of the letter of demand before filing the action, the letter having been sent instead on 19
FIRST DIVISION September 1969 or only twelve days before the filing of the action.[4]
[G.R. No. 102833. February 9, 1996]
LOLITA AMIGO and ESTELITA VDA. DE SALINAS, petitioners, vs. THE HONORABLE
COURT OF APPEALS, HONORABLE AUGUSTO V. BREVA, as Judge, RTC
of Davao, Branch X, THE SHERIFF OF THE RTC represented by Alfonso M.
Zamora, Deputy Sheriff of Branch X, and JESUS WEE ENG, respondents.
DECISION
VITUG, J.:
Challenged in the petition for review on certiorari is the decision of the Court of
Appeals rendered on 12 November 1991[1] dismissing the petition to annul the writs of
execution and demolition issued by the Regional Trial Court of Davao City, Branch 1 0, [2] in
the implementation of its final judgment of eviction against herein petitioners in Civil Case
No. 10363.
Petitioners Lolita Amigo and Estelita vda. de Salinas leased in 1961 from Mercedes
Inigo, a parcel of land, also known as Lot 502-C-9, Psd-l0752, located along Leon Garcia
St., Agdao District, Davao City, registered in the lessors name under TCT No. T-
5454. Petitioners constructed their houses on the lot. Mercedes Inigo later sold and
transferred her ownership of the land to Juan Bosquit and herein private respondent Jesus
Wee Eng. TCT No. T-5454 was cancelled and another title, TCT No. 13659, was issued
on 28 May 1964 jointly in the names of the two vendees.
On 17 December 1966, Bosquit and Wee entered into a dee4 of exchange with the
City Government of Davao. Bosquit and Wee exchanged a portion of their Lot 502-C-9 for
also a portion of Lot No. 502- C-il under TCT No. T-5788 in the name of the city. The
transaction was authorized and approved by the City Council of Davao. [3]
In order to delineate the portion of Lot 502-C-9 ceded to the city government, Bosquit
and Wee caused the preparation of plan Psd-i 1-00025 8 subdividing the property into Lot
502-C-9-A and Lot 502-C-9-B. For its part, the city government caused the subdivision
of Lot 502-C-11 into Lot 502-C-11-A and Lot 502-C-11-B. In consonance with the
agreement, TCT No. T-13659 held by Bosquit and Wee was cancelled and in lieu thereof,
two separate certificates of title were issued: TCT No. 46656 in the name of the City
Government of Davao covering Lot 502-C-9-A, and TCT No. 46657 in the names of
Bosquit and Wee corresponding to Lot 502-C-9-B. In turn, TCT No. T-5788 in the name of
the city government, was cancelled and two separate titles were issued: TCT No. T-51826
in the names of Bosquit and Wee for Lot 502-C-11-A and TCT No. T-51827 in the name of
the city government over Lot 502-C-i 1-B.
On 01 October 1969, Bosquit and Wee instituted an action for unlawful detainer
against petitioners before the City Court of Davao (Civil Case No. 1561-A). After almost
seven years, or on 19 July 1976, the city court finally dismissed the action on the
technicality that the plaintiffs did not observe the required 15-day period from the sending
On 25 October 1976, Bosquit sold his rights and interests over Lots 502-C-9-B and
502-C-i 1-A to Wee. The titles over the property were thereupon cancelled and TCT No. T-
53041 and TCT No. T-53042 were issued solely in the name of Wee.
On 22 July 1977, Wee, herein private respondent, filed a complaint (docketed Civil
Case No. 10363) against petitioners in the then Court of First Instance of Davao, Branch
III, for recovery of the real property in question. On 08 September 1978, after the
petitioners had filed their answer, the court appointed Orville 0. Bueno, a duly licensed
geodetic engineer, its commissioner to conduct a relocation survey of the boundaries of
the land. In his report, dated 27 November 1978, Bueno stated that -
x x x portions of about two-thirds (2/3) of the houses of Lolita Amigo and that of Estelita
Vda. de Salinas is inside of Lot 502-C-9-B, Psd-i 1-000258, covered by TCT No. T-5304l,
issued in the name of Jesus Wee Eng; the remaining one-third of it lies on the road
widening and the creek respectively.[5]
Whereupon, private respondent sought an amendment of his complaint which was
allowed by the lower court on 13 November 1979.[6] As so amended, the complaint prayed
not only for the recovery of real property and damages but also for an abatement of
nuisance[7] over the portion of the improvements introduced by petitioners that encroached
on the sidewalk of Leon Garcia Street.
In their amended answer, petitioners denied the material allegations of the amended
complaint. Petitioners stressed that their houses stood neither on private respondents land
nor on the sidewalk or shoulders of Leon Garcia Street but along the banks of the Agdao
Creek.
Parenthetically, in 1982, during the pendency of Civil Case No. 10363, petitioners
Amigo and Salinas were designated census-beneficiaries of their respective areas (Tag
No. 82-A-0342 and Tag No. 82-A-0341)[8] under a so-called City of Davao RCDP-NHA
Agreement.
After a full reception of the evidence, the trial court, on 23 September 1983, rendered
its decision which held:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the
plaintiff:
UNDER THE FIRST CA USE OF ACTION
1. Ordering the defendants to vacate the portions of land occupied by them as appearing
in the Commissioners Report (Exhibits C and D) and to deliver the same to the plaintiff;
and
2. To pay the.plaintiff the amount of THIRTY (P30. 00) PESOS each per month for the use
of plaintiffs land, to be reckoned from the date of judicial demand on July 22, 1977 until
defendants shall have vacated the premises in question.
UNDER THE SECOND CA USE OF ACTION
1. The defendants are hereby ordered to demolish the portions of their houses constructed
on the road widening of Leon Garcia Street which constitute a nuisance per se;
2. To pay plaintiff the amount of TWO THOUSAND (P2,000.00) PESOS for and as
attorneys fees; and
3. To pay costs.
All other claims and counterclaims are hereby DISMISSED.
SO ORDERED.[9]
Petitioners appealed the decision to the Court of Appeals (AC-G.R. CV No. 02405).
In its resolution of 29 November 1984, however, the appellate court dismissed the appeal
for the failure of petitioners to file an appeal brief.[10] A petition for relief from the order of
dismissal was denied by the appellate court, in a resolution of 09 July 1985, for having
been filed beyond the reglementary period)[11]
In due time, private respondent moved for execution of the judgment. The lower
court, in its order of 28 October 1988, granted the motion and ordered the issuance of the
corresponding writ.[12] An omnibus motion to quash the writ of execution[13] filed by
petitioners was denied by said court on 27 January 1989.[14] Private respondent, forthwith
moved for a special order of demolition which the court granted on 13 March 1989.[15]
Meanwhile, on 02 March 1989, petitioners filed with the Court of Appeals an action
(docketed CA-G.R. SP No. 16979) for the annulment of the trial courts decision of 23
September 1983, as well as all orders and proceedings subsequent thereto, including the
various writs of execution and demolition. [16] Petitioners contended that the judgment
rendered by the lower court was void for want of jurisdiction.
