A.M.No.

MTC-02-1429 October 4, 2002

FRANCISCA P. PASCUAL, complainant,

vs.
Judge EDUARDO U. JOVELLANOS, Municipal Circuit Trial Court, Alcala, Pangasinan,
respondent.

DECISION

PANGANIBAN, J.:

Municipal trial court judges ought to be familiar with the Rules on Summary Procedure
governing ejectment cases. Failure to observe them constitutes gross ignorance of the law.

Statement of the Case

The sworn Administrative Complaint,1 filed by Francisca P. Pascual, charged Judge Eduardo U.
Jovellanos of the Municipal Circuit Trial Court of Alcala, Pangasinan with gross ignorance of
the law, bias and partiality, abuse of discretion and neglect of duty.2

The Antecedents

The facts in the present case are summarized by the Office of the Court Administrator (OCA) in
its January 28, 2002 Memorandum3 addressed to this Court as follows:

"Complainant x x x alleges that she filed a complaint for forcible entry docketed as Civil Case
No. 730 against a certain Lorenzo L. Manaois. The complaint was dismissed without prejudice
for being insufficient in some material allegations (Order dated 13 October 1999). On 15
November 1999, she filed a corrected complaint which was docketed as Civil Case No. 740.

"Instead of filing an answer, defendant filed a Motion to Strike Out arguing that the new
allegations in the complaint are false. After the period to answer lapsed and no answer was
submitted, complainant filed a Motion for Summary Judgment dated 15 December 1999.
Defendant opposed the motion.

"On 30 May 2000, defendant's motion to strike out was granted by respondent Judge.
Complainant filed a motion for reconsideration of the aforesaid order.

"Based on the foregoing, complainant accuse[d] respondent Judge of Neglect of Duty anchored
on the following grounds:

'a. Defendant should have filed an answer instead of a Motion to Strike Out. Inspite
thereof, respondent Judge granted the motion 120 days after its filing, thus defeating the
summary nature of the case;
 'b. The Order granting the motion to strike out is bereft of any findings of fact because no
hearing was conducted relative thereon;

'c. Respondent Judge exhibited his bias and partiality in favor of the defendant in his
Order granting the motion to strike out when he pointed out 'x x x that the complaint in
this case is virtually a rehash of the complaint in Civil Case No. 730 x x x'. Complainant
asserts that the same is to be expected because the defects or insufficiency in the first
complaint were just being rectified in the later one;

'd. Her Motion for Summary Judgment remains, until the present, unacted upon.'

"Meanwhile, defendant, taking advantage of the lull in the proceedings, started the construction
of a one-storey building on the subject land. To protect her interest, complainant filed an
Application for Preliminary Injunction dated 8 May 2000. Acting thereon, respondent Judge
issued a Temporary Restraining Order dated 9 May 2000 and set the hearing on the Injunction.
On said date, complainant was able to present evidence in support of her application while
defendant chose not to present controverting evidence and to just submit a memorandum.

"On the last day of the effectivity of the TRO (29 May 2000), complainant filed an Extremely
Urgent Ex-Parte Motion to grant her application for injunction. On 7 June 2000 defendant filed
his memorandum. However, until the present, respondent Judge has not ruled on her application
on preliminary injunction.

"Instead of obeying the TRO, defendant continued with the construction of the building and even
started with a new one. Hence, a contempt charge was filed by herein complainant on 8 May
2000. Defendant moved to dismiss the contempt charge on the ground that it was filed in the
same proceedings ([C]ivil [C]ase No. 740) and the filing fee was not paid. The court, however,
motu propio docketed the complaint for contempt as Civil Case No. 744 while the required
docket and other fees were paid by defendant on 31 May 2000. On same date, the court issued an
Order furnishing anew the defendants/respondents with a copy of the contempt charge. These,
complainant claims, cured the defect cited by defendants/respondents in their motion to dismiss.
However, respondent Judge still has not resolved the aforesaid motion to the prejudice of herein
complainant."4

In his Comment5 dated September 30, 2000, respondent denied the allegations in the Complaint.
He accused Atty. Alejandro V. Peregrino, complainant's counsel in the forcible entry case, of
having a penchant for filing administrative cases against him instead of appealing decisions
before the proper court. Respondent added that none of the charges had any factual or legal
bases. He insisted that his Decision in Civil Case No. 730 had been rendered with utmost good
faith, honesty and sound discretion.6

The OCA's Recommendation

After investigation of this case, the OCA found that respondent failed to apply the Rule on
Summary Procedure, which he ought to have been very conversant with, because it was a
common procedure in municipal courts. Accordingly, it recommended that respondent "be
FINED in the amount of P10,000.00 and warned that the commission of a similar infraction will
be dealt with more severely."7

This Court's Ruling

We agree with the findings of the OCA, but increase the penalty, taking note that this is
respondent's second infraction.

Administrative Liability

Judges are the visible representations of law and justice.8 They ought to be embodiments of
competence, integrity and independence.9 In particular, municipal judges are frontline officers in
the administration of justice.10 It is therefore essential that they live up to the high standards
demanded by the Code of Judicial Conduct.11 To be able to render substantial justice and to
maintain public confidence in the legal system, they are expected to exhibit more than just a
cursory acquaintance with statutes and procedural rules. They are likewise expected to keep
abreast of all laws and prevailing jurisprudence.12 Judicial competence requires no less.13

Moreover, judges are bound to dispose of the court's business promptly and to decide cases
within the required period.14 For it cannot be gainsaid that justice delayed is justice denied.
Procrastination among members of the judiciary in rendering decisions and in acting upon cases
before them not only causes great injustice to the parties involved, but also invites suspicion of
ulterior motives on their part.15

It must be emphasized that rules of procedure have been formulated and promulgated by this
Court to ensure the speedy and efficient administration of justice. Failure to abide by these rules
undermines the wisdom behind them and diminishes respect for the rule of law.16 The Rule on
Summary Procedure was promulgated precisely to achieve an expeditious and inexpensive
determination of cases. Failure to observe the period within which to render a judgment subjects
the defaulting judge to administrative sanctions.17 For this reason, the Rule frowns upon delays
and expressly prohibits, altogether, the filing of motions for extension.18

In this case, it is very clear that respondent lacks awareness of the relevant provisions on
ejectment.19 He has evidently been remiss in resolving the forcible entry case, pursuant to the
Revised Rules on Summary Procedure.20 Verily, judgment should have been rendered based on
the allegations of the Complaint and the evidence presented therein, inasmuch as the defendant
failed to file his answer after the lapse of ten (10) days from the service of the summons.21
Section 6 of the Rule allows the trial court to render judgment, even motu proprio, upon failure
of the defendant to file an answer within the reglementary period.22 Moreover, under Section 10
of the Rule, respondent was duty-bound to render his decision within thirty (30) days from
receipt of the last affidavits and position papers, or the expiration of the period for filing them.23
This notwithstanding, he has not yet ruled on the Motion for Summary Judgment24 dated
December 15, 1999, filed in accordance with Section 6 of the Rule on Summary Procedure.

Furthermore, respondent failed to apply these very basic rules when he granted the defendant's
Motion to Strike Out which was in reality a motion to dismiss, a prohibited pleading.25 In his
Order26 dated May 30, 2000, he ruled that the Complaint in Civil Case No. 740 was a mere
rehash of the dismissed Complaint in Civil Case No. 730. He cited Section 1227 of Rule 8 of the
1997 Rules on Civil Procedure as basis for this ruling. In doing so, he committed an obvious
mistake showing gross ignorance of the law. This is because the civil case assigned to him is for
forcible entry, which is governed by the Rule on Summary Procedure.28 In fact, all cases of
forcible entry and unlawful detainer are governed by this Rule.29

It must likewise be underscored that respondent dismissed Civil Case No. 730 without prejudice,
on the theory that the date of the dispossession had not been initially indicated in the Complaint.
Thus, it would reasonably be expected that the allegations in that civil case would be reiterated in
Civil Case No. 740. Needless to state, what also contributed to the delay in the resolution of the
main case was the grant of the Motion to Strike Out based on misplaced reasoning.30

Lack of knowledge of the Rules on Summary Procedure reflects a serious degree of

incompetence.31 When the law is so elementary, as in this case, not to be aware of it constitutes
gross ignorance of the law.32 A member of the bench must be constantly abreast of legal and
jurisprudential developments, bearing in mind that this learning process never ceases. It is
indispensable to the correct dispensation of justice.33

Delay

Respondent claimed that if there was any delay on his part in resolving the incidents, it was not
intentional but merely brought about by pressure from work.34

We are not convinced. Rule 3.05 of Canon 3 of the Canons on Judicial Ethics mandates that a
judge should dispose of the court's business promptly and decide each case within the period
prescribed therefor.35 We have held in numerous cases that failure to decide within the
reglementary period constitutes gross inefficiency and warrants the imposition of administrative
sanctions.36

In the present case, the heavy caseload in respondent's sala, though unfortunate, cannot excuse
him from due observance of the rules. We reiterate that judges, when burdened by heavy
caseloads that prevent them from deciding cases within the reglementary period, may ask for
additional time from this Court. Indubitably, respondent has failed to do so.37 He ought to know
that the speedy resolution of forcible entry cases is a matter of public policy. His inaction for
almost three years on complainants' Motion for Summary Judgment practically rendered
nugatory the whole purpose of summary proceedings -- to promote a more expeditious and
inexpensive determination of cases.38 By tarrying too long in deciding this forcible entry case, he
failed to live up to the mandate of the Code of Judicial Conduct to "maintain professional
competence."39 Judges are called upon to observe utmost diligence and dedication in the
performance of their judicial functions and duties.40

In determining his administrative liability, we note that this is not the first infraction of
respondent.41 In Espiritu v. Jovellanos,42 he was found guilty of gross misconduct for his
partiality to one of the parties, for which he was fined P20,000.
Indeed, it seems that he has remained undeterred in disregarding the law and the Code which he
has pledged to uphold.43 He appears to be unfazed by the previous penalties and warnings meted
out to him.44 Since this is his second infraction, he deserves a sanction heavier than that
recommended by the OCA.

WHEREFORE, Judge Eduardo Jovellanos is hereby found GUILTY of gross ignorance of the
law and is FINED in the amount of fifteen thousand pesos (P15,000). He is further warned that a
repetition of this or similar offenses will be dealt with even more severely.

SO ORDERED.

G.R. No. 152807 August 12, 2003

HEIRS OF LOURDES SAEZ SABANPAN: BERNARDO S. SABANPAN, RENE S.

SABANPAN, DANILO S. SABANPAN and THELMA S. CHU; HEIRS OF ADOLFO
SAEZ: MA. LUISA SAEZ TAPIZ, MA. VICTORIA SAEZ LAPITAN, MA. BELEN SAEZ
and EMMANUEL SAEZ; and HEIRS OF CRISTINA SAEZ GUTIERREZ: ROY SAEZ
GUTIERREZ and LUIS SAEZ JR., petitioners,
vs.
ALBERTO C. COMORPOSA, HERDIN C. COMORPOSA, OFELIA C. ARIEGO,1
REMEDIOS COMORPOSA, VIRGILIO A. LARIEGO,1a BELINDA M. COMORPOSA
and ISABELITA H. COMORPOSA, respondents.

PANGANIBAN, J.:

The admissibility of evidence should be distinguished from its probative value. Just because a
piece of evidence is admitted does not ipso facto mean that it conclusively proves the fact in
dispute.

The Case

Before us is a Petition for Review2 under Rule 45 of the Rules of Court, seeking to set aside the
August 7, 2001 Decision and the February 27, 2002 Resolution of the Court of Appeals3 (CA) in
CA-GR SP No. 60645. The dispositive portion of the assailed Decision reads as follows:

"WHEREFORE, in view of all the foregoing, the Court hereby AFFIRMS the Decision
dated 22 June 2000 rendered by Branch 18 of the Regional Trial Court of Digos, Davao
del Sur, REVERSING and SETTING ASIDE the Decision of the Municipal Trial Court
of Sta. Cruz, Davao del Su[r]."4

The assailed Resolution5 denied petitioners' Motion for Reconsideration.

 The Facts

The CA summarized the factual antecedents of the case as follows:

"A [C]omplaint for unlawful detainer with damages was filed by [petitioners] against
[respondents] before the Santa Cruz, Davao del Sur Municipal Trial Court.

"The [C]omplaint alleged that Marcos Saez was the lawful and actual possessor of Lot
No. 845, Land 275 located at Darong, Sta. Cruz, Davao del Sur with an area of 1.2
hectares. In 1960, he died leaving all his heirs, his children and grandchildren.

"In 1965, Francisco Comorposa who was working in the land of Oboza was terminated
from his job. The termination of his employment caused a problem in relocating his
house. Being a close family friend of [Marcos] Saez, Francisco Comorposa approached
the late Marcos Saez's son, [Adolfo] Saez, the husband of Gloria Leano Saez, about his
problem. Out of pity and for humanitarian consideration, Adolfo allowed Francisco
Comorposa to occupy the land of Marcos Saez. Hence, his nipa hut was carried by his
neighbors and transferred to a portion of the land subject matter of this case. Such
transfer was witnessed by several people, among them, Gloria Leano and Noel Oboza.
Francisco Comorposa occupied a portion of Marcos Saez' property without paying any
rental.

"Francisco Comorposa left for Hawaii, U.S.A. He was succeeded in his possession by the
respondents who likewise did not pay any rental and are occupying the premises through
petitioners' tolerance.

"On 7 May 1998, a formal demand was made upon the respondents to vacate the
premises but the latter refused to vacate the same and claimed that they [were] the
legitimate claimants and the actual and lawful possessor[s] of the premises. A
[C]omplaint was filed with the barangay office of Sta. Cruz[,] Davao del Sur, but the
parties failed to arrive at an amicable settlement. Thus, the corresponding Certificate to
File Action was issued by the said barangay and an action for unlawful detainer was filed
by petitioners against respondents.

"Respondents, in their Answer, denied the material allegations of the [C]omplaint and
alleged that they entered and occupied the premises in their own right as true, valid and
lawful claimants, possessors and owners of the said lot way back in 1960 and up to the
present time; that they have acquired just and valid ownership and possession of the
premises by ordinary or extraordinary prescription, and that the Regional Director of the
DENR, Region XI has already upheld their possession over the land in question when it
ruled that they [were] the rightful claimants and possessors and [were], therefore, entitled
to the issuance of a title.

"The Municipal Trial Court of Sta. Cruz, Davao del Sur rendered judgment in favor of
petitioners but the Regional Trial Court of Digos, Davao del Sur, on appeal, reversed and
set aside the said decision. x x x"6
 Ruling of the Court of Appeals

Affirming the Regional Trial Court (RTC), the CA upheld the right of respondents as claimants
and possessors. The appellate court held that -- although not yet final -- the Order issued by the
regional executive director of the Department of Environment and Natural Resources (DENR)
remained in full force and effect, unless declared null and void. The CA added that the
Certification issued by the DENR's community environment and natural resources (CENR)
officer was proof that when the cadastral survey was conducted, the land was still alienable and
was not yet allocated to any person.

According to the CA, respondents had the better right to possess alienable and disposable land of
the public domain, because they have sufficiently proven their actual, physical, open, notorious,
exclusive, continuous and uninterrupted possession thereof since 1960. The appellate court
deemed as self-serving, and therefore incredible, the Affidavits executed by Gloria Leano Saez,
Noel Oboza and Paulina Paran.

Hence, this Petition.7

The Issue

In their Memorandum, petitioners raise the following issues for the Court's consideration:

"I

Did the Court of Appeals gravely abuse its discretion and [err] in sustaining the ruling of
the Regional Trial Court giving credence to the Order dated 2 April 1998 issued by the
regional executive director?

"II

Did the Court of Appeals gravely abuse its discretion and err in sustaining the Regional
Trial Court's ruling giving weight to the CENR Officer's Certification, which only bears
the facsimile of the alleged signature of a certain Jose F. Tagorda and, [worse], it is a new
matter raised for the first time on appeal?

"III

Did the Court of Appeals gravely abuse its discretion and err in holding that the land
subject matter of this case has been acquired by means of adverse possession and
prescription?

"IV

Did the Court of Appeals gravely abuse its discretion, and err in declaring that, 'neither is
there error on the part of the Regional Trial Court, when it did not give importance to the
 affidavits by Gloria Leano Saez, Noel [Oboza], and Paulina Paran for allegedly being self
serving?'"8

To facilitate the discussion, the fourth and the third issues shall be discussed in reverse sequence.

The Court's Ruling

The Petition has no merit.

First Issue:
The DENR Order of April 2, 1998

Petitioners claim that the reliance of the CA upon the April 2, 1998 Order issued by the regional
director of the DENR was erroneous. The reason was that the Order, which had upheld the claim
of respondents, was supposedly not yet final and executory. Another Order dated August 23,
1999,9 issued later by the DENR regional director, allegedly held in abeyance the effectivity of
the earlier one.

Under the Public Land Act,10 the management and the disposition of public land is under the
primary control of the director of lands11 (now the director of the Lands Management Bureau or
LMB),12 subject to review by the DENR secretary.13 As a rule, then, courts have no jurisdiction
to intrude upon matters properly falling within the powers of the LMB.

The powers given to the LMB and the DENR to alienate and dispose of public land does not,
however, divest regular courts of jurisdiction over possessory actions instituted by occupants or
applicants to protect their respective possessions and occupations.14 The power to determine who
has actual physical possession or occupation of public land and who has the better right of
possession over it remains with the courts.15 But once the DENR has decided, particularly
through the grant of a homestead patent and the issuance of a certificate of title, its decision on
these points will normally prevail.16

Therefore, while the issue as to who among the parties are entitled to a piece of public land
remains pending with the DENR, the question of recovery of possession of the disputed property
is a matter that may be addressed to the courts.

Second Issue:
CENR Officer's Certification

Petitioners contend that the CENR Certification dated July 22, 1997 is a sham document,
because the signature of the CENR officer is a mere facsimile. In support of their argument, they
cite Garvida v. Sales Jr.17 and argue that the Certification is a new matter being raised by
respondents for the first time on appeal.

We are not persuaded.

In Garvida, the Court held:

 "A facsimile or fax transmission is a process involving the transmission and reproduction
of printed and graphic matter by scanning an original copy, one elemental area at a time,
and representing the shade or tone of each area by a specified amount of electric current.
x x x"18

Pleadings filed via fax machines are not considered originals and are at best exact copies. As
such, they are not admissible in evidence, as there is no way of determining whether they are
genuine or authentic.19

The Certification, on the other hand, is being contested for bearing a facsimile of the signature of
CENR Officer Jose F. Tagorda. The facsimile referred to is not the same as that which is alluded
to in Garvida. The one mentioned here refers to a facsimile signature, which is defined as a
signature produced by mechanical means but recognized as valid in banking, financial, and
business transactions.20

Note that the CENR officer has not disclaimed the Certification. In fact, the DENR regional
director has acknowledged and used it as reference in his Order dated April 2, 1998:

"x x x. CENR Officer Jose F. Tagorda, in a 'CERTIFICATION' dated 22 July 1997,

certified among others, that: x x x per records available in his Office, x x x the
controverted lot x x x was not allocated to any person x x x."21

If the Certification were a sham as petitioner claims, then the regional director would not have
used it as reference in his Order. Instead, he would have either verified it or directed the CENR
officer to take the appropriate action, as the latter was under the former's direct control and
supervision.

Petitioners' claim that the Certification was raised for the first time on appeal is incorrect. As
early as the pretrial conference at the Municipal Trial Court (MTC), the CENR Certification had
already been marked as evidence for respondents as stated in the Pre-trial Order.22 The
Certification was not formally offered, however, because respondents had not been able to file
their position paper.

Neither the rules of procedure23 nor jurisprudence24 would sanction the admission of evidence
that has not been formally offered during the trial. But this evidentiary rule is applicable only to
ordinary trials, not to cases covered by the rule on summary procedure -- cases in which no full-
blown trial is held.25

Third Issue:
Affidavit of Petitioners' Witnesses

Petitioners assert that the CA erred in disregarding the Affidavits of their witnesses, insisting that
the Rule on Summary Procedure authorizes the use of affidavits. They also claim that the failure
of respondents to file their position paper and counter-affidavits before the MTC amounts to an
admission by silence.
The admissibility of evidence should not be confused with its probative value. Admissibility
refers to the question of whether certain pieces of evidence are to be considered at all, while
probative value refers to the question of whether the admitted evidence proves an issue.26 Thus, a
particular item of evidence may be admissible, but its evidentiary weight depends on judicial
evaluation within the guidelines provided by the rules of evidence.27

While in summary proceedings affidavits are admissible as the witnesses' respective testimonies,
the failure of the adverse party to reply does not ipso facto render the facts, set forth therein, duly
proven. Petitioners still bear the burden of proving their cause of action, because they are the
ones asserting an affirmative relief.28

Fourth Issue:
Defense of Prescription

Petitioners claim that the court a quo erred in upholding the defense of prescription proffered by
respondents. It is the former's contention that since the latter's possession of the land was merely
being tolerated, there was no basis for the claim of prescription. We disagree.

For the Court to uphold the contention of petitioners, they have first to prove that the possession
of respondents was by mere tolerance. The only pieces of evidence submitted by the former to
support their claim were a technical description and a vicinity map drawn in accordance with the
survey dated May 22, 1936.29 Both of these were discredited by the CENR Certification, which
indicated that the contested lot had not yet been allocated to any person when the survey was
conducted.30 The testimony of petitioners' witnesses alone cannot prevail over respondents'
continued and uninterrupted possession of the subject lot for a considerable length of time.

Furthermore, this is an issue of fact that cannot, as a rule, be raised in a petition for review under
Rule 45.31

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioners.

SO ORDERED.

G.R. No. 160242 May 17, 2005

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, petitioner,

vs.
COURT OF APPEALS and MONARK EQUIPMENT CORPORATION, respondents.
 DECISION

CALLEJO, SR., J.:

On March 13, 2001, Monark Equipment Corporation (MEC) filed a Complaint1 for a sum of
money with damages against the Asian Construction and Development Corporation (ACDC)
with the Regional Trial Court (RTC) of Quezon City. The complaint alleged the following:
ACDC leased Caterpillar generator sets and Amida mobile floodlighting systems from MEC
during the period of March 13 to July 15, 1998 but failed, despite demands, to pay the rentals
therefor in the total amount of P4,313,935.00; from July 14 to August 25, 1998, various
equipments from MEC were, likewise, leased by ACDC for the latters power plant in Mauban,
Quezon, and that there was still a balance of P456,666.67; and ACDC also purchased and took
custody of various equipment parts from MEC for the agreed price of P237,336.20 which,
despite demands, ACDC failed to pay.

MEC prayed that judgment be rendered in its favor, thus:

1. Ordering defendant to pay the plaintiff the total amount of FIVE MILLION
SEVENTY-ONE THOUSAND THREE HUNDRED THIRTY-FIVE [PESOS] & 86/100
(P5,071,335.86);

2. Ordering defendant to pay the plaintiff legal interest of 12% per annum on the
principal obligations in the total amount of FIVE MILLION SEVENTY-ONE
THOUSAND THREE HUNDRED THIRTY-FIVE [PESOS] & 86/100 (P5,071,335.86)
computed from the date the obligations became due until fully paid;

3. Ordering defendant to pay attorneys fees in the amount equivalent to 15% of the
amount of claim;

4. Ordering defendant to pay all costs of litigation.

Plaintiff prays for such other reliefs as may be just and equitable under the premises.2

ACDC filed a motion to file and admit answer with third-party complaint against Becthel
Overseas Corporation (Becthel). In its answer, ACDC admitted its indebtedness to MEC in the
amount of P5,071,335.86 but alleged the following special and affirmative defenses:

5. Defendant has incurred an obligation with plaintiff, in the amount of P5,071,335.86.

But third-party defendant fails and refuses to pay its overdue obligation in connection
with the leased equipment used by defendant to comply with its contracted services;

6. The equipment covered by the lease were all used in the construction project of
Becthel in Mauban, Quezon, and Expo in Pampanga and defendant was not yet paid of its
services that resulted to the non-payment of rentals on the leased equipment.3
 And by way of third-party complaint against Becthel as third-party defendant, ACDC
alleged that:

7. Third-party plaintiff repleads the foregoing allegations in the preceding paragraphs as

may be material and pertinent hereto;

8. Third-party BECTHEL OVERSEAS CORPORATION (herein called "Becthel") is a

corporation duly organized and existing under the laws of the United States of America
but may be served with summons at Barangay Cagsiay I, Mauban, Quezon 4330,
Philippines;

9. Third-party defendant Becthel contracted the services of third-party plaintiff to do

construction work at its Mauban, Quezon project using the leased equipment of plaintiff
Monark;

10. With the contracted work, third-party plaintiff rented the equipment of the plaintiff
Monark;

11. Third-party plaintiff rendered and complied with its contracted works with third-party
defendant using plaintiffs (Monark) rented equipment. But, third-party defendant
BECTHEL did not pay for the services of third-party plaintiff ASIAKONSTRUKT that
resulted to the non-payment of plaintiff Monarks claim;

12. Despite repeated demands, third-party defendant failed and refused to pay its overdue
obligation to third-party plaintiff ASIAKONSTRUKT, and third-party defendant needs to
be impleaded in this case for contribution, indemnity, subrogation or other reliefs to off-
set or to pay the amount of money claim of plaintiff Monark on the leased equipment
used in the Mauban, Quezon project in the total amount of P456,666.67;

13. By reason thereof, third-party plaintiff was compelled to prosecute its claim against
third-party defendant and hired the services of undersigned counsel for an attorneys fees
of P500,000.00.4

ACDC prayed that judgment be rendered in its favor dismissing the complaint and ordering the
third-party defendant (Becthel) to pay P456,666.67 plus interest thereon and attorneys fees.5

MEC opposed the motion of ACDC to file a third-party complaint against Becthel on the ground
that the defendant had already admitted its principal obligation to MEC in the amount of
P5,071,335.86; the transaction between it and ACDC, on the one hand, and between ACDC and
Becthel, on the other, were independent transactions. Furthermore, the allowance of the third-
party complaint would result in undue delays in the disposition of the case.6

MEC then filed a motion for summary judgment, alleging therein that there was no genuine issue
as to the obligation of ACDC to MEC in the total amount of P5,071,335.86, the only issue for the
trial courts resolution being the amount of attorneys fees and costs of litigation.7
ACDC opposed the motion for summary judgment, alleging that there was a genuine issue with
respect to the amount of P5,071,335.86 being claimed by MEC, and that it had a third-party
complaint against Becthel in connection with the reliefs sought against it which had to be
litigated.8

In its reply, MEC alleged that the demand of ACDC in its special and affirmative defenses
partook of the nature of a negative pregnant, and that there was a need for a hearing on its claim
for damages.

On August 2, 2001, the trial court issued a Resolution denying the motion of ACDC for leave to
file a third-party complaint and granting the motion of MEC, which the trial court considered as
a motion for a judgment on the pleadings. The fallo of the resolution reads:

ACCORDINGLY, this Court finds defendant Asian Construction and Development

Corporation liable to pay plaintiff Monark Equipment Corporation and is hereby ordered
to pay plaintiff the amount of FIVE MILLION SEVENTY-ONE THOUSAND AND
THREE HUNDRED THIRTY-FIVE & 86/100 PESOS (P5,071,335.86) plus 12%
interest from the filing of the complaint until fully paid.

SO ORDERED.9

ACDC appealed the resolution to the Court of Appeals (CA), alleging that

I. THE LOWER COURT ERRED IN DENYING THE MOTION TO FILE AND

ADMIT ANSWER WITH THIRD-PARTY COMPLAINT;

II. THE LOWER COURT ERRED IN GRANTING THE MOTION FOR SUMMARY
JUDGMENT;

III. THE LOWER COURT ERRED WHEN IT DENIED THE THIRD-PARTY

COMPLAINT AND ORDERED DEFENDANT TO PAY THE AMOUNT OF
P5,071,335.86 PLUS INTEREST OF 12% PER ANNUM.10

On July 18, 2001, the CA rendered judgment dismissing the appeal and affirming the assailed
decision. The appellate court ruled that since MEC had prayed for judgment on the pleadings, it
thereby waived its claim for damages other than the amount of P5,071,335.86; hence, there was
no longer a genuine issue to be resolved by the court which necessitated trial. The appellate court
sustained the disallowance of the third-party complaint of ACDC against Becthel on the ground
that the transaction between the said parties did not arise out of the same transaction on which
MECs claim was based.

Its motion for reconsideration of the decision having been denied, ACDC, now the petitioner,
filed the present petition for review on certiorari, and raises the following issues:

I. WHETHER OR NOT A THIRD-PARTY COMPLAINT IS PROPER; AND

 II. WHETHER OR NOT JUDGMENT ON THE PLEADINGS IS PROPER.11

Citing the rulings of this Court in Allied Banking Corporation v. Court of Appeals12 and British
Airways v. Court of Appeals,13 the petitioner avers that the CA erred in ruling that in denying its
motion for leave to file a third-party complaint, the RTC acted in accordance with the Rules of
Court and case law. The petitioner maintains that it raised genuine issues in its answer; hence, it
was improper for the trial court to render judgment on the pleadings:

With due respect, the judgment on the pleadings affirmed by the Court of Appeals is not,
likewise, proper considering that the Answer with Third-Party Complaint, although it
admitted the obligation to respondent, tendered an issue of whether the respondents
claim is connected with the third-party claim.

As alleged in the Answer with Third-Party Complaint, it is admitted then by respondent,

for purposes of judgment on the pleadings, that failure to pay respondent was in
connection of Becthel Overseas Corporations failure to pay its obligation to petitioner
and that the equipment leased was used in connection with the Becthel Overseas
Corporation project.

This tendered issue could not just be disregarded in the light of the third-party complaint
filed by herein petitioner and third-party plaintiff which, as argued in the first
discussion/argument, is proper and should have been given due course.14

The petition is denied for lack of merit.

Section 11, Rule 6 of the Rules of Court provides:

Sec. 11. Third (fourth, etc.)-party complaint. A third (fourth, etc.) party complaint is a
claim that a defending party may, with leave of court, file against a person not a party to
the action, called the third (fourth, etc.) party defendant, for contribution, indemnity,
subrogation or any other relief, in respect of his opponents claim.

Furthermore, Section 1, Rule 34 of the Rules of Court provides that the Court may render
judgment on the pleadings, as follows:

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. 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.

