to the damages
claimed in the complaint.986

PCI Bank filed a Motion for Reconsideration which the trial court denied in its Order dated
11 April 1996.987 After the reception of Ongs evidence in support of her claim for damages, the
trial court rendered its Decision988 dated 3 May 1999 wherein it ruled:

982
Id. at 54.
983
Id. at 60.
984
Id.
985
Id. at 72.
986
Rollo, p. 268.
987
Records, p. 106.
988
Penned by Judge William M. Layague.

726
 IN LIGHT OF THE FOREGOIN CONSIDERATION, and as plaintiff has
preponderantly established by competent evidence her claims in the Complaint,
judgment in hereby rendered for the plaintiff against the defendant-bank ordering
the latter:

1. To pay the plaintiff the sum of FIFTY

THOUSAND PESOS (P50,000.00) in the concept of moral
damages;

2. To pay the plaintiff the sum of TWENTY

THOUSAND PESOS (P20,000.00) as exemplary damages;

3. To pay the plaintiff the sum of THREE

THOUSAND FIVE HUNDRED PESOS (P3,500.00) representing
actual expenses;

4. To pay the plaintiff the sum of TWENTY

THOUSAND PESOS (P20,000.00) as and for attorneys fees; and

5. To pay the costs.989

From this decision, PCI Bank sought recourse before the Court of Appeals. In a Decision990
dated 29 October 2002, the appellate court denied the appeal of PCI Bank and affirmed the orders
and decision of the trial court.

989
Records, pp. 192-198.
990
Penned by Associate Justice Elvi John S. Asuncion with Associate Justice Conrado M. Vasquez, Jr. and
Sergio L. Pestano, concurring; rollo, pp. 255-262.

727
 Unperturbed, PCI Bank then filed the present petition for review before this Court and
raised the following issues:

1. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A

GRAVE AND REVERSIBLE ERROR WHEN IT SUSTAINED THE LOWER
COURTS ORDER DATED 2 MARCH 1999 GRANTING RESPONDENTS
MOTION FOR SUMMARY JUDGMENT NOTWITHSTANDING THE
GLARING FACT THAT THERE ARE GENUINE, MATERIAL AND
FACTUAL ISSUES WHICH REQUIRE THE PRESENTATION OF EVIDENCE.

2. WHETHER OR NOT THE COURT OF APPEALS WAS IN ERROR

WHEN IT SUSTAINED THE LOWER COURTS DECISION DATED 3 MAY
1999 GRANTING THE RELIEFS PRAYED FOR IN RESPONDENT ONGS
COMPLAINT INSPITE OF THE FACT THAT RESPONDENT ONG WOULD
BE UNJUSTLY ENRICHED AT THE EXPENSE OF PETITIONER BANK, IF
PETITIONER BANK WOULD BE REQUIRED TO PAY AN UNFUNDED
CHECK.

3. WHETHER OR NOT THE COURT OF APPEALS COMMITTED

REVERSIBLE ERRORS WHEN IT AFFIRMED THE COURT A QUOS
DECISIION DATED 3 MAY 1999 AWARDING DAMAGES TO
RESPONDENT ONG AND HOLDING THAT RESPONDENT ONG HAD
PREPONDERANTLY ESTABLISHED BY COMPETENT EVIDENCE HER
CLAIMS IN THE COMPLAINT INSPITE OF THE FACT THAT THE
EVIDENCE ON RECORD DOES NOT JUSTIFY THE AWARD OF DAMAGES.

4. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A

REVERSIBLE ERROR WHEN IT AFFIRMED THE LOWER COURTS
FACTUAL FINDING IN ITS DECISION DATED 3 MAY 1999 HOLDING
RESPONDENT ONG A HOLDER IN DUE COURSE INSPITE OF THE FACT
THAT THE REQUISITE OF GOOD FAITH AND FOR VALUE IS LACKING
AND DESPITE THE ABSENCE OF A PROPER TRIAL TO DETERMINE
SUCH FACTUAL ISSUE.

5. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A

REVERSIBLE ERROR WHEN IT UPHELD THE LOWER COURTS DECISION
DATED 3 MAY 1999 DENYING PETITIONER EPCI BANKS
728
 COUNTERCLAIM INSPITE OF THE FACT THAT IT WAS SHOWN THAT
RESPONDENT ONGS COMPLAINT LACKS MERIT.991

We affirm the Decision of the trial court and the Court of Appeals.

The provision on summary judgment is found in Section 1, Rule 35 of the 1997 Rules of
Court:

SECTION 1. Summary judgment for claimant. A party seeking to recover

upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at
any time after the pleading in answer thereto has been served, move with supporting
affidavits, depositions or admissions for a summary judgment in his favor upon all
or any part thereof.

Thus, it has been held that a summary judgment is proper where, upon a motion filed after
the issues had been joined and on the basis of the pleadings and papers filed, the court finds that
there is no genuine issue as to any material fact to except as to the amount of damages. A genuine
issue has been defined as an issue of fact which calls for the presentation of evidence, as
distinguished from an issue which is sham, fictitious, contrived and patently unsubstantial so as
not to constitute a genuine issue for trial.992

A court may grant summary judgment to settle expeditiously a case if, on motion of either
party, there appears from the pleadings, depositions, admissions, and affidavits that no important
issues of fact are involved, except the amount of damages.993 Rule 35, Section 3, of the Rules of

991
Id. at 471-472.
992
Ley Construction and Development Corporation v. Union Bank of the Philippines, 389 Phil. 788, 798
(2000).
993
Cotabato Timberland Co. Inc. v. C. Alcantara and Sons, Inc., G.R. No. 145469, 28 May 2004, 430
SCRA 227, 223.

729
Court provides two requisites for summary judgment to be proper: (1) there must be no genuine
issue as to any material fact, except for the amount of damages; and (2) the party presenting the
motion for summary judgment must be entitled to a judgment as a matter of law.994

Certainly, when the facts as pleaded appear uncontested or undisputed, then theres no real
or genuine issue or question as to the facts, and summary judgment is called for.995

By admitting it committed an error, clearing the check of Sarande and issuing in favor of
Ong not just any check but a managers check for that matter, PCI Banks liability is fixed. Under
the circumstances, we find that summary judgment was proper and a hearing would serve no
purpose. That summary judgment is appropriate was incisively expounded by the trial court when
it made the following observation:

[D]efendant-bank had certified plaintiffs PCIB Check No. 073661 and since
certification is equivalent to acceptance, defendant-bank as drawee bank is bound
on the instrument upon certification and it is immaterial to such liability in favor of
the plaintiff who is a holder in due course whether the drawer (Warliza Sarande)
had funds or not with the defendant-bank (Security vs. State Bank, 154 N.W. 282)
or the drawer was indebted to the bank for more than the amount of the check (Nat.
Bank vs. Schmelz, Nat. Bank, 116 S.E. 880) as the certifying bank as all the
liabilities under Sec. 62 of the Negotiable Instruments Law which refers to liability
of acceptor (Title Guarantee vs. Emadee Realty Corp., 240 N.Y. 36).

It may be true that plaintiffs PCIB Check No. 073661 for P132,000.00
which was paid to her by Warliza Sarande was actually not funded but since
plaintiff became a holder in due course, defendant-bank cannot interpose a defense
of want or lack of consideration because that defense is equitable or personal and
cannot prosper against a holder in due course pursuant to Section 28 of the
Negotiable Instruments Law. Therefore, when the aforementioned check was
endorsed and presented by the plaintiff and certified to and accepted by defendant-

994
Monetary Foods Corporation v. Eserjose, G.R. No. 153126, 11 September 2003, 410 SCRA 627, 633,
citing Solidbank Corporation v. Court of Appeals, 439 Phil. 23, 34 (2002).
995
Evadel Realty and Development Corporation v. Soriano, G.R. No. 144291, 20 April 2001, 357 SCRA
395, 401.

730
 bank in the purchase of PCIB Managers Check No. 1983 in the amount of
P132,000.00, there was a valid consideration.996

The property of summary judgment was further explained by this Court when it
pronounced that:

The theory of summary judgment is that although an answer may on its face
appear to tender issues requiring trial yet if it is demonstrated by affidavits,
depositions, or admissions that those issues are not genuine, but sham or fictitious,
the Court is unjustified in dispensing with the trial and rendering summary
judgment for plaintiff. The court is expected to act chiefly on the basis of the
affidavits, depositions, admissions submitted by the movant, and those of the other
party in opposition thereto. The hearing contemplated (with 10-day notice) is for
the purpose of determining whether the issues are genuine or not, not to receive
evidence on the issues set up in the pleadings. A hearing is not thus de riguer. The
matter may be resolved, and usually is, on the basis of affidavits, depositions,
admissions. This is not to say that a hearing may be regarded as a superfluity. It is
not, and the Court has plenary discretion to determine the necessity therefore.997

The second and fourth issues are inter-related and so they shall be resolved together. The
second issue has reference to PCI Banks claim of unjust enrichment on the part of Ong if it would
be compelled to make good the managers check it had issued. As asserted by PCI Bank under the
fourth issue, Ong is not a holder in due course because the managers check was drawn against a
closed account; therefore, the same was issued without consideration.

On the matter of unjust enrichment, the fundamental doctrine of unjust enrichment is the
transfer of value without just cause or consideration. The elements of this doctrine are: enrichment
on the part of the defendant; impoverishment on the part of the plaintiff; and lack of cause. The

996
Records, p. 77.
997
Carcon Development Corporation v. Court of Appeals, G.R. No. 88218, 19 December 1989, 180 SCRA
348, 352.
.

731
main objective is to prevent one to enrich himself at the expense of another.998 It is based on the
equitable postulate that it is unjust for a person to retain benefit without paying for it.999 It is well
to stress that the check of Sarande had been cleared by the PCI Bank for which reason the former
issued the check to Ong. A check which has been cleared and credited to the account of the creditor
shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited
to his account.1000

Having cleared the check earlier, PCI Bank, therefore, became liable to Ong and it cannot
allege want or failure of consideration between it and Sarande. Under settled jurisprudence, Ong
is a stranger as regards the transaction between PCI Bank and Sarande.1001

PCI Bank next insists that since there was no consideration for the issuance of the managers
check, ergo, Ong is not a holder in due course. This claim is equally without basis. Pertinent
provisions of the Negotiable Instruments Law are hereunder quoted:

SECTION 52. What constitutes a holder in due course. A holder in due

course is a holder who has taken the instrument under the following conditions:

(a) That it is complete and regular upon its face;

998
P.C. Javier and Sons, Inc. v. Court of Appeals, G.R. No. 129552, 29 June 2005, 462 SCRA 36, 47,
citing De Leon v. Santioago Syjuco, Inc., 90 Phil. 311 (1951).
999
Soler v. Court of Appeals, G.R. No. 123892, 21 May 2001, 358 SCRA 57, 64.
1000
Section 32 of Presidential Decree No. 72 (Amending Republic Act Numbered Two Hundred and Sixty-
Five, entitled, The Central Bank Act), states:
SEC. 32 . Section sixty-three of the same Act is hereby amended to read as follows:
SEC. 63. Legal character . Checks representing deposit money do not have legal tender
power and their acceptance in the payment of debts, both public and private, is at the option of the
creditor: Provided, however, that a check which has been cleared and credited to the account of
the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the
amount credited to his account. (O.G. No. 50, Vol. 68, p. 46; emphasis supplied.)
1001
Hector M. De Leon, Jr., THE PHILIPPINE NEGOTIABLE INSTRUMENTS LAW (and Allied Laws)
Annotated (2004 ed.), p. 223, citing National Bank v. Picornell, 46 Phil. 716 (1922).

732
 (b) That he became the holder of it before it was overdue, and without
notice it had been previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the person negotiating it.

The same law provides further:

Sec. 24. Presumption of consideration. Every negotiable instrument is

deemed prima facie to have been issued for a valuable consideration; and every
person whose signature appears thereon to have become a party thereto for value.

Sec. 26. What constitutes holder for value. Where value has at any time
been given for the instrument, the holder is deemed a holder for value in respect to
all parties who become such prior to that time.

Sec. 28. Effect of want of consideration. Absence or failure of consideration

is a matter of defense as against any person not a holder in due course; and partial
failure of consideration is a defense pro tanto, whether the failure is an ascertained
and liquidated amount or otherwise.

Easily discernible is that what Ong obtained from PCI Bank was not just any ordinary
check but a managers check. A managers check is an order of the bank to pay, drawn upon itself,
committing in effect its total resources, integrity and honor behind its issuance. By its peculiar

733
character and general use in commerce, a managers check is regarded substantially to be as good
as the money it represents.1002

A managers check stands on the same footing as a certified check.1003 The effect of
certification is found in Section 187, Negotiable Instruments Law.

Sec. 187. Certification of check; effect of. Where a check is certified by the
bank on which it is drawn, the certification is equivalent to an acceptance.1004

The effect of issuing a managers check was incontrovertibly elucidated when we declared
that:

A managers check is one drawn by the banks manager upon the bank itself. It is
similar to a cashiers check both as to effect and use. A cashiers check is a check of
the banks cashier on his own or another check. In effect, it is a bill of exchange
drawn by the cashier of a bank upon the bank itself, and accepted in advance by the
act of its issuance. It is really the banks own check and may be treated as a
promissory note with the bank as a maker. The check becomes the primary
obligation of the bank which issues it and constitutes its written promise to pay
upon demand. The mere issuance of it is considered an acceptance thereof. x x x.1005

In the case of New Pacific Timber & Supply Co., Inc. v. Seneris1006:

1002
Tan v. Court of Appeals, G.R. No. 108555, 20 December 1994, 239 SCRA 310, 322, cited in BPI v. Court
of Appeals, G.R. No. 112392, 29 February 2000, 326 SCRA 41.
1003
Supra note 21 at 411.
1004
Id.
1005
International Corporate Bank v. Gueco, G.R. no. 141968, 12 February 2001, 351 SCRA 516, 528.
1006
G.R. No. L-41764, 19 December 1980, 101 SCRA 686, 693.

734
 [S]ince the said check had been certified by the drawee bank, by the certification,
the funds represented by the check are transferred from the credit of the maker to
that of the payee or holder, and for all intents and purposes, the latter becomes the
depositor of the drawee bank, with rights and duties of one in such situation. Where
a check is certified by the bank on which it is drawn, the certification is equivalent
to acceptance. Said certification implies that the check is drawn upon sufficient
funds in the hands of the drawee, that they have been set apart for its satisfaction,
and that they shall be so applied whenever the check is presented for payment. It is
an understanding that the check is good then, and shall continue good, and this
agreement is as binding on the bank as its notes circulation, a certificate of deposit
payable to the order of depositor, or any other obligation it can assume. The object
of certifying a check, as regards both parties, is to enable the holder to use it as
money. When the holder procures the check to be certified, the check operates as
an assignment of a part of the funds to the creditors. Hence, the exception to the
rule enunciated under Section 63 of the Central Bank Act to the effect that a check
which has been cleared and credited to the account of the creditor shall be
equivalent to a delivery to the creditor in cash in an amount equal to the amount
credited to his account shall apply in this case x x x.

By accepting PCI Bank Check No. 073661 issued by Sarande to Ong and issuing in turn a
managers check in exchange thereof, PCI Bank assumed the liabilities of an acceptor under Section
62 of the Negotiable Instruments Law which states:

Sec. 62. Liability of acceptor. The acceptor by accepting the instruments

engages that he will pay it according to the tenor of his acceptance; and admits

(a) The existence of the drawer, the genuineness of his signature, and his
capacity and authority to draw the instrument; and

(b) The existence of the payee and his then capacity to indorse.

735
 With the above jurisprudential basis, the issues on Ong being not a holder in due course
and failure or want of consideration for PCI Banks issuance of the managers check is out of sync.

Section 2, of Republic Act No. 8791, The General Banking Law of 2000 decrees:

SEC. 2. Declaration of Policy. The State recognizes the vital role of banks
in providing an environment conducive to the sustained development of the national
economy and the fiduciary nature of banking that requires high standards of
integrity and performance. In furtherance thereof, the State shall promote and
maintain a stable and efficient banking and financial system that is globally
competitive, dynamic and responsive to the demands of a developing economy.

In Associated Bank v. Tan,1007 it was reiterated:

x x x the degree of diligence required of banks is more than that of a good

father of a family where the fiduciary nature of their relationship with their
depositors is concerned. Indeed, the banking business is vested with the trust and
confidence of the public; hence the appropriate standard of diligence must be very
high, if not the highest degree of diligence.

Measured against these standards, the next question that needs to be addressed is: Did PCI
Bank exercise the requisite degree of diligence required of it? From all indications, it did not. PCI
Bank distinctly made the following uncontested admission:

1007
G.R. No. 156940, 14 December 2004, 446 SCRA 282, 291, citing Philippine Bank of Commerce v. Court
of Appeals, 336 Phil. 667, 681 (1997).

736
 1. On 29 November 1991, one Warliza Sarande deposited to her
savings account with PCI Banks Magsaysay Avenue Branch, TCBT-General
Santos Branch Check No. 0249188 for P225,000.00. Said check, however, was
inadvertently sent by PCI Bank through local clearing when it should have
been sent through inter-regional clearing since the check was drawn at TCBT-
General Santos City.

2. On 5 December 1991, Warliza Sarande inquired whether TCBT

Check No. 0249188 had been cleared. Not having received any advice from the
drawee bank within the regular clearing period for the return of locally cleared
checks, and unaware then of the error of not having sent the check through inter-
regional clearing, PCI Bank advised her that Check No. 024188 is treated as
cleared. x x x.1008 (Emphasis supplied.)

From the foregoing, it is palpable and readily apparent that PCI Bank failed to exercise the
highest degree of care1009 required of it under the law.

In the case of Philippine National Bank v. Court of Appeals,1010 we declared:

The banking system has become an indispensable institution in the modern

world and plays a vital role in the economic life of every civilized society. Whether
as mere passive entities for the safe-keeping and saving of money or as active
instruments of business and commerce, banks have attained an ubiquitous presence
among the people, who have come to regard them with respect and even gratitude
and, most of all, confidence.

1008
Records, p. 24.
1009
Philippine Bank of Commerce v. Court of Appeals, supra not 27.
1010
326 Phil. 326, 347 (1996), citing Bautista v. Mangaldan Rural Bank, Inc., G.R. No. 100755, 10
February 1994, 230 SCRA 16, 21 and Simex International (Manila), Inc. v. Court of Appeals,
G.R. No. 88013, 19 March 1990, 183 SCRA 360, 366-367.

737
 Having settled the other issues, we now resolve the question on the award of moral and
exemplary damages by the trial court to the respondent.

Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury.
Though incapable of pecuniary computation, moral damages may be recovered if they are the
proximate result of the defendants wrongful act or omission.1011 The requisites for an award of
moral damages are well-defined, thus, firstly, evidence of besmirched reputation or physical,
mental or psychological suffering sustained by the claimant; secondly, a culpable act or omission
factually established; thirdly, proof that the wrongful act or omission of the defendant is the
proximate cause of the damages sustained by the claimant; and fourthly, that the case is predicated
on any of the instances expressed or envisioned by Article 22191012 and Article 22201013 of the
Civil Code. All these elements are present in the instant case.1014

In the first place, by refusing to make good the managers check it has issued, Ong suffered
embarrassment and humiliation arising from the dishonor of the said check.1015 Secondly, the
culpable act of PCI Bank in having cleared the check of Serande and issuing the managers check
to Ong is undeniable. Thirdly, the proximate cause of the loss is attributable to PCI Bank.
Proximate cause is defined as that cause which, in natural and continuous sequence, unbroken by

1011
Article 2217, Civil Code.
1012
Art. 2219. Moral damages may be recovered in the following and analogues cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
1013
Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of
contract where the defendant acted fraudulently or in bad faith.
1014
Cagungun v. Planters Development Bank, G.R. No. 158674, 17 October 2005, 473 SCRA 259, 272-273.
1015
TSN, 28 August 1997, p. 11; records, p. 171.

738
any efficient intervening cause, produces the injury, and without which the result would not have
occurred.1016 In this case, the proximate cause of the loss is the act of PCI Bank in having cleared
the check of Sarande and its failure to exercise that degree of diligence required of it under the law
which resulted in the loss to Ong.

On exemplary damages, Article 2229 of the Civil Code states:

Art. 2229. Exemplary or corrective damages are imposed, by way of

example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages.

The law allows the grant of exemplary damages to set an example for the public good. The
banking system has become an indispensable institution in the modern world and plays a vital role
in the economic life of every civilized society. Whether as mere passive entities for the safe-
keeping and saving of money or as active instruments of business and commerce, banks have
attained an ubiquitous presence among the people, who have come to regard them with respect
and even gratitude and most of all, confidence. For this reason, banks should guard against injury
attributable to negligence or bad faith on its part.1017 Without a doubt, it has been repeatedly
emphasized that since the banking business is impressed with public interest, of paramount
importance thereto is the trust and confidence of the public in general. Consequently, the highest
degree of diligence is expected, and high standards of integrity and performance are even required
of it.1018 Having failed in this respect, the award of exemplary damages is warranted.

Article 2216 of the Civil Code provides:

1016
Phil. Bank of Commerce v. Court of Appeals, supra note 27, cited in Bank of the Philippine Islands v. Casa
Montessori Internationale, G.R. No. 149454, 28 May 2004, 430 SCRA 261, 287.
1017
Cagungun v. Planters Development Bank, supra not 34 at 273-274.
1018
Bank of the Philippine Islands v. Casa Montessori Internationale, supra note 36.

739
 ART. 2216. No proof of pecuniary loss is necessary in order that moral,
nominal, temperate, liquidated or exemplary damages may be adjudicated. The
assessment of such damages, except liquidated ones, is left to the discretion of the
court, according to the circumstances of each case.

Based on the above provision, the determination of the amount to be awarded (except
liquidated damages) is left to the sound discretion of the court according to the circumstances of
each case.1019 In the case before us, we find that the award of moral damages in the amount of
P50,000.00 and exemplary damages in the amount of P20,000.00 is reasonable and justified.

With the above disquisition, there is no necessity of further discussing the last issue on the
PCI Banks counterclaim based on the supposed lack of merit of Ongs complaint.

WHEREFORE, premises considered, the Petition is DENIED and the Decision of the
Court of Appeals dated 29 October 2002 in CA-G.R. CV No. 65000 affirming the Decision dated
3 may 1999, of the Regional Trial Court of Davao City, Branch 14, in Civil Case No. 21458-92,
are AFFIRMED.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

1019
Simex International (Manila), Inc. v. Court of Appeals, supra note 30.

740
 ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice

741
742
 FIRST DIVISION

ESTATE OF LIM CHING, G.R. No. 149603

Represented by ATTORNEY JOSE
LIM,
Present:
Petitioner,

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,
versus
CORONA,
AZCUNA, and
GARCIA, JJ.
FLORENCIA BACALA, DOLORES L.
MENDOZA, JUANITA ALVAREZ
AND APOLINARIO LAURENA,
Respondents.
Promulgated:

March 14, 2007

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

DECISION

SANDOVAL-GUTIERREZ, J.:

743
 Before us for resolution is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended, assailing the January 31, 2001 Decision1020 and August 17,
2001 Resolution of the Court of Appeals in CA-G.R. CV No. 62495, entitled Estate of Lim Ching,
represented by Attorney Jose Lim, versus Florencia L. Bacala, Dolores L. Mendoza, Juanita L.
Alvarez and Apolinario C. Laurena.

The facts are:

On December 10, 1934, Ireneo Laurena executed a pacto de retro sale in favor of Lim
Ching of two parcels of land located at Barangay Cabagawan, Saint Bernard, Southern Leyte.
However, on February 23, 1935, Ireneo executed a deed of renunciation covering the same parcels
of land wherein he waived his right to repurchase the same, thus vesting ownership and possession
of the land to Lim Ching.

Sometime in 1936, Ireneo filed with the then Court of First Instance (CFI), now Regional
Trial Court (RTC), Maasin, Leyte a complaint for recovery of the two parcels of land against Lim
Ching, docketed as Civil Case No. 1919.

On October 19, 1937, the CFI rendered a Decision1021 ordering Lim Ching to return the
two parcels of land to Ireneo.

1020
Penned by Associate Justice Portia Alio-Hormachuelos and concurred in by Associate Justice Fermin A. Martin,
Jr. and Associate Justice Mercedes Gozo-Dadole (both retired).
1021
Records, pp. 294-297.

744
 On appeal by Lim Ching, docketed as T-A G.R. No. 2647, the Tribunal de Apelacion (now
Court of Appeals) rendered a Decision1022 dated August 19, 1939 reversing the trial courts
judgment and declaring Lim Ching the owner of the property. The Decision 1023 became final and
executory since Ireneo did not take further action.

Lim Ching then continued exercising his right of ownership. Upon his death, his heirs,
including Atty. Jose Lim, representing the estate of Lim Ching, herein petitioner, inherited the
land.

After 57 years, or in February 1996, Ireneos heirs, herein respondents Florencia Bacala,
Dolores L. Mendoza, Juanita Alvarez, and Apolinario Laurena, took possession of the property
without the consent of Lim Chings heirs. Respondents claimed they inherited it from Ireneo.

Several times, petitioner demanded that respondents vacate the land but they refused.
Hence, on March 21, 1996, petitioner filed with the RTC, Branch 26, San Juan, Southern Leyte a
complaint for quieting of title with prayer for a writ of preliminary injunction against respondents,
docketed as Civil Case No. R-448.1024 Petitioner alleged that it is the absolute owner of the land in
question as held by the Tribunal de Apelacion (now Court of Appeals) in its Decision dated August
19, 1939 in TA-G.R. No. 2647.

In their answer to the complaint,1025 respondents countered that petitioner has no cause of
action as the land it is claiming is different from the lot they have been occupying.

On October 24, 1996, upon agreement of both parties, the RTC issued an Order creating a
committee to undertake an ocular inspection of the property. The committee was composed of

1022
Id., pp. 290-293.
1023
Rollo, pp. 50-56.
1024
Records, pp. 2-8.
1025
Id., pp. 25-35.

745
Calvin Tabada, Head of the City Environment and Natural Resources Office (CENRO), San Juan,
Southern Leyte; Nicandro Nombrado, then acting court sheriff; and Grace Botoy, the municipal
assessor, also of Saint Bernard, Southern Leyte.

On December 13, 1996, the committee submitted to the RTC its Commissioners Report1026
stating that the land being claimed by petitioner is also the same property being claimed by
respondents.

On February 20, 1997, the RTC issued an Order1027 approving the Commissioners Report.

On October 16, 1997, petitioner filed with the RTC a motion for summary judgment 1028
based on the Commissioners Report1029 and the August 19, 1939 Decision of the Tribunal de
Apelacion (now Court of Appeals) in T-A G.R. No. 2647 declaring Lim Ching the owner of the
property. As mentioned earlier, Lim Ching is the predecessor of Atty. Jose Lim representing herein
petitioner.

On February 20, 1998, respondents filed their comments and opposition1030 to petitioners
motion for summary judgment.

1026
Id., pp. 173-174.
1027
Id., pp. 213-215.
1028
Id., pp. 354-359.
1029
Supra.
1030
Id., pp. 388-390.

746
 On March 18, 1998, the RTC issued an Order1031 granting the motion for summary
judgment and submitting the case for resolution. Respondents filed their motion for
reconsideration1032 but it was denied.1033

On December 15, 1998, the RTC rendered its Decision1034 in favor of the petitioner,
holding that its claim deserves more credence, thus:

xxx

As borne out by the evidence adduced by both parties during the trial, it was
admitted that there was a prior case that involved the predecessors in interests of
both parties and that the land or subject property is located at Barangay Cabagawan,
St. Bernard, Sourthern Leyte. Plaintiff averred and anchored their claim of
ownership over the subject property or a decision rendered by the Court of Appeals
dated August 19, 1939. Plaintiffs claim of ownership and possession of the property
in dispute was all evidenced by Exhibits A, B, C, D, F and H. Defendants, on the
other hand, vehemently denied plaintiffs claim of ownership and possession of the
property in dispute and stressed that what they are claiming is separate and distinct
land from those that are subject of the aforesaid Court of Appeals decision.
Defendants were able to present tax declarations and tax receipts evidencing
payment of realty taxes over the subject property they are claiming ownership.

After examining and evaluating the conflicting claim of the plaintiff and
defendants, the plaintiffs claim deserves more credence.

The RTC further held that respondents failed to substantiate their defense that the area they
are claiming is different from the land in controversy.

1031
Id., pp. 400-401.
1032
Id., pp. 402-407.
1033
Id., p. 413.
1034
Id., pp. 416-422.

747
 The dispositive portion of the Decision1035 reads:

WHEREFORE, IN THE LIGHT OF THE FOREGOING, judgment is

hereby rendered in favor of the plaintiff and against the defendants. The plaintiff is
declared as the legal owner and possessor of the land in litigation and the defendant
is hereby ordered to:

1. To respect said ownership and possession by the plaintiff;

2. To vacate from the land in question immediately and demolish all

structures built on the premises of the subject property;

3. To jointly and severally pay the plaintiff the sums of P50,000.00 as

moral damages, P20,000.00 as attorneys fees, P1,691.50 as exemplary damages to
deter others from committing the same act.

SO ORDERED.

Respondents interposed an appeal to the Court of Appeals, docketed as CA-G.R. CV No.

62495.

On January 31, 2001, the Court of Appeals rendered the assailed Decision reversing the
RTC Decision. It found that there are questions of fact in issue, such as respondents contentions
that they have been in possession of the land in dispute since time immemorial and that petitioners
action has been barred by prescription. Thus, the appellate court ordered the remand of the case to
the trial court for further proceedings.

The issue raised in this petition is whether a summary judgment may be rendered by the
trial court.

1035
Annex E, Rollo, pp. 50-56.

748
 Summary judgment is sanctioned in this jurisdiction by Section 1, Rule 35 of the 1997
Rules of Civil Procedure, as amended, reproduced hereunder:

SECTION 1. Summary judgment for claimant. A party seeking to recover

upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at
any time, after the pleading in answer thereto has been served, move with
supporting affidavits, depositions or admissions for a summary judgment in his
favor upon all or any part thereof.

The theory of summary judgment is that, although an answer may on its face appear to
tender issues requiring trial, if it is demonstrated by affidavits, depositions or admissions that those
issues are not genuine but sham or fictitious, the court is justified in dispensing with the trial and
rendering summary judgment.1036 It was devised to aid parties in avoiding the expense and loss of
time involved in a trial.1037

In this case, the parties agreed that a committee be formed to conduct an ocular inspection
to determine whether they are claiming the same property. The trial court approved the finding of
the committee, stated in the Commissioners Report, that respondents are claiming a property which
is also being claimed by petitioner. Considering that the parties agreed to the formation of a
committee, they are bound by its finding. It is settled that when a referee (the commissioners in
this case) is appointed, he becomes for the time being an accredited agent and an officer of the
court, and the reference is clearly a judicial proceeding. What the referee does while acting within
the scope of his official duty is, therefore, in the contemplation of law, done by the court itself.
Hence, his conclusions must be assumed to be correct until error is properly shown,1038 which

1036
Republic v. Sandiganbayan, G.R. No. 152154, July 15, 2003, 406 SCRA 220.
1037
Cotabato Timberland Company, Inc. v. C. Alcantara and Sons, Inc., G.R. No. 145469, May 28, 2004, 430 SCRA
227.
1038
Justice Jose Y. Feria (Ret.) and Maria Concepcion S. Noche, Civil Procedure, Annotated, Vol. 1, pp. 591-592,
citing Kriedt v. E.C. McCullough & Co., 37 Phil. 482 (1918).

749
is not so in the present case.

It must be recalled that respondents main defense is that they are occupying a property
different from that being claimed by petitioner. Consequently, based on the Commissioners
Report, respondents failed to prove that they are the rightful owners of the disputed land
considering that what they own is a different area.

At any rate, petitioner has shown that as early as August 19, 1939, the Tribunal de
Apelacion (now Court of Appeals) rendered a Decision declaring Lim Ching, the predecessor of
Atty. Jose Lim, herein representative of petitioner, the owner of the property.

Clearly, a summary judgment was correctly rendered by the trial court since there was no
more genuine factual issue to be resolved.

It is settled that a court may grant a summary judgment to settle expeditiously a case if, on
motion of either party, there appears from the pleadings, depositions, admissions, and affidavits
that no important issues of fact are involved, except the amount of damages. In such event, the
moving party is entitled to a judgment as a matter of law.1039

WHEREFORE, we GRANT the petition. The challenged Decision and Resolution of the
Court of Appeals in CA-G.R. CV No. 62495 are REVERSED. The Decision of the RTC in Civil
Case No. R-448 is AFFIRMED.

1039
Cotabato Timberland Company, Inc. v. C. Alcantara and Sons, Inc., supra, citing Concrete Aggregates
Corporation v. Court of Appeals, 266 SCRA 88, 95 (1997).

750
 SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

RENATO C. CORONA ADOLFO AZCUNA

Associate Justice Associate Justice

CANCIO C. GARCIA
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

751
REYNATO S. PUNO
Chief Justice

752
 Republic of the Philippines
Supreme Court
Manila

SECOND DIVISION

ATTY. MANGONTAWAR M. GUBAT, G.R. No. 167415

Petitioner,

Present:

CARPIO, J., Chairperson,

- versus - BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

NATIONAL POWER CORPORATION, Promulgated:

Respondent. February 26, 2010
x--------------------------------------------------------x

DECISION

753
DEL CASTILLO, J.:

Truly, there is no doubt that the rights of others cannot be prejudiced by private
agreements. However, before this Court can act and decide to protect the one apparently
prejudiced, we should remember what Aesop taught in one of his fables: Every truth has
two sides; it is well to look at both, before we commit ourselves to either.

A lawyer asserts his right to his contingent fees after his clients, allegedly behind his back, had
entered into an out-of-court settlement with the National Power Corporation (NPC). The trial court
granted his claim by way of summary judgment. However, this was reversed by the Court of Appeals
(CA) because the counsel was allegedly enforcing a decision that was already vacated. In this petition,
petitioner Atty. Mangontawar M. Gubat (Atty. Gubat) attempts to persuade us that the compensation due
him is independent of the vacated decision, his entitlement thereto being based on another reason: the bad
faith of his clients and of the respondent NPC.

Factual Antecedents

In August 1990, plaintiffs Ala Mambuay, Norma Maba, and Acur Macarampat separately filed
civil suits for damages against the NPC before the Regional Trial Court of Lanao del Sur in Marawi City
(RTC), respectively docketed as Civil Case Nos. 294-90, 295-90, and 296-90. In the said complaint,
plaintiffs were represented by Atty. Linang Mandangan (Atty. Mandangan) and petitioner herein, whose
services were engaged at an agreed attorneys fees of P30,000.00 for each case and P600.00 for every
appearance. Petitioner was the one who signed the complaints on behalf of himself and Atty.
Mandangan.1040

1040
Rollo, pp. 132, 135, and 138.

754
 During the course of the proceedings, the three complaints were consolidated because the
plaintiffs causes of action are similar. They all arose from NPCs refusal to pay the amounts demanded by
the plaintiffs for the cost of the improvements on their respective lands which were destroyed when the
NPC constructed the Marawi-Malabang Transmission Line.

On the day of the initial hearing on the merits, NPC and its counsel failed to appear.
Consequently, respondent was declared in default. Despite the plea of NPC for the lifting of the default
order, the RTC of Marawi City, Branch 8, rendered its Decision1041 on April 24, 1991, the dispositive
portion of which provides:

PREMISES CONSIDERED, judgment is hereby rendered in favor of the herein

plaintiffs and against the defendant National Power Corporation as represented by its
President Ernesto Aboitiz, P.M. Durias and Rodrigo P. Falcon, ordering the latter jointly
and severally:

(1) In Civil Case No. 204-90 to pay plaintiff Ala Mambuay the sum of
P103,000.00 representing the value of the improvements and the occupied portion of the
land, P32,000.00 as attorneys fees, P20,000.00 as moral and/or exemplary damages,
P50,000.00 as actual damages and the costs;

(2) In Civil Case No. 295-90 to pay plaintiff Norma Maba represented by Capt.
Ali B. Hadji Ali the sum of P146,700.00 representing the value of the improvements and
the occupied portion of the land, P32,000.00 as attorneys fees, P20,000.00 as moral and/or
exemplary damages, P50,000.00 as actual damages and the costs;

(3) In Civil Case No. 296-90 to pay plaintiff Acur Macarampat the sum of
P94,100.00 representing the value of the improvements and the occupied portion of the
land, P32,000.00 as attorneys fees, P20,000.00 as moral and/or exemplary damages,
P50,000.00 as actual damages and the costs.1042

NPC appealed to the CA which was docketed as CA-G.R. CV No. 33000. During the pendency
of the appeal, Atty. Gubat filed an Entry and Notice of Charging Lien1043 to impose his attorneys lien of

1041
CA rollo, pp. 48-56; penned by Judge Santos B. Adiong.
1042
Id. at 55.
1043
Rollo, p. 34.

755
P30,000.00 and appearance fees of P2,000.00 on each of the three civil cases he handled, totalling
P96,000.00.

On August 19, 1992, NPC moved to dismiss its appeal1044 alleging that the parties had arrived at
a settlement. Attached to the motion were acknowledgment receipts1045 dated April 2, 1992 signed by
plaintiffs Acur Macarampat, Ala Mambuay, and Norma Maba, who received P90,060.00, P90,000.00,
and P90,050.00 respectively, in full satisfaction of their claims against the NPC. The motion stated that
copies were furnished to Atty. Mandangan and herein petitioner,

although it was only Atty. Mandangans signature which appeared therein.1046

On January 24, 1996, the CA rendered its Decision1047 disposing thus:

WHEREFORE, the Order of Default dated December 11, 1990; the Order
denying the Motion for Reconsideration to Lift Order of Default dated January 25, 1991;
and the Decision dated April 24, 1991, are hereby ANNULLED and SET ASIDE and
the records of Civil Case Nos. 294-90, 295-90 and 296-90 are hereby ordered remanded
to the court of origin for new trial.1048

1044
Id. at 38-40.
1045
Id. at 35-37. Except as to the amount, name of plaintiff, and the Civil Case No., the Acknowledgment Receipts
signed by each plaintiff were similarly worded in this manner:
This is to acknowledge receipt from the NATIONAL POWER CORPORATION (NPC) the sum of
(amount) as full and complete settlement of the cases entitled in (name of case) in (civil case no.) which is now
pending appeal before the Court of Appeals.
With the execution of this Acknowledgment Receipt, it is understood that I and my heirs and assigns have
no further claim against NPC with respect to the damage to improvements over my parcel of land which was
affected by the 69 KV Transmission Line.
Iligan City, Philippines, 2 April 1992.
Sgd.
(name of claimant)
Representing NPC:
(Sgd.)
CANDIDATO RAMOS
(Sgd.)
ATTY. ARTHUR L. ABUNDIENTE
Counsel for Defendant-NPC
1046
Id. at 40.
1047
CA rollo, pp 62-73; penned by Associate Justice Cancio C. Garcia and concurred in by Associate Justices
Eugenio S. Labitoria and Portia Alio-Hormachuelos.
1048
Id. at 72.

756
 After the cases were remanded to the RTC, petitioner filed a Motion for Partial Summary
Judgment1049 on his attorneys fees. He claimed that the plaintiffs and the NPC deliberately did not inform
him about the execution of the compromise agreement, and that said parties connived with each other in
entering into the compromise agreement in order to unjustly deprive him of his attorneys fees. Furthermore,
he alleged:

xxxx

12. That, in view of such settlement, there are no more genuine issues between
the parties in the above-entitled cases except as to the attorneys fees; As such, this
Honorable Court may validly render a partial summary judgment on the claim for
attorneys fees; and

13. That the undersigned counsel hereby MOVES for a partial summary judgment
on his lawful attorneys fees based on the pleadings and documents on file with the records
of this case.1050

xxxx

Petitioner thus prayed that a partial summary judgment be rendered on his attorneys fess and that
NPC be ordered to pay him directly his lawful attorneys fees of P32,000.00 in each of the above cases, for
a total of P96,000.00.

NPC opposed the motion for partial summary of judgment. It alleged that a client may
compromise a suit without the intervention of the lawyer and that petitioners claim for attorneys fees
should be made against the plaintiffs. NPC likewise claimed that it settled the case in good faith and that
plaintiffs were paid in full satisfaction of their claims which included attorneys fees.

1049
Id. at 74-77.
1050
Id. at 76.

757
 On March 15, 2000, the trial court issued an Order1051 granting petitioners motion for summary
judgment. It found that the parties to the compromise agreement connived to petitioners prejudice which
amounts to a violation of the provisions of the Civil Code on Human Relations.1052 It ruled that:

xxxx

There is no dispute that the Compromise Agreement was executed during the
pendency of these cases with the Honorable Court of Appeals. Despite the knowledge of
the defendant that the services of the movant was on a contingent basis, defendant
proceeded with the Compromise Agreement without the knowledge of Atty. Gubat. The
actuation of the defendant is fraudulently designed to deprive the movant of his lawful
attorneys fees which was earlier determined and awarded by the Court. Had defendant
been in good faith in terminating these cases, Atty. Gubat could have been easily
contacted.

x x x x1053

The dispositive portion of the Order reads:

WHEREFORE, premises considered, plaintiffs Ala Mambuay, Norma Maba

and Acur Macarampat as well as defendant National Power Corporation are hereby
ordered to pay jointly and solidarily Atty. Mangontawar M. Gubat the sum of
P96,000.00.1054

NPC filed a Motion for Reconsideration1055 but the motion was denied by the

1051
Id. at 81-82; penned by Acting Presiding Judge Moslemen T. Macarambon.
1052
Article 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice,
give everyone his due, and observe honesty and good faith.
Article 20. Every person who, contrary to law, willfully or negligently causes damage to another, shall
indemnify the latter for the same.
Article 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for the damage.
1053
CA rollo, pp. 81-82.
1054
Id. at 82.
1055
Id. at 83-86.

758
trial court in its June 27, 2000 Order.1056 Thus, NPC filed a Petition for Certiorari1057 before the CA
docketed as CA-G.R. SP No. 60722, imputing grave abuse of discretion on the court a quo for granting
petitioners Motion for Partial Summary Judgment. It prayed that the subject order be set aside insofar as
NPC is concerned.

NPC maintained that it acted in good faith in the execution of the compromise settlement. It
likewise averred that the lower courts award of attorneys fees amounting to P96,000.00 was clearly based
on the award of attorneys fees in the April 24, 1991 Decision of the trial court which had already been
reversed and set aside by the CA in CA-G.R. CV No. 33000. Moreover, NPC contended that petitioner
cannot enforce his charging lien because it presupposes that he has secured a favorable money judgment
for his clients. At any rate, since petitioner is obviously pursuing the compensation for the services he
rendered to his clients, thus, recourse should only be against them, the payment being their personal
obligation and not of respondent. NPC further alleged that even assuming that the subject attorneys fees
are those that fall under Article 2208 of the Civil Code1058 which is in the concept of indemnity for
damages to be paid to the winning party in a litigation, such fees belong to the clients and not to the
lawyer, and this form of damages has already been paid directly to the plaintiffs.

1056
Id. at 87; penned by Judge Santos B. Adiong.
1057
Id. at 2-24.
1058
In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid,
just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation
should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.

759
 On the other hand, petitioner claimed that he was not informed of the compromise agreement or
furnished a copy of NPCs Motion to Dismiss Appeal. He alleged that the same was received only by
Atty. Mandangan who neither signed any of the pleadings nor appeared in any of the hearings before the
RTC. Petitioner clarified that his motion for a partial summary judgment was neither a request for the
revival of the vacated April 24, 1991 Decision nor an enforcement of the lien, but a grant of his
contingent fees by the trial court as indemnity for damages resulting from the fraudulent act of NPC and
of his clients who conspired to deprive him of the fees due him. He asserted that NPC cannot claim good
faith because it knew of the existence of his charging lien when it entered into a compromise with the
plaintiffs.

Petitioner also alleged that NPCs remedy should have been an ordinary appeal and not a petition
for certiorari because the compromise agreement had settled the civil suits. Thus, when the trial court
granted the motion for partial summary judgment on his fees, it was a final disposition of the entire case.
He also argued that the issue of bad faith is factual which cannot be a subject of a certiorari petition. He
also insisted that NPCs petition was defective for lack of a board resolution authorizing Special Attorney
Comie Doromal (Atty. Doromal) of the Office of the Solicitor General (OSG) to sign on NPCs behalf.

On September 9, 2002, the CA rendered the herein assailed Decision1059 ruling that:

The reasoning of Atty. Gubat is a crude palusot (a sneaky fallacious reasoning)

for how can one enforce a part of a decision which has been declared void and vacated.
In legal contemplation, there is no more decision because, precisely, the case was
remanded to the court a quo for further proceeding.

It was bad enough that Atty. Gubat tried to pull a fast [one] but it was [worse]
that respondent Judge fell for it resulting in a plainly erroneous resolution.

1059
Rollo, pp. 26-31; penned by Associate Justice Hilarion L. Aquino and concurred in by Associate Justices
Salvador J. Valdez, Jr. and Jose L. Sabio, Jr.

760
 Like his predecessor Judge Adiong, Judge Macarambon committed basic errors
unquestionably rising to the level of grave abuse of discretion amounting to lack or
excess of jurisdiction.

WHEREFORE, finding merit in the petition, the Court issues the writ of
certiorari and strikes down as void the Order dated March 15, 2000 granting Atty.
Mangontawar M. Gubats Motion for Partial Summary Judgment as well as the Order
dated June 27, 2000 denying petitioner National Power Corporations Motion for
Reconsideration.

SO ORDERED.1060

Petitioner filed a motion for reconsideration but the motion was denied by the CA in its January
19, 2005 Resolution,1061 Hence, this petition.

Petitioner insists on the propriety of the trial courts order of summary judgment on his attorneys
fees. At the same time, he imputes grave abuse of discretion amounting to lack or excess of jurisdiction
on the CA for entertaining respondents Petition for Certiorari. He maintains that the petition should have
been dismissed outright for being the wrong mode of appeal.

Our Ruling

The petition lacks merit.

Petitioners resort to Rule 65 is not proper.

1060
Id at 30-31.
1061
Id. at 32-33; penned by Associate Justice Jose Sabio, Jr. and concurred in by Associate Justices Godardo A.
Jacinto and Salvador J. Valdez.

761
 At the outset, the petition should have been dismissed outright because petitioner resorted to the
wrong mode of appeal by filing the instant petition for certiorari under Rule 65. Section 1 of the said
Rule explicitly provides that a petition for certiorari is available only when there is no appeal or any plain,
speedy, and adequate remedy in the ordinary course of law. In this case, the remedy of appeal by way of a
petition for review on certiorari under Rule 45 is not only available but also the proper mode of appeal.
For all intents and purposes, we find that petitioner filed the instant petition for certiorari under Rule 65
as a substitute for a lost appeal. We note that petitioner received a copy of the January 19, 2005
Resolution of the CA denying his motion for reconsideration on January 28, 2005. Under Section 2 of
Rule 45, petitioner has 15 days from notice of the said Resolution within which to file his petition for
review on certiorari. As such, he should have filed his appeal on or before February 12, 2005. However,
records show that the petition was posted on March 1, 2005, or long after the period to file the appeal has
lapsed.

At any rate, even if we treat the instant petition as one filed under Rule 45, the same should still
be denied for failure on the part of the petitioner to show that the CA committed a reversible error
warranting the exercise of our discretionary appellate jurisdiction.

Petitioners resort to summary judgment is not proper;

he is not entitled to an immediate relief as a matter of
law, for the existence of bad faith is a genuine issue of
fact to be tried.

A summary judgment is allowed only if, after hearing, the court finds that except as to the amount
of damages, the pleadings, affidavits, depositions and admissions show no genuine issue as to any
material fact and that the movant is entitled to a judgment as a matter of law.1062 The purpose of a
summary judgment is to avoid drawn out litigations and useless delays because the facts appear
undisputed to the mind of the court. Such judgment is generally based on the facts proven summarily by
affidavits, depositions, pleadings, or admissions of the parties.1063 For a full-blown trial to be dispensed

1062
RULES OF COURT, Rule 35, Section 3.
1063
Nocom v. Camerino, G.R. No. 182984, February 10, 2009, 578 SCRA 390, 410.

762
with, the party who moves for summary judgment has the burden of demonstrating clearly the absence of
genuine issues of fact, or that the issue posed is patently insubstantial as to constitute a genuine issue.1064
Genuine issue means an issue of fact which calls for the presentation of evidence as distinguished from an
issue which is fictitious or contrived.1065

Petitioner pleaded for a summary judgment on his fees on the claim that the parties intentionally
did not inform him of the settlement. He alleged that he never received a copy of NPCs Motion to
Withdraw Appeal before the CA and that instead, it was another lawyer who was furnished and who
acknowledged receipt of the motion. When he confronted his clients, he was allegedly told that the NPC
deceived them into believing that what they received was only a partial payment exclusive of the
attorneys fees. NPC contested these averments. It claimed good faith in the execution of the compromise
agreement. It stressed that the attorneys fees were already deemed included in the monetary consideration
given to the plaintiffs for the compromise.

The above averments clearly pose factual issues which make the rendition of summary judgment
not proper. Bad faith imports a dishonest purpose or some moral obliquity and conscious doing of a
wrong. It is synonymous with fraud, in that it involves a design to mislead or deceive another.1066 The
trial court should have exercised prudence by requiring the presentation of evidence in a formal trial to
determine the veracity of the parties respective assertions. Whether NPC and the plaintiffs connived and
acted in bad faith is a question of fact and is evidentiary. Bad faith has to be established by the claimant
with clear and convincing evidence, and this necessitates an examination of the evidence of all the parties.
As certain facts pleaded were being contested by the opposing parties, such would not warrant a rendition
of summary judgment.

Moreover, the validity or the correct interpretation of the alleged compromise agreements is still
in issue in view of the diverse interpretations of the parties thereto. In fact, in the Decision of the CA dated

1064
Philippine Countryside Rural Bank v. Toring, G.R. No. 157862, April 16, 2009.
1065
Manufacturers Hanover Trust Co. and/or Chemical Bank v. Guerrero, 445 Phil. 770, 776 (2003).
1066
Solidbank Corporation v. Mindanao Ferroalloy Corporation, G.R. No. 153535, July 28, 2005, 464 SCRA 409,
426.

763
January 24, 1996, the appellate court ordered the case to be remanded to the trial court for new trial,
thereby ignoring completely NPCs motion to dismiss appeal based on the alleged compromise
agreements it executed with the plaintiffs. Even in its assailed Decision of September 9, 2002, the CA did
not rule on the validity of the alleged compromise agreements. This is only to be expected in view of its
earlier ruling dated January 24, 1996 which directed the remand of the case to the court of origin for new
trial.