On 08 March 1989, the Court of Appeals granted petitioners prayer for a temporary
restraining order.[17] The restraining order was lifted when, on 12 November 1991, the
appellate court ultimately dismissed the petition. [18]
Petitioners instituted the instant petition for review on certiorari raising several
questions:
1. Whether or not the court a quo acquired jurisdiction over the subject matter and their
person in the case at bench;
2. Whether or not the Court of Appeals erred when it failed to consider the badges of fraud
in the exchange of lots between private respondent and the City Government of Davao;
3. Whether or not their status as lessees in the disputed lot was affected by the said
swapping or exchange of lots; and
4. Whether or not they are entitled to the so-called right of first refusal under Section 6 of
P.D. No. 1417 and as such cannot be evicted from the disputed lot.
We deny the petition.
The Court must remind the parties that the case brought up to the Court of Appeals
is an extraordinary action that has sought to annul the writs of execution and demolition
issued under and by virtue of a final judgment that is alleged to be void for want of
jurisdiction. The petition should not thus be used as a stratagem to once again reopen the
entire controversy, and make a complete farce of a duly promulgated decision that has
long become final and executory, such as by allowing matters outside the question
fjurisdiction to be here litigated anew. Accordingly, this ponencia must and shall only deal
with the first of the above-enumerated issues raised in the instant petition.
Petitioners maintain that the judgment of the trial court is void for being coram non
judice. Jurisdiction over the subject matter of a case is conferred by law [19] and determined
by the allegations of the complaint. It should hardly be of any consequence that the merits
of the case are later found to veer away from the claims asseverated by the plaintiff. The
suit below is aimed at recovering real property, an action clearly well within the jurisdiction
of the Regional Trial Court.[20] Incidentally, petitioners assertion that the litigated lots
belong in ownership to the city government and not to private respondent is not borne out
by the evidence on record. On the contrary, it appears that private respondent has been,
and still is; the registered owner of both Lot 502-C-9-B and Lot 502-C-i 1-A, respectively,
under TCT No. T-53041 and TCT No. T-53042.[21]
Neither may petitioners feign absence ofjurisdiction over their persons. Jurisdiction over
the person of the defendant in a civil action is acquired either by his voluntary appearance
in court and his submission to its authority or by service of summons. [22] In this case, by
their filing of an answer and later an amended answer, petitioners must be deemed to
have formally and effectively appeared before the lower court. As early as 1918, the
essence of voluntary appearance has been explained by this Court; thus, in Flores v.
Zurbito,[23] we have said:
A voluntary appearance is a waiver of the necessity of a formal notice. An appearance in
whatever form, without expressly objecting to the jurisdiction of the court over the person,
is a submission to the jurisdiction of the court over the person. While the formal method of
entering an appearance in a cause pending in the courts is to deliver to the clerk a written
direction ordering him to enter the appearance of the person who subscribes it, an
appearance may be made by simply filing a formal motion, or plea or answer. This formal
method of appearance is not necessary. (Italics supplied.)
Unlike the question ofjurisdiction over the subject matter which may be invoked at
any stage of the proceedings (even on appeal), the issue ofjurisdiction over the person of
the defendant, however, as has been so held lately in La Naval Drug Corporation v. Court
of Appeals,[24] must be seasonably raised, and it can well be pleaded in a motion to
dismiss or by way of an affirmative defense in an answer. The records bear out the fact
that petitioners have allowed the issue ofjurisdiction to pass unquestioned until the
rendition of the judgment. It is now too late in the day for petitioners to assail the
jurisdiction of the lower court over their person, a somersault that neither law nor policy will
sanction.[25]
WHEREFORE, the instant petition for review on certiorari is hereby DENIED for lack
of merit and the questioned decision of the Court of Appeals is AFFIRMED. Costs against
petitioners.
SO ORDERED
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 106161 February 1, 1995
ILOCOS SUR ELECTRIC COOPERATIVE, INC. and EFREN BAUTISTA, petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, and the NLRC, REGIONAL
ARBITRATORS, BRANCH NO. I, (San Fernando, La Union), respondents.
KAPUNAN, J.:
This is a petition for certiorari questioning the jurisdiction of the National Labor Relations
Commission over termination cases involving employees of electric cooperatives.
Briefly, the facts of the case are as follows:
Engr. Egdon Sabio was employed as Manager of the Engineering Department of Ilocos
Sur Electric Cooperative (ISECO), herein petitioner, in May 1982. He was relieved of his
duties on June 10, 1989 and was dismissed on July 1, 1989 pursuant to ISECO's Board
Resolution No. 63 s. 1989 dated July 19, 1989.
It appears that on June 8, 1989, Sabio wrote to the ISECO Board of Directors, thru its
President, Atty. Manuel Agpalo, about the expenses incurred by Acting General Manager,
Atty. Efren Bautista, in the total amount of P131,788.79 from May 1988 to May 1989 for his
travel to the office of the National Electrification Administration (NEA) and places outside
the area serviced by the cooperative. Sabio revealed that in one year, Bautista was away
for two hundred twenty (220) days, while in contrast the previous Acting General Manager,
Genaro Cada, who stayed out of the cooperative for not more than thirty (30) days for the
same length of time spent not more than ten thousand pesos (P10,000.00). 1
On June 9, 1989, Bautista summoned Sabio to his office and asked him to file a letter of
irrevocable resignation with the assurance that separation benefits will be granted to him.
Bautista also suggested to Sabio to apply as Acting General Manager of Abra Electric
Cooperative. When asked why he made such request, Bautista could not give any
satisfactory answer. Bautista also offered Sabio a one-month vacation leave with pay but
Sabio refused the offer. Bautista made known that the resignation letter or the application
for leave must be in before 9:00 in the morning of June 10. With or without the letter of
resignation or application for leave, Sabio was told, he would be terminated just the same.
Instead of filing either, Sabio on June 10, 1989 sent a letter of apology 2 to Bautista with
copies furnished to the Board of Directors, Department Managers and Sub-Area
Managers, but maintaining that he had not violated any of the cooperative's rules and
regulations.3 However, on that same day Sabio received Memo No. 47-80 from Bautista,
relieving him from his position as Engineering Manager without giving any reason. 4
On June 16, 1989; Bautista issued Memo No. 55-89 requiring Sabio to explain in writing
within 24 hours upon receipt why he should not be separated from the service for grave
and serious misconduct for committing the following acts:
1. Unauthorized assumption of authority and power to relay massage
through the Radio Operator when such authority is exclusively reposed
to (sic), the General Manager or his duly authorized representative for
confidentiality of communication.