The purpose of Section 11, Rule 6 of the Rules of Court is to permit a defendant to assert an
independent claim against a third-party which he, otherwise, would assert in another action, thus
preventing multiplicity of suits. All the rights of the parties concerned would then be adjudicated
in one proceeding. This is a rule of procedure and does not create a substantial right. Neither
does it abridge, enlarge, or nullify the substantial rights of any litigant.15 This right to file a third-
party complaint against a third-party rests in the discretion of the trial court. The third-party
complaint is actually independent of, separate and distinct from the plaintiffs complaint, such
that were it not for the rule, it would have to be filed separately from the original complaint.16

A prerequisite to the exercise of such right is that some substantive basis for a third-party claim
be found to exist, whether the basis be one of indemnity, subrogation, contribution or other
substantive right.17 The bringing of a third-party defendant is proper if he would be liable to the
plaintiff or to the defendant or both for all or part of the plaintiffs claim against the original
defendant, although the third-party defendants liability arises out of another transaction.18 The
defendant may implead another as third-party defendant (a) on an allegation of liability of the
latter to the defendant for contribution, indemnity, subrogation or any other relief; (b) on the
ground of direct liability of the third-party defendant to the plaintiff; or (c) the liability of the
third-party defendant to both the plaintiff and the defendant.19 There must be a causal connection
between the claim of the plaintiff in his complaint and a claim for contribution, indemnity or
other relief of the defendant against the third-party defendant. In Capayas v. Court of First
Instance,20 the Court made out the following tests: (1) whether it arises out of the same
transaction on which the plaintiffs claim is based; or whether the third-party claim, although
arising out of another or different contract or transaction, is connected with the plaintiffs claim;
(2) whether the third-party defendant would be liable to the plaintiff or to the defendant for all or
part of the plaintiffs claim against the original defendant, although the third-party defendants
liability arises out of another transaction; and (3) whether the third-party defendant may assert
any defenses which the third-party plaintiff has or may have to the plaintiffs claim.

The third-party complaint does not have to show with certainty that there will be recovery
against the third-party defendant, and it is sufficient that pleadings show possibility of
recovery.21 In determining the sufficiency of the third-party complaint, the allegations in the
original complaint and the third-party complaint must be examined.22 A third-party complaint
must allege facts which prima facie show that the defendant is entitled to contribution,
indemnity, subrogation or other relief from the third-party defendant.23

It bears stressing that common liability is the very essence for contribution. Contribution is a
payment made by each, or by any of several having a common liability of his share in the
damage suffered or in the money necessarily paid by one of the parties in behalf of the other or
others.24 The rule on common liability is fundamental in the action for contribution.25 The test to
determine whether the claim for indemnity in a third-party complaint is, whether it arises out of
the same transaction on which the plaintiffs claim is based, or the third-party plaintiffs claim,
although arising out of another or different contract or transaction, is connected with the
plaintiffs claim.26

In this case, the claims of the respondent, as plaintiff in the RTC, against the petitioner as
defendant therein, arose out of the contracts of lease and sale; such transactions are different and
separate from those between Becthel and the petitioner as third-party plaintiff for the
construction of the latters project in Mauban, Quezon, where the equipment leased from the
respondent was used by the petitioner. The controversy between the respondent and the
petitioner, on one hand, and that between the petitioner and Becthel, on the other, are thus
entirely distinct from each other. There is no showing in the proposed third-party complaint that
the respondent knew or approved the use of the leased equipment by the petitioner for the said
project in Quezon. Becthel cannot invoke any defense the petitioner had or may have against the
claims of the respondent in its complaint, because the petitioner admitted its liabilities to the
respondent for the amount of P5,075,335.86. The barefaced fact that the petitioner used the
equipment it leased from the respondent in connection with its project with Becthel does not
provide a substantive basis for the filing of a third-party complaint against the latter. There is no
causal connection between the claim of the respondent for the rental and the balance of the
purchase price of the equipment and parts sold and leased to the petitioner, and the failure of
Becthel to pay the balance of its account to the petitioner after the completion of the project in
Quezon.27

We note that in its third-party complaint, the petitioner alleged that Becthel should be ordered to
pay the balance of its account of P456,666.67, so that the petitioner could pay the same to the
respondent. However, contrary to its earlier plea for the admission of its third-party complaint
against Becthel, the petitioner also sought the dismissal of the respondents complaint. The
amount of P456,666.67 it sought to collect from Becthel would not be remitted to the respondent
after all.

The rulings of this Court in Allied Banking Corporation and British Airways are not applicable in
this case since the factual backdrops in the said cases are different.

In Allied Banking Corporation, Joselito Yujuico obtained a loan from General Bank and Trust
Company. The Central Bank of the Philippines ordered the liquidation of the Bank. In a
Memorandum Agreement between the liquidation of the Bank and Allied Banking Corporation,
the latter acquired the receivables from Yujuico. Allied Banking Corporation then sued Yujuico
for the collection of his loan, and the latter filed a third-party complaint against the Central Bank,
alleging that by reason of its tortious interference with the affairs of the General Bank and Trust
Company, he was prevented from performing his obligation under the loan. This Court allowed
the third-party complaint based on the claim of the defendant therein, thus:

In the words of private respondent, he "[s]eeks to transfer liability for the default
imputed against him by the petitioner to the proposed third-party defendants because of
their tortious acts which prevented him from performing his obligations." Thus, if at the
outset the issue appeared to be a simple makers liability on a promissory note, it became
complex by the rendition of the aforestated decision.28

In British Airways, the Court allowed the third-party complaint of British Airways against its
agent, the Philippine Airlines, on the plaintiffs complaint regarding his luggage, considering that
a contract of carriage was involved. The Court ruled, thus:

Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view
of their contract of carriage. Yet, BA adamantly disclaimed its liability and instead
imputed it to PAL which the latter naturally denies. In other words, BA and PAL are
blaming each other for the incident.
 In resolving this issue, it is worth observing that the contract of air transportation was
exclusively between Mahtani and BA, the latter merely endorsing the Manila to
Hongkong leg of the formers journey to PAL, as its subcontractor or agent. In fact, the
fourth paragraph of the "Conditions of Contracts" of the ticket issued by BA to Mahtani
confirms that the contract was one of continuous air transportation from Manila to
Bombay.

"4. xxx carriage to be performed hereunder by several successive carriers is regarded as a

single operation."

Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani
from Manila to Hongkong acted as the agent of BA.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule
that an agent is also responsible for any negligence in the performance of its function and
is liable for damages which the principal may suffer by reason of its negligent act. Hence,
the Court of Appeals erred when it opined that BA, being the principal, had no cause of
action against PAL, its agent or sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the International Air
Transport Association (IATA), wherein member airlines are regarded as agents of each
other in the issuance of the tickets and other matters pertaining to their relationship.
Therefore, in the instant case, the contractual relationship between BA and PAL is one of
agency, the former being the principal, since it was the one which issued the confirmed
ticket, and the latter the agent.29

It goes without saying that the denial of the petitioners motion with leave to file a third-party
complaint against Becthel is without prejudice to its right to file a separate complaint against the
latter.

Considering that the petitioner admitted its liability for the principal claim of the respondent in
its Answer with Third-Party Complaint, the trial court did not err in rendering judgment on the
pleadings against it.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs
against the petitioner.

SO ORDERED.

G.R. No. 161909 April 25, 2012

PHILTRANCO SERVICE ENTERPRISES, INC., Petitioner,

vs.
FELIX PARAS AND INLAND TRAILWAYS, INC., AND HON. COURT OF APPEALS,
Respondents.

DECISION

BERSAMIN, J.:

In an action for breach of contract of carriage commenced by a passenger against his common
carrier, the plaintiff can recover damages from a third-party defendant brought into the suit by
the common carrier upon a claim based on tort or quasi-delict. The liability of the third-party
defendant is independent from the liability of the common carrier to the passenger.

Philtranco Service Enterprises, Inc. (Philtranco) appeals the affirmance with modifications by the
Court of Appeals (CA) of the decision of the Regional Trial Court (RTC) awarding moral, actual
and temperate damages, as well as attorneys fees and costs of suit, to respondent Felix Paras
(Paras), and temperate damages to respondent Inland Trailways, Inc. (Inland), respectively the
plaintiff and the defendant/third-party plaintiff in this action for breach of contract of carriage,
upon a finding that the negligence of the petitioner and its driver had caused the serious physical
injuries Paras sustained and the material damage Inlands bus suffered in a vehicular accident.

Antecedents

The antecedent facts, as summarized by the CA, are as follows:

Plaintiff-appellant [respondent] Felix Paras (Paras for brevity), who hails from Cainta, Rizal is
engaged in the buy and sell of fish products. Sometime on 08 February 1987, on his way home to
Manila from Bicol Region, he boarded a bus with Body No. 101 and Plate No. EVE 508, owned
and operated by Inland Trailways, Inc. (Inland for brevity) and driven by its driver Calvin Coner
(Coner for brevity).

At approximately 3:50 oclock in the morning of 09 February 1987, while the said bus was
travelling along Maharlika Highway, Tiaong, Quezon, it was bumped at the rear by another bus
with Plate No. EVB 259, owned and operated by Philtranco Service Enterprises, Inc. (Philtranco
for brevity). As a result of the strong and violent impact, the Inland bus was pushed forward and
smashed into a cargo truck parked along the outer right portion of the highway and the shoulder
thereof. Consequently, the said accident bought considerable damage to the vehicles involved
and caused physical injuries to the passengers and crew of the two buses, including the death of
Coner who was the driver of the Inland Bus at the time of the incident.

Paras was not spared from the pernicious effects of the accident. After an emergency treatment at
the San Pablo Medical Center, San Pablo City, Laguna, Paras was taken to the National
Orthopedic Hospital. At the latter hospital, he was found and diagnosed by Dr. Antonio
Tanchuling, Jr. to be affected with the following injuries: a) contusion/hematoma; b) dislocation
of hip upon fracture of the fibula on the right leg; c) fractured small bone on the right leg; and d)
close fracture on the tibial plateau of the left leg. (Exh. "A", p. 157, record)
On 04 March 1987 and 15 April 1987, Paras underwent two (2) operations affecting the fractured
portions of his body. (Exhs. "A-2" and "A-3", pp. 159 and 160 respectively, record)

Unable to obtain sufficient financial assistance from Inland for the costs of his operations,
hospitalization, doctors fees and other miscellaneous expenses, on 31 July 1989, Paras filed a
complaint for damages based on breach of contract of carriage against Inland.

In its answer, defendant Inland denied responsibility, by alleging, among others, that its driver
Coner had observed an utmost and extraordinary care and diligence to ensure the safety of its
passengers. In support of its disclaimer of responsibility, Inland invoked the Police Investigation
Report which established the fact that the Philtranco bus driver of [sic] Apolinar Miralles was the
one which violently bumped the rear portion of the Inland bus, and therefore, the direct and
proximate cause of Paras injuries.

On 02 March 1990, upon leave of court, Inland filed a third-party complaint against Philtranco
and Apolinar Miralles (Third Party defendants). In this third-party complaint, Inland, sought for
exoneration of its liabilities to Paras, asserting that the latters cause of action should be directed
against Philtranco considering that the accident was caused by Miralles lack of care, negligence
and reckless imprudence. (pp. 50 to 56, records).

After trial, the RTC (Branch 71) in Antipolo, Rizal rendered its judgment on July 18, 1997,1 viz:

WHEREFORE, third-party defendant Philtranco and Apolinar Miralles are hereby ordered to pay
plaintiff jointly and severally, the following amounts:

1.54,000.00 as actual damages;

2.50,000.00 as moral damages;

3.20,000.00 as attorneys fees and costs.

SO ORDERED.

All the parties appealed to the CA on different grounds.

On his part, Paras ascribed the following errors to the RTC, to wit:

I. THE TRIAL COURT ERRED IN HOLDING THAT ONLY THIRD-PARTY

DEFENDANT-APPELLANT PHILTRANCO IS LIABLE FOR THE DAMAGES
SUFFERED BY APPELLANT PARAS.

II. THE TRIAL COURT ERRED IN NOT HOLDING APPELLANT INLAND

TRAILWAYS INC. TO BE JOINTLY AND SEVERALLY LIABLE FOR THE
DAMAGES SUFFERED BY PARAS.
 III. THE TRIAL COURT ERRED IN NOT AWARDING UNEARNED INCOME AS
ADDITIONAL ACTUAL DAMAGES SUFFERED BY APPELLANT PARAS AS HIS
PHYSICAL DISABILITY IS PERMANENT IN NATURE.

IV. THE TRIAL COURT ERRED IN NOT AWARDING EXEMPLARY DAMAGES

IN FAVOR OF APPELLANT PARAS.

On the other hand, Inland assigned the following errors to the RTC, namely:

THE TRIAL COURT ERRED WHEN IT FAILED TO AWARD DAMAGES UNTO THE
THIRD PARTY PLAINTIFF NOTWITHSTANDING CLEAR FINDING THAT:

It is clear from the evidence that the plaintiff sustained injuries because of the reckless,
negligence, and lack of precaution of third party defendant Apolinar Miralles, an employee of
Philtranco.

AND, COMPLETELY DISREGARDED THE UNCONTROVERTED ORAL AND

DOCUMENTARY EVIDENCES ESTABLISHING THE EXTENT AND DEGREE OF
DAMAGES SUSTAINED BY THE THIRD PARTY PLAINTIFF.

Lastly, Philtranco stated that the RTC erred thuswise:

THE COURT A QUO MISERABLY ERRED IN AWARDING ACTUAL DAMAGES

GREATER THAN WHAT WAS ALLEGED IN THE COMPLAINT ITSELF, AND
EVEN MUCH MORE GREATER THAN WHAT WERE PROVED DURING THE
TRIAL, HENCE, PERPETUATING UNJUST ENRICHMENT.

II

THE COURT A QUO SERIOUSLY ERRED IN AWARDING MORAL DAMAGES TO

A CAUSE OF ACTION OF CULPA-CONTRACTUAL EVEN WITHOUT ANY
EVIDENCE OF GROSS BAD FAITH; HENCE, CONTRARY TO THE
ESTABLISHED DOCTRINE IN THE CASES OF PHIL. RABBIT BUS LINES VS.
ESGUERRA; SOBERANO VS. BENGUET AUTO LINE AND FLORES VS.
MIRANDA.

III

THE COURT A QUO MISERABLY ERRED IN HOLDING THAT MIRALLES WAS

THE ONE AT FAULT MERELY ON THE STRENGHT OF THE TESTIMONY OF
THE POLICE INVESTIGATOR WHICH IS IN TURN BASED ON THE
STATEMENTS OF ALLEGED WITNESSES WHO WERE NEVER PRESENTED ON
THE WITNESS STAND.
 IV

THE COURT A QUO COMMITTED A GRIEVOUS ERROR IN DISREGARDING

THE TESTIMONY OF APPELLANTS WITNESSES WHO TESTIFIED AS TO THE
DEFENSE OF EXERCISE OF DUE DILIGENCE IN THE SELECTION AND
SUPERVISION OF EMPLOYEES PURSUANT TO ART. 2180, LAST PARAGRAPH,
NEW CIVIL CODE.

On September 25, 2002, the CA promulgated its decision,2 disposing:

WHEREFORE, in consideration of the foregoing premises, the assailed decision dated 18 July
19(9)7 is perforce affirmed with the following modifications:

1. Third party defendants-appellants Philtranco and Apolinar Miralles are ordered to pay
plaintiff-appellant Felix Paras jointly and severally the following amounts:

a) 1,397.95 as actual damages;

b) 50,000.00 as temperate damages;

c) 50,000.00 as moral damages; and

d) 20,000.00 as attorneys fees and costs of suit.

2. On the third party plaintiff-appellant Inlands claims, the third party defendant-
appellants Philtranco and Apolinar Miralles are hereby ordered to pay the former (Inland)
jointly and severally the amount of 250,000.00 as and by way of temperate damages.

SO ORDERED.

The CA agreed with the RTCs finding that no trace of negligence at the time of the accident was
attributable to Inlands driver, rendering Inland not guilty of breach of contract of carriage; that
faulty brakes had caused Philtrancos bus to forcefully bump Inlands bus from behind, making it
hit the rear portion of a parked cargo truck; that the impact had resulted in considerable material
damage to the three vehicles; and that Paras and others had sustained various physical injuries.

Accordingly, the CA: (a) sustained the award of moral damages of 50,000.00 in favor of Paras
pursuant to Article 2219 of the Civil Code based on quasi-delict committed by Philtranco and its
driver; (b) reduced the actual damages to be paid by Philtranco to Paras from 54,000.00 to
1,397.95 because only the latter amount had been duly supported by receipts; (c) granted
temperate damages of 50,000.00 (in lieu of actual damages in view of the absence of competent
proof of actual damages for his hospitalization and therapy) to be paid by Philtranco to Paras;
and (d) awarded temperate damages of 250,000.00 under the same premise to be paid by
Philtranco to Inland for the material damage caused to Inlands bus.
Philtranco moved for reconsideration,3 but the CA denied its motion for reconsideration on
January 21, 2004.4

Issues

Hence, this appeal, in which the petitioner submits that the CA committed grave abuse of
discretion amounting to lack of jurisdiction in awarding moral damages to Paras despite the fact
that the complaint had been anchored on breach of contract of carriage; and that the CA
committed a reversible error in substituting its own judgment by motu proprio awarding
temperate damages of 250,000.00 to Inland and 50,000.00 to Paras despite the clear fact that
temperate damages were not raised on appeal by Paras and Inland.

Ruling

The appeal lacks merit.

The Court does not disturb the unanimous findings by the CA and the RTC on the negligence of
Philtranco and its driver being the direct cause of the physical injuries of Paras and the material
damage of Inland.

Nonetheless, we feel bound to pass upon the disparate results the CA and the RTC reached on
the liabilities of Philtranco and its driver.

1.

Paras can recover moral damages

in this suit based on quasi-delict

Philtranco contends that Paras could not recover moral damages because his suit was based on
breach of contract of carriage, pursuant to which moral damages could be recovered only if he
had died, or if the common carrier had been guilty of fraud or bad faith. It argues that Paras had
suffered only physical injuries; that he had not adduced evidence of fraud or bad faith on the part
of the common carrier; and that, consequently, Paras could not recover moral damages directly
from it (Philtranco), considering that it was only being subrogated for Inland.

The Court cannot uphold the petitioners contention.

As a general rule, indeed, moral damages are not recoverable in an action predicated on a breach
of contract. This is because such action is not included in Article 2219 of the Civil Code5 as one
of the actions in which moral damages may be recovered. By way of exception, moral damages
are recoverable in an action predicated on a breach of contract: (a) where the mishap results in
the death of a passenger, as provided in Article 1764,6 in relation to Article 2206, (3),7 of the
Civil Code; and (b) where the common carrier has been guilty of fraud or bad faith,8 as provided
in Article 22209 of the Civil Code.
Although this action does not fall under either of the exceptions, the award of moral damages to
Paras was nonetheless proper and valid. There is no question that Inland filed its third-party
complaint against Philtranco and its driver in order to establish in this action that they, instead of
Inland, should be directly liable to Paras for the physical injuries he had sustained because of
their negligence. To be precise, Philtranco and its driver were brought into the action on the
theory of liability that the proximate cause of the collision between Inlands bus and Philtrancos
bus had been "the negligent, reckless and imprudent manner defendant Apolinar Miralles drove
and operated his driven unit, the Philtranco Bus with Plate No. 259, owned and operated by
third-party defendant Philtranco Service Enterprises, Inc."10 The apparent objective of Inland
was not to merely subrogate the third-party defendants for itself, as Philtranco appears to
suggest,11 but, rather, to obtain a different relief whereby the third-party defendants would be
held directly, fully and solely liable to Paras and Inland for whatever damages each had suffered
from the negligence committed by Philtranco and its driver. In other words, Philtranco and its
driver were charged here as joint tortfeasors who would be jointly and severally be liable to
Paras and Inland.

Impleading Philtranco and its driver through the third-party complaint filed on March 2, 1990
was correct. The device of the third-party action, also known as impleader, was in accord with
Section 12, Rule 6 of the Revised Rules of Court, the rule then applicable, viz:

Section 12. Third-party complaint. A third-party complaint is a claim that a defending party
may, with leave of court, file against a person not a party to the action, called the third-party
defendant, for contribution, indemnity, subrogation or any other relief, in respect of his
opponents claim.12

Explaining the application of Section 12, Rule 6, supra, the Court said in Balbastro v. Court of
Appeals,13 to wit:

Section 12 of Rule 6 of the Revised Rules of Court authorizes a defendant to bring into a lawsuit
any person "not a party to the action . . . for contribution, indemnity, subrogation or any other
relief in respect of his opponent's claim." From its explicit language it does not compel the
defendant to bring the third-parties into the litigation, rather it simply permits the inclusion of
anyone who meets the standard set forth in the rule. The secondary or derivative liability of the
third-party is central whether the basis is indemnity, subrogation, contribution, express or
implied warranty or some other theory. The impleader of new parties under this rule is proper
only when a right to relief exists under the applicable substantive law. This rule is merely a
procedural mechanism, and cannot be utilized unless there is some substantive basis under
applicable law.

Apart from the requirement that the third-party complainant should assert a derivative or
secondary claim for relief from the third-party defendant there are other limitations on said
partys ability to implead. The rule requires that the third-party defendant is "not a party to the
action" for otherwise the proper procedure for asserting a claim against one who is already a
party to the suit is by means of counterclaim or cross-claim under sections 6 and 7 of Rule 6. In
addition to the aforecited requirement, the claim against the third-party defendant must be based
upon plaintiff's claim against the original defendant (third-party claimant). The crucial
characteristic of a claim under section 12 of Rule 6, is that the original "defendant is attempting
to transfer to the third-party defendant the liability asserted against him by the original plaintiff."

Accordingly, the requisites for a third-party action are, firstly, that the party to be impleaded
must not yet be a party to the action; secondly, that the claim against the third-party defendant
must belong to the original defendant; thirdly, the claim of the original defendant against the
third-party defendant must be based upon the plaintiffs claim against the original defendant;
and, fourthly, the defendant is attempting to transfer to the third-party defendant the liability
asserted against him by the original plaintiff.14

As the foregoing indicates, the claim that the third-party complaint asserts against the third-party
defendant must be predicated on substantive law. Here, the substantive law on which the right of
Inland to seek such other relief through its third-party complaint rested were Article 2176 and
Article 2180 of the Civil Code, which read:

Article 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this chapter. (1902a)

Article 2180. The obligation imposed by article 2176 is demandable not only for ones own acts
or omissions, but also for those of persons for whom one is responsible.

xxx

Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.

xxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage. (1903a)

Paras cause of action against Inland (breach of contract of carriage) did not need to be the same
as the cause of action of Inland against Philtranco and its driver (tort or quasi-delict) in the
impleader. It is settled that a defendant in a contract action may join as third-party defendants
those who may be liable to him in tort for the plaintiffs claim against him, or even directly to the
plaintiff.15 Indeed, Prof. Wright, et al., commenting on the provision of the Federal Rules of
Procedure of the United States from which Section 12, supra, was derived, observed so, to wit:16

The third-party claim need not be based on the same theory as the main claim. For example,
there are cases in which the third-party claim is based on an express indemnity contract and the
original complaint is framed in terms of negligence. Similarly, there need not be any legal
relationship between the third-party defendant and any of the other parties to the action.
Impleader also is proper even though the third partys liability is contingent, and technically does
not come into existence until the original defendants liability has been established. In addition,
the words is or may be liable in Rule 14(a) make it clear that impleader is proper even though
the third-party defendants liability is not automatically established once the third-party
plaintiffs liability to the original plaintiff has been determined.

Nor was it a pre-requisite for attachment of the liability to Philtranco and its driver that Inland be
first declared and found liable to Paras for the breach of its contract of carriage with him.17 As
the Court has cogently discoursed in Samala v. Judge Victor:18

Appellants argue that since plaintiffs filed a complaint for damages against the defendants on a
breach of contract of carriage, they cannot recover from the third-party defendants on a cause of
action based on quasi-delict. The third party defendants, they allege, are never parties liable with
respect to plaintiff s claim although they are with respect to the defendants for indemnification,
subrogation, contribution or other reliefs. Consequently, they are not directly liable to the
plaintiffs. Their liability commences only when the defendants are adjudged liable and not when
they are absolved from liability as in the case at bar.

Quite apparent from these arguments is the misconception entertained by appellants with respect
to the nature and office of a third party complaint.

Section 16, Rule 6 of the Revised Rules of Court defines a third party complaint as a "claim that
a defending party may, with leave of court, file against a person not a party to the action, called
the third-party defendant, for contribution, indemnification, subrogation, or any other relief, in
respect of his opponents claim." In the case of Viluan vs. Court of Appeals, et al., 16 SCRA 742
[1966], this Court had occasion to elucidate on the subjects covered by this Rule, thus:

... As explained in the Atlantic Coast Line R. Co. vs. U.S. Fidelity & Guaranty Co., 52 F. Supp.
177 (1943:)

From the sources of Rule 14 and the decisions herein cited, it is clear that this rule, like the
admiralty rule, covers two distinct subjects, the addition of parties defendant to the main cause
of action, and the bringing in of a third party for a defendants remedy over. xxx

If the third party complaint alleges facts showing a third partys direct liability to plaintiff on the
claim set out in plaintiffs petition, then third party shall make his defenses as provided in Rule
12 and his counterclaims against plaintiff as provided in Rule 13. In the case of alleged direct
liability, no amendment (to the complaint) is necessary or required. The subject-matter of the
claim is contained in plaintiff's complaint, the ground of third partys liability on that claim is
alleged in third party complaint, and third partys defense to set up in his answer to plaintiff's
complaint. At that point and without amendment, the plaintiff and third party are at issue as to
their rights respecting the claim.

The provision in the rule that, The third-party defendant may assert any defense which the third-
party plaintiff may assert to the plaintiffs claim, applies to the other subject, namely, the alleged
liability of third party defendant. The next sentence in the rule, The third-party defendant is
bound by the adjudication of the third party plaintiffs liability to the plaintiff, as well as of his
own to the plaintiff or to the third-party plaintiff applies to both subjects. If third party is brought
in as liable only to defendant and judgment is rendered adjudicating plaintiff's right to recover
against defendant and defendants rights to recover against third party, he is bound by both
adjudications.That part of the sentence refers to the second subject. If third party is brought in as
liable to plaintiff, then third party is bound by the adjudication as between him and plaintiff. That
refers to the first subject. If third party is brought in as liable to plaintiff and also over to
defendant, then third party is bound by both adjudications. xxx

Under this Rule, a person not a party to an action may be impleaded by the defendant either (a)
on an allegation of liability to the latter; (b) on the ground of direct liability to the plaintiff-; or,
(c) both (a) and (b). The situation in (a) is covered by the phrase "for contribution, indemnity or
subrogation;" while (b) and (c) are subsumed under the catch all "or any other relief, in respect of
his opponents claim."

The case at bar is one in which the third party defendants are brought into the action as directly
liable to the plaintiffs upon the allegation that "the primary and immediate cause as shown by the
police investigation of said vehicular collision between (sic) the above-mentioned three vehicles
was the recklessness and negligence and lack of imprudence (sic) of the third-party defendant
Virgilio (should be Leonardo) Esguerra y Ledesma then driver of the passenger bus." The effects
are that "plaintiff and third party are at issue as to their rights respecting the claim" and "the third
party is bound by the adjudication as between him and plaintiff." It is not indispensable in the
premises that the defendant be first adjudged liable to plaintiff before the third-party defendant
may be held liable to the plaintiff, as precisely, the theory of defendant is that it is the third party
defendant, and not he, who is directly liable to plaintiff. The situation contemplated by
appellants would properly pertain to situation (a) above wherein the third party defendant is
being sued for contribution, indemnity or subrogation, or simply stated, for a defendant's
"remedy over".19

It is worth adding that allowing the recovery of damages by Paras based on quasi-delict, despite
his complaint being upon contractual breach, served the judicial policy of avoiding multiplicity
of suits and circuity of actions by disposing of the entire subject matter in a single litigation.20

2.

Award of temperate damages was in order

Philtranco assails the award of temperate damages by the CA considering that, firstly, Paras and
Inland had not raised the matter in the trial court and in their respective appeals; secondly, the
CA could not substitute the temperate damages granted to Paras if Paras could not properly
establish his actual damages despite evidence of his actual expenses being easily available to
him; and, thirdly, the CA gravely abused its discretion in granting motu proprio the temperate
damages of 250,000.00 to Inland although Inland had not claimed temperate damages in its
pleading or during trial and even on appeal.

The Court cannot side with Philtranco.

Actual damages, to be recoverable, must not only be capable of proof, but must actually be
proved with a reasonable degree of certainty. The reason is that the court "cannot simply rely on
speculation, conjecture or guesswork in determining the fact and amount of damages," but "there
must be competent proof of the actual amount of loss, credence can be given only to claims
which are duly supported by receipts."21

The receipts formally submitted and offered by Paras were limited to the costs of medicines
purchased on various times in the period from February 1987 to July 1989 (Exhibits E to E-35,
inclusive) totaling only 1,397.95.22 The receipts by no means included hospital and medical
expenses, or the costs of at least two surgeries as well as rehabilitative therapy. Consequently,
the CA fixed actual damages only at that small sum of 1,397.95. On its part, Inland offered no
definite proof on the repairs done on its vehicle, or the extent of the material damage except the
testimony of its witness, Emerlinda Maravilla, to the effect that the bus had been damaged
beyond economic repair.23 The CA rejected Inlands showing of unrealized income worth
3,945,858.50 for 30 months (based on alleged average weekly income of 239,143.02
multiplied by its guaranteed revenue amounting to 55% thereof, then spread over a period of 30
months, the equivalent to the remaining 40% of the vehicles un-depreciated or net book value),
finding such showing arbitrary, uncertain and speculative.24 As a result, the CA allowed no
compensation to Inland for unrealized income.

Nonetheless, the CA was convinced that Paras should not suffer from the lack of definite proof
of his actual expenses for the surgeries and rehabilitative therapy; and that Inland should not be
deprived of recourse to recover its loss of the economic value of its damaged vehicle. As the
records indicated, Paras was first rushed for emergency treatment to the San Pablo Medical
Center in San Pablo City, Laguna, and was later brought to the National Orthopedic Hospital in
Quezon City where he was diagnosed to have suffered a dislocated hip, fracture of the fibula on
the right leg, fracture of the small bone of the right leg, and closed fracture on the tibial plateau
of the left leg. He underwent surgeries on March 4, 1987 and April 15, 1987 to repair the
fractures.25 Thus, the CA awarded to him temperate damages of 50,000.00 in the absence of
definite proof of his actual expenses towards that end. As to Inland, Maravillas testimony of the
bus having been damaged beyond economic repair showed a definitely substantial pecuniary
loss, for which the CA fixed temperate damages of 250,000.00. We cannot disturb the CAs
determination, for we are in no position today to judge its reasonableness on account of the lapse
of a long time from when the accident occurred.26

In awarding temperate damages in lieu of actual damages, the CA did not err, because Paras and
Inland were definitely shown to have sustained substantial pecuniary losses. It would really be a
travesty of justice were the CA now to be held bereft of the discretion to calculate moderate or
temperate damages, and thereby leave Paras and Inland without redress from the wrongful act of
Philtranco and its driver.27 We are satisfied that the CA exerted effort and practiced great care to
ensure that the causal link between the physical injuries of Paras and the material loss of Inland,
on the one hand, and the negligence of Philtranco and its driver, on the other hand, existed in
fact. It also rejected arbitrary or speculative proof of loss. Clearly, the costs of Paras surgeries
and consequential rehabilitation, as well as the fact that repairing Inlands vehicle would no
longer be economical justly warranted the CA to calculate temperate damages of 50,000.00 and
250,000.00 respectively for Paras and Inland.
There is no question that Article 2224 of the Civil Code expressly authorizes the courts to award
temperate damages despite the lack of certain proof of actual damages, to wit:

Article 2224. Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss has
been suffered but its amount cannot, from the nature of the case, be proved with certainty.