Considering the above disquisition, there is still a factual issue on whether the NPC and the
plaintiffs had already validly entered into a compromise agreement. Clearly, the NPC and the plaintiffs
have diverse interpretations as regards the stipulations of the compromise agreement which must be
resolved. According to the NPC, the amounts it paid to the plaintiffs were in full satisfaction of their
claims. Plaintiffs claim otherwise. They insist that the amounts they received were exclusive of attorneys
claim. They also assert that NPC undertook to pay the said attorneys fees to herein petitioner.

A client may enter into a compromise agreement

without the intervention of the lawyer, but the terms of
the agreement should not deprive the counsel of his
compensation for the professional services he had
rendered. If so, the compromise shall be subjected to
said fees. If the client and the adverse party who
assented to the compromise are found to have
intentionally deprived the lawyer of his fees, the terms of
the compromise, insofar as they prejudice the lawyer,
will be set aside, making both parties accountable to pay
the lawyers fees. But in all cases, it is the client who is
bound to pay his lawyer for his legal representation.

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid

litigation or put an end to one already commenced.1067 It is a consensual contract, binding upon the

1067
CIVIL CODE, Article 2028.

764
signatories/privies, and it has the effect of res judicata.1068 This cannot however affect third persons who
are not parties to the agreement.1069

Contrary to petitioners contention, a client has an undoubted right to settle a suit without the
intervention of his lawyer,1070 for he is generally conceded to have the exclusive control over the subject-
matter of the litigation and may, at any time before judgment, if acting in good faith, compromise, settle,
and adjust his cause of action out of court without his attorneys intervention, knowledge, or consent, even
though he has agreed with his attorney not to do so.1071 Hence, a claim for attorneys fees does not void
the compromise agreement and is no obstacle to a court approval.1072

However, counsel is not without remedy. As the validity of a compromise agreement cannot be
prejudiced, so should not be the payment of a lawyers adequate and reasonable compensation for his
services should the suit end by reason of the settlement. The terms of the compromise subscribed to by
the client should not be such that will amount to an entire deprivation of his lawyers fees, especially when
the contract is on a contingent fee basis. In this sense, the compromise settlement cannot bind the lawyer
as a third party. A lawyer is as much entitled to judicial protection against injustice or imposition of fraud
on the part of his client as the client is against abuse on the part of his counsel. The duty of the court is not
only to ensure that a lawyer acts in a proper and lawful manner, but also to see to it that a lawyer is paid
his just fees.1073

Even if the compensation of a counsel is dependent only upon winning a case he himself secured
for his client, the subsequent withdrawal of the case on the clients own volition should never completely
deprive counsel of any legitimate compensation for his professional services.1074 In all cases, a client is

1068
CIVIL CODE, Article 2037.
1069
University of the East v. Secretary of Labor and Employment, G.R. Nos. 93310-12, November 21 1991, 204
SCRA 254, 262.
1070
Rustia v. Judge of First Instance of Batangas, 44 Phil 62, 65 (1922).
1071
Samonte v. Samonte, 159-A Phil. 777, 791-792 (1975).
1072
Cabildo v. Hon. Navarro, 153 Phil. 310, 314 (1973).
1073
Masmud v. National Labor Relations Commission, G.R. No. 183385, February 13, 2009, 579 SCRA 509, 520.
1074
National Power Corporation v. National Power Corporation Employees and Workers Association, 178 Phil. 1,
10-11 (1979).

765
bound to pay his lawyer for his services. The determination of bad faith only becomes significant and
relevant if the adverse party will likewise be held liable in shouldering the attorneys fees.1075

Petitioners compensation is a personal obligation of his clients who have benefited from his legal
services prior to their execution of the compromise agreement. This is strictly a contract between them.
NPC would only be made liable if it was shown that it has connived with the petitioners clients or acted in
bad faith in the execution of the compromise agreement for the purpose of depriving petitioner of his
lawful claims for attorneys fees. In each case, NPC should be held solidarily liable for the payment of the
counsels compensation. However, as we have already discussed, petitioners resort to summary judgment
is not proper. Besides, it is interesting to note that petitioner is the only one claiming for his attorneys fees
notwithstanding that plaintiffs counsels of record were petitioner herein and Atty. Mandangan.
Nevertheless, this is not at issue here. As we have previously discussed, this is for the trial court to
resolve.

The CA soundly exercised its discretion in resorting to a

liberal application of the rules. There are no vested right
to technicalities.

Concededly, the NPC may have pursued the wrong remedy when it filed a petition for certiorari
instead of an appeal since the ruling on attorneys fees is already a ruling on the merits. However, we find
that the trial court gravely abused its discretion amounting to lack or excess of jurisdiction when it ordered
NPC solidarily liable with the plaintiffs for the payment of the attorneys fees. The rule that a petition for
certiorari is dismissible when the mode of appeal is available admits of exceptions, to wit: (a) when the
writs issued are null; and, (b) when the questioned order amounts to an oppressive exercise of judicial
authority.1076 Clearly, respondent has shown its entitlement to the exceptions.

1075
See Aro v. Hon. Naawa, 137 Phil. 745 (1969).
1076
Jan-Dec Construction Corporation v. Court of Appeals, G.R. No. 146818, February 6, 2006, 481 SCRA 556,
564.

766
 The same liberal application should also apply to the question of the alleged lack of authority of
Atty. Doromal to execute the certification of non-forum shopping for lack of a board resolution from the
NPC. True, only individuals vested with authority by a valid board resolution may sign the certificate of
non-forum shopping in behalf of the corporation, and proof of such authority must be attached to the
petition,1077 the failure of which will be sufficient cause for dismissal. Nevertheless, it cannot be said that
Atty. Doromal does not enjoy the presumption that he is authorized to represent respondent in filing the
Petition for Certiorari before the CA. As Special Attorney, he is one of the counsels of NPC in the
proceedings before the trial court, and the NPC never questioned his authority to sign the petition for its
behalf.

In any case, the substantive issues we have already discussed are justifiable reasons to relax the
rules of procedure. We cannot allow a patently wrong judgment to be implemented because of technical
lapses. This ratiocination is in keeping with the policy to secure a just, speedy and inexpensive disposition
of every action or proceeding.1078 As we have explained in Alonso v. Villamor:1079

There is nothing sacred about processes or pleadings, their forms or contents.

Their sole purpose is to facilitate the application of justice to the rival claims of
contending parties. They were created, not to hinder and delay, but to facilitate and
promote, the administration of justice. They do not constitute the thing itself, which
courts are always striving to secure to litigants. They are designed as the means best
adopted to obtain that thing. In other words, they are a means to an end. When they lose
the character of the one and become the other, the administration of justice is at fault and
courts are correspondingly remiss in the performance of their obvious duty.

The error in this case is purely technical. To take advantage of it for other
purposes than to cure it, does not appeal to a fair sense of justice. Its presentation as fatal
to the plaintiff's case smacks of skill rather than right. A litigation is not a game of
technicalities in which one more deeply schooled and skilled in the subtle art of
movement and position, entraps and destroys the other. It is rather, a contest in which
each contending party fully and fairly lays before the court the facts in issue and then,
brushing aside as wholly trivial and indecisive all imperfections of form and technicalities
of procedure, asks that justice be done upon the merits. Law-suits, unlike duels, are not to

1077
Philippine Airlines, Inc. v. Flight Attendants and Stewards Association of the Philippines, G.R. No. 143088,
January 24, 2006, 479 SCRA 605, 608.
1078
RULES OF COURT, Rule 1, Section 6.
1079
16 Phil 315, 321-322 (1910).

767
 be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to
justice and becomes its great hindrance and chief enemy, deserves scant consideration
from courts. There should be no vested rights in technicalities. No litigant should be
permitted to challenge a record of a court of these Islands for defect of form when his
substantial rights have not been prejudiced thereby.

WHEREFORE, the Petition is hereby DISMISSED for lack of merit. The September 9, 2002
Decision of the Court of Appeals and its January 19, 2005 Resolution are AFFIRMED.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION ROBERTO A. ABAD

Associate Justice
Associate Justice

JOSE P. PEREZ
Associate Justice

768
 ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons attestation,
it is hereby certified that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

769
 SECOND DIVISION

[G.R. No. 134049. June 17, 2004]

MARCOPPER MINING CORPORATION, petitioner, vs. SOLIDBANK CORPORATION,

THE SHERIFF OF MANILA and DEPUTY SHERIFF CARLOS BAJAR,
respondents.

DECISION
CALLEJO, SR., J.:

Before us is a petition for review of the Decision1080 of the Court of Appeals in CA-G.R. SP
No. 44570, dismissing the petition for certiorari and prohibition with prayer for the issuance of
temporary restraining order and/or writ of preliminary injunction filed by Marcopper Mining
Corporation, and its Resolution1081 dated June 5, 1998, denying the motion for reconsideration of
the said decision.

The Antecedents

Petitioner Marcopper Mining Corporation (MMC, for brevity), is a domestic corporation,

engaged in the mining and production of copper concentrates in Boac, Marinduque, since 1968. In
order to sustain its operations, MMC entered into several loan transactions with various banks and
financial institutions, including the Asian Development Bank.
Also among the transactions entered into by MMC were two foreign currency loans with
respondent Solidbank Corporation, denominated as FCDU 96-049 and 96-050, for
US$1,000,000.00 each, or a total of US$2,000,000 which were payable on demand. Each loan was
covered by a promissory note in which MMC, through John E. Loney and Jose E. Reyes, signed
as Maker-Borrower/Assignor. It was agreed therein that the loan would accumulate an interest of
8.75% per annum. It was, likewise, provided that the payment for the loan would be sourced from
the foreign exchange proceeds from the shipment of the copper concentrates by MMC to Nippon
Mining & Metals Co., Ltd. to the extent of US$1,206,783.09 to be shipped in May 1996.
On March 24, 1996, in the course of its mining operations, a leakage occurred in the tailings
of the taipan Pit in MMCs Boac, Marinduque plant, resulting in the cessation of mining operations.
Consequently, the MMC failed to ship copper concentrates to Nippon Mining & Metals Co., Ltd.
On March 29, 1996, the Department of Environment and Natural Resources issued a Closure

1080
Penned by Associate Justice Consuelo Ynares-Santiago (now an Associate Justice of the Supreme Court), with
Associate Justices Bernardo Ll. Salas and Demetrio G. Demetria, concurring.
1081
Rollo, p. 53.

770
Order, ordering the MMC to cease its mining operations. This was followed by a cease and desist
order from the Pollution Adjudication Board.
As a result of such orders, the MMC was unable to pay for the loans it obtained from the
respondent bank. In such a situation, the MMC was prompted to ask for a consolidation of FCDU
96-049 and 96-050. On July 9, 1996, the aforementioned FCDUs were consolidated into FCDU
96-808 for US$2,000,000. It was specified therein that FCDU 96-808 was acquired by MMC as
its working capital, payable on demand and repriced every thirty (30) days. However, the MMC
still failed to settle its loan.
On September 19, 1996, respondent bank filed a civil complaint docketed as Civil Case No.
96-80083 for a sum of money against MMC, its President/Chief Executive Officer John E. Loney,
Treasurer Jose E. Reyes and its Assistant Corporate Secretary, Teodulo C. Gabor, Jr. The
respondent alleged the following in its complaint:
First Cause of Action
6. On January 16, 1996, the defendant obtained a foreign currency loan from plaintiff in the
amount of US$1,000,000.00 and as evidenced thereof, the defendant corporation, through its
officers, defendants JOHN B. LONEY and JOSE E. REYES, acting in their dual capacities as
President/CEO and Treasurer, respectively, as well as in their personal capacities, executed on
even date a Foreign Currency Denominated Promissory Note (FCDU for brevity) No. 96-049
undertaking, jointly and severally, to pay the said obligation with interest at 8.75% upon demand
by plaintiff. Copy of FCDU note is hereto attached and made an integral part hereof as Annex A.
Second Cause of Action
7. On January 16, 1996, the defendants obtained a foreign currency loan from the plaintiff in
the amount of US$1,000,000.00 and as evidence thereof, the defendant corporation through its
officers, defendants JOHN E. LONEY and JOSE E. REYES acting in their dual capacities as
President/CEO and Treasurer, respectively, as well as in their personal capacities executed on even
date a Foreign Currency Denominated Promissory Note (FCDU for brevity) No. 96-050
undertaking, jointly and severally, to pay the said obligation with interest of 8.75% upon demand
by plaintiff. Copy of the FCDU note is hereto attached as Annex B and made an integral part
hereof.
Allegations Common to Both Causes of Action
8. Under the terms of the FCDU Note, parties agreed as follows:
a) in the event of default, defendants agreed to pay additionally a penalty at
the rate of 2% per month until fully paid.
b) Defendants agreed to an increase or decrease as the case may be of the
interest rate presently stipulated on the basis of prevailing rates either at the local
or international capital markets.
c) in case of litigation, defendants agreed to pay such sum equivalent to 10%
of the amount involved by way of attorneys fees.
d) in any action arising from the notes, parties agreed to submit themselves
to the jurisdiction of the proper courts of Metro Manila or of the place of

771
 execution of the notes at the sole option of plaintiff.
9. The defendants defaulted in the payment of the FCDU Notes and inspite (sic) repeated
demands, defendants failed and refused to settle their obligations to plaintiff. Copy of the latest
demand is hereto attached as Annex C and made an integral part hereof.
10. As of September 13, 1996, defendants obligation to plaintiff is in the amount of FIFTY-
TWO MILLION NINE HUNDRED SEVENTY THOUSAND SEVEN HUNDRED FIFTY-
SIX AND 89/100 (P52,970,756.89), Philippine Currency. Copy of the Statement of Account is
hereto attached as Annex D and made an integral part hereof;
11. As a consequence of the defendants willful refusal to pay a plainly just and valid
obligation, plaintiff was constrained to engage the services of the undersigned counsel for a fee
equivalent to 10% of the amount involved by way of attorneys fees.1082
In support of its plea for a writ of preliminary attachment, the respondent also alleged, inter
alia, the following:
Grounds for Issuance of Preliminary Attachment
11. For and in consideration of plaintiffs extending the foreign currency loans unto the
defendants, the latter made undertakings that their obligations shall be paid from the proceeds of
the Purchase Order from Nippon Mining & Metal Co., Ltd. (Invoice No. SAN-47 dated January
9, 1996) covering copper concentrates to the extent of US$1,206,783.09 to be shipped in May
1996. These representations were reflected on the FCDU Notes (96-049 & 96-050) particularly
No. 3 thereof which are bracketed and marked as Annex A-1 for FCDU 96-049 and Annex B-1
for FCDU 96-050, respectively, and made integral parts hereof.
12. The proceeds of the shipments were never remitted to plaintiff pursuant to the defendants
commitments aforestated upon which plaintiff heavily relied upon as factors that induced it to
release the amounts covered by the FCDU notes.
13. As a consequence of the defendants failure to make the remittance and to cover up their
utter bad faith, they adopted a scheme whereby, they sought the consolidation of the two
promissory notes into one for US$2,000,000.00 evidenced by loan No. FCDU 96-808 duly signed
this time, by defendants Jose E. Reyes and Teodulo C. Gabor, Jr. This was allowed by plaintiff
upon the assurances of the aforenamed that the Secretarys Certificate attesting to their authority to
commit the defendant corporation into a joint and solidary liability with them will be submitted in
due time. Copy of the FCDU Note No. 96-808 is hereto attached as Annex E and made an integral
part hereof.
14. Unfortunately, the required Secretarys Certificate showing such authority was never
submitted and it became evident that the assurances turned out to be another misrepresentation.
15. This is a clear badge of fraud on the part of the defendants conspiring to achieve a common
end of contracting an obligation that they really did not have the intention to pay at its inception.
16. To further foreclose whatever chance of plaintiff in recovering the enormous indebtedness
of the defendants, the latter conceived of selling defendant corporations substantial assets in the

1082
CA Rollo, pp. 050-053.

772
form of shareholdings in various country clubs to make effective their plans of placing their
valuable assets beyond reach of their creditors, one of the plaintiff[s] herein. Copy of defendants
letter addressed to Asian Development Bank asking for permission to sell is hereto attached as
Annex F and made an integral part thereof.
17. The circumstances pieced together only reinforced the claim of bad faith on the part of the
defendants and are grounds for the issuance of attachment under Rule 57, Sec. 1(d) of the Revised
Rules of Court, which provides:
In an action against a party who has been guilty of a fraud in contracting the
debt or incurring the obligation upon which the action is brought, or in
concealing or disposing of the property for the taking, detention or conversion
of which the action is brought.
as well as 1(e) stating:
In an action against a party who has removed or disposed of his property, or is about to do so,
with intent to defraud his creditors.
18. Plaintiff has sufficient causes of action and there is no sufficient security for the claims
sought to be enforced herein by plaintiff other than the properties of the defendants that may still
be reached by a writ of preliminary attachment, if it is immediately and expeditiously issued;
19. The amount due to plaintiff is as much as the sum hereinabove specified over and above
all the counterclaim that maybe interposed by the defendants;
20. Plaintiff is ready and willing to put up a bond in such amount as may be determined to
answer for all the damages that the defendants may sustain by reason of the attachment, if the
Honorable Court should finally adjudge that plaintiff is not entitled thereto.1083
The respondent prayed that, after due proceedings, judgment be rendered in its favor, viz:
PRAYER
WHEREFORE, it is respectfully prayed that:
1. At the commencement of this action and upon the filing of a bond in such amount as this
Honorable Court may fix, a writ of preliminary attachment be forthwith issued against the
properties of the defendants as satisfaction of any judgment that plaintiff may secure.
2. After trial, judgment be rendered ordering defendants, jointly and severally, to pay plaintiff
the sum of FIFTY-TWO MILLION NINE HUNDRED SEVENTY THOUSAND SEVEN
HUNDRED FIFTY-SIX AND 89/100 (P52,970,756.89) PESOS, Philippine Currency, plus
interests and charges until fully paid;
3. Such sum equivalent to 10% of the amount involved by way of attorneys fees; and
4. Costs of suit.

1083
Id. at 053-056.

773
 Plaintiff prays for other reliefs just and equitable under the premises.1084
On September 20, 1996, the trial court issued an Order for the issuance of a writ of preliminary
attachment, upon the respondents posting of a bond duly approved by the court in the amount of
P58,267,831.59.1085 The respondent posted the requisite bond, and after the same was approved by
the court, a writ of preliminary attachment was issued in the respondents favor.
The petitioner MMC filed a motion to dissolve the writ of preliminary attachment issued by
the court, on the following grounds:
PLAINTIFF HAS NO CAUSE OF ACTION AGAINST DEFENDANTS.
PLAINTIFF IS NOT ENTITLED TO ATTACHMENT. THE REQUIREMENTS
ENTITLING IT TO THE WRIT ARE WANTING AND THE FACTS STATED IN THE
AFFIDAVIT OF ATTACHMENT ARE UNTRUE AND FALSE.
MARCOPPER AND INDIVIDUAL DEFENDANTS HAVE NOT COMMITTED
FRAUD AND ARE NOT GUILTY OF FRAUD IN CONTRACTING THE DEBT OR
INCURRING THE OBLIGATION UPON WHICH THE ACTION IS BROUGHT, OR
IN CONCEALING OR DISPOSING OF PROPERTY FOR THE TAKING,
DETENTION AND CONVERSION OF WHICH THE ACTION IS BROUGHT.
DEFENDANTS HAVE NOT REMOVED OR DISPOSED OF THEIR PROPERTIES,
OR ABOUT TO DO SO, AND THERE IS NO INTENT TO DEFRAUD
CREDITORS.1086
On October 28, 1996, the petitioner filed the verified answer to the complaint, incorporating
therein its special and affirmative defenses, viz:
Defendant Marcopper repleads the allegations in the preceding paragraphs hereof;
9. Plaintiff has no cause of actions against Marcopper;
10. The Foreign Currency loans (FCDU Nos. 96-049 and 96-050) set forth in plaintiffs First
and Second Causes of Action (pars. 6, 7, 8 and 9 of the Complaint) have been paid and/or
extinguished. Marcopper was not in default in respect of said FCDU loans.
11. Plaintiff Solidbank is one of the banks with whom Marcopper does business with. The
other banks are Security Bank and Trust Company, Rizal Commercial Banking Corporation, Bank
of America, NT and SA, Westmont Bank, Citibank and the Bank of Nova Scotia, a Canadian bank
licensed to do business in the Philippines;
12. Marcopper maintaining banking facilities with Solidbank since 1992;
13. During the period 1992-1996, Marcopper has availed of financial facility from Solidbank
in the form of FCDU loans secured by promissory note/s payable from proceeds of export credit
or purchase order;

1084
Id. at 056-057.
1085
Id. at 076.
1086
Id. at 071.

774
 14. The FCDU loans of 16 January 1996 under FCDU Notes 96-049 and 96-050, totalling
US$2 Million were to be paid out of proceeds of the purchase order from Nippon Mining and
Metal Co., Ltd. covering copper concentrates to the extent of US$1,206,783.09, to be shipped by
Marcopper to Japan in May 1996;
15. Starting March 24, 1996, Marcopper unexpectedly experienced a leakage of tailings from
the Tapian Pit which caused the operations to be closed on March 25, 1996;
16. Because of the magnitude, gravity and seriousness of the leakage affecting several
municipalities in Marinduque where Marcopper has its mining operations, the Department of
Environment and Natural Resources (DENR), the Bureau of Mines and the Pollution Control
Commission ordered Marcopper to suspend its mining operations.
17. Plaintiffs allegations in its Complaint that:
12. The proceeds of the shipments were never remitted to plaintiff pursuant
to the defendants commitment aforestated upon which plaintiff heavily relied
upon as factors that induced it to release the amounts covered by the FCDU
notes.
and in paragraph 14 of the affidavit of attachment that:
14. The proceeds of the shipments were never remitted to plaintiff pursuant
to the defendants commitments aforestated upon which plaintiff heavily relied
upon as factors that induced it to release the amounts covered by the FCDU
notes.
is untrue. Marcoppers operations have been closed and there was no May shipment of copper
concentrates to Nippon Mining and Metal Co., Ltd. as forecasted in January 1996. Marcopper gave
a force majeure notice to Nippon stating that its operations have been closed by the government
as a consequence of the tailings leakage. The May 1996 shipment has not taken place from which
to make the payment to Solidbank;
18. Contrary to the obligations in paragraphs 13, 14, 15, 16 and 17 of the Complaint,
Marcopper acted in good faith when it asked plaintiff for a US$2 Million FCDU loan in July 1996
to retire the FCDU Notes of January 16, 1996, and for working capital;
19. The Secretarys Certificate attesting to the authority of individual defendants Jose E. Reyes,
as Treasurer, and Atty. Teodulo Gabor, Acting Corporate Secretary, to sign in behalf of Marcopper
specifically denies that it represented that individual defendants Reyes and Gabor will be jointly
and severally liable for the FCDU loan of Marcopper under FCDU 96-808, and/or that the
aforenamed corporate officers have committed themselves to be personally or jointly and severally
liable with Marcopper. Said individual defendants have no interest in said loan other than their
being employees and signatories to bank accounts and/or FCDU loans of Marcopper;
20. As a consequence of the March 1996 environmental incident and the closure of the mine,
Marcoppers Management investigated ways of meeting its liabilities including Solidbanks loan.
This request was forwarded to the Asian Development Bank (ADB), Bank of Nova Scotia and
Placer Dome, Inc., who hold the assets referred in Annex F of the complaint as security and
secondly, selling of Marcoppers assets requires the approval of said institutions. The Bank of Nova
Scotia is Solidbanks largest shareholder and therefore Solidbank was aware of Marcoppers

775
request;
21. Defendant Marcopper was not in default of the FCDU loans of US$2 Million under the
Promissory Notes FCDU Nos. 96-049 and 96-050 both dated January 16, 1996 as there was no
demand made upon defendant for the payment of said notes. Moreover, the obligation under the
said notes were fully paid and/or extinguished/novated;
22. On July 19, 1996, Marcopper obtained from Solidbank foreign currency loan of US$2
Million under FCDU 96-808 to retire the loans under FCDU Nos. 96-049 and 96-050, and for
working capital;
23. During the negotiation between Marcopper and plaintiff Solidbank which resulted in the
retirement of the promissory notes dated January 16, 1996, and availment of FCDU No. 96-808,
plaintiff was fully aware that Marcopper had stopped mining operations, that there was no copper
concentrate production, that there was no shipment of copper concentrate to Nippon Mining and
Metal Co. Ltd. and that Marcopper could not expect any payment of the FCDU loans of January
16, 1996 out of purchase order from Nippon Mining & Metal Co. Ltd. (per Invoice No. SAN-47,
January 9, 1996). Fully aware of the financial and operating difficulties encountered by
Marcopper, Solidbank agreed to extend to Marcopper a loan under FCDU 96-808 to enable it to
retire FCDU loans 96-049 and 96-050 and for working capital to resume operations and thereby
start producing concentrates for shipment;
24. The demand for payment or call on said promissory note (FCDU 96-808) was not by
reason of alleged fraud in incurring the debt or contraction of the obligation sued upon, or
concealment or disposal or attempt to dispose of properties and assets, but for reasons stated by
plaintiff Solidbank that:
Because of a material adverse change in the condition of your company
brought about by the cancellation of your environmental clearance among
others. We are now compelled to make full demand of above loan. Kindly make
full principal and interest payment amounting to $2,013,993.06 on August 15,
196 (sic).
The averments in the affidavit of attachment that:
To further foreclose whatever chance of plaintiff in recovering the
enormous indebtedness of the defendants, the latter conceived of selling
defendant corporations substantial assets in the form of shares in various country
clubs to make effective their plans of placing their valuable assets beyond reach
of other creditors, one of them plaintiff herein. (par. 18 of Affidavit),
and that
copy of defendants letter addressed to Asian Development asking for
permission to sell (par. 16 of Complaint and Annex F thereof).
belies plaintiffs assertion that defendants have concealed, removed or disposed of their properties
with intent to defraud creditors;
25. The letter dated 07 May 1996 (Annex F of the Complaint) of Marcopper to the Asian
Development Bank (ADB) shows that Marcopper has requested permission from ADB, a major
creditor, to sell the assets consisting substantially of club shares, an aircraft and a house and lot at

776
Forbes Park, Makati, to allow Marcopper to use the proceeds thereof to meet its financial
requirements. It also informed ADB that Marcopper is experiencing extreme financial difficulties
due to the shutdown of its operations and for the company to survive until it resumes operation, it
needs cash to finance its daily requirements. The letter is a good faith and arms-length request. To
date, Marcopper has not disposed of the club shares and other properties;
26. The loan extended by plaintiff to Marcopper on July 19, 1996 is not yet due and
demandable. While said FCDU note appears on its face to be payable on demand, the same, as in
previous FCDU loans obtained from Solidbank, and other banks of Marcopper, is to be paid out
of export shipments or purchase orders of copper concentrates, in accordance with Central Bank
Circular and related issuance of the Bangko Sentral ng Pilipinas. Under paragraph 3 of said FCDU
(Annex E of Complaint), the payment on demand is qualified by the following stipulation: xxx
authorizing Solidbank to apply to the payment of the principal, interest or any other amount of
obligations under or which may arise from this loan, at any time and without notice, any or all of
the proceeds of xxx export shipments, negotiations, bills, purchase orders, or other form of
agreements, or any other monies or property, coursed through or negotiated with Solidbank xxx;
27. Unfortunately, due to fortuitous event or force majeure as averred in pars. 15, 16, 17 and
18 hereof, Marcoppers operations were ordered suspended by government authorities until the
matter of the environmental incident and leakage of tailings shall have been adequately corrected.
While Marcopper is temporarily unable to service its financial obligations with plaintiff,
Marcopper and parties-in-interest to it; are doing everything possible to prevent recurrence of the
leakage of tailings, and for the lifting of the suspension order, thereby enabling Marcopper to
resume operations, make export shipment of copper concentrates and from proceeds thereof, to
pay its financial obligations to Solidbank and other creditors;
28. Marcopper is not reneging on its obligations under FCDU No. 96-808, but due to
insuperable causes, production of concentrates from which payments on the FCDU loan has to be
made, was suspended and/or temporarily stopped;
29. FCDU No. 96-808 fails to express the true intent and agreement between plaintiff and
Marcopper that payment of the loan shall be from proceeds of export shipment and/or purchase
orders on copper concentrate production. Hence, there is a need for reformation of FCDU Note
No. 96-808, to express the true agreement between plaintiff and Marcopper;
30. For reasons afore-alleged in the preceding paragraphs, events and circumstances
manifestly beyond the contemplation of the parties have arisen after the obtention of the FCDU
loan No. 96-808 which renders temporarily impossible or extremely difficult the performance by
Marcopper of its obligation thereunder. In such a situation, payment is not yet due until the
conditions which prevented fulfillment has ceased to exist. Under Article 1267 of the Civil Code,
the court may grant equitable relief to the obligor, herein defendant Marcopper, in whole or in
part;1087
On January 10, 1997, the respondent filed a Motion for Partial Summary Judgment against
the petitioner MMC only, on the following grounds:
A

1087
Id. at 083-090.

777
 DEFENDANT MARCOPPER MINING CORPORATION ADMITS THE
MATERIAL ALLEGATIONS OF THE COMPLAINT ON THE CONTRACTING
OF THE SUBJECT LOANS AND THEIR NON-PAYMENT OBVIATING TRIAL.
B
DEFENDANT MARCOPPER MINING CORPORATION HAS NO REAL
DEFENSE AND PLAINTIFF IS ENTITLED TO JUDGMENT FOR THE UNPAID
OBLIGATIONS AS A MATTER OF LAW.1088
Appended to the said motion was the affidavit of Mary Jean A. Go, the Manager of the
Corporate Banking Group II. The petitioner MMC, as well as the other defendants in the case,
opposed the motion contending that:
1. THE MOTION FOR SUMMARY JUDGMENT HAS NO FACTUAL AND LEGAL
BASIS. IT IS BEREFT OF MERIT.
2. SUMMARY JUDGMENT IS PROPER ONLY WHEN THERE IS CLEARLY NO
GENUINE ISSUE AS TO ANY MATERIAL FACT IN THE ACTION.
MARCOPPER AND INDIVIDUAL DEFENDANTS HAVE GENUINE DEFENSES
TENDERING FACTUAL ISSUES REQUIRING TRIAL ON THE MERITS.
3. ALL DEFENDANTS HAVE SPECIAL AND AFFIRMATIVE DEFENSES AS
AGAINST THE UNFOUNDED CLAIMS OF SOLIDBANK.
4. INDIVIDUAL DEFENDANTS JOHN E. LONEY, JOSE E. REYES AND
TEODULO C. GABOR, JR. ARE SUED BY PLAINTIFF SOLIDBANK ON
ALLEGED JOINT AND SEVERAL LIABILITY WITH CORPORATE
DEFENDANT MARCOPPER ON THE LATTERS LOAN FROM SOLIDBANK.
5. A PARTIAL SUMMARY JUDGMENT AGAINST MARCOPPER WITHOUT
AWAITING TRIAL ON THE MERITS ON THE DEFENSES AVAILABLE TO
INDIVIDUAL DEFENDANTS WILL BE A DENIAL OF THEIR RIGHT TO DUE
PROCESS AS THEY WILL BE HELD JOINTLY AND SEVERALLY LIABLE
WITH MARCOPPER, IF A PARTIAL SUMMARY JUDGMENT IS RENDERED
AGAINST THE LATTER.1089
The defendants appended to their Opposition the affidavit of Teodulo C. Gabor, Jr., the Vice-
President/Corporate Secretary of petitioner MMC. On March 20, 1997, the Asian Development
Bank, MMC, Placer Dome, Inc. and MR Holdings, Inc. as assignees, executed an Assignment
Agreement.
On May 7, 1997, the trial court issued an Order granting the motion of the respondent for
partial summary judgment and rendered a Partial Judgment against the petitioner MMC only. The
fallo of the decision reads, viz:
WHEREFORE, PREMISES CONSIDERED, partial judgment is hereby rendered ordering
defendant Marcopper Mining Corporation as follows:

1088
Id. at 094.
1089
Id. at 110.

778
 1. To pay plaintiff Solidbank the sum of Fifty-Two Million Nine Hundred Seventy Thousand
Seven Hundred Fifty-Six and 89/100 only (P52,970,756.89), plus interest and charges until fully
paid.
2. To pay an amount equivalent to ten per cent (10%) of abovestated amount as attorneys fees;
and
3. To pay the costs of suit.
SO ORDERED.1090
The trial court held that the answer of the petitioner failed to raise genuine issues of facts. The
petitioner MMC received a copy of the partial judgment of the trial court on May 8, 1997, and,
filed a notice of appeal from said judgment on May 9, 1997.1091 The respondent bank, likewise,
received a copy of said judgment, on May 8, 1997 and filed a Motion for Execution Pending
Appeal dated May 13, 1997. Over the petitioner MMCs opposition, the trial court issued an Order
dated June 25, 1997 granting the respondents motion.1092 On July 7, 1997, the court issued a Writ
of Execution pending appeal.1093
Earlier, or on July 2, 1997, the petitioner MMC filed a Petition for Certiorari and Prohibition
with a plea for a writ of preliminary injunction in the Court of Appeals, docketed as CA-G.R. SP
No. 44570, for the nullification of the June 25, 1997 Order of execution pending appeal. However,
the certificate of non-forum shopping embodied in the petition was executed by its counsel, Atty.
Cirilo E. Doronila.1094 Nevertheless, on July 4, 1997, the CA issued a Resolution granting the
petitioners plea for a temporary restraining order. The respondent filed an Urgent Omnibus Motion
to Strike Out the Petition for Certiorari and to declare the petitioner in contempt of court, on the
following grounds:
Violation of SC Revised
Administrative Circulars
Nos. 28-91 and 04-94.
PETITIONER VIOLATED SUPREME COURT REVISED ADMINISTRATIVE
CIRCULARS NOS. 28-91 AND 04-94 ON CERTIFICATION UNDER OATH
REQUIRED TO PREVENT FORUM SHOPPING OR MULTIPLE FILING OF
PETITIONS MERITING SUMMARY DISMISSAL OF THE PETITIONS AND
ALSO CONSTITUTING DIRECT CONTEMPT WHEN PETITIONERS COUNSEL
EXECUTED THE FALSE CERTIFICATION UNDER OATH HIMSELF INSTEAD
OF THE PETITIONER APPLICANT OR PRINCIPAL PARTY SEEKING RELIEF
AS DIRECTED IN SAID CIRCULAR.
Fatal Errors in availing Two
(2) or Twin Modes of Appeal
1090
Id. at 043-044.
1091
Rollo, p. 125.
1092
Id. at 136-137.
1093
Id. at 366-367.
1094
Id. at 032-033.

779
 in the Same Case.
PETITIONER PURSUED IN THE ACTION TWO (2) OR TWIN REMEDIES OF
APPEAL: FIRST, ORDINARY APPEAL AND SECOND BY CERTIORARI
CONSTITUTING NOT ONLY A VIOLATION ON THE RULE OF FORUM
SHOPPING BUT RESULTS IN AN ABANDONMENT OF THE ORDINARY
APPEAL EARLIER TAKEN, THUS, MAKING THE TRIAL COURTS APPEALED
DECISION FINAL AND EXECUTORY.1095
In its Comment on the petition, the respondent bank reiterated its plea that the petition be
expunged; in the alternative, it prayed that the appellate court dismiss the same on the following
grounds:
-1-
THE PETITION WAS CERTIFIED TO BY PETITIONERS COUNSEL IN
VIOLATION OF SUPREME COURT ADMINISTRATIVE CIRCULAR 28-91 ON
CERTIFICATION ISSUED TO PREVENT FORUM SHOPPING.
-2
PETITIONER PURSUED TWO REMEDIES OF APPEAL AND CERTIORARI
BEFORE THIS COURT WHICH ARE MUTUALLY EXCLUSIVE AND NOT
ALTERNATIVE OR SUCCESSIVE AND WHICH ALSO CONSTITUTE FORUM
SHOPPING DESERVING OUTRIGHT DISMISSAL.
-3-
SUMMARY JUDGMENT WAS JUSTIFIED AND PROPER UNDER THE
PREVAILING CIRCUMSTANCES. THE PRESENT PETITION IS PATENTLY
BEREFT OF ANY LEGAL OR FACTUAL MERIT AND IS OBVIOUSLY BEING
PROSECUTED SOLELY AND MANIFESTLY FOR DELAY CONSIDERING
THE:
3.1) Unqualified admission of petitioner of the material allegations of the complaint found in
paragraphs 6, 7 & 8 of its Answer to the Complaint, as well as its admission for the non-payment
of its obligations to the private respondent obviating the necessity of a full-blown trial.
3.2) Obvious lack of genuine issue as to any material and real defenses entitling respondent
bank to a judgment as a matter of law (Sec. 3, Rule 35, Amended Rules of Court).
-4-
THE ISSUANCE OF A SPECIAL ORDER OF EXECUTION PENDING APPEAL
IS JUSTIFIED CONSIDERING THAT RECOVERY UNDER THE JUDGMENT
RENDERED BY THE TRIAL COURT MAY BE RENDERED INUTILE AND
NUGATORY CONSIDERING THE FOLLOWING MATERIAL AND
SUPERVENING CIRCUMSTANCES, MORE PARTICULARLY, THE MANY
CASES, BOTH CIVIL AND CRIMINAL, AND LABOR CLAIMS FILED
AGAINST THE PETITIONER AND ITS TOP MANAGEMENT OFFICIALS, TO

1095
Id. at 167.

780
 WIT:
4.1) Claims for P1.2-Billion damages filed by the Municipality of Boac and the Province
of Marinduque.
4.2) Demand for the settlement of P26-Million in unpaid fines by the Dept. of
Environment and Natural Resources (DENR).
4.3) Pending Multi-Million labor claims for unpaid wages and other separation benefits
by its regular work force which were laid off as a consequence of the closure and stoppage
of the mining operations at its minesite in the Province of Marinduque.
4.4) Unpaid loans running into Millions incurred from various Commercial Banks
notably Philippine Commercial International Bank (PCIBank) and Rizal, etc. and its
material and mining equipment suppliers and dealers.
4.5) Criminal complaints in Marinduque Court filed against defendant John E. Loney,
President/CEO Marcopper and his two top officials for violating mining and
environmental laws, punishable by fine and/or imprisonment.1096
In its comment, the respondent appended news items appearing in (1) the January 11, 1997
issue of the Philippine Daily Inquirer; (2) the May 30, 1997 issue of the Philippine Star; and (3)
an opinion column of the April 7, 1997 issue of the Manila Times on the May 7, 1996 Letter of
petitioner MMC to the Asian Development Bank.1097
For its part, the petitioner alleged the following in its comment: (a) the fine of P26,000,000
imposed on the petitioner by the Pollution Adjudication Board is the subject of its petition in the
Court of Appeals in Marcopper Mining Corporation vs. the Pollution Adjudication Board,
docketed as CA-G.R. SP No. 44656; (b) the claims for alleged unpaid wages of its former
employees are pending in court; (c) the petitioner had not yet been sued by its bank creditors except
by the respondent; (d) the criminal complaints against its former officers are pending in the courts;
and, (e) it is not in the brink of bankruptcy.
On December 12, 1997, the Court of Appeals rendered judgment dismissing the petition. The
appellate court ruled that the petitioner adopted two different modes of appeal, at the same time;
as such, it is guilty of forum shopping because it assailed in its petition, not only the June 25, 1997
Order of the trial court but also the merits of the trial courts partial judgment. The CA also held
that the Certification of Non-Forum Shopping executed by its counsel, Atty. Cirilo E. Doronila,
was fatally defective, warranting the dismissal of the petition. Finally, the CA ruled that the June
25, 1997 Order of the trial court was issued in accordance with the Rules of Court and case law.

The Present Petition

The petitioners motion for reconsideration having been denied by the CA, the petitioner filed

1096
Id. at 178-180.
1097
CA Rollo, pp. 137-201.

781
its petition in this Court on July 15, 1998, contending as follows:
I
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING
THAT THE VERIFICATION/CERTIFICATION AGAINST FORUM SHOPPING
OF THE PETITION IN CA-G.R. SP NO. 44570 WAS IMPROPER AND NOT A
SUBSTANTIAL COMPLIANCE WITH THE RULES.
II
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING
THAT PETITIONER IS GUILTY OF FORUM-SHOPPING.
III
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
AFFIRMING THE REGIONAL TRIAL COURTS ORDER OF JUNE 25, 1997.
IV
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING
THAT NO GENUINE ISSUES WERE RAISED THEREBY DEPRIVING
PETITIONER OF ITS RIGHT TO PRESENT EVIDENCE IN SUPPORT OF ITS
AFFIRMATIVE AND SPECIAL DEFENSES.1098
For its part, the respondent put forth the following contentions:
THE COURT OF APPEALS ACTED CORRECTLY WHEN IT RULED THAT THE
VERIFICATION/CERTIFICATION AGAINST FORUM SHOPPING OF THE
PETITON IN CA-G.R. SP NO. 44570 BY PETITIONERS COUNSEL WAS
IMPROPER AND NOT A SUBSTANTIAL COMPLIANCE WITH THE RULES.
THE COURT OF APPEALS ACTED CORRECTLY WHEN IT RULED THAT
PETITIONER IS GUILTY OF FORUM SHOPPING FOR FILING A NOTICE OF
APPEAL OF THE DECISION AND LATER A PETITION FOR CERTIORARI
AND PROHIBITION OF THE ORDER GRANTING EXECUTION PENDING
APPEAL.
THE COURT OF APPEALS ACTED CORRECTLY WHEN IT AFFIRMED THE
REGIONAL TRIAL COURTS ORDER DATED JUNE 25, 1997 GRANTING
PRIVATE RESPONDENT SOLIDBANKS MOTION FOR EXECUTION
PENDING APPEAL.
THE COURT OF APPEALS ACTED CORRECTLY WHEN IT RULED THAT NO
GENUINE ISSUES WERE RAISED, THUS, PETITIONER WAS NOT DEPRIVED
OF ITS RIGHT TO PRESENT EVIDENCE IN SUPPORT OF ITS AFFIRMATIVE
AND SPECIAL DEFENSES.1099

1098
Rollo, p. 15.
1099
Id. at 290.

782
 PETITIONER MARCOPPER CEASED TO BE THE REAL PARTY-IN-INTEREST
WITHIN THE PURVIEW OF SECTION 2, RULE 3 OF THE 1997 RULES OF
CIVIL PROCEDURE AS A RESULT OF THE ASSIGNMENT OF THE ENTIRE
MINING EQUIPMENT, MACHINERIES AND FACILITIES BY MARCOPPER TO
MR HOLDINGS LTD., INC.
PETITIONER IS A STRANGER TO THE PETITION AND NOW ESTOPPED
FROM ADOPTING A CONTRADICTORY POSITION AFTER CONCEDING
OWNERSHIP OF ITS ENTIRE PROPERTIES TO MR HOLDINGS LTD., INC.1100
On July 20, 1998, the petitioner filed a Supplement to Petition with a plea for a temporary
restraining order or a writ of preliminary injunction, contending that the respondent was bent on
having the assailed order and writ of execution of the trial court enforced by the sheriff.
For its part, the respondent opposed such petition and filed a Motion dated August 4, 1998,
alleging that it was the province of Marinduque that caused the levy on the petitioners property for
non-payment of taxes due on its lands, which caused the petitioner to file a petition for certiorari
in the Regional Trial Court of Marinduque in Civil Case No. 98-1 against the Provincial Treasurer
of Marinduque, et al. The respondent also alleged that the petitioner ceased operations beginning
the first quarter of 1996, and, as a consequence, terminated the employment of hundreds of its
employees because of extreme financial difficulties. It also averred that in its Letter to the
respondent dated April 2, 1997, the petitioner stated that the only possible way it could repay its
unsecured creditors would be to sell certain club shares which were mortgaged to MR Holdings,
Inc., the Asian Development Banks successor-in-interest.
In its Counter-Manifestation dated October 21, 1998, the respondent alleged that the
petitioner, in cahoots with MR Holdings, Inc., sought to obstruct the sale of its properties at public
auction by executing a deed of assignment of its rights, properties and equipment, on the basis of
which MR Holdings, Inc. filed a third-party claim over petitioners equipment and properties in
Civil Case No. 96-80083. According to the respondent, the MR Holdings, Inc. even filed a
complaint for the nullification of the sheriffs sale in Civil Case No. 96-80083 in the RTC of Manila,
Branch 26, with a plea for a writ of preliminary injunction, docketed as Civil Case No. 98-15. The
court, however, denied the same in its Order dated October 6, 1998. The respondent prayed that
disciplinary action be taken against the petitioners counsel of record for making false allegations
in support of its motion for a writ of preliminary injunction.
It turned out that the petitioner, in payment of its obligations amounting to
US$19,550,747.001101 as of December 31, 1997, executed a Deed of Assignment on December 28,
1997 in favor of MR Holdings, Inc. covering its properties, equipment and facilities.1102

The Issues

1100
Id. at 326.
1101
Id. at 280.
1102
Id. at 279.

783
 The threshold issues for resolution are the following: (a) whether or not the petitioner ceased
as the real party-in-interest in the case when it executed a Deed of Assignment covering properties,
mining equipment and facilities described therein in favor of MR Holdings Ltd., Inc.; (b) whether
the petitioner is guilty of forum shopping; (c) whether the petitioner failed to comply with Section
5, Rule 7 of the Rules of Civil Procedure (which was taken from SC Administrative Circular No.
04-94); and, (d) whether the RTC committed grave abuse of discretion amounting to excess or lack
of jurisdiction in granting the respondents motion for execution pending appeal.
On the first issue, the respondent contends that the petitioner executed such Deed of
Assignment in favor of MR Holdings Ltd., Inc. on December 8, 1997, or four days before the
appellate court rendered its assailed decision; in executing the said deed, the petitioner ceased to
be a real party-in-interest under Section 2, Rule 3 of the 1997 Rules of Civil Procedure. The
respondent further asserts that, under the said deed, the petitioner absolutely transferred the
ownership of its properties lock, stock and barrel to MR Holdings Ltd., Inc. Hence, the petitioner
no longer stands to be benefited or injured by the judgment in this case; nor can it be considered
the party entitled to the avails of the suit. More so, the respondent notes, since MR Holdings Ltd.,
Inc., is a wholly-owned subsidiary of Placer Dome, Inc., which, in turn, owns and manages the
petitioner. The respondent argued that its stance is further buttressed by the complaint in Civil
Case No. 98-15 in the RTC of Manila filed by MR Holdings Ltd., Inc. to annul the levy of the
personal properties based on the writ of execution pending appeal issued by the court.1103
The petitioner, for its part, contends otherwise, and insists that:
12. The fact that MR Holdings owns the mining properties, machineries and facilities, does
not at all affect petitioners right to maintain and continue the prosecution of its petition. There is a
partial judgment against petitioner to pay Solidbank P52.970 Million, which is on appeal before
the Court of Appeals.
13. The acquisition by MR Holdings of the mining properties and facilities does not and has
not obliterated the partial judgment which can be enforced within ten (10) years. (Sec. 6, Rule 39
of the 1997 Rules of Civil Procedure, as amended).
14. That petitioner now stands as a shell corporation with no physical asset to speak of, since
all its properties are now owned by MR Holdings Ltd., Inc. (par. 1.10, Supplemental Comment),
does not at all address the issues raised in this petition on the invalidity of the proceedings before
the trial court and its order of execution pending appeal dated June 25, 1997.
15. MR Holdings ownership of the mining properties and facilities and whether or not
Solidbank can collect now on its partial judgment has no materiality and relevance to the grounds
raised and reliefs prayed for in the petition to set aside the decision and resolution dated December
23, 1997 and June 5, 1998, respectively, of the Court of Appeals, and to nullify the trial courts
order of June 25, 1997. It cannot be denied that petitioner stands to be injured by the questioned
decision, resolution and order, and therefore it is entitled to the avails of the suit the instant petition
to nullify and set aside the decision and order.
16. Moreover, Solidbank refuses to accept the validity of the Deed of Assignment of the
mining properties and facilities to MR Holdings Ltd. as shown by its allegations at p. 4 of its

1103
Id. at 332-348.

784
Supplemental Comment that private respondent does not concede to the veracity of the claimed
Deed of Assignment.
17. Consequently, insofar as Solidbank is concerned, it does not recognize the ownership of
MR Holdings over the mining properties and facilities subject of the deed of assignment. Hence,
any disposition of said properties under a writ of execution to enforce the summary partial
judgment would continue to affect the interest of the petitioner. In fact, in the Sheriffs proceedings
on execution of the partial judgment in Civil Case No. 96-80083, the trial court denied the third-
party claim of MR Holdings, Ltd.1104

The Ruling of the Court

The contention of the respondent does not persuade. Section 19, Rule 3 of the Rules of Court
provides:
SEC. 19. Transfer of interest. In case of any transfer of interest, the action may be continued
by or against the original party, unless the court upon motion directs the person to whom the
interest is transferred to be substituted in the action or joined with the original party.
The original party remains, either as party-petitioner or party-respondent, as the case may be,
despite the transfer pendente lite. It does not lose its personality as the real party-in-interest merely
because of the transfer of interest to another pendente lite. The records show that the petitioner
executed the Deed of Assignment pendente lite, while the case was still on appeal before the Court
of Appeals. Neither the petitioner nor its assignee filed a motion in the appellate court or in this
Court for the substitution of the assignee as party-petitioner in lieu of the present petitioner.1105
Besides, the party injured by the partial judgment of the trial court is the petitioner and not the
assignee. This is so since under the trial courts partial judgment against the petitioner ordering
execution pending appeal, the petitioner is liable to the respondent in the principal amount of
P52,970,756.89 plus the amount of P5,297,075.00 as attorneys fees. The obligation of the
petitioner to the respondent under the partial decision of the trial court has not been assigned to
and accepted by MR Holdings Ltd., Inc. The real party-in-interest to assail the execution of the
partial judgment is the petitioner, being the judgment debtor, and not MR Holdings Ltd., Inc.
Moreover, the respondent itself contends that the petitioner executed the deed of assignment to
defraud the petitioners creditors because it was executed only on December 8, 1997, after the trial
court had already issued its order granting the respondents motion for execution pending appeal.
On the second issue, the Court of Appeals ruled that the petitioner is guilty of forum shopping
because, aside from appealing the writ of error from the trial courts partial judgment, the petitioner,
likewise, assailed the merits of the partial decision in its petition for certiorari and prohibition in
CA-G.R. SP No. 44570. The petitioner, for its part, assails the ruling of the appellate court,
contending that its appeal by writ of error from the partial decision of the trial court is different
from its petition for certiorari and prohibition in the Court of Appeals, wherein it assailed an
interlocutory order of the trial court the June 25, 1997 Order granting execution of the partial

1104
Id. at 438-439.
1105
Commodities Storage & Ice Plant Corporation vs. Court of Appeals, 274 SCRA 439 (1997).

785
judgment of the trial court pending appeal. The petitioner argues that its petition for certiorari and
prohibition in the appellate court does not involve, much less constitute, an attack on the merits of
the appealed partial decision of the trial court. Moreover, the decision of the appellate court in CA-
G.R. SP No. 44570 does not constitute a bar to the appeal of the petitioner from the trial courts
partial judgment.
We agree with the petitioner.
There is forum shopping when, as a result of an adverse opinion in one forum, a party seeks a
favorable opinion (other than by appeal on certiorari) in another.1106 The test for determining
whether a party violates the rule against forum shopping is where a final judgment in one case will
amount to res judicata in the action under consideration or where the elements of litis pendentia
are present. In Buan vs. Lopez,1107 we held that litis pendentia exists if the following requisites are
present:
(a) identity of parties, or at least such parties as represent the same interests in both actions;
(b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and
(c) the identity of the two preceding particulars is such that any judgment rendered in the other
action, will, regardless of which party is successful, amount to res judicata in the action under
consideration.1108
In this case, the petitioner interposed an appeal by writ of error from the partial judgment of
the trial court. In its appeal, the petitioner sought the reversal of such partial decision, and prayed
for a trial of Civil Case No. 96-80083 on its merits where the parties would be accorded the right
to adduce their respective evidence. On the other hand, the petitioner, in its petition for certiorari
and prohibition in the Court of Appeals, assailed the June 25, 1997 interlocutory order of the trial
court which granted the motion of the respondent for execution pending appeal, where it was
alleged that the trial court committed grave abuse of discretion amounting to excess or lack of
jurisdiction and that it had no appeal, nor any plain, speedy and adequate remedy in the ordinary
course of law to nullify such order. The petitioner, likewise, prayed for the issuance of a writ of
certiorari and prohibition nullifying the June 25, 1997 Order of the trial court and the writ of
execution pending appeal issued in favor of the respondent as follows:
And after due proceedings, this Petition be given DUE COURSE, and judgment rendered on
a writ of Certiorari nullifying and setting aside the Order of 25 June 1997 of respondent judge in
Civil Case No. 96-80083 entitled Solidbank Corporation, plaintiff, versus Marcopper Mining
Corporation, John E. Loney, Jose E. Reyes and Teodulo C. Gabor, Jr., respondents, Regional Trial
Court of Manila, Branch 26, and all proceedings taken in furtherance thereof, for being null and
void and rendered with grave abuse of discretion. A Writ of Prohibition be further issued
perpetually enjoining all respondents from enforcing the said Order of 25 June 1997.
Such other just and equitable relief and remedies are prayed for.1109

1106
Philippine Economic Zone Authority vs. Judge Vianzon, 336 SCRA 309 (2000).
1107
145 SCRA 34, cited in Fortich vs. Corona, 289 SCRA 624 (1998).
1108
Cited in Antifonda vs. Sandiganbayan, 358 SCRA 335 (2001).
1109
CA Rollo, p. 032.