2. Unauthorized assumption of power and authority by requesting NEA
for my replacement of another NEA Manager with the caliber of Engr.
Genaro O. Cada, when such authority is exclusively reposed and
vested to (sic) the Board of Directors as a corporate body for corporate
action which authority you arrogated upon yourself without authority.
3. Your alleged solicitation of signatures to the petition for my
replacement with another NEA Manager, personally or thru, linemen
from personnel of Main Office and sub-officers during office hours,
hampering the operation of their respective offices, causing confusion
and diversion among rank and file, factionalism among supervisors,
endangering the positive gains of the coop as proven by the 25%
system loss for the months of March, April and May, which ultimately
and finally will lead to the downfall and disintegration of ISECO as in
the part (sic), of which you are very well aware of, and part of the
confusion; leading to the disconnection of ISECO by NPC and depriving
the coop employees of the benefits they are now receiving/enjoying.
4. Your failure to coordinate with NPC on the higher contracted energy
and demand for power allocating to NPC when NPC deferred its
operation for one month causing NPC to penalize ISECO in the amount
of P139,000.00 for failure to use the higher contracted energy and
demand allocation for NPC.5
On June 24, 1989, Sabio submitted his answer denying all the charges against him. On
June 30, l989 Bautista placed him under preventive suspension without pay effective July
1, 1989, which prompted Sabio to file a complaint for illegal suspension and a claim for
representation/travel allowances before the Labor Arbiter. On July 13, 1989 Bautista
issued Office Memo No. 69-89, creating an ad hoc committee; to investigate the case
against Sabio. Thereafter, the ad hoc committee submitted a report of its investigation
containing the following conclusions and recommendations to wit:
CONCLUSIONS :
In view of the foregoing the ADHOC Committee finds that:
1. Engr. Egdon Sabio is guilty of No. 2, of VI of the Rules and
Regulations governing the conduct. of employees for willfully ordering
his subordinate, Mr. Onofre Habon (Annex 1) to type a petition for the
ouster of AGM Bautista for his allegedly being extravagant a charge
which he failed to substantiate.
2. Egdon Sabio did indeed solicit signatures of employees to a petition
for the ouster of the AGM, as shown and verified by the execution of
affidavits of at least 6 employees (annex 2) which act is inimical to the
smooth operation of the cooperative as it promotes divisiveness among
the employees;
3. Egdon Sabio ordered the radio operator to transmit a radio message
quoted as follows:
From: ISECO Concerned employees
To: NEA Administrator
Please send another GM with a caliber of GM Cada.
Present GM is gastador.
EGDON SABIO
Although such message is not in the possession of the Radio Operator,
an affidavit to this effect has been executed (Annex 3). The actuation is
corroborated by Egdon Sabio himself when he sent a letter of Apology
addressed to AGM Bautista (Annex 9). Premises above-stated, Egdon
Sabio is also guilty of Board Policy No. 3-3 dated November 3, l974
specifically "and all other acts prejudicial to the interest and welfare of
the coop and such other grounds as provided by existing laws" (Annex
14).
4. For gross negligence of duty, for failure to coordinate with the
National Power Corporation on the anticipated lean period, causing the
Coop to lose P139-T which it could have been avoided if proper
representation was made earlier (see letter of Engr. Cu undated). All
these factors contribute to loss of trust and confidence on Egdon Sabio
which is punishable by dismissal as per labor laws.
5. Egdon Sabio is also guilty of No. 2 of VI of the Rules and
Regulations governing the conduct of employees for airing publicly over
station DWRS derogatory remarks and malicious accusations against
AGM Bautista, his superior. Especially that the informations being fed
to media are incorrect.
RECOMMENDATION:
Human considerations taken into account, it would best serve the best
interest of cooperative if Egdon Sabio be DISMISSED if only to serve
as a precedent and/or stern warning to all employees especially from
among the staff, not to indulge themselves in any act which could be
detrimental to the welfare of the coop by using their influence or their
subordinates to attain their personal ambitions or whatever purposes
regardless of whether they have valid grounds or none at all. 6
On July 27, 1989, Bautista recommended to the ISECO Board of Directors the approval of
the report and recommendation of the ad hoc committee. On July 29, 1989, the Board
adopted the recommendation of the ad hoc committee and passed Resolution No. 63 s.
1989, terminating the services of Sabio retroactive July 1, 1989. 7Consequently, Sabio filed
a complaint for illegal dismissal with claim for damages against petitioner with respondent
National Labor Relations Commission (NLRC), docketed as NLRC Case No. RAB-1-07-
1050-89, which was assigned to Labor Arbiter Amado T. Adquilen of the Regional
Arbitration Branch, DOLE, for compulsory arbitration.
On January 8, 1990, the Labor Arbiter, after considering the evidence on record, held in
his decision dated January 8, 19908 that Sabio was illegally and unjustly dismissed without
due process of law.
The dispositive portion of the decision reads:
WHEREFORE, with all the foregoing considerations whereby order the
respondents Ilocos Sur Electric Cooperative, Inc, (ISECO) and/or AGM
Efren Bautista as follows:
1. To reinstate complainant Engr. Egdon Sabio to his former position as
ISECO engineering Department Manager, without loss of seniority
rights and to pay him full backwages in the amount of THIRTY THREE
THOUSAND TWENTY PESOS (P33,020.00) plus medical, rice
allowances, 1989 13th month pay balance as well as all other benefits/
bonuses customarily granted to employees by ISECO as a matter of
company policy and established practice; and
2. To pay complainant THIRTY THOUSAND PESOS (P30,000.00) as
moral and exemplary damages.
SO ORDERED.
Petitioners appealed to the National Labor Relations Commission which, in a resolution
promulgated June 26, 19909dismissed the appeal for having been filed out of time. The
NLRC found that petitioners received a copy of the Labor Arbiter's decision on January 20,
1990 but interposed their appeal only on January 1, 1990 which was beyond the ten-day
period prescribed by the Revised Rules of the NLRC, specifically Rule VIII section I(a). A
motion for reconsideration was, likewise, denied by the NLRC in its resolution of November
16, 1990. 10 A notice of appeal to the President was filed. This was merely noted by the
Commission on June 24, 1991, a petition for the issuance of a writ of execution was
submitted by Sabio. Upon computation of the exact amount to be awarded to Sabio, the
Executive Labor Arbiter issued a writ of execution dated April 13, 1992, to wit:
WHEREFORE, let writ of execution issue in order to effect the
following:
 1. The reinstatement aspect of the decision of the
Labor Arbiter dated January 8, 1990; and
2. The payment of the monetary award due the
complainant in the total amount of P74,487.50, as,
also decreed in said decision.
11
SO ORDERED.