The rationale for Article 2224 has been stated in Premiere Development Bank v. Court of
Appeals28 in the following manner:

Even if not recoverable as compensatory damages, Panacor may still be awarded damages in the
concept of temperate or moderate damages. When the court finds that some pecuniary loss has
been suffered but the amount cannot, from the nature of the case, be proved with certainty,
temperate damages may be recovered. Temperate damages may be allowed in cases where from
the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is
convinced that the aggrieved party suffered some pecuniary loss.

The Code Commission, in explaining the concept of temperate damages under Article 2224,
makes the following comment:

In some States of the American Union, temperate damages are allowed. There are cases where
from the nature of the case, definite proof of pecuniary loss cannot be offered, although the court
is convinced that there has been such loss. For instance, injury to ones commercial credit or to
the goodwill of a business firm is often hard to show with certainty in terms of money. Should
damages be denied for that reason? The judge should be empowered to calculate moderate
damages in such cases, rather than that the plaintiff should suffer, without redress from the
defendants wrongful act.

3.

Paras loss of earning capacity

must be compensated

In the body of its decision, the CA concluded that considering that Paras had a minimum
monthly income of 8,000.00 as a trader he was entitled to recover compensation for unearned
income during the 3-month period of his hospital confinement and the 6-month period of his
recovery and rehabilitation; and aggregated his unearned income for those periods to
72,000.00.29 Yet, the CA omitted the unearned income from the dispositive portion.

The omission should be rectified, for there was credible proof of Paras loss of income during his
disability. According to Article 2205, (1), of the Civil Code, damages may be recovered for loss
or impairment of earning capacity in cases of temporary or permanent personal injury. Indeed,
indemnification for damages comprehends not only the loss suffered (actual damages or damnum
emergens) but also the claimants lost profits (compensatory damages or lucrum cessans).30
Even so, the formula that has gained acceptance over time has limited recovery to net earning
capacity; hence, the entire amount of 72,000.00 is not allowable. The premise is obviously that
net earning capacity is the persons capacity to acquire money, less the necessary expense for his
own living.31 To simplify the determination, therefore, the net earning capacity of Paras during
the 9-month period of his confinement, surgeries and consequential therapy is pegged at only
half of his unearned monthly gross income of 8,000.00 as a trader, or a total of 36,000.00 for
the 9-month period, the other half being treated as the necessary expense for his own living in
that period.

It is relevant to clarify that awarding the temperate damages (for the substantial pecuniary losses
corresponding to Parass surgeries and rehabilitation and for the irreparability of Inlands
damaged bus) and the actual damages to compensate lost earnings and costs of medicines give
rise to no incompatibility. These damages cover distinct pecuniary losses suffered by Paras and
Inland,32 and do not infringe the statutory prohibition against recovering damages twice for the
same act or omission.33

4.

Increase in award of attorneys fees

Although it is a sound policy not to set a premium on the right to litigate,34 we consider the
grant to Paras and Inland of reasonable attorneys fees warranted. Their entitlement to attorneys
fees was by virtue of their having been compelled to litigate or to incur expenses to protect their
interests,35 as well as by virtue of the Court now further deeming attorneys fees to be just and
equitable.36

In view of the lapse of a long time in the prosecution of the claim,37 the Court considers it
reasonable and proper to grant attorneys fees to each of Paras and Inland equivalent to 10% of
the total amounts hereby awarded to them, in lieu of only 20,000.00 for that purpose granted to
Paras.

5.

Legal interest on the amounts awarded

Pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,38 legal interest at the rate of 6%
per annum accrues on the amounts adjudged reckoned from July 18, 1997, the date when the
RTC rendered its judgment; and legal interest at the rate of 12% per annum shall be imposed
from the finality of the judgment until its full satisfaction, the interim period being regarded as
the equivalent of a forbearance of credit.

WHEREFORE, the Court AFFIRMS WITH MODIFICATION the decision of the Court of
Appeals promulgated on September 25, 2002, by ordering PHILTRANCO SERVICE
ENTERPRISES, INC. and APOLINAR MIRALLES to pay, jointly and severally, as follows:

1. To Felix Paras:
 (a) 1,397.95, as reimbursement for the costs of medicines purchased between
February 1987 and July 1989;

(b) 50,000.00 as temperate damages;

(c) 50,000.00 as moral damages;

(d) 36,000.00 for lost earnings;

(e) 10% of the total of items (a) to (d) hereof as attorneys fees; and

(f) Interest of 6% per annum from July 18, 1997 on the total of items (a) to (d)
hereof until finality of this decision, and 12% per annum thereafter until full
payment.

2. To Inland Trailways, Inc.:

(a) 250,000.00 as temperate damages;

(b) 10% of item (a) hereof; and

(c) Interest of 6% per annum on item (a) hereof from July 18, 1997 until finality
of this decision, and 12% per annum thereafter until full payment.

3. The petitioner shall pay the costs of suit.

SO ORDERED.

G. R. No. 164317 February 6, 2006

ALFREDO CHING, Petitioner,

vs.
THE SECRETARY OF JUSTICE, ASST. CITY PROSECUTOR ECILYN BURGOS-
VILLAVERT, JUDGE EDGARDO SUDIAM of the Regional Trial Court, Manila, Branch
52; RIZAL COMMERCIAL BANKING CORP. and THE PEOPLE OF THE
PHILIPPINES, Respondents.

DECISION

CALLEJO, SR., J.:

Before the Court is a petition for review on certiorari of the Decision1 of the Court of Appeals
(CA) in CA-G.R. SP No. 57169 dismissing the petition for certiorari, prohibition and mandamus
filed by petitioner Alfredo Ching, and its Resolution2 dated June 28, 2004 denying the motion for
reconsideration thereof.

Petitioner was the Senior Vice-President of Philippine Blooming Mills, Inc. (PBMI). Sometime
in September to October 1980, PBMI, through petitioner, applied with the Rizal Commercial
Banking Corporation (respondent bank) for the issuance of commercial letters of credit to
finance its importation of assorted goods.3

Respondent bank approved the application, and irrevocable letters of credit were issued in favor
of petitioner. The goods were purchased and delivered in trust to PBMI. Petitioner signed 13
trust receipts4 as surety, acknowledging delivery of the following goods:

T/R Date Granted Maturity Principal Description of Goods

Nos. Date

1845 12-05-80 03-05-81 P1,596,470.05 79.9425 M/T "SDK"

Brand Synthetic
Graphite Electrode

1853 12-08-80 03-06-81 P198,150.67 3,000 pcs. (15 bundles)

Calorized Lance Pipes

1824 11-28-80 02-26-81 P707,879.71 One Lot High Fired

Refractory Tundish
Bricks

1798 11-21-80 02-19-81 P835,526.25 5 cases spare parts for

CCM

1808 11-21-80 02-19-81 P370,332.52 200 pcs. ingot moulds

2042 01-30-81 04-30-81 P469,669.29 High Fired Refractory

Nozzle Bricks

1801 11-21-80 02-19-81 P2,001,715.17 Synthetic Graphite

Electrode [with] tapered
pitch filed nipples

1857 12-09-80 03-09-81 P197,843.61 3,000 pcs. (15 bundles

calorized lance pipes [)]

1895 12-17-80 03-17-81 P67,652.04 Spare parts for

Spectrophotometer

1911 12-22-80 03-20-81 P91,497.85 50 pcs. Ingot moulds

2041 01-30-81 04-30-81 P91,456.97 50 pcs. Ingot moulds

 2099 02-10-81 05-11-81 P66,162.26 8 pcs. Kubota Rolls for
rolling mills

2100 02-10-81 05-12-81 P210,748.00 Spare parts for

Lacolaboratory
Equipment5

Under the receipts, petitioner agreed to hold the goods in trust for the said bank, with authority to
sell but not by way of conditional sale, pledge or otherwise; and in case such goods were sold, to
turn over the proceeds thereof as soon as received, to apply against the relative acceptances and
payment of other indebtedness to respondent bank. In case the goods remained unsold within the
specified period, the goods were to be returned to respondent bank without any need of demand.
Thus, said "goods, manufactured products or proceeds thereof, whether in the form of money or
bills, receivables, or accounts separate and capable of identification" were respondent banks
property.

When the trust receipts matured, petitioner failed to return the goods to respondent bank, or to
return their value amounting to 6,940,280.66 despite demands. Thus, the bank filed a criminal
complaint for estafa6 against petitioner in the Office of the City Prosecutor of Manila.

After the requisite preliminary investigation, the City Prosecutor found probable cause estafa
under Article 315, paragraph 1(b) of the Revised Penal Code, in relation to Presidential Decree
(P.D.) No. 115, otherwise known as the Trust Receipts Law. Thirteen (13) Informations were
filed against the petitioner before the Regional Trial Court (RTC) of Manila. The cases were
docketed as Criminal Cases No. 86-42169 to 86-42181, raffled to Branch 31 of said court.

Petitioner appealed the resolution of the City Prosecutor to the then Minister of Justice. The
appeal was dismissed in a Resolution7 dated March 17, 1987, and petitioner moved for its
reconsideration. On December 23, 1987, the Minister of Justice granted the motion, thus
reversing the previous resolution finding probable cause against petitioner.8 The City Prosecutor
was ordered to move for the withdrawal of the Informations.

This time, respondent bank filed a motion for reconsideration, which, however, was denied on
February 24, 1988.9 The RTC, for its part, granted the Motion to Quash the Informations filed by
petitioner on the ground that the material allegations therein did not amount to estafa.10

In the meantime, the Court rendered judgment in Allied Banking Corporation v. Ordoez,11
holding that the penal provision of P.D. No. 115 encompasses any act violative of an obligation
covered by the trust receipt; it is not limited to transactions involving goods which are to be sold
(retailed), reshipped, stored or processed as a component of a product ultimately sold. The Court
also ruled that "the non-payment of the amount covered by a trust receipt is an act violative of
the obligation of the entrustee to pay."12

On February 27, 1995, respondent bank re-filed the criminal complaint for estafa against
petitioner before the Office of the City Prosecutor of Manila. The case was docketed as I.S. No.
95B-07614.
Preliminary investigation ensued. On December 8, 1995, the City Prosecutor ruled that there was
no probable cause to charge petitioner with violating P.D. No. 115, as petitioners liability was
only civil, not criminal, having signed the trust receipts as surety.13 Respondent bank appealed
the resolution to the Department of Justice (DOJ) via petition for review, alleging that the City
Prosecutor erred in ruling:

1. That there is no evidence to show that respondent participated in the misappropriation

of the goods subject of the trust receipts;

2. That the respondent is a mere surety of the trust receipts; and

3. That the liability of the respondent is only civil in nature.14

On July 13, 1999, the Secretary of Justice issued Resolution No. 25015 granting the petition and
reversing the assailed resolution of the City Prosecutor. According to the Justice Secretary, the
petitioner, as Senior Vice-President of PBMI, executed the 13 trust receipts and as such, was the
one responsible for the offense. Thus, the execution of said receipts is enough to indict the
petitioner as the official responsible for violation of P.D. No. 115. The Justice Secretary also
declared that petitioner could not contend that P.D. No. 115 covers only goods ultimately
destined for sale, as this issue had already been settled in Allied Banking Corporation v.
Ordoez,16 where the Court ruled that P.D. No. 115 is "not limited to transactions in goods which
are to be sold (retailed), reshipped, stored or processed as a component of a product ultimately
sold but covers failure to turn over the proceeds of the sale of entrusted goods, or to return said
goods if unsold or not otherwise disposed of in accordance with the terms of the trust receipts."

The Justice Secretary further stated that the respondent bound himself under the terms of the
trust receipts not only as a corporate official of PBMI but also as its surety; hence, he could be
proceeded against in two (2) ways: first, as surety as determined by the Supreme Court in its
decision in Rizal Commercial Banking Corporation v. Court of Appeals;17 and second, as the
corporate official responsible for the offense under P.D. No. 115, via criminal prosecution.
Moreover, P.D. No. 115 explicitly allows the prosecution of corporate officers "without
prejudice to the civil liabilities arising from the criminal offense." Thus, according to the Justice
Secretary, following Rizal Commercial Banking Corporation, the civil liability imposed is
clearly separate and distinct from the criminal liability of the accused under P.D. No. 115.

Conformably with the Resolution of the Secretary of Justice, the City Prosecutor filed 13
Informations against petitioner for violation of P.D. No. 115 before the RTC of Manila. The
cases were docketed as Criminal Cases No. 99-178596 to 99-178608 and consolidated for trial
before Branch 52 of said court. Petitioner filed a motion for reconsideration, which the Secretary
of Justice denied in a Resolution18 dated January 17, 2000.

Petitioner then filed a petition for certiorari, prohibition and mandamus with the CA, assailing
the resolutions of the Secretary of Justice on the following grounds:

1. THE RESPONDENTS ARE ACTING WITH AN UNEVEN HAND AND IN FACT,

ARE ACTING OPPRESSIVELY AGAINST ALFREDO CHING WHEN THEY
 ALLOWED HIS PROSECUTION DESPITE THE FACT THAT NO EVIDENCE HAD
BEEN PRESENTED TO PROVE HIS PARTICIPATION IN THE ALLEGED
TRANSACTIONS.

2. THE RESPONDENT SECRETARY OF JUSTICE COMMITTED AN ACT IN

GRAVE ABUSE OF DISCRETION AND IN EXCESS OF HIS JURISDICTION
WHEN THEY CONTINUED PROSECUTION OF THE PETITIONER DESPITE THE
LENGTH OF TIME INCURRED IN THE TERMINATION OF THE PRELIMINARY
INVESTIGATION THAT SHOULD JUSTIFY THE DISMISSAL OF THE INSTANT
CASE.

3. THE RESPONDENT SECRETARY OF JUSTICE AND ASSISTANT CITY

PROSECUTOR ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO
AN EXCESS OF JURISDICTION WHEN THEY CONTINUED THE PROSECUTION
OF THE PETITIONER DESPITE LACK OF SUFFICIENT BASIS.19

In his petition, petitioner incorporated a certification stating that "as far as this Petition is
concerned, no action or proceeding in the Supreme Court, the Court of Appeals or different
divisions thereof, or any tribunal or agency. It is finally certified that if the affiant should 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, of any other tribunal or agency, it hereby
undertakes to notify this Honorable Court within five (5) days from such notice."20

In its Comment on the petition, the Office of the Solicitor General alleged that -

A.

THE HONORABLE SECRETARY OF JUSTICE CORRECTLY RULED THAT

PETITIONER ALFREDO CHING IS THE OFFICER RESPONSIBLE FOR THE
OFFENSE CHARGED AND THAT THE ACTS OF PETITIONER FALL WITHIN
THE AMBIT OF VIOLATION OF P.D. [No.] 115 IN RELATION TO ARTICLE 315,
PAR. 1(B) OF THE REVISED PENAL CODE.

B.

THERE IS NO MERIT IN PETITIONERS CONTENTION THAT EXCESSIVE

DELAY HAS MARRED THE CONDUCT OF THE PRELIMINARY
INVESTIGATION OF THE CASE, JUSTIFYING ITS DISMISSAL.

C.

THE PRESENT SPECIAL CIVIL ACTION FOR CERTIORARI, PROHIBITION AND

MANDAMUS IS NOT THE PROPER MODE OF REVIEW FROM THE
RESOLUTION OF THE DEPARTMENT OF JUSTICE. THE PRESENT PETITION
MUST THEREFORE BE DISMISSED.21
On April 22, 2004, the CA rendered judgment dismissing the petition for lack of merit, and on
procedural grounds. On the procedural issue, it ruled that (a) the certification of non-forum
shopping executed by petitioner and incorporated in the petition was defective for failure to
comply with the first two of the three-fold undertakings prescribed in Rule 7, Section 5 of the
Revised Rules of Civil Procedure; and (b) the petition for certiorari, prohibition and mandamus
was not the proper remedy of the petitioner.

On the merits of the petition, the CA ruled that the assailed resolutions of the Secretary of Justice
were correctly issued for the following reasons: (a) petitioner, being the Senior Vice-President of
PBMI and the signatory to the trust receipts, is criminally liable for violation of P.D. No. 115; (b)
the issue raised by the petitioner, on whether he violated P.D. No. 115 by his actuations, had
already been resolved and laid to rest in Allied Bank Corporation v. Ordoez;22 and (c) petitioner
was estopped from raising the

City Prosecutors delay in the final disposition of the preliminary investigation because he failed
to do so in the DOJ.

Thus, petitioner filed the instant petition, alleging that:

THE COURT OF APPEALS ERRED WHEN IT DISMISSED THE PETITION ON

THE GROUND THAT THE CERTIFICATION OF NON-FORUM SHOPPING
INCORPORATED THEREIN WAS DEFECTIVE.

II

THE COURT OF APPEALS ERRED WHEN IT RULED THAT NO GRAVE ABUSE

OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WAS
COMMITTED BY THE SECRETARY OF JUSTICE IN COMING OUT WITH THE
ASSAILED RESOLUTIONS.23

The Court will delve into and resolve the issues seriatim.

The petitioner avers that the CA erred in dismissing his petition on a mere technicality. He
claims that the rules of procedure should be used to promote, not frustrate, substantial justice. He
insists that the Rules of Court should be construed liberally especially when, as in this case, his
substantial rights are adversely affected; hence, the deficiency in his certification of non-forum
shopping should not result in the dismissal of his petition.

The Office of the Solicitor General (OSG) takes the opposite view, and asserts that indubitably,
the certificate of non-forum shopping incorporated in the petition before the CA is defective
because it failed to disclose essential facts about pending actions concerning similar issues and
parties. It asserts that petitioners failure to comply with the Rules of Court is fatal to his petition.
The OSG cited Section 2, Rule 42, as well as the ruling of this Court in Melo v. Court of
Appeals.24
We agree with the ruling of the CA that the certification of non-forum shopping petitioner
incorporated in his petition before the appellate court is defective. The certification reads:

It is further certified that as far as this Petition is concerned, no action or proceeding in the
Supreme Court, the Court of Appeals or different divisions thereof, or any tribunal or agency.

It is finally certified that if the affiant should 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,
of any other tribunal or agency, it hereby undertakes to notify this Honorable Court within five
(5) days from such notice.25

Under Section 1, second paragraph of Rule 65 of the Revised Rules of Court, the petition should
be accompanied by a sworn certification of non-forum shopping, as provided in the third
paragraph of Section 3, Rule 46 of said Rules. The latter provision reads in part:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. The
petition shall contain the full names and actual addresses of all the petitioners and respondents, a
concise statement of the matters involved, the factual background of the case and the grounds
relied upon for the relief prayed for.

xxx

The petitioner shall also submit together with the petition 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, he undertakes to
promptly inform the aforesaid courts and other tribunal or agency thereof within five (5) days
therefrom. xxx

Compliance with the certification against forum shopping is separate from and independent of
the avoidance of forum shopping itself. The requirement is mandatory. The failure of the
petitioner to comply with the foregoing requirement shall be sufficient ground for the dismissal
of the petition without prejudice, unless otherwise provided.26

Indubitably, the first paragraph of petitioners certification is incomplete and unintelligible.

Petitioner failed to certify that he "had not heretofore commenced any other action involving the
same issues in the Supreme Court, the Court of Appeals or the different divisions thereof or any
other tribunal or agency" as required by paragraph 4, Section 3, Rule 46 of the Revised Rules of
Court.

We agree with petitioners contention that the certification is designed to promote and facilitate
the orderly administration of justice, and therefore, should not be interpreted with absolute
literalness. In his works on the Revised Rules of Civil Procedure, former Supreme Court Justice
Florenz Regalado states that, with respect to the contents of the certification which the pleader
may prepare, the rule of substantial compliance may be availed of.27 However, there must be a
special circumstance or compelling reason which makes the strict application of the requirement
clearly unjustified. The instant petition has not alleged any such extraneous circumstance.
Moreover, as worded, the certification cannot even be regarded as substantial compliance with
the procedural requirement. Thus, the CA was not informed whether, aside from the petition
before it, petitioner had commenced any other action involving the same issues in other tribunals.

On the merits of the petition, the CA ruled that the petitioner failed to establish that the Secretary
of Justice committed grave abuse of discretion in finding probable cause against the petitioner
for violation of estafa under Article 315, paragraph 1(b) of the Revised Penal Code, in relation to
P.D. No. 115. Thus, the appellate court ratiocinated:

Be that as it may, even on the merits, the arguments advanced in support of the petition are not
persuasive enough to justify the desired conclusion that respondent Secretary of Justice gravely
abused its discretion in coming out with his assailed Resolutions. Petitioner posits that, except
for his being the Senior Vice-President of the PBMI, there is no iota of evidence that he was a
participes crimines in violating the trust receipts sued upon; and that his liability, if at all, is
purely civil because he signed the said trust receipts merely as a xxx surety and not as the
entrustee. These assertions are, however, too dull that they cannot even just dent the findings of
the respondent Secretary, viz:

"x x x it is apropos to quote section 13 of PD 115 which states in part, viz:

xxx If the violation or offense is committed by a corporation, partnership, association or other

judicial entities, the penalty provided for in this Decree shall be imposed upon the directors,
officers, employees or other officials or persons therein responsible for the offense, without
prejudice to the civil liabilities arising from the criminal offense.

"There is no dispute that it was the respondent, who as senior vice-president of PBM, executed
the thirteen (13) trust receipts. As such, the law points to him as the official responsible for the
offense. Since a corporation cannot be proceeded against criminally because it cannot commit
crime in which personal violence or malicious intent is required, criminal action is limited to the
corporate agents guilty of an act amounting to a crime and never against the corporation itself
(West Coast Life Ins. Co. vs. Hurd, 27 Phil. 401; Times, [I]nc. v. Reyes, 39 SCRA 303). Thus,
the execution by respondent of said receipts is enough to indict him as the official responsible for
violation of PD 115.

"Parenthetically, respondent is estopped to still contend that PD 115 covers only goods which are
ultimately destined for sale and not goods, like those imported by PBM, for use in manufacture.
This issue has already been settled in the Allied Banking Corporation case, supra, where he was
also a party, when the Supreme Court ruled that PD 115 is not limited to transactions in goods
which are to be sold (retailed), reshipped, stored or processed as a component or a product
ultimately sold but covers failure to turn over the proceeds of the sale of entrusted goods, or to
return said goods if unsold or disposed of in accordance with the terms of the trust receipts.
"In regard to the other assigned errors, we note that the respondent bound himself under the
terms of the trust receipts not only as a corporate official of PBM but also as its surety. It is
evident that these are two (2) capacities which do not exclude the other. Logically, he can be
proceeded against in two (2) ways: first, as surety as determined by the Supreme Court in its
decision in RCBC vs. Court of Appeals, 178 SCRA 739; and, secondly, as the corporate official
responsible for the offense under PD 115, the present case is an appropriate remedy under our
penal law.

"Moreover, PD 115 explicitly allows the prosecution of corporate officers without prejudice to
the civil liabilities arising from the criminal offense thus, the civil liability imposed on
respondent in RCBC vs. Court of Appeals case is clearly separate and distinct from his criminal
liability under PD 115."28

Petitioner asserts that the appellate courts ruling is erroneous because (a) the transaction
between PBMI and respondent bank is not a trust receipt transaction; (b) he entered into the
transaction and was sued in his capacity as PBMI Senior Vice-President; (c) he never received
the goods as an entrustee for PBMI, hence, could not have committed any dishonesty or abused
the confidence of respondent bank; and (d) PBMI acquired the goods and used the same in
operating its machineries and equipment and not for resale.

The OSG, for its part, submits a contrary view, to wit:

34. Petitioner further claims that he is not a person responsible for the offense allegedly because
"[b]eing charged as the Senior Vice-President of Philippine Blooming Mills (PBM), petitioner
cannot be held criminally liable as the transactions sued upon were clearly entered into in his
capacity as an officer of the corporation" and that [h]e never received the goods as an entrustee
for PBM as he never had or took possession of the goods nor did he commit dishonesty nor
"abuse of confidence in transacting with RCBC." Such argument is bereft of merit.

35. Petitioners being a Senior Vice-President of the Philippine Blooming Mills does not
exculpate him from any liability. Petitioners responsibility as the corporate official of PBM who
received the goods in trust is premised on Section 13 of P.D. No. 115, which provides:

Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the sale of the
goods, documents or instruments covered by a trust receipt to the extent of the amount owing to
the entruster or as appears in the trust receipt or to return said goods, documents or instruments if
they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute
the crime of estafa, punishable under the provisions of Article Three hundred and fifteen,
paragraph one (b) of Act Numbered Three thousand eight hundred and fifteen, as amended,
otherwise known as the Revised Penal Code. If the violation or offense is committed by a
corporation, partnership, association or other juridical entities, the penalty provided for in this
Decree shall be imposed upon the directors, officers, employees or other officials or persons
therein responsible for the offense, without prejudice to the civil liabilities arising from the
criminal offense. (Emphasis supplied)
36. Petitioner having participated in the negotiations for the trust receipts and having received
the goods for PBM, it was inevitable that the petitioner is the proper corporate officer to be
proceeded against by virtue of the PBMs violation of P.D. No. 115.29

The ruling of the CA is correct.

In Mendoza-Arce v. Office of the Ombudsman (Visayas),30 this Court held that the acts of a
quasi-judicial officer may be assailed by the aggrieved party via a petition for certiorari and
enjoined (a) when necessary to afford adequate protection to the constitutional rights of the
accused; (b) when necessary for the orderly administration of justice; (c) when the acts of the
officer are without or in excess of authority; (d) where the charges are manifestly false and
motivated by the lust for vengeance; and (e) when there is clearly no prima facie case against the
accused.31 The Court also declared that, if the officer conducting a preliminary investigation (in
that case, the Office of the Ombudsman) acts without or in excess of his authority and resolves to
file an Information despite the absence of probable cause, such act may be nullified by a writ of
certiorari.32

Indeed, under Section 4, Rule 112 of the 2000 Rules of Criminal Procedure,33 the Information
shall be prepared by the Investigating Prosecutor against the respondent only if he or she finds
probable cause to hold such respondent for trial. The Investigating Prosecutor acts without or in
excess of his authority under the Rule if the Information is filed against the respondent despite
absence of evidence showing probable cause therefor.34 If the Secretary of Justice reverses the
Resolution of the Investigating Prosecutor who found no probable cause to hold the respondent
for trial, and orders such prosecutor to file the Information despite the absence of probable cause,
the Secretary of Justice acts contrary to law, without authority and/or in excess of authority. Such
resolution may likewise be nullified in a petition for certiorari under Rule 65 of the Revised
Rules of Civil Procedure.35

A preliminary investigation, designed to secure the respondent against hasty, malicious and
oppressive prosecution, is an inquiry to determine whether (a) a crime has been committed; and
(b) whether there is probable cause to believe that the accused is guilty thereof. It is a means of
discovering the person or persons who may be reasonably charged with a crime. Probable cause
need not be based on clear and convincing evidence of guilt, as the investigating officer acts
upon probable cause of reasonable belief. Probable cause implies probability of guilt and
requires more than bare suspicion but less than evidence which would justify a conviction. A
finding of probable cause needs only to rest on evidence showing that more likely than not, a
crime has been committed by the suspect.36

However, while probable cause should be determined in a summary manner, there is a need to
examine the evidence with care to prevent material damage to a potential accuseds
constitutional right to liberty and the guarantees of freedom and fair play37 and to protect the
State from the burden of unnecessary expenses in prosecuting alleged offenses and holding trials
arising from false, fraudulent or groundless charges.38
In this case, petitioner failed to establish that the Secretary of Justice committed grave abuse of
discretion in issuing the assailed resolutions. Indeed, he acted in accord with law and the
evidence.

Section 4 of P.D. No. 115 defines a trust receipt transaction, thus:

Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within the
meaning of this Decree, is any transaction by and between a person referred to in this Decree as
the entruster, and another person referred to in this Decree as entrustee, whereby the entruster,
who owns or holds absolute title or security interests over certain specified goods, documents or
instruments, releases the same to the possession of the entrustee upon the latters execution and
delivery to the entruster of a signed document called a "trust receipt" wherein the entrustee binds
himself to hold the designated goods, documents or instruments in trust for the entruster and to
sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over
to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as
appears in the trust receipt or the goods, documents or instruments themselves if they are unsold
or not otherwise disposed of, in accordance with the terms and conditions specified in the trust
receipt, or for other purposes substantially equivalent to any of the following:

1. In case of goods or documents, (a) to sell the goods or procure their sale; or (b) to
manufacture or process the goods with the purpose of ultimate sale; Provided, That, in the
case of goods delivered under trust receipt for the purpose of manufacturing or
processing before its ultimate sale, the entruster shall retain its title over the goods
whether in its original or processed form until the entrustee has complied fully with his
obligation under the trust receipt; or (c) to load, unload, ship or otherwise deal with them
in a manner preliminary or necessary to their sale; or

2. In the case of instruments a) to sell or procure their sale or exchange; or b) to deliver

them to a principal; or c) to effect the consummation of some transactions involving
delivery to a depository or register; or d) to effect their presentation, collection or
renewal.

The sale of goods, documents or instruments by a person in the business of selling goods,
documents or instruments for profit who, at the outset of the transaction, has, as against the
buyer, general property rights in such goods, documents or instruments, or who sells the same to
the buyer on credit, retaining title or other interest as security for the payment of the purchase
price, does not constitute a trust receipt transaction and is outside the purview and coverage of
this Decree.

An entrustee is one having or taking possession of goods, documents or instruments under a trust
receipt transaction, and any successor in interest of such person for the purpose of payment
specified in the trust receipt agreement.39 The entrustee is obliged to: (1) hold the goods,
documents or instruments in trust for the entruster and shall dispose of them strictly in
accordance with the terms and conditions of the trust receipt; (2) receive the proceeds in trust for
the entruster and turn over the same to the entruster to the extent of the amount owing to the
entruster or as appears on the trust receipt; (3) insure the goods for their total value against loss
from fire, theft, pilferage or other casualties; (4) keep said goods or proceeds thereof whether in
money or whatever form, separate and capable of identification as property of the entruster; (5)
return the goods, documents or instruments in the event of non-sale or upon demand of the
entruster; and (6) observe all other terms and conditions of the trust receipt not contrary to the
provisions of the decree.40

The entruster shall be entitled to the proceeds from the sale of the goods, documents or
instruments released under a trust receipt to the entrustee to the extent of the amount owing to
the entruster or as appears in the trust receipt, or to the return of the goods, documents or
instruments in case of non-sale, and to the enforcement of all other rights conferred on him in the
trust receipt; provided, such are not contrary to the provisions of the document.41

In the case at bar, the transaction between petitioner and respondent bank falls under the trust
receipt transactions envisaged in P.D. No. 115. Respondent bank imported the goods and
entrusted the same to PBMI under the trust receipts signed by petitioner, as entrustee, with the
bank as entruster. The agreement was as follows:

And in consideration thereof, I/we hereby agree to hold said goods in trust for the said BANK as
its property with liberty to sell the same within ____days from the date of the execution of this
Trust Receipt and for the Banks account, but without authority to make any other disposition
whatsoever of the said goods or any part thereof (or the proceeds) either by way of conditional
sale, pledge or otherwise.