786
 The rights asserted, the issues raised and the reliefs prayed for by the petitioner in its petition
for certiorari and prohibition are different from those in its appeal from the partial judgment of the
trial court.
Contrary to the ruling of the appellate court, the petitioners allegation in its petition for
certiorari and prohibition in the appellate court, that the RTC committed grave abuse of discretion
amounting to excess or lack of jurisdiction when the trial court granted the respondents motion for
execution pending appeal on the finding that the petitioners appeal thereon was dilatory,
predicated, in turn, on its ruling in its partial judgment that the petitioner did not raise any genuine
issues in its answer to the complaint of the private respondent, did not thereby render the petitioner
guilty of forum shopping. The petitioner did not seek to have the partial judgment of the trial court
reversed by the appellate court. The petitioner merely pointed out that the RTC acted arbitrarily
and capriciously when it declared, in its June 25, 1997 Order, that the appeal was dilatory. Apropos
is the ruling of this Court in International School, Inc. of Manila vs. Court of Appeals, et al.,1110
thus:
Forum shopping is present when in the two or more cases pending there is identity of parties,
rights or causes of action and reliefs sought. While there is an identity of parties in the appeal and
in the petition for review on certiorari filed before this Court, it is clear that the causes of action
and reliefs sought are identical, although petitioner ISM may have mentioned in its appeal the
impropriety of the writ of execution pending appeal under the circumstances obtaining in the case
at bar. Clearly, there can be no forum shopping when in one petition a party questions the order
granting the motion for execution pending appeal, as in the case at bar, and, in a regular appeal
before the appellate court, the party questions the decision on the merits which finds the party
guilty of negligence and holds the same liable for damages therefor. After all, the merits of the
main case are not to be determined in a petition questioning execution pending appeal and vice-
versa. Hence, reliance on the principle of forum shopping is misplaced.1111
In fine, the petition filed in the appellate court did not involve the merits of the petitioners
appeal from the partial decision of the trial court. The petitioner was only questioning the June 25,
1997 Order of the trial court which granted the respondents motion for execution of the partial
decision of the trial court pending appeal. The petition assailing the June 25, 1997 Order before
the appellate court is not a bar to its consideration of the merits of the appeal from the partial
decision of the trial court. Indeed, to bar the petitioner from assailing the June 25, 1997 Order of
the trial court would be to deprive it of its remedy under Rule 65 of the Rules of Court.
On the third issue, we agree with the respondent that the petitioner failed to comply with
Section 5, Rule 7 of the 1997 Rules of Civil Procedure which took effect on July 1, 1997, because
the certification of non-forum shopping embodied in its petition for certiorari and prohibition was
executed by its counsel, and not by its duly authorized representative or officer. The said rule
which was taken from Supreme Court Circular No. 04-94 provides, viz:
SEC. 5. Certification against forum shopping. The plaintiff or principal party shall certify
under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore

1110
309 SCRA 474 (1999).
1111
Id. at 480.

787
commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-
judicial agency and, to the best of his knowledge, no such other action or claim is pending therein;
(b) if there is such other pending action or claim, a complete statement of the present status thereof;
and (c) if he should thereafter learn that the same or similar action or claim has been filed or is
pending, he shall report that fact within five (5) days therefrom to the court when his aforesaid
complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment
of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding administrative and criminal actions. If
the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the
same shall be ground for summary dismissal with prejudice and shall constitute direct contempt,
as well as a cause for administrative sanctions.1112
The requirement to file a certification of non-forum shopping in an initiatory pleading is
mandatory. Compliance with the certification against forum shopping is separate from and
independent of the second case of forum shopping itself.1113 The failure of a party to submit a
certification against forum shopping cannot be excused by the fact that the petitioner is not guilty
of forum shopping. An initiatory pleading without the corresponding certification against forum
shopping may be dismissed without prejudice. Subsequent compliance with the requirement will
not excuse a partys failure to comply in the first instance.1114
The certification against forum shopping must be executed by the party-pleader and not by
his counsel. The rationale for the rule was explained by this Court in Digital Microwave
Corporation vs. Court of Appeals,1115 thus:
The reason the certification against forum shopping is required to be accomplished by
petitioner himself is because only the petitioner himself has actual knowledge of whether or not
he has initiated similar actions or proceedings in different courts or agencies. Even his counsel
may be unaware of such fact. For sure, his counsel is aware of the action for which he has been
retained. But what of other possible actions?
We reject the petitioners contention that there was no need for any authorized officer of the
petitioner to execute the requisite certification, on its mere assertion that Atty. Cirilo Doronila,
being the litigating counsel in all cases filed by the petitioner, had personal knowledge of the said
cases; hence, the certification of Atty. Doronila is more than sufficient compliance with the rules.
First. In the verification executed by Atty. Doronila embodied in the petition, no declaration
was made that the only counsel of the petitioner in all cases filed by it is the Quasha Ancheta Pea
& Nolasco Law Offices, and that Atty. Doronila was assigned as the litigation counsel in all the
said cases. The petitioner is not precluded from engaging the services of another counsel for its

1112
Idem, supra.
1113
Melo, et al. vs. Court of Appeals, et al., 218 SCRA 94 (1999).
1114
Ibid.
1115
328 SCRA 286 (2000).

788
other cases to be filed in court.
Second. The Court cannot accept the petitioners submission that the certification may be
executed by counsel and not by the party-pleader as mandated by the rule, on the mere claim that
such counsel is his counsel de parte in all the cases filed by it. Such submission would defeat the
very purpose of the rules, as it would give the party the sole discretion whether or not to comply
therewith. As this Court ruled in Melo vs. Court of Appeals,1116
Every party filing a complaint or any other initiatory pleading is required to swear under oath
that he has not committed nor will he commit forum shopping. Otherwise, we would have an
absurd situation where the parties themselves would be the judge of whether their actions
constitute a violation of said Circular and compliance therewith would depend on their belief that
they might or might not have violated the requirement. Such interpretation of the requirement
would defeat the very purpose of Circular 04-94.
The petitioner, however, pleads that it be spared the consequences of its procedural lapse, and
prays that the Court resolve the issue raised in its petition on its merits, namely, whether the trial
court committed grave abuse of discretion amounting to excess or lack of jurisdiction when it
ordered the execution of its decision pending appeal, and whether the appellate court erred in
affirming the said order.
We agree with the petitioner. In Uy vs. Bank of the Philippine Islands,1117 we held that the
apparent merits of the petition should be deemed as a special circumstance or compelling reason
to exempt a party from the sanction of the denial of its petition for non-compliance with Section
5, Rule 7 of the Rules of Court. Besides, this Court has the power to suspend its own rules where,
as in this case, the ends of justice would be served thereby.
This brings us to the last issue.
Section 2, Rule 39 of the 1997 Rules of Civil Procedure provides:
Sec. 2. Discretionary execution-
(a) Execution of a judgment or final order pending appeal. On motion of the prevailing party
with notice to the adverse party filed in the trial court while it has jurisdiction over the case and is
in possession of either the original record or the record on appeal, as the case may be, at the time
of the filing of such motion, said court may, in its discretion, order execution of a judgment or
final order even before the expiration of the period to appeal.
After the trial court has lost jurisdiction, the motion for execution pending appeal may be filed
in the appellate court.
Discretionary execution may only issue upon good reason to be stated in a special order after
due hearing.
Execution pending appeal is an extraordinary remedy, being more of the exception rather than
the rule.1118 This rule is strictly construed against the movant because courts look with disfavor

1116
Supra.
1117
336 SCRA 419 (2000).
1118
Maceda, Jr. vs. Development Bank of the Philippines, 313 SCRA 233 (1999).

789
upon any attempt to execute a judgment which has not acquired finality. Such execution affects
the rights of the parties which are yet to be ascertained on appeal.1119
There are three requisites for the grant of an execution of a judgment pending appeal, which
the movant, not the adverse party, must establish with clear and convincing evidence: (a) there
must be a motion by the prevailing party with notice to the adverse party; (b) there must be a good
reason for execution pending appeal; and, (c) the good reason must be stated in the order.1120
It is not intended obviously that execution pending appeal shall issue as a matter of course.
Good reasons, special, important, pressing reasons must exist to justify it; otherwise, instead of an
instrument of solicitude and justice, it may well become a tool of oppression and inequity.1121 The
existence of good reasons is what confers discretionary power on a court to issue a writ of
execution pending appeal.1122 The reasons allowing execution must constitute superior
circumstance demanding urgency which will outweigh the injury or damages should the losing
party secure a reversal of the judgment.1123
In the present recourse, the respondent filed, with proper notice to the petitioner, a motion for
execution pending appeal before the expiration of the period to file an appeal on the following
grounds:
3.1 The summary judgment rendered in the above-captioned case show there is no genuine
controversion of the issues by the corporate defendant;
3.2. That any appeal undertaken by the same would be of frivolous nature designed to unreasonably
delay and/or deprive the plaintiff the recovery of its legitimate claims against corporate defendant
herein;
3.3. That plaintiff is willing to put up a supersedeas bond as this Court may fix for the issuance of
the writ of execution pending appeal.1124
The trial court ordered the execution of its decision pending appeal as follows:
As the bases for the execution pending appeal prayed for, plaintiff cites, among others, an
offer to post a bond in an amount equal the value sought to be enforced, which bond shall answer
for any damage defendant may suffer in the event the judgment rendered by the Court is reversed
or modified on appeal.
After a careful consideration of the grounds relied upon by both parties, this Court finds and
so holds that although defendant Marcopper Mining Corporation filed its Notice of Appeal on May
9, 1997 and plaintiff Solidbank filed its Motion for Execution Pending Appeal only on May 13,
1997 or four (4) days later, the Court has not lost jurisdiction over the case as the latter pleading
was filed within fifteen (15) days period from receipt of the Courts decision (Eudula vs. Court of

1119
Ibid.
1120
Id.
1121
Ong vs. Court of Appeals, 203 SCRA 38 (1991).
1122
Roxas vs. Court of Appeals, 157 SCRA 370 (1988).
1123
Ong vs. Court of Appeals, supra.
1124
CA Rollo, p. 636.

790
Appeals, 211 SCRA 546).
Likewise, contrary to the defendant corporations claim, the questioned decision, being one
anchored on a clear finding that no genuine controversion of the issues has been raised, deserves
implementation pending appeal, in keeping with truth and justice. Indeed, if required bond is
property posted, rights of the defendant would be amply guaranteed and protected.
In the light of the foregoing, there is hardly any question that plaintiffs Motion for Execution
Pending Appeal is meritorious.1125
The appellate court affirmed the trial courts order as well as the writ of execution issued by it
based on the said order, not only on the pleadings of the parties in the RTC but also based on the
documents, newspaper items, etc., submitted by the parties and their pleadings in the appellate
court, viz:
Anent the issue of the propriety of the Order dated June 25, 1997 of the respondent court
granting Solidbanks Motion for Execution Pending Appeal, We find that the said order is based
on valid grounds, and on its finding that no genuine issues has been raised by the petitioner.
Moreover, petitioners rights are amply protected and guaranteed by the bond in the amount of P30
Million which was posted by Solidbank, in addition to its surety bond of P58.2 Million which has
been filed with the respondent court. The petitioner has not shown sufficient justification why the
said order granting execution pending appeal should be set aside, while private respondent
Solidbank has established why the Order granting execution pending appeal should be sustained,
to wit: the liabilities incurred by the petitioner consisting of unpaid fines imposed by the
Department of Environment and Natural Resources; the claims for unpaid wages by petitioners
employees, as well as the criminal charges filed against petitioner Marcopper officers, and its
liabilities in various commercial banks, as well as the net loss of P103 Million they incurred arising
from the cessation of its mining operations due to the massive leakage of mine mining tailing that
took place in Marinduque in March, 1996.1126
We do not agree with the trial court and the appellate court.
The issue of whether the petitioner raised genuine issues in its answer to the complaint is the
subject of the appeal of the petitioner via a writ of error to the appellate court. In Philippine Bank
of Communications, Inc. vs. Court of Appeals,1127 we held that it is not for the trial court to
determine the merits of its decision it rendered and use the same as basis for its order allowing
execution of its decision pending appeal. The determination of the merits of the trial court is lodged
in the appellate court. The trial court cannot preempt the decision of the appellate court on the
merits of the petitioners appeal of the trial courts decision, and use it as basis for affirming the trial
courts order of execution pending appeal.
The filing of a bond cannot make up or substitute for the absence of any good reason for the
execution pending appeal.1128 The mere filing of a bond by a successful party is not a good reason

1125
Id. at 49-50.
1126
Id. at 49-50.
1127
279 SCRA 364 (1997).
1128
Productive International Resources Corporation vs. Court of Appeals, 259 SCRA 510 (1996).

791
for ordering execution pending appeal. Indeed, in International School, Inc. of Manila vs. Court
of Appeals,1129 we held that:
x x x to consider the mere posting of a bond a good reason would precisely make immediate
execution of a judgment pending appeal routinary, the rule rather than the exception. Judgments
would be executed immediately, as a matter of course, once rendered, if all that the prevailing
party needed to do was to post a bond to answer for damages that might result therefrom. This is
a situation, to repeat, neither contemplated nor intended by law.
In fine, the rule is now settled that the mere filing of a bond by the successful party is not a
good reason for ordering execution pending appeal, as a combination of circumstances is the
dominant consideration which impels the grant of immediate execution, the requirement of a bond
is imposed merely as an additional factor, no doubt for the protection of the defendants creditor.
In fine, the trial court committed grave abuse of discretion amounting to excess or lack of
jurisdiction when it issued the assailed order granting execution of its decision pending appeal
based on the reasons embodied in the said order. Hence, the assailed order is a nullity. The
appellate court consequently erred when it affirmed the said order.
The appellate court, likewise, erred in justifying the execution of the RTC decision pending
appeal on the following allegations of the respondent: (1) that fines were imposed on the petitioner
by the Pollution Adjudication Board; (2) the claims for unpaid wages of its employees whose
employment were terminated; (3) the criminal charges filed against the petitioners former officials
and employees; (4) the petitioners liabilities to commercial banks; and, (5) the alleged net losses
amounting to more than P103,000,000 incurred by the petitioner arising from the cessation of its
mining operations due to the massive leakage of mine tailings. These allegations of the respondent
in the Court of Appeals were not cited by the trial court in its assailed order for execution pending
appeal. Moreover, the respondent failed to adduce evidence to prove the said claims in the trial
court. It was only in the Court of Appeals that the respondent made such allegations as additional
grounds for execution pending appeal of the RTC decision. The task of the appellate court in the
certiorari proceedings before it was to merely determine whether the trial court committed grave
abuse of discretion amounting to excess or lack of jurisdiction in allowing execution pending
appeal for reasons embodied in the said order and not for grounds or reasons extraneous thereto.
Furthermore, as gleaned from the CA records, the respondents claim that the petitioner
incurred a net loss is based on a news item printed in the August 4, 1997 issue of the Manila
Bulletin.1130 The validity of the fines imposed by the Pollution Adjudication Board is the subject
of the petitioners action in the Court of Appeals, entitled Marcopper Mining Corporation vs. The
Pollution Adjudication Board, et al., and docketed as CA-G.R. SP No. 44656 raffled to the Sixth
Division. The respondent has not submitted to the Court of Appeals, and even in this Court, any
final and executory decision of the appellate court, ruling adversely against the petitioner. Neither
did the respondent adduce in evidence any final judgment convicting the former officers and
employees of the petitioner of violating environmental laws, or any ruling of the National Labor
Relations Commission in favor of such employees with an award for money claims. The
respondent, likewise, did not adduce any complaint against the petitioner filed by any of its

1129
Supra at note 31.
1130
CA Rollo, p. 321.

792
creditors.
In fine, even the reasons cited by the appellate court to justify its affirmance of the assailed
Order of the RTC has not been clearly established by the respondent.
IN LIGHT OF ALL THE FOREGOING, the petition in this case is GRANTED. The
assailed Decision of the Court of Appeals in CA-G.R. SP No. 44570 and the assailed Order of the
RTC in Civil Case No. 96-80083 dated May 7, 1997 and the Writ of Execution issued by the RTC
on the basis of the said Order, are REVERSED AND SET ASIDE.
SO ORDERED.
Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.

793
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

PHILIPPINE COCONUT G.R. Nos. 177857-58

, PRODUCERS FEDERATION, INC.
(COCOFED), MANUEL V. DEL
ROSARIO, DOMINGO P. ESPINA,
SALVADOR P. BALLARES,
JOSELITO A. MORALEDA,
PAZ M. YASON,
VICENTE A. CADIZ,
CESARIA DE LUNA TITULAR, and
RAYMUNDO C. DE VILLA,
Petitioners,

- versus -

REPUBLIC OF THE PHILIPPINES,

Respondent,

WIGBERTO E. TAADA,
OSCAR F. SANTOS,

794
SURIGAO DEL SUR FEDERATION
OF AGRICULTURAL
COOPERATIVES (SUFAC) and
MORO FARMERS ASSOCIATION
OF ZAMBOANGA DEL SUR
(MOFAZS), represented by
ROMEO C. ROYANDOYAN,
Intervenors.
x------------------------------------------------x
DANILO S. URSUA, G.R. No. 178193
Petitioner,

- versus -

REPUBLIC OF THE PHILIPPINES,

Respondent,
x------------------------------------------------x

Present:

CORONA, C.J.,
CARPIO,*
VELASCO, JR.,

*
No part.

795
 LEONARDO-DE CASTRO,*
BRION,**
PERALTA,*
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.

Promulgated:

January 24, 2012

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

DECISION

VELASCO, JR., J.:

The Case

**
On official leave.

796
 Cast against a similar backdrop, these consolidated petitions for review under Rule 45 of
the Rules of Court assail and seek to annul certain issuances of the Sandiganbayan in its Civil Case
No. 0033-A entitled, Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al.,
Defendants, COCOFED, et al., BALLARES, et al., Class Action Movants, and Civil Case No.
0033-F entitled, Republic of the Philippines, Plaintiff, v. Eduardo M. Cojuangco, Jr., et al.,
Defendants. Civil Case (CC) Nos. 0033-A and 0033-F are the results of the splitting into eight (8)
amended complaints of CC No. 0033 entitled, Republic of the Philippines v. Eduardo Cojuangco,
Jr., et al., a suit for recovery of ill-gotten wealth commenced by the Presidential Commission on
Good Government (PCGG), for the Republic of the Philippines (Republic), against Ferdinand E.
Marcos and several individuals, among them, Ma. Clara Lobregat (Lobregat) and petitioner Danilo
S. Ursua (Ursua). Lobregat and Ursua occupied, at one time or another, directorial or top
management positions in either the Philippine Coconut Producers Federation, Inc. (COCOFED)
or the Philippine Coconut Authority (PCA), or both.1131 Each of the eight (8) subdivided
complaints correspondingly impleaded as defendants only the alleged participants in the
transaction/s subject of the suit, or who are averred as owner/s of the assets involved.

The original complaint, CC No. 0033, as later amended to make the allegations more
specific, is described in Republic v. Sandiganbayan1132 (one of several ill-gotten suits of the same
title disposed of by the Court) as revolving around the provisional take over by the PCGG of
COCOFED, Cocomark, and Coconut Investment Company and their assets and the sequestration
of shares of stock in United Coconut Planters Bank (UCPB) allegedly owned by, among others,
over a million coconut farmers, and the six (6) Coconut Industry Investment Fund (CIIF)
corporations,1133 referred to in some pleadings as CIIF oil mills and the fourteen (14) CIIF holding

1131
Per the Affidavit of Atty. Arturo Liquete, then PCA Board Secretary, Lobregat was a member of the PCA
Board for the most part from 1970 to 1985; rollo (G.R. No. 180705), p. 804.
1132
G.R. No. 96073, January 23, 1995, 240 SCRA 376.
1133
Southern Luzon Coconut Oil Mills, Cagayan de Oro Oil Co. Inc., Iligan Coconut Industries, San Pablo
Manufacturing Corp, Granexport Manufacturing Corp., & Legaspi Oil Co., Inc.

797
companies1134 (hereafter collectively called CIIF companies), so-called for having been either
organized, acquired and/or funded as UCPB subsidiaries with the use of the CIIF levy. The basic
complaint also contained allegations about the alleged misuse of the coconut levy funds to buy out
the majority of the outstanding shares of stock of San Miguel Corporation (SMC).

More particularly, in G.R. Nos. 177857-58, class action petitioners COCOFED and a group
of purported coconut farmers and COCOFED members (hereinafter COCOFED et al.
collectively)1135 seek the reversal of the following judgments and resolutions of the anti-graft court
insofar as these issuances are adverse to their interests:

1) Partial Summary Judgment1136 dated July 11, 2003, as reiterated in a

resolution1137 of December 28, 2004, denying COCOFEDs motion for
reconsideration, and the May 11, 2007 resolution denying COCOFEDs motion to
set case for trial and declaring the partial summary judgment final and
appealable,1138 all issued in Civil Case No. 0033-A; and

2) Partial Summary Judgment1139 dated May 7, 2004, as also reiterated in a

resolution1140 of December 28, 2004, and the May 11, 2007 resolution1141 issued in
Civil Case No. 0033-F. The December 28, 2004 resolution denied COCOFEDs
Class Action Omnibus Motion therein praying to dismiss CC Case No. 0033-F on
jurisdictional ground and alternatively, reconsideration and to set case for trial. The
May 11, 2007 resolution declared the judgment final and appealable.

1134
Composed of Soriano Shares, ASC Investors, ARC Investors, Roxas Shares, Toda Holdings, AP
Holdings, Fernandez Holdings, SMC Officers Corps., Te Deum Resources, and Anglo Ventures, Randy Allied
Ventures, Rock Steel Resources, Valhalla Properties Ltd., and First Meridian Development, all names ending with the
suffix Corp. or Inc.
1135
Aside from being coconut farmers, petitioners del Rosario and Espina represent themselves as Directors
of COCOFED and the ultimate beneficial owners of CIIF companies.
1136
Penned by Associate Justice Teresita Leonardo-De Castro (now a member of this Court), concurred in
by Associate Justices Diosdado M. Peralta (now also a member of this Court) and Francisco H. Villaruz, Jr.; rollo
(G.R. Nos. 177857-58), pp. 205-287.
1137
Id. at 289-327.
1138
Id. at 329-39.
1139
Id. at 341-405.
1140
Id. at 407-25.
1141
Id. at 427-42.

798
 For convenience, the partial summary judgment (PSJ) rendered on July 11, 2003 in CC No.
0033-A shall hereinafter be referred to as PSJ-A, and that issued on May 7, 2004 in CC 0033-F,
as PSJ-F. PSJ-A and PSJ-F basically granted the Republics separate motions for summary
judgment.

On June 5, 2007, the court a quo issued a Resolution in CC No. 0033-A, which modified
PSJ-A by ruling that no further trial is needed on the issue of ownership of the subject properties.
Likewise, on May 11, 2007, the said court issued a Resolution in CC No. 0033-F amending PSJ-
F in like manner.

On the other hand, petitioner Ursua, in G.R. No. 178193, limits his petition for review on
PSJ-A to the extent that it negates his claims over shares of stock in UCPB.

Taada, et al. have intervened1142 in G.R. Nos. 177857-58 in support of the governments
case.

Another petition was filed and docketed as G.R. No. 180705. It involves questions relating
to Eduardo M. Cojuangco, Jr.s (Cojuangco, Jr.s) ownership of the UCPB shares, which he
allegedly received as option shares, and which is one of the issues raised in PSJ-A.1143 G.R. No.
180705 was consolidated with G.R. Nos. 177857-58 and 178193. On September 28, 2011,
respondent Republic filed a Motion to Resolve G.R. Nos. 177857-58 and 178193.1144 On January
17, 2012, the Court issued a Resolution deconsolidating G.R. Nos. 177857-58 and 178193 from

1142
Dated September 2, 2009, id. at 2127-49.
1143
See PSJ-A.
1144
On July 19, 2011, petitioner Eduardo M. Cojuangco, Jr. also filed a Motion to Deconsolidate G.R. No.
180705 from G.R. Nos. 177857-58 and 178193.

799
G.R. No. 180705. This Decision is therefore separate and distinct from the decision to be rendered
in G.R. No. 180705.

The Facts

The relevant facts, as culled from the records and as gathered from Decisions of the Court in a

batch of coco levy and illegal wealth cases, are:

In 1971, Republic Act No. (R.A.) 6260 was enacted creating the Coconut Investment
Company (CIC) to administer the Coconut Investment Fund (CIF), which, under Section 81145
thereof, was to be sourced from a PhP 0.55 levy on the sale of every 100 kg. of copra. Of the PhP
0.55 levy of which the copra seller was, or ought to be, issued COCOFUND receipts, PhP 0.02
was placed at the disposition of COCOFED, the national association of coconut producers declared
by the Philippine Coconut Administration (PHILCOA, now PCA1146) as having the largest
membership.1147

The declaration of martial law in September 1972 saw the issuance of several presidential
decrees (P.Ds.) purportedly designed to improve the coconut industry through the collection and
use of the coconut levy fund. While coming generally from impositions on the first sale of copra,
the coconut levy fund came under various names, the different establishing laws and the stated
ostensible purpose for the exaction explaining the differing denominations. Charged with the duty

1145
Section 8. The Coconut Investment Fund. There shall be levied on the coconut farmer a sum which shall
be converted into shares of stock of the [CIC] upon its incorporation. For every fifty-five centavos (P0.55) so collected,
fifty centavos (P0.50) shall be set aside to constitute a special fund, to be known as the Coconut Investment Fund,
which shall be used exclusively to pay the subscription by the Philippine Government for and in behalf of the coconut
farmers to the capital stock of said Company: Provided, . Provided, further, That the (PHILCOA) shall, in consultation
with [COCOFED] prescribe and promulgate the necessary rules, regulations and procedures for the collection of such
levy and issuance of the corresponding receipts. (Emphasis added.)
1146
COCOFED v. PCGG, G.R. No. 75713, October 2, 1989, 178 SCRA 236.
1147
R.A. 6260, Sec. 9.

800
of collecting and administering the Fund was PCA.1148 Like COCOFED with which it had a legal
linkage,1149 the PCA, by statutory provisions scattered in different coco levy decrees, had its share
of the coco levy.1150

The following were some of the issuances on the coco levy, its collection and utilization,
how the proceeds of the levy will be managed and by whom, and the purpose it was supposed to
serve:

1. P.D. No. 276 established the Coconut Consumers Stabilization Fund (CCSF) and
declared the proceeds of the CCSF levy as trust fund,1151 to be utilized to subsidize the sale of
coconut-based products, thus stabilizing the price of edible oil.1152

2. P.D. No. 582 created the Coconut Industry Development Fund (CIDF) to finance the
operation of a hybrid coconut seed farm.

3. Then came P.D. No. 755 providing under its Section 1 the following:

It is hereby declared that the policy of the State is to provide readily available credit
facilities to the coconut farmers at a preferential rates; that this policy can be
expeditiously and efficiently realized by the implementation of the Agreement for
the Acquisition of a Commercial Bank for the benefit of Coconut Farmers executed
by the [PCA]; and that the [PCA] is hereby authorized to distribute, for free, the
shares of stock of the bank it acquired to the coconut farmers.

1148
Republic v. Sandiganbayan, G.R. No. 118661, January 22, 2007; not to be confused with an earlier cited
case of the same title.
1149
Per P.D. No. 623, 3 board seats of the PCA 7-man board were reserved to those recommended by
COCOFED.
1150
For example: Article III, Sec. 2(c) of the Coconut Industry Code (P.D. No. 961) allows the use of the
CCSF levy to finance the development and operating expenses of COCOFED inclusive of its projects; Art. II, Sec.
3(k) of the same Code empowers the PCA to collect a fee from desiccating factory to defray its operating expenses.
1151
Republic v. COCOFED, G.R. Nos. 14062-64, December 14, 2001, 372 SCRA 462.
1152
P.D. No. 276, Sec. 1(b).

801
 Towards achieving the policy thus declared, P.D. No. 755, under its Section 2, authorized
PCA to utilize the CCSF and the CIDF collections to acquire a commercial bank and deposit the
CCSF levy collections in said bank, interest free, the deposit withdrawable only when the bank
has attained a certain level of sufficiency in its equity capital. The same section also decreed that
all levies PCA is authorized to collect shall not be considered as special and/or fiduciary funds or
form part of the general funds of the government within the contemplation of P.D. No. 711.1153

4. P.D. No. 961 codified the various laws relating to the development of coconut/palm oil
industries.

5. The relevant provisions of P.D. No. 961, as later amended by P.D. No. 1468 (Revised
Coconut Industry Code), read:

ARTICLE III
Levies

Section 1. Coconut Consumers Stabilization Fund Levy. The [PCA] is

hereby empowered to impose and collect the Coconut Consumers Stabilization
Fund Levy .

Section 5. Exemption. The [CCSF] and the [CIDF] as well as all

disbursements as herein authorized, shall not be construed as special and/or
fiduciary funds, or as part of the general funds of the national government within
the contemplation of PD 711; the intention being that said Fund and the
disbursements thereof as herein authorized for the benefit of the coconut

1153
P.D. No. 711 is entitled: Abolishing all Existing Special and Fiduciary Funds and Transferring to the
General Fund the Operations and Funding of all Special and Fiduciary Funds.

802
 farmers shall be owned by them in their private capacities: . (Emphasis
supplied.)

6. Letter of Instructions No. (LOI) 926, Series of 1979, made reference to the creation,
out of other coco levy funds, of the Coconut Industry Investment Fund (CIIF) in P.D. No. 1468
and entrusted a portion of the CIIF levy to UCPB for investment, on behalf of coconut farmers, in
oil mills and other private corporations, with the following equity ownership structure:1154

Section 2. Organization of the Cooperative Endeavor. The [UCPB], in its

capacity as the investment arm of the coconut farmers thru the [CIIF] is hereby
directed to invest, on behalf of the coconut farmers, such portion of the CIIF in
private corporations under the following guidelines:

a) The coconut farmers shall own or control at least (50%) of the

outstanding voting capital stock of the private corporation [acquired] thru the CIIF
and/or corporation owned or controlled by the farmers thru the CIIF . (Words in
bracket added.)

Through the years, a part of the coconut levy funds went directly or indirectly to various
projects and/or was converted into different assets or investments.1155 Of particular relevance to
this case was their use to acquire the First United Bank (FUB), later renamed UCPB, and the
acquisition by UCPB, through the CIIF companies, of a large block of SMC shares. 1156

Apropos the intended acquisition of a commercial bank for the purpose stated earlier, it
would appear that FUB was the bank of choice which the Pedro Cojuangco group (collectively,

1154
Vital Legal Documents, Vol. 69, pp. 90-95.
1155
Republic v. Sandiganbayan, G.R. No. 118661, January 22, 2007, 512 SCRA 25.
1156
A total of 33.1 million shares; Republic v. Sandiganbayan, supra.

803
Pedro Cojuangco) had control of. The plan, then, was for PCA to buy all of Pedro Cojuangcos
shares in FUB. However, as later events unfolded, a simple direct sale from the seller (Pedro) to
PCA did not ensue as it was made to appear that Cojuangco, Jr. had the exclusive option to acquire
the formers FUB controlling interests. Emerging from this elaborate, circuitous arrangement were
two deeds; the first, simply denominated as Agreement,1157 dated May 1975,1158 entered into by
and between Cojuangco, Jr., for and in his behalf and in behalf of certain other buyers, and Pedro
Cojuangco, purportedly accorded Cojuangco, Jr. the option to buy 72.2% of FUBs outstanding
capital stock, or 137,866 shares (the option shares, for brevity), at PhP 200 per share.

The second but related contract, dated May 25, 1975, was denominated as Agreement for
the Acquisition of a Commercial Bank for the Benefit of the Coconut Farmers of the
Philippines.1159 It had PCA,1160 for itself and for the benefit of the coconut farmers, purchase from
Cojuangco, Jr. the shares of stock subject of the First Agreement for PhP 200 per share. As
additional consideration for PCAs buy-out of what Cojuangco, Jr. would later claim to be his
exclusive and personal option,1161 it was stipulated that, from PCA, Cojuangco, Jr. shall receive
equity in FUB amounting to 10%, or 7.22%, of the 72.2%, or fully paid shares.

Apart from the aforementioned 72.2%, PCA purchased from other FUB shareholders 6,534
shares.

While the 64.98% portion of the option shares (72.2% 7.22% = 64.98%) ostensibly
pertained to the farmers, the corresponding stock certificates supposedly representing the farmers

1157
Annex G to Petition in G.R. No. 180705; rollo, pp. 459-463.
1158
No particular day was indicated, although the special power of attorney granted to Atty. Edgardo Angara
by Cojuangco for the former to sign the Agreement was dated May 25, 1975.
1159
Annex I to Petition in G.R. No. 180705, rollo, pp. 466-76.
1160
Represented by Lobregat.
1161
Albeit not mentioned in the first contract document, the notion of an option was adverted to in the SPA
in favor of Mr. Angara and in the second contract document between PCA and Cojuangco.

804
equity were in the name of and delivered to PCA.1162 There were, however, shares forming part of
the aforesaid 64.98% portion, which ended up in the hands of non-farmers.1163 The remaining
27.8% of the FUB capital stock were not covered by any of the agreements.

Under paragraph 8 of the second agreement, PCA agreed to expeditiously distribute the
FUB shares purchased to such coconut farmers holding registered COCOFUND receipts on
equitable basis.

As found by the Sandiganbayan, the PCA appropriated, out of its own fund, an amount for
the purchase of the said 72.2% equity, albeit it would later reimburse itself from the coconut
levy fund.1164

As of June 30, 1975, the list of FUB stockholders shows PCA with 129,955 shares.1165

Shortly after the execution of the PCA Cojuangco, Jr. Agreement, President Marcos issued,
on July 29, 1975, P.D. No. 755 directing, as earlier narrated, PCA to use the CCSF and CIDF to
acquire a commercial bank to provide coco farmers with readily available credit facilities at
preferential rate, and PCA to distribute, for free, the bank shares to coconut farmers.

Then came the 1986 EDSA event. One of the priorities of then President Corazon C.
Aquinos revolutionary government was the recovery of ill-gotten wealth reportedly amassed by
the Marcos family and close relatives, their nominees and associates. Apropos thereto, she issued
Executive Order Nos. (E.Os.) 1, 2 and 14, as amended by E.O. 14-A, all Series of 1986. E.O. 1

1162
On May 30, 1975, FUB issued Stock Certificate Nos. 745 and 746 covering 124,080 and 5,880 shares),
respectively, in the name of [PCA] for the benefit of the coconut farmers of the Philippines; Republic v.
Sandiganbayan, supra note 25.
1163
PSJ-A, p. 4.
1164
Republic v. COCOFED, G.R. Nos. 147062-64, December 14, 2001, 372 SCRA 462, 477
1165
Republic v. Sandiganbayan, G.R. No. 118661, January 22, 2007, 512 SCRA 25.

805
created the PCGG and provided it with the tools and processes it may avail of in the recovery
efforts;1166 E.O. No. 2 asserted that the ill-gotten assets and properties come in the form of shares
of stocks, etc.; while E.O. No. 14 conferred on the Sandiganbayan exclusive and original
jurisdiction over ill-gotten wealth cases, with the proviso that technical rules of procedure and
evidence shall not be applied strictly to the civil cases filed under the E.O. Pursuant to these
issuances, the PCGG issued numerous orders of sequestration, among which were those handed
out, as earlier mentioned, against shares of stock in UCPB purportedly owned by or registered in
the names of (a) more than a million coconut farmers and (b) the CIIF companies, including the
SMC shares held by the CIIF companies. On July 31, 1987, the PCGG instituted before the
Sandiganbayan a recovery suit docketed thereat as CC No. 0033.

After the filing and subsequent amendments of the complaint in CC 0033, Lobregat,
COCOFED et al., and Ballares et al., purportedly representing over a million coconut farmers,
sought and were allowed to intervene.1167 Meanwhile, the following incidents/events transpired:

1. On the postulate, inter alia, that its coco-farmer members own at least 51% of
the outstanding capital stock of UCPB, the CIIF companies, etc., COCOFED et
al., on November 29, 1989, filed Class Action Omnibus Motion praying for the
lifting of the orders of sequestration referred to above and for a chance to present
evidence to prove the coconut farmers ownership of the UCPB and CIIF shares.
The plea to present evidence was denied;

2. Later, the Republic moved for and secured approval of a motion for separate
trial which paved the way for the subdivision of the causes of action in CC 0033,
each detailing how the assets subject thereof were acquired and the key roles the
principal played;

3. Civil Case 0033, pursuant to an order of the Sandiganbayan would be

subdivided into eight complaints, docketed as CC 0033-A to CC 0033-H.1168

1166
The validity and propriety of these processes were sustained by the Court in BASECO v. PCGG, No. L-
75885, May 27, 1987, 150 SCRA 181.
1167
Per the Sandiganbayans Resolution of October 1, 1991.
1168
The Complaints in CC 0033-A and CC 0033-F contain common allegations, as shall be detailed later.

806
 Lobregat, Ballares et al., COCOFED, et al., on the strength of their authority
to intervene in CC 0033, continued to participate in CC 0033-A where one of the
issues raised was the misuse of the names/identities of the over a million coconut
farmers;1169

4. On February 23, 2001, Lobregat, COCOFED, Ballares et al., filed a Class

Action Omnibus Motion to enjoin the PCGG from voting the sequestered UCPB
shares and the SMC shares registered in the names of the CIIF companies. The
Sandiganbayan, by Order of February 28, 2001, granted the motion, sending the
Republic to come to this Court on certiorari, docketed as G.R. Nos. 147062-64,
to annul said order; and

5. By Decision of December 14, 2001, in G.R. Nos. 147062-64 (Republic

v. COCOFED), 1170 the Court declared the coco levy funds as prima facie public
funds. And purchased as the sequestered UCPB shares were by such funds,
beneficial ownership thereon and the corollary voting rights prima facie pertain,
according to the Court, to the government.

The instant proceedings revolve around CC 0033-A (Re: Anomalous Purchase and Use of
[FUB] now [UCPB])1171 and CC 0033-F (Re: Acquisition of San Miguel Corporation Shares of
Stock), the first case pivoting mainly on the series of transactions culminating in the alleged
anomalous purchase of 72.2% of FUBs outstanding capital stock and the transfer by PCA of a
portion thereof to private individuals. COCOFED, et al. and Ballares, et al. participated in CC No.
0033-A as class action movants.

Petitioners COCOFED et al.1172 and Ursua1173 narrate in their petitions how the farmers
UCPB shares in question ended up in the possession of those as hereunder indicated:

1169
Rollo (G.R. Nos. 177857-58), p. 216.
1170
Reported in 372 SCRA 2001.
1171
Named as defendants were Cojuangco, Ferdinand and Imelda Marcos, Lobregat, Enrile, Urusa, Jose
Eleazar, Jr. and Herminigildo Zayco; rollo (G.R. No. 180705), pp. 481-00.
1172
Class Action Petition for Review, pp. 38-41; Rollo (G.R. Nos.177857-58), pp. 51-54.
1173
Ursuas Petition for Review, pp. 11-14; Rollo (G.R. No. 178193), pp. 26-29.

807
 1) The farmers UCPB shares were originally registered in the name of PCA for
the eventual free distribution thereof to and registration in the individual names of
the coconut farmers in accordance with PD 755 and the IRR that PCA shall issue;

2) Pursuant to the stock distribution procedures set out in PCA

Administrative Order No. 1, s. of 1975, (PCA AO 1),1174 farmers who had paid to
the CIF under RA 6260 and registered their COCOFUND (CIF) receipts with PCA
were given their corresponding UCPB stock certificates. As of June 1976, the cut-
off date for the extended registration, only 16 million worth of COCOFUND
receipts were registered, leaving over 50 million shares undistributed;
3) PCA would later pass Res. 074-78, s. of 1978, to allocate the 50 million
undistributed shares to (a) farmers who were already recipients thereof and (b)
qualified farmers to be identified by COCOFED after a national census.
4) As of May 1981, some 15.6 million shares were still held by and
registered in the name of COCOFED in behalf of coconut farmers for distribution
immediately after the completion of the national census, to all those determined by
the PCA to be bonafide coconut farmers, but who have not received the bank
shares;1175 and

5) Prior to June 1986, a large number of coconut farmers opted to sell all/part
of their UCPB shares below their par value. This prompted the UCPB Board to

1174
In its pertinent parts, PCA A.O. No. 1 reads:

Section 1. Eligible Coconut Farmers. All coconut farmers who have paid to the [CIF] and registered their
COCOFUND receipts and registered the same with the [PCA] shall be entitled to a proportionate share of the equity
in the Bank, subject to the terms and conditions herein provided.

SECTION. 3 Eligible COCOFUND Receipts.- All COCOFUND receipts issued by the PCA from the
effectivity of R.A.6260 up to June 30, 1975 shall be considered eligible for registration by the coconut farmers for
purposes of qualifying them to participate in the equity in the Bank.

SECTION 4, Registered COCOFUND Receipts All COCOFUND receipts eligible under Section 3 hereof
and which are registered on or before December 31, 1975 shall be qualified for equity participation in the Bank.

SECTION 7- Additional Period of Registration- To enable all qualified farmers to participate in the sharing
of the equity in the Bank, the period of registration shall be extended up to March 31, 1976, thereafter any unregistered
COCOFUND receipts can no longer qualify for registration for purposes of these rules and regulations.
1175
COCOFED et al.s Petition, rollo (G.R. Nos. 177857-58), pp. 52-53.

808
 authorize the CIIF companies to buy these shares. Some 40.34 million common
voting shares of UCPB ended up with these CIIF companies albeit initially
registered in the name of UCPB.

On the other hand, the subject of CC 0033-F are two (2) blocks of SMC shares of stock,
the first referring to shares purchased through and registered in the name of the CIIF holding
companies. The purported ownership of the second block of SMC shares is for the nonce irrelevant
to the disposition of this case. During the time material, the CIIF block of SMC shares represented
27% of the outstanding capital stock of SMC.

Civil Case No. 0033-A

After the pre-trial, but before the Republic, as plaintiff a quo, could present, as it committed
to, a list of UCPB stockholders as of February 25, 1986,1176 among other evidence, COCOFED, et
al., on the premise that the sequestered farmers UCPB shares are not unlawfully acquired assets,
filed in April 2001 their Class Action Motion for a Separate Summary Judgment. In it, they prayed
for a judgment dismissing the complaint in CC 0033-A, for the reason that the over than a million
unimpleaded coconut farmers own the UCPB shares. In March 2002, they filed Class Action
Motion for Partial Separate Trial on the issue of whether said UCPB shares have legitimately
become the private property of the million coconut farmers.

Correlatively, the Republic, on the strength of the December 14, 2001 ruling in Republic
v. COCOFED1177 and on the argument, among others, that the claim of COCOFED and Ballares
et al. over the subject UCPB shares is based solely on the supposed COCOFUND receipts issued
for payment of the R.A. 6260 CIF levy, filed a Motion for Partial Summary Judgment [RE:

1176
The list was not adduced; in March 2001, the Republic filed a Motion Ad Cautelam for Leave to Present
Additional Evidence which COCOFED opposed.
1177
Supra note 34.

809
COCOFED, et al. and Ballares, et al.] dated April 22, 2002, praying that a summary judgment be
rendered declaring:

a. That Section 2 of [PD] 755, Section 5, Article III of P.D. 961 and Section 5,
Article III of P.D. No. 1468 are unconstitutional;

b. That (CIF) payments under (R.A.) No. 6260 are not valid and legal bases for
ownership claims over UCPB shares; and

c. That COCOFED, et al., and Ballares, et al. have not legally and validly obtained
title over the subject UCPB shares.

After an exchange of pleadings, the Republic filed its sur-rejoinder praying that it be
conclusively held to be the true and absolute owner of the coconut levy funds and the UCPB shares
acquired therefrom.1178

A joint hearing on the separate motions for summary judgment to determine what material
facts exist with or without controversy followed.1179 By Order1180 of March 11, 2003, the
Sandiganbayan detailed, based on this Courts ruling in related cases, the parties manifestations
made in open court and the pleadings and evidence on record, the facts it found to be without
substantial controversy, together with the admissions and/or extent of the admission made by the
parties respecting relevant facts, as follows:

As culled from the exhaustive discussions and manifestations of the parties in open
court of their respective pleadings and evidence on record, the facts which exist
without any substantial controversy are set forth hereunder, together with the

1178
Rollo (G.R. Nos. 177857-58), pp. 830-871.
1179
See PSJ-A, p. 2.
1180
Rollo (G.R. No.180705), pp. 956-961.

810
admissions and/or the extent or scope of the admissions made by the parties relating
to the relevant facts:

1. The late President Ferdinand E. Marcos was President for two terms . . . and,
during the second term, declared Martial Law through Proclamation No. 1081 dated
September 21, 1972.

2. On January 17, 1973, [he] issued Proclamation No. 1102 announcing the
ratification of the 1973 Constitution.

3. From January 17, 1973 to April 7, 1981, [he] . . .exercised the powers and
prerogative of President under the 1935 Constitution and the powers and
prerogative of President . . . the 1973 Constitution.

[He] promulgated various [P.D.s], among which were P.D. No. 232, P.D. No. 276,
P.D. No. 414, P.D. No. 755, P.D. No. 961 and P.D. No. 1468.

4. On April 17, 1981, amendments to the 1973 Constitution were effected and, on
June 30, 1981, [he], after being elected President, reassumed the title and exercised
the powers of the President until 25 February 1986.
5. Defendants Maria Clara Lobregat and Jose R. Eleazar, Jr. were [PCA] Directors
during the period 1970 to 1986.

6. Plaintiff admits the existence of the following agreements which are

attached as Annexes A and B to the Opposition dated October 10, 2002 of defendant
Eduardo M. Cojuangco, Jr. to the above-cited Motion for Partial Summary
Judgment:

a) Agreement made and entered into this ______ day of May,

1975 at Makati, Rizal, Philippines, by and between:

PEDRO COJUANGCO, Filipino, x x x, for and in his own

behalf and in behalf of certain other stockholders of First United

811
Bank listed in Annex A attached hereto (hereinafter collectively
called the SELLERS);

and

EDUARDO COJUANGCO, JR., Filipino, x x x, represented

in this act by his duly authorized attorney-in-fact, EDGARDO J.
ANGARA, for and in his own behalf and in behalf of certain other
buyers, (hereinafter collectively called the BUYERS);

WITNESSETH: That

WHEREAS, the SELLERS own of record and beneficially a

total of 137,866 shares of stock, with a par value of P100.00 each, of
the common stock of the First United Bank (the Bank), a commercial
banking corporation existing under the laws of the Philippines;

WHEREAS, the BUYERS desire to purchase, and the

SELLERS are willing to sell, the aforementioned shares of stock
totaling 137,866 shares (hereinafter called the Contract Shares)
owned by the SELLERS due to their special relationship to
EDUARDO COJUANGCO, JR.;

NOW, THEREFORE, for and in consideration of the

premises and the mutual covenants herein contained, the parties
agree as follows:

1. Sale and Purchase of Contract Shares

Subject to the terms and conditions of this Agreement, the

SELLERS hereby sell, assign, transfer and convey unto the
BUYERS, and the BUYERS hereby purchase and acquire, the
Contract Shares free and clear of all liens and encumbrances thereon.

812
2. Contract Price

The purchase price per share of the Contract Shares payable

by the BUYERS is P200.00 or an aggregate price of P27,573,200.00
(the Contract Price).