Thus, this petition which raises the following issues:
1. Whether or not the NLRC has jurisdiction over the case of Engr.
Egdon A. Sabio.
2. Whether or not Engr. Egdon A. Sabio was dismissed by the Board of
Directors of ISECO in accordance with law.
The petition is devoid of merit.
Presidential Decree No. 269, as amended by P.D. 1645, relied upon by petitioners, does
not apply in this case. Said Decree pertains to NEA 's exercise of its power of supervision
and control over electric cooperative.
Thus, Section 10, of P.D. 269, as amended, provides:
Enforcement Powers and Remedies. In the exercise of its power of
supervision and control over electric cooperatives and other borrower,
supervised or controlled entities, the NEA is empowered to issue
orders, rules and regulations and motu propio or upon petition of third
parties, to conduct investigations, referenda and other similar actions in
all matters affecting said electric cooperatives and other borrower, or
supervised or controlled entities.
If the electric cooperative concerned or other similar entity fails after
due notice to comply, with NEA orders, rules and regulations and/or
decisions or with any of the terms of the Loan Agreement, the NEA
Board of Administrators may avail of any or all of the following
remedies:
xxx xxx xxx
(e) Take preventive and/or disciplinary measures including suspension
and/or removal and replacement of any or all the members of the Board
of Directors, officers or employees of the Cooperative, other borrower
institutions or supervised controlled entities as the NEA Board of
Administrator may deem fit and necessary and to take any other
remedial measures as the law or the Loan Agreement may provide.
(Emphasis supplied.)
It is clear from the aforequoted provision of P.D. 269, as amended by P.D. 1645 that only
the power of supervision and control over electric cooperatives and other borrowers,
supervised or controlled, is given to the NEA. There is nothing said law which provides that
the NEA administration has the power to hear and decide termination cases of employees
in electric cooperatives. That authority is vested in the Labor Arbiter.
In the present case, there is no dispute that Sabio is an employee of ISECO whose
services as manager of the Engineering Department of ISECO were terminated. The
dismissal arose from a purely labor dispute which falls within the original and exclusive
jurisdiction of the Labor Arbiters and the NLRC. Thus, Section. 217 of the Labor Code
provides:
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a)
Except as otherwise provided under this Code the Labor Arbiters shall
have original and exclusive jurisdiction to hear and decide, within thirty
(30) calendar days after the submission of the case by the parties for
decision without extension, even in the absence of stenographic notes,
the following cases involving all workers, whether agricultural or non-
agricultural:
1. Unfair labor practice cases;
2. Termination of disputes;
xxx xxx xxx
Moreover, the NLRC 's jurisdiction was only raised for the first time in this petition.
Petitioners did not question the jurisdiction of the Labor Arbiter either in a motion to
dismiss or in their answer. In fact, petitioners participated in the proceedings before the
Labor Arbiter, as well as in the NLRC to which they appealed the Labor Arbiter's decision.
It has been consistently held by this Court that while jurisdiction may be assailed at any
stage, a party's active participation in the proceedings before a court without jurisdiction
will estop such party from assailing such lack of it. 12 It is an undesirable practice of a party
participating in the proceedings and submitting his case for decision and then accepting
the judgment only if favorable, and attacking it for lack of jurisdiction, when adverse. 13
Petitioners also claim that the dismissal of Sabio was an exercise of management
prerogative under Article 283 of the Labor Code. We do not agree.
Well settled is the rule that the employer's prerogative/power to dismiss an employee must
not be exercised arbitrarily and without just cause, otherwise the constitutional guarantee
of security of tenure would be rendered nugatory. 14 Moreover, it must be done without
abuse of discretion. 15
In the case, at bench records show that petitioner Bautista acted with grave abuse of
discretion in having Sabio dismissed. After Sabio denounced the excessive expenditures
of Bautista for one year and his (Bautista) absences totaling 220 days for the same period,
he was called by Bautista himself who told him to resign and when asked for the reason
why he was being asked to do so, Bautista was not able to answer and instead gave
another option to Sabio, that is for Sabio to take a vacation leave. Failing to convince
Sabio, Bautista informed him that he would be terminated just the same. 16
It should be noted that the ad hoc committee which recommended the dismissal of Sabio
was composed of Bautista's men and, in fact, two of them executed affidavits in favor of
Bautista.17
The factual circumstances clearly demonstrate that petitioners arbitrarily exercised their
prerogative in dismissing Sabio.
Article 283 of the Labor Code on which the dismissal of Sabio was claimed to have been
anchored states:
Art. 283. Closure of establishments and reduction of personnel. The
employer may also terminate the employment of any employee due to
the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on
the workers and the Ministry of Labor and Employment (now
Department of Labor and Employment) at least one (1) month before
the intended date thereof. . . . (Emphasis supplied)
Here, the instances when the employer may validly terminate the employment of an
employee in the exercise of management prerogative are not present. Petitioners claim
that the position of Sabio as Manager of the Engineering Department was already deleted
or abolished. However, the memorandum dated January 15, 1990 18 which contained the
recommendations for reorganization and replacement of ISECO personnel did not
satisfactorily explain or give a credible justification why the Engineering Department was
abolished. As correctly observed by the Solicitor General, there was merely a change in
nomenclature from "Engineering Department" to "Technical Services Department" while
the classifications of the other departments, namely Administrative, Finance and Member
Services were retained. As there was no evidence presented to show that the abolishment
of the Engineering Department was due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment, then said deletion of the position of Sabio cannot be said to be a proper
exercise of management prerogative. Thus, the dismissal of Sabio was illegal. On this
point, we quote with favor the findings of the Labor Arbiter:
On the first issue, we find complainant illegally and unjustly dismissed
and without due process of law. Gleaned from the facts presented and
the evidence adduced, respondents anchored the dismissal of
complainant on the alleged overt (sic) acts of unauthorized assumption
of authority and power to relay message through the Radio Operator
when such authority is exclusively reposed to the General Manager or
his duly authorized representative for confidentiality of information;
unauthorized assumption of power and authority by requesting NEA for
the replacement of respondent AGM Bautista when such authority is
exclusively repose and vested to the Board of Directors as a corporate
body for a corporate action which complainant arrogated unto himself
without authority; alleged solicitation of signatures to the petition for the
replacement of AGM Bautista, personally or thru linemen from
Personnel of Main Office and Sub-Offices during office hours,
hampering the operation of their respective offices, causing confusion
and diversion among rank and file employees, factionalism among
supervisors, endangering the positive gains of the cooperative as
proven by the 25% system loss for the months March, April and May
which ultimately and finally will lead to the downfall and disintegration of
ISECO and as part of the confusion; lead to the disconnection of
ISECO by the National Power Corporation and depriving the
cooperative employees of the benefits they are now enjoying; and the
alleged failure of complainant to coordinate with the NPC on the higher
contracted energy and demand for power allocation to NPC when
National Tobacco Corporation deferred its operation for one month
causing the NPC to penalize ISECO in the amount of P139,000.00 for
failure to use the higher contracted energy and demand allocation for
National Tobacco Corporation. All these accusations were ably refuted
by complainant and the record is bereft of any substantial evidence to
show complainant's alleged offenses. Indeed, nowhere in the record
shows that complainant sent unauthorized messages or communication
duly signed by him and relayed through the radio operator to the NEA
or to any other agency. Nor is there any showing that Engr. Sabio
prepared any letter/request or petition for the replacement of
respondent Bautista as ISECO Acting General Manager. What is clear
and revealing though, and respondent admits, is that AGM Bautista
called the complainant to his office on June 9, 1989, a day after
complainant wrote Atty. Manuel Agpalo, President of the ISECO Board
of Directors about the expenses of AGM Bautista in the amount of
P131,788.79 covering the period May 1988 to May 1989 and his
absences totalling two hundred-twenty (220) days as compared to the
expenses of the previous Acting General Manager Genaro O. Cada
which is only P10,000.00 more or less covering the same span of time.