I/we agree to keep the said goods insured to their full value against loss from fire, theft, pilferage
or other casualties as directed by the BANK, the sum insured to be payable in case of loss to the
BANK, with the understanding that the BANK is, not to be chargeable with the storage premium
or insurance or any other expenses incurred on said goods.

In case of sale, I/we further agree to turn over the proceeds thereof as soon as received to the
BANK, to apply against the relative acceptances (as described above) and for the payment of any
other indebtedness of mine/ours to the BANK. In case of non-sale within the period specified
herein, I/we agree to return the goods under this Trust Receipt to the BANK without any need of
demand.

I/we agree to keep the said goods, manufactured products or proceeds thereof, whether in the
form of money or bills, receivables, or accounts separate and capable of identification as
property of the BANK.42

It must be stressed that P.D. No. 115 is a declaration by legislative authority that, as a matter of
public policy, the failure of person to turn over the proceeds of the sale of the goods covered by a
trust receipt or to return said goods, if not sold, is a public nuisance to be abated by the
imposition of penal sanctions.43

The Court likewise rules that the issue of whether P.D. No. 115 encompasses transactions
involving goods procured as a component of a product ultimately sold has been resolved in the
affirmative in Allied Banking Corporation v. Ordoez.44 The law applies to goods used by the
entrustee in the operation of its machineries and equipment. The non-payment of the amount
covered by the trust receipts or the non-return of the goods covered by the receipts, if not sold or
otherwise not disposed of, violate the entrustees obligation to pay the amount or to return the
goods to the entruster.

In Colinares v. Court of Appeals,45 the Court declared that there are two possible situations in a
trust receipt transaction. The first is covered by the provision which refers to money received
under the obligation involving the duty to deliver it (entregarla) to the owner of the merchandise
sold. The second is covered by the provision which refers to merchandise received under the
obligation to return it (devolvera) to the owner.46 Thus, failure of the entrustee to turn over the
proceeds of the sale of the goods covered by the trust receipts to the entruster or to return said
goods if they were not disposed of in accordance with the terms of the trust receipt is a crime
under P.D. No. 115, without need of proving intent to defraud. The law punishes dishonesty and
abuse of confidence in the handling of money or goods to the prejudice of the entruster,
regardless of whether the latter is the owner or not. A mere failure to deliver the proceeds of the
sale of the goods, if not sold, constitutes a criminal offense that causes prejudice, not only to
another, but more to the public interest.47

The Court rules that although petitioner signed the trust receipts merely as Senior Vice-President
of PBMI and had no physical possession of the goods, he cannot avoid prosecution for violation
of P.D. No. 115.

The penalty clause of the law, Section 13 of P.D. No. 115 reads:

Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the sale of the
goods, documents or instruments covered by a trust receipt to the extent of the amount owing to
the entruster or as appears in the trust receipt or to return said goods, documents or instruments if
they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute
the crime of estafa, punishable under the provisions of Article Three hundred and fifteen,
paragraph one (b) of Act Numbered Three thousand eight hundred and fifteen, as amended,
otherwise known as the Revised Penal Code.1wphi1 If the violation or offense is committed by
a corporation, partnership, association or other juridical entities, the penalty provided for in this
Decree shall be imposed upon the directors, officers, employees or other officials or persons
therein responsible for the offense, without prejudice to the civil liabilities arising from the
criminal offense.

The crime defined in P.D. No. 115 is malum prohibitum but is classified as estafa under
paragraph 1(b), Article 315 of the Revised Penal Code, or estafa with abuse of confidence. It
may be committed by a corporation or other juridical entity or by natural persons. However, the
penalty for the crime is imprisonment for the periods provided in said Article 315, which reads:

ARTICLE 315. Swindling (estafa). Any person who shall defraud another by any of the means
mentioned hereinbelow shall be punished by:

1st. The penalty of prision correccional in its maximum period to prision mayor in its
minimum period, if the amount of the fraud is over 12,000 pesos but does not exceed
 22,000 pesos; and if such amount exceeds the latter sum, the penalty provided in this
paragraph shall be imposed in its maximum period, adding one year for each additional
10,000 pesos; but the total penalty which may be imposed shall not exceed twenty years.
In such cases, and in connection with the accessory penalties which may be imposed and
for the purpose of the other provisions of this Code, the penalty shall be termed prision
mayor or reclusion temporal, as the case may be;

2nd. The penalty of prision correccional in its minimum and medium periods, if the
amount of the fraud is over 6,000 pesos but does not exceed 12,000 pesos;

3rd. The penalty of arresto mayor in its maximum period to prision correccional in its
minimum period, if such amount is over 200 pesos but does not exceed 6,000 pesos; and

4th. By arresto mayor in its medium and maximum periods, if such amount does not exceed 200
pesos, provided that in the four cases mentioned, the fraud be committed by any of the following
means; xxx

Though the entrustee is a corporation, nevertheless, the law specifically makes the officers,
employees or other officers or persons responsible for the offense, without prejudice to the civil
liabilities of such corporation and/or board of directors, officers, or other officials or employees
responsible for the offense. The rationale is that such officers or employees are vested with the
authority and responsibility to devise means necessary to ensure compliance with the law and, if
they fail to do so, are held criminally accountable; thus, they have a responsible share in the
violations of the law.48

If the crime is committed by a corporation or other juridical entity, the directors, officers,
employees or other officers thereof responsible for the offense shall be charged and penalized for
the crime, precisely because of the nature of the crime and the penalty therefor. A corporation
cannot be arrested and imprisoned; hence, cannot be penalized for a crime punishable by
imprisonment.49 However, a corporation may be charged and prosecuted for a crime if the
imposable penalty is fine. Even if the statute prescribes both fine and imprisonment as penalty, a
corporation may be prosecuted and, if found guilty, may be fined.50

A crime is the doing of that which the penal code forbids to be done, or omitting to do what it
commands. A necessary part of the definition of every crime is the designation of the author of
the crime upon whom the penalty is to be inflicted. When a criminal statute designates an act of a
corporation or a crime and prescribes punishment therefor, it creates a criminal offense which,
otherwise, would not exist and such can be committed only by the corporation. But when a penal
statute does not expressly apply to corporations, it does not create an offense for which a
corporation may be punished. On the other hand, if the State, by statute, defines a crime that may
be committed by a corporation but prescribes the penalty therefor to be suffered by the officers,
directors, or employees of such corporation or other persons responsible for the offense, only
such individuals will suffer such penalty.51 Corporate officers or employees, through whose act,
default or omission the corporation commits a crime, are themselves individually guilty of the
crime.52
The principle applies whether or not the crime requires the consciousness of wrongdoing. It
applies to those corporate agents who themselves commit the crime and to those, who, by virtue
of their managerial positions or other similar relation to the corporation, could be deemed
responsible for its commission, if by virtue of their relationship to the corporation, they had the
power to prevent the act.53 Moreover, all parties active in promoting a crime, whether agents or
not, are principals.54 Whether such officers or employees are benefited by their delictual acts is
not a touchstone of their criminal liability. Benefit is not an operative fact.

In this case, petitioner signed the trust receipts in question. He cannot, thus, hide behind the
cloak of the separate corporate personality of PBMI. In the words of Chief Justice Earl Warren, a
corporate officer cannot protect himself behind a corporation where he is the actual, present and
efficient actor.55

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against
the petitioner.

SO ORDERED.

G.R. No. 170924 July 4, 2007

In the matter of the Petition for Habeas Corpus of CEZARI GONZALES and JULIUS
MESA
ROBERTO RAFAEL PULIDO, petitioner,
vs.
Gen. EFREN ABU, as Chief of Staff of the Armed Forces of the Philippines and all persons
acting in his stead and under his authority, and GEN. ERNESTO DE LEON, in his
capacity as the Flag Officer in Command of the Philippine Navy, and all persons acting in
his stead and under his authority, respondents.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review under Rule 45 of the Rules of Court assailing the Decision1 of
the Court of Appeals in CA-G.R. SP No. 90546 which dismissed the Petition for Habeas Corpus
filed by petitioner Roberto Rafael Pulido (Pulido) in behalf of Cezari Gonzales and Julius Mesa,
and imposed on petitioner the penalty of censure, and its Resolution2 dated 6 January 2006
denying his motion for reconsideration.

The facts are not disputed.

At around one oclock in the morning of 27 July 2003, three hundred twenty-one (321) junior
officers and enlisted personnel of the Armed Forces of the Philippines (AFP) entered and took
over the premises of the Oakwood Premiere Luxury Apartments (Oakwood) located at the
Glorietta Complex, Ayala Avenue, Makati City. They disarmed the security guards of said
establishment and planted explosives in its immediate surroundings.

The soldiers publicly announced that they went to Oakwood to air their grievances against the
administration of President Gloria Macapagal Arroyo (President Arroyo). They declared their
withdrawal of support from the Commander-in-Chief of the AFP President Arroyo and
demanded her resignation and that of the members of her cabinet and top officers of both the
AFP and the Philippine National Police (PNP).

At about one oclock in the afternoon, President Arroyo issued Proclamation No. 427 declaring
the country to be under a "state of rebellion." Consequently, she issued General Order No. 4
directing the AFP and the PNP to carry out all reasonable measures, giving due regard to
constitutional rights, to suppress and quell the "rebellion."

After a series of negotiations between the soldiers and the government negotiators, the former
agreed to return to barracks, thus ending the occupation of Oakwood.

Among those involved in the occupation of Oakwood were Cezari Gonzales and Julius Mesa,
both enlisted personnel of the Philippine Navy. It is in their behalf that the Petition for Habeas
Corpus was filed before the Court of Appeals.

On 2 August 2003, then AFP Chief of Staff Narciso L. Abaya issued a directive3 to all Major
Service Commanders and to the Chief of the Intelligence Service of the Armed Forces of the
Philippines (ISAFP) regarding the Custody of Military Personnel Involved in the 27 July 2003
Mutiny. On the strength thereof, Gonzales and Mesa were taken into custody by their Service
Commander.

Gonzales and Mesa were not charged before a court martial with violation of the Articles of War.
They were, however, among the soldiers charged before Branch 61 of the Regional Trial Court
(RTC) of Makati City, with the crime of Coup Detat as defined under Article 134-A of the
Revised Penal Code. Said case entitled, "People v. Capt. Milo D. Maestrecampo, et al." was
docketed as Criminal Case No. 03-2784. On 18 November 2003, a Commitment Order was
issued by the RTC committing custody of the persons of Gonzales and Mesa to the Commanding
Officer of Fort San Felipe Naval Base, Cavite City.4

On 8 December 2003, Gonzales and Mesa were discharged5 from military service.

On 16 December 2003, per order of the RTC, Criminal Case No. 03-2784 was consolidated with
Criminal Case No. 03-2678 entitled, "People v. Ramon B. Cardenas" pending before Branch 148
of the RTC of Makati City, on the ground that the cases are founded on the same facts and/or
formed part of a series of offenses of similar character.6

In a Manifestation and Motion dated 3 March 2004, Commodore Normando Naval, Commander
of Naval Base Cavite, asked the Makati RTC, Branch 148, to relieve him of his duty as custodian
of Gonzales and Mesa and that the latter be transferred to the Makati City Jail.7 In an Order dated
29 April 2004, the RTC relieved him of his duty but ordered the transfer of Gonzales and Mesa
from the Naval Base Cavite in Sangley Point, Cavite City, to the Philippine Marine Brigade
Headquarters, Philippine Marine, Fort Bonifacio, Taguig, Metro Manila, under the custody of the
Commander of the Marine Brigade of the Philippine Marines, Fort Bonifacio, Taguig, Metro
Manila.8

In an Order dated 8 July 2004, the RTC resolved the petitions for bail filed by the accused-
soldiers. It admitted Gonzales and Mesa, and twenty-five other co-accused to bail pegging the
amount thereof at P100,000.00 each.9

On 19 July 2004, both Gonzales and Mesa posted bail.10 On 20 July 2004, the RTC issued orders
directing the Commanding Officer of Philippine Marine Corps, Fort Bonifacio, Makati City, to
release Gonzales and Mesa from his custody.11 Despite said orders and their service to the
marines, Gonzales and Mesa were not released.

On 21 July 2004, the People of the Philippines moved for partial reconsideration12 of the order
granting bail. Prior to the resolution of said motion, Jovencito R. Zuo, Chief State Prosecutor,
advised Brig. Gen. Manuel F. Llena, Judge Advocate General, to defer action on the provisional
release of Gonzales and Mesa "until the Motion for Reconsideration shall have been resolved
and attained finality."13 On 26 October 2004, the RTC denied the motion for partial
reconsideration.

With the denial of the Motion for Partial Reconsideration, the People filed with the Court of
Appeals on 4 February 2005 a special civil action for certiorari under Rule 65 of the Rules of
Court with urgent prayer for Temporary Restraining Order (TRO) and/or Writ of Preliminary
Injunction, asking for the nullification and setting aside of the orders dated 8 July 2004 and 26
October 2004 of Judge Oscar B. Pimentel for having been issued without jurisdiction and/or
grave abuse of discretion amounting to lack or excess of jurisdiction. The Petition for Certiorari
was raffled to the Seventh Division and was docketed as CA-G.R. SP No. 88440 entitled,
"People of the Philippines v. Hon. Oscar B. Pimentel, Presiding Judge of the Regional Trial
Court of Makati City, Branch 148." The Court of Appeals (Seventh Division) did not issue a
TRO and/or preliminary injunction.

Since Gonzales and Mesa continued to be in detention, a Petition for Habeas Corpus14 was filed
by petitioner Pulido on their behalf on 22 July 2005. The case was docketed as CA-G.R. SP No.
90546 and raffled to the Third Division. In support thereof, it was argued that since Gonzales and
Mesa are no longer subject to Military Law as they had been discharged from the service on 8
December 2003, and since they are not charged before a court martial, the military authorities
have no jurisdiction to detain them, and there is no legal ground to detain them further because a
court order for their release had already been issued.

On 10 August 2005, the Court of Appeals (3rd Division) issued a Writ of Habeas Corpus
directing respondents Gen. Efren Abu, Chief of Staff of the Armed Forces of the Philippines, and
all persons acting in his stead and under his authority, and Gen. Ernesto de Leon, Flag Officer in
Command of the Philippine Navy, and all persons acting in his stead and under his authority, to
produce the bodies of Gonzales and Mesa before the Court and to appear and show the cause and
validity of their detention.15
On 18 August 2005, a return of the Writ of Habeas Corpus was made.16 Respondents prayed that
the Petition for Habeas Corpus be dismissed primarily on two grounds: (1) the continued
detention of Gonzales and Mesa is justified because of the pendency of the Petition for
Certiorari questioning the order dated 8 July 2004 of the RTC granting bail to Gonzales and
Mesa before the 7th Division of the Court of Appeals, docketed as CA-G.R. SP No. 88440; and
(2) petitioner is guilty of forum shopping because of his failure to state in the petition that the
order granting bail has been elevated to the Court of Appeals and pending before its 7th Division.

On 9 September 2005, the Court of Appeals (7th Division) rendered its decision in CA-G.R. SP
No. 88440 dismissing the petition that questioned the propriety of the granting of bail to
Gonzales, Mesa, and twenty-five of their co-accused.17

On 12 September 2005, the Court of Appeals (3rd Division) dismissed the Petition for Habeas
Corpus for violation of Section 5, Rule 7 of the Rules of Court. It ratiocinated:

A reading of the parties submissions reveals a threshold issue the charge of forum
shopping and the related falsity in the certification supporting the petition. We must
initially resolve these issues because a finding that the petitioner violated Section 5, Rule
7 of the Rules of Court can lead to the outright dismissal of the present petition. x x x

xxxx

The records show that the present petition contained the following certificate of non-
forum shopping:

"I, ROBERTO RAFAEL PULIDO, with office address at Unit 1601, 16th Floor
139 Corporate Center Valero Street, Makati City, after having been duly sworn in
accordance with law, do hereby state that:

1. I am the petitioner in the above-captioned case;

2. I have read the Petition and caused it to be prepared. All the contents thereof
are true to my own personal knowledge and the record;

3. I have not heretofore commenced any action or proceeding involving the same
issues, in the Supreme Court, the Court of Appeals, or any other tribunal or
agency and to the best of my knowledge, no action or proceeding is pending in the
Supreme Court, the Court of Appeals, or any other tribunal or agency; except for
the related cases of "Eugene Gonzales et al. vs. Gen. Narciso Abaya, et al., G.R.
No. 164007 and "Humabono Adaza et al., vs. Gen. Pedro Cabuay et al., G.R. No.
160792, both awaiting the resolution of the Supreme Court.

5. (sic, should be 4) If I should learn of any similar action or proceeding filed or is

pending in the Supreme Court, the Court of Appeals, or any other tribunal or
agency, I undertake to report such fact within five (5) days therefrom to this
Court.
The present petition and its accompanying certification likewise show that the petitioner
never mentioned the pendency before the Seventh Division of this Court of the certiorari
case, SP 88440, for the annulment of the lower courts order granting the soldiers-
accuseds petition for bail, when this same lower court order is cited as basis for the
immediate release of Gonzales and Mesa in the present petition. All that the certification
mentioned were the related cases pending before the Honorable Supreme Court. Neither
did the petitioner comply with his undertaking under his certification to inform this Court
within five (5) days of the pendency of any similar action or proceeding filed or is
pending in the Supreme Court, the Court of Appeals, or any other tribunal or agency, as
in fact the certiorari case was already pending with this Court when the present petition
was filed. The certiorari case was only brought to our attention after the respondents filed
their Return of the Writ.

To be sure, the petitioner, who is also the counsel for the accused Gonzales and Mesa in
the criminal case before Branch 148 RTC Makati City and who represents Gonzales and
Mesa as private respondents in CA-G.R. SP No. 88440, cannot feign ignorance of the
pendency of the certiorari case. Why he deliberately kept the pendency of the certiorari
case hidden from us, has not been sufficiently explained. We have no doubt, however,
that his deliberate act of withholding information on a material fact directly required to be
disclosed by the Rules of Court cannot but have legal consequences.

The primary basis of the present petition is the bail granted to and posted by Gonzales
and Mesa. This is very clear from the petitioners argument that "The continued detention
of the enlisted personnel constitutes violation of the lawful orders of the civilian court."
He cited in support of this argument the grant and the posting of the bail, and the issuance
of the release orders by the lower court. He did not disclose, however, what subsequently
happened to the order granting bail. He deliberately omitted in his narration the fact that
the People moved to reconsider this order. Thus, he gave the impression that the order
granting bail immediately became enforceable and that Gonzales and Mesas continued
detention is illegal because their constitutional rights to bail, which have received judicial
imprimatur, were continuously being violated by the respondents.

The petitioner next omitted the fact that after the denial of its motion for reconsideration
of the order granting bail, the People filed the certiorari case before this Court, seeking to
annul the lower courts order. While we are aware of the rule that the mere pendency of
a petition for certiorari will not prevent the implementation of the assailed order unless
the court where the petition was filed issues either a temporary restraining order or a
writ or preliminary injunction the filing of a petition for habeas corpus while the order
granting bail is being questioned on a petition for certiorari raises issues beyond the
immediate execution of the lower courts bail and release orders. They raise questions on
the propriety of filing the habeas corpus petition to seek the release of persons under
detention, at the same time that a petition regarding their continued detention and release
are pending. Apparently, the petitioner wanted to avoid these questions, prompting him to
actively conceal the subsequent motion for reconsideration of the bail order and the
petition for certiorari directly questioning this same order. In short, the petitioner
conveniently omitted in his narration of facts the material factual antecedents
detrimental to his cause; he chose to narrate only the factual antecedents favorable to
his cause.

That the present petition has direct and intimate links with the certiorari case is beyond
doubt as they involve two sides of the same coin. The certiorari case filed by the People
seeks to prevent the release of Gonzales and Mesa by annulling the lower courts grant of
bail. The present petition, on the other hand, was filed in behalf of Gonzales and Mesa to
secure their immediate release because the order granting bail is already executory. In
effect, the petitioner seeks to implement through a petition for habeas corpus the
provisional release from detention that the lower court has ordered. The question this
immediately raises is: can this be done through a petition for habeas corpus when the
validity of the grant of bail and the release under bail are live questions before another
Division of this Court?

We believe and so hold that his cannot and should not be done as this is precisely the
reason why the rule against forum shopping has been put in place. The remedies sought
being two sides of the same coin (i.e., the release of Gonzales and Mesa), they cannot be
secured through separately-filed cases where issues of jurisdiction may arise and whose
rulings may conflict with one another. To be sure, we clearly heard the petitioner say that
there can be no conflict because the effectiveness of our ruling in this petition will
depend on the nature and tenor of the ruling in the certiorari case; there is no basis for a
release on habeas corpus if this same Court will rule in the certiorari case that the grant of
bail is improper. For this very same reason, we should not entertain the present petition as
the matter before us is already before another co-equal body whose ruling will be finally
determinative of the issue of Gonzales and Mesas release. The Decision of the Seventh
Division of this Court, heretofore footnoted, ordering the release on bail of Gonzales and
Mesa drives home this point.

To be strictly accurate, the issues of detention and immediate release that are now before
the two Divisions of this Court are likewise properly within the jurisdiction of the lower
court who has original jurisdiction over the criminal case and who has issued the order
granting bail in the exercise of this jurisdiction. If indeed there is a question relating to
the immediate release of Gonzales and Mesa pursuant to the lower courts order pending
the determination of the certiorari issues, such question should be brought before the
lower court as the tribunal that has ordered the release, or before the Seventh Division of
this Court in the exercise of its supervisory powers over the lower court. The Decision
recently promulgated by the Seventh Division of this Court ordering the release on bail of
the soldiers-accused effectively demonstrates this point.

The inter-relationships among the criminal case below, the certiorari case and the present
petition, as well as among the courts where these cases are pending, show beyond doubt
that the petitioner committed forum shopping in the strict sense of that term i.e., the
attempt by a party, after an adverse opinion in one forum, to seek a favorable opinion in
another forum other that through an appeal or certiorari. The "adverse" aspect for the
petitioner, while not an opinion, is no less adverse as he has failed to secure the release of
Gonzales and Mesa before the lower court and before this Court in the certiorari case (as
 of the time of the filing of the present petition); thus, he came to us in the present petition.
That the Seventh Division of this Court has ordered the release on bail of the soldiers-
accused, thus rendering the present petition moot and academic after the finality of the 7th
Division Decision, plainly demonstrates this legal reality.18

The Court further imposed on petitioner the penalty of censure for the aforesaid violation. The
dispositive portion of the decision reads:

WHEREFORE, premises considered, we hereby DISMISS the petition for violation of

and pursuant to Section 5 Rule 7 of the Rules of Court. The petitioner, Atty. Roberto
Rafael Pulido, is hereby CENSURED for these violations. Let a copy of this Decision be
furnished the Honorable Supreme Court, to be attached to the petitioners record as a
member of the Bar, as a RECORD OF CENSURE that may be referred to and
considered in any future similar act.19

On 5 September 2005, petitioner filed a Motion for Reconsideration20 which the Court of
Appeals (Special Former Third Division) denied in its resolution21 dated 6 January 2006.

Petitioner is now before us raising the following issues:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN

DISMISSING THE PETITION FOR HABEAS CORPUS ON THE GROUND OF
FORUM SHOPPING.

A. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED

IN NOT CONSIDERING THE NATURE OF THE ACTION AND LIMITED
ITSELF TO THE ISSUE OF FORUM SHOPPING.

B. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED

IN IMPOSING UPON PETITIONER THE PENALTY OF CENSURE.

C. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED

IN NOT PASSING UPON THE EXISTENCE OR ABSENCE OF VALID
GROUNDS TO DETAIN JULIUS MESA AND CEZARI GONZALES.

Petitioner prays that the assailed decision and resolution of the Court of Appeals be reversed and
set aside, and an order be issued ordering respondents to immediately release Gonzales and
Mesa. He further prays that the censure against him be also reversed and set aside.

Before respondents could comment on the petition, petitioner filed, with leave of court, a Motion
to Withdraw the Prayer for the Immediate Release of Julius Mesa and Cezari Gonzales.22
Petitioner informed the Court that the Commanding General of the Philippine Marines had
ordered the release of Gonzales and Mesa and surrendered their persons to the RTC of Makati
City, Branch 148. Thus, Mesa and Gonzales are now enjoying temporary liberty by virtue of the
release orders dated 20 July 2004 issued by the RTC. Petitioner asks that the prayer for the
immediate release of Gonzales and Mesa be dismissed but asks that the other prayers in the
petition be granted.

In its comment, the Solicitor General stressed that the habeas corpus petition has been rendered
moot and academic by reason of the release of Mesa and Gonzales from detention and, in the
absence of an actual case or controversy, it is impractical to consider and resolve issues
involving the validity or legality of their detention, including the alleged refusal of the Court of
Appeals to resolve said issues.

When the release of the persons in whose behalf the application for a Writ of Habeas Corpus
was filed is effected, the Petition for the issuance of the writ becomes moot and academic.23 With
the release of both Mesa and Gonzales, the Petition for Habeas Corpus has, indeed, been
rendered moot. Courts of justice constituted to pass upon substantial rights will not consider
questions where no actual interests are involved. Thus, the well-settled rule that courts will not
determine a moot question. Where the issues have become moot and academic, there ceases to be
any justiciable controversy, thus rendering the resolution of the same of no practical value.24 This
Court will therefore abstain from expressing its opinion in a case where no legal relief is needed
or called for.25

The only remaining issues to be resolved are: (1) Is petitioner guilty of forum shopping? (2)
Should petitioner be penalized when he failed to inform the 3rd Division of the Court of Appeals
of the pendency of the Petition for Certiorari filed by respondents before the 7th Division of the
same court which asked for the annulment of the RTCs order granting Gonzales and Mesas
petition for bail?

To support his contention that there was no forum shopping, petitioner asserts that the issues in
the petitions for certiorari and habeas corpus are not similar/identical. As to his non-disclosure
of respondents filing of the motion for reconsideration and the Petition for Certiorari, petitioner
claims that the same has no legal relevance to the Petition for Habeas Corpus because at the time
he filed said petition, the order granting bail subsisted and has not been reversed or modified;
and no TRO or injunction has been issued that would affect the efficacy or validity of the order
granting the bail and the order directing the release of Mesa and Gonzales.

For filing a Petition for Habeas Corpus despite the pendency of the Petition for Certiorari that
questioned the validity of the order granting bail, which order is precisely the very basis of the
Petition for Habeas Corpus, petitioner is guilty of forum shopping.

It has been held that forum shopping is the act of a party against whom an adverse judgment has
been rendered in one forum, of seeking another (and possibly favorable) opinion in another
forum (other than by appeal or the special civil action of certiorari), or 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. Thus, it has been held that there is forum shopping
(1) when, as a result of an adverse decision in one forum, a party seeks a favorable decision
(other than by appeal or certiorari) in another; OR (2) if, after he has filed a petition before the
Supreme Court, a party files a motion before the Court of Appeals, since in such a case, he
deliberately splits appeals in the hope that even in one case in which a particular allowable
remedy sought for is dismissed, another case (offering a similar remedy) would still be open; OR
(3) where a party attempts to obtain a preliminary injunction in another court after failing to
obtain the same from the original court.26

The Court has laid down the yardstick to determine whether a party violated the rule against
forum shopping, as where the elements of litis pendentia are present or where a final judgment in
one case will amount to res judicata in the other. Stated differently, there must be between the
two cases: (a) identity of parties; (b) identity of rights asserted and reliefs 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.27

As lucidly explained by the Court of Appeals, the ultimate relief sought by petitioner in both the
certiorari and habeas corpus cases is the release of Gonzales and Mesa. Petitioner should not
have filed the Petition for Habeas Corpus because the relief he is seeking therein is the same
relief he is asking for in the certiorari case. Moreover, the main issue in both cases boils down to
whether Gonzales and Mesa should be released on bail. Because of the presence of the elements
of litis pendentia -- parties, reliefs and issue are substantially the same/similar in the two cases;
and any decision in the certiorari case will be binding on the habeas corpus case petitioner is
thus guilty of forum shopping.

For his failure to inform the Court of Appeals of the pendency of the certiorari case, petitioner
clearly violated his obligation to disclose within five days the pendency of the same or a similar
action or claim as mandated in Section 5(c), Rule 728 of the Rules of Court.

WHEREFORE, premises considered, the Decision of the Court of Appeals in CA-G.R. SP No.
90546 dated 12 September 2005 is AFFIRMED. Costs against the petitioner.

SO ORDERED.

G.R. No. 150859 March 28, 2005

FLORENTINO GONZALES, EDGARDO SANTOS, LEOPOLDO ROSETE, FELINA

VICTORIA and CRISTETA DELA CRUZ, Petitioner,
vs.
BALIKATAN KILUSANG BAYAN SA PANANALAPI, INCORPORATED,1 respondent.

RESOLUTION

QUISUMBING, J.:

For our review is the Court of Appeals Resolution,2 dated September 11, 2001, in CA-G.R. SP
No. 66102 dismissing petitioners petition on technical grounds as well as its Resolution,3 dated
November 20, 2001, denying petitioners motion for reconsideration, for lack of merit.
Respondent is a cooperative doing business in Bunducan, Bocaue, Bulacan, while petitioners are
members of the cooperative.4

Sometime in November 7, 1997, petitioner Florentino Gonzales obtained a loan of P150,000

with the other petitioners Edgardo Santos, Leopoldo Rosete, Felina Victoria and Cristeta dela
Cruz as co-makers. Petitioners signed a promissory note binding themselves jointly and severally
to pay the loan in monthly amortizations of P6,250 for two years starting November 7, 1997 up
to November 7, 1999. When petitioner Gonzales failed to pay despite repeated written demands,
respondent filed a case for sum of money and damages in the Municipal Trial Court of Bocaue.
Summons were thereafter served and the case was set for hearing on September 29, 2000. On the
scheduled hearing, defendants appeared but because they failed to file their answer to the
complaint, the court declared them in default and thereafter allowed the presentation of
respondents evidence ex-parte on October 6, 2000.5

On January 23, 2001, the court a quo rendered its decision finding for the respondent and against
the petitioners, the dispositive portion stating:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendants ordering the latter to pay jointly and severally to the former the sum of
P128,953.45 with interest thereon at the rate of 11% per annum from the time demand
was made until fully paid, a fine of two percent per month on the principal and interests
due plus the amount of 25% of the amount due as and by way of attorneys fees and
expenses of collection together with the costs of this suit.

SO ORDERED.6

Petitioners appealed to the Regional Trial Court of Bulacan, contending that the court a quo
erred when it declared them in default as they were not notified of the respondents motion to
declare them in default, nor did the respondent show proof that summons were properly issued
upon them to warrant the declaration of default.