3. Delivery of, and payment for, stock certificates

Upon the execution of this Agreement, (i) the SELLERS

shall deliver to the BUYERS the stock certificates representing
the Contract Shares, free and clear of all liens, encumbrances,
obligations, liabilities and other burdens in favor of the Bank or
third parties, duly endorsed in blank or with stock powers
sufficient to transfer the shares to bearer; and (ii) BUYERS shall
deliver to the SELLERS P27,511,295.50 representing the
Contract Price less the amount of stock transfer taxes payable
by the SELLERS, which the BUYERS undertake to remit to the
appropriate authorities. (Emphasis added.)

4. Representation and Warranties of Sellers

The SELLERS respectively and independently of each other

represent and warrant that:

(a) The SELLERS are the lawful owners of, with good
marketable title to, the Contract Shares and that (i) the certificates to
be delivered pursuant thereto have been validly issued and are fully
paid and no-assessable; (ii) the Contract Shares are free and clear of
all liens, encumbrances, obligations, liabilities and other burdens in
favor of the Bank or third parties

This representation shall survive the execution and delivery

of this Agreement and the consummation or transfer hereby
contemplated.

813
 (b) The execution, delivery and performance of this
Agreement by the SELLERS does not conflict with or constitute any
breach of any provision in any agreement to which they are a party
or by which they may be bound.

(c) They have complied with the condition set forth in Article
X of the Amended Articles of Incorporation of the Bank.

5. Representation of BUYERS .

6. Implementation

The parties hereto hereby agree to execute or cause to be

executed such documents and instruments as may be required in
order to carry out the intent and purpose of this Agreement.

7. Notices .

IN WITNESS WHEREOF, the parties hereto have hereunto set their

hands at the place and on the date first above written.

PEDRO COJUANGCO EDUARDO COJUANGCO,

JR.
(on his own behalf and in (on his own behalf and in
behalf
behalf of the other Sellers of the other Buyers)
listed in Annex A hereof) (BUYERS)
(SELLERS)

814
 By:

EDGARDO J. ANGARA
Attorney-in-Fact

b) Agreement for the Acquisition of a Commercial Bank for the

Benefit of the Coconut Farmers of the Philippines, made and entered
into this 25th day of May 1975 at Makati, Rizal, Philippines, by and
between:

EDUARDO M. COJUANGCO, JR., x x x, hereinafter

referred to as the SELLER;

and

PHILIPPINE COCONUT AUTHORITY, a public

corporation created by Presidential Decree No. 232, as amended, for
itself and for the benefit of the coconut farmers of the Philippines,
(hereinafter called the BUYER)

WITNESSETH: That

WHEREAS, on May 17, 1975, the Philippine Coconut

Producers Federation (PCPF), through its Board of Directors,
expressed the desire of the coconut farmers to own a commercial
bank which will be an effective instrument to solve the perennial
credit problems and, for that purpose, passed a resolution requesting
the PCA to negotiate with the SELLER for the transfer to the coconut
farmers of the SELLERs option to buy the First United Bank (the
Bank) under such terms and conditions as BUYER may deem to be
in the best interest of the coconut farmers and instructed Mrs. Maria
Clara Lobregat to convey such request to the BUYER;

815
 WHEREAS, the PCPF further instructed Mrs. Maria Clara
Lobregat to make representations with the BUYER to utilize its
funds to finance the purchase of the Bank;

WHEREAS, the SELLER has the exclusive and personal

option to buy 144,400 shares (the Option Shares) of the Bank,
constituting 72.2% of the present outstanding shares of stock of the
Bank, at the price of P200.00 per share, which option only the
SELLER can validly exercise;

WHEREAS, in response to the representations made by the

coconut farmers, the BUYER has requested the SELLER to exercise
his personal option for the benefit of the coconut farmers;

WHEREAS, the SELLER is willing to transfer the Option

Shares to the BUYER at a price equal to his option price of P200 per
share;

WHEREAS, recognizing that ownership by the coconut

farmers of a commercial bank is a permanent solution to their
perennial credit problems, that it will accelerate the growth and
development of the coconut industry and that the policy of the state
which the BUYER is required to implement is to achieve vertical
integration thereof so that coconut farmers will become participants
in, and beneficiaries of, the request of PCPF that it acquire a
commercial bank to be owned by the coconut farmers and,
appropriated, for that purpose, the sum of P150 Million to enable the
farmers to buy the Bank and capitalize the Bank to such an extension
as to be in a position to adopt a credit policy for the coconut farmers
at preferential rates;

WHEREAS, x x x the BUYER is willing to subscribe to

additional shares (Subscribed Shares) and place the Bank in a more
favorable financial position to extend loans and credit facilities to
coconut farmers at preferential rates;

816
 NOW, THEREFORE, for and in consideration of the
foregoing premises and the other terms and conditions hereinafter
contained, the parties hereby declare and affirm that their principal
contractual intent is (1) to ensure that the coconut farmers own at
least 60% of the outstanding capital stock of the Bank; and (2) that
the SELLER shall receive compensation for exercising his personal
and exclusive option to acquire the Option Shares, for transferring
such shares to the coconut farmers at the option price of P200 per
share, and for performing the management services required of him
hereunder.

1. To ensure that the transfer to the coconut farmers of the

Option Shares is effected with the least possible delay and to provide
for the faithful performance of the obligations of the parties
hereunder, the parties hereby appoint the Philippine National Bank
as their escrow agent (the Escrow Agent).

Upon execution of this Agreement, the BUYER shall deposit

with the Escrow Agent such amount as may be necessary to
implement the terms of this Agreement.

2. As promptly as practicable after execution of this

Agreement, the SELLER shall exercise his option to acquire the
Option Share and SELLER shall immediately thereafter deliver and
turn over to the Escrow Agent such stock certificates as are herein
provided to be received from the existing stockholders of the Bank
by virtue of the exercise on the aforementioned option.

3. To ensure the stability of the Bank and continuity of

management and credit policies to be adopted for the benefit of the
coconut farmers, the parties undertake to cause the stockholders and
the Board of Directors of the Bank to authorize and approve a
management contract between the Bank and the SELLER under the
following terms:

(a) The management contract shall be for a period of five (5)

years, renewable for another five (5) years by mutual
agreement of the SELLER and the Bank;

817
 (b) The SELLER shall be elected President and shall hold
office at the pleasure of the Board of Directors. While serving
in such capacity, he shall be entitled to such salaries and
emoluments as the Board of Directors may determine;

(c) The SELLER shall recruit and develop a professional

management team to manage and operate the Bank under the
control and supervision of the Board of Directors of the Bank;

(d) The BUYER undertakes to cause three (3) persons

designated by the SELLER to be elected to the Board of
Directors of the Bank;

(e) The SELLER shall receive no compensation for

managing the Bank, other than such salaries or emoluments
to which he may be entitled by virtue of the discharge of his
function and duties as President, provided and

(f) The management contract may be assigned to a

management company owned and controlled by the
SELLER.

4. As compensation for exercising his personal and exclusive

option to acquire the Option Shares and for transferring such shares
to the coconut farmers, as well as for performing the management
services required of him, SELLER shall receive equity in the Bank
amounting, in the aggregate, to 95,304 fully paid shares in
accordance with the procedure set forth in paragraph 6 below;

5. In order to comply with the Central Bank program for

increased capitalization of banks and to ensure that the Bank will be
in a more favorable financial position to attain its objective to extend
to the coconut farmers loans and credit facilities, the BUYER
undertakes to subscribe to shares with an aggregate par value of

818
P80,864,000 (the Subscribed Shares). The obligation of the BUYER
with respect to the Subscribed Shares shall be as follows:

(a) The BUYER undertakes to subscribe, for the benefit of

the coconut farmers, to shares with an aggregate par value of
P15,884,000 from the present authorized but unissued shares
of the Bank; and

(b) The BUYER undertakes to subscribe, for the benefit of

the coconut farmers, to shares with an aggregate par value of
P64,980,000 from the increased capital stock of the Bank,
which subscriptions shall be deemed made upon the approval
by the stockholders of the increase of the authorized capital
stock of the Bank from P50 Million to P140 Million.

The parties undertake to declare stock dividends of P8

Million out of the present authorized but unissued capital stock of
P30 Million.

6. To carry into effect the agreement of the parties that the

SELLER shall receive as his compensation 95,304 shares:

(a) .

(b) With respect to the Subscribed Shares, the BUYER

undertakes, in order to prevent the dilution of SELLERs
equity position, that it shall cede over to the SELLER 64,980
fully-paid shares out of the Subscribed Shares. Such
undertaking shall be complied with in the following manner:
.

7. The parties further undertake that the Board of Directors

and management of the Bank shall establish and implement a loan

819
policy for the Bank of making available for loans at preferential rates
of interest to the coconut farmers .

8. The BUYER shall expeditiously distribute from time to

time the shares of the Bank, that shall be held by it for the benefit of
the coconut farmers of the Philippines under the provisions of this
Agreement, to such, coconut farmers holding registered
COCOFUND receipts on such equitable basis as may be determine
by the BUYER in its sound discretion.

9. .

10. To ensure that not only existing but future coconut

farmers shall be participants in and beneficiaries of the credit
policies, and shall be entitled to the benefit of loans and credit
facilities to be extended by the Bank to coconut farmers at
preferential rates, the shares held by the coconut farmers shall not be
entitled to pre-emptive rights with respect to the unissued portion of
the authorized capital stock or any increase thereof.

11. After the parties shall have acquired two-thirds (2/3) of

the outstanding shares of the Bank, the parties shall call a special
stockholders meeting of the Bank:

(a) To classify the present authorized capital stock of

P50,000,000 divided into 500,000 shares, with a par value of
P100.00 per share into: 361,000 Class A shares, with an
aggregate par value of P36,100,000 and 139,000 Class B
shares, with an aggregate par value of P13,900,000. All of the
Option Shares constituting 72.2% of the outstanding shares,
shall be classified as Class A shares and the balance of the
outstanding shares, constituting 27.8% of the outstanding
shares, as Class B shares;

(b) To amend the articles of incorporation of the Bank to

effect the following changes:

820
 (i) change of corporate name to First United Coconut
Bank;

(ii) replace the present provision restricting the

transferability of the shares with a limitation on
ownership by any individual or entity to not more than
10% of the outstanding shares of the Bank;

(iii) provide that the holders of Class A shares shall

not be entitled to pre-emptive rights with respect to
the unissued portion of the authorized capital stock or
any increase thereof; and

(iv) provide that the holders of Class B shares shall be

absolutely entitled to pre-emptive rights, with respect
to the unissued portion of Class B shares comprising
part of the authorized capital stock or any increase
thereof, to subscribe to Class B shares in proportion t
the subscriptions of Class A shares, and to pay for
their subscriptions to Class B shares within a period
of five (5) years from the call of the Board of
Directors.

(c) To increase the authorized capital stock of the Bank from

P50 Million to P140 Million.;

(d) To declare a stock dividend of P8 Million payable to the

SELLER, the BUYER and other stockholders of the Bank out
of the present authorized but unissued capital stock of P30
Million;

(e) To amend the by-laws of the Bank accordingly; and

821
(f) To authorize and approve the management contract provided in
paragraph 2 above.

The parties agree that they shall vote their shares and take all
the necessary corporate action in order to carry into effect the
foregoing provisions of this paragraph 11 .

12. It is the contemplation of the parties that the Bank shall

achieve a financial and equity position to be able to lend to the
coconut farmers at preferential rates.

In order to achieve such objective, the parties shall cause the Bank
to adopt a policy of reinvestment, by way of stock dividends, of such
percentage of the profits of the Bank as may be necessary.

13. The parties agree to execute or cause to be executed such

documents and instruments as may be required in order to carry out
the intent and purpose of this Agreement.

IN WITNESS WHEREOF,

PHILIPPINE COCONUT AUTHORITY

(BUYER)

By:

EDUARDO COJUANGCO, JR. MARIA CLARA L.

LOBREGAT
(SELLER)

822
7. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit
that the (PCA) was the other buyers represented by . Cojuangco, Jr. in the May
1975 Agreement entered into between Pedro Cojuangco (on his own behalf and in
behalf of other sellers listed in Annex A of the agreement) and Cojuangco, Jr. (on
his own behalf and in behalf of the other buyers). Defendant Cojuangco insists he
was the only buyer under the aforesaid Agreement.

8. ..

9. Defendants Lobregat, et al., and COCOFED, et al., and Ballares, et al.

admit that in addition to the 137,866 FUB shares of Pedro Cojuangco, et al. covered
by the Agreement, other FUB stockholders sold their shares to PCA such that the
total number of FUB shares purchased by PCA increased from 137,866 shares to
144,400 shares, the OPTION SHARES referred to in the Agreement of May 25,
1975. Defendant Cojuangco did not make said admission as to the said 6,534 shares
in excess of the 137,866 shares covered by the Agreement with Pedro Cojuangco.

10. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit
that the Agreement, described in Section 1 of Presidential Decree (P.D.) No. 755
dated July 29, 1975 as the Agreement for the Acquisition of a Commercial Bank
for the Benefit of Coconut Farmers executed by the Philippine Coconut Authority
and incorporated in Section 1 of P.D. No. 755 by reference, refers to the
AGREEMENT FOR THE ACQUISITION OF A COMMERCIAL BANK FOR
THE BENEFIT OF THE COCONUT FARMERS OF THE PHILIPPINES dated
May 25, 1975 between defendant Eduardo M. Cojuangco, Jr. and the [PCA] (Annex
B for defendant Cojuangcos OPPOSITION TO PLAINTIFFS MOTION FOR
PARTIAL SUMMARY JUDGMENT [RE: EDUARDO M. COJUANGCO, JR.]
dated September 18, 2002).

Plaintiff refused to make the same admission.

11. the Court takes judicial notice that P.D. No. 755 was published [in] volume
71 of the Official Gazette but the text of the agreement was not so published with
P.D. No. 755.

823
12. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit
that the PCA used public funds, in the total amount of P150 million, to purchase
the FUB shares amounting to 72.2% of the authorized capital stock of the FUB,
although the PCA was later reimbursed from the coconut levy funds and that
the PCA subscription in the increased capitalization of the FUB, which was later
renamed the (UCPB), came from the said coconut levy funds.

13. Pursuant to the May 25, 1975 Agreement, out of the 72.2% shares of the
authorized and the increased capital stock of the FUB (later UCPB), entirely paid
for by PCA, 64.98% of the shares were placed in the name of the PCA for the
benefit of the coconut farmers and 7,22% were given to defendant Cojuangco.
The remaining 27.8% shares of stock in the FUB which later became the UCPB
were not covered by the two (2) agreements referred to in item no. 6, par. (a) and
(b) above.

There were shares forming part of the aforementioned 64.98% which were later
sold or transferred to non-coconut farmers.

14. Under the May 27, 1975 Agreement, defendant Cojuangcos equity in the
FUB (now UCPB) was ten percent (10%) of the shares of stock acquired by the
PCA for the benefit of the coconut farmers.

15. That the fully paid 95.304 shares of the FUB, later the UCPB, acquired by
defendant Cojuangco, Jr. pursuant to the May 25, 1975 Agreement were paid for
by the PCA in accordance with the terms and conditions provided in the said
Agreement.

16. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. admit
that the affidavits of the coconut farmers (specifically, Exhibit 1-Farmer to 70-
Farmer) uniformly state that:

a. they are coconut farmers who sold coconut products;

b. in the sale thereof, they received COCOFUND receipts pursuant to
R.A. No. 6260;
c. they registered the said COCOFUND receipts; and
d. by virtue thereof, and under R.A. No. 6260, P.D. Nos. 755, 961 and
1468, they are allegedly entitled to the subject UCPB shares.

824
 but subject to the following qualifications:

a. there were other coconut farmers who received UCPB shares

although they did not present said COCOFUND receipt because the
PCA distributed the unclaimed UCPB shares not only to those who
already received their UCPB shares in exchange for their
COCOFUND receipts but also to the coconut farmers determined by
a national census conducted pursuant to PCA administrative
issuances;

b. [t]here were other affidavits executed by Lobregat, Eleazar, Ballares

and Aldeguer relative to the said distribution of the unclaimed UCPB
shares; and

c. the coconut farmers claim the UCPB shares by virtue of their

compliance not only with the laws mentioned in item (d) above but
also with the relevant issuances of the PCA such as, PCA
Administrative Order No. 1, dated August 20, 1975 (Exh. 298-
Farmer); PCA Resolution No. 033-78 dated February 16, 1978.

The plaintiff did not make any admission as to the foregoing qualifications.

17. Defendants Lobregat, et al. and COCOFED, et al. and Ballares, et al. claim that
the UCPB shares in question have legitimately become the private properties of the
1,405,366 coconut farmers solely on the basis of their having acquired said shares
in compliance with R.A. No. 6260, P.D. Nos. 755, 961 and 1468 and the
administrative issuances of the PCA cited above.

18. ..

On July 11, 2003, the Sandiganbayan issued the assailed PSJ-A finding for the Republic,
the judgment accentuated by (a) the observation that COCOFED has all along manifested as
representing over a million coconut farmers and (b) a declaration on the issue of ownership of
UCPB shares and the unconstitutionality of certain provisions of P.D. No. 755 and its

825
implementing regulations. On the matter of ownership in particular, the anti-graft court declared
that the 64.98% sequestered Farmers UCPB shares, plus other shares paid by PCA are conclusively
owned by the Republic. In its pertinent parts, PSJ-A, resolving the separate motions for summary
judgment in seriatim with separate dispositive portions for each, reads:

WHEREFORE, in view of the foregoing, we rule as follows:

A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY

JUDGMENT dated April 11, 2001 filed by Defendant Maria Clara L. Lobregat,
COCOFED, et al., and Ballares, et al.

The Class Action Motion for Separate Summary Judgment dated April 11,
2001 filed by defendant Maria Clara L. Lobregat, COCOFED, et al. and Ballares,
et al., is hereby DENIED for lack of merit.

B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: COCOFED,

ET AL. AND BALLARES, ET AL.) dated April 22, 2002 filed by Plaintiff.

1. a. Section 1 of P.D. No. 755, taken in relation to Section 2 of the same

P.D., is unconstitutional: (i) for having allowed the use of the CCSF to
benefit directly private interest by the outright and unconditional grant
of absolute ownership of the FUB/UCPB shares paid for by PCA
entirely with the CCSF to the undefined coconut farmers, which negated
or circumvented the national policy or public purpose declared by P.D.
No. 755 to accelerate the growth and development of the coconut
industry and achieve its vertical integration; and (ii) for having unduly
delegated legislative power to the PCA.

b. The implementing regulations issued by PCA, namely, Administrative

Order No. 1, Series of 1975 and Resolution No. 074-78 are likewise
invalid for their failure to see to it that the distribution of shares serve
exclusively or at least primarily or directly the aforementioned public
purpose or national policy declared by P.D. No. 755.

826
 2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall
not be considered special and/or fiduciary funds nor part of the general
funds of the national government and similar provisions of Sec. 5, Art. III,
P.D. No. 961 and Sec. 5, Art. III, P.D. No. 1468 contravene the provisions
of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29
(3).

3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and validly
obtained title of ownership over the subject UCPB shares by virtue of P.D.
No. 755, the Agreement dated May 25, 1975 between the PCA and
defendant Cojuangco, and PCA implementing rules, namely, Adm. Order
No. 1, s. 1975 and Resolution No. 074-78.

4. The so-called Farmers UCPB shares covered by 64.98% of the UCPB

shares of stock, which formed part of the 72.2% of the shares of stock of
the former FUB and now of the UCPB, the entire consideration of which
was charged by PCA to the CCSF, are hereby declared conclusively owned
by, the Plaintiff Republic of the Philippines.

C. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: EDUARDO

M. COJUANGCO, JR.) dated September 18, 2002 filed by Plaintiff.

1. Sec. 1 of P.D. No. 755 did not validate the Agreement between PCA and
defendant Eduardo M. Cojuangco, Jr. dated May 25, 1975 nor did it give
the Agreement the binding force of a law because of the non-publication of
the said Agreement.

2. Regarding the questioned transfer of the shares of stock of FUB (later

UCPB) by PCA to defendant Cojuangco or the so-called Cojuangco UCPB
shares which cost the PCA more than Ten Million Pesos in CCSF in 1975,
we declare, that the transfer of the following FUB/UCPB shares to
defendant Eduardo M. Cojuangco, Jr. was not supported by valuable
consideration, and therefore null and void:

a. The 14,400 shares from the Option Shares;

b. Additional Bank Shares Subscribed and Paid by PCA, consisting of:

1. Fifteen Thousand Eight Hundred Eighty-Four (15,884) shares out

of the authorized but unissued shares of the bank, subscribed and
paid by PCA;

827
 2. Sixty Four Thousand Nine Hundred Eighty (64,980) shares of the
increased capital stock subscribed and paid by PCA; and

3. Stock dividends declared pursuant to paragraph 5 and paragraph

11 (iv) (d) of the Agreement.

3. The above-mentioned shares of stock of the FUB/UCPB transferred to

defendant Cojuangco are hereby declared conclusively owned by the
Republic of the Philippines.

4. The UCPB shares of stock of the alleged fronts, nominees and dummies of
defendant Eduardo M. Cojuangco, Jr. which form part of the 72.2% shares
of the FUB/UCPB paid for by the PCA with public funds later charged to
the coconut levy funds, particularly the CCSF, belong to the plaintiff
Republic of the Philippines as their true and beneficial owner.

Let trial of this Civil Case proceed with respect to the issues which have not
been disposed of in this Partial Summary Judgment. For this purpose, the
plaintiffs Motion Ad Cautelam to Present Additional Evidence dated March
28, 2001 is hereby GRANTED.

From PSJ-A, Lobregat moved for reconsideration which COCOFED, et al. and Ballares,
et al. adopted. All these motions were denied in the extended assailed Resolution1181 of December
28, 2004.

Civil Case No. 0033-F

Here, the Republic, after filing its pre-trial brief, interposed a Motion for Judgment on the
Pleadings and/or for [PSJ] (Re: Defendants CIIF Companies, 14 Holding Companies and

1181
Supra note 7.

828
COCOFED, et al.) praying that, in light of the parties submissions and the supervening ruling in
Republic v. COCOFED1182 which left certain facts beyond question, a judgment issue:

1) Declaring Section 5 of Article III of P.D. No. 961 (Coconut Industry Code) and
Section 5 of Article III of P.D. No. 1468 (Revised Coconut Industry Code) to
be unconstitutional;

2) Declaring that CIF payments under RA No. 6260 are not valid and legal bases
for ownership claims over the CIIF companies and, ultimately, the CIIF block
of SMC shares; and

3) Ordering the reconveyance of the CIIF companies, the 14 holding companies,

and the 27% CIIF block of San Miguel Corporation shares of stocks in favor of
the government and declaring the ownership thereof to belong to the
government in trust for all the coconut farmers.

At this juncture, it may be stated that, vis--vis CC 0033-F, Gabay Foundation, Inc. sought
but was denied leave to intervene. But petitioners COCOFED, et al. moved and were allowed to
intervene1183 on the basis of their claim that COCOFED members beneficially own the block of
SMC shares held by the CIIF companies, at least 51% of whose capitol stock such members own.
The claim, as the OSG explained, arose from the interplay of the following: (a) COCOFED et al.s
alleged majority ownership of the CIIF companies under Sections 91184 and 101185 of P.D. No.
1468, and (b) their alleged entitlement to shares in the CIIF companies by virtue of their supposed

1182
Supra note 34.
1183
The Answer-In-Intervention of COCOFED et al., reads in part as follows:

1.2. The more than one million COCOFED members are the registered owners and/or the beneficial owners
of all, or at least not less than (51%) of the capital stock of the CIIF Companies. The CIIF Companies have wholly
owned subsidiaries described as the 14 CIIF Holding Companies. These 14 are the registered owners of SMC shares.
As such, COCOFED et al., and the COCOFED members are the ultimate beneficial owners of SMC shares.

1.3. The individual COCOFED members are filing and prosecuting this INTERVENTION in their capacities
as: . ; b) Coconut farmers/producers who registered receipts that were issued in their favor by the [PCA] as required
by Rep. Act No. 6260 (hereinafter referred to as COCOFUND Receipt Law) for themselves and for and on behalf of
the more than one million coconut farmers who are similarly situated.
1184
Section 9. Investment For the Benefit of the Coconut Farmers. Notwithstanding any law to the contrary
notwithstanding, the bank acquired under PD 755 is hereby given full power and authority to make investments in the
form of shares of stock in corporations engaged activities relating to the coconut and other palm oils industry.
1185
Section 10. Distribution to Coconut Farmers. The investment made by the bank as authorized under
Section 9 hereof shall all be equitably distributed, for free, by the bank to the coconut farmers.

829
registration of COCOFUND receipts allegedly issued to COCOFED members upon payment of
the R.A. 6260 CIF levy.1186

Just as in CC No. 0033-A, the Sandiganbayan also conducted a hearing in CC No. 0033-F
to determine facts that appeared without substantial controversy as culled from the records and, by
Order1187 of February 23, 2004, outlined those facts.

1186
OSGs Comment, pp. 33-34; rollo (G.R. Nos. 177857-58), pp. 688-689.
1187
The MOTION FOR JUDGMENT ON THE PLEADINGS AND/OR FOR PARTIAL SUMMARY JUDGMENT (Re:
Defendants CIIF Companies, 14 Holding Companies and COCOFED, et al.) dated July 12, 2002 filed by plaintiff
Republic of the Philippines involves the Twenty-Seven Percent Coconut Industry Investment Fund (CIIF) Block of San
Miguel Corporation (SMC) shares of stock. As culled from the records of this case, the following are the admitted
facts or the facts that appear without substantial controversy:

1. The above-mentioned 27% Block of SMC Shares are registered in the names of fourteen (14)
holding companies listed hereunder:

3. The CIIF is an accumulation of a portion of the Coconut Consumers Stabilization Fund (CCSF) and
the Coconut Industry Development Fund (CIDF), which is mandated by Section 2(d) and Section 9 and 10, Article III,
Presidential Decrees (P.D.) No. 961 and No. 1468 to be utilized by the United Coconut Planters Bank (UCPB) for
investment in the form of shares of stock in corporations organized for the purpose of engaging in the establishment
and the operation of industries and commercial activities and other allied business undertakings relating to coconut
and other palm oils industry in all its aspects. The corporations, including their subsidiaries or affiliates wherein the
CIIF has been invested are referred to as CIIF companies.

4. The investments made by UCPB in CIIF companies are required by the said Decrees to be equitably
distributed for free by the said bank to the coconut farmers except such portion of the investment which it may
consider necessary to retain to insure continuity and adequacy of financing of the particular endeavor.

5. Through PCA Resolution No. 130-77 dated July 19, 1977 (Exh. 337-Farmer), the Philippine Coconut
Authority (PCA), after having ascertained that the CCSF collections are more than sufficient to finance the primary
purposes for which the CCSF is to be utilized, ordered as follows: all unexpected appropriations from out of the CCSF
Collections as of this date shall constitute the initial funds of the Coconut Industry Investment Fund (CIIF), and that
the Acting Administrator of the Philippine Coconut Authority is hereby directed to deliver to the United Coconut
Planters Bank all such unexpended sums.

6. The UCPB acquired controlling interests in the CIIF Oil Mills mentioned in paragraph 2 above
using the CIIF.

830
 7. The UCPB as trustee for the CIIF and in compliance with P.D. 1468, prescribed the equitable
distribution for free to the coconut farmers of the shares of the CIIF Companies and the measures that would afford
the widest distribution of the investment among coconut farmers. (Excerpts of Minutes of the UCPB Board of
Directors Meeting held on November 17, 1981) (Exh. 346-Farmer).

8. The UCPB distributed a part of the investments made in such companies to the identified coconut
farmers and retained part as administrator of the CIIF. The said identified coconut farmers and the UCPB for the
benefit of the coconut farmers are the registered controlling stockholders of the outstanding capital stock of the
defendants CIIF Oil Mills listed in paragraph 2 above.

9. In 1983, the UCPB, as administrator of the CIIF, authorized SOLCOM, CAGOIL, ILICOCO, GRANEX
and LEGOIL to acquire 33,133,266 shares of stock of San Miguel Corporation (SMC).

10. To hold the SMC Shares, defendants 14 Holding Companies were incorporated under the
Corporation Code as follows: .

11. All the outstanding capital stock of defendants 14 Holding Companies are owned by defendants
CIIF Oil Mills in the following proportion: .

12. The terms and conditions for the purchase of the CIIF Block of SMC Shares were contained in a
written agreement entered into between defendant Eduardo M. Cojuangco, Jr. and late Don Andres Soriano, Jr. To
finance the acquisition of the CIIF Block of SMC shares, the parent CIIF Companies extended cash advances to the 14
Holding Companies. The 14 CIIF Holding Companies also used its incorporating equity and borrowed funds from
UCPB.

13. The purported farmer-affidavits submitted by defendants COCOFED, et al. in Civil Cases No. 0033-
A, B and F uniformly allege, mutatis mutandis, as basis of their claim for the CIIF Block of SMC Shares, that:

a. they are allegedly coconut farmers who supposedly sold coconut products;
b. in the supposed sale thereof, they allegedly received COCOFUND receipts pursuant to RA
No. 6260;
c. they allegedly registered the said COCOFUND receipts; and
d. by virtue thereof, and under RA No. 6260, PD Nos. 961 and 1468, they are allegedly
entitled to ownership of the CIIF Companies, and ultimately the CIIF Block of SMC Shares.
However, defendants COCOFED, et al. claim in their opposition to the subject motion that the payors of the
CIF under R.A. No. 6260 were the same payors of the CCSF and CIDF, that shares of stock of the UCPB were also
distributed to those who did not register any COCOFUND Receipt; and that their claim over the CIIF Block of SMC
Shares is based on the express mandate of laws and their implementing rules and regulations.

14. In particular, the COCOFED, et al. claim that the COCOFED members are the registered owners
and/or beneficial owner of all, or at least not less than (51%) of the capital stock of the CIIF companies, which have
wholly owned subsidiaries described as the 14 holding companies. These 14 holding companies are the registered
owners of the CIIF Block of SMC Shares. Accordingly, COCOFED, et al. claim that they and the COCOFED members
are the ultimate beneficial owners of the said share. (Record, Vol. III, pp. 526-527 and pp. 138-539).

15. The COCOFED, is a private non-stock, non-profit corporation which was recognized as the national
association of coconut producers with the largest number of membership.

16. The identification of the coconut farmers and distribution of the shares of stock of the CIIF
companies for free to the so identified coconut farmers followed the same procedure laid down by PCA
Administration Order No. 1, series of 1975 and PCA Resolution No. 074-78 dated June 7, 1978.

831
 On May 7, 2004, the Sandiganbayan, in light of its ruling in CC No. 0033-A and disposing
of the issue on ownership of the CIIF oil and holding companies and their entire block of subject
SMC shares, issued the assailed PSJ-F also finding for the Republic, the fallo of which pertinently
reading:

WHEREFORE, in view of the foregoing, we hold that:

The Motion for Partial Summary Judgment (Re: Defendants CIIF

Companies, 14 Holding Companies and Cocofed et al.) filed by Plaintiff is hereby
GRANTED. ACCORDINGLY, THE CIIF COMPANIES, namely:

1. Southern Luzon Coconut Oil Mills (SOLCOM);

2. Cagayan de Oro Oil Co., Inc. (CAGOIL);
3. Iligan Coconut Industries, Inc. (ILICOCO);
4. San Pablo Manufacturing Corp. (SPMC);
5. Granexport Manufacturing Corp. (GRANEX); and
6. Legaspi Oil Co., Inc. (LEGOIL),

AS WELL AS THE 14 HOLDING COMPANIES, NAMELY:

1. Soriano Shares, Inc.;

2. ACS Investors, Inc.;
3. Roxas Shares, Inc.;
4. Arc Investors, Inc.;
5. Toda Holdings, Inc.;

17. Defendant Eduardo M. Cojuangco, Jr. disclaims any interest in the 27% CIIF Block of SMC Shares.

The plaintiff and the defendants are hereby directed to submit their comment on the foregoing list of
admitted facts or facts that appear without substantial controversy within ten (10) days from receipt hereof.

832
 6. AP Holdings, Inc.;
7. Fernandez Holdings, Inc.;
8. SMC Officers Corps, Inc.;
9. Te Deum Resources, Inc.;
10. Anglo Ventures, Inc.;
11. Randy Allied Ventures, Inc.;
12. Rock Steel Resources, Inc.;
13. Valhalla Properties Ltd., Inc.; and
14. First Meridian Development, Inc.

AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION (SMC) SHARES

OF STOCK TOTALLING 33,133,266 SHARES AS OF 1983 ARE DECLARED
OWNED BY THE GOVERNMENT IN TRUST FOR ALL THE COCONUT
FARMERS GOVERNMENT AND ORDERDED RECONVEYED TO
THE GOVERNMENT.1188 (Emphasis and capitalization in the original;
underscoring added.)

Let the trial of this Civil Case proceed with respect to the issues which have
not been disposed of in this Partial Summary Judgment, including the determination
of whether the CIIF Block of SMC Shares adjudged to be owned by the
Government represents 27% of the issued and outstanding capital stock of SMC
according to plaintiff or to 31.3% of said capital stock according to COCOFED, et
al and Ballares, et al.

SO ORDERED.

1188
Rollo (G.R. No. 180705), pp. 404-05.

833
 Expressly covered by the declaration and the reconveyance directive are all dividends
declared, paid and issued thereon as well as any increments thereto arising from, but not limited
to, exercise of pre-emptive rights.

On May 26, 2004, COCOFED et al., filed an omnibus motion (to dismiss for lack of subject
matter jurisdiction or alternatively for reconsideration and to set case for trial), but this motion was
denied per the Sandiganbayans Resolution1189 of December 28, 2004.

On May 11, 2007, in CC 0033-A, the Sandiganbayan issued a Resolution1190 denying

Lobregats and COCOFEDs separate motions to set the case for trial/hearing, noting that there is
no longer any point in proceeding to trial when the issue of their claim of ownership of the
sequestered UCPB shares and related sub-issues have already been resolved in PSJ-A.

For ease of reference, PSJ-A and PSJ-F each originally decreed trial or further hearing on
issues yet to be disposed of. However, the Resolution1191 issued on June 5, 2007 in CC 0033-A
and the Resolution1192 of May 11, 2007 rendered in CC 0033-F effectively modified the underlying
partial summary judgments by deleting that portions on the necessity of further trial on the
issue of ownership of (1) the sequestered UCPB shares, (2) the CIIF block of SMC shares
and (3) the CIIF companies. As the anti-graft court stressed in both resolutions, the said issue of
ownership has been finally resolved in the corresponding PSJs.1193

1189
Supra note 10.
1190
Supra note 8.
1191
Rollo (G.R. Nos. 177857-58), pp. 501-516.
1192
Supra note 11.
1193
The paragraph in PSJ-F which the May 11, 2007 Resolution deleted reads: Let a trial of this Civil Case
proceed with respect to the issue which has not bee disposed in this [PSA-F] including the determination of whether
the CIIF Block of SMC shares adjudged to be owned by the Government represents 27% of the issued and outstanding
capital stock of the Government according to plaintiff or to 31% of said capital stock according to COCOFED, et al.
and Banares, et al.

834
 Hence, the instant petitions.

The Issues

COCOFED et al., in G.R. Nos. 177857-58, impute reversible error on the Sandiganbayan
for (a) assuming jurisdiction over CC Nos. 0033-A and 0033-F despite the Republics failure to
establish below the jurisdictional facts, i.e., that the sequestered assets sought to be recovered are
ill-gotten in the context of E.O. Nos. 1, 2, 14 and 14-A; (b) declaring certain provisions of coco
levy issuances unconstitutional; and (c) denying the petitioners plea to prove that the sequestered
assets belong to coconut farmers. Specifically, petitioners aver:

I. The Sandiganbayan gravely erred when it refused to acknowledge that it did not
have subject matter jurisdiction over the ill-gotten wealth cases because the
respondent Republic failed to prove, and did not even attempt to prove, the
jurisdictional fact that the sequestered assets constitute ill-gotten wealth of former
President Marcos and Cojuangco. Being without subject matter jurisdiction over
the ill-gotten wealth cases, a defect previously pointed out and repeatedly assailed
by COCOFED, et al., the assailed PSJs and the assailed Resolutions are all null and
void.

A. Insofar as the ill-gotten wealth cases are concerned, the Sandiganbayans

subject matter jurisdiction is limited to the recovery of ill-gotten wealth as
defined in Eos 1, 2, 14 and 14-A. Consistent with that jurisdiction, the
subdivided complaints in the ill-gotten wealth cases expressly alleged that
the sequestered assets constitutes ill-gotten wealth of former President
Marcos and Cojuangco, having been filed pursuant to, and in connection
with, Eos 1, 2, 14 and 14-A, the Sandiganbayan gravely erred, if not
exceeded its jurisdiction, when it refused to require the respondent Republic
to prove the aforesaid jurisdictional fact.

B. . Having no evidence on record to prove the said jurisdictional fact, the

Sandiganbayan gravely erred, if not grossly exceeded its statutory
jurisdiction, when it rendered the assailed PSJs instead of dismissing the ill-
gotten wealth cases.

C. Under Section 1 of Rule 9 of the Rules of Court, lack of jurisdiction over

the subject matter may be raised at any stage of the proceedings. In any
event, in pursuing its intervention in the ill-gotten wealth cases, COCOFED,

835
 et al precisely questioned the Sandiganbayans subject matter jurisdiction,
asserted that the jurisdictional fact does not exist, moved to dismiss the ill-
gotten wealth cases and even prayed that the writs of sequestration over the
sequestered assets be lifted. In concluding that those actions constitute an
invocation of its jurisdiction, the Sandiganbayan clearly acted whimsically,
capriciously and in grave abuse of its discretion.

II. Through the assailed PSJs and the assailed Resolutions, the Sandiganbayan
declared certain provisions of the coconut levy laws as well as certain
administrative issuances of the PCA as unconstitutional. In doing so, the
Sandiganbayan erroneously employed, if not grossly abused, its power of judicial
review.

A. the Sandiganbayan gravely erred, if not brazenly exceeded its statutory

jurisdiction and abused the judicial powers, when it concluded that the
public purpose of certain coconut levy laws was not evident, when it
thereupon formulated its own public policies and purposes for the coconut
levy laws and at the same time disregarded the national policies specifically
prescribed therein.

B. In ruling that it is not clear or evident how the means employed by the
[coconut levy] laws would serve the avowed purpose of the law or can serve
a public purpose, the Sandiganbayan erroneously examined, determined and
evaluated the wisdom of such laws, a constitutional power within the
exclusive province of the legislative department.

C. The Sandiganbayan gravely erred in declaring Section 1 of PD 755, PCA

[AO] 1 and PCA Resolution No. 074-78 constitutionally infirm by reason
of alleged but unproven and unsubstantiated flaws in their implementation.

D. The Sandiganbayan gravely erred in concluding that Section 1 of PD 755

constitutes an undue delegation of legislative power insofar as it authorizes
the PCA to promulgate rules and regulations governing the distribution of
the UCPB shares to the coconut farmers. Rather, taken in their proper
context, Section 1 of PD 755 was complete in itself, [and] prescribed
sufficient standards that circumscribed the discretion of the PCA.

836
 More importantly, this Honorable Court has, on three (3) separate
occasions, rejected respondent Republics motion to declare the coconut
levy laws unconstitutional. The Sandiganbayan gravely erred, if not acted
in excess of its jurisdiction, when it ignored the settled doctrines of law of
the case and/or stare decisis and granted respondent Republics fourth
attempt to declare the coconut levy laws unconstitutional, despite fact that
such declaration of unconstitutionality was not necessary to resolve the
ultimate issue of ownership involved in the ill-gotten wealth cases.

III. In rendering the assailed PSJs and thereafter refusing to proceed to trial on the
merits, on the mere say-so of the respondent Republic, the Sandiganbayan
committed gross and irreversible error, gravely abused its judicial discretion and
flagrantly exceeded its jurisdiction as it effectively sanctioned the taking of
COCOFED, et al.s property by the respondent Republic without due process of law
and through retroactive application of the declaration of unconstitutionality of the
coconut levy laws, an act that is not only illegal and violative of the settled
Operative Fact Doctrine but, more importantly, inequitable to the coconut farmers
whose only possible mistake, offense or misfortune was to follow the law.

A. .

1. In the course of the almost twenty (20) years that the ill-gotten wealth
cases were pending, COCOFED, et al. repeatedly asked to be allowed
to present evidence to prove that the true, actual and beneficial owners
of the sequestered assets are the coconut farmers and not Cojuangco, an
alleged crony of former President Marcos. The Sandiganbayan
grievously erred and clearly abused its judicial discretion when it
repeatedly and continuously denied COCOFED, et al. the opportunity
to present their evidence to disprove the baseless allegations of the Ill-
Gotten Wealth Cases that the sequestered assets constitute ill-gotten
wealth of Cojuangco and of former President Marcos, an error that
undeniably and illegally deprived COCOFED, et al of their
constitutional right to be heard.

2. The Sandiganbayan erroneously concluded that the Assailed PSJs and

Assailed Resolutions settled the ultimate issue of ownership of the
Sequestered Assets and, more importantly, resolved all factual and legal
issues involved in the ill-gotten wealth cases. Rather, as there are triable

837
 issues still to be resolved, it was incumbent upon the Sandiganbayan to
receive evidence thereon and conduct trial on the merits.

3. Having expressly ordered the parties to proceed to trial and thereafter

decreeing that trial is unnecessary as the Assailed PSJs were final and
appealable judgments, the Sandiganbayan acted whimsically,
capriciously and contrary to the Rules of Court, treated the parties in the
ill-gotten wealth cases unfairly, disobeyed the dictate of this Honorable
Court and, worse, violated COCOFED, et als right to due process and
equal protection of the laws.

B. The Sandiganbayan gravely erred if not grossly abused its discretion

when it repeatedly disregarded, and outrightly refused to recognize, the
operative facts that existed as well as the rights that vested from the time
the coconut levy laws were enacted until their declaration of
unconstitutionality in the assailed PSJs. As a result, the assailed PSJs
constitute a proscribed retroactive application of the declaration of
unconstitutionality, a taking of private property, and an impairment of
vested rights of ownership, all without due process of law.1194 Otherwise
stated, the assailed PSJs and the assailed Resolutions effectively penalized
the coconut farmers whose only possible mistake, offense or misfortune was
to follow the laws that were then legal, valid and constitutional.

IV. The voluminous records of these ill-gotten wealth cases readily reveal the
various dilatory tactics respondent Republic resorted to. As a result, despite the
lapse of almost twenty (20) years of litigation, the respondent Republic has not been
required to, and has not even attempted to prove, the bases of its perjurious claim
that the sequestered assets constitute ill-gotten wealth of former President Marcos
and his crony, Cojuangco. In tolerating respondent Republics antics for almost
twenty (20) years, the Sandiganbayan so glaringly departed from procedure and
thereby flagrantly violated COCOFED, et al.s right to speedy trial.

1194
Rollo (G.R. Nos. 177857-58), pp. 35-40.

838
 In G.R. No. 178193, petitioner Ursua virtually imputes to the Sandiganbayan the same
errors attributed to it by petitioners in G.R. Nos. 177857-58.1195 He replicates as follows:

The Sandiganbayan decided in a manner not in accord with the Rules of Court and
settled jurisprudence in rendering the questioned PSJ as final and appealable
thereafter taking the sequestered assets from their owners or record without
presentation of any evidence, thus, the questioned PSJ and the questioned
Resolutions are all null and void.

A. The Sandiganbayans jurisdiction insofar as the ill-gotten wealth

cases are concerned, is limited to the recovery of ill-gotten wealth
as defined in Executive Orders No. 1, 2, 14 and 14-A.

B. The Sandiganbayan should have decided to dismiss the case or

continue to receive evidence instead of ruling against the
constitutionality of some coconut levy laws and PCA issuances
because it could decide on other grounds available to it.

II

The Sandiganbayan gravely erred when it declared PD. 755, Section 1 and 2,
Section 5, Article 1 of PD 961, and Section 5 of Art. III of PD 1468 as well as
administrative issuances of the PCA as unconstitutional in effect, it abused it power
of judicial review.

A. The Sandiganbayan gravely erred in concluding that the purpose

of PD 755 Section 1 and 2, Section 5, Article 1 of PD 961, and
Section 5 of Art. III of PD 1468 is not evident. It then proceeded to
formulated its own purpose thereby intruding into the wisdom of the
legislature in enacting [t]he law.

B. The Sandiganbayan gravely erred in declaring Section 1 of PD

755, PCA [AO] No. 1 and PCA Resolution No. 074-78
unconstitutional due to alleged flaws in their implementation.

C. The Sandiganbayan gravely erred in concluding that Section 1 of

PD No. 755 constitutes an undue delegation of legislative power
insofar as it authorizes the PCA to promulgate rules and regulations
governing the distribution of the UCPB shares to the coconut
farmers. Section 1 of PD 755 was complete in itself, prescribed
sufficient standards that circumscribed the discretion of the PCA

1195
Rollo (G.R. No. 178193), pp. 18-20.

839
 and merely authorized the PCA to fill matters of detail an execution
through promulgated rules and regulations.

III

The coconut levy laws, insofar as they allowed the PCA to promulgate rules and
regulations governing the distribution of the UCPB to the coconut farmers, do not
constitute an undue delegation of legislative power as they were complete in
themselves and prescribed sufficient standards that circumscribed the discretion of
the PCA.

IV

Assuming ex-gratia argumenti that the coconut levy laws are unconstitutional, still,
the owners thereof cannot be deprived of their property without due process of law
considering that they have in good faith acquired vested rights over the sequestered
assets.
In sum, the instant petitions seek to question the decisions of the Sandiganbayan in both
CC Nos. 0033-A and 0033-F, along with the preliminary issues of objection. We shall address at
the outset, (1) the common preliminary questions, including jurisdictional issue, followed by (2)
the common primary contentious issues (i.e. constitutional questions), and (3) the issues particular
to each case.

The Courts Ruling

The Sandiganbayan has jurisdiction over the subject

matter ofthe subdivided amended complaints.

The primary issue, as petitioners COCOFED, et al. and Ursua put forward, boils down to
the Sandiganbayans alleged lack of jurisdiction over the subject matter of the amended complaints.
Petitioners maintain that the jurisdictional facts necessary to acquire jurisdiction over the subject
matter in CC No. 0033-A have yet to be established. In fine, the Republic, so petitioners claim,
has failed to prove the ill-gotten nature of the sequestered coconut farmers UCPB shares.
Accordingly, the controversy is removed from the subject matter jurisdiction of the Sandiganbayan
and necessarily any decision rendered on the merits, such as PSJ-A and PSJ-F, is void.

840
 To petitioners, it behooves the Republic to prove the jurisdictional facts warranting the
Sandiganbayans continued exercise of jurisdiction over ill-gotten wealth cases. Citing Manila
Electric Company [Meralco] v. Ortaez,1196 petitioners argue that the jurisdiction of an adjudicatory
tribunal exercising limited jurisdiction, like the Sandiganbayan, depends upon the facts of the case
as proved at the trial and not merely upon the allegation in the complaint.1197 Cited too is PCGG
v. Nepumuceno,1198 where the Court held:

The determinations made by the PCGG at the time of issuing sequestration

orders cannot be considered as final determinations; that the properties or entities
sequestered or taken-over in fact constitute ill-gotten wealth according to [E.O.]
No. 1 is a question which can be finally determined only by a court the
Sandiganbayan. The PCGG has the burden of proving before the Sandiganbayan
that the assets it has sequestered or business entity it has provisionally taken-over
constitutes ill-gotten wealth within the meaning of [E.O.] No. 1 and Article No.
XVIII (26) of the 1987 Constitution.

Petitioners above posture is without merit.

Justice Florenz D. Regalado explicates subject matter jurisdiction:

16. Basic is the doctrine that the jurisdiction of a court over the subject-matter
of an action is conferred only by the Constitution or the law and that the Rules of
Court yield to substantive law, in this case, the Judiciary Act and B.P. Blg. 129,
both as amended, and of which jurisdiction is only a part. Jurisdiction cannot be
acquired through, or waived, enlarged or diminished by, any act or omission of the
parties; neither can it be conferred by the acquiescence of the court. Jurisdiction
must exist as a matter of law. Consequently, questions of jurisdiction may be raised
for the first time on appeal even if such issue was not raised in the lower court.

17. Nevertheless, in some case, the principle of estoppel by laches has been
availed to bar attacks on jurisdiction.1199

It is, therefore, clear that jurisdiction over the subject matter is conferred by law. In turn,
the question on whether a given suit comes within the pale of a statutory conferment is determined

1196
No. L-19557, March 31, 1964, 10 SCRA 637.
1197
Rollo (G.R. Nos. 177857-58), p. 86.
1198
G.R. No. 78750, April 20, 1990, 184 SCRA 449, 460.
1199
1 Regalado, REMEDIAL LAW COMPENDIUM 11 (6th revised ed., 1997).

841
by the allegations in the complaint, regardless of whether or not the plaintiff will be entitled at the
end to recover upon all or some of the claims asserted therein.1200 We said as much in Magay v.
Estiandan:1201

[J]urisdiction over the subject matter is determined by the allegations of the

complaint, irrespective of whether or not the plaintiff is entitled to recover upon all
or some of the claims asserted therein-a matter that can be resolved only after and
as a result of the trial. Nor may the jurisdiction of the court be made to depend upon
the defenses set up in the answer or upon the motion to dismiss, for, were we to be
governed by such rule, the question of jurisdiction could depend almost entirely
upon the defendant.

Of the same tenor was what the Court wrote in Allied Domecq Philippines, Inc. v.
1202
Villon:

Jurisdiction over the subject matter is the power to hear and determine the
general class to which the proceedings in question belong. Jurisdiction over the
subject matter is conferred by law and not by the consent or acquiescence of any or
all of the parties or by erroneous belief of the court that it exists. Basic is the rule
that jurisdiction over the subject matter is determined by the cause or causes of
action as alleged in the complaint.

The material averments in subdivided CC No. 0033-A and CC No. 0033-F included the
following:

12. Defendant Eduardo Cojuangco, Jr served as a public officer during the

Marcos administration.