On this occasion, AGM Bautista tried to convince the complainant to
resign so he could paid (sic) all his separation benefits or that
complainant may apply as Acting General Manager of the Abra Electric
Cooperative. But when complainant inquired as to the reason why he is
being asked to resign, respondent Bautista cannot give an answer and
again presented another option to complainant for the latter to file his
vacation leave immediately or on or before 10:00 o'clock in the morning
of the following day (June 10, 1989). And failing to convince
complainant either to resign or file his vacation leave, AGM Bautista
informed complainant that he (Bautista) will terminate him just the
same. These acts of respondent Bautista, taken together, clearly
manifest and indubitably show his desire to ease out complainant from
his job. And true enough, he carried out his scheme and succeeded in
having complainant eventually terminated by issuing his Office Order to
that effect in succession firstly, by relieving complainant thru
Memorandum No. 47-89, dated June 10, 1989, immediately and
directing him to turn over all the documents and accountabilities in his
(complainant) possession to the designated OIC, Engr. Fred R. Jacob.
The said relief memo does not contain any reason why complainant is
being relieved from his job; secondly, by placing complainant under
preventive suspension effective July 1, 1989 for 30 days as per Official
Order No. 143-89 dated June 29, 1989 on the sole ground that
complainant's explanation in compliance to Memo No. 55-89 dated
June 16, 1989 is allegedly satisfactory; thirdly, creating an Ad Hoc thru
Office Memo No. 68-89 dated July 13, 1989 to investigate complainant
which is composed of his chosen men two (2) of whom, before being
named as members of the Ad Hoc Committee, executed affidavits in
favor of AGM Bautista. Hesitantly, complainant did not submit himself to
the Ad Hoc Committee for it is evident that the body cannot act
 objectively on his case. While AGM Bautista may be clothed with the
authority to create the same and appoint members thereto, fairness
demand and prudence dictates that the members composing the
investigating body should be free from any cloud of doubt of being
partial, nay, subservient to the appointing authority and biased against
the person under investigation. This is not so in this case. As heretofore
mentioned, two members had previously executed their written support
in favor of AGM Bautista which they have coupled with their strongly
worded subsequent recommendation for the ouster of complainant after
their "ex-parte" investigation which ended with their verdict thus . . .
"regardless of whether they have valid grounds or none at all." A
perusal of this portion of the Ad Hoc Committee's recommendation,
read together with the rest of the committee's disposition and taking into
account all the attendant circumstances of the issue, they have delved
upon, creates an impression that within the ISECO, even legitimate
grievances from employees as what complainant did in this instant
case, seemingly cannot be tolerated. It is too clear that the main reason
complainant earned the ire and disgust of respondent AGM Bautista is
his courage in bringing to the attention of the ISECO Board of Directors
what he believed as extravagance on the part of respondent Acting
General Manager and his absences from his ISECO office for 220 days
covering the period May 26, 1988 to May 25, 1989 and spending the
amount of P131,732,79 as compared to the expenses and absences of
the former Acting General Manager who spent no more than
P10,000.00 and stayed out of his ISECO office for not more than 30-
days covering almost the same period of time in comparison. Clearly,
the complainant was acting in good faith and merely exercising his
bounden duty, as he puts it in his letter of apology and explanation, to
protect the interest of the cooperative of which he is a member-
consumer and incidentally its employee. 19

Finally, the findings of fact of the Labor Arbiter that Sabio was illegally dismissed by
ISECO Board of Directors were based on substantial evidence. In certiorari proceedings
under Rule 65 of the Rules of Court, judicial review by this Court does not go so far as to
evaluate the sufficiency of evidence upon which the Labor Arbiter and the NLRC based
their determinations, the inquiry being limited essentially to whether or not said public
respondents had acted without or in excess of its jurisdiction or with grave abuse of
discretion. 20 More importantly, this Court is bound by the findings of fact there being no
showing that either the Labor Arbiter or the NLRC gravely abused its discretion or
otherwise acted without jurisdiction or in excess of the same. 21

WHEREFORE, premises considered, the petition is hereby DISMISSED for lack of merit.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-104033 December 27, 1993
NOE S. ANDAYA, petitioner,
vs.
LISANDRO C. ABADIA, RENE R. CRUZ, VICTOR M. PUNZALAN, LYSIAS C.
CABUSAO, JOSE O. BARNUEVO, JOSE M. FORONDA, LAMBERTO TORRES,
EDGAR C. GALVANTE, EMERSON C. TANGAN, PRIMITIVO A. SOMERA, and
BENJAMIN N. SANTOS, SR., respondents.
Bernardo P. Fernandez and Doroteo B. Daguna for petitioner.
M.M. Lazaro & Associates for respondents.
BELLOSILLO, J.:
Maintaining that the Regional Trial Court (RTC) and not the securities and Exchange
Commission (SEC) has jurisdiction over his complaint, petitioner argues that the court a
quo 1 should not have dismissed Civil Case No. Q-91-10470 filed by him against herein
respondents, who were original defendants in the court below. He asserts that "actually,
the complaint is based not so much on plaintiff's attempted removal but rather on
the manner of his removal and the consequent effects thereof." 2 Specifically, he alleges in
his petition that
Before the Regional Trial Court, Branch 101, Quezon City, in an action
denominated "Injunction and Damages with Restraining Order and/or
Preliminary Injunction", docketed as Civil Case No. Q-91-10470 of said
Court, petitioner NOE S. ANDAYA, as plaintiff, sued respondents
LISANDRO C. ABADIA, RENE R. CRUZ, VICTOR M. PUNZALAN,
LYSIAS C. CABUSAO, JOSE O. BARNUEVO, JOSE M. FORONDA,
LAMBERTO TORRES, EDGAR C. GALVANTE, EMERSON, C.