The Regional Trial Court affirmed the decision of the MTC in this wise:

WHEREFORE, finding no cogent reason to reverse, alter or even modify the appealed
decision, the same is hereby AFFIRMED [i]n toto.

SO ORDERED.7

Petitioners thereafter elevated the case to the Court of Appeals on a petition for review. The CA
dismissed the petition in a Resolution, dated September 11, 2001, thus:

The instant petition for review is DISMISSED outright for the following reasons:

1. The certification of non-forum shopping is not signed by all the petitioners

 2. All relevant documents, particularly the parties memoranda mentioned on page 9 of
the petition, are not attached thereto, as required by Section 2 (d), Rule 42, 1997 Rules of
Civil Procedure.

SO ORDERED.8

Likewise, the Motion for Reconsideration filed by petitioners was also dismissed, hence this
appeal before us.

The issues raised by the petitioners are as follows:

A. WHETHER OR NOT THE PETITIONERS SUBSTANTIALLY COMPLIED WITH

THE CERTIFICATION ON NON-FORUM-SHOPPING AND ON ATTACHMENT OF
CERTAIN RELEVANT DOCUMENTS.

B. WHETHER OR NOT THE JUDGMENT BY DEFAULT IS VOID FOR LACK OF

JURISDICTION OVER THE PETITIONERS WHO WERE NOT SERVED WITH
SUMMONS PROPERLY.

C. WHETHER OR NOT THE CASE SHOULD BE DISMISSED FOR LACK OF

CAUSE OF ACTION AND OF JURISDICTION.9

On the first issue, petitioners contend that even if only petitioner Gonzales signed the
Verification and Certification, the failure of others to sign was not fatal since Gonzales had
already represented the other petitioners in the proceedings below and this was never opposed by
the respondent. Gonzales avers there is substantial compliance.

This contention is without merit. As repeatedly held by this Court, the certificate of non-forum
shopping should be signed by all the petitioners or plaintiffs in a case, otherwise, it would be
deemed insufficient. The attestation contained in the certification of non-forum shopping
requires personal knowledge by the party executing it, and the lone signing petitioner could not
be presumed to have personal knowledge of the filing or non-filing by his co-petitioners of any
action or claim it. To merit the courts consideration, petitioners must show reasonable cause for
failure to personally sign the certification.10 But in the present case, the Motion for
Reconsideration filed below by petitioners did not satisfactorily explain the failure of the other
petitioners to sign the certification of non-forum shopping nor did it cure the said defect, hence
the petition was appropriately and validly dismissed by the Court of Appeals.11

If only for the proper edification of the parties, we now resolve the second and third issues raised
herein. Petitioners contend that it is by service of summons that a court acquires jurisdiction over
the person of a petitioner. Where there was no valid proof of service of summons on him, he
could not be declared in default, according to petitioners.

In this regard, petitioners should be reminded of the provision in the Rules of Court that a
defendants voluntary appearance in an action shall be equivalent to service of summons.12
Further, the lack of jurisdiction over the person of the defendant may be waived either expressly
or impliedly. When a defendant voluntarily appears, he is deemed to have submitted himself to
the jurisdiction of the court. If he does not wish to waive this defense, he must do so seasonably
by motion, and object thereto.13

As the records would show, summons and copies of the complaint were served on the petitioners
and the case was set for hearing by the MTC on September 29, 2000, upon the motion of the
respondent. The petitioners appeared before the court on the scheduled hearing, as evidenced by
their signatures in the minutes. Their voluntary appearance cured the defect, if any, in the service
of summons.14

Petitioners further contend that when the respondent orally move in open court for the
declaration of default due to petitioners failure to file an answer to the complaint despite their
appearance in court, they were not notified thereof in contravention of the Revised Rules of Civil
Procedure which states that "[i]f the defending party fails to answer within the time allowed
therefor, the court shall, upon motion of the claiming party with notice to the defending party,
and proof of such failure, declare the defending party in default"15

Petitioners ought to be guided by Rule 15, Section 2, which provides that "[a]ll motions shall be
in writing except those made in open court or in the course of a hearing or trial." Moreover,
every written motion shall be set for hearing by the applicant, with the exception of motions
which the court might act upon without prejudicing the rights of the adverse party.16 As a general
rule, a notice is required where a party has a right to resist the relief sought by the motion.
Principles of natural justice demand that his right should not be affected without an opportunity
to be heard.17 Such, however, does not appear to be the situation here.

In this case, the motion to declare petitioners in default was, to reiterate, made in open court and
in their presence. By their presence, notice to them is fairly constituted. What the law really
eschews is not the lack of previous notice of hearing but the lack of opportunity to be heard.18
Petitioners were not without such opportunity to contest the motion for and the order of default
then and there at the trial court.

Besides, petitioners failure to move for the lifting of the order of default serves as a waiver on
their part to later question its propriety. The records showed that after the court a quo issued the
default order, the petitioners did not file any pleading at all questioning its validity. As it was,
they merely waited for the decision to be rendered, and when it was adverse to their interest, they
began questioning it.19

Finally, there was no showing at all that petitioners ever questioned the jurisdiction of the MTC
over them, except when the judgment in default was already rendered. To properly avail of the
defense of invalid service of summons, petitioners should have questioned it and the MTCs
exercise of jurisdiction over them from the very start.20

Petitioners failure to object to the MTCs jurisdiction from the very beginning precludes them
from raising it now as a ground to set aside the judgment by default. A defendant cannot be
permitted to speculate upon the judgment of the court by objecting to the courts jurisdiction
over its person if the judgment is adverse to it, and acceding to jurisdiction over its person if and
when the judgment sustains its defenses.21 Nor can they claim that they are not bound by the
consequences of their own acts before the court. It would defeat the ends of justice and fair play
if their stance is sustained after judgment had been duly rendered on the case.

WHEREFORE, the instant petition is DENIED. The assailed decisions of the Regional Trial
Court and the Municipal Trial Court of Bocaue, Bulacan are hereby AFFIRMED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

G.R. No. 171219 September 3, 2012

ATTY. FE Q. PALMIANO-SALVADOR, Petitioner,

vs.
CONSTANTINO ANGELES, substituted by LUZ G. ANGELES*, Respondent.

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying
that the Decision1 of the Court of Appeals (CA) promulgated on September 16, 2005 dismissing
the petition before it, and its Resolution2 dated January 13, 2006, denying petitioner's Motion for
Reconsideration, be reversed and set aside.

The records reveal the CA's narration of facts to be accurate, to wit:

xxxx

Respondent-appellee ANGELES is one of the registered owners of a parcel of land located at

1287 Castanos Street, Sampaloc, Manila, evidenced by Transfer Certificate of Title No. 150872.
The subject parcel of land was occupied by one Jelly Galiga (GALIGA) from 1979 up to 1993,
as a lessee with a lease contract. Subsequently, Fe Salvador (SALVADOR) alleged that she
bought on September 7, 1993 the subject parcel of land from GALIGA who represented that he
was the owner, being one in possession. Petitioner-appellant SALVADOR remained in
possession of said subject property from November 1993 up to the present.

On November 18, 1993, the registered owner, the respondentappellee ANGELES, sent a letter to
petitioner-appellant SALVADOR demanding that the latter vacate the subject property, which
was not heeded by petitioner-appellant SALVADOR. Respondent-appellee ANGELES, thru one
Rosauro Diaz, Jr. (DIAZ), filed a complaint for ejectment on October 12, 1994 with the
Metropolitan Trial Court [MeTC] of Manila, Branch 16, docketed as Civil Case No. 146190-CV.
The Assailed Decision of the Trial Courts

The [MeTC] rendered its decision on November 29, 1999 in favor of herein respondent-appellee
ANGELES, the dispositive portion of which reads, to wit:

WHEREFORE, judgment is hereby rendered for the plaintiff and against the defendant ordering
the latter and all persons claiming under her to:

1) vacate the parcel of land located at 1287 Castanos Street, Sampaloc, Manila, and
surrender the same to the plaintiff;

2) pay the plaintiff the sum of Php1,000.00 monthly as reasonable compensation for her
use and occupancy of the above parcel of land beginning November 1993 up to the time
she has actually vacated the premises;

3) pay the plaintiff the sum of Php5,000.00 as attorney's fees and the cost of suit.

SO ORDERED.

In the appeal filed by petitioner-appellant SALVADOR, she alleged, among others, that DIAZ,
who filed the complaint for ejectment, had no authority whatsoever from respondent-appellee
ANGELES at the time of filing of the suit. Petitioner-appellant SALVADOR's appeal was
denied by the [Regional Trial Court] RTC in a Decision dated March 12, 2003. The Motion for
Reconsideration filed by SALVADOR was denied in an Order dated March 16, 2004.3

Petitioner elevated the case to the CA via a petition for review, but in a Decision dated
September 16, 2005, said petition was dismissed for lack of merit. The CA affirmed the factual
findings of the lower courts that Galiga, the person who supposedly sold the subject premises to
petitioner, was a mere lessee of respondent, the registered owner of the land in question. Such
being the case, the lower court ruled that Galiga could not have validly transferred ownership of
subject property to herein petitioner. It was ruled by the CA that there were no significant facts
or circumstances that the trial court overlooked or misinterpreted, thus, it found no reason to
overturn the factual findings of the MeTC and the RTC. A motion for reconsideration of said
Decision was denied in a Resolution dated January 13, 2006.

Hence, the present petition, where one of the important issues for resolution is the effect of
Rosauro Diaz's (respondent's representative) failure to present proof of his authority to represent
respondent (plaintiff before the MeTC) in filing the complaint. This basic issue has been ignored
by the MeTC and the RTC, while the CA absolutely failed to address it, despite petitioner's
insistence on it from the very beginning, i.e., in her Answer filed with the MeTC. This is quite
unfortunate, because this threshold issue should have been resolved at the outset as it is
determinative of the court's jurisdiction over the complaint and the plaintiff.

Note that the complaint before the MeTC was filed in the name of respondent, but it was one
Rosauro Diaz who executed the verification and certification dated October 12, 1994, alleging
therein that he was respondent's attorney-in-fact. There was, however, no copy of any document
attached to the complaint to prove Diaz's allegation regarding the authority supposedly granted to
him. This prompted petitioner to raise in her Answer and in her Position Paper, the issue of
Diaz's authority to file the case. On December 11, 1995, more than a year after the complaint was
filed, respondent attached to his Reply and/or Comment to Respondent's (herein petitioner)
Position Paper,4 a document entitled Special Power of Attorney (SPA)5 supposedly executed by
respondent in favor of Rosauro Diaz. However, said SPA was executed only on November 16,
1994, or more than a month after the complaint was filed, appearing to have been notarized
by one Robert F. McGuire of Santa Clara County. Observe, further, that there was no
certification from the Philippine Consulate General in San Francisco, California, U.S.A, that said
person is indeed a notary public in Santa Clara County, California. Verily, the court cannot give
full faith and credit to the official acts of said Robert McGuire, and hence, no evidentiary weight
or value can be attached to the document designated as an SPA dated November 16, 1994. Thus,
there is nothing on record to show that Diaz had been authorized by respondent to initiate the
action against petitioner.1wphi1

What then, is the effect of a complaint filed by one who has not proven his authority to represent
a plaintiff in filing an action? In Tamondong v. Court of Appeals,6 the Court categorically stated
that "[i]f a complaint is filed for and in behalf of the plaintiff [by one] who is not authorized to
do so, the complaint is not deemed filed. An unauthorized complaint does not produce any legal
effect. Hence, the court should dismiss the complaint on the ground that it has no jurisdiction
over the complaint and the plaintiff."7 This ruling was reiterated in Cosco Philippines Shipping,
Inc. v. Kemper Insurance Company,8 where the Court went on to say that "[i]n order for the
court to have authority to dispose of the case on the merits, it must acquire jurisdiction over the
subject matter and the parties. Courts acquire jurisdiction over the plaintiffs upon the filing of the
complaint, and to be bound by a decision, a party should first be subjected to the court's
jurisdiction. Clearly, since no valid complaint was ever filed with the [MeTC], the same did not
acquire jurisdiction over the person of respondent [plaintiff before the lower court]."9

Pursuant to the foregoing rulings, therefore, the MeTC never acquired jurisdiction over this case
and all proceedings before it were null and void. The courts could not have delved into the very
merits of the case, because legally, there was no complaint to speak of. The court's jurisdiction
cannot be deemed to have been invoked at all.

IN VIEW OF THE FOREGOING, the Petition is GRANTED. The Decision of the

Metropolitan Trial Court in Civil Case No. 146190, dated November 29, 1999; the Decision of
the Regional Trial Court in Civil Case No. 00-96344, dated March 12, 2003; and the Decision of
the Court of Appeals in CA-G.R. SP No. 83467, are SET ASIDE AND NULLIFIED. The
complaint filed by respondent before the Metropolitan Trial Court is hereby DISMISSED.

SO ORDERED.

G.R. No. 89114 December 2, 1991

FRANCISCO S. TANTUICO, JR., petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, PRESIDENTIAL COMMISSION ON GOOD
GOVERNMENT, MATEO A. T. CAPARAS, AND THE SANDIGANBAYAN, respondents.

Kenny H. Tantuico for petitioner.

PADILLA, J.:

In this petition for certiorari, mandamus and prohibition with a prayer for the issuance of a writ
of preliminary injunction and/or restraining order, the petitioner seeks to annul and set aside the
resolution of the Sandiganbayan, dated 21 April 1989, denying his motion for a bill of
particulars as well as its resolution, dated 29 May 1989, which denied his motion for
reconsideration; to compel the respondent PCGG to prepare and file a bill of particulars, or that
said respondent be ordered to exclude petitioner as defendant in Civil Case No. 0035 should they
fail to submit the said bill of particulars; and to enjoin the respondent Sandiganbayan from
further proceeding against petitioner until the bill of particulars is submitted, claiming that the
respondent Sandiganbayan acted with grave abuse of discretion amounting to lack of jurisdiction
in promulgating the aforesaid resolutions and that there is no appeal, nor any plain, speedy and
adequate remedy for him in the ordinary course of law other than the present petition.

As prayed for, this Court issued on 1 August 1989 a temporary restraining order "effective
immediately and continuing until further orders from this Court, ordering the respondent
Sandiganbayan to CEASE and DESIST from further proceeding in Civil Case No. 0035 (PCGG
35), entitled "Republic of the Philippines vs. Benjamin (Kokoy) Romualdez, et al." pending
before it. 1

The antecedents are as follows:

On 31 July 1987, the Republic of the Philippines, represented by the PCGG, and assisted by the
Office of the Solicitor General, filed with the Sandiganbayan Civil Case No. 0035, entitled
"Republic of the Philippines vs. Benjamin (Kokoy) Romualdez, et al." for reconveyance,
reversion, accounting, restitution and damages. 2

The principal defendants in the said Civil Case No. 0035 are Benjamin (Kokoy) Romualdez,
Ferdinand E. Marcos and Imelda R. Marcos.
Petitioner Francisco S. Tantuico, Jr. was included as defendant in Civil Case No. 0035 on the
theory that: (1) he acted in unlawful concert with the principal defendants in the
misappropriation and theft of public funds, plunder of the nation's wealth, extortion, blackmail,
bribery, embezzlement and other acts of corruption, betrayal of public trust and brazen abuse of
power; 3 (2) he acted as dummy, nominee or agent, by allowing himself to be incorporator,
director, board member and/or stockholder of corporations beneficially held and/or controlled by
the principal defendants; 4 (3) he acted singly or collectively, and/or in unlawful concert with
one another, in flagrant breach of public trust and of their fiduciary obligations as public officers,
with gross and scandalous abuse of right and power and in brazen violation of the Constitution
and laws of the Philippines, embarked upon a systematic plan to accumulate ill-gotten wealth ; 5
(4) he (petitioner) taking undue advantage of his position as Chairman of the Commission on
Audit and with grave failure to perform his constitutional duties as such Chairman, acting in
concert with defendants Ferdinand E. Marcos and Imelda R. Marcos, facilitated and made
possible the withdrawals, disbursements and questionable use of government funds; 6 and (5) he
acted as dummy, nominee and/or agent by allowing himself to be used as instrument in
accumulating ill-gotten wealth through government concessions, orders and/or policies
prejudicial to plaintiff, or to be incorporator, director, or member of corporations beneficially
held and/or controlled by defendants Ferdinand E. Marcos, Imelda R. Marcos, Benjamin
(Kokoy) Romualdez and Juliette Gomez Romualdez in order to conceal and prevent recovery of
assets illegally obtained. 7

On 11 April 1988, after his motion for production and inspection of documents 8 was denied by
respondent court in its resolution 9 dated 9 March 1988, petitioner filed a Motion for a Bill of
Particulars, 10 alleging inter alia that he is sued for acts allegedly committed by him as (a) a
public officer-Chairman of the Commission on Audit, (b) as a private individual, and (c) in both
capacities, in a complaint couched in too general terms and shorn of particulars that would
inform him of the factual and legal basis thereof, and that to enable him to understand and know
with certainty the particular acts allegedly committed by him and which he is now charged with
culpability, it is necessary that plaintiff furnish him the particulars sought therein relative to the
averments in paragraphs 2, 9(a), 15, 7 and 17 of the Second Amended Complaint so that he can
intelligently prepare his responsive pleading and prepare for trial. The particulars sought for in
the said motion are as follows:

a. Relative to the averments in paragraphs 2, 9(a) and l5 of the Second Amended

Complaint:

i) What are the dates of the resolutions (if on appeal) or the acts (if otherwise)
issued or performed by herein defendant which allowed the facilitation of, and
made possible the, withdrawals, disbursements and questionable use of
government funds;

ii) What ministries or Departments, offices or agencies of the government were

involved in these questionable use of government funds;

iii) What are the names of the auditors who had the original audit jurisdiction over
the said withdrawals, disbursements and questionable use of government funds;
 iv) How much government funds were involved in these questionable-
disbursements, individually and in totally?

v) Were the disbursements brought to herein defendant for action on pre-audit,

post-audit or otherwise or where they initiated and/or allowed release by herein
defendant alone, without them undergoing usual governmental audit procedures,
or in violation thereof.?

vi) What were herein defendant's other acts or omission or participation in the
matter of allowing such disbursements and questionable use of government funds,
if any?

b. Relative to paragraphs 7 and 17 of the Second Amended Complaint:

i) In what particular contract, dealing, transaction and/or relationship of any

nature of Ferdinand E. Marcos, Imelda R. Marcos, Juliette Gomez Romualdez or
Benjamin T. Romualdez did herein defendant act as dummy, nominee or agent?
Please specify the dealings, the dates, the corporations or entities involved, the
government offices involved and the private and public documents, if any,
showing herein defendant's complicity, since he is not aware of any such instance.
More basically, please specify whether the defendant is a dummy or nominee or
agent and of which corporation or transaction?

ii) What particular government concession, order and/or policy obtained by

Ferdinand E. Marcos, or Imelda R. Marcos, or Juliette Gomez Romualdez and/or
Benjamin T. Romualdez allowed them either singly or jointly to accumulate ill-
gotten wealth by using herein defendant as instrument for their accomplishment.
Likewise please identify the nature of the transactions, the dates and the document
showing complicity on the part of herein defendant; he is not aware of any such
instance.

iii) Please specify the name or denominate the particular government concession,
order and/or policy prejudicial to the interest of the government which was
obtained by either of the above-named four defendants through the participation
of herein defendant as a dummy, nominee or agent of herein defendant. Please
likewise identify the government office involved, the dates and other particulars,
likewise defendant is not aware of any such instance.

iv) Please name and specify the corporation whether stock or non-stock, whether
government or private, beneficially held and/or controlled by either of the four
above defendants, where herein defendant is an incorporator, director or member
and where his inclusion as such incorporator, director or member of the
corporation was made in order to conceal and prevent recovery of assets illegally
obtained by the aforementioned four defendants, how many shares are involved
and what are their values, how and when have they been acquired.
The Solicitor General, for and in behalf of respondents (except the respondent
Sandiganbayan), opposed the motion. 11 After the petitioner had filed his reply 12
thereto, the respondent Sandiganbayan promulgated on 21 April 1990 a resolution 13
denying the petitioner's motion for a bill of particulars on the ground that the particulars
sought by petitioner are evidentiary in nature, the pertinent part of which resolution
reads, as follows:

We are of the considered opinion that the allegations in the Expanded Complaint
are quite clear and sufficient enough for defendant-movant to know the nature and
scope of the causes of action upon which plaintiff seeks relief. They provide the
factual scenario which, coupled with other allegations set forth in the "Common
Averments" and further specified in the "Specific Averments" of herein
defendant-movant and his co-defendants' illegal acts which are within defendant-
movant's peculiar and intimate knowledge as a government official and corporate
executive, will enable him to make the proper admission, denials or qualifications,
set out affirmative and/or special defenses and thereafter prepare for trial.
Evidentiary facts or matters are not essential in the pleading of the cause of
action, nor to details or probative value or particulars of evidence by which these
material evidence are to be established (Remitere vs. Yulu, 6 SCRA 251). The
matters which he seeks are evidentiary in nature and, being within his intimate or
personal knowledge, may be denied or admitted by him or if deemed necessary,
be the subject of other forms of discovery. 14

Petitioner moved for reconsideration 15 but this was denied by respondent

Sandiganbayan in its resolution 16 dated 29 May 1990.

Hence, petitioner filed the present petition.

The principal issue to be resolved in the case at bar is whether or not the respondent
Sandiganbayan acted with grave abuse of discretion in issuing the disputed resolutions.

Petitioner argues that the allegations of the Second Amended Complaint in Civil Case
No. 0035 (PCGG 35) pertaining to him state only conclusions of fact and law, inferences
of facts from facts not pleaded and mere presumptions, not ultimate facts as required by
the Rules of Court.

On the other hand, the respondent Sandiganbayan, by and through the Solicitor General,
contends that the essential elements of an action for recovery of ill-gotten wealth are: (1)
an accumulation of assets, properties and other possessions; (2) of former President
Ferdinand E. Marcos, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates,
business associates, dummies, agents, or nominees; and (3) whose value is out of
proportion to their known lawful income, and that the ultimate facts establishing these
three (3) essential elements of an action for recovery of ill-gotten wealth are sufficiently
alleged in the complaint. Hence, petitioner is not entitled to a bill of particulars.
A complaint is defined as a concise statement of the ultimate facts constituting the
plaintiff's cause or causes of action. 17 Like all other pleadings allowed by the Rules of
Court, 18 the complaint shall contain in a methodical and logical form a plain, concise
and direct statement of the ultimate facts on which the plaintiff relies for his claim,
omitting the statement of mere evidentiary
facts. 19 Its office, purpose or function is to inform the defendant clearly and definitely of
the claims made against him so that he may be prepared to meet the issues at the trial.
The complaint should inform the defendant of all the material facts on which the plaintiff
relies to support his demand; it should state the theory of a cause of action which forms
the bases of the plaintiff's claim of liability. 20

The rules on pleading speak of two (2) kinds of facts: the first, the "ultimate facts", and
the second, the "evidentiary facts." In Remitere vs. Vda. de Yulo, 21 the term "ultimate
facts" was defined and explained as follows:

The term "ultimate facts" as used in Sec. 3, Rule 3 of the Rules of Court, means
the essential facts constituting the plaintiffs cause of action. A fact is essential if it
cannot be stricken out without leaving the statement of the cause of action
insufficient. . . . (Moran, Rules of Court, Vol. 1, 1963 ed., p. 213).

Ultimate facts are important and substantial facts which either directly form the
basis of the primary right and duty, or which directly make up the wrongful acts
or omissions of the defendant. The term does not refer to the details of probative
matter or particulars of evidence by which these material elements are to be
established. It refers to principal, determinate, constitutive facts, upon the
existence of which, the entire cause of action rests.

while the term "evidentiary fact" has been defined in the following tenor:

Those facts which are necessary for determination of the ultimate facts; they are
the premises upon which conclusions of ultimate facts are based. Womack v.
Industrial Comm., 168 Colo. 364,451 P. 2d 761, 764. Facts which furnish
evidence of existence of some other fact. 22

Where the complaint states ultimate facts that constitute the three (3) essential elements
of a cause of action, namely: (1) the legal right of the plaintiff, (2) the correlative
obligation of the defendant, and (3) the act or omission of the defendant in violation of
said legal right, the complaint states a cause of action, otherwise, the complaint must
succumb to a motion to dismiss on that ground of failure to state a cause of action. 23
However, where the allegations of the complaint are vague, indefinite, or in the form of
conclusions, the proper recourse would be, not a motion to dismiss, but a motion for a bill
of particulars. 24 Thus, Section 1, Rule 12 of the Rules of Court provides:

Before responding to a pleading or, if no responsive pleading is permitted by

these rules, within ten (10) days after service of the pleading upon him, a party
may move for a more definite statement or for a bill of particulars of any matter
 which is not averred with sufficient definiteness or particularity to enable him
properly to prepare his responsive pleading or to prepare for trial. Such motion
shall point out the defects complained of and the details desired.

In this connection, the following allegations have been held as mere conclusions of law,
inferences from facts not alleged or opinion of the pleader: (a) the allegations that
defendants appellees were "actuated by ulterior motives, contrary to law and morals, with
abuse of their advantageous position as employers, in gross and evident bad faith and
without giving plaintiff . . . his due, wilfully, maliciously, unlawfully, and in summary
and arbitrary manner", are conclusions of law, inferences from facts not alleged and
expressions of opinion unsupported by factual premises; 25 (b) an allegation of duty in
terms unaccompanied by a statement of facts showing the existence of the duty, is a mere
conclusion of law, unless there is a relation set forth from which the law raises the duty;
26 (c) an averment . . . that an act was "unlawful" or "wrongful" is a mere legal
conclusion or opinion of the pleader; 27 (d) the allegation that there was a violation of
trust was plainly a conclusion of law, for "a mere allegation that it was the duty of a party
to do this or that, or that he was guilty of a breach of duty, is a statement of a conclusion,
not of a fact;" 28 (e) an allegation that a contract is valid or void, is a mere conclusion of
law; 29 (f) the averment in the complaint that "defendant usurped the office of Senator of
the Philippines" is a conclusion of law not a statement of fact inasmuch as the
particular facts on which the alleged usurpation is predicated are not set forth therein; 30
and (g) the averment that "with intent of circumventing the constitutional prohibition that
'no officer or employee in the civil service shall be removed or suspended except for
cause as provided by law', respondents maliciously and illegally for the purpose of
political persecution and political vengeance, reverted the fund of the salary item . . . and
furthermore eliminated or abolished the said position effective 1 July 1960" is a mere
conclusion of law unsupported by factual premises. 31

Bearing in mind the foregoing rules on pleading and case law, let us now examine the
allegations of the Second Amended Complaint against the petitioner to determine
whether or no they were averred with sufficient definiteness or particularity to enable him
properly to prepare his responsive pleading or to prepare for trial. If the allegations of the
said complaint are vague, indefinite or in the form of conclusions, then petitioner is
entitled to a bill of particulars.

The allegations in the complaint pertaining to the alleged culpable and unlawful acts of
herein petitioner are quoted hereunder as follows:

GENERAL AVERMENTS

OF

DEFENDANTS' ILLEGAL ACTS

9. (a) From the early years of his presidency, Defendant Ferdinand E. Marcos
took undue advantage of his powers as President. All throughout the period from
September 21, 1972 to February 25, 1986, he gravely abused his powers under
martial law and ruled as Dictator under the 1973 Marcos-promulgated
Constitution. Defendant Ferdinand E. Marcos, together with other Defendants,
acting singly or collectively, and/or in unlawful concert with one another, in
flagrant breach of public trust and of their fiduciary obligations as public officers,
with gross and scandalous abuse of right and power and in brazen violation of the
Constitution and laws of the Philippines, embarked upon a systematic plan to
accumulate ill-gotten wealth;

(b) Upon his unfettered discretion, and sole authority, for the purpose of
implementing the plan referred to above, Defendant Ferdinand E. Marcos ordered
and caused, among others:

(b-i) the massive and unlawful withdrawal of funds, securities, reserves

and other assets and property from the National Treasury, the Central
Bank, the other financial institutions and depositories of Plaintiff;

(b-ii) the transfer of such funds, securities, reserves and other assets and
property to payees or transferees of his choice and whether and in what
manner such transactions should be recorded in the books and records of
these institutions and other depositories of Plaintiff;

10. Among others, in furtherance of the plan and acting in the manner referred to
above, in unlawful concerted with one another and with gross abuse of power and
authority, Defendants Ferdinand E. Marcos and Imelda R. Marcos;

xxx xxx xxx

b. Converted government-owned and controlled corporations into private

enterprises and appropriated them and/or their assets for their own benefit
and enrichment;

c. Awarded contracts with the Government to their relatives, business

associates, dummies, nominees, agents or persons who were beholden to
said Defendants, under terms and conditions grossly and manifestly
disadvantageous to the Government;

d. Misappropriated, embezzled and/or converted to their own use funds of

Government financial institutions, particularly those allocated to the
Office of the President and other ministries and agencies of the
Government including, those conveniently denominated as intelligence or
counter-insurgency funds, as well as funds provided to Plaintiff by foreign
countries, multinationals, public and private financial institutions;
 e. Raided Government financial and banking institutions of billions of
pesos in loans, guarantees and other types of financial accommodations to
finance dubious and/or overpriced projects of favored corporations or
individuals and misused and/or converted to their own use and benefit
deposits found therein to the financial ruin of Plaintiff and the Filipino
people;

xxx xxx xxx

h. Sold, conveyed and/or transferred Government property, real and/or

personal, to corporations beneficially held and/ or controlled by them or
through third persons, under such terms and conditions grossly and
manifestly disadvantageous to the Government;

i. Engaged in other illegal and improper acts and practices designed to

defraud Plaintiff and the Filipino people, or otherwise misappropriated and
converted to their own use, benefit and enrichment the lawful patrimony
and revenues of Plaintiff and the Filipino people.

11. Among the assets acquired by Defendants in the manner above-described and
discovered by the Commission in the exercise of its official responsibilities are
funds and other property listed in Annex "A" hereof and made an integral part of
this Complaint.

12. Defendants, acting singly or collectively, and/or in unlawful concert with one
another, for the purpose of preventing disclosure and avoiding discovery of their
unmitigated plunder of the National Treasury and of their other illegal acts, and
employing the services of prominent lawyers, accountants, financial experts,
businessmen and other persons, deposited, kept and invested funds, securities and
other assets estimated at billions of US dollars in various banks, financial
institutions, trust or investment companies and with persons here and abroad.