13. Defendant Eduardo Cojuangco, Jr., taking advantage of his association,

influence and connection, acting in unlawful concert with the [Marcoses] and the
individual defendants, embarked upon devices, schemes and stratagems, including
the use of defendant corporations as fronts, to unjustly enrich themselves as the
expense of the Plaintiff and the Filipino people, such as when he

a) manipulated, beginning the year 1975 with the active collaboration of

Defendants , Marai Clara Lobregat, Danilo Ursua [etc.], the purchase by the (PCA)

1200
Id. at 271.
1201
No. L-28975, February 27, 1976, 69 SCRA 456.
1202
G.R. No. 156264, September 30, 2004, 439 SCRA 667, 672-73.

842
of 72.2% of the outstanding capital stock of the (FUB) which was subsequently
converted into a universal bank named (UCPB) through the use of (CCSF) in a
manner contrary to law and to the specific purposes for which said coconut levy
funds were imposed and collected under P.D. 276 and under anomalous and sinister
designs and circumstances, to wit:

(i) Defendant Eduardo Cojuangco, Jr. coveted the coconut levy funds as a
cheap, lucrative and risk-free source of funds with which to exercise his
private option to buy the controlling interest in FUB.
(ii) to legitimize a posteriori his highly anomalous and irregular use and
diversion of government funds to advance his own private and
commercial interests Defendant Eduardo Cojuangco, Jr. caused the
issuance of PD 755 (a) declaring that the coconut levy funds shall not
be considered special and fiduciary and trust funds conveniently
repealing for that purpose a series of previous decrees establishing the
character of the coconut levy funds as special, fiduciary, trust and
governments; (b) confirming the agreement between Cojuangco and
PCA on the purchase of FUB by incorporating by reference said private
commercial agreement in PD 755;
(iii).
(iv) To perpetuate his opportunity to build his economic empire, Cojuangco
caused the issuance of an unconstitutional decree (PD 1468) requiring
the deposit of all coconut levy funds with UCPB interest free to the
prejudice of the government and finally
(v) Having fully established himself as the undisputed coconut king with
unlimited powers to deal with the coconut levy funds, the stage was now
set for Defendant Eduardo Cojuangco, Jr. to launch his predatory forays
into almost all aspects of Philippine activity namely . oil mills.
(vi) In gross violation of their fiduciary positions and in contravention of the
goal to create a bank for coconut farmers of the country, the capital stock
of UCPB as of February 25, 1986 was actually held by the defendants,
their lawyers, factotum and business associates, thereby finally gaining
control of the UCPB by misusing the names and identities of the so-
called more than one million coconut farmers.

(b) created and/or funded with the use of coconut levy funds various
corporations, such as (COCOFED) with the active collaboration and participation
of Defendants Juan Ponce Enrile, Maria Clara Lobregat most of whom comprised
the interlocking officers and directors of said companies; dissipated, misused
and/or misappropriated a substantial part of said coco levy funds FINALLY GAIN
OWNERSHIP AND CONTROL OF THE UNITED COCONUT PLANTERS
BANK BY MISUSING THE NAMES AND/OR IDENTIFIES OF THE SO-
CALLLED MORE THAN ONE MILLION COCONUT FARNMERS;

(c) misappropriated, misused and dissipated P840 million of the (CIDF)

levy funds deposited with the National Development Corporation (NIDC) as

843
administrator trustee of said funds and later with UCPB, of which Defendant
Eduardo Cojuangco, Jr. was the Chief Executive Officer.

(d) established and caused to be funded with coconut levy fundfs, with the
active collaboration of Defendants Ferdinand E. Marcos through the issuance of
LOI 926 and of [other] defendants the United Coconut Oil Mills, Inc., a corporation
controlled by Defendant Eduardo Cojuangco, Jr. and bought sixteen (16) certain
competing oil mills at exorbitant prices then mothballed them.

(i) misused coconut levy funds to buy majority of the outstanding shares of
stock of San Miguel Corporation.

14. Defendants Eduardo Cojuangco, Jr. of the Angara Concepcion Cruz

Regala and Abello law offices (ACCRA) plotted, devised, schemed, conspired and
confederated with each other in setting up, through the use of the coconut levy funds
the financial and corporate structures that led to the establishment of UCPB
UNICOM [etc.] and more than twenty other coconut levy funded corporations
including the acquisition of [SMC] shares and its institutionalization through
presidential directives of the coconut monopoly.

16. The acts of Defendants, singly or collectively, and /or in unlawful

concert with one another, constitute gross abuse of official position and authority,
flagrant breach of public trust and fiduciary obligations, brazen abuse of right and
power, unjust enrichment, violation of the Constitution and laws to the grave and
irreparable damage of the Plaintiff and the Filipino people.

CC No. 0033-F

12. Defendant Eduardo Cojuangco, Jr., served as a public officer during the
Marcos administration.

13. Having fully established himself as the undisputed coconut king with
unlimited powers to deal with the coconut levy funds, the stage was now set for
Cojuangco, Jr. to launch his predatory forays into almost all aspects of Philippine
economic activity namely oil mills .

14. Defendant Eduardo Cojuangco, Jr., taking undue advantage of his

association, influence, and connection, acting in unlawful concert with Defendants

844
Ferdinand E. Marcos and Imelda R. Marcos, and the individual defendants,
embarked upon devices, schemes and stratagems, including the use of defendant
corporations as fronts, to unjustly enrich themselves at the expense of Plaintiff and
the Filipino people.

(a) Having control over the coconut levy, Defendant Eduardo M.

Cojuangco invested the funds in diverse activities, such as the various
businesses SMC was engaged in.;

(c) Later that year [1983], Cojuangco also acquired the Soriano stocks
through a series of complicated and secret agreements, a key feature of
which was a voting trust agreement that stipulated that Andres, Jr. or his
heir would proxy over the vote of the shares owned by Soriano and
Cojuangco.

(g) All together, Cojuangco purchased 33 million shares of the SMC through
the 14 holding companies

3.1. The same fourteen companies were in turn owned by the six (6)
so-called CIIF Companies.

(h) Defendant Corporations are but shell corporations owned by

interlocking shareholders who have previously admitted that they are
just nominee stockholders who do not have any proprietary interest over
the shares in their names. [L]awyers of the Angara Abello Concepcion
Regala & Cruz (ACCRA) Law offices, the previous counsel who
incorporated said corporations, prove that they were merely nominee
stockholders thereof.

(l) These companies, which ACCRA Law Offices organized for Defendant
Cojuangco to be able to control more than 60% of SMC shares, were
funded by institutions which depended upon the coconut levy such as
the UCPB, UNICOM, (COCOLIFE), among others. Cojuangco and his
ACCRA lawyers used the funds from 6 large coconut oil mills and 10
copra trading companies to borrow money from the UCPB and purchase
these holding companies and the SMC stocks. Cojuangco used $ 150
million from the coconut levy, broken down as follows:

Amount Source Purpose

(in million)

845
 $ 22.26 Oil Mills equity in holding
Companies

$ 65.6 Oil Mills loan to holding

Companies

$ 61.2 UCPB loan to holding

Companies [164]

The entire amount, therefore, came from the coconut levy, some passing
through the Unicom Oil mills, others directly from the UCPB.

(m) With his entry into the said Company, it began to get favors from the
Marcos government, significantly the lowering of the excise taxes on
beer, one of the main products of SMC.

15. Defendants plotted, devised, schemed, conspired and confederated with

each other in setting up, through the use of coconut levy funds, the financial and
corporate framework and structures that led to the establishment of UCPB, [etc.],
and more than twenty other coconut levy-funded corporations, including the
acquisition of [SMC] shares and its institutionalization through presidential
directives of the coconut monopoly.

16. The acts of Defendants, singly or collectively, and/or in unlawful

concert with one another, constitute gross abuse of official position and authority,
flagrant breach of public trust and fiduciary obligations, brazen abuse of right and
power, unjust enrichment, violation of the constitution and laws of the Republic of
the Philippines, to the grave and irreparable damage of Plaintiff and the Filipino
people.1203

Judging from the allegations of the defendants illegal acts thereat made, it is fairly obvious
that both CC Nos. 0033-A and CC 0033-F partake, in the context of EO Nos. 1, 2 and 14, series
of 1986, the nature of ill-gotten wealth suits. Both deal with the recovery of sequestered shares,
property or business enterprises claimed, as alleged in the corresponding basic complaints, to be
ill-gotten assets of President Marcos, his cronies and nominees and acquired by taking undue
advantage of relationships or influence and/or through or as a result of improper use, conversion
or diversion of government funds or property. Recovery of these assetsdetermined as shall

1203
See PSJ-F, pp. 5-9.

846
hereinafter be discussed as prima facie ill-gottenfalls within the unquestionable jurisdiction of the
Sandiganbayan.1204

P.D. No. 1606, as amended by R.A. 7975 and E.O. No. 14, Series of 1986, vests the
Sandiganbayan with, among others, original jurisdiction over civil and criminal cases instituted
pursuant to and in connection with E.O. Nos. 1, 2, 14 and 14-A. Correlatively, the PCGG Rules
and Regulations defines the term Ill-Gotten Wealth as any asset, property, business enterprise or
material possession of persons within the purview of [E.O.] Nos. 1 and 2, acquired by them
directly, or indirectly thru dummies, nominees, agents, subordinates and/or business associates
by any of the following means or similar schemes:

(1) Through misappropriation, conversion, misuse or malversation of

public funds or raids on the public treasury;

(2) .;

(3) By the illegal or fraudulent conveyance or disposition of assets

belonging to the government or any of its subdivisions, agencies or
instrumentalities or government-owned or controlled corporations;
(4) By obtaining, receiving or accepting directly or indirectly any shares
of stock, equity or any other form of interest or participation in any business
enterprise or undertaking;

(5) Through the establishment of agricultural, industrial or commercial

monopolies or other combination and/or by the issuance, promulgation
and/or implementation of decrees and orders intended to benefit particular
persons or special interests; and

(6) By taking undue advantage of official position, authority,

relationship or influence for personal gain or benefit.1205 (Emphasis
supplied)

Section 2(a) of E.O. No. 1 charged the PCGG with the task of assisting the President in
[T]he recovery of all ill-gotten wealth accumulated by former [President] Marcos, his immediate
family, relatives, subordinates and close associates including the takeover or sequestration of all
business enterprises and entities owned or controlled by them, during his administration, directly

1204
San Miguel Corporation v. Sandiganbayan, G.R. Nos. 104637-38, September 14, 2000, 340 SCRA 289.
1205
Section 1.

847
or through nominees, by taking undue advantage of their public office and/or using their powers,
authority, influence, connections or relationship. Complementing the aforesaid Section 2(a) is
Section 1 of E.O. No. 2 decreeing the freezing of all assets in which the [Marcoses] their close
relatives, subordinates, business associates, dummies, agents or nominees have any interest or
participation.

The Republics averments in the amended complaints, particularly those detailing the
alleged wrongful acts of the defendants, sufficiently reveal that the subject matter thereof
comprises the recovery by the Government of ill-gotten wealth acquired by then President Marcos,
his cronies or their associates and dummies through the unlawful, improper utilization or diversion
of coconut levy funds aided by P.D. No. 755 and other sister decrees. President Marcos himself
issued these decrees in a brazen bid to legalize what amounts to private taking of the said public
funds.

Petitioners COCOFED et al. and Ursua, however, would insist that the Republic has failed
to prove the jurisdiction facts: that the sequestered assets indeed constitute ill-gotten wealth as
averred in the amended subdivided complaints.

This contention is incorrect.

There was no actual need for Republic, as plaintiff a quo, to adduce evidence to show that
the Sandiganbayan has jurisdiction over the subject matter of the complaints as it leaned on the
averments in the initiatory pleadings to make visible the jurisdiction of the Sandiganbayan over
the ill-gotten wealth complaints. As previously discussed, a perusal of the allegations easily reveals
the sufficiency of the statement of matters disclosing the claim of the government against the coco
levy funds and the assets acquired directly or indirectly through said funds as ill-gotten wealth.
Moreover, the Court finds no rule that directs the plaintiff to first prove the subject matter
jurisdiction of the court before which the complaint is filed. Rather, such burden falls on the
shoulders of defendant in the hearing of a motion to dismiss anchored on said ground or a
preliminary hearing thereon when such ground is alleged in the answer.

848
 COCOFED et al. and Ursuas reliance on Manila Electric Company [Meralco] v.
Ortanez1206 is misplaced, there being a total factual dissimilarity between that and the case at bar.
Meralco involved a labor dispute before the Court of Industrial Relations (CIR) requiring the
interpretation of a collective bargaining agreement to determine which between a regular court and
CIR has jurisdiction. There, it was held that in case of doubt, the case may not be dismissed for
failure to state a cause of action as jurisdiction of CIR is not merely based on the allegations of the
complaint but must be proved during the trial of the case. The factual milieu of Meralco shows
that the said procedural holding is peculiar to the CIR. Thus, it is not and could not be a precedent
to the cases at bar.

Even PCGG v. Nepomuceno1207 is not on all fours with the cases at bench, the issue therein
being whether the regional trial court has jurisdiction over the PCGG and sequestered properties,
vis--vis the present cases, which involve an issue concerning the Sandiganbayans jurisdiction. Like
in Meralco, the holding in Nepomuceno is not determinative of the outcome of the cases at bar.

While the 1964 Meralco and the Nepomuceno cases are inapplicable, the Courts ruling in
Tijam v. Sibonhonoy1208 is the leading case on estoppel relating to jurisdiction. In Tijam, the Court
expressed displeasure on the undesirable practice of a party submitting his case for decision and
then accepting judgment, only if favorable, and then attacking it for lack of jurisdiction, when
adverse.

Considering the antecedents of CC Nos. 0033-A and 0033-F, COCOFED, Lobregat,

Ballares, et al. and Ursua are already precluded from assailing the jurisdiction of the
Sandiganbayan. Remember that the COCOFED and the Lobregat group were not originally
impleaded as defendants in CC No. 0033. They later asked and were allowed by the Sandiganbayan
to intervene. If they really believe then that the Sandiganbayan is without jurisdiction over the
subject matter of the complaint in question, then why intervene in the first place? They could have
sat idly by and let the proceedings continue and would not have been affected by the outcome of

1206
Meralco v. Ortaez, 119 Phil. 911 (1964).
1207
G.R. No. 78750, April 20, 1990, 184 SCRA 449.
1208
No. L-21450, April 15, 1968, 23 SCRA 30.

849
the case as they can challenge the jurisdiction of the Sandiganbayan when the time for
implementation of the flawed decision comes. More importantly, the decision in the case will have
no effect on them since they were not impleaded as indispensable parties. After all, the joinder of
all indispensable parties to a suit is not only mandatory, but jurisdictional as well.1209 By their
intervention, which the Sandiganbayan allowed per its resolution dated September 30, 1991,
COCOFED and Ursua have clearly manifested their desire to submit to the jurisdiction of the
Sandiganbayan and seek relief from said court. Thereafter, they filed numerous pleadings in the
subdivided complaints seeking relief and actively participated in numerous proceedings. Among
the pleadings thus filed are the Oppositions to the Motion for Intervention interposed by the
Pambansang Koalisyon ng mga Samahang Magsasaka at Manggagawa sa Niyogan and Gabay ng
Mundo sa Kaunlaran Foundation, Inc., a Class Action Omnibus Motion to enjoin the PCGG from
voting the SMC shares dated February 23, 2001 (granted by Sandiganbayan) and the Class Action
Motion for a Separate Summary Judgment dated April 11, 2001. By these acts, COCOFED et al.
are now legally estopped from asserting the Sandiganbayns want of jurisdiction, if that be the case,
over the subject matter of the complaint as they have voluntarily yielded to the jurisdiction of the
Sandiganbayan. Estoppel has now barred the challenge on Sandiganbayans jurisdiction.

The ensuing excerpts from Macahilig v. Heirs of Magalit1210 are instructive:

We cannot allow her to attack its jurisdiction simply because it rendered a Decision
prejudicial to her position. Participation in all stages of a case before a trial court
effectively estops a party from challenging its jurisdiction. One cannot belatedly
reject or repudiate its decision after voluntarily submitting to its jurisdiction, just to
secure affirmative relief against ones opponent or after failing to obtain such relief.
If, by deed or conduct, a party has induced another to act in a particular manner,
estoppel effectively bars the former from adopting an inconsistent position, attitude
or course of conduct that thereby causes loss or injury to the latter.

Lest it be overlooked, this Court has already decided that the sequestered shares are prima
facie ill-gotten wealth rendering the issue of the validity of their sequestration and of the

1209
See Pascual v. Robles, G.R. No. 182645, December 15, 2010, 638 SCRA 712, 719.
1210
G.R. No. 141423, November 15, 2000, 344 SCRA 838.

850
jurisdiction of the Sandiganbayan over the case beyond doubt. In the case of COCOFED v.
PCGG,1211 We stated that:

It is of course not for this Court to pass upon the factual issues thus raised.
That function pertains to the Sandiganbayan in the first instance. For purposes of
this proceeding, all that the Court needs to determine is whether or not there is
prima facie justification for the sequestration ordered by the PCGG. The Court is
satisfied that there is. The cited incidents, given the public character of the
coconut levy funds, place petitioners COCOFED and its leaders and officials,
at least prima facie, squarely within the purview of Executive Orders Nos. 1,
2 and 14, as construed and applied in BASECO, to wit:

1. that ill-gotten properties (were) amassed by the leaders and supporters of

the previous regime;

a. more particularly, that (i)ll-gotten wealth was accumulated by Marcos,

his immediate family, relatives, subordinates and close associates, . (and) business
enterprises and entities (came to be) owned or controlled by them, during (the
Marcos) administration, directly or through nominees, by taking undue advantage
of their public office and using their powers, authority, influence, connections or
relationships;

b. otherwise stated, that there are assets and properties purportedly

pertaining to [the Marcoses], their close relatives, subordinates, business
associates, dummies, agents or nominees which had been or were acquired by them
directly or indirectly, through or as a result of the improper or illegal use of funds
or properties owned by the Government or any of its branches, instrumentalities,
enterprises, banks or financial institutions, or by taking undue advantage of their
office, authority, influence, connections or relationship, resulting in their unjust
enrichment .;

2. The petitioners claim that the assets acquired with the coconut levy funds
are privately owned by the coconut farmers is founded on certain provisions of law,
to wit [Sec. 7, RA 6260 and Sec. 5, Art. III, PD 1468] (Words in bracket added;
italics in the original).

In their attempt to dismiss the amended complaints in question, petitioners asseverate that
(1) the coconut farmers cannot be considered as subordinates, close and/or business associates,
dummies, agents and nominees of Cojuangco, Jr. or the Marcoses, and (2) the sequestered shares

1211
G.R. No. 75713, October 2, 1989, 178 SCRA 237, 250-252.

851
were not illegally acquired nor acquired through or as result of improper or illegal use or
conversion of funds belonging to the Government. While not saying so explicitly, petitioners are
doubtless conveying the idea that wealth, however acquired, would not be considered ill-gotten in
the context of EO 1, 2 and 14, s. of 1986, absent proof that the recipient or end possessor thereof
is outside the Marcos circle of friends, associates, cronies or nominees.

We are not convinced.

As may be noted, E.O. 1 and 2 advert to President Marcos, or his associates nominees. In
its most common signification, the term nominee refers to one who is designated to act for another
1212
usually in a limited way; a person in whose name a stock or bond certificate is registered but
who is not the actual owner thereof is considered a nominee.1213 Corpus Juris Secundum describes
a nominee as one:

designated to act for another as his representative in a rather limited sense.

It has no connotation, however, other than that of acting for another, in
representation of another or as the grantee of another. In its commonly accepted
meaning the term connoted the delegation of authority to the nominee in a
representative or nominal capacity only, and does not connote the transfer or
assignment to the nominee of any property in, or ownership of, the rights of the
person nominating him.1214

So, the next question that comes to the fore is: would the term nominee include the more
than one million coconut farmers alleged to be the recipients of the UCPB shares?

Guided by the foregoing definitions, the query must be answered in the affirmative if only
to give life to those executive issuances aimed at ensuring the recovery of ill-gotten wealth. It is
basic, almost elementary, that:
Laws must receive a sensible interpretation to promote the ends for which
they are enacted. They should be so given reasonable and practical construction as
will give life to them, if it can be done without doing violence to reason.
Conversely, a law should not be so construed as to allow the doing of an act which

1212
BLACKS LAW DICTIONARY 1050 (6th ed., 1990).
1213
WEBSTERS THIRD NEW INTERNATIONAL DICTIONARY (1981 ed.).
1214
66 C.J.S. 600.

852
 is prohibited by law, not so interpreted as to afford an opportunity to defeat
compliance with its terms, create an inconsistency, or contravene the plain words
of the law. Interpretatio fienda est ut res magis valeat quam pereat or that
interpretation as will give the thing efficacy is to be adopted.1215

E.O. 1, 2, 14 and 14-A, it bears to stress, were issued precisely to effect the recovery of ill-
gotten assets amassed by the Marcoses, their associates, subordinates and cronies, or through their
nominees. Be that as it may, it stands to reason that persons listed as associated with the
Marcoses1216 refer to those in possession of such ill-gotten wealth but holding the same in behalf
of the actual, albeit undisclosed owner, to prevent discovery and consequently recovery. Certainly,
it is well-nigh inconceivable that ill-gotten assets would be distributed to and left in the hands of
individuals or entities with obvious traceable connections to Mr. Marcos and his cronies. The Court
can take, as it has in fact taken, judicial notice of schemes and machinations that have been put in
place to keep ill-gotten assets under wraps. These would include the setting up of layers after layers
of shell or dummy, but controlled, corporations1217 or manipulated instruments calculated to
confuse if not altogether mislead would-be investigators from recovering wealth deceitfully
amassed at the expense of the people or simply the fruits thereof. Transferring the illegal assets to
third parties not readily perceived as Marcos cronies would be another. So it was that in PCGG v.
Pena, the Court, describing the rule of Marcos as a well entrenched plundering regime of twenty
years, noted the magnitude of the past regimes organized pillage and the ingenuity of the
plunderers and pillagers with the assistance of experts and the best legal minds in the market.1218

Hence, to give full effect to E.O. 1, 2 and 14, s. of 1986, the term nominee, as used in the
above issuances, must be taken to mean to include any person or group of persons, natural or
juridical, in whose name government funds or assets were transferred to by Pres. Marcos, his
cronies or his associates. To this characterization must include what the Sandiganbayan considered
the unidentified coconut farmers, more than a million of faceless and nameless coconut farmers,
the alleged beneficiaries of the distributed UCPB shares, who, under the terms of Sec. 10 of
PCA A.O. No. 1, s. of 1975, were required, upon the delivery of their respective stock

1215
Agpalo, STATUTORY CONSTRUCTION 259 (4th ed., 1998).
1216
Their close relatives, subordinates, business associates, dummies, agents or nominees.
1217
Yuchengco v. Sandiganbayan, G.R. No. 149802, January 20, 2006, 479 SCRA 1.
1218
No. L-77663, April 12, 1988, 159 SCRA 556, 574.

853
certificates, to execute an irrevocable proxy in favor of the Banks manager. There is thus
ample truth to the observations - [That] the PCA provided this condition only indicates that the
PCA had no intention to constitute the coconut farmer UCPB stockholder as a bona fide
stockholder; that the 1.5 million registered farmer-stockholders were mere nominal
stockholders.1219

From the foregoing, the challenge on the Sandiganbayans subject matter jurisdiction at bar
must fail.

II

Petitioners COCOFED et al. were not

deprived of their right to be heard.

As a procedural issue, COCOFED, et al. and Ursua next contend that in the course of
almost 20 years that the cases have been with the anti-graft court, they have repeatedly sought
leave to adduce evidence (prior to respondents complete presentation of evidence) to prove the
coco farmers actual and beneficial ownership of the sequestered shares. The Sandiganbayan,
however, had repeatedly and continuously disallowed such requests, thus depriving them of their
constitutional right to be heard.

This contention is untenable, their demand to adduce evidence being disallowable on the
ground of prematurity.

The records reveal that the Republic, after adducing its evidence in CC No. 0033-A,
subsequently filed a Motion Ad Cautelam for Leave to Present Additional Evidence dated March
28, 2001. This motion remained unresolved at the time the Republic interposed its Motion for
Partial Summary Judgment. The Sandiganbayan granted the later motion and accordingly rendered

1219
Separate concurring opinion in PSJ-A of Associate Justice Villaruz; rollo (G.R. No. 180705), p. 271.

854
the Partial Summary Judgment, effectively preempting the presentation of evidence by the
defendants in said case (herein petitioners COCOFED and Ursua).

Section 5, Rule 30 the Rules of Court clearly sets out the order of presenting evidence:

SEC. 5. Order of trial.Subject to the provisions of section 2 of Rule 31, and

unless the court for special reasons otherwise directs, the trial shall be limited to
the issues stated in the pre-trial order and shall proceed as follows:

(a) The plaintiff shall adduce evidence in support of his complaint;

(b) The defendant shall then adduce evidence in support of his

defense, counterclaim, cross-claim and third-party complaint;

(g) Upon admission of the evidence, the case shall be deemed

submitted for decision, unless the court directs the parties to argue or to
submit their respective memoranda or any further pleadings.

If several defendants or third-party defendants, and so forth. having separate

defenses appear by different counsel, the court shall determine the relative order of
presentation of their evidence. (Emphasis supplied.)

Evidently, for the orderly administration of justice, the plaintiff shall first adduce evidence
in support of his complaint and after the formal offer of evidence and the ruling thereon, then
comes the turn of defendant under Section 3 (b) to adduce evidence in support of his defense,
counterclaim, cross-claim and third party complaint, if any. Deviation from such order of trial is
purely discretionary upon the trial court, in this case, the Sandiganbayan, which cannot be
questioned by the parties unless the vitiating element of grave abuse of discretion supervenes.
Thus, the right of COCOFED to present evidence on the main case had not yet ripened. And the

855
rendition of the partial summary judgments overtook their right to present evidence on their
defenses.

It cannot be stressed enough that the Republic as well as herein petitioners were well within
their rights to move, as they in fact separately did, for a partial summary judgment. Summary
judgment may be allowed where, save for the amount of damages, there is, as shown by affidavits
and like evidentiary documents, no genuine issue as to any material fact and the moving party is
entitled to a judgment as a matter of law. A genuine issue, as distinguished from one that is
fictitious, contrived and set up in bad faith, means an issue of fact that calls for the presentation of
evidence.1220 Summary or accelerated judgment, therefore, is a procedural technique aimed at
weeding out sham claims or defenses at an early stage of the litigation.1221 Sections 1, 2 and 4 of
Rule 35 of the Rules of Court on Summary Judgment, respectively provide:

SECTION 1. Summary judgment for claimant.A party seeking to recover

upon a claim, counterclaim, or cross-claim may, at any time after the pleading in
answer thereto has been served, move with supporting affidavits, depositions or
admissions for a summary judgment in his favor upon all or any part thereof.

SEC. 2. Summary judgment for defending party.A party against whom a

claim, counterclaim or cross-claim is asserted is sought may, at any time, move
with supporting affidavits, depositions or admissions for a summary judgment in
his favor as to all or any part thereof.

SEC. 4. Case not fully adjudicated on motion.If on motion under this Rule,
judgment is not rendered upon the whole case or for all the reliefs sought and a trial
is necessary, the court at the hearing of the motion, by examining the pleadings and
the evidence before it and by interrogating counsel shall ascertain what material
facts exist without substantial controversy and what are actually and in good faith
controverted. It shall thereupon make an order specifying the facts that appear
without substantial controversy, including the extent to which the amount of
damages or other relief is not in controversy, and directing such further proceedings
in the action as are just. The facts so specified shall be deemed established, and the
trial shall be conducted on the controverted facts accordingly.

Clearly, petitioner COCOFEDs right to be heard had not been violated by the mere issuance
of PSJ-A and PSJ-F before they can adduce their evidence.

1220
PNB v. Noahs Ark Sugar Refinery, G.R. No. 107243, September 1, 1993, 226 SCRA 36.
1221
Carcon Development Corp. v. Court of Appeals, G.R. No. 88218, December 19, 1989, 180 SCRA 348.

856
 As it were, petitioners COCOFED et al. were able to present documentary evidence in
conjunction with its Class Action Omnibus Motion dated February 23, 2001 where they appended
around four hundred (400) documents including affidavits of alleged farmers. These petitioners
manifested that said documents comprise their evidence to prove the farmers ownership of the
UCPB shares, which were distributed in accordance with valid and existing laws.1222

Lastly, COCOFED et al. even filed their own Motion for Separate Summary Judgment, an
event reflective of their admission that there are no more factual issues left to be determined at the
level of the Sandiganbayan. This act of filing a motion for summary judgment is a judicial
admission against COCOFED under Section 26, Rule 130 which declares that the act, declaration
or omission of a party as to a relevant fact may be given in evidence against him.

Viewed in this light, the Court has to reject petitioners self-serving allegations about being
deprived the right to adduce evidence.

III

The right to speedy trial was not violated.

This brings to the fore the alleged violation of petitioners right to a speedy trial and speedy
disposition of the case. In support of their contention, petitioners cite Licaros v.
Sandiganbayan,1223 where the Court dismissed the case pending before the Sandiganbayan for
violation of the accuseds right to a speedy trial.

It must be clarified right off that the right to a speedy disposition of case and the accuseds
right to a speedy trial are distinct, albeit kindred, guarantees, the most obvious difference being
that a speedy disposition of cases, as provided in Article III, Section 16 of the Constitution, obtains
regardless of the nature of the case:

1222
Republic v. COCOFED, et al., TSN, April 17, 2001, p. 198.
1223
G.R. No. 145851, November 22, 2001, 370 SCRA 394.

857
 Section 16. All persons shall have the right to a speedy disposition of their
cases before all judicial, quasi-judicial, or administrative bodies.

In fine, the right to a speedy trial is available only to an accused and is a peculiarly criminal
law concept, while the broader right to a speedy disposition of cases may be tapped in any
proceedings conducted by state agencies. Thus, in Licaros the Court dismissed the criminal case
against the accused due to the palpable transgression of his right to a speedy trial.

In the instant case, the appropriate right involved is the right to a speedy disposition of
cases, the recovery of ill-gotten wealth being a civil suit.

Nonetheless, the Court has had the occasion to dismiss several cases owing to the
infringement of a partys right to a speedy disposition of cases.1224 Dismissal of the case for
violation of this right is the general rule. Bernat v. The Honorable Sandiganbayan (5th Division)1225
expounds on the extent of the right to a speedy disposition of cases as follows:

Section 16 of Article III of the Constitution guarantees the right of all

persons to a speedy disposition of their cases. Nevertheless, this right is deemed
violated only when the proceedings are attended by vexatious, capricious and
oppressive delays. Moreover, the determination of whether the delays are of said
nature is relative and cannot be based on a mere mathematical reckoning of time.
Particular regard must be taken of the facts and circumstances peculiar to each case.
As a guideline, the Court in Dela Pea v. Sandiganbayan mentioned certain factors
that should be considered and balanced, namely: 1) length of delay; 2) reasons for
the delay; 3) assertion or failure to assert such right by the accused; and 4) prejudice
caused by the delay.

While this Court recognizes the right to speedy disposition quite distinctly
from the right to a speedy trial, and although this Court has always zealously
espoused protection from oppressive and vexatious delays not attributable to the
party involved, at the same time, we hold that a partys individual rights should not

1224
Enriquez v. Office of the Ombudsman, G.R. Nos. 174902-06, February 15, 2008, 545 SCRA 618; Lopez,
Jr. v. Office of the Ombudsman, G.R. No. 140529, September 6, 2001, 364 SCRA 569; Roque v. Office of the
Ombudsman, G.R. No. 129978, May 12, 1999, 307 SCRA 104; Duterte v. Sandiganbayan, G.R. No. 130191, April
27, 1998, 289 SCRA 721; Tatad v. Sandiganbayan, Nos. L-72335-39, March 21, 1988, 159 SCRA 70.
1225
G.R. No. 158018, May 20, 2004, 428 SCRA 787, 789-790.

858
 work against and preclude the peoples equally important right to public justice. In
the instant case, three people died as a result of the crash of the airplane that the
accused was flying. It appears to us that the delay in the disposition of the case
prejudiced not just the accused but the people as well. Since the accused has
completely failed to assert his right seasonably and inasmuch as the respondent
judge was not in a position to dispose of the case on the merits we hold it proper
and equitable to give the parties fair opportunity to obtain substantial justice in the
premises.

The more recent case of Tello v. People1226 laid stress to the restrictive dimension to the
right to speedy disposition of cases, i.e., it is lost unless seasonably invoked:

In Bernat , the Court denied petitioners claim of denial of his right to a

speedy disposition of cases considering that [he] chose to remain silent for eight
years before complaining of the delay in the disposition of his case. The Court ruled
that petitioner failed to seasonably assert his right and he merely sat and waited
from the time his case was submitted for resolution. In this case, petitioner similarly
failed to assert his right to a speedy disposition of his case. He only invoked his
right to a speedy disposition of cases after [his conviction]. Petitioners silence may
be considered as a waiver of his right.

An examination of the petitioners arguments and the cited indicia of delay would reveal
the absence of any allegation that petitioners moved before the Sandiganbayan for the dismissal of
the case on account of vexatious, capricious and oppressive delays that attended the proceedings.
Following Tello, petitioners are deemed to have waived their right to a speedy disposition of the
case. Moreover, delays, if any, prejudiced the Republic as well. What is more, the alleged breach
of the right in question was not raised below. As a matter of settled jurisprudence, but subject to
equally settled exception, an issue not raised before the trial court cannot be raised for the first
time on appeal.1227 The sporting idea forbidding one from pulling surprises underpins this rule. For
these reasons, the instant case cannot be dismissed for the alleged violation of petitioners right to
a speedy disposition of the case.

IV
Sections 1 and 2 of P.D. No. 755, Article III, Section 5 of P.D. No. 961 and Article III,
Section 5 of P.D. No. 1468, are unconstitutional.

1226
G.R. No. 165781, June 5, 2009, 588 SCRA 519, 527-528.
1227
Heirs of Bernardo Ulep v. Ducat, G.R. No. 159284, January 27, 2009, 577 SCRA 6, 19.

859
The Court may pass upon the constitutionality of P.D.
Nos. 755, 961 and 1468.

Petitioners COCOFED et al. and Ursua uniformly scored the Sandiganbayan for abusing
its power of judicial review and wrongly encroaching into the exclusive domain of Congress when
it declared certain provisions of the coconut levy laws and PCA administrative issuances as
unconstitutional.

We are not persuaded.

It is basic that courts will not delve into matters of constitutionality unless unavoidable,
when the question of constitutionality is the very lis mota of the case, meaning, that the case cannot
be legally resolved unless the constitutional issue raised is determined. This rule finds anchorage
on the presumptive constitutionality of every enactment. Withal, to justify the nullification of a
statute, there must be a clear and unequivocal breach of the Constitution. A doubtful or speculative
infringement would simply not suffice.1228

Just as basic is the precept that lower courts are not precluded from resolving, whenever
warranted, constitutional questions, subject only to review by this Court.

To Us, the present controversy cannot be peremptorily resolved without going into the
constitutionality of P.D. Nos. 755, 961 and 1468 in particular. For petitioners COCOFED et al.
and Ballares et al. predicate their claim over the sequestered shares and necessarily their cause on
laws and martial law issuances assailed by the Republic on constitutional grounds. Indeed, as aptly
observed by the Solicitor General, this case is for the recovery of shares grounded on the invalidity
of certain enactments, which in turn is rooted in the shares being public in character, purchased as
they were by funds raised by the taxing and/or a mix of taxing and police powers of the state.1229
As may be recalled, P.D. No. 755, under the policy-declaring provision, authorized the distribution
of UCPB shares of stock free to coconut farmers. On the other hand, Section 2 of P.D. No. 755,

1228
Garcia v. Executive Secretary, G.R. No. 157584, April 2, 2009, 583 SCRA 119, 138-39.
1229
Sur-Rejoinder, p. 17, rollo (G.R. Nos. 177857-58), p. 846.

860
hereunder quoted below, effectively authorized the PCA to utilize portions of the CCSF to pay the
financial commitment of the farmers to acquire UCPB and to deposit portions of the CCSF levies
with UCPB interest free. And as there also provided, the CCSF, CIDF and like levies that PCA is
authorized to collect shall be considered as non-special or fiduciary funds to be transferred to the
general fund of the Government, meaning they shall be deemed private funds.

Section 2 of P.D. No. 755 reads:

Section 2. Financial Assistance. To enable the coconut farmers to comply

with their contractual obligations under the aforesaid Agreement, the [PCA] is
hereby directed to draw and utilize the collections under the [CCSF]
authorized to be levied by [PD] No. 232, as amended, to pay for the financial
commitments of the coconut farmers under the said agreement and, except for
[PCAs] budgetary requirements , all collections under the [CCSF] Levy and (50%)
of the collections under the [CIDF] shall be deposited, interest free, with the said
bank of the coconut farmers and such deposits shall not be withdrawn until the the
bank has sufficient equity capital ; and since the operations, and activities of the
[PCA] are all in accord with the present social economic plans and programs of the
Government, all collections and levies which the [PCA] is authorized to levy
and collect such as but not limited to the [CCS Levy] and the [CIDF] shall not
be considered or construed, under any law or regulation, special and/or
fiduciary funds and do not form part of the general funds of the national
government within the contemplation of [P.D.] No. 711. (Emphasis supplied)

A similar provision can also be found in Article III, Section 5 of P.D. No. 961 and Article
III, Section 5 of P.D. No. 1468, which We shall later discuss in turn:

P.D. No. 961

Section 5. Exemptions. The Coconut Consumers Stabilization Fund and the

Coconut Industry Development Fund as well as all disbursements of said funds
for the benefit of the coconut farmers as herein authorized shall not be
construed or interpreted, under any law or regulation, as special and/or
fiduciary funds, or as part of the general funds of the national government
within the contemplation of P.D. No. 711; nor as a subsidy, donation, levy,

861
 government funded investment, or government share within the contemplation of
P.D. 898, the intention being that said Fund and the disbursements thereof as
herein authorized for the benefit of the coconut farmers shall be owned by
them in their own private capacities.1230 (Emphasis Ours)

P.D. No. 1468

Section 5. Exemptions. The [CCSF] and the [CIDF] as well as all disbursement
as herein authorized, shall not be construed or interpreted, under nay law or
regulation, as special and/or fiduciary funds, or as part of the general funds of
the national government within the contemplation of PD 711; nor as subsidy,
donation, levy government funded investment, or government share within the
contemplation of PD 898, the intention being that said Fund and the
disbursements thereof as herein authorized for the benefit of the coconut
farmers shall be owned by them in their private capacities.1231 (Emphasis Ours.)

In other words, the relevant provisions of P.D. Nos. 755, as well as those of P.D. Nos. 961
and 1468, could have been the only plausible means by which close to a purported million and a
half coconut farmers could have acquired the said shares of stock. It has, therefore, become
necessary to determine the validity of the authorizing law, which made the stock transfer and
acquisitions possible.

To reiterate, it is of crucial importance to determine the validity of P.D. Nos. 755, 961 and
1468 in light of the constitutional proscription against the use of special funds save for the purpose
it was established. Otherwise, petitioners claim of legitimate private ownership over UCPB
shares and indirectly over SMC shares held by UCPBs subsidiaries will have no leg to stand on,
P.D. No. 755 being the only law authorizing the distribution of the SMC and UCPB shares of stock
to coconut farmers, and with the aforementioned provisions actually stating and holding that the
coco levy fund shall not be considered as a special not even general fund, but shall be owned by
the farmers in their private capacities.1232

The Sandiganbayans ensuing ratiocination on the need to pass upon constitutional issues
the Republic raised below commends itself for concurrence:

1230
An Act to Codify the Laws Dealing with the Development of the Coconut and other Palm Oil Industry
and for other Purposes [Presidential Decree No 961], art. III, 5.
1231
Presidential Decree No. 1468, Art. III, Sec. 5.
1232
P.D. No. 755, Sec. 2; P.D. No. 961, Art. III, Sec. 5; P.D. No. 1468, Art. III, Sec. 5.

862
 This Court is convinced of the imperative need to pass upon the issues of
constitutionality raised by Plaintiff. The issue of constitutionality of the
provisions of P.D. No. 755 and the laws related thereto goes to the very core of
Plaintiffs causes of action and defenses thereto. It will serve the best interest of
justice to define this early the legal framework within which this case shall be heard
and tried, taking into account the admission of the parties and the established facts,
particularly those relating to the main substance of the defense of Lobregat,
COCOFED, et al. and Ballares, et al., which is anchored on the laws being
assailed by Plaintiff on constitutional grounds.

The Court is also mindful that lower courts are admonished

to observe a becoming modesty in examining constitutional
questions, but that they are nonetheless not prevented from resolving
the same whenever warranted, subject only to review by the highest
tribunal (Ynot v. Intermediate Appellate Court).

It is true that, as a general rule, the question of constitutionality must be

raised at the earliest opportunity. The Honorable Supreme Court has clearly stated
that the general rule admits of exceptions, thus:

For courts will pass upon a constitutional question only

when presented before it in bona fide cases for determination, and
the fact that the question has not been raised before is not a valid
reason for refusing to allow it to be raised later. It has been held that
the determination of a constitutional question is necessary whenever
it is essential to the decision of the case as where the right of a party
is founded solely on a statute, the validity of which is attacked.

In the case now before us, the allegations of the Subdivided Complaint are
consistent with those in the subject Motion, and they sufficiently raise the issue of
constitutionality of the provisions of laws in question. The Third Amended
Complaint (Subdivided) states:

(ii) to legitimize a posteriori his highly anomalous and

irregular use and diversion of government funds to advance his own
private and commercial interests, Cojuangco, Jr. caused the issuance
of PD 755 (a) declaring that the coconut levy funds shall not be
considered special and fiduciary and trusts funds and do not form
part of the general funds of the National Government, conveniently

863
 repealing for that purpose a series of coconut levy funds as special,
fiduciary, trust and government funds.

(iv) To perpetuate his opportunity to deal with and make use

the coconut levy funds to build his economic empire, Cojuangco, Jr.
caused the issuance by Defendant Ferdinand E. Marcos of an
unconstitutional decree (PD 1468) requiring the deposit of all
coconut levy funds with UCPB, interest free, to the prejudice of the
government.

The above-quoted allegations in the Third Amended Complaint

(Subdivided) already question the legitimacy of the exercise by former President
Marcos of his legislative authority when he issued P.D. Nos. 755 and 1468. The
provision of Sec. 5, Art. III of P.D. 961 is substantially similar to the provisions of
the aforesaid two [PDs]. P.D. No. 755 allegedly legitimized the highly anomalous
and irregular use and diversion of government funds to advance his [defendant
Cojuangcos] own private and commercial interest. The issuance of the said [PD]
which has the force and effect of a law can only be assailed on constitutional
grounds. The merits of the grounds adverted to in the allegations of the Third
Amended Complaint (Subdivided) can only be resolved by this Court by testing the
questioned [PDs], which are considered part of the laws of the land.

As early as June 20, 1989, this Court in its Resolution expressed this Courts
understanding of the import of the allegations of the complaint, as follows:

It is likewise alleged in the Complaint that in order to

legitimize the diversion of funds, defendant Ferdinand E. Marcos
issued the Presidential Decrees referred to by the movants. This is
then the core of Plaintiffs complaint: that, insofar as the coconut
levy is concerned, these decrees had been enacted as tools for the
acquisition of ill-gotten wealth for specific favored individuals.

Even if Plaintiff may not have said so effectively, the

complaint in fact disputes the legitimacy, and, if one pleases, the
constitutionality of such enactments.

The issue is validly raised on the face of the complaint and

defendants must respond to it.

Since the question of constitutionality may be raised even on appeal if the

determination of such a question is essential to the decision of the case, we find
more reason to resolve this constitutional question at this stage of the proceedings,
where the defense is grounded solely on the very laws the constitutionality of
which are being questioned and where the evidence of the defendants would seek

864
 mainly to prove their faithful and good faith compliance with the said laws and their
implementing rules and regulations.1233 (Emphasis added.)

The Courts rulings in COCOFED v. PCGG and Republic

v. Sandiganbayan, as law of the case, are speciously
invoked.

To thwart the ruling on the constitutionality of P.D. Nos. 755, 961 and 1468, petitioners
would sneak in the argument that the Court has, in three separate instances, upheld the validity,
and thumbed down the Republics challenge to the constitutionality, of said laws imposing the
different coconut levies and prescribing the uses of the fund collected. The separate actions of the
Court, petitioners add, would conclude the Sandiganbayan on the issue of constitutionality of said
issuances, following the law-of-the-case principle. Petitioners allege:

Otherwise stated, the decision of this Honorable Court in the COCOFED

Case overruling the strict public fund theory espoused by the Respondent Republic,
upholding the propriety of the laws imposing the collections of the different
Coconut Levies and expressly allowing COCOFED, et al., to prove that the
Sequestered Assets have legitimately become their private properties had become
final and immutable.1234

Petitioners are mistaken.

Yu v. Yu,1235 as effectively reiterated in Vios v. Pantangco,1236 defines and explains the

ramifications of the law of the case principle as follows:

Law of the case has been defined as the opinion delivered on a former
appeal. It is a term applied to an established rule that when an appellate court passes
on a question and remands the case to the lower court for further proceedings, the
question there settled becomes the law of the case upon subsequent appeal. It means
that whatever is once irrevocably established as the controlling legal rule or
decision between the same parties in the same case continues to be the law of the

1233
Rollo (G.R. Nos. 177857-58), pp. 33-37, 237-241.
1234
Id. at 136.
1235
G.R. No. 164915, March 10, 2006, 484 SCRA 485, 497.
1236
G.R. No. 163103, February 6, 2009, 578 SCRA 129, 143.

865
 case, so long as the facts on which such decision was predicated continue to be the
facts of the case before the court.

Otherwise put, the principle means that questions of law that have been previously raised
and disposed of in the proceedings shall be controlling in succeeding instances where the same
legal question is raised, provided that the facts on which the legal issue was predicated continue to
be the facts of the case before the court. Guided by this definition, the law of the case principle
cannot provide petitioners any comfort. We shall explain why.

In the first instance, petitioners cite COCOFED v. PCGG.1237 There, respondent PCGG
questioned the validity of the coconut levy laws based on the limits of the states taxing and police
power, as may be deduced from the ensuing observations of the Court:

. Indeed, the Solicitor General suggests quite strongly that the laws
operating or purporting to convert the coconut levy funds into private funds, are a
transgression of the basic limitations for the licit exercise of the state's taxing and
police powers, and that certain provisions of said laws are merely clever stratagems
to keep away government audit in order to facilitate misappropriation of the funds
in question.

The utilization and proper management of the coconut levy funds, [to
acquire shares of stocks for coconut farmers and workers] raised as they were by
the States police and taxing power are certainly the concern of the Government.
The coconut levy funds are clearly affected with public interest. Until it is
demonstrated satisfactorily that they have legitimately become private funds, they
must prima facie be accounted subject to measures prescribed in EO Nos. 1, 2, and
14 to prevent their concealment, dissipation, etc.1238 [Words in bracket added.]

The issue, therefore, in COCOFED v. PCGG turns on the legality of the transfer of the
shares of stock bought with the coconut levy funds to coconut farmers. This must be distinguished
with the issues in the instant case of whether P.D. No. 755 violated Section 29, paragraph 3 of
Article VI of the 1987 Constitution as well as to whether P.D. No. 755 constitutes undue delegation
of legislative power. Clearly, the issues in both sets of cases are so different as to preclude the
application of the law of the case rule.

1237
Supra note 16.
1238
Id. at 252.

866
 The second and third instances that petitioners draw attention to refer to the rulings in
Republic v. Sandiganbayan, where the Court by Resolution of December 13, 1994, as reiterated in
another resolution dated March 26, 1996, resolved to deny the separate motions of the Republic to
resolve legal questions on the character of the coconut levy funds, more particularly to declare as
unconstitutional (a) coconut levies collected pursuant to various issuances as public funds and (b)
Article III, Section 5 of P.D. No. 1468.

Prescinding from the foregoing considerations, petitioners would state: Having filed at
least three (3) motions seeking, among others, to declare certain provisions of the Coconut Levy
Laws unconstitutional and having been rebuffed all three times by this Court, the Republic - and
necessarily Sandiganbayan should have followed as [they were] legally bound by this Courts prior
determination on that above issue of constitutionality under the doctrine of Law of the Case.

Petitioners are wrong. The Court merely declined to pass upon the constitutionality of the
coconut levy laws or some of their provisions. It did not declare that the UCPB shares acquired
with the use of coconut levy funds have legitimately become private.

The coconut levy funds are in the nature of taxes and can
only be used for public purpose. Consequently, they
cannot be used to purchase shares of stocks to be given
for free to private individuals.

Indeed, We have hitherto discussed, the coconut levy was imposed in the exercise of the
States inherent power of taxation. As We wrote in Republic v. COCOFED:1239

Indeed, coconut levy funds partake of the nature of taxes, which, in

general, are enforced proportional contributions from persons and properties,
exacted by the State by virtue of its sovereignty for the support of government and
for all public needs.

Based on its definition, a tax has three elements, namely: a) it is an enforced

proportional contribution from persons and properties; b) it is imposed by the State

1239
Republic v. COCOFED, G.R. No. 147062-64, December 14, 2001, 372 SCRA 462, 482-84.

867
by virtue of its sovereignty; and c) it is levied for the support of the government.
The coconut levy funds fall squarely into these elements for the following reasons:

(a) They were generated by virtue of statutory enactments imposed on the

coconut farmers requiring the payment of prescribed amounts. Thus, PD No. 276,
which created the Coconut Consumer[s] Stabilization Fund (CCSF), mandated the
following:

a. A levy, initially, of P15.00 per 100 kilograms of copra

resecada or its equivalent in other coconut products, shall be imposed
on every first sale, in accordance with the mechanics established
under RA 6260, effective at the start of business hours on August 10,
1973.

The proceeds from the levy shall be deposited with the

Philippine National Bank or any other government bank to the
account of the Coconut Consumers Stabilization Fund, as a separate
trust fund which shall not form part of the general fund of the
government.

The coco levies were further clarified in amendatory laws, specifically PD

No. 961 and PD No. 1468 in this wise:

The Authority (PCA) is hereby empowered to impose and

collect a levy, to be known as the Coconut Consumers Stabilization
Fund Levy, on every one hundred kilos of copra resecada, or its
equivalent delivered to, and/or purchased by, copra exporters, oil
millers, desiccators and other end-users of copra or its equivalent in
other coconut products. The levy shall be paid by such copra
exporters, oil millers, desiccators and other end-users of copra
or its equivalent in other coconut products under such rules and
regulations as the Authority may prescribe. Until otherwise
prescribed by the Authority, the current levy being collected shall be
continued.