TANGAN, PRIMITIVO A. SOMERA AND BENJAMIN N. SANTOS, SR.,
as defendants, alleging . . . that said respondents, as directors of the
Armed Forces and Police Savings and Loan Association, Inc.,
(AFPSLAI) . . . acting in concerts and pursuant to an illegal and
nefarious scheme to oust petitioner from his then positions as President
and General Manager of the AFPSLAI, with grave abuse of authority
and in gross and deliberate violation of the norms of human relations
and of petitioner's right to due process, illegally, maliciously and with
evident bad faith, convened a meeting of the AFPSLAI Board of
Directors and illegally reorganized the management of AFPSLAI by
ousting and removing, without just and lawful cause, petitioner from his
positions therein, causing petitioner moral and exemplary damages,
and praying . . . for the issuance of a temporary restraining order . . .
and . . . a writ of preliminary injunction, restraining respondents from
implementing the result of the irregularity convened and illegally
conducted reorganization of the management of AFPSLAI, as well as
respondents Punzalan and Tangan from assuming and taking over
from petitioner the offices of President and General Manager of said
AFPSLAI and from performing and exercising the functions and powers
thereof pending final determination of the case.3
On 30 October 1991, the trial court granted the prayer of petition for temporary restraining
order and set the hearing on the injunctive relief.4
On 4 November 1991, respondents filed an Urgent Motion to Dismiss on the ground that
the complaint raised intra-corporate controversies over which the Securities and Exchange
Commission, and not the court a quo, has exclusive original jurisdiction. 5 On 5 November
1991, respondents filed an Urgent Motion to Lift Restraining Order and Opposition to
Preliminary Injunction. 6 Petitioner filed a Consolidated Opposition to Urgent Motion to
Dismiss and Motion to Lift Restraining Order with Reply to Opposition to Preliminary
Injunction and Reiteration of Motions for Contempt (for violation of the Temporary
Restraining Order), arguing that "the case is mainly based not on petitioner's attempted
removal per se but rather on the manner of his removal and the effect thereof, which was
done anti-socially, oppressively, in gross violation of the norms of human relations and
without giving petitioner his due . . ."7
On 12 November 1991, before the trial court could rule on the motion to dismiss, petitioner
filed an amended complaint impleading as additional defendants then Central bank
Governor Jose L. Cuisia, Jr., Central Bank SRDC Managing Director Ricardo P. Lirio and
Central Bank SES Acting Director Candon B. Guerrero. 8 On 13 November 1991,
respondents filed an Omnibus Motion contending, inter alia, that the filing of an amended
complaint seeking to confer jurisdiction on the court was improper and should not be
allowed.9
On 14 November 1991, Judge Pedro T. Santiago of the court a quo issued an order
dismissing the case for lack of jurisdiction insofar as herein respondents were concerned
and denied petitioner's motions to declare respondents in contempt of court. While the
order mentioned the amended complaint, it made no express disposition thereon. It simply
ruled that
Evidently, the prayers for damages and injunction are predicated on
corporate matters. It should be stressed at this point that the subject
causes of action stated in the complaint, from the alleged illegal notices
of meetings to the election and tenure of officers, are matters covered
by the AFPSLAI By-Laws. Specifically, on the allegation that the plaintiff
was ousted and removed in a votation by the AFPSLAI Board of
Directors, whether rightly or without just cause, this is covered by the
AFPSLAI By-Laws, Sec. 3, that: "All executive officers shall hold office
at the pleasure of the Board, and all other officers, agents and
employees shall hold office for such time as it is provided for in their
contract of employment and if none is provided, at the pleasure of the
Board (emphasis supplied).
 The specific law, P.D. No. 902-A, defines and vests jurisdiction over
corporate matter in the Securities and Exchange Commission in no
uncertain terms, Section 3, to be "absolute jurisdiction, supervision and
control over all corporations." In the case at bar, AFPSLAI is a
corporation and the alleged causes of action in the complaint are
clearly corporate matters.
The damages sought as a consequence of the alleged corporate
wrongs committed by the defendants becomes merely incidental. The
other relief for injunction prayed for is also within the jurisdictional
power of the SEC (Sec. 6, P.D. 902-A).
In resume therefore, the very allegations in the complaint being
indubitably corporate matters militate against the jurisdiction of this
Court over the instant case. 10
On 18 November 1991, petitioner moved to reconsider the 14 November 1991 order
arguing, among others, that "since the case under Amended Complaints impleads parties-
defendant not in any way connected with the AFPSLAI, any apparent corporate element in
the case is swept away." 11 Respondents filed an opposition thereto, and on 10 February
1992, the court a quo denied the motion for reconsideration as well as the motion to
dismiss the amended complaint earlier filed by defendants Cuisia, et al., holding that
. . . the fact remains that the substance and essence of the complaint
against the original 11 defendants in both the first and the amended
complaint are the same that the said defendants are being held
civilly liable for their corporate acts in the AFPSLAI.
Consequently, the Court finds no reason to change its lack of resolution
dismissing the instant complaint FOR LACK OF JURISDICTION insofar
as the original defendants are concerned, namely: Lisandro C. Abadia,
Rene R. Cruz, Victor M. Punzalan, Lysias C. Cabusao, Jose O.
Barnuevo, Jose M. Foronda, Lamberto Torres, Edgar C. Galvante,
Emerson C. Tangan, Primitivo A. Somera, Benjamin N. Santos, Sr.
. . . . Thus, where the defendants Abadia, et al., were dismissed from
the case, it does not necessarily follow that the whole case, specifically
the amended complaint, is also dismissed as the allegations therein
insofar as the defendants Cuisia, et al. . . . . are concerned, are within
the context of the jurisdiction of this Court. The matter does not only
present a case of splitting the causes of action, which is frowned upon,
but a matter of jurisdiction. This Court has no jurisdiction on corporate
matters as in the case of defendants Abadia, et al. . . . . but no so,
however, in the case of defendants Cuisia, et al . . . . where their
alleged acts stated in the amended complaint fall within the jurisdiction
of the Court. 12
Petitioner now comes to us on appeal praying for the reversal of the orders of the court
dated 14 November 1991 and 10 February 1992 insofar as the case against herein
respondents is concerned.
The allegations against herein respondents in the amended complaint unquestionably
reveal intra-corporate controversies cleverly concealed, although unsuccessfully, by use of
civil law terms and phrases. The amended complaint impleads herein respondents who, in
their capacity as directors of AFPSLAI, allegedly convened an illegal meeting and voted for
the reorganization of management resulting in petitioner's ouster as corporate officer.