SPECIFIC AVERMENTS

OF

DEFENDANTS' ILLEGAL ACTS

xxx xxx xxx

14. Defendants Benjamin (Kokoy) Romualdez and Juliette Gomez Romualdez,

acting by themselves and/or in unlawful concert with Defendants Ferdinand E.
Marcos and Imelda R. Marcos, and taking undue advantage of their relationship,
influence and connection with the latter Defendant spouses, engaged in devices,
schemes and strategems to unjustly enrich themselves at the expense of Plaintiff
and the Filipino people, among others:

(a) obtained, with the active collaboration of Defendants Senen J. Gabaldon,

Mario D. Camacho, Mamerto Nepomuceno, Carlos J. Valdes, Delia Tantuico,
Jovencio F. Cinco, Cesar C. Zalamea and Francisco Tantuico, control of some of
the biggest business enterprises in the Philippines, such as, the Manila Electric
Company (MERALCO), Benguet Consolidated Mining Corporation (BENGUET)
and the Pilipinas Shell Corporation, by employing devious financial schemes and
techniques calculated to require the massive infusion and hemmorrhage of
government funds with minimum or negligible "cashout" from Defendant
Benjamin Romualdez. The following are the general features of a classic take-
over bid by Defendant Benjamin Romualdez:

xxx xxx xxx

(ii) The shares were held in the name of corporations which were
organized soldely (sic) for the purpose of holding title to them. These
corporations did not have any operating history nor any financial track
record. Projected cash flow consisted almost solely of future and
contingent dividends on the shares held. In spite of these limitations, these
companies enjoyed excellent credit lines from banks and other financial
institutions, as evidenced by the millions of pesos in loan and guarantees
outstanding in their books;

(iii) The "seed money" used to wrest control came from government and
taxpayers' money in the form of millions of pesos in loans, guarantees and
standby L/C's from government financial institutions, notably the DBP
and PNB, which were in turn rediscounted with the Central Bank;

(iv) Additional funding was provided from the related interests; and

(v) This intricate (sic) skein of inter-corporate dealings was controlled and
administered by an exclusive and closely knit group of interlocking
directorate and officership

xxx xxx xxx

(g) Secured, in a veiled attempt to justify MERALCO's anomalous acquisition of

the electric cooperatives, with the active collaborations of Defendants Cesar E. A.
Virata, Juanita R. Remulla, Isidro Rodriguez, Jose C. Hernandez, Pedro Dumol,
Ricardo C. Galing, Francisco C. Gatmaitan, Mario D. Camacho and the rest of the
Defendants, the approval by Defendant Ferdinand E. Marcos and his cabinet of
the so-called "Three-Year Program for the Extension of MERALCO's Services to
Areas Within The 60-kilometer Radius of Manila", which required government
capital investment amounting to millions of pesos;
 xxx xxx xxx

(1) Caused the National Investment and Development Corporation (NIDC) to

dispose of its interest in the oil plants located in Tanauan, Leyte, which were
owned and operated by its subsidiary, the NIDC Oil Mills, Inc., in favor of the
SOLO II, Inc., a corporation beneficially held and controlled by Defendant
Benjamin Romualdez, with the active collaboration of Defendants Jose Sandejas,
Francisco Tantuico and Dominador G. Ingco, under terms and conditions grossly
disadvantageous to NIDC, to the grave and irreparable damage of Plaintiff and the
Filipino people.

(2) Defendant Francisco Tantuico, taking undue advantage of his position as

Chairman of the Commission on Audit and with grave failure to perform his
constitutional duties as such Chairman, acting in concert with Defendants
Ferdinand E. Marcos and Imelda R. Marcos, facilitated and made possible the
withdrawals, disbursements and questionable use of government funds as stated in
the foregoing paragraphs to the grave and irreparable damage and injury of
Plaintiff and the entire Filipino people.

xxx xxx xxx

17. The following Defendants acted as dummies, nominees and/ or agents by

allowing themselves (i) to be used as instruments in accumulating ill-gotten
wealth through government concessions, orders and/or policies prejudicial to
Plaintiff, or (ii) to be incorporators, directors, or members of corporations held
and/or controlled by Defendants Ferdinand E. Marcos, Imelda R. Marcos,
Benjamin (Kokoy) Romualdez, and Juliette Gomez Romualdez in order conceal
(sic) and prevent recovery of assets illegally obtained: Francisco Tantuico . . .

17.a. THE NAMES OF SOME OF THE CORPORATIONS BENEFICALLY

HELD AND/OR CONTROLLED BY THE DEFENDANTS BENJAMIN
(KOKOY) ROMUALDEZ, FERDINAND E. MARCOS AND IMELDA R.
MARCOS WHERE THE POSITIONS/PARTICIPATIONS AND/OR
INVOLVEMENTS OF SOME OF THE DEFENDANTS AS DUMMIES,
NOMINEES AND/OR AGENTS ARE INDICATED ARE LISTED IN ANNEX
"B" HEREOF AND MADE AN INTEGRAL PART OF THIS COMPLAINT.

xxx xxx xxx

18. 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, acquisition of unexplained
wealth, brazen abuse of official position and authority, flagrant breach of public
trust and fiduciary obligations, acquisition of unexplained wealth, 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. (Emphasis supplied)

Let us now analyze and discuss the allegations of the complaint in relation to which the
petitioner pleads for a bill of particulars.

As quoted above, paragraph 9(a) of the complaint alleges that "Defendant Ferdinand E.
Marcos, together with other Defendants, acting singly or collectively, and/or in unlawful
concert with one another, in flagrant breach of public trust and of their fiduciary
obligations as public officers, with gross and scandalous abuse of right and power and in
brazen violation of the Constitution and laws of the Philippines, embarked upon a
systematic plan to accumulate ill-gotten wealth." In the light of the rules on pleading and
case law cited above, the allegations that defendant Ferdinand E. Marcos, together with
the other defendants "embarked upon a systematic plan to accumulate ill-gotten wealth"
and that said defendants acted "in flagrant breach of public trust and of their fiduciary
obligations as public officers, with gross and scandalous abuse of right and in brazen
violation of the Constitution and laws of the Philippines", are conclusions of law
unsupported by factual premises.

Nothing is said in the complaint about the petitioner's acts in execution of the alleged
"systematic plan to accumulate ill-gotten wealth", or which are supposed to constitute
"flagrant breach of public trust", "gross and scandalous abuse of right and power", and
"violations of the Constitution and laws of the Philippines". The complaint does not even
allege what duties the petitioner failed to perform, or the particular rights he abused.

Likewise, paragraph 15 avers that "defendant Francisco Tantuico, taking undue

advantage of his position as Chairman of the Commission on Audit and with grave failure
to perform his constitutional duties as such Chairman, acting in concert with Defendants
Ferdinand E. Marcos and Imelda R. Marcos facilitated and made possible the
withdrawals, disbursements and questionable use of government funds as stated in the
foregoing paragraphs to the grave and irreparable damage and injury of Plaintiff and the
entire Filipino people." In like manner, the allegation that petitioner "took undue
advantage of his position as Chairman of the Commission on Audit," that he "failed to
perform his constitutional duties as such Chairman," and acting in concert with Ferdinand
E. Marcos and Imelda R. Marcos, "facilitated and made possible the withdrawals,
disbursements, and questionable use of government funds as stated in the foregoing
paragraphs, to the grave and irreparable damage and injury of plaintiff and the entire
Filipino people", are mere conclusions of law. Nowhere in the complaint is there any
allegation as to how such duty came about, or what petitioner's duties were, with respect
to the alleged withdrawals and disbursements or how petitioner facilitated the alleged
withdrawals, disbursements, or conversion of public funds and properties, nor an
allegation from where the withdrawals and disbursements came from, except for a
general allegation that they came from the national treasury. On top of that, the complaint
does not even contain any factual allegation which would show that whatever
withdrawals, disbursements, or conversions were made, were indeed subject to audit by
the COA.
In this connection, it may well be stated that the Commission on Audit (COA) is an
independent, constitutional commission, which has no power or authority to withdraw,
disburse, or use funds and property pertaining to other government offices or agencies.
This is done by the agency or office itself, the chief or head of which is primarily and
directly responsible for the funds and property pertaining to such office or agency. 32
The COA is merely authorized to audit, examine and settle accounts of the various
government offices or agencies, and this task is performed not by the Chairman of the
COA but by the COA auditors assigned to the government office or agency subject to
COA audit.

Thus, in each agency of the government, there is an auditing unit headed by an auditor,
whose duty is to audit and settle the accounts, funds, financial transactions, and resources
of the agency under his audit jurisdiction. 33 The decision of the auditor is appealable to
the Regional Director, 34 whose decision, is in turn, appealable to the COA Manager. 35
Any party dissatisfied with the decision of the COA Manager may bring the matter on
appeal to the Commission proper, a collegiate body exercising quasi-judicial functions,
composed of three (3) COA Commissioners, with the COA Chairman as presiding
officer. 36 It is only at this stage that the COA Chairman would come to know of the
matter and be called upon to act on the same, and only if an aggrieved party brings the
matter on appeal.

In other words, the Chairman of the COA does not participate or personally audit all
disbursements and withdrawals of government funds, as well as transactions involving
government property. The averments in the particular paragraph of the complaint merely
assume that petitioner participated in or personally audited all disbursements and
withdrawals of government funds, and all transactions involving government property.
Hence, the alleged withdrawals, disbursements and questionable use of government funds
could not have been, as held by respondent Sandiganbayan, "within the peculiar and
intimate knowledge of petitioner as Chairman of the COA."

The complaint further avers in paragraph 17 that "(t)he following Defendants acted as
dummies, nominees and/or agents by allowing themselves (i) to be instruments in
accumulating ill-gotten wealth through government concessions, order and/or policies
prejudicial to Plaintiff, or (ii) to be incorporators, directors, or members of corporations
beneficially held and/or controlled by Defendant Ferdinand E. Marcos, Imelda R.
Marcos, Benjamin (Kokoy) T. Romualdez and Juliette Gomez Romualdez in order to
conceal and prevent recovery of assets illegally obtained: Francisco Tantuico . . ." 37
Again, the allegation that petitioner acted as dummy, nominee, or agent by allowing
himself "to be used as instrument in accumulating ill-gotten wealth through government
concessions, orders and/or policies prejudicial to Plaintiff" or "to be (an) incorporator,
director, or member of corporations beneficially held and/or controlled" by the Marcoses
and Romualdezes, is a conclusion of law without factual basis.
The complaint does not contain any allegation as to how petitioner became, or why he is
perceived to be, a dummy, nominee or agent. Besides, there is no averment in the
complaint how petitioner allowed himself to be used as instrument in the accumulation of
ill-gotten wealth, what the concessions, orders and/or policies prejudicial to plaintiff are,
why they are prejudicial, and what petitioner had to do with the granting, issuance, and or
formulation of such concessions, orders, and/or policies. Moreover, Annex "A" of the
complaint lists down sixty-one (61) corporations which are supposed to be beneficially
owned or controlled by the Marcoses and Romualdezes. However, the complaint does not
state which corporations petitioner is supposed to be a stockholder, director, member,
dummy, nominee and/or agent. More significantly, the petitioner's name does not even
appear in Annex "B" of the complaint, which is a listing of the alleged "Positions and
Participations of Some Defendants".

The allegations in the complaint, above-referred to, pertaining to petitioner are, therefore,
deficient in that they merely articulate conclusions of law and presumptions unsupported
by factual premises. Hence, without the particulars prayed for in petitioner's motion for a
bill of particulars, it can be said the petitioner can not intelligently prepare his responsive
pleading and for trial.

Furthermore, the particulars prayed for, such as, names of persons, names of
corporations, dates, amounts involved, specification of property for identification
purposes, the particular transactions involving withdrawals and disbursements, and a
statement of other material facts as would support the conclusions and inferences in the
complaint, are not evidentiary in nature. On the contrary, those particulars are material
facts that should be clearly and definitely averred in the complaint in order that the
defendant may, in fairness, be informed of the claims made against him to the end that he
may be prepared to meet the issues at the trial.

Thus, it has been held that the purpose or object of a bill of particulars is

. . . to amplify or limit a pleading, specify more minutely and particularly a claim

or defense set up and pleaded in general terms, give information, not contained in
the pleading, to the opposite party and the court as to the precise nature, character,
scope, and extent of the cause of action or defense relied on by the pleader, and
apprise the opposite party of the case which he has to meet, to the end that the
proof at the trial may be limited to the matters specified, and in order that surprise
at, and needless preparation for, the trial may be avoided, and that the opposite
party may be aided in framing his answering pleading and preparing for trial. It
has also been stated that it is the function or purpose of a bill of particulars to
define, clarify, particularize, and limit or circumscribe the issues in the case, to
expedite the trial, and assist the court. A general function or purpose of a bill of
particulars is to prevent injustice or do justice in the case when that cannot be
accomplished without the aid of such a bill. 38
 Anent the contention of the Solicitor General that the petitioner is not entitled to a bill of
particulars because the ultimate facts constituting the three (3) essential elements of a
cause of action for recovery of ill-gotten wealth have been sufficiently alleged in the
complaint, it would suffice to state that in a motion for a bill of particulars, the only
question to be resolved is whether or not the allegations of the complaint are averred with
sufficient definiteness or particularity to enable the movant properly to prepare his
responsive pleading and to prepare for trial. As already discussed, the allegations of the
complaint pertaining to the herein petitioner are deficient because the averments therein
are mere conclusions of law or presumptions, unsupported by factual premises.

In the light of the foregoing, the respondent Sandiganbayan acted with grave abuse of
discretion amounting to lack or excess of jurisdiction in promulgating the questioned
resolutions.

WHEREFORE, the petition is GRANTED and the resolutions dated 21 April 1989 and
29 May 1989 are hereby ANNULLED and SET ASIDE. The respondents are hereby
ordered to PREPARE and FILE a Bill of Particulars containing the facts prayed for by
petitioner within TWENTY (20) DAYS from notice, and should they fail to submit the
said Bill of Particulars, respondent Sandiganbayan is ordered TO EXCLUDE the herein
petitioner as defendant in Civil Case No. 0035.

SO ORDERED.

G.R. No. 114942 November 27, 2000

MAUNLAD SAVINGS & LOAN ASSOCIATION, INC., petitioner,

vs.
THE HON. COURT OF APPEALS and VICTOR T. NUBLA, respondents.

DECISION

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision1 and the Resolution2 of the Court
of Appeals dated July 9, 1993 and April 4, 1994, respectively, reversing, for having been issued
with grave abuse of discretion, the Orders of the Regional Trial Court of Binangonan, Rizal,
Branch 68 dated September 18, 19923 and February 12, 19934 in Civil Case No. 212-B which
denied private respondent Victor T. Nublas motion to admit amended answer and motion for
submission of petitioner Maunlad Savings & Loan Association, Inc.s (hereafter, Maunlad
Savings) documents marked as defense evidence by private respondent.
The facts are as follows:

On August 27, 1986, petitioner Maunlad Savings instituted a complaint5 for sum of money
against private respondent Victor T. Nubla and Vicente Nubla on the basis of a promissory note6
allegedly executed by the Nublas on May 4, 1984 to secure a loan amounting to P700,000.00
which, upon maturity on May 4, 1985 and despite repeated demands, the Nublas failed to pay
and continuously defaulted, and which as of the final demand letter on July 24, 1986 amounted
to P1,290,786.00, inclusive of interests and penalties.

The Nublas filed their Answer7 admitting that they executed the promissory note but denied any
liability thereunder, alleging that they did not receive any value out of the transaction nor did the
said document reflect the real agreement between the parties inasmuch as the transaction sued
upon was actually the obligation of Ever-Realty and Development Corporation (hereafter, Ever-
Rise). However, the said Answer was not under oath.

Following the pre-trial conference, petitioner Maunlad Savings presented its evidence relying on
the admission by the Nublas of the genuineness and due execution of the subject promissory note
inasmuch as their answer was not under oath as required by Section 8, Rule 88 of the Rules of
Court. Aurea del Rosario, petitioners Account Officer, testified on August 19, 1987 and
produced in open court the Offering Ticket stipulating the material agreements of the loan
transaction. Upon the request of the counsel for the Nublas, the offering ticket was marked as
their Exhibit "1". Another witness, Noli T. Lipio, testified on October 19, 1987 and presented a
Deed of Assignment which showed that Maunlad applied the proceeds of the loan to another
account. This deed of assignment was marked as Exhibit "3" for the Nublas. After the
completion of the presentation of its evidence, it formally offered in evidence its documentary
exhibits on December 1, 1987 and rested its case after the trial court admitted them on June 5,
1988.

On July 6, 1988, the Nublas commenced the presentation of their evidence. Private respondent
Victor T. Nubla testified that the loan documents and the promissory note did not embody the
real agreement of the parties because they signed blank documents on the understanding that
they were signing as representatives of Ever-Rise, and not in their personal capacity. When
cross-examined, private respondent Nubla maintained that he and his brother, Vicente Nubla
signed the promissory note in blank. On redirect examination, private respondent Nubla testified
that the loan documents and the promissory note were erroneous because Maunlad Savings, in
filling up the blanks, did not include the name of Ever-Rise as principal obligor. The Nublas
finally concluded their evidence on January 23, 1991, following the testimony of their third
witness.

The Nublas then filed their Formal Offer of Documentary Exhibits dated May 2, 1991. At the
same time, they also filed a motion for the remarking of their exhibits. The trial court granted the
motion for remarking. The petitioner, through counsel, subsequently filed its objections to the
offer of documentary exhibits which the trial court admitted notwithstanding the objections
thereto of petitioner.
On August 8, 1991, private respondent filed his Memorandum. On October 15, 1991, petitioner
Maunlad Savings filed a motion to submit the case for decision.

On March 24, 1992, the Nublas filed a Motion to Admit Amended Answer9 seeking to
introduced the following amendments, (1) the failure to type the name of Ever-Rise as the real
obligor in the promissory note; (2) the failure to reflect in the loan documents that the Nublas
were mere representatives of Ever-Rise; (3) the absence of any agreement that the Nublas made
themselves personally liable for the obligation; and (4) the fact that P477,777.78 of the loan
proceeds was not released either to Ever-Rise or the Nublas, but was applied to another account
without the conformity of Ever-Rise or the Nublas. In seeking admission of their amended
answer, the Nublas cite Section 5, Rule 10 of the Rules of Court which allows the amendment of
pleadings to conform to the evidence.

The Nublas likewise filed a Motion for Submission of Plaintiffs (Maunlad Savings) Documents
Marked by Defendants (the Nublas) as Their Evidence10 after realizing that they failed to
include in their Offer of Evidence the Offering Ticket and the Deed of Assignment earlier
marked for the defense as Exhibits "1" and "3". Petitioner Maunlad Savings filed its opposition
to the twin motions on May 22, 1992.

Both motions were denied by the trial court in an Omnibus Order dated September 18, 1992,11
ratiocinating that the proposed amendment in the amended answer will ultimately change or alter
the theory of the defense and thus cannot be allowed under Section 3, Rule 10 of the Rules of
Court. Furthermore, with respect to the motion for submission of Maunlad Savings documents
marked by the Nublas as their evidence, the trial court held that, under Section 35, Rule 13212 of
the Rules of Court, the court cannot consider evidence not formally offered. The Nublas
sought13 reconsideration but the same was denied in a resolution14 dated February 12, 1993.

Petitioner Nubla interposed a petition for certiorari, prohibition and mandamus15 before the
Court of Appeals contending that the trial courts denial of his twin motions amounted to grave
abuse of discretion. Acting on the petition, the appellate court issued on July 9, 1993 its
decision16 reversing the challenged Orders, the dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, the instant petition is hereby GRANTED and the
orders dated September 18, 1992 and February 12, 1993 issued by the Regional Trial Court of
Binangonan, Rizal, Branch 68 in Civil Case No. 212-B are declared NULL and VOID and set
aside. The said Court is directed to: (1) admit the amended answer dated march 24, 1992; and (2)
require the respondent to submit the Offering ticket and Deed of Assignment, earlier marked as
Exhibits "1" and "3" for remarking as evidence for the defense; and (3) allow the supplemental
formal offer of said documents as evidence for the defense.

No costs.

SO ORDERED."
Reconsideration of the above decision having been denied by the appellate court in a
Resolution17 dated April 4, 1994, petitioner Maunlad Savings interposed the instant petition
anchored on the following assignment of errors:18

THE HONORABLE COURT OF APPEALS ERRED IN GRANTING THE HIGH

PREROGATIVE WRIT OF CERTIORARI

THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING THAT

THE AMENDMENT OF THE PRIVATE RESPONDENTS ANSWER TO THE
COMPLAINT, AFTER HE HAD ALREADY FORMALLY OFFERED HIS
EVIDENCE, ALLEGEDLY TO CONFORM TO THE EVIDENCE PRESENTED
DURING THE TRIAL, WILL ALTER HIS DEFENSE, MUCH TO THE PREJUDICE
OF THE PETITIONER-PLAINTIFF

THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING THAT

THE PRIVATE RESPONDENT SHOULD NOT BE ALLOWED TO REMARK HIS
DOCUMENTARY EXHIBITS AFTER HE HAD ALREADY FORMALLY OFFERED
THEM IN EVIDENCE

The petition, being devoid of merit, must fail.

Under Sec. 7, Rule 819 of the Rules of Court, when the cause of action is anchored on a
document, the genuineness or due execution of the instrument shall be deemed impliedly
admitted unless the defendant, under oath, specifically denies them, and sets forth what he claims
to be the facts. Said rule should be read in conjunction with Sec. 9 of Rule 13020 of the Revised
Rules of Evidence which provides, in substance, that when the parties have reduced their
agreement to writing they have made such writing the only repository and memorial of the truth,
and whatever is not found in the writing must be understood to have been waived or
abandoned,21 unless he puts in issue that there is a mistake or imperfection in the writing, or that
it does not express the true agreement of the parties, or that the agreement is invalid or that there
is an intrinsic ambiguity in the writing.22

In the instant case, while the specific denial in the original answer was not under oath and thus
gave rise to the implied admission of the genuineness and due execution of the contents of the
promissory note, private respondent, thru his testimony, was able to put in issue and present
parol evidence to controvert the terms of the promissory note, which are essentially the bedrock
of his defense. The presentation of the contrariant evidence for and against imputations of
genuineness and due execution undoubtedly cured, clarified or expanded, as the case may be,
whatever defects in the pleadings or vagueness in the issues there might have been as presented
in the original answer.23

The record shows that petitioner Maunlad Savings made no timely objection when private
respondent introduced parol evidence to explain the circumstances behind the execution and
issuance of the promissory note. The rule is that objections to evidence must be made as soon as
the grounds therefor become reasonably apparent.24 In the case of testimonial evidence, the
objection must be made when the objectionable question is asked or after the answer is given if
the objectionable features become apparent only by reason of such answer,25 otherwise the
objection is waived and such evidence will form part of the records of the case as competent and
complete evidence and all parties are thus amenable to any favorable or unfavorable effects
resulting from the evidence.26 Thus, the objections of petitioner Maunlad Savings on the hearing
of October 12, 1998 and January 23, 199127 amounted to no more than a belated attempt to
remedy its neglectful act of prior implied consent to the presentation of parol evidence on the
terms of the agreement between the parties.

Hence, the amended answer should have been admitted by trial court, pursuant to Sec. 5, Rule
10, quoted below, which allows amendments to conform to the evidence presented, thus:

Sec. 5. Amendment to conform to or authorize presentation of evidence. When issues not

raised by the pleadings are tried with the express or implied consent of the parties, they shall be
treated in all respects as if they had been raised in the pleadings. Such amendment of the
pleadings as may be necessary to cause them to conform to the evidence and to raise these issues
may be made upon motion of any party at any time, even after judgment; but failure to amend
does not affect the result of the trial of these issues. If evidence is objected to at the trial on the
ground that it is not within the issues made by the pleadings, the court may allow the pleadings
to be amended and shall do so with liberality if the presentation of the merits of the action and
the ends of substantial justice will be subserved thereby. The court may grant a continuance to
enable the amendment to be made.

Furthermore, it is settled that the trial court cannot just disregard evidence which would
ordinarily be incompetent under the rules but has been rendered admissible by the failure of a
party to object thereto. Thus:

x x x The acceptance of an incompetent witness to testify in a civil suit, as well as the allowance
of improper questions that may be put to him while on the stand is a matter resting in the
discretion of the litigant. He may assert his right by timely objection or he may waive it,
expressly or by silence. In any case the option rests with him. Once admitted, the testimony is in
the case for what it is worth and the judge has no power to disregard it for the sole reason that it
could have been excluded, if it had been objected to, nor to strike it out on its own motion.28

With respect to the Motion for Submission of Maunlad Savings documents marked by the
Nublas as their evidence, this Court agrees with the pronouncements of the appellate court
that:29

On the matter of submission of the respondent associations documents marked by the

defendants as their evidence, we find that, under the circumstances and considering their
ramifications, this Court must allow a relaxation of the stringent requirements of the rules in
order that substantial justice may be better served. The Offering Ticket and Deed of Assignment
(marked as exhibits "1" and "3", respectively) were presented before the court by two of the
respondent associations witnesses, namely" Ms. Aurea del Rosario on August 19, 1987; and Ms.
Noli T. Lipio, on October 19, 1987. Clearly, these documents were duly identified by the said
witnesses testimonies which were duly recorded as part of the proceedings. While it may be that
there was no verbatim recital of the contents of the two documents in the records of this case, the
respondent court cannot totally disregard the fact that the Offering Ticket is a document which
contains the material agreements between the parties. For a thorough and fair appreciation of the
merits of this case, respondent court must study the stipulations in the Offering ticket so that the
respective rights and obligations of the opposing parties can be determined. The respondent court
cannot just pretend that the Offering Ticket does not exist even after it had been properly
presented and identified, just because its contents were not incorporated in the records of the
proceedings. The same goes for the Deed of Assignment which is the petitioners proof that a
sizable portion of the loan proceeds was released to a third party without the authority or consent
of the Nublas or Ever-Rise Realty. Considering the not inconsiderable amount involved, should
the stipulations in the Deed of Assignment prove to be conclusive, it would be a grave injustice
to exclude the deed of assignment from the respondent courts consideration. Needless to say, the
petitioners defense rests on the stipulations contained in these two documents. A proper
determination of the merits of this case therefore necessitates the admission and consideration of
the two documents.1wphi1

It may be argued that if the said documents are truly pivotal to the defense, the petitioner must
suffer the consequences of his counsels failure to make a formal offer of said documents as
evidence for the defense. To our mind, however, the said counsels failure may be considered
excusable under the circumstances. In the first place, these documents are in the possession of
the respondent association, as these were presented by the latters witnesses. Had they been in
the possession of the petitioner or his counsel, it would amount to gross and inexcusable
negligence to fail to formally offer the same as evidence. Since these documents were never in
the possession of the defense, and considering the amount of time that has passed since their
presentation, it is understandable that they were overlooked when the time came to offer
evidence formally. Fortunately for the petitioner, the omission was discovered and a move to
correct the same was made before a decision could be rendered.1wphi1

The general aim of procedural law is to facilitate the application of justice to the rival claims of
contending parties, bearing always in mind that procedural rules are created not to hinder or
delay but to facilitate and promote the administration of justice.30 Courts in the exercise of their
functions, and in rendering decisions, must not be too dogmatic as to restrict itself to literal
interpretations of words, phrases and sentences; a complete and holistic view must be taken in
order to render a just and equitable judgment.31 It is far better to dispose of the case on the
merits which is a primordial end rather than on a technicality, if it be the case, that may result in
injustice.32 Considering that the instant case involves a sizable sum of money, the overriding
consideration of a judgment based on the merits should prevail over the primordial interests of
strict enforcement on matters of technicalities.

All premises considered, the Court is convinced that the respondent appellate court committed no
error in reversing the challenged orders of the trial court.

WHEREFORE, the petition is hereby DENIED for lack of merit and the challenged decision and
resolution dated July 9, 1993 and April 4, 1994, respectively, of the Court of Appeals in CA-
G.R. SP No. 30344 are hereby AFFIRMED. Costs against petitioners.

SO ORDERED.
G.R. No. 173559 January 7, 2013

LETICIA DIONA, represented by her Attorney-in-Fact, MARCELINA DIONA, Petitioner,

vs.
ROMEO A. BALANGUE, SONNY A. BALANGUE, REYNALDO A. BALANGUE, and
ESTEBAN A. BALANGUE, JR., Respondents.

DECISION

DEL CASTILLO, J.:

The great of a relief neither sought by the party in whose favor it was given not supported by the
evidence presented violates the opposing partys right to due process and may be declared void
ab initio in a proper proceeding.

This Petition for Review on Certiorari1 assails the November 24, 2005 Resolution2 of the Court
of Appeals (CA) issued in G.R. SP No. 85541 which granted the Petition for Annulment of
Judgment3 filed by the respondents seeking to nullify that portion of the October 17, 2000
Decision4 of the Regional Trial Court (RTC), Branch 75, Valenzuela City awarding petitioner
5% monthly interest rate for the principal amount of the loan respondent obtained from her.

This Petition likewise assails the CAs June 26, 2006 Resolution5 denying petitioners Motion
for Reconsideration.

Factual Antecedents

The facts of this case are simple and undisputed.

On March 2, 1991, respondents obtained a loan of 45,000.00 from petitioner payable in six
months and secured by a Real Estate Mortgage6 over their 202-square meter property located in
Marulas, Valenzuela and covered by Transfer Certificate of Title (TCT) No. V-12296.7 When the
debt became due, respondents failed to pay notwithstanding demand. Thus, on September 17,
1999, petitioner filed with the RTC a Complaint8 praying that respondents be ordered:

(a) To pay petitioner the principal obligation of 45,000.00, with interest thereon at the
rate of 12% per annum, from 02 March 1991 until the full obligation is paid.

(b) To pay petitioner actual damages as may be proven during the trial but shall in no
case be less than 10,000.00; 25,000.00 by way of attorneys fee, plus 2,000.00 per
hearing as appearance fee.

(c) To issue a decree of foreclosure for the sale at public auction of the aforementioned
parcel of land, and for the disposition of the proceeds thereof in accordance with law,
 upon failure of the respondents to fully pay petitioner within the period set by law the
sums set forth in this complaint.

(d) Costs of this suit.

Other reliefs and remedies just and equitable under the premises are likewise prayed for.9
(Emphasis supplied)

Respondents were served with summons thru respondent Sonny A. Balangue (Sonny). On
October 15, 1999, with the assistance of Atty. Arthur C. Coroza (Atty. Coroza) of the Public
Attorneys Office, they filed a Motion to Extend Period to Answer. Despite the requested
extension, however, respondents failed to file any responsive pleadings. Thus, upon motion of
the petitioner, the RTC declared them in default and allowed petitioner to present her evidence
ex parte.10

Ruling of the RTC sought to be annulled.

In a Decision11 dated October 17, 2000, the RTC granted petitioners Complaint. The dispositive
portion of said Decision reads:

WHEREFORE, judgment is hereby rendered in favor of the petitioner, ordering the respondents
to pay the petitioner as follows:

a) the sum of FORTY FIVE THOUSAND (45,000.00) PESOS, representing the unpaid
principal loan obligation plus interest at 5% per month [sic] reckoned from March 2,
1991, until the same is fully paid;

b) 20,000.00 as attorneys fees plus cost of suit;

c) in the event the [respondents] fail to satisfy the aforesaid obligation, an order of
foreclosure shall be issued accordingly for the sale at public auction of the subject
property covered by Transfer Certificate of Title No. V-12296 and the improvements
thereon for the satisfaction of the petitioners claim.