Like other tax measures, they were not voluntary payments or donations by
the people. They were enforced contributions exacted on pain of penal sanctions, as
provided under PD No. 276:

3. Any person or firm who violates any provision of this

Decree or the rules and regulations promulgated thereunder, shall, in
addition to penalties already prescribed under existing administrative
and special law, pay a fine of not less than P2,500 or more than
P10,000, or suffer cancellation of licenses to operate, or both, at the
discretion of the Court.

868
 Such penalties were later amended thus: .

(b) The coconut levies were imposed pursuant to the laws enacted by the
proper legislative authorities of the State. Indeed, the CCSF was collected under PD
No. 276.

(c) They were clearly imposed for a public purpose. There is absolutely
no question that they were collected to advance the governments avowed policy
of protecting the coconut industry. This Court takes judicial notice of the fact that
the coconut industry is one of the great economic pillars of our nation, and
coconuts and their byproducts occupy a leading position among the countrys export
products.

Taxation is done not merely to raise revenues to support the government,

but also to provide means for the rehabilitation and the stabilization of a
threatened industry, which is so affected with public interest as to be within the
police power of the State.

Even if the money is allocated for a special purpose and raised by special
means, it is still public in character. In Cocofed v. PCGG, the Court observed that
certain agencies or enterprises were organized and financed with revenues derived
from coconut levies imposed under a succession of law of the late dictatorship with
deposed Ferdinand Marcos and his cronies as the suspected authors and chief
beneficiaries of the resulting coconut industry monopoly. The Court continued: . It
cannot be denied that the coconut industry is one of the major industries
supporting the national economy. It is, therefore, the States concern to make it a
strong and secure source not only of the livelihood of a significant segment of the
population, but also of export earnings the sustained growth of which is one of
the imperatives of economic stability.1240 (Emphasis Ours)

We have ruled time and again that taxes are imposed only for a public purpose.1241 They
cannot be used for purely private purposes or for the exclusive benefit of private persons.1242 When
a law imposes taxes or levies from the public, with the intent to give undue benefit or advantage
to private persons, or the promotion of private enterprises, that law cannot be said to satisfy the
requirement of public purpose.1243 In Gaston v. Republic Planters Bank, the petitioning sugar

1240
Republic v. COCOFED, G.R. No. 147062-64, December 14, 2001, 372 SCRA 462, 482-84.
1241
Planters Products, Inc. v. Fertiphil Corporation, G.R. No. 166006, March 14, 2008, 548 SCRA 485,
510.
1242
Id.; Pascual v. Secretary of Public Works and Communications, 110 Phil. 331 (1960).
1243
Id. at 511.

869
producers, sugarcane planters and millers sought the distribution of the shares of stock of the
Republic Planters Bank, alleging that they are the true beneficial owners thereof.1244 In that case,
the investment, i.e., the purchase of the said bank, was funded by the deduction of PhP 1.00 per
picul from the sugar proceeds of the sugar producers pursuant to P.D. No. 388.1245 In ruling against
the petitioners, the Court held that to rule in their favor would contravene the general principle that
revenues received from the imposition of taxes or levies cannot be used for purely private purposes
or for the exclusive benefit of private persons.1246 The Court amply reasoned that the Stabilization
Fund must be utilized for the benefit of the entire sugar industry, and all its components,
stabilization of the domestic market including foreign market, the industry being of vital
importance to the countrys economy and to national interest.1247

Similarly in this case, the coconut levy funds were sourced from forced exactions decreed
under P.D. Nos. 232, 276 and 582, among others,1248 with the end-goal of developing the entire
coconut industry.1249 Clearly, to hold therefore, even by law, that the revenues received from the
imposition of the coconut levies be used purely for private purposes to be owned by private
individuals in their private capacity and for their benefit, would contravene the rationale behind
the imposition of taxes or levies.

Needless to stress, courts do not, as they cannot, allow by judicial fiat the conversion of
special funds into a private fund for the benefit of private individuals. In the same vein, We cannot
subscribe to the idea of what appears to be an indirect if not exactly direct conversion of special
funds into private funds, i.e., by using special funds to purchase shares of stocks, which in turn
would be distributed for free to private individuals. Even if these private individuals belong to, or
are a part of the coconut industry, the free distribution of shares of stocks purchased with special

1244
Gaston v. Republic Planters Bank, No. L-77194, March 15, 1988, 158 SCRA 626, 628-629.
1245
Id. at 629.
1246
Id. at 634.
1247
Id.
1248
Creating a Philippine Coconut Authority [P.D. No. 232], June 30, 1973; Establishing a Coconut
Consumers Stabilization Fund [P.D. No. 276], August 20, 1973; Further Amending Presidential Decree No. 232, As
Amended [P.D. No. 582], November 14, 1974.
1249
Republic v. COCOFED, G.R. No. 147062-64, December 14, 2001, 372 SCRA 462, 482-84.

870
public funds to them, nevertheless cannot be justified. The ratio in Gaston,1250 as expressed below,
applies mutatis mutandis to this case:

The stabilization fees in question are levied by the State for a special purpose
that of financing the growth and development of the sugar industry and all its
components, stabilization of the domestic market including the foreign market. The
fact that the State has taken possession of moneys pursuant to law is sufficient
to constitute them as state funds even though they are held for a special
purpose.

That the fees were collected from sugar producers,[etc.], and that the
funds were channeled to the purchase of shares of stock in respondent Bank do
not convert the funds into a trust fund for their benefit nor make them the
beneficial owners of the shares so purchased. It is but rational that the fees be
collected from them since it is also they who are benefited from the expenditure
of the funds derived from it. .1251 (Emphasis Ours.)

In this case, the coconut levy funds were being exacted from copra exporters, oil millers,
desiccators and other end-users of copra or its equivalent in other coconut products.1252 Likewise
so, the funds here were channeled to the purchase of the shares of stock in UCPB. Drawing a clear
parallelism between Gaston and this case, the fact that the coconut levy funds were collected from
the persons or entities in the coconut industry, among others, does not and cannot entitle them to
be beneficial owners of the subject funds or more bluntly, owners thereof in their private capacity.
Parenthetically, the said private individuals cannot own the UCPB shares of stocks so purchased
using the said special funds of the government.1253

Coconut levy funds are special public funds of the

government.

1250
No. L-77194, March 15, 1988, 158 SCRA 626, 633-634; cited in Republic v. COCOFED, G.R. Nos.
147062-64, December 14, 2001, 372 SCRA 462, 485-86.
1251
Gaston v. Republic Planters Bank, No. L-77194, March 15, 1988, 158 SCRA 626, 633-34; cited in
Republic v. COCOFED, G.R. Nos. 147062-64, December 14, 2001, 372 SCRA 462, 485-86.
1252
Republic v. COCOFED, G.R. Nos. 147062-64, December 14, 2001, 372 SCRA 462, 483; citing P.D. No.
961, 1976, Art. III, 1; P.D. No. 1468, 1978, Art. III, 1.
1253
See infra discussion, coconut levy fund as special fund of the government.

871
 Plainly enough, the coconut levy funds are public funds. We have ruled in Republic v.
COCOFED that the coconut levy funds are not only affected with public interest; they are prima
facie public funds.1254 In fact, this pronouncement that the levies are government funds was
admitted and recognized by respondents, COCOFED, et al., in G.R. No. 147062-64.1255 And more
importantly, in the same decision, We clearly explained exactly what kind of government fund the
coconut levies are. We were categorical in saying that coconut levies are treated as special funds
by the very laws which created them:

Finally and tellingly, the very laws governing the coconut levies recognize
their public character. Thus, the third Whereas clause of PD No. 276 treats them
as special funds for a specific public purpose. Furthermore, PD No. 711
transferred to the general funds of the State all existing special and fiduciary
funds including the CCSF. On the other hand, PD No. 1234 specifically declared
the CCSF as a special fund for a special purpose, which should be treated as a
special account in the National Treasury.1256 (Emphasis Ours.)

If only to stress the point, P.D. No. 1234 expressly stated that coconut levies are special
funds to be remitted to the Treasury in the General Fund of the State, but treated as Special
Accounts:

Section 1. All income and collections for Special or Fiduciary Funds

authorized by law shall be remitted to the Treasury and treated as Special Accounts
in the General Fund, including the following:

(a) [PCA] Development Fund, including all income derived therefrom under
Sections 13 and 14 of [RA] No. 1145; Coconut Investments Fund under Section 8
of [RA] No. 6260, including earnings, profits, proceeds and interests derived
therefrom; Coconut Consumers Stabilization Funds under Section 3-A of PD No.
232, as inserted by Section 3 of P.D. No. 232, as inserted by Section 2 of P.D. No.
583; and all other fees accruing to the [PCA] under the provisions of Section 19 of
[RA] No. 1365, in accordance with Section 2 of P.D. No. 755 and all other income
accruing to the [PCA] under existing laws.1257 (Emphasis Ours)

1254
Republic v. COCOFED, G.R. No. 147062-64, December 14, 2001, 372 SCRA 462, 491.
1255
Id. at 488.
1256
Id. at 490.
1257
Instituting a Procedure for the Management of Special and Fiduciary Funds Earmarked or Administered by
Departments, Bureaus, Offices and Agencies of the National Government, including Government-Owned or
Controlled Corporations [P.D. No. 1234], 1977, 1 (a).

872
 Moreover, the Court, in Gaston, stated the observation that the character of a stabilization
fund as a special fund is emphasized by the fact that the funds are deposited in the Philippine
National Bank [PNB] and not in the Philippine Treasury, moneys from which may be paid out
only in pursuance of an appropriation made by law.1258 Similarly in this case, Sec.1 (a) of P.D. No.
276 states that the proceeds from the coconut levy shall be deposited with the PNB, then a
government bank, or any other government bank under the account of the CCSF, as a separate
trust fund, which shall not form part of the governments general fund.1259 And even assuming
arguendo that the coconut levy funds were transferred to the general fund pursuant to P.D. No.
1234, it was with the specific directive that the same be treated as special accounts in the general
fund.1260

The coconut levy funds can only be used for the special
purpose and the balance thereof should revert back to the
general fund. Consequently, their subsequent
reclassification as a private fund to be owned by private
individuals in their private capacities under P.D. Nos.
755, 961 and 1468 are unconstitutional.

To recapitulate, Article VI, Section 29 (3) of the 1987 Constitution, restating a general
principle on taxation, enjoins the disbursement of a special fund in accordance with the special
purpose for which it was collected, the balance, if there be any, after the purpose has been fulfilled
or is no longer forthcoming, to be transferred to the general funds of the government, thus:

Section 29(3).

(3) All money collected on any tax levied for a special purpose shall be
treated as a special fund and paid out for such purpose only. If the purpose for
which a special fund was created has been fulfilled or abandoned, the balance, if
any, shall be transferred to the general funds of the Government. (Emphasis Ours)

1258
Gaston v. Republic Planters Bank, G.R. No. L-77194, March 15, 1988, 158 SCRA 626, 633.
1259
P.D. No. 276, 1 (a).
1260
P.D. No. 1234, 1 (a).

873
 Correlatively, Section 2 of P.D. No. 755 clearly states that:

Section 2. Financial Assistance. To enable the coconut farmers to comply

with their contractual obligations under the aforesaid Agreement, the [PCA] is
hereby directed to draw and utilize the collections under the Coconut Consumers
Stabilization Fund [CCSF] authorized to be levied by [P.D.] 232, as amended, to
pay for the financial commitments of the coconut farmers under the said agreement.
and the Coconut Industry Development Fund as prescribed by Presidential Decree
No. 582 shall not be considered or construed, under any law or regulation,
special and/or fiduciary funds and do not form part of the general funds of the
national government within the contemplation of Presidential Decree No. 711.
(Emphasis Ours)

Likewise, as discussed supra, Article III, Section 5 of both P.D. Nos. 961 and 1468
provides that the CCSF shall not be construed by any law as a special and/or trust fund, the stated
intention being that actual ownership of the said fund shall pertain to coconut farmers in their
private capacities.1261 Thus, in order to determine whether the relevant provisions of P.D. Nos.
755, 961 and 1468 complied with Article VI, Section 29 (3) of the 1987 Constitution, a look at the
public policy or the purpose for which the CCSF levy was imposed is necessary.

The CCSF was established by virtue of P.D. No. 276 wherein it is stated that:

WHEREAS, an escalating crisis brought about by an abnormal situation in

the world market for fats and oils has resulted in supply and price dislocations in
the domestic market for coconut-based goods, and has created hardships for
consumers thereof;

WHEREAS, the representatives of the coconut industry have proposed

the implementation of an industry-financed stabilization scheme which will permit
socialized pricing of coconut-based commodities;

WHEREAS, it is the policy of the State to promote the welfare and

economic well-being of the consuming public;

1261
P.D. No. 961, Art. III, 5; P.D. No. 1468, Art. III, 5.

874
 1. In addition to its powers granted under [P.D.] No. 232, the [PCA] is
hereby authorized to formulate and immediately implement a stabilization scheme
for coconut-based consumer goods, along the following general guidelines:

(a) .The proceeds of the levy shall be deposited with the Philippine
National Bank or any other government bank to the account of the CCSF as
a separate trust fund.

(b) The Fund shall be utilized to subsidize the sale of coconut-

based products at prices set by the Price Control Council.:

As couched, P.D. No. 276 created and exacted the CCSF to advance the governments
avowed policy of protecting the coconut industry.1262 Evidently, the CCSF was originally set up
as a special fund to support consumer purchases of coconut products. To put it a bit differently,
the protection of the entire coconut industry, and even more importantly, for the consuming public
provides the rationale for the creation of the coconut levy fund. There can be no quibbling then
that the foregoing provisions of P.D. No. 276 intended the fund created and set up therein not
especially for the coconut farmers but for the entire coconut industry, albeit the improvement of
the industry would doubtless redound to the benefit of the farmers. Upon the foregoing perspective,
the following provisions of P.D. Nos. 755, 961 and 1468 insofar as they declared, as the case may
be, that: [the coconut levy] fund and the disbursements thereof [shall be] authorized for the benefit
of the coconut farmers and shall be owned by them in their private capacities;1263 or the coconut
levy fund shall not be construed by any law to be a special and/or fiduciary fund, and do not
therefore form part of the general fund of the national government later on;1264 or the UCPB shares
acquired using the coconut levy fund shall be distributed to the coconut farmers for free,1265
violated the special public purpose for which the CCSF was established.

In sum, not only were the challenged presidential issuances unconstitutional for decreeing
the distribution of the shares of stock for free to the coconut farmers and, therefore, negating the
public purpose declared by P.D. No. 276, i.e., to stabilize the price of edible oil1266 and to protect

1262
Republic v. COCOFED, G.R. Nos. 147062-64, December 14, 2001, 372 SCRA 462, 484.
1263
P.D. No. 961, Art. III, 5; P.D. No. 1468, Art. III, 5.
1264
P.D. No. 775, 2; P.D. No. 961, Art. III, 5; P.D. No. 1468, Art. III, 5.
1265
P.D. No. 775, 1.
1266
Supra note 118.

875
the coconut industry.1267 They likewise reclassified, nay treated, the coconut levy fund as private
fund to be disbursed and/or invested for the benefit of private individuals in their private
capacities, contrary to the original purpose for which the fund was created. To compound the
situation, the offending provisions effectively removed the coconut levy fund away from the cavil
of public funds which normally can be paid out only pursuant to an appropriation made by law.1268
The conversion of public funds into private assets was illegally allowed, in fact mandated, by these
provisions. Clearly therefore, the pertinent provisions of P.D. Nos. 755, 961 and 1468 are
unconstitutional for violating Article VI, Section 29 (3) of the Constitution. In this context, the
distribution by PCA of the UCPB shares purchased by means of the coconut levy fund a special
fund of the government to the coconut farmers, is therefore void.

We quote with approval the Sandiganbayans reasons for declaring the provisions of P.D.
Nos. 755, 961 and 1468 as unconstitutional:

It is now settled, in view of the ruling in Republic v. COCOFED, et al.,

supra, that Coconut levy funds are raised with the use of the police and taxing
powers of the State; that they are levies imposed by the State for the benefit of the
coconut industry and its farmers and that they were clearly imposed for a public
purpose. This public purpose is explained in the said case, as follows:

. c) They were clearly imposed for a public purpose. There

is absolutely no question that they were colleted to advance the
governments avowed policy of protecting the coconut industry.

Taxation is done not merely to raise revenues to support the

government, but also to provide means for the rehabilitation and the
stabilization of a threatened industry, which is so affected with
public interest as to be within the police power of the State, as held
in Caltex Philippines v. COA and Osmea v. Orbos.

The avowed public purpose for the disbursement of the CCSF is contained
in the perambulatory clauses and Section 1 of P.D. No. 755. The imperativeness of
enunciating the public purpose of the expenditure of funds raised through taxation

1267
Supra note 119.
1268
CONSTITUTION, Art. VI, 29 (1).

876
is underscored in the case of Pascual v. The Secretary of Public Works and
Communications, et al, supra, which held:

As regards the legal feasibility of appropriating public funds

for a private purpose the principle according to Ruling Case Law, is
this:

It is a general rule that the legislature is without power to

appropriate public revenue for anything but a public purpose it is the
essential character of the direct object of the expenditure which must
determine its validity as justifying a tax, and not the magnitude of
the interests to be affected nor the degree to which the general
advantage of the community, and thus the public welfare may be
ultimately benefited by their promotion. Incidental advantage to the
public or to the state, which results from the promotion of private
interests and the prosperity of private enterprises or business, does
not justify their aid by the use of public money. 25 R.L.C. pp. 398-
400)

The rule is set forth in Corpus Juris Secundum in the

following language:

The test of the constitutionality of a statute requiring

the use of public funds is whether the statute is designed to
promote the public interests, as opposed to the furtherance
of the advantage of individuals, although each advantage
to individuals might incidentally serve the public. (81
C.J.S. p. 1147)

Needless to say, this Court is fully in accord with the

foregoing views. Besides, reflecting as they do, the established
jurisprudence in the United States, after whose constitutional system
ours has been patterned, said views and jurisprudence are, likewise,
part and parcel of our own constitutional law.

The gift of funds raised by the exercise of the taxing powers of the State
which were converted into shares of stock in a private corporation, slated for free
distribution to the coconut farmers, can only be accorded constitutional sanction if
it will directly serve the public purpose declared by law.1269

1269
Rollo (G.R. No. 177857-58), pp. 144-148, 799-803.

877
Section 1 of P.D. No. 755, as well as PCA Administrative
Order No. 1, Series of 1975 (PCA AO 1), and Resolution
No. 074-75, are invalid delegations of legislative power.

Petitioners argue that the anti-graft court erred in declaring Section 1 of PD 755, PCA
Administrative Order No. 1 and PCA Resolution No. 074-78 constitutionally infirm by reason of
alleged but unproven and unsubstantiated flaws in their implementation. Additionally, they explain
that said court erred in concluding that Section 1 of PD No. 755 constitutes an undue delegation
of legislative power insofar as it authorizes the PCA to promulgate rules and regulations governing
the distribution of the UCPB shares to the farmers.

These propositions are meritless.

The assailed PSJ-A noted the operational distribution nightmare faced by PCA and the
mode of distribution of UCPB shares set in motion by that agency left much room for diversion.
Wrote the Sandiganbayan:

The actual distribution of the bank shares was admittedly an enormous

operational problem which resulted in the failure of the intended beneficiaries to
receive their shares of stocks in the bank, as shown by the rules and regulations,
issued by the PCA, without adequate guidelines being provided to it by P.D. No.
755. PCA Administrative Order No. 1, Series of 1975 (August 20, 1975), Rules and
Regulations Governing the Distribution of Shares of Stock of the Bank Authorized
to be Acquired Pursuant to PCA Board Resolution No. 246-75, quoted hereunder
discloses how the undistributed shares of stocks due to anonymous coconut farmers
or payors of the coconut levy fees were authorized to be distributed to existing
shareholders of the Bank:

Section 9. Fractional and Undistributed Shares Fractional

shares and shares which remain undistributed shall be
distributed to all the coconut farmers who have qualified and
received equity in the Bank and shall be apportioned among
them, as far as practicable, in proportion to their equity in
relation to the number of undistributed equity and such
further rules and regulations as may hereafter be
promulgated.

878
 The foregoing PCA issuance was further amended by Resolution
No. 074-78, still citing the same problem of distribution of the bank
shares.:

Thus, when 51,200,806 shares in the bank remained undistributed, the PCA
deemed it proper to give a bonanza to coconut farmers who already got their bank
shares, by giving them an additional share for each share owned by them and by
converting their fractional shares into full shares. The rest of the shares were then
transferred to a private organization, the COCOFED, for distribution to those
determined to be bona fide coconut farmers who had not received shares of stock
of the Bank. .

The PCA thus assumed, due to lack of adequate guidelines set by P.D. No.
755, that it had complete authority to define who are the coconut farmers and
to decide as to who among the coconut farmers shall be given the gift of bank
shares; how many shares shall be given to them, and what basis it shall use to
determine the amount of shares to be distributed for free to the coconut farmers. In
other words, P.D. No. 755 fails the completeness test which renders it
constitutionally infirm.

Regarding the second requisite of standard, it is settled that legislative

standard need not be expressed.

We observed, however, that the PCA [AO] No. 1, Series of 1975 and PCA
Rules and Regulations 074-78, did not take into consideration the accomplishment
of the public purpose or the national standard/policy of P.D. No. 755 which is
directly to accelerate the development and growth of the coconut industry and as a
consequence thereof, to make the coconut farmers participants in and beneficiaries
of such growth and development. The said PCA issuances did nothing more than
provide guidelines as to whom the UCPB shares were to be distributed and how
many bank shares shall be allotted to the beneficiaries. There was no mention of
how the distributed shares shall be used to achieve exclusively or at least directly
or primarily the aim or public purpose enunciated by P.D. No. 755. The numerical
or quantitative distribution of shares contemplated by the PCA regulations which
is a condition for the validly of said administrative issuances. There was a reversal
of priorities. The narrow private interests prevailed over the laudable
objectives of the law. However, under the May 25, 1975 agreement implemented
by the PCA issuances, the PCA acquired only 64.98% of the shares of the bank and
even the shares covering the said 64.98% were later on transferred to non-coconut
farmers.

The distribution for free of the shares of stock of the CIIF Companies is
tainted with the above-mentioned constitutional infirmities of the PCA
administrative issuances. In view of the foregoing, we cannot consider the provision

879
 of P.D. No. 961 and P.D. No. 1468 and the implementing regulations issued by the
PCA as valid legal basis to hold that assets acquired with public funds have
legitimately become private properties. 1270 (Emphasis added.)

P.D. No. 755 involves an invalid delegation of legislative power, a concept discussed in
Soriano v. Laguardia,1271 citing the following excerpts from Edu v. Ericta:
It is a fundamental that Congress may not delegate its legislative power.
What cannot be delegated is the authority to make laws and to alter and repeal them;
the test is the completeness of the statute in all its term and provisions when it leaves
the hands of the legislature. To determine whether or not there is an undue
delegation of legislative power, the inquiry must be directed to the scope and
definiteness of the measure enacted. The legislature does not abdicate its
functions when it describes what job must be done, who is to do it, and what is
the scope of his authority.

To avoid the taint of unlawful delegation, there must be a standard, which

implies at the very least that the legislature itself determines matters of principle
and lays down fundamental policy. Otherwise, the charge of complete abdication
may be hard to repel. A standard thus defines legislative policy, marks its limits,
maps out its boundaries and specifies the public agency to apply it. It indicates
the circumstances under which the legislative command is to be effected. It is
the criterion by which legislative purpose may be carried out. Thereafter, the
executive or administrative office designated may in pursuance of the above
guidelines promulgate supplemental rules and regulations.1272 (Emphasis supplied)

Jurisprudence is consistent as regards the two tests, which must be complied with to
determine the existence of a valid delegation of legislative power. In Abakada Guro Party List, et
al. v. Purisima,1273 We reiterated the discussion, to wit:

Two tests determine the validity of delegation of legislative power: (1) the
completeness test and (2) the sufficient standard test. A law is complete when it
sets forth therein the policy to be executed, carried out or implemented by the
delegate. It lays down a sufficient standard when it provides adequate guidelines
or limitations in the law to map out the boundaries of the delegates authority
and prevent the delegation from running riot. To be sufficient, the standard
must specify the limits of the delegates authority, announce the legislative
policy and identify the conditions under which it is to be implemented.

1270
Id. at 62-64.
1271
G.R. No. 164785, April 29, 2009, 587 SCRA 79, 117-18.
1272
No. L-32096, October 24, 1970, 35 SCRA 481, 496-497.
1273
G.R. No. 166715, August 14, 2008, 562 SCRA 251, 277.

880
 In the instant case, the requisite standards or criteria are absent in P.D. No. 755. As may be
noted, the decree authorizes the PCA to distribute to coconut farmers, for free, the shares of stocks
of UCPB and to pay from the CCSF levy the financial commitments of the coconut farmers under
the Agreement for the acquisition of such bank. Yet, the decree does not even state who are to be
considered as coconut farmers. Would, say, one who plants a single coconut tree be already
considered a coconut farmer and, therefore, entitled to own UCPB shares? If so, how many shares
shall be given to him? The definition of a coconut farmer and the basis as to the number of shares
a farmer is entitled to receive for free are important variables to be determined by law and cannot
be left to the discretion of the implementing agency.

Moreover, P.D. No. 755 did not identify or delineate any clear condition as to how the
disposition of the UCPB shares or their conversion into private ownership will redound to the
advancement of the national policy declared under it. To recall, P.D. No. 755 seeks to accelerate
the growth and development of the coconut industry and achieve a vertical integration thereof so
that coconut farmers will become participants in, and beneficiaries of, such growth and
development.1274 The Sandiganbayan is correct in its observation and ruling that the said law
gratuitously gave away public funds to private individuals, and converted them exclusively into
private property without any restriction as to its use that would reflect the avowed national policy
or public purpose. Conversely, the private individuals to whom the UCPB shares were transferred
are free to dispose of them by sale or any other mode from the moment of their acquisition. In fact
and true enough, the Sandiganbayan categorically stated in its Order dated March 11, 2003,1275
that out of the 72.2% shares and increased capital stock of the FUB (later UCPB) allegedly covered
by the May 25, 1975 Agreement,1276 entirely paid for by PCA, 7.22% were given to Cojuangco
and the remaining 64.98%, which were originally held by PCA for the benefit of the coconut
farmers, were later sold or transferred to non-coconut farmers.1277 Even the proposed rewording
of the factual allegations of Lobregat, COCOFED, et al. and Ballares, et al., reveals that indeed,
P.D. No. 755 did not provide for any guideline, standard, condition or restriction by which the said

1274
P.D. No. 755, whereas clause.
1275
Supra note 50.
1276
See infra discussion Part III, Civil Case No. 0033-A.
1277
PSJ-A, pp. 51-52.

881
shares shall be distributed to the coconut farmers that would ensure that the same will be
undertaken to accelerate the growth and development of the coconut industry pursuant to its
national policy. The proposed rewording of admissions reads:

There were shares forming part of the aforementioned 64.98% which were,
after their distribution, for free, to the coconut farmers as required by P.D. No. 755,
sold or transferred respectively by individual coconut farmers who were then the
registered stockholders of those UCPB shares to non-coconut farmers.1278

Clearly, P.D. No. 755, insofar as it grants PCA a veritable carte blanche to distribute to
coconut farmers UCPB shares at the level it may determine, as well as the full disposition of such
shares to private individuals in their private capacity without any conditions or restrictions that
would advance the laws national policy or public purpose, present a case of undue delegation of
legislative power. As such, there is even no need to discuss the validity of the administrative orders
and resolutions of PCA implementing P.D. No. 755. Water cannot rise higher than its source.

Even so, PCA AO 1 and PCA Resolution No. 078-74, are in themselves, infirm under the
undue delegation of legislative powers. Particularly, Section 9 of PCA AO I provides:

SECTION 9. Fractional and Undistributed Shares Fractional shares and

shares which remain undistributed as a consequence of the failure of the coconut
farmers to register their COCOFUND receipts or the destruction of the
COCOFUND receipts or the registration of COCOFUND receipts in the name of
an unqualified individual, after the final distribution is made on the basis of the
consolidated IBM registration Report as of March 31, 1976 shall be distributed to
all the coconut farmers who have qualified and received equity in the Bank and
shall be appointed among them, as far as practicable, in proportion to their equity
in relation to the number of undistributed equity and such further rules and
regulations as may hereafter be promulgated.

The foregoing provision directs and authorizes the distribution of fractional and
undistributed shares as a consequence of the failure of the coconut farmers with Coco Fund receipts
to register them, even without a clear mandate or instruction on the same in any pertinent existing
law. PCA Resolution No. 078-74 had a similar provision, albeit providing more detailed

1278
PSJ-A, pp. 52, citing Comment of Defendant Maria Clara L. Lobregat, Movants COCOFED, et al., and
Movants Ballares, et al. (Re: Order of March 11, 2003), p. 16.

882
information. The said Resolution identified 51,200,806 shares of the bank that remained
undistributed and PCA devised its own rules as to how these undistributed and fractional shares
shall be disposed of, notwithstanding the dearth as to the standards or parameters in the laws which
it sought to implement.

Eventually, what happened was that, as correctly pointed out by the Sandiganbayan, the
PCA gave a bonanza to supposed coconut farmers who already got their bank shares, by giving
them extra shares according to the rules established on its own by the PCA under PCA AO 1 and
Resolution No. 078-74. Because of the lack of adequate guidelines under P.D. No. 755 as to how
the shares were supposed to be distributed to the coconut farmers, the PCA thus assumed that it
could decide for itself how these shares will be distributed. This obviously paved the way to
playing favorites, if not allowing outright shenanigans. In this regard, this poser raised in the Courts
February 16, 1993 Resolution in G.R. No. 96073 is as relevant then as it is now: How is it that
shares of stocks in such entities which was organized and financed by revenues derived from
coconut levy funds which were imbued with public interest ended up in private hands who are not
farmers or beneficiaries; and whether or not the holders of said stock, who in one way or another
had had some part in the collection, administration, disbursement or other disposition of the
coconut levy funds were qualified to acquire stock in the corporations formed and operated from
these funds. 1279

Likewise, the said PCA issuances did not take note of the national policy or public purpose
for which the coconut levy funds were imposed under P.D. No. 755, i.e. the acceleration of the
growth and development of the entire coconut industry, and the achievement of a vertical
integration thereof that could make the coconut farmers participants in, and beneficiaries of, such
growth and development.1280 Instead, the PCA prioritized the coconut farmers themselves by fully
disposing of the bank shares, totally disregarding the national policy for which the funds were
created. This is clearly an undue delegation of legislative powers.

1279
See Separate Opinion of Justice Vitug in Republic v. COCOFED, supra note 34.
1280
P.D. 755, whereas clause.

883
 With this pronouncement, there is hardly any need to establish that the sequestered assets
are ill-gotten wealth. The documentary evidence, the P.D.s and Agreements, prove that the transfer
of the shares to the more than one million of supposed coconut farmers was tainted with illegality.

Article III, Section 5 of P.D. No. 961 and Article III,

Section 5 of P.D. No. 1468 violate Article IX (D) (2) of the
1987 Constitution.

Article III, Section 5 of P.D. No. 961 explicitly takes away the coconut levy funds from
the coffer of the public funds, or, to be precise, privatized revenues derived from the coco levy.
Particularly, the aforesaid Section 5 provides:

Section 5. Exemptions. The Coconut Consumers Stabilization Fund and the

Coconut Industry Development fund as well as all disbursements of said funds for
the benefit of the coconut farmers as herein authorized shall not be construed or
interpreted, under any law or regulation, as special and/or fiduciary funds, or as
part of the general funds of the national government within the contemplation of
P.D. No. 711; nor as a subsidy, donation, levy, government funded investment, or
government share within the contemplation of P.D. 898 the intention being that
said Fund and the disbursements thereof as herein authorized for the benefit of
the coconut farmers shall be owned in their own private capacity.1281 (Emphasis
Ours)

The same provision is carried over in Article III, Section 5 of P.D. No. 1468, the Revised
Coconut Industry Code:

These identical provisions of P.D. Nos. 961 and 1468 likewise violate Article IX (D),
Section 2(1) of the Constitution, defining the powers and functions of the Commission on Audit
(COA) as a constitutional commission:

Sec. 2. (1) The Commission on Audit shall have the power, authority, and
duty to examine, audit, and settle all accounts pertaining to the revenue and
receipts of, and expenditures or uses of funds and property, owned or held in trust
by, or pertaining to, the Government, or any of its subdivisions, agencies, or

1281
P.D. No. 961, Art. III, 5.

884
 instrumentalities, including government-owned and controlled corporations with
original charters, and on a post-audit basis: (a) constitutional bodies, commissions
and offices that have been granted fiscal autonomy under this Constitution; (b)
autonomous state colleges and universities; (c) other government-owned or
controlled corporations and their subsidiaries;.1282 (Emphasis Ours)

A similar provision was likewise previously found in Article XII (D), Section 2 (1) of the
1973 Constitution, thus:

Section 2. The Commission on Audit shall have the following powers and
functions:

(1) Examine, audit, and settle, in accordance with law and regulations,
all accounts pertaining to the revenues and receipts of, and expenditures
or uses of funds and property, owned or held in trust by, or pertaining to,
the Government, or any of its subdivisions, agencies, or instrumentalities,
including government-owned and controlled corporations; keep the general
accounts of the government and, for such period as may be provided by law,
preserve the vouchers pertaining thereto; and promulgate accounting and
auditing rules and regulations including those for the prevention of
irregular, unnecessary, excessive, or extravagant expenditures or use of
funds and property.1283 (Emphasis Ours)

The Constitution, by express provision, vests the COA with the responsibility for State
audit.1284 As an independent supreme State auditor, its audit jurisdiction cannot be undermined by
any law. Indeed, under Article IX (D), Section 3 of the 1987 Constitution, [n]o law shall be passed
exempting any entity of the Government or its subsidiary in any guise whatever, or any investment
of public funds, from the jurisdiction of the Commission on Audit.1285 Following the mandate of
the COA and the parameters set forth by the foregoing provisions, it is clear that it has jurisdiction
over the coconut levy funds, being special public funds. Conversely, the COA has the power,
authority and duty to examine, audit and settle all accounts pertaining to the coconut levy funds
and, consequently, to the UCPB shares purchased using the said funds. However, declaring the
said funds as partaking the nature of private funds, ergo subject to private appropriation, removes

1282
CONSTITUTION, Art. IX (D), 2 (1).
1283
1973 CONSTITUTION, Art. XII (D), 2 (1).
1284
Mamaril v. Domingo, G.R. No. 100284, October 13, 1993, 227 SCRA 206.
1285
CONSTITUTION, Art. IX (D), 3. (Emphasis Ours.)

885
them from the coffer of the public funds of the government, and consequently renders them
impervious to the COA audit jurisdiction. Clearly, the pertinent provisions of P.D. Nos. 961 and
1468 divest the COA of its constitutionally-mandated function and undermine its constitutional
independence.

The assailed purchase of UCPB shares of stocks using the coconut levy funds presents a
classic example of an investment of public funds. The conversion of these special public funds
into private funds by allowing private individuals to own them in their private capacities is
something else. It effectively deprives the COA of its constitutionally-invested power to audit and
settle such accounts. The conversion of the said shares purchased using special public funds into
pure and exclusive private ownership has taken, or will completely take away the said funds from
the boundaries with which the COA has jurisdiction. Obviously, the COA is without audit
jurisdiction over the receipt or disbursement of private property. Accordingly, Article III, Section
5 of both P.D. Nos. 961 and 1468 must be struck down for being unconstitutional, be they assayed
against Section 2(1), Article XII (D) of the 1973 Constitution or its counterpart provision in the
1987 Constitution.

The Court, however, takes note of the dispositive portion of PSJ-A, which states that:1286

2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall not
be considered special and/or fiduciary funds nor part of the general funds of the
national government and similar provisions of Sec. 3, Art. III, P.D. 961 and Sec.
5, Art. III, P.D. 1468 contravene the provisions of the Constitution, particularly,
Art. IX (D), Sec. 2; and Article VI, Sec. 29 (3). (Emphasis Ours)

However, a careful reading of the discussion in PSJ-A reveals that it is Section 5 of Article
III of P.D. No. 961 and not Section 3 of said decree, which is at issue, and which was therefore
held to be contrary to the Constitution. The dispositive portion of the said PSJ should therefore be

1286
PSJ-A, pp. 55 & 81.

886
corrected to reflect the proper provision that was declared as unconstitutional, which is Section 5
of Article III of P.D. No. 961 and not Section 3 thereof.

The CIIF Companies and the CIIF Block

of SMC shares are public funds/assets

From the foregoing discussions, it is fairly established that the coconut levy funds are
special public funds. Consequently, any property purchased by means of the coconut levy funds
should likewise be treated as public funds or public property, subject to burdens and restrictions
attached by law to such property.

In this case, the 6 CIIF Oil Mills were acquired by the UCPB using coconut levy funds.1287
On the other hand, the 14 CIIF holding companies are wholly owned subsidiaries of the CIIF Oil
Mills.1288 Conversely, these companies were acquired using or whose capitalization comes from
the coconut levy funds. However, as in the case of UCPB, UCPB itself distributed a part of its
investments in the CIIF oil mills to coconut farmers, and retained a part thereof as
administrator.1289 The portion distributed to the supposed coconut farmers followed the procedure
outlined in PCA Resolution No. 033-78.1290 And as the administrator of the CIIF holding
companies, the UCPB authorized the acquisition of the SMC shares.1291 In fact, these companies
were formed or organized solely for the purpose of holding the SMC shares.1292 As found by the
Sandiganbayan, the 14 CIIF holding companies used borrowed funds from the UCPB to acquire
the SMC shares in the aggregate amount of P1.656 Billion.1293

Since the CIIF companies and the CIIF block of SMC shares were acquired using coconut
levy funds funds, which have been established to be public in character it goes without saying that

1287
Rollo, G.R. Nos. 177857-58, pp. 504& 524; PSJ-F, po, 37 & 57.
1288
Id. at 504 & 513; PSJ-F, pp. 37 & 46.
1289
Id. at 504 & 515; PSJ-F, pp. 37 & 48.
1290
Id. at 510; PSJ-F, p. 43.
1291
Id. at 505 & 515; PSJ-F, pp. 38 & 48.
1292
Id. at 476 & 515; PSJ-F, pp. 8 & 48.
1293
Id. at 515-16; PSJ-F, pp. 48-49.

887
these acquired corporations and assets ought to be regarded and treated as government assets.
Being government properties, they are accordingly owned by the Government, for the coconut
industry pursuant to currently existing laws.1294

It may be conceded hypothetically, as COCOFED et al. urge, that the 14 CIIF holding
companies acquired the SMC shares in question using advances from the CIIF companies and
from UCPB loans. But there can be no gainsaying that the same advances and UCPB loans are
public in character, constituting as they do assets of the 14 holding companies, which in turn are
wholly-owned subsidiaries of the 6 CIIF Oil Mills. And these oil mills were organized, capitalized
and/or financed using coconut levy funds. In net effect, the CIIF block of SMC shares are simply
the fruits of the coconut levy funds acquired at the expense of the coconut industry. In Republic v.
COCOFED,1295 the en banc Court, speaking through Justice (later Chief Justice) Artemio
Panganiban, stated: Because the subject UCPB shares were acquired with government funds, the
government becomes their prima facie beneficial and true owner. By parity of reasoning, the
adverted block of SMC shares, acquired as they were with government funds, belong to the
government as, at the very least, their beneficial and true owner.

We thus affirm the decision of the Sandiganbayan on this point. But as We have earlier
discussed, reiterating our holding in Republic v. COCOFED, the States avowed policy or purpose
in creating the coconut levy fund is for the development of the entire coconut industry, which is
one of the major industries that promotes sustained economic stability, and not merely the
livelihood of a significant segment of the population.1296 Accordingly, We sustain the ruling of the
Sandiganbayan in CC No. 0033-F that the CIIF companies and the CIIF block of SMC shares are
public funds necessary owned by the Government. We, however, modify the same in the following
wise: These shares shall belong to the Government, which shall be used only for the benefit of the
coconut farmers and for the development of the coconut industry.

1294
Supra note 114.
1295
Supra note 34, at 491.
1296
Id. at 482-484.

888
Sandiganbayan did not err in ruling that
PCA (AO) No. 1, Series of 1975 and
PCA rules and regulations 074-78 did
not comply with the national standard
or policy of P.D. No. 755.

According to the petitioners, the Sandiganbayan has identified the national policy sought
to be enhanced by and expressed under Section 1 in relation to Section 2 of P.D. No. 755. Yet, so
petitioners argue, that court, with grave abuse of discretion, disregarded such policy and thereafter,
ruled that Section 1 in relation to Section 2 of P.D. No. 755 is unconstitutional as the decree failed
to promote the purpose for which it was enacted in the first place.

We are not persuaded. The relevant assailed portion of PSJ-A states:

We observe, however, that the PCA [AO] No. 1, Series of 1975 and PCA
Rules and Regulations 074-78, did not take into consideration the accomplishment
of the public purpose or the national standard/policy of P.D. No. 755 which is
directly to accelerate the development and growth of the coconut industry and as a
consequence thereof, to make the coconut farmers participants in and beneficiaries
of such growth and development.

It is a basic legal precept that courts do not look into the wisdom of the laws passed. The
principle of separation of powers demands this hands-off attitude from the judiciary. Saguiguit v.
People1297 teaches why:

[W]hat the petitioner asks is for the Court to delve into the policy behind or
wisdom of a statute, which, under the doctrine of separation of powers, it cannot
do,. Even with the best of motives, the Court can only interpret and apply the law
and cannot, despite doubts about its wisdom, amend or repeal it. Courts of justice
have no right to encroach on the prerogatives of lawmakers, as long as it has not
been shown that they have acted with grave abuse of discretion. And while the
judiciary may interpret laws and evaluate them for constitutional soundness and to
strike them down if they are proven to be infirm, this solemn power and duty do
not include the discretion to correct by reading into the law what is not written
therein.

1297
G.R. No. 144054, June 30, 2006, 484 SCRA 128, 134.

889
 We reproduce the policy-declaring provision of P.D. No. 755, thus:

Section 1. Declaration of National Policy. It is hereby declared that the

policy of the State is to provide readily available credit facilities to the coconut
farmers at preferential rates; that this policy can be efficiently realized by the
implementation of the Agreement for the Acquisition of a Commercial Bank for
the benefit of the Coconut Farmers executed by the [PCA], the terms of which
Agreement are hereby incorporated by reference; and that the [PCA] is hereby
authorized to distribute, for free, the shares of stock of the bank it acquired to the
coconut farmers under such rules and regulations it may promulgate.

P.D. No. 755 having stated in no uncertain terms that the national policy of providing cheap
credit facilities to coconut farmers shall be achieved with the acquisition of a commercial bank,
the Court is without discretion to rule on the wisdom of such an undertaking. It is abundantly clear,
however, that the Sandiganbayan did not look into the policy behind, or the wisdom of, P.D. No.
755. In context, it did no more than to inquire whether the purpose defined in P.D. No. 755 and
for which the coco levy fund was established would be carried out, obviously having in mind the
(a) dictum that the power to tax should only be exercised for a public purpose and (b) command
of Section 29, paragraph 3 of Article VI of the 1987 Constitution that:

(3) All money collected on any tax levied for a special purpose shall be
treated as a special fund and paid out for such purpose only. If the purpose for
which a special fund was created has been fulfilled or abandoned, the balance, if
any, shall be transferred to the general funds of the Government. (Emphasis
supplied)

For the above reason, the above-assailed action of the Sandiganbayan was well within the
scope of its sound discretion and mandate.

890
 Moreover, petitioners impute on the anti-graft court the commission of grave abuse of
discretion for going into the validity of and in declaring the coco levy laws as unconstitutional,
when there were still factual issues to be resolved in a full blown trial as directed by this Court.1298

Petitioners COCOFED and the farmer representatives miss the point. They acknowledged
that their alleged ownership of the sequestered shares in UCPB and SMC is predicated on the coco
levy decrees. Thus, the legality and propriety of their ownership of these valuable assets are
directly related to and must be assayed against the constitutionality of those presidential decrees.
This is a primordial issue, which must be determined to address the validity of the rest of petitioners
claims of ownership. Verily, the Sandiganbayan did not commit grave abuse of discretion, a phrase
which, in the abstract, denotes the idea of capricious or whimsical exercise of judgment or the
exercise of power in an arbitrary or despotic manner by reason of passion or personal hostility as
to be equivalent to having acted without jurisdiction.1299

The Operative Fact Doctrine does not apply

Petitioners assert that the Sandiganbayans refusal to recognize the vested rights purportedly
created under the coconut levy laws constitutes taking of private property without due process of
law. They reason out that to accord retroactive application to a declaration of unconstitutionality
would be unfair inasmuch as such approach would penalize the farmers who merely obeyed then
valid laws.

This contention is specious.

In Yap v. Thenamaris Ships Management,1300 the Operative Fact Doctrine was discussed
in that:

As a general rule, an unconstitutional act is not a law; it confers no rights; it

imposes no duties; it affords no protection; it creates no office; it is inoperative as if

1298
Rollo (G.R. Nos. 177857-58), p. 156.
1299
Julies Franchise Corp. v. Ruiz, G.R. No. 180988, August 28, 2009, 597 SCRA 463, 471.
1300
G.R. No. 179532, May 30, 2011.

891
 it has not been passed at all. The general rule is supported by Article 7 of the Civil
Code, which provides:

Art. 7. Laws are repealed only by subsequent ones, and their violation
or non-observance shall not be excused by disuse or custom or
practice to the contrary.

The doctrine of operative fact serves as an exception to the aforementioned

general rule. In Planters Products, Inc. v. Fertiphil Corporation, we held:

The doctrine of operative fact, as an exception to the general rule,

only applies as a matter of equity and fair play. It nullifies the effects
of an unconstitutional law by recognizing that the existence of a
statute prior to a determination of unconstitutionality is an operative
fact and may have consequences which cannot always be ignored.
The past cannot always be erased by a new judicial declaration.

The doctrine is applicable when a declaration of unconstitutionality

will impose an undue burden on those who have relied on the invalid
law. Thus, it was applied to a criminal case when a declaration of
unconstitutionality would put the accused in double jeopardy or
would put in limbo the acts done by a municipality in reliance upon
a law creating it.1301

In that case, this Court further held that the Operative Fact Doctrine will not be applied as
an exception when to rule otherwise would be iniquitous and would send a wrong signal that an
act may be justified when based on an unconstitutional provision of law.1302

1301
Yap v. Thenamaris Ships Management, G.R. No. 179532, May 30, 2011. (Emphasis Ours)
1302
See e.g. Yap v. Thenamaris Ships Management, G.R. No. 179532, May 30, 2011.

892
 The Court had the following disquisition on the concept of the Operative Fact Doctrine in
the case of Chavez v. National Housing Authority:1303

The operative fact doctrine is embodied in De Agbayani v. Court of Appeals,

wherein it is stated that a legislative or executive act, prior to its being declared as
unconstitutional by the courts, is valid and must be complied with, thus:

As the new Civil Code puts it: When the courts declare a law to be
inconsistent with the Constitution, the former shall be void and the
latter shall govern. Administrative or executive acts, orders and
regulations shall be valid only when they are not contrary to the laws
of the Constitution. It is understandable why it should be so, the
Constitution being supreme and paramount. Any legislative or
executive act contrary to its terms cannot survive.

Such a view has support in logic and possesses the merit of

simplicity. It may not however be sufficiently realistic. It does not
admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be
complied with. This is so as until after the judiciary, in an
appropriate case, declares its invalidity, it is entitled to obedience
and respect. Parties may have acted under it and may have changed
their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative
or executive act was in operation and presumed to be valid in all
respects. It is now accepted as a doctrine that prior to its being
nullified, its existence as a fact must be reckoned with. This is
merely to reflect awareness that precisely because the judiciary is
the governmental organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may have
elapsed before it can exercise the power of judicial review that may
lead to a declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no recognition of what
had transpired prior to such adjudication.

1303
G.R. No. 164527, August 15, 2007, 530 SCRA 235.

893
 In the language of an American Supreme Court decision: The actual
existence of a statute, prior to such a determination [of
unconstitutionality], is an operative fact and may have consequences
which cannot justly be ignored. The past cannot always be erased by
a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, with respect
to particular relations, individual and corporate, and particular
conduct, private and official. This language has been quoted with
approval in a resolution in Araneta v. Hill and the decision in Manila
Motor Co., Inc. v. Flores. An even more recent instance is the
opinion of Justice Zaldivar speaking for the Court in Fernandez v.
Cuerva and Co. (Emphasis supplied.)

The principle was further explicated in the case of Rieta v. People of the
Philippines, thus:

In similar situations in the past this Court had taken the

pragmatic and realistic course set forth in Chicot County Drainage
District vs. Baxter Bank to wit:

The courts below have proceeded on the theory that

the Act of Congress, having been found to be
unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no
duties, and hence affording no basis for the
challenged decree. It is quite clear, however, that
such broad statements as to the effect of a
determination of unconstitutionality must be taken
with qualifications. The actual existence of a statute,
prior to [the determination of its invalidity], is an
operative fact and may have consequences which
cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be
considered in various aspects with respect to
particular conduct, private and official. Questions of
rights claimed to have become vested, of status, of

894
 prior determinations deemed to have finality and
acted upon accordingly, of public policy in the light
of the nature both of the statute and of its previous
application, demand examination. These questions
are among the most difficult of those which have
engaged the attention of courts, state and federal, and
it is manifest from numerous decisions that an all-
inclusive statement of a principle of absolute
retroactive invalidity cannot be justified.