While it may be said that the same corporate acts also give rise to civil liability for
damages, it does not follow that the case is necessarily taken out of the jurisdiction of the
SEC as it may award damages which can be considered consequential in the exercise of
its adjudicative powers. Besides, incidental issues that properly fall within the authority of a
tribunal may also be considered by it to avoid multiplicity of actions. Consequently, in intra-
corporate matters such as those affecting the corporation, its directors, trustees, officers,
shareholders, the issue of consequential damages may just as well be resolved and
adjudicated by the SEC.
Moreover, mere allegations of violation of the provisions of the Civil Code on human
relations do not necessarily call for the application of the provisions of the Civil Code in
place of AFPSLAI By-Laws. In De Tavera v. Philippine Tuberculosis Society, Inc., 13 ruled
Petitioner cannot likewise seek relief from the general provisions on the
New Civil Code on Human Relations nor from the fundamental
principles of the New Constitution on preservation of human dignity.
While these provisions present some basic principles that are to be
observed for the rightful relationship between human beings and the
stability of social order, these are merely guides for human conduct in
the absence of specific legal provisions and definite contractual
stipulations. In the case at bar, the Code of By-Laws of the Society
contains a specific provision governing the term of office of petitioner.
The same necessarily limits her right under the new Civil Code and the
New Constitution upon acceptance of the appointment.
The determination of the rights of petitioner arising from the alleged illegal convening of the
meeting of AFPSLAI Board of Directors and his subsequent ouster from corporate offices
as a result of the voting for the reorganization of management are obviously intra-
corporate controversies subject to the jurisdiction of SEC as provided in P.D. No. 902-A
which states:
Sec. 5. In addition to the regulatory and adjudicative functions of the
Securities and Exchange Commission over corporations . . . it shall
have original and exclusive jurisdiction to hear and decide cases
involving . . . . (b) Controversies arising out of intra-corporate . . .
relations . . . . (c) Controversies in the election or appointment of
directors, trustees, officers or managers of such corporations . . . .
The same may also be said of petitioner's prayer for damages, considering that his right
thereto either depends on, or is inextricably linked with, the resolution of the corporate
controversies. For instance, the prayer for moral damages is grounded on "defendants'
gross and evident bad faith, insidious machinations and conspirational acts, false and
derogatory misinterpretations and imputations against plaintiff and other malevolent and
illegal acts calculated to realize and accomplish the threatened illegal removal of plaintiff
from his positions aforesaid . . . .;" 14while the prayer for exemplary damages is dependent
on alleged respondents' "concerted illegal effort to maliciously set him up for, and
fraudulently consummate, his illegal ouster from his positions in the AFPSLAI . . . ." 15
Even the supposed allegations of violation of the provisions of the Civil Code on human
relations, as in par. 7 of the Complaint which states that "certain parties, including
defendant SANTOS, "masterminded a plot to degrade plaintiff and to denigrate his
accomplishments in the AFPSLAI by spreading false and derogatory rumors against
plaintiff," are all treated in the complaint as mere components of the general scheme
allegedly perpetrated by respondents as directors to oust him from his corporate offices,
and not as causes of action independent of intra-corporate matters. Moreover, the
injunction prayed for in the complaint is within the jurisdiction of SEC pursuant to Sec. 6,
par. (a), of P.D. 902-A which states: "(i)n order to effectively exercise such jurisdiction, the
Commission shall possess the following powers . . . . (t)o issue preliminary or permanent
injunction, whether prohibitory or mandatory, in all cases in which it has jurisdiction . . . ."
In his Supplemental Appeal by Certiorari With Prayer for Issuance of Preliminary Injunction
or Restraining Order, 16petitioner refers to allegations in pars. 7, 11, 15 and 16 17 of the
complaint which supposedly disclose that the case is within the jurisdiction of the court a
quo. Petitioner wilily, but unavailingly, tries to mangle his complaint, dismember its parts,
and present to us only those paragraphs which he considers are beyond the jurisdiction of
SEC.
We are not distracted by this artful maneuver. In giving utmost importance to these
paragraphs and in treating them as his strongest arguments to support his position,
petitioner unwittingly exposes his achilles' heel. These paragraphs themselves show that
the allegations of violations of the rules on human relations also fall within the jurisdiction
of SEC because they are treated merely as ingredients of "malevolent and illegal acts
calculated to realize and accomplish the threatened illegal removal of plaintiff from his
(corporate) positions."
In sum, what petitioner filed against respondents before the court a quo was an intra-
corporate case under the guise of an action for injunction and damages.
Petitioner also seeks reversal of the assailed orders on the alleged procedural infirmity that
"despite the filing of an Amended Complaint before a responsive pleading has been filed,
which superseded the original complaint and rendered respondents' Motion to Dismiss the
original complaint functus oficio, the Court a quo without first admitting the Amended
Complaint and merely upon respondents' Omnibus Motion . . . dismissed the case as
against respondents."
First of all, under Sec. 2, Rule 10, Rules of Court, the filing of an amended complaint
before answer is an undisputed right of plaintiff, hence, there is no need for the court to
allow its admission. 18 Quite obviously, any statement admitting such amended complaint
may reasonably be considered a superfluity. Considered in this light, the court a quo could
not be faulted for not making any statement admitting the amended complaint.
It appears however that the Omnibus Motion (seeking dismissal of the Amended
Complaint) was already filed when the court a quo rendered the order of 14 November
1991 resolving, not the Omnibus Motion, but the Urgent Motion to Dismiss (seeking
dismissal of the original Complaint). Ordinarily, the filing of the Omnibus Motion should
render the Urgent Motion to Dismiss superseded. 19 Petitioner thus posits that the court a
quo was precluded from acting not only on the Urgent Motion to Dismiss because it was
deemed superseded, but also on the Omnibus Motion because no hearing was had
thereon thus leaving the assailed orders without basis to lean on. Where in this case,
however, the Omnibus Motion already comprehended the lone issue raised in the Urgent
Motion to Dismiss (i.e., the court has no jurisdiction over intra-corporate matters) and upon
which ground the court a quo dismissed the case against respondents, the previous
hearing 20 on the Urgent Motion to Dismiss may cure the defect of absence of hearing on
the Omnibus Motion but only insofar as said issue was concerned. What is important is
that petitioner was heard on that issue, hence, due process was observed. Moreover, the
Omnibus Motion made an express statement adopting the arguments in the Urgent Motion
to Dismiss. While this practice of adopting another pleading is not necessarily
encouraged, 21 the peculiar circumstances of this case demand the application of liberality.
Besides, even if the Urgent Motion to Dismiss may have been deemed superseded, the
Court is not precluded from considering the same which still remains in the record. The
withdrawal of motions or pleadings from the record cannot easily be implied. 22
The foregoing notwithstanding, remedial rights and privileges under the Rules of Court are
utterly useless in a forum that has no jurisdiction over the case. It should be noted that the
court a quo dismissed the case against respondents on the ground that it has no
jurisdiction over the subject matter thereof which mainly involves intra-corporate
controversies.