SO ORDERED.12 (Emphasis supplied)

Subsequently, petitioner filed a Motion for Execution,13 alleging that respondents did not
interpose a timely appeal despite receipt by their former counsel of the RTCs Decision on
November 13, 2000. Before it could be resolved, however, respondents filed a Motion to Set
Aside Judgment14 dated January 26, 2001, claiming that not all of them were duly served with
summons. According to the other respondents, they had no knowledge of the case because their
co-respondent Sonny did not inform them about it. They prayed that the RTCs October 17, 2000
Decision be set aside and a new trial be conducted.

But on March 16, 2001, the RTC ordered15 the issuance of a Writ of Execution to implement its
October 17, 2000 Decision. However, since the writ could not be satisfied, petitioner moved for
the public auction of the mortgaged property,16 which the RTC granted.17 In an auction sale
conducted on November 7, 2001, petitioner was the only bidder in the amount of 420,000.00.
Thus, a Certificate of Sale18 was issued in her favor and accordingly annotated at the back of
TCT No. V-12296.

Respondents then filed a Motion to Correct/Amend Judgment and To Set Aside Execution Sale19
dated December 17, 2001, claiming that the parties did not agree in writing on any rate of
interest and that petitioner merely sought for a 12% per annum interest in her Complaint.
Surprisingly, the RTC awarded 5% monthly interest (or 60% per annum) from March 2, 1991
until full payment. Resultantly, their indebtedness inclusive of the exorbitant interest from March
2, 1991 to May 22, 2001 ballooned from 124,400.00 to 652,000.00.

In an Order20 dated May 7, 2002, the RTC granted respondents motion and accordingly
modified the interest rate awarded from 5% monthly to 12% per annum. Then on August 2,
2002, respondents filed a Motion for Leave To Deposit/Consign Judgment Obligation21 in the
total amount of 126,650.00.22

Displeased with the RTCs May 7, 2002 Order, petitioner elevated the matter to the CA via a
Petition for Certiorari23 under Rule 65 of the Rules of Court. On August 5, 2003, the CA
rendered a Decision24 declaring that the RTC exceeded its jurisdiction in awarding the 5%
monthly interest but at the same time pronouncing that the RTC gravely abused its discretion in
subsequently reducing the rate of interest to 12% per annum. In so ruling, the CA ratiocinated:

Indeed, We are convinced that the Trial Court exceeded its jurisdiction when it granted 5%
monthly interest instead of the 12% per annum prayed for in the complaint. However, the proper
remedy is not to amend the judgment but to declare that portion as a nullity. Void judgment for
want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of
any obligation (Leonor vs. CA, 256 SCRA 69). No legal rights can emanate from a resolution
that is null and void (Fortich vs. Corona, 312 SCRA 751).

From the foregoing, the remedy of the respondents is to have the Court declare the portion of the
judgment providing for a higher interest than that prayed for as null and void for want of or in
excess of jurisdiction. A void judgment never acquire[s] finality and any action to declare its
nullity does not prescribe (Heirs of Mayor Nemencio Galvez vs. CA, 255 SCRA 672).

WHEREFORE, foregoing premises considered, the Petition having merit, is hereby GIVEN
DUE COURSE. Resultantly, the challenged May 7, 2002 and September 5, 2000 orders of
Public Respondent Court are hereby ANNULLED and SET ASIDE for having been issued with
grave abuse of discretion amounting to lack or in excess of jurisdiction. No costs.

SO ORDERED.25 (Emphases in the original; italics supplied.)

Proceedings before the Court of Appeals

Taking their cue from the Decision of the CA in the special civil action for certiorari,
respondents filed with the same court a Petition for Annulment of Judgment and Execution Sale
with Damages.26 They contended that the portion of the RTC Decision granting petitioner 5%
monthly interest rate is in gross violation of Section 3(d) of Rule 9 of the Rules of Court and of
their right to due process. According to respondents, the loan did not carry any interest as it was
the verbal agreement of the parties that in lieu thereof petitioners family can continue occupying
respondents residential building located in Marulas, Valenzuela for free until said loan is fully
paid.

Ruling of the Court of Appeals

Initially, the CA denied due course to the Petition.27 Upon respondents motion, however, it
reinstated and granted the Petition. In setting aside portions of the RTCs October 17, 2000
Decision, the CA ruled that aside from being unconscionably excessive, the monthly interest rate
of 5% was not agreed upon by the parties and that petitioners Complaint clearly sought only the
legal rate of 12% per annum. Following the mandate of Section 3(d) of Rule 9 of the Rules of
Court, the CA concluded that the awarded rate of interest is void for being in excess of the relief
sought in the Complaint. It ruled thus:

WHEREFORE, respondents motion for reconsideration is GRANTED and our resolution dated
October 13, 2004 is, accordingly, REVERSED and SET ASIDE. In lieu thereof, another is
entered ordering the ANNULMENT OF:

(a) public respondents impugned October 17, 2000 judgment, insofar as it awarded 5%
monthly interest in favor of petitioner; and

(b) all proceedings relative to the sale at public auction of the property titled in
respondents names under Transfer Certificate of Title No. V-12296 of the Valenzuela
registry.

The judgment debt adjudicated in public respondents impugned October 17, 2000 judgment is,
likewise, ordered RECOMPUTED at the rate of 12% per annum from March 2, 1991. No costs.

SO ORDERED.28 (Emphases in the original.)

Petitioner sought reconsideration, which was denied by the CA in its June 26, 2006 Resolution.29

Issues

Hence, this Petition anchored on the following grounds:

I. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS

ERROR OF LAW WHEN IT GRANTED RESPONDENTS PETITION FOR
ANNULMENT OF JUDGMENT AS A SUBSTITUTE OR ALTERNATIVE REMEDY
OF A LOST APPEAL.

II. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND

SERIOUS ERROR AND MISAPPREHENSION OF LAW AND THE FACTS WHEN
 IT GRANTED RESPONDENTS PETITION FOR ANNULMENT OF JUDGMENT OF
THE DECISION OF THE REGIONAL TRIAL COURT OF VALENZUELA, BRANCH
75 DATED OCTOBER 17, 2000 IN CIVIL CASE NO. 241-V-99, DESPITE THE FACT
THAT SAID DECISION HAS BECOME FINAL AND ALREADY EXECUTED
CONTRARY TO THE DOCTRINE OF IMMUTABILITY OF JUDGMENT.30

Petitioners Arguments

Petitioner claims that the CA erred in partially annulling the RTCs October 17, 2000 Decision.
She contends that a Petition for Annulment of Judgment may be availed of only when the
ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no
longer available through no fault of the claimant. In the present case, however, respondents had
all the opportunity to question the October 17, 2000 Decision of the RTC, but because of their
own inaction or negligence they failed to avail of the remedies sanctioned by the rules. Instead,
they contented themselves with the filing of a Motion to Set Aside Judgment and then a Motion
to Correct/Amend Judgment and to Set Aside Execution Sale.

Petitioner likewise argues that for a Rule 47 petition to prosper, the same must either be based on
extrinsic fraud or lack of jurisdiction. However, the allegations in respondents Rule 47 petition
do not constitute extrinsic fraud because they simply pass the blame to the negligence of their
former counsel. In addition, it is too late for respondents to pass the buck to their erstwhile
counsel considering that when they filed their Motion to Correct/Amend Judgment and To Set
Aside Execution Sale they were already assisted by their new lawyer, Atty. Reynaldo A. Ruiz,
who did not also avail of the remedies of new trial, appeal, etc. As to the ground of lack of
jurisdiction, petitioner posits that there is no reason to doubt that the RTC had jurisdiction over
the subject matter of the case and over the persons of the respondents.

While conceding that the RTC patently made a mistake in awarding 5% monthly interest,
petitioner nonetheless invokes the doctrine of immutability of final judgment and contends that
the RTC Decision can no longer be corrected or modified since it had long become final and
executory. She likewise points out that respondents received a copy of said Decision on
November 13, 2000 but did nothing to correct the same. They did not even question the award of
5% monthly interest when they filed their Motion to Set Aside Judgment which they anchored on
the sole ground of the RTCs lack of jurisdiction over the persons of some of the respondents.

Respondents Arguments

Respondents do not contest the existence of their obligation and the principal amount thereof.
They only seek quittance from the 5% monthly interest or 60% per annum imposed by the RTC.
Respondents contend that Section (3)d of Rule 9 of the Rules of Court is clear that when the
defendant is declared in default, the court cannot grant a relief more than what is being prayed
for in the Complaint. A judgment which transgresses said rule, according to the respondents, is
void for having been issued without jurisdiction and for being violative of due process of law.

Respondents maintain that it was through no fault of their own, but through the gross negligence
of their former counsel, Atty. Coroza, that the remedies of new trial, appeal or petition for relief
from judgment were lost. They allege that after filing a Motion to Extend Period to Answer,
Atty. Coroza did not file any pleading resulting to their being declared in default. While the said
lawyer filed on their behalf a Motion to Set Aside Judgment dated January 26, 2001, he however
took no steps to appeal from the Decision of the RTC, thereby allowing said judgment to lapse
into finality. Citing Legarda v. Court of Appeals,31 respondents aver that clients are not always
bound by the actions of their counsel, as in the present case where the clients are to lose their
property due to the gross negligence of their counsel.

With regard to petitioners invocation of immutability of judgment, respondents argue that said
doctrine applies only to valid and not to void judgments.

Our Ruling

The petition must fail.

We agree with respondents that the award of 5% monthly interest violated their right to due
process and, hence, the same may be set aside in a Petition for Annulment of Judgment filed
under Rule 47 of the Rules of Court.

Annulment of judgment under Rule 47; an exception to the final judgment rule; grounds therefor.

A Petition for Annulment of Judgment under Rule 47 of the Rules of Court is a remedy granted
only under exceptional circumstances where a party, without fault on his part, has failed to avail
of the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies.
Said rule explicitly provides that it is not available as a substitute for a remedy which was lost
due to the partys own neglect in promptly availing of the same. "The underlying reason is
traceable to the notion that annulling final judgments goes against the grain of finality of
judgment. Litigation must end and terminate sometime and somewhere, and it is essential to an
effective administration of justice that once a judgment has become final, the issue or cause
involved therein should be laid to rest."32

While under Section 2, Rule 4733 of the Rules of Court a Petition for Annulment of Judgment
may be based only on the grounds of extrinsic fraud and lack of jurisdiction, jurisprudence
recognizes lack of due process as additional ground to annul a judgment.34 In Arcelona v. Court
of Appeals,35 this Court declared that a final and executory judgment may still be set aside if,
upon mere inspection thereof, its patent nullity can be shown for having been issued without
jurisdiction or for lack of due process of law.

Grant of 5% monthly interest is way beyond the 12% per annum interest sought in the Complaint
and smacks of violation of due process.

It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess of what is
being sought by the party. They cannot also grant a relief without first ascertaining the evidence
presented in support thereof. Due process considerations require that judgments must conform to
and be supported by the pleadings and evidence presented in court. In Development Bank of the
Philippines v. Teston,36 this Court expounded that:
Due process considerations justify this requirement. It is improper to enter an order which
exceeds the scope of relief sought by the pleadings, absent notice which affords the opposing
party an opportunity to be heard with respect to the proposed relief. The fundamental purpose of
the requirement that allegations of a complaint must provide the measure of recovery is to
prevent surprise to the defendant.

Notably, the Rules is even more strict in safeguarding the right to due process of a defendant
who was declared in default than of a defendant who participated in trial. For instance,
amendment to conform to the evidence presented during trial is allowed the parties under the
Rules.37 But the same is not feasible when the defendant is declared in default because Section
3(d), Rule 9 of the Rules of Court comes into play and limits the relief that may be granted by
the courts to what has been prayed for in the Complaint. It provides:

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

The raison dtre in limiting the extent of relief that may be granted is that it cannot be presumed
that the defendant would not file an Answer and allow himself to be declared in default had he
known that the plaintiff will be accorded a relief greater than or different in kind from that
sought in the Complaint.38 No doubt, the reason behind Section 3(d), Rule 9 of the Rules of
Court is to safeguard defendants right to due process against unforeseen and arbitrarily issued
judgment. This, to the mind of this Court, is akin to the very essence of due process. It embodies
"the sporting idea of fair play"39 and forbids the grant of relief on matters where the defendant
was not given the opportunity to be heard thereon.

In the case at bench, the award of 5% monthly interest rate is not supported both by the
allegations in the pleadings and the evidence on record. The Real Estate Mortgage40 executed by
the parties does not include any provision on interest. When petitioner filed her Complaint before
the RTC, she alleged that respondents borrowed from her "the sum of FORTY-FIVE
THOUSAND PESOS (45,000.00), with interest thereon at the rate of 12% per annum"41 and
sought payment thereof. She did not allege or pray for the disputed 5% monthly interest. Neither
did she present evidence nor testified thereon. Clearly, the RTCs award of 5% monthly interest
or 60% per annum lacks basis and disregards due process. It violated the due process
requirement because respondents were not informed of the possibility that the RTC may award
5% monthly interest. They were deprived of reasonable opportunity to refute and present
controverting evidence as they were made to believe that the complainant petitioner was seeking
for what she merely stated in her Complaint.

Neither can the grant of the 5% monthly interest be considered subsumed by petitioners general
prayer for "other reliefs and remedies just and equitable under the premises x x x."42 To repeat,
the courts grant of relief is limited only to what has been prayed for in the Complaint or related
thereto, supported by evidence, and covered by the partys cause of action.43 Besides, even
assuming that the awarded 5% monthly or 60% per annum interest was properly alleged and
proven during trial, the same remains unconscionably excessive and ought to be equitably
reduced in accordance with applicable jurisprudence. In Bulos, Jr. v. Yasuma,44 this Court held:
In the case of Ruiz v. Court of Appeals, citing the cases of Medel v. Court of Appeals, Garcia v.
Court of Appeals, Spouses Bautista v. Pilar Development Corporation and the recent case of
Spouses Solangon v. Salazar, this Court considered the 3% interest per month or 36% interest
per annum as excessive and unconscionable. Thereby, the Court, in the said case, equitably
reduced the rate of interest to 1% interest per month or 12% interest per annum. (Citations
omitted)

It is understandable for the respondents not to contest the default order for, as alleged in their
Comment, "it is not their intention to impugn or run away from their just and valid obligation."45
Nonetheless, their waiver to present evidence should never be construed as waiver to contest
patently erroneous award which already transgresses their right to due process, as well as
applicable jurisprudence.

Respondents former counsel was grossly negligent in handling the case of his clients;
respondents did not lose ordinary remedies of new trial, petition for relief, etc. through their own
fault.

Ordinarily, the mistake, negligence or lack of competence of counsel binds the client.1wphi1
This is based on the rule that any act performed by a counsel within the scope of his general or
implied authority is regarded as an act of his client. A recognized exception to the rule is when
the lawyers were grossly negligent in their duty to maintain their clients cause and such
amounted to a deprivation of their clients property without due process of law.46 In which case,
the courts must step in and accord relief to a client who suffered thereby.47

The manifest indifference of respondents former counsel in handling the cause of his client was
already present even from the beginning. It should be recalled that after filing in behalf of his
clients a Motion to Extend Period to Answer, said counsel allowed the requested extension to
pass without filing an Answer, which resulted to respondents being declared in default. His
negligence was aggravated by the fact that he did not question the awarded 5% monthly interest
despite receipt of the RTC Decision on November 13, 2000.48 A simple reading of the
dispositive portion of the RTC Decision readily reveals that it awarded exorbitant and
unconscionable rate of interest. Its difference from what is being prayed for by the petitioner in
her Complaint is so blatant and very patent. It also defies elementary jurisprudence on legal rate
of interests. Had the counsel carefully read the judgment it would have caught his attention and
compelled him to take the necessary steps to protect the interest of his client. But he did not.
Instead, he filed in behalf of his clients a Motion to Set Aside Judgment49 dated January 26, 2001
based on the sole ground of lack of jurisdiction, oblivious to the fact that the erroneous award of
5% monthly interest would result to his clients deprivation of property without due process of
law. Worse, he even allowed the RTC Decision to become final by not perfecting an appeal.
Neither did he file a petition for relief therefrom. It was only a year later that the patently
erroneous award of 5% monthly interest was brought to the attention of the RTC when
respondents, thru their new counsel, filed a Motion to Correct/Amend Judgment and To Set
Aside Execution Sale. Even the RTC candidly admitted that it "made a glaring mistake in
directing the defendants to pay interest on the principal loan at 5% per month which is very
different from what was prayed for by the plaintiff."50
"A lawyer owes entire devotion to the interest of his client, warmth and zeal in the maintenance
and defense of his rights and the exertion of his utmost learning and ability, to the end that
nothing can be taken or withheld from his client except in accordance with the law."51 Judging
from how respondents former counsel handled the cause of his clients, there is no doubt that he
was grossly negligent in protecting their rights, to the extent that they were deprived of their
property without due process of law.

In fine, respondents did not lose the remedies of new trial, appeal, petition for relief and other
remedies through their own fault. It can only be attributed to the gross negligence of their
erstwhile counsel which prevented them from pursuing such remedies. We cannot also blame
respondents for relying too much on their former counsel. Clients have reasonable expectations
that their lawyer would amply protect their interest during the trial of the case.52 Here,

"respondents are plain and ordinary people x x x who are totally ignorant of the intricacies and
technicalities of law and legal procedures. Being so, they completely relied upon and trusted
their former counsel to appropriately act as their interest may lawfully warrant and require."53

As a final word, it is worth noting that respondents principal obligation was only 45,000.00.
Due to their former counsels gross negligence in handling their cause, coupled with the RTCs
erroneous, baseless, and illegal award of 5% monthly interest, they now stand to lose their
property and still owe petitioner a large amount of money. As aptly observed by the CA:

x x x If the impugned judgment is not, therefore, rightfully nullified, petitioners will not only end
up losing their property but will additionally owe private respondent the sum of 232,000.00
plus the legal interest said balance had, in the meantime, earned. As a court of justice and equity,
we cannot, in good conscience, allow this unconscionable situation to prevail.54

Indeed, this Court is appalled by petitioners invocation of the doctrine of immutability of

judgment. Petitioner does not contest as she even admits that the RTC made a glaring mistake in
awarding 5% monthly interest.55 Amazingly, she wants to benefit from such erroneous award.
This Court cannot allow this injustice to happen.

WHEREFORE, the instant Petition is hereby DENIED and the assailed November 24, 2005 and
June 26, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 85541 are AFFIRMED.

SO ORDERED.

G.R. No. 133119 August 17, 2000

FINANCIAL BUILDING CORPORATION, petitioner,

vs.
FORBES PARK ASSOCIATION, INC., respondent.

DECISION
DE LEON, JR., J.:

Before us is petition for review on certiorari of the Decision1 dated March 20, 1998 of the Court
of Appeals2 in CA-GR CV No. 48194 entitled "Forbes Park Association, Inc. vs. Financial
Building Corporation", finding Financial Building Corporation (hereafter, Financial Building)
liable for damages in favor of Forbes Park Association, Inc. (hereafter, Forbes Park), for
violating the latters deed of restrictions on the construction of buildings within the Forbes Park
Village, Makati.

The pertinent facts are as follows:

The then Union of Soviet Socialist Republic (hereafter, USSR) was the owner of a 4,223 square
meter residential lot located at No. 10, Narra Place, Forbes Park Village in Makati City. On
December 2, 1985, the USSR engaged the services of Financial Building for the construction of
a multi-level office and staff apartment building at the said lot, which would be used by the
Trade Representative of the USSR.3 Due to the USSRs representation that it would be building
a residence for its Trade Representative, Forbes Park authorized its construction and work began
shortly thereafter.

On June 30, 1986, Forbes Park reminded the USSR of existing regulations4 authorizing only the
construction of a single-family residential building in each lot within the village. It also elicited a
reassurance from the USSR that such restriction has been complied with.5 Promptly, the USSR
gave its assurance that it has been complying with all regulations of Forbes Park.6 Despite this,
Financial Building submitted to the Makati City Government a second building plan for the
construction of a multi-level apartment building, which was different from the first plan for the
construction of a residential building submitted to Forbes Park.

Forbes Park discovered the second plan and subsequent ocular inspection of the USSRs subject
lot confirmed the violation of the deed of restrictions. Thus, it enjoined further construction
work. On March 27, 1987, Forbes Park suspended all permits of entry for the personnel and
materials of Financial Building in the said construction site. The parties attempted to meet to
settle their differences but it did not push through.

Instead, on April 9, 1987, Financial Building filed in the Regional Trial Court of Makati, Metro
Manila, a Complaint7 for Injunction and Damages with a prayer for Preliminary Injunction
against Forbes Park docketed as Civil Case No. 16540. The latter, in turn, filed a Motion to
Dismiss on the ground that Financial Building had no cause of action because it was not the real
party-in-interest.

On April 28, 1987, the trial court issued a writ of preliminary injunction against Forbes Park but
the Court of Appeals nullified it and dismissed the complaint in Civil Case No. 16540 altogether.
We affirmed the said dismissal in our Resolution,8 promulgated on April 6, 1988, in G.R. No.
79319 entitled "Financial Building Corporation, et al. vs. Forbes Park Association, et al."

After Financial Buildings case, G.R. No. 79319, was terminated with finality, Forbes Park
sought to vindicate its rights by filing on October 27, 1989 with the Regional Trial Court of
Makati a Complaint9 for Damages, against Financial Building, docketed as Civil Case No. 89-
5522, arising from the violation of its rules and regulations. The damages claimed are in the
following amounts: (a) P3,000,000.00 as actual damages; (b) P1,000,000.00 as moral damages;
(c) P1,000,000.00 as exemplary damages; and (d) P1,000,000.00 as attorneys fees.10 On
September 26, 1994, the trial court rendered its Decision11 in Civil Case No. 89-5522 in favor of
Forbes Park and against Financial Building, the dispositive portion of which reads, to wit:

"WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the
plaintiff and against the defendant:

(1) Ordering the defendant to remove/demolish the illegal structures within three (3)
months from the time this judgment becomes final and executory, and in case of failure
of the defendant to do so, the plaintiff is authorized to demolish/remove the structures at
the expense of the defendant;

(2) Ordering the defendant to pay damages, to wit:

(a) P3,000,000.00 as actual damages by way of demolition expenses;

(b) P1,000,000.00 as exemplary damages;

(c) P500,000.00 as attorneys fees;

(d) the costs of suit.

SO ORDERED."

Financial Building appealed the said Decision of the trial court in Civil Case No. 89-5522 by
way of a petition for review on certiorari12 entitled "Financial Building Corporation vs. Forbes
Park Association, Inc." to the Court of Appeals and docketed therein as CA-GR CV No. 48194.
However, the Court of Appeals affirmed it in its Decision13 dated March 20, 1998, the
dispositive portion of which reads:

"WHEREFORE, the Decision dated September 26, 1994 of the Regional Trial Court of Makati is
AFFIRMED with the modification that the award of exemplary damages, as well as attorneys
fees, is reduced to fifty thousand pesos (P50,000.00) each."

Hence, this petition, wherein Financial Building assigns the following errors:

I. "THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE

COMPLAINT FILED BY RESPONDENT FPA DESPITE THE FACT THAT ITS
ALLEGED CLAIMS AND CAUSES OF ACTION THEREIN ARE BARRED BY
PRIOR JUDGMENT AND/OR ARE DEEMED WAIVED FOR ITS FAILURE TO
INTERPOSE THE SAME AS COMPULSORY COUNTERCLAIMS IN CIVIL CASE
NO. 16540;
 II. THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE
COMPLAINT FILED BY RESPONDENT FPA AGAINST PETITIONER FBC SINCE
RESPONDENT FPA HAS NO CAUSE OF ACTION AGAINST PETITIONER FBC;

III. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING DAMAGES IN

FAVOR OF RESPONDENT FPA DESPITE THE FACT THAT ON THE BASIS OF
THE EVIDENCE ON RECORD, RESPONDENT FPA IS NOT ENTITLED THERETO
AND PETITIONER FBC IS NOT LIABLE THEREFOR;

IV. THE COURT OF APPEALS ERRED IN ORDERING THE DEMOLITION OF THE

ILLEGAL STRUCTURES LOCATED AT NO. 10 NARRA PLACE, FORBES PARK,
MAKATI CITY, CONSIDERING THAT THE SAME ARE LOCATED ON
DIPLOMATIC PREMISES"14

We grant the petition.

First. The instant case is barred due to Forbes Parks failure to set it up as a compulsory
counterclaim in Civil Case No. 16540, the prior injunction suit initiated by Financial Building
against Forbes Park.

A compulsory counterclaim is one which arises out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the opposing partys claim.15 If it is within
the jurisdiction of the court and it does not require for its adjudication the presence of third
parties over whom the court cannot acquire jurisdiction, such compulsory counterclaim is barred
if it is not set up in the action filed by the opposing party.16

Thus, a compulsory counterclaim cannot be the subject of a separate action but it should instead
be asserted in the same suit involving the same transaction or occurrence, which gave rise to it.17
To determine whether a counterclaim is compulsory or not, we have devised the following tests:
(1) Are the issues of fact or law raised by the claim and the counterclaim largely the same? (2)
Would res judicata bar a subsequent suit on defendants claim absent the compulsory
counterclaim rule? (3) Will substantially the same evidence support or refute plaintiffs claim as
well as the defendants counterclaim? and (4) Is there any logical relation between the claim and
the counterclaim? Affirmative answers to the above queries indicate the existence of a
compulsory counterclaim.18

Undoubtedly, the prior Civil Case No. 16540 and the instant case arose from the same
occurrence the construction work done by Financial Building on the USSRs lot in Forbes Park
Village. The issues of fact and law in both cases are identical. The factual issue is whether the
structures erected by Financial Building violate Forbes Parks rules and regulations, whereas the
legal issue is whether Financial Building, as an independent contractor working for the USSR,
could be enjoined from continuing with the construction and be held liable for damages if it is
found to have violated Forbes Parks rules.

As a result of the controversy, Financial Building seized the initiative by filing the prior
injunction case, which was anchored on the contention that Forbes Parks prohibition on the
construction work in the subject premises was improper. The instant case on the other hand was
initiated by Forbes Park to compel Financial Building to remove the same structures it has
erected in the same premises involved in the prior case and to claim damages for undertaking the
said construction. Thus, the logical relation between the two cases is patent and it is obvious that
substantially the same evidence is involved in the said cases.

Moreover, the two cases involve the same parties. The aggregate amount of the claims in the
instant case is within the jurisdiction of the regional trial court, had it been set up as a
counterclaim in Civil Case No. 16540. Therefore, Forbes Parks claims in the instant case should
have been filed as a counterclaim in Civil Case No. 16540.

Second. Since Forbes Park filed a motion to dismiss in Civil Case No. 16540, its existing
compulsory counterclaim at that time is now barred.

A compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its
jurisdictional support therefrom.19 A counterclaim presupposes the existence of a claim against
the party filing the counterclaim. Hence, where there is no claim against the counterclaimant, the
counterclaim is improper and it must dismissed, more so where the complaint is dismissed at the
instance of the counterclaimant.20 In other words, if the dismissal of the main action results in
the dismissal of the counterclaim already filed, it stands to reason that the filing of a motion to
dismiss the complaint is an implied waiver of the compulsory counterclaim because the grant of
the motion ultimately results in the dismissal of the counterclaim.

Thus, the filing of a motion to dismiss and the setting up of a compulsory counterclaim are
incompatible remedies.1wphi1 In the event that a defending party has a ground for dismissal
and a compulsory counterclaim at the same time, he must choose only one remedy. If he decides
to file a motion to dismiss, he will lose his compulsory counterclaim. But if he opts to set up his
compulsory counterclaim, he may still plead his ground for dismissal as an affirmative defense in
his answer.21 The latter option is obviously more favorable to the defendant although such fact
was lost on Forbes Park.

The ground for dismissal invoked by Forbes Park in Civil Case No. 16540 was lack of cause of
action. There was no need to plead such ground in a motion to dismiss or in the answer since the
same was not deemed waived if it was not pleaded.22 Nonetheless, Forbes Park still filed a
motion to dismiss and thus exercised bad judgment in its choice of remedies. Thus, it has no one
to blame but itself for the consequent loss of its counterclaim as a result of such choice.

Inasmuch as the action for damages filed by Forbes Park should be as it is hereby dismissed for
being barred by the prior judgment in G.R. No. 79319 (supra) and/or deemed waived by Forbes
Park to interpose the same under the rule on compulsory counterclaims, there is no need to
discuss the other issues raised by the herein petitioner.

WHEREFORE, the instant petition is hereby GRANTED and the Decision dated March 20,
1998 of the Court of Appeals in CA-G.R. CV No. 48194 is hereby REVERSED and SET
ASIDE.
Costs against respondent Forbes Park Association, Inc. .

SO ORDERED.

G.R. No. 91486 January 19, 2001

ALBERTO G. PINLAC, ATTY. ERIBERTO H. DECENA, RODOLFO F. REYES,

FELIPE BRIONES, JUANITO METILLA, JR., FELIPE A. FLORES, HERMINIO
ELEVADO, NARCISO S. SIMEROS, petitioners,
vs.
COURT OF APPEALS, ATTY. CORAZON A. MERRERA, ATTY. JEAN MAJASIAR-
PUNO, SERGIO ACABAN, represented by Atty. Ramon Gerona, ATTY. ROGELIO
VELASCO, MARTINA S. NONA, OVIDEO MEJICA, ALFREDO ITALIA, MARIANO
GUEVARRA, JESUS YUJUICO, DOMINADOR RIVERA, SATURNINA SALES,
represented by Atty. Consolacion Sales-Demontano, FRED CHUA, SONIA SY CHUA,
LAWRENCE CHUA, CAROLINA C. RUBIO, represented by Tessie Sebastian, GEORGE
G. GUERRERO, BEATRIZ TANTOCO, represented by Filomena Cervantes, ATTY.
MARCELA CELESTINO-GARCIA, FEDERICO GARCIA, ILDEFONSO MORALES,
LEONCIA VELASCO, OCRAVIO F. LINA, ANA MARIA JARAMILLO, ESTRELLA
BASA, JOSE ESTEVA, JR., CIRILO GONZALES, VILLY TOBLAS, MIGUEL DELA
PAZ, RUBEN GUILLERMO, FAUSTO YADAO, represented by Jeremias Panlilio,
RICARDO YAP, ROSAURO/PATRICL MARQUWZ, represented by Emmanuel
Marquez, MODESTA FABRIG AND MAXIMINO SALCEDA, MELIA LATOMBO,
TERESITA PANGILINAN-RIVERO, ARCH. DANILO C. DE CASTRO, JOSE S.
LEDESMA, JAIME P. ANG, VEICENTE P. ANG, MAURO U. GABRIEL, ATTY.
VIRGINIA GOMEZ, GIL S. BONILLA, LOURDES BLANCO, represented by Catalina
Blanco, JOSEFA SANCHEZ and ROSALINA VILLEGAS, represented by Heidi Bobis,
SHIRLEY BUCAG, QUIRINA O. TUVERA, represented by Wilfredo Orejuros,
GREGORIO AVENTINO, represented by Enrico Aventino, LEONARDO L. NICOLAS,
NICOMEDES PENARANDA, FRANCISCA MEDRANO, OFELIA IGNACIO,
ROSENDO ABIBO, represented by Santos Chavez, SOLEDAD BAUTISTA DE
COLUMNA, represented by Zenaida Valle, MARQUITA/SEBASTIAN LOPEZ,
represented by Emmanuel Marquez, DELIA DORION, GERARDO L. SANTIAGO,
FIDEL PANGANIBA, represented by Manuel dela Roca, MATEO and OFELIA
INOVEJAS, REMEDIOS C. DOVAS, represented by Josefa Capistrano, DOMINGO
ALTAMIRANO and SPOUSES ROLANDO ALTAMIRANO and MINERVA
FETALVERO, BEATRIZ RINGPIS, ROSARIO DE MATA, RUFINA CRUZ, represented
by JOSEFA MANABAT, SPOUSES ANITA SALONGA-CAPAGCUAN and MAYNARD
CAPAGCUAN, DISCORA YATCO, represented by VICTORINA Y. FIRME, and
CONSUELO YATCO, GENEROSA MEDINA VDA. DE NOGUERA, represented by
ATTY. RAYMUNDO M. NOGUERA, BEATRIZ SALANDANAN and LOURDES
ALONTE-VASQUEZ, PEDRO COSIO and VICTOTINA CARINO, RUTH C. ZAPARTE,
PRECIOSISIMA V. YAPCHULAY, BASILISA B. YAPCHULAY, OFELIA B.
YAPCHULAY, FELISA B. YAPCHULAY, FE B. YAPCHULAY, WILMA B.
YAPCHULAY, FELIX B. YAPCHULAY, MARIANO B. YAPCHULAY, GEN.
ALFREDO LIM, and other registered OWNERS OF VILAR-MALOLES (VILMA)
SUBDIVISION, respondents.