Moreover, the Court ruled in Chavez that:

Furthermore, when petitioner filed the instant case against respondents on August
5, 2004, the JVAs were already terminated by virtue of the MOA between the NHA
and RBI. The respondents had no reason to think that their agreements were
unconstitutional or even questionable, as in fact, the concurrent acts of the executive
department lent validity to the implementation of the Project. The SMDRP
agreements have produced vested rights in favor of the slum dwellers, the buyers
of reclaimed land who were issued titles over said land, and the agencies and
investors who made investments in the project or who bought SMPPCs. These
properties and rights cannot be disturbed or questioned after the passage of around
ten (10) years from the start of the SMDRP implementation. Evidently, the
operative fact principle has set in. The titles to the lands in the hands of the buyers
can no longer be invalidated.1304

In the case at bar, the Court rules that the dictates of justice, fairness and equity do not
support the claim of the alleged farmer-owners that their ownership of the UCPB shares should be
respected. Our reasons:

1. Said farmers or alleged claimants do not have any legal right to own the UCPB shares
distributed to them. It was not successfully refuted that said claimants were issued receipts under
R.A. 6260 for the payment of the levy that went into the Coconut Investment Fund (CIF) upon
which shares in the Coconut Investment Company will be issued. The Court upholds the finding
of the Sandiganbayan that said investment company is a different corporate entity from the United

1304
Id. at 336.

895
Coconut Planters Bank. This was in fact admitted by petitioners during the April 17, 2001 oral
arguments in G.R. Nos. 147062-64.1305

The payments under R.A. 6260 cannot be equated with the payments under P.D. No. 276,
the first having been made as contributions to the Coconut Investment Fund while the payments
under P.D. No. 276 constituted the Coconut Consumers Stabilization Fund (CCSF). R.A. 6260
reads:

Section 2. Declaration of Policy. It is hereby declared to be the national policy to

accelerate the development of the coconut industry through the provision of
adequate medium and long-term financing for capital investment in the industry, by
instituting a Coconut Investment fund capitalized and administered by coconut
farmers through a Coconut Investment Company.1306

P.D. No. 276 provides:

1. In addition to its powers granted under Presidential Decree No. 232, the
Philippine Coconut Authority is hereby authorized to formulate and immediately
implement a stabilization scheme for coconut-based consumer goods, along the
following general guidelines:

(a) .

The proceeds from the levy shall be deposited with the Philippine National
Bank or any other government bank to the account of the Coconut
Consumers Stabilization Fund, as a separate trust fund which shall not form
part of the general fund of the government.

(b) The Fund shall be utilized to subsidize the sale of coconut-based

products at prices set by the Price Control Council, under rules and
regulations to be promulgated by the Philippine Consumers Stabilization
Committee.1307

1305
Rollo (G.R. Nos. 147062-64), TSN, April 17, 2001, p. 169.
1306
R.A. No. 6260, 2.
1307
P.D. No. 276, 1 (a) & (b).

896
 The PCA, via Resolution No. 045-75 dated May 21, 1975, clarified the distinction between
the CIF levy payments under R.A. 6260 and the CCSF levy paid pursuant to P.D. 276, thusly:

It must be remembered that the receipts issued under R.A. No. 6260 were
to be registered in exchange for shares of stock in the Coconut Investment Company
(CIC), which obviously is a different corporate entity from UCPB. This fact was
admitted by petitioners during the April 17, 2001 oral arguments in G.R. Nos.
147062-64.

In fact, while the CIF levy payments claimed to have been paid by
petitioners were meant for the CIC, the distribution of UCPB stock certificates to
the coconut farmers, if at all, were meant for the payors of the CCSF in proportion
to the coconut farmers CCSF contributions pursuant to PCA Resolution No. 045-
75 dated May 21, 1975:

RESOLVED, FURTHER, That the amount of ONE

HUNDRED FIFTY MILLION (P150,000,000.00) PESOS be
appropriated and set aside from available funds of the PCA to be
utilized in payment for the shares of stock of such existing
commercial bank and that the Treasurer be instructed to disburse the
said amount accordingly.

RESOLVED, FINALLY, That be directed to organize a

team which shall prepare a list of coconut farmers who have paid
the levy and contributed to the [CCSF] and to prepare a stock
distribution plan to the end that the aforesaid coconut farmers shall
receive certificates of stock of such commercial bank in proportion
to their contributions to the Fund.

Unfortunately, the said resolution was never complied with in the

distribution of the so-called farmers UCPB shares.

The payments therefore under R.A. 6260 are not the same as those under P.D. No. 276.
The amounts of CIF contributions under R.A. 6260 which were collected starting 1971 are
undeniably different from the CCSF levy under P.D. No. 276, which were collected starting 1973.
The two (2) groups of claimants differ not only in identity but also in the levy paid, the amount of
produce and the time the government started the collection.

897
 Thus, petitioners and the alleged farmers claiming them pursuant to R.A. 6260 do not have
any legal basis to own the UCPB shares distributed to them, assuming for a moment the legal
feasibility of transferring these shares paid from the R.A. 6260 levy to private individuals.

2. To grant all the UCPB shares to petitioners and its alleged members would be iniquitous
and prejudicial to the remaining 4.6 million farmers who have not received any UCPB shares when
in fact they also made payments to either the CIF or the CCSF but did not receive any receipt or
who was not able to register their receipts or misplaced them.

Section 1 of P.D. No. 755 which was declared unconstitutional cannot be considered to be
the legal basis for the transfer of the supposed private ownership of the UCPB shares to petitioners
who allegedly paid the same under R.A. 6260. The Solicitor General is correct in concluding that
such unauthorized grant to petitioners constitutes illegal deprivation of property without due
process of law. Due process of law would mean that the distribution of the UCPB shares should
be made only to farmers who have paid the contribution to the CCSF pursuant to P.D. No. 276,
and not to those who paid pursuant to R.A. 6260. What would have been the appropriate
distribution scheme was violated by Section 1 of P.D. No. 755 when it required that the UCPB
shares should be distributed to coconut farmers without distinction in fact, giving the PCA limitless
power and free hand, to determine who these farmers are, or would be.

We cannot sanction the award of the UCPB shares to petitioners who appear to represent
only 1.4 million members without any legal basis to the extreme prejudice of the other 4.6 million
coconut farmers (Executive Order No. 747 fixed the number of coconut farmers at 6 million in
1981). Indeed, petitioners constitute only a small percentage of the coconut farmers in the
Philippines. Thus, the Sandiganbayan correctly declared that the UCPB shares are government
assets in trust for the coconut farmers, which would be more beneficial to all the coconut farmers
instead of a very few dubious claimants;

3. The Sandiganbayan made the finding that due to enormous operational problems and
administrative complications, the intended beneficiaries of the UCPB shares were not able to
receive the shares due to them. To reiterate what the anti-graft court said:

898
 The actual distribution of the bank shares was admittedly an
enormous operational problem which resulted in the failure of the
intended beneficiaries to receive their shares of stocks in the bank,
as shown by the rules and regulations, issued by the PCA, without
adequate guidelines being provided to it by P.D. No. 755. PCA
Administrative Order No. 1, Series of 1975 (August 20, 1975),
Rules and Regulations Governing the Distribution of Shares of
Stock of the Bank Authorized to be Acquired Pursuant to PCA
Board Resolution No. 246-75, quoted hereunder discloses how the
undistributed shares of stocks due to anonymous coconut farmers or
payors of the coconut levy fees were authorized to be distributed to
existing shareholders of the Bank:

Section 9. Fractional and Undistributed Shares

Fractional shares and shares which remain undistributed as
a consequence of the failure of the coconut farmers to
register their COCOFUND receipts or the destruction of
the COCOFUND receipts or the registration of the
COCOFUND receipts in the name of an unqualified
individual, after the final distribution is made on the basis
of the consolidated IBM registration Report as of March
31, 1976 shall be distributed to all the coconut farmers who
have qualified and received equity in the Bank and shall be
apportioned among them, as far as practicable, in
proportion to their equity in relation to the number of
undistributed equity and such further rules and regulations
as may hereafter be promulgated.

The foregoing PCA issuance was further amended by

Resolution No. 074-78, still citing the same problem of distribution
of the bank shares. This latter Resolution is quoted as follows:

RESOLUTION NO. 074-78

AMENDMENT OF ADMINISTRATIVE ORDER

NO. 1, SERIES OF 1975, GOVERNING THE
DISTRIBUTION OF SHARES

WHEREAS, pursuant to PCA Board Resolution No. 246-75,

the total par value of the shares of stock of the Bank purchased by
the PCA for the benefit of the coconut farmers is P85,773,600.00
with a par value of P1.00 per share or equivalent to 85,773.600
shares;

899
 WHEREAS, out of the 85,773,600 shares, a total of
34,572,794 shares have already been distributed in accordance with
Administrative Order No. 1, Series of 1975, to wit:

First Distribution - 12,573,059

Second Distribution - 10,841,409
Third Distribution - 11,158,326
34,572,794

WHEREAS, there is, therefore, a total of 51,200,806 shares

still available for distribution among the coconut farmers;

WHEREAS, it was determined by the PCA Board, in

consonance with the policy of the state on the integration of the
coconut industry, that the Bank shares must be widely distributed as
possible among the coconut farmers, for which purpose a national
census of coconut farmers was made through the Philippine Coconut
Producers Federation (COCOFED);

WHEREAS, to implement such determination of the PCA

Board, there is a need to accordingly amend Administrative Order
No. 1, Series of 1975;

NOW, THEREFORE, BE IT RESOLVED, AS IT IS

HEREBY RESOLVED, that the remaining 51,200,806 shares of
stock of the Bank authorized to be acquired pursuant to the PCA
Board Resolution No. 246-75 dated July 25, 1975 be distributed as
follows:

(1) All the coconut farmers who have received their shares
in the equity of the Bank on the basis of Section 8 of
Administrative Order No. 1, Series of 1975, shall receive
additional share for each share presently owned by them;

(2) Fractional shares shall be completed into full shares, and

such full shares shall be distributed among the coconut farmers
who qualified for the corresponding fractional shares;

(3) The balance of the shares, after deducting those to be

distributed in accordance with (1) and (2) above, shall be
transferred to COCOFED for distribution, immediately after
completion of the national census of coconut farmers prescribed
under Resolution No. 033-78 of the PCA Board, to all those who
are determined by the PCA Board to be bona fide coconut
farmers and have not received shares of stock of the Bank. The

900
 shares shall be equally determined among them on the basis of
per capita.

RESOLVED, FURTHER, That the rules and regulations

under Administrative Order No. 1, Series of 1975, which are
inconsistent with this Administrative Order be, as they are hereby,
repealed and/or amended accordingly.

Thus, when 51,200,806 shares in the bank remained undistributed, the PCA
deemed it proper to give a bonanza to coconut farmers who already got their bank
shares, by giving them an additional share for each share owned by them and by
converting their fractional shares into full shares. The rest of the shares were then
transferred to a private organization, the COCOFED, for distribution to those
determined to be bona fide coconut farmers who had not received shares of stock
of the Bank. The distribution to the latter was made on the basis of per capita,
meaning without regard to the COCOFUND receipts. The PCA considered itself
free to disregard the said receipts in the distribution of the shares although they
were considered by the May 25, 1975 Agreement between the PCA and defendant
Cojuangco (par. [8] of said Agreement) and by Sections 1, 3, 4, 6 and 9, PCA
Administrative Order No. 1, Series of 1975 as the basis for the distribution of
shares.

The PCA thus assumed, due to lack of adequate guidelines set by P.D. No.
755, that it had complete authority to define who are the coconut farmers and to
decide as to who among the coconut farmers shall be given the gift of bank shares;
how many shares shall be given to them, and what basis it shall use to determine
the amount of shares to be distributed for free to the coconut farmers. In other
words, P.D. No. 755 fails the completeness test which renders it constitutionally
infirm.

Due to numerous flaws in the distribution of the UCPB shares by PCA, it would be best
for the interest of all coconut farmers to revert the ownership of the UCBP shares to the
government for the entire coconut industry, which includes the farmers;

4. The Court also takes judicial cognizance of the fact that a number, if not all, of the
coconut farmers who sold copra did not get the receipts for the payment of the coconut levy for
the reason that the copra they produced were bought by traders or middlemen who in turn sold the
same to the coconut mills. The reality on the ground is that it was these traders who got the receipts
and the corresponding UCPB shares. In addition, some uninformed coconut farmers who actually
got the COCOFUND receipts, not appreciating the importance and value of said receipts, have

901
already sold said receipts to non-coconut farmers, thereby depriving them of the benefits under the
coconut levy laws. Ergo, the coconut farmers are the ones who will not be benefited by the
distribution of the UCPB shares contrary to the policy behind the coconut levy laws. The
nullification of the distribution of the UCPB shares and their transfer to the government for the
coconut industry will, therefore, ensure that the benefits to be deprived from the UCPB shares will
actually accrue to the intended beneficiaries the genuine coconut farmers.

From the foregoing, it is highly inappropriate to apply the operative fact doctrine to the
UCPB shares. Public funds, which were supposedly given utmost safeguard, were haphazardly
distributed to private individuals based on statutory provisions that are found to be constitutionally
infirm on not only one but on a variety of grounds. Worse still, the recipients of the UCPB shares
may not actually be the intended beneficiaries of said benefit. Clearly, applying the Operative Fact
Doctrine would not only be iniquitous but would also serve injustice to the Government, to the
coconut industry, and to the people, who, whether willingly or unwillingly, contributed to the
public funds, and therefore expect that their Government would take utmost care of them and that
they would be used no less, than for public purpose.

We clarify that PSJ-A is subject of another petition for review interposed by Eduardo
Cojuangco, Jr., in G.R. No. 180705 entitled, Eduardo M. Cojuangco, Jr. v. Republic of the
Philippines, which shall be decided separately by this Court. Said petition should accordingly not
be affected by this Decision save for determinatively legal issues directly addressed herein.

WHEREFORE, the petitions in G.R. Nos. 177857-58 and 178793 are hereby DENIED.
The Partial Summary Judgment dated July 11, 2003 in Civil Case No. 0033-A as reiterated with
modification in Resolution dated June 5, 2007, as well as the Partial Summary Judgment dated
May 7, 2004 in Civil Case No. 0033-F, which was effectively amended in Resolution dated May
11, 2007, are AFFIRMED with MODIFICATION, only with respect to those issues subject of
the petitions in G.R. Nos. 177857-58 and 178193. However, the issues raised in G.R. No. 180705
in relation to Partial Summary Judgment dated July 11, 2003 and Resolution dated June 5, 2007
in Civil Case No. 0033-A, shall be decided by this Court in a separate decision.

902
 The Partial Summary Judgment in Civil Case No. 0033-A dated July 11, 2003, is hereby
MODIFIED, and shall read as follows:

WHEREFORE, in view of the foregoing, We rule as follows:

SUMMARY OF THE COURTS RULING.

A. Re: CLASS ACTION MOTION FOR A SEPARATE SUMMARY

JUDGMENT dated April 11, 2001 filed by Defendant Maria Clara L. Lobregat,
COCOFED, et al., and Ballares, et al.

The Class Action Motion for Separate Summary Judgment dated April 11,
2001 filed by defendant Maria Clara L. Lobregat, COCOFED, et al. and Ballares,
et al., is hereby DENIED for lack of merit.

B. Re: MOTION FOR PARTIAL SUMMARY JUDGMENT (RE: COCOFED,

ET AL. AND BALLARES, ET AL.) dated April 22, 2002 filed by Plaintiff.

1. a. The portion of Section 1 of P.D. No. 755, which reads:

and that the Philippine Coconut Authority is hereby

authorized to distribute, for free, the shares of stock of the
bank it acquired to the coconut farmers under such rules and
regulations it may promulgate.

taken in relation to Section 2 of the same P.D., is unconstitutional: (i) for

having allowed the use of the CCSF to benefit directly private interest by
the outright and unconditional grant of absolute ownership of the
FUB/UCPB shares paid for by PCA entirely with the CCSF to the undefined
coconut farmers, which negated or circumvented the national policy or
public purpose declared by P.D. No. 755 to accelerate the growth and

903
 development of the coconut industry and achieve its vertical integration;
and (ii) for having unduly delegated legislative power to the PCA.

b. The implementing regulations issued by PCA, namely, Administrative

Order No. 1, Series of 1975 and Resolution No. 074-78 are likewise
invalid for their failure to see to it that the distribution of shares serve
exclusively or at least primarily or directly the aforementioned public
purpose or national policy declared by P.D. No. 755.

2. Section 2 of P.D. No. 755 which mandated that the coconut levy funds shall
not be considered special and/or fiduciary funds nor part of the general
funds of the national government and similar provisions of Sec. 5, Art. III,
P.D. No. 961 and Sec. 5, Art. III, P.D. No. 1468 contravene the provisions
of the Constitution, particularly, Art. IX (D), Sec. 2; and Article VI, Sec. 29
(3).

3. Lobregat, COCOFED, et al. and Ballares, et al. have not legally and validly
obtained title of ownership over the subject UCPB shares by virtue of P.D.
No. 755, the Agreement dated May 25, 1975 between the PCA and
defendant Cojuangco, and PCA implementing rules, namely, Adm. Order
No. 1, s. 1975 and Resolution No. 074-78.

4. The so-called Farmers UCPB shares covered by 64.98% of the UCPB

shares of stock, which formed part of the 72.2% of the shares of stock of
the former FUB and now of the UCPB, the entire consideration of which
was charged by PCA to the CCSF, are hereby declared conclusively owned
by, the Plaintiff Republic of the Philippines.

SO ORDERED.

904
 The Partial Summary Judgment in Civil Case No. 0033-F dated May 7, 2004, is hereby
MODIFIED, and shall read as follows:

WHEREFORE, the MOTION FOR EXECUTION OF PARTIAL

SUMMARY JUDGMENT (RE: CIIF BLOCK OF SMC SHARES OF
STOCK) dated August 8, 2005 of the plaintiff is hereby denied for lack of merit.
However, this Court orders the severance of this particular claim of Plaintiff. The
Partial Summary Judgment dated May 7, 2004 is now considered a separate final
and appealable judgment with respect to the said CIIF Block of SMC shares of
stock.

The Partial Summary Judgment rendered on May 7, 2004 is modified by

deleting the last paragraph of the dispositive portion, which will now read, as
follows:

WHEREFORE, in view of the foregoing, we hold that:

The Motion for Partial Summary Judgment (Re: Defendants

CIIF Companies, 14 Holding Companies and Cocofed, et al) filed
by Plaintiff is hereby GRANTED. ACCORDINGLY, THE CIIF
COMPANIES, NAMELY:

1. Southern Luzon Coconut Oil Mills (SOLCOM);

2. Cagayan de Oro Oil Co., Inc. (CAGOIL);
3. Iligan Coconut Industries, Inc. (ILICOCO);
4. San Pablo Manufacturing Corp. (SPMC);
5. Granexport Manufacturing Corp. (GRANEX); and
6. Legaspi Oil Co., Inc. (LEGOIL),

AS WELL AS THE 14 HOLDING COMPANIES,

NAMELY:

905
 1. Soriano Shares, Inc.;
2. ACS Investors, Inc.;
3. Roxas Shares, Inc.;
4. Arc Investors; Inc.;
5. Toda Holdings, Inc.;
6. AP Holdings, Inc.;
7. Fernandez Holdings, Inc.;
8. SMC Officers Corps, Inc.;
9. Te Deum Resources, Inc.;
10. Anglo Ventures, Inc.;
11. Randy Allied Ventures, Inc.;
12. Rock Steel Resources, Inc.;
13. Valhalla Properties Ltd., Inc.; and
14. First Meridian Development, Inc.

AND THE CIIF BLOCK OF SAN MIGUEL CORPORATION

(SMC) SHARES OF STOCK TOTALING 33,133,266 SHARES
AS OF 1983 TOGETHER WITH ALL DIVIDENDS
DECLARED, PAID AND ISSUED THEREON AS WELL AS
ANY INCREMENTS THERETO ARISING FROM, BUT NOT
LIMITED TO, EXERCISE OF PRE-EMPTIVE RIGHTS ARE
DECLARED OWNED BY THE GOVERNMENT TO BE
USED ONLY FOR THE BENEFIT OF ALL COCONUT
FARMERS AND FOR THE DEVELOPMENT OF THE
COCONUT INDUSTRY, AND ORDERED RECONVEYED
TO THE GOVERNMENT.

THE COURT AFFIRMS THE RESOLUTIONS ISSUED BY

THE SANDIGANBAYAN ON JUNE 5, 2007 IN CIVIL CASE
NO. 0033-A AND ON MAY 11, 2007 IN CIVIL CASE NO. 0033-
F, THAT THERE IS NO MORE NECESSITY OF FURTHER
TRIAL WITH RESPECT TO THE ISSUE OF OWNERSHIP
OF (1) THE SEQUESTERED UCPB SHARES, (2) THE CIIF
BLOCK OF SMC SHARES, AND (3) THE CIIF COMPANIES.
AS THEY HAVE FINALLY BEEN ADJUDICATED IN THE

906
 AFOREMENTIONED PARTIAL SUMMARY JUDGMENTS
DATED JULY 11, 2003 AND MAY 7, 2004.

SO ORDERED.

Costs against petitioners COCOFED, et al. in G.R. Nos. 177857-58 and Danila S. Ursua in
G.R. No. 178193.

PRESBITERO J. VELASCO, JR.

Associate Justice
WE CONCUR:

RENATO C. CORONA
Chief Justice

No Part I am a petitioner in related

case with same issue GR 147036 &
147811 No part
ANTONIO T. CARPIO TERESITA J. LEONARDO-DE CASTRO
Associate Justice Associate Justice

(On official leave)

ARTURO D. BRION DIOSDADO M. PERALTA

907
 Associate Justice Associate Justice

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

JOSE P. PEREZ JOSE C. MENDOZA

Associate Justice Associate Justice

MARIA LOURDES P. ARANAL-SERENO BIENVENIDO L. REYES

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

908
 C E R T I F I CAT I O N

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court.

RENATO C. CORONA
Chief Justice

909
 FIRST DIVISION

SPOUSES MORRIS CARPO and

SOCORRO CARPO, G.R. No. 166577

Petitioners,

Present:

PUNO, C.J.,
Chairperson,
- versus -
CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
VILLARAMA, JR., JJ.

AYALA LAND, INCORPORATED, Promulgated:

Respondent.

February 3, 2010
x----------------------------------------------------x

DECISION

LEONARDO-DE CASTRO, J.:

In the instant petition for review on certiorari under Rule 45 of the Rules of Court,

910
petitioners seek to set aside and annul the Decision1308 dated December 22, 2003 of the Court of
Appeals (CA) in CA-G.R. CV No. 61784, which reversed and set aside the Summary Judgment1309
dated December 22, 1998 of the Regional Trial Court (RTC) of Las Pias City, Branch 255. Also
subject of the present petition is the CA Resolution1310 dated December 16, 2004 which denied the
motion for reconsideration of the earlier decision.

A summary of the facts, as culled from the records of the case, follows:

On February 16, 1995, petitioner spouses Morris and Socorro Carpo (Carpos) filed a
Complaint for Quieting of Title1311 with the RTC of Makati City against Ayala Corporation, Ayala
Property Ventures Corporation (APVC), and the Register of Deeds of Las Pias, docketed as Civil
Case No. 95-292.

In their Complaint, the Carpos claimed to be the owners of a 171,209-square meter parcel
of land covered by Transfer Certificate of Title (TCT) No. 296463 issued in their names.1312 They
further alleged that Ayala Corporation was claiming to have titles (specifically, TCT Nos. 125945,
T-4366, T-4367 and T-4368) over the property covered by the Carpos TCT No. 296463 and that
Ayala Corporation had made such property its equity contribution in APVC to be developed into
a residential subdivision. Attached as annexes to the complaint were photocopies of:

(a) TCT No. 296463 issued on August 13, 1970 in the name of the Carpos, covering a
parcel of land (Lot 3, plan Psu-56007) located in the Barrio of Almanza, Las Pias with an area of
171,309 square meters;

1308
Penned by Associate Justice Danilo B. Pine (ret.), with then Associate Justice (now Retired Associate Justice
of this Court) Cancio C. Garcia and Associate Justice Renato C. Dacudao (ret.) concurring; rollo, pp. 9-27.
1309
Id. at 90-94.
1310
Id. at 29-31.
1311
Records, pp. 1-7.
1312
In the Complaint, the area of the subject property was alleged to be 171,209 square meters but in TCT No.
296463, the property was described as having an area of 171,309 square meters.

911
 (b) TCT No. 125945 issued on April 6, 1988 in the name of Ayala Corporation, covering
a parcel of land (Lot 3, Plan Psu-80886) located in Bo. Tindig na Manga, Las Pias with an area of
171,309 square meters;

(c) TCT No. T-4367 issued on May 18, 1988 in the name of Ayala Corporation, covering
a parcel of land (Lot 2, plan Psu-47035) located in the Sitio of May Kokak, Bo. of Almanza, Las
Pias with an area of 218,523 square meters; and

(d) TCT No. T-4368 issued on May 18, 1988 in the name of Ayala Corporation, covering
a parcel of land (Lot 3, plan Psu-47035) located in the Sitio of May Kokak, Bo. of Almanza, Las
Pias with an area of 155,345 square meters.

No copy of TCT No. T-4366 was attached to the complaint.

According to the complaint, TCT Nos. 125945, T-4366, T-4367 and T-4368 and their
derivatives appear to have been issued in the name of Ayala and purport to cover and embrace the
Carpos property or portion thereof duly covered registered under the already indefeasible and
incontrovertible TCT [No.] 296463 are inherently invalid and enforceable (sic) for not being the
duly issued derivatives of the Carpos title.1313 The Carpos additionally applied for a restraining
order and writ of preliminary injunction to enjoin Ayala Corporation and APVC from doing
construction and development works on the properties in purported violation of the Carpos rights.

The complaint prayed that the trial court render judgment:

1313
Paragraph 3.03 of the Complaint; records, p. 3.

912
 (1) canceling and declaring void TCT Nos. 125945, T-4366, T-4367, T-4368 and all
alleged derivatives thereof, issued in the name of Ayala Corporation and/or APVC over the
properties or portion thereof embraced in the Carpos TCT No. 296463 and issuing a writ of
possession in favor of the Carpos and/or ordering Ayala Corporation and APVC to surrender to
the Carpos the properties or portion thereof being occupied by the said corporations under
inherently invalid or void titles; (2) declaring TCT No. 296463 issued in their names as valid and
the Carpos as the owners of the property described therein including the parcels of land being
claimed and occupied by Ayala [Corporation] and APVC withou[t] valid and enforceable titles;
and (3) ordering Ayala Corporation and APVC to pay jointly and severally the amount of P100,000
as attorneys fees plus costs of suit and litigation expenses.1314

On March 10, 1995, before defendants could file an answer, petitioners filed an Amended
Complaint, impleading respondent Ayala Land, Incorporated (ALI) in lieu of Ayala Corporation
after purportedly verifying with the Register of Deeds of Las Pias that the title to the subject
property was registered in the name of ALI and not Ayala Corporation.1315

On October 12, 1995 and January 12, 1996, ALI filed its Answer with Counterclaims and
Opposition to Application for Restraining Order and Writ of Preliminary Injunction1316 and Pre-
trial Brief with Motion to Admit Amended Answer,1317 respectively.

In its Amended Answer, ALI alleged that APVC no longer exists having been merged with
ALI in 1991. ALI pointed out that the areas covered by TCT Nos. T-4366, T-4367, and T-4368 do
not overlap with the Carpos claimed property and the dispute pertained only to the land covered
by the Carpos TCT No. 296463 and TCT No. T-5333 in the name of Las Pias Ventures, Inc. (LPVI)
which was derived from TCT No. 125945 in the name of Ayala Corporation. It appeared that Ayala
Corporation contributed the property to LPVI and LPVI had, in turn, also merged with ALI.

1314
Id. at 5.
1315
Plaintiffs Manifestation dated March 7, 1995; id. at 91.
1316
Id. at 97-128.
1317
Id. at 133-A to 161.

913
Further, ALI alleged that it is the true owner of the property covered by TCT No. T-5333 as it
traces back its title to Original Certificate of Title (OCT) No. 242 issued in 1950 while the Carpos
title was derived from OCT No. 8575 issued only in 1970. ALI also claimed the Carpos complaint
was barred by res judicata in view of the 1941 decision of this Court in Guico v. San Pedro1318
which upheld the ownership of a certain Eduardo Guico over the subject property as Lot 3, of Psu-
80886 over the claim of a certain Florentino Baltazar who was asserting ownership of the same
under his plan, Psu-56007.

During the pendency of the case, ALI secured a title in its own name, TCT No. T-41262,
over the property previously covered by TCT No. T-5333.1319

In the Order1320 dated March 6, 1996, the Makati RTC ruled that the present case was an
action in rem and directed the transfer of the case to the RTC of Las Pias where the disputed
property is located. The case was thereafter assigned to Branch 255 of the Las Pias RTC and
docketed as Civil Case No. 96-0082.

On December 17, 1996, ALI filed a Motion for Summary Judgment on the ground that
there was allegedly no genuine issue as to any material fact and the only issue for the court to
resolve was a purely legal one which of the two (2) titles should be accorded priority. According
to ALI, the parties were relying on their respective TCTs, and since ALI admittedly traces its title
to OCT No. 242 which was issued more than twenty (20) years earlier than the Carpos predecessors
title (OCT No. 8575), its title is, thus, superior. Expectedly, the Carpos filed an opposition to the
motion for summary judgment, arguing that there were genuine issues and controversies to be
litigated.

1318
72 Phil 415 (1941).
1319
Records, p. 133-A.
1320
Id. at 166.

914
 In an Order dated April 7, 1997, the RTC denied ALIs motion for summary judgment. This
denial was challenged in a petition for certiorari with the CA in CA-G.R. SP No. 44243.

In a decision1321 dated September 25, 1997, the CA granted ALIs petition and ordered the
RTC to render a summary judgment. Both parties moved for reconsideration of the CA Decision.
ALI filed a motion for partial reconsideration, entreating the CA itself to render the summary
judgment in the interest of judicial economy and on a claim that the sole issue was legal. The
Carpos, in their motion, insisted that there were genuine issues in this case that must be threshed
out in a trial. Both motions were denied in the CA Resolution dated January 12, 1998.1322

Both parties elevated the matter to this Court in separate petitions for review on certiorari.
In G.R. No. 132259, ALI assailed the CAs refusal to render a summary judgment, while in G.R.
No. 132440, the Carpos assailed the CAs ruling that trial was unnecessary.

In separate minute Resolutions,1323 the Court denied both petitions. Both parties motions
for reconsideration were likewise denied.

Accordingly, the RTC rendered a Summary Judgment dated December 22, 1998, finding
the Carpos title superior to that of ALI and ruling, thus:

Upon the other hand, this Court is not inclined to concur with Ayalas claim
of the validity of its TCT No. T-5333 and alleged OCT No. 242 absent of any
admission to that effect by the plaintiffs in their complaint. A reading of the
defendants answer reveals that OCT No. 242 covers the property surveyed under
SWO, but the pleadings on file fail to allege that the same was approved by the
Director of the Bureau of Lands, thereby justifying this court to be skeptical of the
validity of the issuance of OCT No. 242. In original land registration cases, it is

1321
Id. at 282-292.
1322
Id. at 305-306.
1323
G.R. No. 132259, id. at 472; G.R. No. 132440, id. at 406.

915
mandatory that the application should be accompanied by a survey plan of the
property applied for registration, duly approved by the Director of the Bureau of
Lands. A survey plan without the approval of the Director of the Bureau of Lands
has the character of being of dubious origin and it is not therefore worthy of being
accepted as evidence. The property being claimed by the defendant ALI, allegedly
registered under OCT No. 242, is shown to have been surveyed under SWO and
not bearing the approval of the Director of the Bureau of Lands. Any title issued
emanating from a survey plan without the approval of the Director of the Bureau of
Lands is tainted with irregularity and therefore void, as ruled in Republic Cement
Corporation vs. Court of Appeals, et al., 198 SCRA 734. In the said case, the
Supreme Court held: That unless a survey plan is duly approved by the Director of
Lands the same is of dubious value and is not acceptable as evidence. Indubitably,
therefore, the reported survey and its alleged results are not entitled to credit and
should be rejected.

The submission of the plan is a statutory requirement of mandatory

character and unless the plan and its technical description are duly approved by the
Director of Lands, the same are not of much value (Republic vs. Vera, 120 SCRA
210). In another case, it was ruled that the Land Registration Commission has no
authority to approve original survey plans (Director of Lands, et al. vs. Honorable
Salvador Reyes, et al., 68 SCRA 177).

Evidently, the SWO survey of the property which defendant ALI claimed
to have been originated from OCT No. 242 had not been approved by the Director
of the Bureau of Lands, but was apparently prepared and approved by the then Land
Registration Commissioner and under the law, the same is void.

It will also be noted that aside from the admissions made by defendant ALI
in its answer, it clearly appears in its title TCT No. T-5333 that the date of survey
was on July 28, 1930. Plaintiffs property covered by TCT No. 296463 was surveyed
on January 4-6, 1927. This means that plaintiffs predecessor-in-interest had claimed
ownership of the property ahead of that of defendant ALIs predecessor-in-interest.
The principle of prior registration cannot be applied in this case because the land
previously surveyed cannot anymore be the subject of another survey, and there is
already a record of a prior survey in the Bureau of Lands. This is precisely the
reason why the survey plan has to be approved by the Director of the Bureau of
Lands. This must be the reason why the later survey in favor of Ayalas predecessor-
in-interest did not anymore bear the approval of the Director of Lands because had
it been submitted for approval, the records of the Bureau of Lands will show that

916
 an earlier survey of the same land had already been made and approved by the
Director of the Bureau of Lands.

Evidently, Ayalas claim of superiority of its title over that of the plaintiffs
cannot therefore be sustained. Be that as it may, the fact that cannot be disputed on
the basis of Ayalas answer is its admission that SWO survey without the approval
of the Director of the Bureau of Lands was submitted in the alleged registration
proceedings, rendering the decree and the title issued thereunder to be tainted with
irregularity and therefore void.

WHEREFORE, in the light of the foregoing and the prevailing

jurisprudence on the matter, judgment is hereby rendered:

(a) Declaring TCT No. 296463 in the name of the plaintiffs Spouses
Morris G. Carpo and Socorro R. Carpo as valid and legal, and
superior to that of defendant Ayalas TCT No. T-5333;

(b) Declaring TCT No. T-5333, TCT No. 125945, TCT No. T-6055,
TCT No. 4366, TCT No. 4367 and TCT No. 4368 and their
derivatives as null and void;

(c) Ordering the defendant Ayala Land, Inc. to pay the sum of
P100,000.00 as attorneys fees; and

(d) To pay the costs.1324

On January 5, 1999, ALI filed a notice of appeal but the same was dismissed by the CA in
a Resolution1325 dated May 14, 1999 for failure to pay the full amount of docket fees. In its motion
for reconsideration, ALI pointed out that it paid the full amount assessed by the cash clerk on duty
at the RTC Las Pias. The motion was also denied, prompting ALI to file with this Court a petition
for review docketed as G.R. No. 140162. Finding ALIs petition meritorious, the Court, in a

1324
Rollo, pp. 92-94.
1325
CA rollo, p. 9.

917
Decision1326 dated November 22, 2000, reversed the CAs dismissal of ALIs appeal and remanded
the same to the CA for further proceedings.

On December 22, 2003, the CA rendered the herein challenged decision in favor of ALI,
the dispositive portion of which reads as follows:

FOR THE FOREGOING DISQUISITIONS, the instant appeal is

GRANTED, the assailed Summary Judgment of the Regional Trial Court of Las
Pias, Branch 255, dated December 22, 1998, is hereby REVERSED and SET
ASIDE, and a new one is rendered as follows:

(1) TCT No. 41262, formerly TCT No. T-5333, in the name of
defendant-appellant Ayala Land, Incorporated is hereby declared to be the VALID
title to the subject property;

(2) TCT No. 296463 issued in the name of plaintiffs-appellees

is declared to be NULL and VOID;

(3) The concerned Register of Deeds is hereby ORDERED to

cancel plaintiffs-appellees TCT No. 296463, and any and all titles issued covering
the subject property, for being spurious and void, and of no force and effect.1327

The Carpos filed their motion for reconsideration but the same was denied by the CA in its
Resolution dated December 16, 2004. Hence, the instant petition for review filed by Socorro Carpo
and the heirs of Morris Carpo.1328 The Petition contained the following assignment of errors:

A THE COURT OF APPEALS ERRED IN DECLARING THAT

THE TITLE OF RESPONDENT IS VALID EVEN WITHOUT THE REQUISITE
SURVEY PLAN APPROVED BY THE DIRECTOR OF LANDS.

1326
Id. at 177-194.
1327
Rollo, p. 27.
1328
Morris Carpo passed away on December 12, 1999 as shown by the death certificate attached to the Petition;
id. at 87.

918
 B. THE COURT OF APPEALS ERRED IN DECLARING
PETITIONERS GUILTY OF LACHES AND PRESCRIPTION.

C. THE COURT OF APPEALS ERRED IN DECLARING THAT

THE RTC RELIED HEAVILY ON AN ALLEGED ADMISSION BY
RESPONDENT OF THE VALIDITY OF THE TITLE OF PETITIONERS OVER
THE DISPUTED PARCEL OF LAND.

D. THE COURT OF APPEALS ERRED IN DECLARING THAT

THERE IS RES JUDICATA AGAINST PETITIONERS BASED ON THE CASE
OF GUICO V. SAN PEDRO, ET AL., 72 PHIL 415, WITHOUT PROPER
DETERMINATION OF WHETHER THE FACTS IN SAID CASE ARE
DIRECTLY APPLICABLE TO THIS CASE AND WHETHER THE ELEMENTS
OF RES JUDICATA ARE PRESENT.1329

Petitioners prayed that this Court render a decision: (a) reversing and setting aside the CA
Decision dated December 22, 2003 and Resolution dated December 16, 2004; (b) reinstating and
affirming in toto the RTCs Summary Judgment dated December 22, 1998; or in the alternative (c)
remanding the case to the RTC for further proceedings.

After a thorough review of the records, we deny the petition and concur with the CA that
the Summary Judgment rendered by the trial court should be reversed and set aside.

Preliminary discussion regarding subject matter of the

controversy

1329
Id. at 40.

919
 At the outset, it should be noted that the trial court in its Summary Judgment declared
null and void (a) TCT No. T-5333 (and its antecedent, TCT No. [125945] T-6055A) covering a
parcel of land with an area of 171,309 square meters; (b) TCT No. T-4366 with a land area of
254,085 square meters; (c) TCT No. T-4367 with a land area of 218,523 square meters; and (d)
TCT No. T-4368 with a land area of 155,345 square meters, despite the lack of evidence of
identity of the properties described in TCT Nos. T-4366, T-4367 and T-4368 with the property
covered by the Carpos TCT No. 296463 or any portion of said property claimed by petitioners.
This was grievous and palpable error on the part of the trial court considering that the property
being claimed by the Carpos under their TCT No. 296463 had an area of only 171,309 square
meters and the total area of the properties in the titles invalidated by the trial court was 799,262
square meters.

It must be emphasized that in CA-G.R. SP No. 44243, involving the same parties, the CA
ruled that:

On the other hand, defendant ALI, in its responsive pleading did not deny
the existence of a title in the name of the plaintiffs/private respondents. Instead, it
alleged:

14. The parcel of land described in TCT No. 296463, issued

in the name of the plaintiffs, completely overlaps the property
covered by ALIs TCT No. T-5333. But TCT No. T-296463 traces
itself to OCT No. 8575 which was issued on August 12, 1970, long
after OCT No. 242 (the title from which ALIs TCT No. T-5333 was
derived) was issued on May 9, 1950 (on the basis of Decree of
Registration No. 2917, Record No. 43516). Hence, ALIs TCT No.
T-5333 is superior to TCT No. 296463. xxx.

This is an admission that the private respondents have a title to the property
in question, and that the property described in private respondents TCT No. 296463
completely overlaps the title of petitioner ALI. This fact is further substantiated
by an affidavit of Jose Rizal Mercado, a Geodetic Engineer who, after attesting
to his qualifications, competence and experience, declared under oath:

9. In connection with the subject case, Affiant was requested

to find out, based on the technical descriptions in their respective

920
 titles, if the lots described in the title of plaintiffs, TCT No. 296463,
overlaps the lots of ALI covered by TCT No. 41262 (formerly, TCT
No. T-5333 of LPVI, and, more previously, TCT No. T (125945)
6055-A, in the name of Ayala Corporation), TCT No. 4366, TCT
No. 4367 and TCT No. 4368, x x x.

9.1. To accomplish this task, Affiant resorted

to the plotting of the technical descriptions found in
the plaintiffs and ALIs respective titles. The standard
operating procedure, adopted by Affiant in this
particular instance, in plotting properties is to study
the technical description in the titles and at the same
time, to get all the available survey plans described
in the titles for reference.

9.2. To evidence this plotting that Affiant

conducted, Affiant prepared a Sketch Plan reflecting
Plaintiffs title vis-a-vis ALIs title. Attached hereto as
Annex G is an original copy of the Sketch Plan
prepared by the Affiant.

9.3. The orange-shaded portion on the Sketch

Plan indicates the area covered by the title of the
plaintiffs and it is clearly shown in this plan that
plaintiffs claimed property entirely overlaps ALIs
property delineated in TCT No. T-41262.
Plaintiffs claimed property (Lot 3, PSU-56007) is
in fact identical to ALIs lot (Lot 3, PSU-80886).

9.4. The blue, pink and green lines on the

Sketch Plan indicate the boundaries of ALIs TCT
Nos. 4366, 4367 and 4368, respectively, and it is
clearly shown that these do not overlap with
plaintiffs claimed property.

The Sketch Plan attached thereto clearly indicates the overlapping and
identical boundaries between the private respondents TCT No. 296463 and

921
 petitioners TCT No. 125945, (formerly TCT No. T-5333).1330 In addition to the
affidavit of the Geodetic Engineer, the petitioner likewise attached to its Motion for
Summary Judgment copies of the following titles:

xxxx

In contrast, the private respondents never controverted the petitioners

allegation that their (private respondents) title, TCT No. 296463 traces its origin to
OCT No. 8575, issued on August 12, 1970, while that of the petitioner has its origin
in OCT No. 242, issued on May 9, 1950. Moreover, the private respondents
attached no supporting document to its Opposition to the Motion for
Summary Judgment.

Thus, as matters stand, the requisites for the grant of summary judgment
appear to have been satisfied xxx.

xxxx

Since the existence of two titles over the same property, as well as the
fact of overlapping of the technical descriptions of the two titles are admitted
in the pleadings, and substantiated by the supporting documents attached by
the defendant-movant (petitioner herein) to its Motion for Summary
Judgment, there is no genuine issue as to any material fact. If at all, the sole
issue is a legal one, to wit: whose title (as to the conflicting ones) is superior
and must be upheld. This issue may be decided on the basis of the affidavits
and supporting documents submitted by the parties, as well as the applicable
law and jurisprudence on the matter. In other words, there need not be a protracted
trial thereon, since all that the trial court should do is to apply the law to the issue,
taking into consideration the documents attached by the parties in their respective
pleadings and/or submitted together with the motion or the opposition thereto. The
same is true with the other defenses raised by the petitioner in its responsive
pleading, to wit: res judicata, prescription and laches which may likewise be
resolved without going to trial.1331 (Emphasis and underscoring supplied.)

1330
This should read subsequently TCT No. T-5333 instead of formerly TCT No. T-5333.
1331
CA rollo, pp. 166-169.

922
 The foregoing CA decision became final and executory after the separate petitions for
review filed with this Court by the parties were denied with finality. The parties, and even the
trial court, were bound by the CAs factual finding therein that the only lots whose technical
descriptions overlap are those covered by the Carpos TCT No. 296463 and ALIs TCT No. T-5333
which later became TCT No. T-41262. There was simply no basis for the trial court to invalidate
all the ALI titles mentioned in the complaint.

The incorrectness of this sweeping invalidation of ALI titles in the Summary Judgment is
even more evident in the case of TCT No. T-4367 (Lot 2, plan Psu-47035) and TCT No. T-4368
(Lot 3, plan Psu-47035). Petitioners claims with respect to these properties are already barred by
res judicata. In Realty Sales Enterprise, Inc. v. Intermediate Appellate Court,1332petitioner Morris
Carpo already asserted his purported ownership of these two properties based on a transfer
certificate of title with the same survey plan number (Psu-56007) as TCT No. 296463. However,
in Realty, his claim was discredited by the Court when it held that Realty Sales Enterprise, Inc.
(Realty), ALIs predecessor in interest,1333 is the one with valid title to these properties. The relevant
portions of the Realty Decision are quoted here:

Two (2) adjacent parcels of land located in Almanza, Las Pias, Metro
Manila, having an aggregate area of 373,868 sq. m., situated in the vicinity of the
Ayala Alabang Project and BF Homes Paraaque are covered by three (3) distinct
sets of Torrens titles to wit:

1) TCT No. 20408 issued on May 29, 1975 in the name of Realty Sales
Enterprise, Inc., which was derived from OCT No. 1609, issued on
May 21, 1958, pursuant to Decree No. N-63394 in LRC Cases Nos.
657, 758 and 976, GLRO Record Nos. N-29882, N-33721 and N-
43516, respectively.

2) TCT No. 303961 issued on October 13, 1970 in the name of Morris
G. Carpo, which was derived from OCT No. 8629, issued on

1332
G.R. No. L-67451, September 28, 1987, 154 SCRA 328.
1333
From the annotations on TCT Nos. T-4367 and T-4368, it would appear that Ayala Corporation acquired the
properties from Realty Sales Enterprise, Inc.

923
 October 13, 1970 pursuant to decree No. N-131349 in LRC Case
No. N-11-M (N-6217), GLRO Record No. N-32166.

3) TCTs Nos. 333982 and 333985, issued on July 27, 1971 in the name
of Quezon City Development and Financing Corporation, derived
from OCT No. 8931 which was issued on July 27, 1971 pursuant to
LRC Case No. P-206 GLRO Record No. N-31777.

On December 29, 1977, Morris Carpo filed a complaint with the Court of
First Instance of Rizal, Branch XXIII, presided over by Judge Rizalina Bonifacio
Vera (hereafter referred to as Vera Court), for "declaration of nullity of Decree No.
N-63394 and TCT No. 20408." Named defendants were Realty Sales Enterprise,
Inc., Macondray Farms, Inc. and the Commissioner of Land Registration. x x x.

xxxx

In the case at bar, it appears that it was Estanislao Mayuga, father of

Dominador Mayuga, predecessor-in-interest of Realty, who originally filed on June
24, 1927 a registration proceeding docketed as LRC Case No. 657, GLRO Record
No. N-29882 in the Court of First Instance of Rizal to confirm his title over parcels
of land described as Lots 1, 2 and 3, Plan Psu-47035. (Lots 2 and 3 are the
subject of the instant litigation among Carpo, Realty and QCDFC.) Case No.
657 was jointly tried with two other cases, LRC Case No. 976, GLRO Record No.
43516 filed by Eduardo Guico and LRC Case No. 758, GLRO Record No. 33721
filed by Florentino Baltazar, as the three cases involved identical parcels of land,
and identical applicants/oppositors.

xxxx

Carpo bought the disputed property from the Baltazars, the original
registered owners, by virtue of a deed executed before Iluminada Figueroa, Notary
Public of Manila dated October 9, 1970. x x x.

xxxx

The Baltazars, predecessors-in-interest of Carpo are heirs of Florentino

Baltazar, an oppositor in the original application filed by Estanislao Mayuga in
1927. As stated earlier, the CFI-Rizal confirmed the title of Estanislao to Lots
1, 2 and 3 of Plan Psu-47035 "desestimando oposicion de Florentino Baltazar . . .
con respeto a dichos lotes . . ." As such successors of Florentino, they could not
pretend ignorance of the land registration proceedings over the disputed

924
 parcels of land earlier initiated by Eduardo Guico, Florentino Baltazar and
Estanislao Mayuga, as when as the decisions rendered therein.

Moreover, it is not disputed that the title in the name of Dominador

Mayuga, from whom Realty derived its title, was issued in 1958, or twelve
years before the issuance of the title in the name of the Baltazars in 1970.

In this jurisdiction, it is settled that "(t)he general rule is that in the case
of two certificates of title, purporting to include the same land, the earlier in
date prevails x x x. In successive registrations, where more than one certificate is
issued in respect of a particular estate or interest in land, the person claiming under
the prior certificate is entitled to the estate or interest; and that person is deemed
to hold under the prior certificate who is the holder of, or whose claim is
derived directly or indirectly from the person who was the holder of the
earliest certificate issued in respect thereof x x x.1334 (Emphasis and underscoring
ours; citations omitted.)

We now discuss each assignment of error raised in the petition.

First Assignment of Error

Petitioners alleged that the CA erred in declaring that the title of respondent is valid even
without the requisite survey plan approved by the Director of the Bureau of Lands.

Petitioners clearly misunderstood or deliberately misread the CAs ruling on this point. It is
the CAs view that the trial courts pronouncement that OCT No. 242 was issued without an
approved survey plan was unwarranted in view of the presumption of regularity that said title
enjoys.

1334
Realty Sales Enterprise, Inc. v. Intermediate Appellate Court, supra note 25 at 330-346.

925
 We cannot but agree with the CA on this point upon perusing the following portion of the
Summary Judgment:

Upon the other hand, this Court is not inclined to concur with Ayalas claim
of the validity of its TCT No. T-5333 and alleged OCT No. 242 absent of any
admission to that effect by the plaintiffs in their complaint. A reading of the
defendants answer reveals that OCT No. 242 covers the property surveyed under
SWO, but the pleadings on file fail to allege that the same was approved by the
Director of the Bureau of Lands, thereby justifying this court to be skeptical of the
validity of the issuance of OCT No. 242. In original land registration cases, it is
mandatory that the application should be accompanied by a survey plan of the
property applied for registration, duly approved by the Director of the Bureau of
Lands. A survey plan without the approval of the Director of the Bureau of Lands
has the character of being of dubious origin and it is not therefore worthy of being
accepted as evidence. The property being claimed by the defendant ALI, allegedly
registered under OCT No. 242, is shown to have been surveyed under SWO and
not bearing the approval of the Director of the Bureau of Lands. Any title issued
emanating from a survey plan without the approval of the Director of the Bureau of
Lands is tainted with irregularity and therefore void, as ruled in Republic Cement
Corporation vs. Court of Appeals, et al., 198 SCRA 734. In the said case, the
Supreme Court held: That unless a survey plan is duly approved by the Director of
Lands the same is of dubious value and is not acceptable as evidence. Indubitably,
therefore, the reported survey and its alleged results are not entitled to credit and
should be rejected.

The submission of the plan is a statutory requirement of mandatory

character and unless the plan and its technical description are duly approved by the
Director of Lands, the same are not of much value (Republic vs. Vera, 120 SCRA
210). In another case, it was ruled that the Land Registration Commission has no
authority to approve original survey plans (Director of Lands, et al. vs. Honorable
Salvador Reyes, et al., 68 SCRA 177).

Evidently, the SWO survey of the property which defendant ALI claimed
to have been originated from OCT No. 242 had not been approved by the Director
of the Bureau of Lands, but was apparently prepared and approved by the then Land
Registration Commissioner and under the law, the same is void.1335

1335
Rollo, pp. 92-93.

926
 To begin with, a perusal of the defendants answer or amended answer would show that,
contrary to the trial courts allusions thereto, there is no admission on the part of ALI that OCT No.
242 was issued without a survey plan that was duly approved by the Director of the Bureau of
Lands. There is likewise no evidence on record to support the trial courts finding that the survey
plan submitted to support the issuance of OCT No. 242 in the 1950 land registration proceedings
was approved only by the Land Registration Commissioner and not by the Director of the Bureau
of Lands.