YNARES-SANTIAGO, J.:

The instant case springs from a contentious and protracted dispute over a sizeable piece of real
property situated in what is now known as Old Balara, Sitio Veterans, Barrio Payatas and
Silangan, all of Quezon City. There are numerous claimants, titled and untitled alike, each either
pressing to own a piece of it, or striving to protect one's right as a titled owner.1wphi1.nt

Petitioners herein are World War II veterans, their dependents and successors-in-interest.
Together, they filed a class suit primarily for Quieting of Title before the Regional Trial Court of
Quezon City, Branch 83, where it was docketed as Civil Case No. Q-35672. In particular,
petitioners claimed that the real property, which has an aggregate area of 502 hectares, were part
of forest lands belonging to the government; that they and their predecessors-in-interest have
occupied said property continuously, adversely, and exclusively for more than thirty (30) years;
and that they have accordingly filed applications for land titling in their respective names with
the appropriate government agency.

While petitioners claim that the land in dispute was part of the public domain, they named as
respondents several persons and corporations who are titled owners of subdivided parcels of land
within the subject property. One of those so impleaded as a party-respondent was the Vil-Ma
Maloles Subdivision (hereinafter, Vil-Ma). The individual lot owners of the said subdivision,
however, were not specifically named. Since personal service of summons could not be effected
on Vil-Ma and some of the other named respondents, petitioners moved for leave of court to
serve summons by publication which was granted. Accordingly, the summons was published in
the "Metropolitan Newsweek", a periodical edited and published in the City of Caloocan and
Malolos, Bulacan.l

Some of the named respondents filed their respective responsive pleadings, while the others,
including Vil-Ma, failed to answer, and were thus declared in default. Consequently, petitioners
were allowed to present evidence ex parte against the defaulted respondents. The court a quo
found the following facts to be conclusive:

(T)hat the case involves three parcel of lands, to wit: Lot 1 & 2 situated at the Old Balara,
Diliman, Quezon City and Lot 3 situated at Sitio Veterans, Barrio Payatas and Silangan,
Quezon City containing an aggregate area of 502 hectares more or less; that Lot 1 is
covered by TCT No.5690 in the name of defaulted respondent Jose V. Bagtas, which title
emanated from TCT No.48546 in the name of Emiliana Vda. De Vera Cruz which
contains an actual area of only 294.6 sq. meters, but, when said TCT No.5690 was issued
the same was illegally and fraudulently expanded to cover 23.5767 hectares through
fraudulent re-surveys without proper judicial proceedings; that on said illegally expanded
area of TCT No.5690 in the name of respondent Jose V. Bagtas, more than 363 transfer
certificates of title were subsequently issued including those belonging to some of the
defaulted respondents thereof; that TCT No. 5690 contains no technical description on its
 face; that Lot 2 is covered by TCT No.3548 in the name of Eustacio Maloles married to
Soledad Villegas and Vicente B. Vilar doing business under the name and style of
defaulted respondent Vilma Maloles Subdivision Inc., which title was derived from TCT
No.33531 in the name of Oscar L. Uy which in turn came from TCT No.26285 in the
name of Maria Lim which was immediately derived from OCT No.614 which contains no
technical description on its face, that TCT No.3548 likewise contains no technical
description on its face; that however, on the face of TCT No.33531 of Oscar L. Uy from
which TCT No.3548 of defaulted respondent Vilma Maloles Subdivision Inc., was
derived, it appears that said TCT No.33531 was cancelled by another title, TCT No.1713
and not by TCT No.3548, the supposed derivative thereof, which title, from the foregoing
facts, seems to have come from nowhere considering that no document could be
produced by the representative of the Register of Deeds of Pasig, relative to the origin of
the aforesaid title and which register of deeds has jurisdiction over the same; that from
this spurious and fraudulent TCT No. 3548 which contains no technical description on its
face, numerous TCTs were subsequently issued, some of which belong to the defaulted
respondents hereof, that despite the issuance has not been cancelled by the Register of
Deeds of Quezon City; that Lot 3 was originally covered by OCT No.333 from which
846 questionable TCTs emanated and issued by the Register of Deeds of Quezon City
perpetrated and made possible by the illegal expansion of the actual area thereof from
4,574 Sq. Meters, more or less, to 407 ,3875 (sic) hectares without proper judicial
proceedings; that as an example of the fraud perpetrated by respondents, TCT No.26205
covers a lot situated at Barrio Ermitao, San Juan del Monte, TCT No.26287 covers a lot
located at Barrio Talipapa, Novaliches, TCT No.33531 covers a lot located at the District
of Cubao. TCT No.47705 covers a lot situated at Barrio San Francisco, San Juan, TCT
No.133770 covers a lot located at San Bartolome, Caloocan City, TCT No.45741 covers
a lot located at San Francisco del Monte, San Juan, TCT No.45636 covers a lot located at
the municipality of San Juan, TCT No.19-6370 covers a lot located at Kamuning District,
TCT No.188447 covers a lot located at San Francisco del Monte with a different mother
title, OCT No.515, TCT No. (22092)-61850 covers a lot located at Tala Estate Caloocan
City, TCT No.14645 covers lot located at Kamuning District and TCT No.14692 covers a
lot located at Bo. San Isidro, Caloocan City, yet these TCTs were utilized by some people
to claim an area located inside the litigated premises despite the fact that their technical
descriptions, as aforementioned, are different from the lands being sought to be covered
therewith; that Lots 1, 2 & 3 have been under the possession of petitioners for a
continuous, public, open, & uninterrupted period of 30 years through World War II
Veterans Legionnaires of the Philippines, Inc., by the principle of tacking possession; that
the Bureau of Forest Development has certified that Lots 1, 2 & 3 are part of public forest
belonging to the government not yet certified for disposition and alienation; that the
Bureau of Forest Development knew and encouraged petitioner's occupancy and
possession of said lots as in fact ordinary residential permits were issued by said agency
to some of herein petitioners and even helped in petitioners, acquisition of electrical
facilities from the MERALCO.2

Resolving the sole issue of whether or not petitioners were entitled to the land they occupy and
possess, even when said land was allegedly part of unclassified public forest land and yet
covered by transfer certificates of title in the names of the defaulted respondent, the court a quo
rendered a Partial Decision in favor of petitioners, based on the following disquisition:

First, because as established from the foregoing facts, OCT No. 614, TCT No.5690, TCT
No.3548 covering Lots 1 & 2 of the disputed land, not having technical descriptions
appearing on their respective face, clearly are null and void by reason thereof. This is
because "a torrens title is the certificate of ownership issued under the Register of Deeds
naming and declaring the owner in fee simple of the real property DESCRIBED therein,
free from all liens and encumbrances except such as maybe expressly noted thereon or
otherwise reserved by law." (Philippine National Bank vs. Tan Ong Zse, 51 Phil. 317).
Without any technical description a title is fictitious and the mere issuance thereof is
fraudulent. Such being the case, it follows that none of the title holders subsequently
issued out of said void titles could say that he or she is an innocent purchaser for value.
For in the case at bar, there are really no rights that could be transferred to them since
even the titles of those supposed owners thereof originally are themselves fictitious. x x x
Second, because although the Bureau of Forest Development maintains, as in fact, it
certified that Lots 1, 2 & 3 are part of the unclassified public forest land of the
government, and therefore, are not susceptible of private appropriation, still, due to the
established fact that the lots involved are under the present occupancy and possession of
petitioners with the knowledge and tolerance of the Bureau of Forest Development, the
true and real nature of said lands as being public forest has become highly dubious and in
the opinion of this Court could not overcome the presumption that said lands are
agricultural. For "the mere fact that a tract of land has trees upon it or has mineral wealth
within it, is not of itself sufficient to declare that one is forest land and the other mineral
land. There must be some proof of the extent as well as of the present or future value of
the land as forest or mineral. It must be shown that the land is more valuable for the
forestry or the minerals which it contains than it is for agricultural purposes. Land may be
classified as forest or mineral today and after the exhaustion of the timber or minerals
contained therein may be classified as agricultural land tomorrow. Hence, in case of
doubt and considering that it is a matter of public knowledge that a majority of the lands
in the Philippines are agricultural lands, it was rightly held that in the absence of evidence
to the contrary any land may be presumed to be agricultural. And that being the case, it is
clear that petitioners have acquired legally a title over Lots 1, 2 & 3 of this case through
extraordinary prescription of thirty (30) years of continuous, public, open and
uninterrupted possession thereof, the lands being agricultural and, thus, are susceptible of
private ownership by petitioners.

WHEREFORE, premises considered, judgement is hereby rendered in favor of

petitioners and against the defaulted respondents:

1) Declaring petitioners through the principal petitioners hereof, to wit: Alberto G.

Pinlac, Atty. Eriberto H. Decena, Rodolfo T. Reyes, Felipe Briones and Juanito S. Metilla
as absolute owners in fee simple title of the aforesaid Lots 1, 2 & 3 hereof by virtue of
extraordinary prescription, with the exception of the lands covered by the respective
transfer certificate of title belonging to the non-defaulted respondents;
 2) Declaring Original Certificate of Title No.614, TCT No. 5690 and TCT No.3548 of the
Register of Deeds of Quezon City, and the subsequent TCTs issued therefrom, with the
exception of those titles belonging to the non-defaulted respondents, as null and void ab
initio;

3) Ordering the Register of Deeds of Quezon City to cancel OCT No. 614, TCT No. 5690
and TCT No. 3548 as well as the subsequent TCTs issued and emanating therefrom, with
the exception of those titles belonging to the non-defaulted respondents, from its record;

4) Declaring the area of TCT No.333 in excess of its true and actual area of 4,574 Sq.
Meters, as well as the TCTs subsequently issued by the Register of Deeds of Quezon
City, covering the area in excess of said actual area, with the exception of those
belonging to non-defaulted respondents, as null and void ab initio;

5) Ordering the Register of Deeds of Quezon City to cancel all TCTs subsequently issued
based on OCT No.333 in excess of the actual area of 4,574 Sq. Meters, with the
exception of those titles belonging to the non-defaulted respondents;

6) Declaring the writ of preliminary injunction dated August 7, 1985, in so far as those
areas covered by the cancelled OCTs and TCTs hereof are concerned, as permanent;

7) Ordering the Register of Deeds of Quezon City to issue herein petitioners the
corresponding individual transfer certificate of titles upon proper application made
thereof.

SO ORDERED.3

On May 17, 1989, or exactly one (1) year and fifty-seven (57) days after the above-quoted
judgement by default was rendered, a Petition for Annulment of Judgement with Certiorari,
Prohibition and Mandamus4 was brought before the Court of Appeals by the titled owners of the
subdivided lots within Vil-Ma. They assailed the default judgement which nullified all their
titles, arguing that the court a quo had no jurisdiction over them and their respective titled
properties. They also alleged that they only came to know of the adverse judgement when
petitioners sought the execution of the judgement by attempting to dispossess some of the titled
owners of the lots and making formal demands for them to vacate their respective properties.

They likewise claimed that the Partial Decision against the defaulted respondents was null and
void on the grounds of lack of jurisdiction and extrinsic fraud, for the reasons that:

(1) Civil Case No. Q-35672, while it was a petition to quiet title, was a collateral
proceeding, not a direct action attacking their duly registered titles. Besides, a petition for
cancellation of title can only be filed by a registered owner or a person having an interest
in registered property, and must be filed in the original land registration case in which the
decree of registration was entered.1wphi1.nt
 (2) They were never made parties to Civil Case No. Q-35672, nor were their lots
described in the complaint, published summons, and Partial Decision. Named defendant
was VIL-MA, a totally separate and independent entity which had already ceased to exist
way back in January of 1976. Moreover, the summons, as well as the Partial Decision
was not published in a newspaper or periodical of general circulation. Thus, the defective
service of summons to said defendant did not place the individual lot owners under the
trial court's jurisdiction, nor are they bound by the adverse judgement.

(3) They were denied due process of law as they were not given their day in court. They
should have been included as indispensable parties-respondents in Civil Case No. Q-
35672 since the petitioners therein were seeking to annul their respective transfer
certificates of title.

(4) Their duly registered titles cannot be defeated by the alleged adverse, continuous and
notorious possession of the petitioners since their titles are indefeasible and cannot be
acquired by prescription or adverse possession.

(5) If, indeed, the subject property is unclassified forest lands, it is not capable of private
appropriation. The court a quo is bereft of authority to declare motu proprio that the
subject property should be reclassified as agricultural, not forest land.

(6) The trial court violated Section 3(c), Rule 10 of the Rules of Court which provides
that when some of several respondents fail to answer, "the court shall try the case against
all upon the answers thus filed and render judgement upon the evidence thus presented,
"whenever a complaint states a common cause of action against several respondents.
Accordingly, the defense interposed by those who answer or appear to litigate the case
should inure to the benefit of even those who fail to appear or answer.

(7) The trial court cannot render null and void in the default judgement the mother title
(OCT No.614), from which the petitioners' transfer certificates were derived, which the
Supreme Court had already declared valid and legal.

To impress upon the Court of Appeals that they have a meritorious defense and that their petition
was not intended to delay or frustrate the final disposition of the case, the titled owners cited the
case of De La Cruz v. De La Cruz,5 where the Supreme Court traced the origins of OCT 614. It
was held in that case, that:

x x x. The Piedad Estate consists of a vast tract of land originally registered on March
12,1912 under Original Certificate of Title No.614 of the Register of Deeds of the
Province of Rizal in the name of the Philippine Government.

The Piedad Estate was one of the so-called friar lands which were purchased by the
government of the Philippines pursuant to the provisions' of the Friar Lands Act, Public
Act No.1120 which was enacted on April 26, 1904. x x x.
 As specifically stated above, the said lands are not "public lands" in the sense in which
those words are used in the Public Land Act Numbered Nine Hundred and twenty-six and
cannot be acquired or leased under the provisions thereof. In the case of Jacinto vs.
Director of Lands (1926) 49 Phil. 853, the Supreme Court held that the so-called friar
lands, to which the government of the Philippines holds title, are not public lands but
private or patrimonial property of the government.

xxx xxx xxx

As held in Lorenzo vs. Nicolas, No. L-4085, 30 July 1952,91 Phil. 686, from the
provisions of sections 11, 12 and 16 of Act No.1120, it is apparent that the pervading
legislative intent is to sell the friar lands acquired by the government to actual settlers and
occupants of the same.6

Claiming that their individual transfer certificates of title were derived from subsequent
subdivisions and transfers of the lots within the Piedad Estate, the defaulted registered owners
invoked the Comments and Recommendations of the Ad Hoc Committee created by the then
Ministry of Natural Resources, tasked to investigate the historical background of the Piedad and
Payatas Estates in Quezon City, containing evidence which they would have substantiated had
they been given their day in court. The Ad Hoc Committee reported, to wit:

FINDINGS AND OBSERVATIONS

The Piedad Estate, situated in the Municipality of San Mateo and Caloocan during the
time of registration in 1910, covers an area of 3850.7226 hectares. The Registration of
Title under Case No.5975 was published in the January 21, 1910 issue of the Official
Gazette.

After the Piedad Estate was registered in Original Certificate of Title No. 614 in the name
of the Government in 1910 under the provisions of Act 496, the area was subdivided
originally into 874 lots. As a result of subsequent surveys executed in the course of
disposition, the number of lots increased to 1,305. Disposition of these lots was made by
the Bureau of Lands thru sales, under the Friar Lands Act, as early as 1910 and records
show that even before the Second World War, all lots in the Piedad Estate have been
disposed of. Owing perhaps to the scarcity of land applicants at the time, it will be
observed that a number of applicants have acquired several lots totalling several hectares.
Among the vendees with several lots are the Philippine Trust Co., the Zuzuarregui's and
the Metropolitan Water District, to name a few. A list of lot holders in the Piedad Estate
with the corresponding lot numbers, lot areas and date of purchase from the Bureau of
Lands is hereto attached and marked as ANNEX "B".

Thru a series of transfer of lots from one owner to another attended at times by
subdivision into smaller lots and at other times by consolidation of several lots into one,
most of the lots of the Piedad Estate have lost their identity both in original ownership
structure and lot descriptions. Piedad Estate now embraces and includes a number of
private residential subdivisions among which are the following:
 1. Villar Maloles Subdivision (owned by Villar Maloles, Psd- 21997)

2. U.P. Sites Nos. land 2

3. Sunnyville Subdivision (Owned by the Delos Santos family)

4. Sterling Meadows Subdivision (LRC) Pcs-11110

5. Dona Patrona Subdivision

6. Far Eastern University (43 has.)

7. Luis Reyes (Psd-19419)

8. Jose Yulo (PLS-336-D)

By virtue of subsequent changes in political boundaries, Piedad Estate is now within

Quezon City. It is located on both sides of Luzon Avenue and is bounded on the North by
the Republic Avenue; on the East by private residential subdivisions which includes the
B.F. Homes (LRC) Psd-133236, the Villa Ligaya Subdivision (Psd-65729), the Kapalaran
Subdivision (Pcs-47850), the Kasiyahan Subdivision (LRC) Pcs-12091, Zuzuarregui
Property (Psd-34912) and the Dona Beartiz Subdivision under Psd-39351; on the South
by the Don Mariano Marcos Avenue; and on the South-West and West by the U.P. Sites
Nos. 1 and 2.

COMMENTS AND RECOMMENDATION

There is no doubt that Piedad Estate has long been segregated from the mass of the public
domain and have become private lands duly registered under the Torrens System
following the procedure for the confirmation of private lands prescribed in Act 496. Thus
the lands inside the Piedad Estate are no longer lands of the public domain. Neither are
these lands forest lands, in the classification of lands for forest purposes, the main
criterion prescribed in Section 15 of P .D. 705, the Forestry Code, is its slope. Those
beyond 18% are to be preserved for forest purposes while those below are to be released
as not needed for forest purposes, hence, as alienable arid disposable. By its physical
nature, location and historical use, the land in question can hardly be considered and
classified as forest land. Physically, it is first, level and at most slightly rolling land.
Location wise, it used to be within the periphery and now in the heart of a metropolis.
While originally it was used for agricultural purposes, it has later become urban due to
population pressure and rapid urbanization in the Metro Manila area. It is devoid of any
timber land, more so if we talk of forest of commercial value. In fact, the Composite
Land Classification Committee of the MNR composed of the Directors of BFD, BL, BF
AR and BMGS, has already signed a land classification map and recommended for its
release because it has absolutely no forest value.
 On the basis of existing records of the Bureau of Lands and the area of the Piedad Estate
as contained in the Technical Descriptions of the said Estate published in the January 21,
1910 issue of the Official Gazette, there is no expansion or enlargement of the area,
hence, it is recommended that existing titles within the area should be respected and their
validity upheld.

xxx xxx xxx

In view of all the foregoing, the committee recommends that all existing titles validly
issued within the area be respected and their validity upheld.7 (Emphasis supplied)

Accordingly, the defaulted titled owners prayed that judgement be rendered:

1. Declaring the aforesaid Partial Decision on defaulted private respondents as null and
void;

2. Declaring all Residential Use Permits issued by the Director of Forest Management
Bureau as null and void;

3. Declaring all Transfer of Certificates of Titles of the petitioners (respondents herein)

emanating from OCT 614 and TCT 3548 (1713) as valid;

4. Ordering private respondents (petitioners herein), their agents or representatives and all
other persons claiming right under them to vacate the respective titled lands of the
petitioners squatted by the former.

5. Ordering the dismissal of Hon. Judge Reynaldo Roura from the Regional, Trial Court,
Macabebe, Pampanga on the grounds of gross incompetence and gross ignorance of the
law (Adm. Circular No.4 of the Supreme Court, dated January 27, 1988).

6. Making the preliminary injunction as permanent; and

7. Ordering the private respondents (petitioners herein) to pay jointly and solidarily to the
petitioners the sum of P200,000.00 as moral and exemplary damages, plus the sum of
P5,000.00 per lot of the petitioners as attorney's fee, aside from cost of suit, and for any
other relief just and proper .8

On June 23, 1989, the Court of Appeals granted respondents (petitioners therein) application for
writ of preliminary injunction, ruling that:

When this case was called for hearing on June 21, 1989 on the application for the
issuance of a writ of preliminary injunction, the parties and their respective counsel
appeared and orally argued their respective stand on the matter. It is admitted that the
herein petitioners, indispensable parties in the case, were not individually served with
summons.
 We believe and so hold that there is merit in the instant application for preliminary
injunction, hence, the same is hereby GRANTED. Upon the posting by the petitioners of
a bond in the amount of One Hundred Thousand Pesos (P100,000.00), subject to Our
approval, let a writ of preliminary injunction issue enjoining the respondents (petitioners
herein), and all persons acting for and in their behalf, to desist and refrain from enforcing
or implementing, or from attempting to enforce and implement, the questioned writ of
execution of the partial judgment, dated March 21, 1988, rendered in Civil Case No. Q-
35672, entitled: "Teofilo M. Gariando, et al., petitioners versus Gregorio Dizon, et al.,
respondents", until further orders from this Court.

SO ORDERED.9

On November 15, 1989, the Court of Appeals rendered a Decision10 granting the petition and
annulling the Partial Decision in Civil Case No. Q-35762 based on its finding that the trial court's
lack of jurisdiction over the persons of respondents ---

x x x becomes all the more apparent when petitioners claim or asseverate that the assailed
Partial Decision can not bind Vilar-Maloles (VILMA), the umbrella name, for the simple
reason that said PARTNERSHIP was dissolved on January 26, 1976, for it can no longer
be sued as it had no more juridical personality .

xxx xxx xxx

Furthermore, petitioners contend that the summons and the Partial Decision were
published in a local newspaper edited in Caloocan City and Malolos, Bulacan known as
"METROPOLITAN NEWSWEEK" implying that said summons and Partial Decision
were not published in a newspaper of general circulation in Quezon City as required by
PD 1079, Sec. 1 thereof. Petitioners not having been duly notified of the
hearing/proceedings, the Partial Decision being assailed is without significance to them
or as far as petitioners are concerned said Partial Decision is null and void.11

Petitioners' motion for reconsideration was denied in a Resolution dated December 21, 1989.12

Hence, the instant petition for certiorari which raises the following Issues:

I. WHETHER OR NOT RESPONDENT COURT OF APPEALS, QUESTIONED

DECISION HAS VIOLATED PETITIONERS' RIGHT TO DUE PROCESS BY
IGNORING AND LEAVING UNDECIDED ALL THE ISSUES RAISED IN THE
ANSWER OF PETITIONERS IN CA-G.R. NO. SP-17596.

II. WHETHER OR NOT THE COURT A-QUO HAS ACQUIRED JURISDICTION

OVER RESPONDENT VILMA MALOLES SUBDIVISION BY THE PUBLICA TION
OF THE SUMMONS AND PETITION AS ORDERED BY THE COURT IN CIVIL
CASE NO. Q-35672 AND SO THE PARTIAL DECISION (ANNEX "B") W AS
LEGAL, VALID AND PROPER.
 III. WHETHER OR NOT PRIV ATE RESPONDENTS PER THEIR PETITION.
BEFORE RESPONDENT COURT OF APPEALS HAS A VALID CAUSE OF
ACTION CONSIDERING THEY ADOPTED CONTRADICTORY POSITIONS OR
THEORIES OF THE CASE, AND THAT RESPONDENT COURT OF APPEALS
DECISION (ANNEX "G") IS VOID.13

We find no merit in the instant petition.

The case before the Court of Appeals was one for annulment of judgement, certiorari, prohibition
and mandamus. In resolving the same, the Court of Appeals need not retry the facts. An action
for annulment of judgement is grounded only on two justifications: (I) extrinsic fraud; and (2)
lack of jurisdiction or denial of due process.14 All that herein private respondents had to prove
was that the trial court had no jurisdiction; that they were prevented from having a trial or
presenting their case to the trial court by some act or conduct of petitioners; 15 or that they had
been denied due process of law. Thus, the Court of Appeals need only to resolve the issues of
lack of jurisdiction, existence of extrinsic fraud, and denial of due process of law.

The action for annulment of judgement cannot and was not a substitute for the lost remedy of
appeal. The very purpose of the action for annulment of judgement was to have the final and
executory judgement set aside so that there will be a renewal of litigation.16 Whether or not the
assailed Partial Decision based solely on facts and evidence presented by the petitioners is
meritorious is irrelevant and immaterial. Thus, the Court of Appeals did not err, nor did it violate
the petitioners' right to due process of law, when it refused to consider all the factual issues
raised by petitioners.

We also agree with the Court of Appeals' conclusion that the Partial Decision is null and void
insofar as private respondents are concerned since the latter were not duly served summons or
notified of the proceedings against them. The summons and the Partial Decision were published
in a local newspaper edited and published in Caloocan City and Malolos, Bulacan. However, the
Court of Appeals found the publication in said newspaper, namely the "Metropolitan
Newsweek," to be invalid because the said periodical is not considered a newspaper of general
circulation in Quezon City where the subject property is located, as required by Presidential
Decree No.1079, Section 1.

Petitioners, however, contend that the service of summons by publication was legal and in
accordance with the requirements of Rule 14, Section 14 of the Rules of Court. The service by
publication was done pursuant to the orders of the trial court dated May 5, 1993 and September
29, 1983.17

While the service of summons by publication may have been done with the approval of the trial
court, it does not cure the fatal defect that the "Metropolitan Newsweek" is not a newspaper of
general circulation in Quezon City .The Rules strictly require that publication must be "in a
newspaper of general circulation and in such places and for such time as the court may order."18
The court orders relied upon by petitioners did not specify the place and the length of time that
the summons was to be published. In the absence of such specification, publication in just any
periodical does not satisfy the strict requirements of the rules. The incomplete directive of the
court a quo coupled with the defective publication of the summons rendered the service by
publication ineffective. The modes of service of summons should be strictly followed in order
that the court may acquire jurisdiction over the respondents,19 and failure to strictly comply with
the requirements of the rules regarding the order of its publication is a fatal defect in the service
of summons.20 It cannot be over emphasized that the statutory requirements of service of
summons, whether personally, by substituted service, or by publication, must be followed
strictly, faithfully and fully, and any mode of service other than that prescribed by the statute is
considered ineffective.21

Be that as it may, even granting that the publication strictly complied with the rules, the service
of summons would still be ineffective insofar as private respondents are concerned. At the time
the complaint for Quieting of title was filed on November 2, 1983, Vilma Maloles Subdivision
no longer existed as a juridical entity. Vilma Maloles Subdivision, a partnership, was dissolved
more than six (6) years earlier, as evidenced by a Certificate of Dissolution issued by the SEC
dated January 26,1976.22 Consequently, it could no longer be sued having lost its juridical
personality.

It was also established that all the lots within the subdivision had been disposed of to private
individuals, herein respondents. As the titled owners, they were not made respondent, neither
were they informed of the adverse proceedings that would result in the nullification of their duly
registered titles. Clearly, there was a blatant disregard for their rights as registered owners.
Private respondents' titles and rights as owners have been unjustly violated. Hence, the Court of
Appeals did not err in granting private respondents' petition by annulling and setting aside the
Partial Decision rendered by the court a quo for lack of jurisdiction and for denial of due process
of law.

Petitioners failed to show that they were the aggrieved parties. If ever there was denial of due
process, it was private respondents who suffered therefrom. Whether by petitioners' failure to
effectively serve summons or by omitting to name private respondents as respondents, the trial
court's Partial Decision declaring private respondents' titles null and void was clearly violative of
the due process requirement of the Constitution. It is elementary that before a person can be
deprived of his right or property he should first be informed of the claim against him and the
theory on which such claim is premised.23 The courts will not countenance a denial of the
fundamental right to due process, which is a cornerstone of our legal system.24

The Partial Decision was a judgement by default, which is generally looked upon with disfavor,25
for it cannot pretend to be based on the merits of the controversy.26 As in this case, the
judgement by default may amount to a positive and considerable injustice to private respondents.
Hence, justice and equity demand that this case be litigated a new.27

It is evident that the reopening of the case would not amount to an exercise in futility nor is it
intended to further delay the final resolution of this controversy. The court a quo should give all
the necessary parties every chance to fight their case fairly and in the open, without resort to
technicalities.28
Finally, the conclusion that the Partial Decision of the court a quo is void finds support in Rule
10, Section 5(c) of the then Rules of Court, which provides:

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

In fact, the court a quo enumerated in the Partial Decision those who filed responsive pleadings.
Considering that petitioners in their complaint stated a common cause of action against all the
named respondents, the court a quo should have heard the case as against all respondents, the
defaulted respondents included. However, the trial court, unmindful of the above-quoted rule,
proceeded to receive evidence ex parte only against the defaulted respondents. The trial court's
disposition is not only violative of the rules but also a clear negation of the defaulted
respondents' limited rights.1wphi1.nt

Whatever defense and evidence the non-defaulted respondents may present which would be
applicable to the situation of the defaulted respondents should inure to the benefit of the latter.
The nullification of OCT 614 adversely affected the answering respondents for they all share the
same mother title. In effect, the court a quo pre-judged the case even against the answering
respondents, for how could OCT 614, the mother title, be valid for one set of respondents and
null and void for the other respondents? In fine, the Partial Decision was procedurally flawed.

WHEREFORE, in view of all the foregoing, the decision of the Court of Appeals in CA-G.R.
SP No. 17596 is AFFIRMED and the instant petition is DENIED for lack of merit.

SO ORDERED.