It would appear the trial court came to the conclusion that OCT No. 242 was issued without
a duly approved survey plan simply because the notation SWO appeared in the technical
description of the said title which was attached to the answer and due to ALIs failure to allege in
its pleadings that the survey plan submitted in support of the issuance of OCT No. 242 was
approved by the Director of the Bureau of Lands.1336

It is incomprehensible how the trial court could conclude that the survey plan mentioned
in OCT No. 242 was unapproved by the appropriate authority all from the notation SWO which
appeared beside the survey plan number on the face of the title or from a failure to allege on the
part of ALI that a duly approved survey plan exists. We quote with approval the discussion of the
CA on this point:

Pursuant to the foregoing, the court a quo erred when, in ruling that the
validity of OCT No. 242 is dubious, it gave emphasis to defendant-appellants
failure to allege that the survey plan of OCT No. 242 was duly approved by the
Director of the Bureau of Lands. It is admitted that a survey plan is one of the
requirements for the issuance of decrees of registration, but upon the issuance of
such decree, it can most certainly be assumed that said requirement was complied

1336
The technical description in OCT No. 242 began with the words: A parcel of land (Lot 2, plan Psu-80886,
SWO-20609, Case No. 976, G.L.R.O. Record No. 43516).

927
 with by ALIs original predecessor-in-interest at the time the latter sought original
registration of the subject property. Moreover, the land registration court must
be assumed to have carefully ascertained the propriety of issuing a decree in favor
of ALIs predecessor-in-interest, under the presumption of regularity in the
performance of official functions by public officers. The court upon which the law
has conferred jurisdiction, is deemed to have all the necessary powers to exercise
such jurisdiction, and to have exercised it effectively. This is as it should be,
because once a decree of registration is made under the Torrens system, and the
time has passed within which that decree may be questioned the title is perfect
and cannot later on be questioned. There would be no end to litigation if every
litigant could, by repeated actions, compel a court to review a decree previously
issued by another court forty-five (45) years ago. The very purpose of the Torrens
system would be destroyed if the same land may be subsequently brought under a
second action for registration, as what the court a quo did when it faulted ALIs
failure to allege that its predecessor-in-interest submitted a survey plan approved
by the Director of the Bureau of Lands in the original land registration case.

The Court need not emphasize that it is not for ALI to allege in its pleadings,
much less prove, that its predecessor-in-interest complied with the requirements for
the original registration of the subject property. A party dealing with a registered
land need not go beyond the Certificate of Title to determine the true owner
thereof so as to guard or protect his or her interest. Hence, ALI was not required
to go beyond what appeared in the transfer certificate of title in the name of its
immediate transferor. It may rely solely, as it did, on the correctness of the
certificate of title issued for the subject property and the law will in no way oblige
it to go behind the certificate of title to determine the condition of the property.
This is the fundamental nature of the Torrens System of land registration, to give
the public the right to rely upon the face of a Torrens certificate of title and to
dispense with the need of inquiring further.1337 (Underscoring ours; citations
omitted.)

It cannot be gainsaid that the issuance of OCT No. 242 was a result of the registration decree

of the Court of First Instance of Rizal, pursuant to land registration proceedings in Case No.

976. In the absence of proof to the contrary, OCT No. 242 and its derivatives, including ALIs

1337
Rollo, pp. 19-20.

928
 TCT No. T-41262, enjoy the presumption of regularity and ALI need not allege or prove that

its title was regularly issued. That is precisely the nature of such a presumption, it dispenses

with proof. Rule 131, Section 3 of the Rules of Court provides:

Section 3. Disputable presumptions. The following presumptions are

satisfactory if uncontradicted, but may be contradicted and overcome by other
evidence:

xxxx

(m) That official duty has been regularly performed;

(n) That a court, or judge acting as such, whether in the Philippines or

elsewhere, was acting in the lawful exercise of jurisdiction;

(o) That all the matters within an issue raised in a case were laid before the
court and passed upon by it; and in like manner that all matters within an issue
raised in a dispute submitted for arbitration were laid before the arbitrators and
passed upon by them; x x x.

Thus, we held in Herce, Jr. v. Municipality of Cabuyao, Laguna1338:

In the absence of evidence to the contrary, the Ordinary Decree Book,

LRC (CLR) Rec. No. 6763, showing that Decree No. 4244 was issued on March 3,
1911, is presumed to have been regularly issued by the accountable public
officers who enjoy the legal presumption of regularity in the performance of
their functions. Thus, the proceedings that led to the issuance of Decree No.
4244 in favor of the Municipality of Cabuyao cannot be overturned without any
countervailing proof to the contrary. In the words of Tichangco v. Enriquez:1339

1338
G.R. No. 166645, November 11, 2005, 474 SCRA 797, 808.
1339
G.R. No. 150629, June 30, 2004, 433 SCRA 324.

929
 To overturn this legal presumption carelessly more than 90
years since the termination of the case will not only endanger
judicial stability, but also violate the underlying principle of the
Torrens system. Indeed, to do so would reduce the vaunted legal
indefeasibility of Torrens titles to meaningless verbiage. (Emphasis
supplied.)

The presumption of regularity enjoyed by the registration decree issued in Case No. 976
and OCT No. 242 includes the presumption that all the requisites for the issuance of a valid title
had been complied with. ALI need not allege or prove that a duly approved survey plan
accompanied the issuance of OCT No. 242 in 1950 because it is presumed. It is the party who
seeks to overcome the presumption who would have the burden to present adequate and convincing
evidence to the contrary. This, petitioners did not even attempt to do.

We cannot accept petitioners proposition that they did not have the burden of proof of
showing the irregularity of ALIs title since the burden of proof purportedly did not shift to them
since no full-blown trial was conducted by the RTC.

This specious argument deserves scant credit. Rule 131, Section 1 of the Rules of Court
provides:

Section 1. Burden of proof. Burden of proof is the duty of a party to present

evidence on the facts in issue necessary to establish his claim or defense by the
amount of evidence required by law.

With the filing of the complaint, petitioners should already have alleged all the bases of
their cause of action, particularly their allegation that ALIs title is null and void and that such title
should be cancelled. However, a scrutiny of the complaint would show that petitioners never

930
alleged the purported lack of an approved survey plan as a defect of ALIs title. All that the
complaint alleged is that ALIs titles should be declared void for not being derivatives of the Carpos
title. Implicit in that allegation is that petitioners were relying solely on the supposed priority of
their own title over ALIs. It stands to reason then that ALI did not have to allege in its Answer that
its mother title, OCT No. 242, was supported by a duly approved survey plan when petitioners did
not raise the same as an issue in their complaint or in any other pleading filed with the trial court.

Indubitably, in view of the CAs Decision in CA-G.R. SP No. 44243, this controversy has
been reduced to the sole substantive issue of which between the two titles, purporting to cover the
same property, deserves priority. This is hardly a novel issue. As petitioners themselves are aware,
in Realty, it was held that:

In this jurisdiction, it is settled that "(t)he general rule is that in the case
of two certificates of title, purporting to include the same land, the earlier in
date prevails x x x. In successive registrations, where more than one certificate is
issued in respect of a particular estate or interest in land, the person claiming
under the prior certificate is entitled to the estate or interest; and that person
is deemed to hold under the prior certificate who is the holder of, or whose
claim is derived directly or indirectly from the person who was the holder of
the earliest certificate issued in respect thereof x x x."1340 (Emphasis supplied.)

In Degollacion v. Register of Deeds of Cavite,1341 we held that [w]here two certificates of

title purport to include the same land, whether wholly or partly, the better approach is to trace the
original certificates from which the certificates of title were derived.

1340
Realty Sales Enterprise, Inc. v. Intermediate Appellate Court, supra note 25 at 346.
1341
G.R No. 161433, August 29, 2006, 500 SCRA 108, 115.

931
 In all, we find that the CA committed no reversible error when it applied the principle
Primus Tempore, Portior Jure (First in Time, Stronger in Right) in this case and found that ALIs
title was the valid title having been derived from the earlier OCT.

Second Assignment of Error

Petitioners contend that it is error on the part of the CA to rule that their cause of action
has been barred by prescription and laches. According to them, since the OCT from which ALI
derived its title is void for want of a duly approved survey plan, their cause of action did not
prescribe. However, as discussed above, the conclusion of the trial court that OCT No. 242 is void
was not sufficiently borne out by the evidence on record. Verily, the premise upon which
petitioners build their theory of imprescriptibility of their action did not exist.

In sum, we find no reason to disturb the CAs finding that:

As previously emphasized, OCT No. 242 of ALIs predecessor-in-interest was

issued on May 7, 1950, or forty-five (45) years before plaintiffs-appellees filed their
complaint on March 10, 1995. As such, it is the Courts firmly held view that
plaintiffs-appellees claim is barred not only by prescription, but also by laches.

Aside from the fact that OCT No. 242 had become incontrovertible after the
lapse of one (1) year from the time a decree of registration was issued, any action
for reconveyance that plaintiffs-appellees could have availed of is also barred.
Although plaintiffs-appellees complaint was for quieting of title, it is in essence an
action for reconveyance based on an implied or constructive trust, considering that
plaintiffs-appellees were alleging in said complaint that there was a serious mistake,
if not fraud, in the issuance of OCT No. 242 in favor of ALIs predecessor-in-
interest. It is now well-settled that an action for reconveyance, which is a legal
remedy granted to a landowner whose property has been wrongfully or erroneously
registered in anothers name, must be filed within ten years from the issuance of the
title, since such issuance operates as a constructive notice. Since ALIs title is traced
to an OCT issued in 1950, the ten-year prescriptive period expired in 1960.

932
 By laches is meant the negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either
has abandoned it or declined to assert it. It does not involve mere lapse or passage
of time, but is principally an impediment to the assertion or enforcement of a right,
which has become under the circumstances inequitable or unfair to permit. In the
instant case, plaintiffs-appellees, as well as their predecessor-in-interest, have not
shown that they have taken judicial steps to nullify OCT No. 242, from which ALIs
title was derived, for forty-five (45) years. To allow them to do so now, and if
successful, would be clearly unjust and inequitable to those who relied on the
validity of said OCT, the innocent purchasers for value, who are protected by the
precise provisions of P.D. 1529, thus:

SECTION 32. Review of decree of registration; Innocent

purchaser for value The decree of registration shall not be reopened
or revised xxx subject, however, to the right of any person xxx to
file in the proper Court of First Instance a petition for reopening and
review of the decree of registration not later than one year from and
after the date of entry of such decree of registration, but in no case
shall such petition be entertained by the court where an innocent
purchaser for value has acquired the land or an interest therein,
whose rights may be prejudiced. Whenever the phrase innocent
purchaser for value or an equivalent phrase occurs in this Decree, it
shall be deemed to include and innocent lessee, mortgagee or other
encumbrances for value.1342

Third Assignment of Error

1342
Rollo, pp. 23-24.

933
 The next assigned error involves the question of whether the trial court, in rendering the
Summary Judgment, indeed relied heavily on the alleged admission made by ALI on the validity
of Carpos title, as declared by the CA. Specifically, the CA stated as follows:

In its assailed decision, the court a quo relied heavily on the alleged
admission by ALI in it[s] Answer of the existence and validity of plaintiffs-
appellees title. We have read the pertinent pleading and We find ALIs statement to
be of no moment.

Nowhere in ALIs statement was there an admission of the validity of

plaintiffs-appellees title. x x x.

The Court cannot comprehend where and how the court a quo could have
gotten the impression that ALI was admitting not only the existence, but also the
validity of plaintiffs-appellees certificate of title. x x x.1343

An examination of the Summary Judgment of the trial court would readily show that indeed
the trial court relied on ALIs supposed admission of the existence of Carpos title in ruling which
of the conflicting titles was valid. Pertinently, the trial court merely declared:

The existence of plaintiffs TCT No. 296463 has been admitted by defendant
Ayala in its answer to have been originated from OCT No. 8575 which was issued
on August 12, 1970. It is very significant that defendant ALI admitted it in its
answer that OCT No. 8575 and plaintiffs TCT No. 296463 both originated from
Decree No. 131141 issued on October 15, 1969 in the name of Apolonio Sabater
as Annex G to defendant ALIs answer. This admission made by the defendant in
its answer is conclusive upon it. It cannot therefore take position contrary to
or inconsistent with its answer, and the facts are to be taken as true
(Westminister High School vs. Sto. Domingo, et al., G.R. No. 12666 R-July 5,
1955; McDaniel vs. Apacible, 44 Phil. 248-255).

1343
Rollo, p. 14.

934
 Upon the other hand, this Court is not inclined to concur with Ayalas claim
of the validity of its TCT No. T-5333 and alleged OCT No. 242 absent of any
admission to that effect by the plaintiffs in their complaint. x x x.1344

Although the Summary Judgment did not expressly state that ALI admitted the validity of
Carpos title with its admission of the said titles existence, that is the unmistakable import of the
trial courts statements that ALIs admission of the existence of Carpos title are conclusive upon it
and bars ALI from taking a position contrary to or inconsistent with its answer followed by the
statement that the trial court is not inclined to concur with Ayalas claim of validity of its TCT No.
T-5333 and alleged OCT No. 242, absent of (sic) any admission to that effect by the plaintiffs.
This is yet another non sequitur argument on the part of the trial court which the CA correctly
pointed out in its own Decision.

Fourth Assignment of Error

As to the issue of res judicata, the Court of Appeals ruled that the decision in the case of
Guico v. San Pedro1345 was binding on the Carpos as it proceeded to discuss, thus:

In Guico vs. San Pedro, the Supreme Court resolved the conflicting claims
over a tract of land situated in barrio Tindig na Manga, Paraaque, Rizal, which was
subdivided into eleven (11) lots. The subject land was sought to be registered by a
certain Eduardo C. Guico on the basis of an accompanying plan Psu-80886, which
interestingly is also the basis of ALIs TCT No. T-5333, now TCT No. 41262.
Guicos application was opposed by, among others, Florentino Baltazar, on the basis
of plan Psu 56007, under which plaintiffs-appellees title was derived.

1344
Id. at 92.
1345
Supra note 11.

935
 It appears that Lots 2 and 3 were adjudicated to Guico on the basis of Psu-
80886 (Lot 3 is the subject matter of the instant case), Lot 10 in favor of Baltazar
on the basis of Psu 56007, under which plaintiffs-appellees title was based, and the
rest to the heirs of Narciso Mayuga. While Baltazar claimed Lot 3 on the basis of
his Psu-56007, his claim was rejected and the Lot was adjudicated to Guico on the
basis of his Psu-80886.

It is clear, therefore, that whatever claim plaintiffs-appellees have on the

subject property on the basis of Lot 3 Psu-56007, through their predecessor-in-
interest, Florentino Baltazar, the same had been clearly and finally denied by the
Supreme Court in Guico vs. San Pedro.

For res judicata to apply, four requisites must be met: (1) the former
judgment or order must be final; (2) it must be a judgment or an order on the merits;
(3) it must have been rendered by a court having jurisdiction over the subject matter
and the parties; and (4) there must be, between the first and the second actions,
identity of parties, of subject matter and of cause of action. Plaintiffs-appellees only
have objections with respect to the fourth requisite, offering the lame excuse that it
is not bound by such decision, there being no identity of parties in Guico vs. San
Pedro and the instant case.1346

We agree with petitioners that it is not apparent from an examination of Guico and the
evidence on record that indeed the predecessors-in-interest of ALI and the Carpos with respect to
the subject property are Eduardo Guico and Florentino Baltazar, especially since the parties
respective OCTs were not issued in these persons names but rather a certain Alberto Yaptinchay
and Apolonio Sabater. It cannot be categorically said that there was identity of parties between the
Guico case and the instant case. Clearly, one of the elements of res judicata, i.e., that there must
be, between the first and the second actions, identity of parties, is lacking. In any event, the CAs
questioned Decision had sufficient basis in fact and law even without relying on the Guico case.

1346
Rollo, pp. 24-25.

936
 In conclusion, we find that the Court of Appeals committed no reversible error in setting
aside the patently erroneous Summary Judgment of the trial court.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated December
22, 2003 and the Resolution dated December 16, 2004 are hereby AFFIRMED.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

CONCHITA CARPIO MORALES LUCAS P. BERSAMIN

Associate Justice Associate Justice

937
 MARTIN S. VILLARAMA, JR.
Associate Justice

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

938
 Republic of the Philippines
Supreme Court
Baguio City

SECOND DIVISION

ATTY. PEDRO M. FERRER, G.R. No. 165300

Petitioner,

Present:

- versus -

CARPIO, J., Chairperson,

BRION,

SPOUSES ALFREDO DIAZ ABAD,

and IMELDA DIAZ, DEL CASTILLO, and

REINA COMANDANTE and PEREZ, JJ.

SPOUSES BIENVENIDO

PANGAN and ELIZABETH

PANGAN, Promulgated:

939
 Respondents. April 23, 2010
x-------------------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

The basic questions to be resolved in this case are: Is a waiver of hereditary rights
in favor of another executed by a future heir while the parents are still living valid? Is an
adverse claim annotated on the title of a property on the basis of such waiver likewise
valid and effective as to bind the subsequent owners and hold them liable to the claimant?

This Petition for Review on Certiorari1347 under Rule 45 of the Rules of Court assails
the December 12, 2003 Decision1348 of the Court of Appeals (CA) in CA-G.R. CV No.
70888.1349 Said Decision modified the June 14, 2001 Summary Judgment1350 of the
Regional Trial Court (RTC) of Quezon City in Civil Case No. Q-99-38876 by holding
respondents Spouses Bienvenido and Elizabeth Pangan (the Pangans) not solidarily liable
with the other respondents, Spouses Alfredo and Imelda Diaz (the Diazes) and Reina
Comandante (Comandante), to petitioner Atty. Pedro M. Ferrer (Atty. Ferrer). Likewise

1347
Rollo, pp. 13-14.
1348
CA rollo, pp. 140-149; penned by Associate Justice Arsenio J. Magpale and concurred in by Associate Justices
Conrado M. Vasquez, Jr. and Bienvenido L. Reyes.
1349
Entitled Atty. Pedro M. Ferrer, plaintiff-appellee, vs. Spouses Alfredo Diaz and Imelda Diaz, Reina
Commandante and Spouses Bienvenido Pangan and Elizabeth Pangan.
1350
Records, pp. 287-291; penned by Judge Emilio L. Leachon, Jr.

940
assailed is the CA Resolution1351 dated September 10, 2004 which denied petitioners as
well as respondents Spouses Diaz and Comandantes respective motions for
reconsideration.

The parties respective versions of the factual antecedents are as follows:

Version of the Petitioner

Petitioner Atty. Ferrer claimed in his original Complaint1352 that on May 7, 1999,
the Diazes, as represented by their daughter Comandante, through a Special Power of
Attorney (SPA),1353 obtained from him a loan of P1,118,228.00. The loan was secured by
a Real Estate Mortgage Contract1354 by way of second mortgage over Transfer Certificate
of Title (TCT) No. RT-66041355 and a Promissory Note1356 payable within six months or
up to November 7, 1999. Comandante also issued to petitioner postdated checks to secure
payment of said loan.

Petitioner further claimed that prior to this or on May 29, 1998, Comandante, for a
valuable consideration of P600,000.00, which amount formed part of the abovementioned
secured loan, executed in his favor an instrument entitled Waiver of Hereditary Rights and
Interests Over a Real Property (Still Undivided),1357 the pertinent portions of which read:

1351
CA rollo, p. 91.
1352
Records, pp. 3-6.
1353
Id. at 7.
1354
Id. at 14-17.
1355
Id. at 92-95.
1356
Id. at 18.
1357
Id. at 19-20.

941
 I, REINA D. COMANDANTE, of legal age, Filipino, married, with residence and
postal address at No. 6, Road 20, Project 8, Quezon City, Metro Manila, Philippines, for a
valuable consideration of SIX HUNDRED THOUSAND PESOS (P600,000.00) which
constitutes my legal obligation/loan to Pedro M. Ferrer, likewise of legal age, Filipino,
married to Erlinda B. Ferrer, with residence and postal address at No. 9, Lot 4, Puerto Rico
Street, Loyola Grand Villas, Quezon City, Metro Manila, Philippines, by virtue of these
presents, do hereby WAIVE, and/or REPUDIATE all my hereditary rights and interests as
a legitimate heir/daughter of Sps. Alfredo T. Diaz and Imelda G. Diaz in favor of said
Pedro M. Ferrer, his heirs and assigns over a certain parcel of land together with all the
improvements found thereon and which property is more particularly described as follows:

TRANSFER CERTIFICATE OF TITLE

NO. RT-6604 (82020) PR-18887

xxxx

and which property is titled and registered in the name of my parents Alfredo T. Diaz and
Imelda G. Diaz, as evidenced by Transfer Certificate of Title No. RT 6604 (82020) PR-
18887.

(sgd.)
REINA D. COMANDANTE
Affiant

On the basis of said waiver, petitioner executed an Affidavit of Adverse Claim1358

which he caused to be annotated at the back of TCT No. RT-6604 on May 26, 1999.

The Diazes, however, reneged on their obligation as the checks issued by

Comandante were dishonored upon presentment. Despite repeated demands, said
respondents still failed and refused to settle the loan. Thus, petitioner filed on September
29, 1999 a Complaint1359 for Collection of Sum of Money Secured by Real Estate
Mortgage Contract against the Diazes and Comandante docketed as Civil Case No. Q-99-
38876 and raffled to Branch 224 of RTC, Quezon City.

1358
Id. at 21.
1359
Id. at 3-6.

942
 Petitioner twice amended his complaint. First, by including as an alternative relief
the Judicial Foreclosure of Mortgage1360 and, second, by impleading as additional
defendants the Pangans as the mortgaged property covered by TCT No. RT-6604 was
already transferred under their names in TCT No. N-209049. Petitioner prayed in his
second amended complaint that all the respondents be ordered to jointly and solidarily pay
him the sum of P1,118,228.00, exclusive of interests, and/or for the judicial foreclosure of
the property pursuant to the Real Estate Mortgage Contract.

Version of the Respondents

In her Answer1361 to petitioners original complaint, Comandante alleged that

petitioner and his wife were her fellow members in the Couples for Christ Movement.
Sometime in 1998, she sought the help of petitioner with regard to the mortgage with a
bank of her parents lot located at No. 6, Rd. 20, Project 8, Quezon City and covered by
TCT No. RT-6604. She also sought financial accommodations from the couple on several
occasions which totaled P500,000.00. Comandante, however, claimed that these loans
were secured by chattel mortgages over her taxi units in addition to several postdated
checks she issued in favor of petitioner.

As she could not practically comply with her obligation, petitioner and his wife,
presented to Comandante sometime in May 1998 a document denominated as Waiver of
Hereditary Rights and Interests Over a Real Property (Still Undivided) pertaining to a
waiver of her hereditary share over her parents abovementioned property. Purportedly, the
execution of said waiver was to secure Comandantes loan with the couple which at that
time had already ballooned to P600,000.00 due to interests.

1360
Id. at 48-51 and 69-72.
1361
Id. at 29-33.

943
 A year later, the couple again required Comandante to sign the following
documents: (1) a Real Estate Mortgage Contract over her parents property; and, (2) an
undated Promissory Note, both corresponding to the amount of P1,118,228.00, which
petitioner claimed to be the total amount of Comandantes monetary obligation to him
exclusive of charges and interests. Comandante alleged that she reminded petitioner that
she was not the registered owner of the subject property and that although her parents
granted her SPA, same only pertains to her authority to mortgage the property to banks and
other financial institutions and not to individuals. Petitioner nonetheless assured
Comandante that the SPA was also applicable to their transaction. As Comandante was
still hesitant, petitioner and his wife threatened to foreclose the formers taxi units and
present the postdated checks she issued to the bank for payment. For fear of losing her taxi
units which were the only source of her livelihood, Comandante was thus constrained to
sign the mortgage agreement as well as the promissory note. Petitioner, however, did not
furnish her with copies of said documents on the pretext that they still have to be notarized,
but, as can be gleaned from the records, the documents were never notarized. Moreover,
Comandante claimed that the SPA alluded to by petitioner in his complaint was not the
same SPA under which she thought she derived the authority to execute the mortgage
contract.

Comandante likewise alleged that on September 29, 1999 at 10:00 o clock in the
morning, she executed an Affidavit of Repudiation/Revocation of Waiver of Hereditary
Rights and Interests Over A (Still Undivided) Real Property,1362 which she caused to be
annotated on the title of the subject property with the Registry of Deeds of Quezon City on
the same day. Interestingly, petitioner filed his complaint later that day too.

1362
Id. at 38.

944
 By way of special and affirmative defenses, Comandante asserted in her Answer to
the amended complaint1363 that said complaint states no cause of action against her because
the Real Estate Mortgage Contract and the waiver referred to by petitioner in his complaint
were not duly, knowingly and validly executed by her; that the Waiver of Hereditary Rights
and Interests Over a Real Property (Still Undivided) is a useless document as its execution
is prohibited by Article 1347 of the Civil Code,1364 hence, it cannot be the source of any
right or obligation in petitioners favor; that the Real Estate Mortgage was of doubtful
validity as she executed the same without valid authority from her parents; and, that the
prayer for collection and/or judicial foreclosure was irregular as petitioner cannot seek said
remedies at the same time.

Apart from executing the affidavit of repudiation, Comandante also filed on October
4, 1999 a Petition for Cancellation of Adverse Claim (P.E. 2468) Under The Memorandum
of Encumbrances of TCT No. RT-6604 (82020) PR-188871365 docketed as LRC Case No.
Q-12009 (99) and raffled to Branch 220 of RTC, Quezon City. Petitioner who was
impleaded as respondent therein moved for the consolidation of said case1366 with Civil
Case No. Q-99-38876. On June 24, 2000, Branch 220 of RTC, Quezon City ordered the
consolidation of LRC Case No. Q-12009 (99) with Civil Case No. Q-99-38876.
Accordingly, the records of the former case was forwarded to Branch 224.

1363
Id. at 208-219.
1364
ART. 1347. All things which are not outside the commerce of men, including future things, may be the object of
a contract. All rights which are not intransmissible may also be the object of contracts.
No contract may be entered into upon future inheritance except in cases expressly authorized by law.
All services which are not contrary to law, morals, good customs, public order or public policy may likewise
be the object of a contract.
1365
Records, p. 1.
1366
Id. at 93.

945
 For their part, the Diazes asserted that petitioner has no cause of action against them.
They claimed that they do not even know petitioner and that they did not execute any SPA
in favor of Comandante authorizing her to mortgage for the second time the subject
property. They also contested the due execution of the SPA as it was neither authenticated
before the Philippine Consulate in the United States nor notarized before a notary public in
the State of New York where the Diazes have been residing for 16 years. They claimed
that they do not owe petitioner anything. The Diazes also pointed out that the complaint
merely refers to Comandantes personal obligation to petitioner with which they had
nothing to do. They thus prayed that the complaint against them be dismissed.1367

At the Pangans end, they alleged that they acquired the subject property by purchase
in good faith and for a consideration of P3,000,000.00 on November 11, 1999 from the
Diazes through the latters daughter Comandante who was clothed with SPA acknowledged
before the Consul of New York. The Pangans immediately took actual possession of the
property without anyone complaining or protesting. Soon thereafter, they were issued TCT
No. N-209049 in lieu of TCT No. RT-6604 which was cancelled. 1368

However, on December 21, 1999, they were surprised upon being informed by
petitioner that the subject land had been mortgaged to him by the Diazes. Upon inquiry
from Comandante, the latter readily admitted that she has a personal loan with petitioner
for which the mortgage of the property in petitioners favor was executed. She admitted,
though, that her parents were not aware of such mortgage and that they did not authorize
her to enter into such contract. Comandante also informed the Pangans that the signatures
of her parents appearing on the SPA are fictitious and that it was petitioner who prepared
such document.

1367
See Answer with Compulsory Counter-Claim of the Diazes, id. at 231-237.
1368
See Answer with Compulsory Counter-Claim of the Pangans, id. at 172-183.

946
 As affirmative defense, the Pangans asserted that the annotation of petitioners
adverse claim on TCT No. RT-6604 cannot impair their rights as new owners of the subject
property. They claimed that the Waiver of Hereditary Rights and Interests Over a Real
Property (Still Undivided) upon which petitioners adverse claim is anchored cannot be the
source of any right or interest over the property considering that it is null and void under
paragraph 2 of Article 1347 of the Civil Code.

Moreover, the Pangans asserted that the Real Estate Mortgage Contract cannot bind
them nor in any way impair their ownership of subject property because it was not
registered before the Register of Deeds.1369

All the respondents interposed their respective counterclaims and prayed for moral
and exemplary damages and attorneys fees in varying amounts.

After the parties have submitted their respective pre-trial briefs, the Diazes filed on
March 29, 2001 a Motion for Summary Judgment1370 alleging that: first, since the
documents alluded to by petitioner in his complaint were defective, he was not entitled to
any legal right or relief; and, second, it was clear from the pleadings that it is Comandante
who has an outstanding obligation with petitioner which the latter never denied. With these,
the Diazes believed that there is no genuine issue as to any material fact against them and,
hence, they were entitled to summary judgment.

1369
Id.
1370
Id. at 246-257.

947
 On May 7, 2001, petitioner also filed a Motion for Summary Judgment,1371 claiming
that his suit against the respondents is meritorious and well-founded and that same is
documented and supported by law and jurisprudence. He averred that his adverse claim
annotated at the back of TCT No. RT-6604, which was carried over in TCT No. 209049
under the names of the Pangans, is not merely anchored on the Waiver of Hereditary Rights
and Interests Over a Real Property (Still Undivided) executed by Comandante, but also on
the Real Estate Mortgage likewise executed by her in representation of her parents and in
favor of petitioner. Petitioner insisted that said adverse claim is not frivolous and invalid
and is registrable under Section 70 of Presidential Decree (PD) No. 1529. In fact, the
Registrar of Deeds of Quezon City had already determined the sufficiency and/or validity
of such registration by annotating said claim, and this, respondents failed to question.
Petitioner further averred that even before the sale and transfer to the Pangans of the subject
property, the latter were already aware of the existence of his adverse claim. In view of
these, petitioner prayed that his Motion for Summary Judgment be granted.

Ruling of the Regional Trial Court

After the filing of the parties respective Oppositions to the said motions for
summary judgment, the trial court, in an Order dated May 31, 2001,1372 deemed both
motions for summary judgment submitted for resolution. Quoting substantially petitioners
allegations in his Motion for Summary Judgment, it thereafter rendered on June 14, 2001
a Summary Judgment1373 in favor of petitioner, the dispositive portion of which reads:

WHEREFORE, premises considered, summary judgment is hereby rendered in

favor of plaintiff and against defendants by:

1371
Id. at 262-268.
1372
Id. at 286.
1373
Id. at 287-291.

948
 a) ORDERING all defendants jointly and solidarily to pay plaintiff the sum of
ONE MILLION ONE HUNDRED EIGHTEEN THOUSAND TWO HUNDRED
TWENTY EIGHT PESOS (P1,118,228.00) which is blood money of plaintiff;

b) ORDERING the Honorable Registrar of Deeds of Quezon City that the rights
and interest of the plaintiff over subject property be annotated at the back of T.C.T. No. N-
209049;

c) SENTENCING all defendants to pay plaintiffs expenses of TEN

THOUSAND PESOS (P10,000.00) and to pay the costs of suit.

IT IS SO ORDERED.1374

The Pangans, the Diazes, and Comandante appealed to the CA.1375 The Pangans
faulted the trial court in holding them jointly and severally liable with the Diazes and
Comandante for the satisfaction of the latters personal obligation to petitioner in the total
amount of P1,118,228.00. The Diazes and Comandante, on the other hand, imputed error
upon the trial court in rendering summary judgment in favor of petitioner. They averred
that assuming the summary judgment was proper, the trial court should not have
considered the Real Estate Mortgage Contract and the Promissory Note as they were
defective, as well as petitioners frivolous and non-registrable adverse claim.

In its Decision1376 dated December 12, 2003, the CA declared Comandantes waiver
of hereditary rights null and void. However, it found the Real Estate Mortgage executed
by Comandante on behalf of her parents as binding between the parties thereto.

As regards the Pangans, the CA ruled that the mortgage contract was not binding
upon them as they were purchasers in good faith and for value. The property was free from
the mortgage encumbrance of petitioner when they acquired it as they only came to know

1374
Id. at 290-291.
1375
Id. at 295 and 301.
1376
CA rollo, pp. 140-149.

949
of the adverse claim through petitioners phone call which came right after the formers
acquisition of the property. The CA further ruled that as Comandantes waiver of hereditary
rights and interests upon which petitioners adverse claim was based is a nullity, it could not
be a source of any right in his favor. Hence, the Pangans were not bound to take notice of
such claim and are thus not liable to petitioner.

Noticeably, the appellate court did not rule on the propriety of the issuance of the
Summary Judgment as raised by the Diazes and Comandante. In the ultimate, the CA
merely modified the assailed Summary Judgment of the trial court by excluding the
Pangans among those solidarily liable to petitioner, in effect affirming in all other respects
the assailed summary judgment, viz:

WHEREFORE, foregoing premises considered, the Decision of the Regional Trial

Court of Quezon City, Branch 224 in Civil Case No. Q-99-38876 is hereby MODIFIED,
as follows:

1. Ordering defendants-appellants Comandante and Spouses Diaz to jointly and

severally pay plaintiff the sum of Php 1,118, 228.00; and

2. Ordering defendants-appellants Comandante and Spouses Diaz to jointly and

severally pay plaintiff the amount of Php10,000.00 plus cost of suit.

SO ORDERED.1377

Petitioners Motion for Reconsideration1378 having been denied by the CA in its

Resolution1379 dated September 10, 2004, he now comes to us through this petition for
review on certiorari insisting that the Pangans should, together with the other respondents,
be held solidarily liable to him for the amount of P1,118,228.00.

1377
Id. at 148.
1378
Id. 166-170.
1379
Id. at 191.

950
 Our Ruling

The petition lacks merit.

Petitioner merely reiterates his contentions in the Motion for Summary Judgment
he filed before the trial court. He insists that his Adverse Claim annotated at the back of
TCT No. RT-6604 is not merely anchored on Comandantes Waiver of Hereditary Rights
and Interests Over A Real Property (Still Undivided) but also on her being the attorney-in-
fact of the Diazes when she executed the mortgage contract in favor of petitioner. He avers
that his adverse claim is not frivolous or invalid and is registrable as the Registrar of Deeds
of Quezon City even allowed its annotation. He also claims that even prior to the sale of
subject property to the Pangans, the latter already knew of his valid and existing adverse
claim thereon and are, therefore, not purchasers in good faith. Thus, petitioner maintains
that the Pangans should be held, together with the Diazes and Comandante, jointly and
severally liable to him in the total amount of P1,118,228.00.

Petitioners contentions are untenable.

The Affidavit of Adverse Claim executed by petitioner reads in part:

xxxx

1. That I am the Recipient/Benefactor of compulsory heirs share over an

undivided certain parcel of land together with all the improvements found therein x x x
as evidenced by Waiver of Hereditary Rights and Interests Over A Real Property,
executed by REINA D. COMANDANTE (a compulsory/legitimate heir of Sps. Alfredo
T. Diaz and Imelda G. Diaz), x x x.

2. That in order to protect my interest over said property as a

Recipient/Benefactor, for the registered owners/parents might dispose (of) and/or
encumber the same in a fraudulent manner without my knowledge and consent, for the
owners duplicate title was not surrendered to me, it is petitioned that this Affidavit of
Adverse Claim be ANNOTATED at the back of the said title particularly on the original

951
 copy of Transfer Certificate of Title No. RT-6604 (82020) PR-18887 which is on file with
the Register of Deeds of Quezon City.

3. That I am executing this Affidavit in order to attest (to) the truth of the foregoing
facts and to petition the Honorable Registrar of Deeds, Quezon City, to annotate this
Affidavit of Adverse Claim at the back of the said title particularly the original copy of
Transfer Certificate of Title No. RT-6604 (82020) PR-18887 which is on file with the said
office, so that my interest as Recipient/Benefactor of the said property will be protected
especially the registered owner/parents, in a fraudulent manner might dispose (of) and/or
encumber the same without my knowledge and consent. (Emphasis ours)

Clearly, petitioners Affidavit of Adverse Claim was based solely on the waiver of
hereditary interest executed by Comandante. This fact cannot be any clearer especially so
when the inscription of his adverse claim at the back of TCT No. RT-6604 reads as follows:

P.E. 2468/T-(82020)RT-6604 - - AFFIDAVIT OF ADVERSE CLAIM - -

Executed under oath by PEDRO M. FERRER, married to Erlinda B. Ferrer, claiming
among others that they have a claim, the interest over said property as
Recipient/Benefactor, by virtue of a waiver of Hereditary Rights and Interest over a real
property x x x1380 (Emphasis ours)

Therefore, there is no basis for petitioners assertion that the adverse claim was also
anchored on the mortgage contract allegedly executed by Comandante on behalf of her
parents.

The questions next to be resolved are: Is Comandantes waiver of hereditary rights

valid? Is petitioners adverse claim based on such waiver likewise valid and effective?

We note at the outset that the validity of petitioners adverse claim should have been
determined by the trial court after the petition for cancellation of petitioners adverse claim

1380
Dorsal side of p. 13 of the Records.

952
filed by Comandante was consolidated with Civil Case No. Q-99-38876.1381 This is in
consonance with Section 70 of PD 1529 which provides:

Section 70. Adverse Claim. Whoever claims any part or interest in registered land
adverse to the registered owner, arising subsequent to the date of the original registration,
may, if no other provision is made in this Decree for registering the same, make a statement
in writing setting forth fully his alleged right or interest, and how or under whom acquired,
a reference to the number of the certificate of title of the registered owner, the name of the
registered owner, and a description of the land in which the right or interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimants
residence, and a place at which all notices may be served upon him. This statement shall
be entitled to registration as an adverse claim on the certificate of title. The adverse claim
shall be effective for a period of thirty days from the date of registration. After the lapse of
said period, the annotation of adverse claim may be cancelled upon filing of a verified
petition therefor by the party in interest: Provided, however, That after cancellation, no
second adverse claim based on the same ground shall be registered by the same claimant.

Before the lapse of thirty days aforesaid, any party in interest may file a petition
in the Court of First Instance where the land is situated for the cancellation of the
adverse claim, and the court shall grant a speedy hearing upon the question of validity
of such adverse claim, and shall render judgment as may be just and equitable. If the
adverse claim is adjudged to be invalid, the registration thereof shall be ordered
cancelled. If, in any case, the court, after notice and hearing, shall find that the adverse
claim thus registered was frivolous, it may fine the claimant in an amount not less than one
thousand pesos nor more than five thousand pesos, in its discretion. Before the lapse of
thirty days, the claimant may withdraw his adverse claim by filing with the Register of
Deeds a sworn petition to that effect. (Emphasis ours)

Pursuant to the third paragraph of the afore-quoted provision, it has been held that
the validity or efficaciousness of an adverse claim may only be determined by the Court
upon petition by an interested party, in which event, the Court shall order the immediate
hearing thereof and make the proper adjudication as justice and equity may warrant. And,
it is only when such claim is found unmeritorious that the registration of the adverse claim
may be cancelled.1382

1381
Records, p. 66.
1382
Sajonas v. Court of Apeals, 327 Phil. 689, 712 (1996).

953
 As correctly pointed out by respondents, the records is bereft of any showing that
the trial court conducted any hearing on the matter. Instead, what the trial court did was to
include this material issue among those for which it has rendered its summary judgment as
shown by the following portion of the judgment:

x x x it will be NOTED that subject Adverse Claim annotated at the back of Transfer
Certificate of Title No. RT-6604 (82020) PR-18887, and carried over to defendants-Sps.
Pangans Title No. N-20909, is not merely anchored on defendant Reina Comandantes
Waiver of Hereditary Rights and Interest Over a Real Property but also on her being the
Attorney-In-Fact of the previous registered owners/parents/defendants Sps. Alfredo and
Imelda Diaz about the Real Estate Mortgage Contract for a loan of P1,118,228.00 which
is a blood money of the plaintiff. Moreover, subject Adverse Claim in LRC Case No. Q-
12009 (99) is NOT frivolous and invalid and consequently, REGISTRABLE by virtue
of Section 110 of the Land Registration Act (now Section 70 of Presidential Decree No.
1529). 1383 (Emphasis ours)

It does not escape our attention that the trial court merely echoed the claim of
petitioner that his adverse claim subject of LRC Case No. Q-12009 (99) is not frivolous,
invalid and is consequently registrable. We likewise lament the apparent lack of effort on
the part of said court to make even a short ratiocination as to how it came up with said
conclusion. In fact, what followed the above-quoted portion of the summary judgment are
mere recitals of the arguments raised by petitioner in his motion for summary judgment.
And in the dispositive portion, the trial court merely casually ordered that petitioners
adverse claim be inscribed at the back of the title of the Pangans. What is worse is that
despite this glaring defect, the CA manifestly overlooked the matter even if respondents
vigorously raised the same before it.
Be that as it may, respondents efforts of pointing out this flaw, which we find
significant, have not gone to naught as will be hereinafter discussed.

1383
Records, p. 290.

954
 All the respondents contend that the Waiver of Hereditary Rights and Interest Over
a Real Property (Still Undivided) executed by Comandante is null and void for being
violative of Article 1347 of the Civil Code, hence, petitioners adverse claim which was
based upon such waiver is likewise void and cannot confer upon the latter any right or
interest over the property.

We agree with the respondents.

Pursuant to the second paragraph of Article 1347 of the Civil Code, no contract may
be entered into upon a future inheritance except in cases expressly authorized by law. For
the inheritance to be considered future, the succession must not have been opened at the
time of the contract. A contract may be classified as a contract upon future inheritance,
prohibited under the second paragraph of Article 1347, where the following requisites
concur:

(1) That the succession has not yet been opened.

(2) That the object of the contract forms part of the inheritance; and,

(3) That the promissor has, with respect to the object, an expectancy of a right which is
purely hereditary in nature.1384

In this case, there is no question that at the time of execution of Comandantes

Waiver of Hereditary Rights and Interest Over a Real Property (Still Undivided),
succession to either of her parents properties has not yet been opened since both of them
are still living. With respect to the other two requisites, both are likewise present
considering that the property subject matter of Comandantes waiver concededly forms part

1384
J.L.T. Agro Inc. v. Balansag, 493 Phil. 365, 378-379 (2005).

955
of the properties that she expect to inherit from her parents upon their death and, such
expectancy of a right, as shown by the facts, is undoubtedly purely hereditary in nature.
From the foregoing, it is clear that Comandante and petitioner entered into a contract
involving the formers future inheritance as embodied in the Waiver of Hereditary Rights
and Interest Over a Real Property (Still Undivided) executed by her in petitioners favor.

In Taedo v. Court of Appeals,1385 we invalidated the contract of sale between Lazaro

Taedo and therein private respondents since the subject matter thereof was a one hectare
of whatever share the former shall have over Lot 191 of the cadastral survey of Gerona,
Province of Tarlac and covered by Title T-13829 of the Register of Deeds of Tarlac. It
constitutes a part of Taedos future inheritance from his parents, which cannot be the source
of any right nor the creator of any obligation between the parties.

Guided by the above discussions, we similarly declare in this case that the Waiver
of Hereditary Rights and Interest Over a Real Property (Still Undivided) executed by
Comandante in favor of petitioner as not valid and that same cannot be the source of any
right or create any obligation between them for being violative of the second paragraph of
Article 1347 of the Civil Code.

Anent the validity and effectivity of petitioners adverse claim, it is provided in

Section 70 of PD 1529, that it is necessary that the claimant has a right or interest in the
registered land adverse to the registered owner and that it must arise subsequent to
registration. Here, as no right or interest on the subject property flows from Comandantes
invalid waiver of hereditary rights upon petitioner, the latter is thus not entitled to the

1385
322 Phil 84 (1996).

956
registration of his adverse claim. Therefore, petitioners adverse claim is without any basis
and must consequently be adjudged invalid and ineffective and perforce be cancelled.

Albeit we have already resolved the issues raised by petitioner, we shall not stop
here as the Diazes and Comandante in their Comment1386 call our attention to the failure
of the CA to pass upon the issue of the propriety of the issuance by the trial court of the
Summary Judgment in favor of petitioner despite the fact that they have raised this issue
before the appellate court. They argue that summary judgment is proper only when there
is clearly no genuine issue as to any material fact in the action. Thus, where the defendant
presented defenses tendering factual issue which call for presentation of evidence, as when
he specifically denies the material allegations in the complaint, summary judgment cannot
be rendered.

The Diazes and Comandante then enumerate the genuine issues in the case which
they claim should have precluded the trial court from issuing a summary judgment in
petitioners favor. First, the execution of the SPA in favor of Comandante referred to by
petitioner in his complaint was never admitted by the Diazes. They assert that as such fact
is disputed, trial should have been conducted to determine the truth of the matter, same
being a genuine issue. Despite this, the trial court merely took the word of the plaintiff and
assumed that said document was indeed executed by them. Second, although Comandante
acknowledges that she has a personal obligation with petitioner, she nevertheless, did not
admit that it was in the amount of P1,118,228.00. Instead, she claims only the amount of
P500,000.00 or P600,000.00 (if inclusive of interest) as her obligation. Moreover, the
Diazes deny borrowing any money from petitioner and neither did the Pangans owe him a
single centavo. Thus, the true amount of the obligation due the petitioner and how each of

1386
Rollo, pp. 192-210.

957
the respondents are responsible for such amount are genuine issues which need formal
presentation of evidence. Lastly, they aver that the trial court ignored factual and material
issues such as the lack of probative value of Comandantes waiver of hereditary rights as
well as of the SPA; the fact that Comandante signed the mortgage contract and promissory
note in her personal capacity; and, that all such documents were prepared by petitioner who
acted as a lawyer and the creditor of Comandante at the same time.

Rule 35 of the Rules of Court provides for summary judgment, the pertinent
provisions of which are the following:

Section 1. Summary Judgment for claimant. A party seeking to recover upon a

claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after
the pleading in answer thereto has been served, move with supporting affidavits,
depositions or admissions for a summary judgment in his favor upon all or any part thereof.

Section 2. Summary Judgment for the defending party. A party against whom a
claim, counterclaim or cross-claim is asserted or a declaratory relief is sought may, at any
time, move with supporting affidavits, depositions or admissions for a summary judgment
in his favor as to all or any part thereof.

Section 3. Motion and proceedings thereon. The motion shall be served at least ten
(10) days before the time specified for the hearing. The adverse party may serve opposing
affidavits, depositions, or admissions at least three (3) days before the hearing. After the
hearing, the judgment sought shall be rendered forthwith if the pleadings, supporting
affidavits, depositions and admissions on file, show that, except as to the amount of
damages, there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.

As can be deduced from the above provisions, summary judgment is a procedural

devise resorted to in order to avoid long drawn out litigations and useless delays. When the
pleadings on file show that there are no genuine issues of facts to be tried, the Rules of
Court allows a party to obtain immediate relief by way of summary judgment. That is,
when the facts are not in dispute, the court is allowed to decide the case summarily by
applying the law to the material facts. Conversely, where the pleadings tender a genuine
958
issue, summary judgment is not proper. A genuine issue is such fact which requires the
presentation of evidence as distinguished from a sham, fictitious, contrived or false
claim.1387

Here, we find the existence of genuine issues which removes the case from the
coverage of summary judgment. The variance in the allegations of the parties in their
pleadings is evident.

Petitioner anchors his complaint for sum of money and/or judicial foreclosure on
the alleged real estate mortgage over the subject property allegedly entered into by
Comandante in behalf of her parents to secure payment of a loan amounting to
P1,118,228.00. To support this claim, petitioner attached to his complaint (1) the SPA
alleged to have been executed by the Diazes; (2) the Real Estate Mortgage Contract
pertaining to the amount of P1,118,228.00; and, (3) a Promissory Note.

Comandante, in her Answer to petitioners Amended Complaint, assailed the

validity and due execution of the abovementioned documents. She asserted that the same
were not duly, knowingly and validly executed by her and that it was petitioner who
prepared all of them. Also, although she admitted owing petitioner, same was not an
absolute admission as she limited herself to an obligation amounting only to P600,000.00
inclusive of charges and interests. She likewise claimed that such obligation is her personal
obligation and not of her parents.

1387
D.M. Consunji, Inc. v. Duvas Corporation, G.R. No. 155174, August 4, 2009.

959
 The Diazes, for their part, also denied that they executed the SPA authorizing their
daughter to mortgage their property to petitioner as well as having any obligation to the
latter.

Clearly, there are genuine issues in this case which require the presentation of
evidence. For one, it is necessary to ascertain in a full blown trial the validity and due
execution of the SPA, the Real Estate Mortgage and the Promissory Notes because the
determination of the following equally significant questions depends on them, to wit: (1)
Are the Diazes obligated to petitioner or is the obligation a purely personal obligation of
Comandante? and, (2) Is the sum of P1,118,228.00 as shown in the Real Estate Mortgage
and the Promissory Note, the amount which is really due the petitioner?

To stress, trial courts have limited authority to render summary judgments and may
do so only when there is clearly no genuine issue as to any material fact. When the facts as
pleaded by the parties are disputed or contested, proceedings for summary judgment cannot
take the place of trial.1388 From the foregoing, it is apparent that the trial court should have
refrained from issuing the summary judgment but instead proceeded to conduct a full
blown trial of the case. In view of this, the present case should be remanded to the trial
court for further proceedings and proper disposition according to the rudiments of a regular
trial on the merits and not through an abbreviated termination of the case by summary
judgment.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of

Appeals dated December 12, 2003 insofar as it excluded the respondents Spouses
Bienvenido Pangan and Elizabeth Pangan from among those solidarily liable to petitioner

1388
Id.

960
Atty. Pedro M. Ferrer, is AFFIRMED. The inscription of the adverse claim of petitioner
Atty. Pedro M. Ferrer on T.C.T. No. N-209049 is hereby ordered CANCELLED. Insofar
as its other aspects are concerned, the assailed Decision is SET ASIDE and VACATED.
The case is REMANDED to the Regional Trial Court of Quezon City, Branch 224 for
further proceedings in accordance with this Decision.

SO ORDERED.

MARIANO C. DEL CASTILLO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ

961
 Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons attestation, it is hereby certified that the conclusions in the above Decision

962
had been reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.

REYNATO S. PUNO
Chief Justice

963