Jurisdiction over subject matter is essential in the sense that erroneous assumption thereof
may put at naught whatever proceedings the court might have had. Hence, even on
appeal, and even if the parties do not raise the issue of jurisdiction, the reviewing court is
not precluded from ruling that it has no jurisdiction over the case. It is elementary that
jurisdiction is vested by law and cannot be conferred or waived by the parties or even by
the judge. It is also irrefutable that a court may at any stage of the proceedings dismiss the
case for want of jurisdiction. For this matter, the ground of lack of jurisdiction in dismissing
a case is not waivable. Hence, the last sentence of Sec. 2, Rule 9, Rules of Court,
expressly states: "Whenever it appears that the court has no jurisdiction over the subject
matter, it shall dismiss the action."
We note that Sec. 2, Rule 9 uses the word "shall," leaving the court no choice under the
given situation but to dismiss the case. The same Rule also uses the phrase "whenever it
appears," which means at anytime after the complaint or amended complaint is filed,
because the lack of jurisdiction may be apparent from the allegations therein. Hence, from
the foregoing, even if no answer or motion to dismiss is filed the court may dismiss the
case for want of jurisdiction. In this sense, dismissal for lack jurisdiction may be ordered by
the court motu propio. Applying this notion to the case at bar, with the dismissal of the
case against respondents for lack of jurisdiction, it then becomes inconsequential whether
the court acted on the Urgent Motion to Dismiss or on the Omnibus Motion without the
requisite notice as provided in Secs. 4 and 6 of Rule 15 of the Rules of Court. The
determination of lack of jurisdiction over respondents being apparent from the face of the
amended complaint, the defect of want of prior notice and hearing of the Omnibus Motion
could not by itself confer jurisdiction upon the court a quo.
WHEREFORE, finding no reversible error committed by the court a quo, the instant
petition is DISMISSED and the assailed orders of 14 November 1991 and 10 February
1992 are AFFIRMED. Costs against petitioner.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G. R. No. 162322 March 14, 2012
REPUBLIC OF THE PHILIPPINES, Petitioner,
vs.
BANTIGUE POINT DEVELOPMENT CORPORATION, Respondent.
DECISION
SERENO, J.:
This Rule 45 Petition requires this Court to address the issue of the proper scope of the
delegated jurisdiction of municipal trial courts in land registration cases. Petitioner Republic
of the Philippines (Republic) assails the Decision of the Court of Appeals (CA)1 in CA-G.R.
CV No. 70349, which affirmed the Decision of the Municipal Trial Court (MTC) of San
Juan, Batangas2 in LRC Case No. N-98-20, LRA Record No. 68329, granting respondent
Bantigue Point Development Corporations (Corporation) application for original
registration of a parcel of land. Since only questions of law have been raised, petitioner
need not have filed a Motion for Reconsideration of the assailed CA Decision before filing
this Petition for Review.
The Facts
On 17 July 1997, respondent Bantigue Point Development Corporation filed with the
Regional Trial Court (RTC) of Rosario, Batangas an application for original registration of
title over a parcel of land with an assessed value of 4,330, 1,920 and 8,670, or a total
assessed value of 14,920 for the entire property, more particularly described as Lot 8060
of Cad 453-D, San Juan Cadastre, with an area of more or less 10,732 square meters,
located at Barangay Barualte, San Juan, Batangas. 3
On 18 July 1997, the RTC issued an Order setting the case for initial hearing on 22
October 1997.4 On 7 August 1997, it issued a second Order setting the initial hearing on 4
November 1997.5
Petitioner Republic filed its Opposition to the application for registration on 8 January 1998
while the records were still with the RTC.6
On 31 March 1998, the RTC Clerk of Court transmitted motu proprio the records of the
case to the MTC of San Juan, because the assessed value of the property was allegedly
less than 100,000.7
Thereafter, the MTC entered an Order of General Default 8 and commenced with the
reception of evidence.9 Among the documents presented by respondent in support of its
application are Tax Declarations,10 a Deed of Absolute Sale in its favor,11 and a
Certification from the Department of Environment and Natural Resources (DENR)
Community Environment and Natural Resources Office (CENRO) of Batangas City that the
lot in question is within the alienable and disposable zone. 12 Thereafter, it awarded the land
to respondent Corporation.13
Acting on an appeal filed by the Republic,14 the CA ruled that since the former had actively
participated in the proceedings before the lower court, but failed to raise the jurisdictional
challenge therein, petitioner is thereby estopped from questioning the jurisdiction of the
lower court on appeal.15 The CA further found that respondent Corporation had sufficiently
established the latters registrable title over the subject property after having proven open,
continuous, exclusive and notorious possession and occupation of the subject land by
itself and its predecessors-in-interest even before the outbreak of World War II.16
Dissatisfied with the CAs ruling, petitioner Republic filed this instant Rule 45 Petition and
raised the following arguments in support of its appeal:
I.
THE REPUBLIC CANNOT BE ESTOPPED FROM QUESTIONING THE
JURISDICTION OF THE MUNICIPAL TRIAL COURT OVER THE APPLICATION
FOR ORIGINAL REGISTRATION OF LAND TITLE EVEN FOR THE FIRST
TIME ON APPEAL
II.
THE MUNICIPAL TRIAL COURT FAILED TO ACQUIRE JURISDICTION OVER
THE APPLICATION FOR ORIGINAL REGISTRATION OF LAND TITLE.17
The Courts Ruling
We uphold the jurisdiction of the MTC, but remand the case to the court a quo for further
proceedings in order to determine if the property in question forms part of the alienable
and disposable land of the public domain.
I
The Republic is not estopped from raising the issue of jurisdiction in this case.
At the outset, we rule that petitioner Republic is not estopped from questioning the
jurisdiction of the lower court, even if the former raised the jurisdictional question only on
appeal. The rule is settled that lack of jurisdiction over the subject matter may be raised at
any stage of the proceedings.18 Jurisdiction over the subject matter is conferred only by the
Constitution or the law.19 It cannot be acquired through a waiver or enlarged by the
omission of the parties or conferred by the acquiescence of the court. 20 Consequently,
questions of jurisdiction may be cognizable even if raised for the first time on appeal. 21
The ruling of the Court of Appeals that "a party may be estopped from raising such
[jurisdictional] question if he has actively taken part in the very proceeding which he
questions, belatedly objecting to the courts jurisdiction in the event that the judgment or
order subsequently rendered is adverse to him"22 is based on the doctrine of estoppel by
laches. We are aware of that doctrine first enunciated by this Court in Tijam v.
Sibonghanoy.23 In Tijam, the party-litigant actively participated in the proceedings before
the lower court and filed pleadings therein. Only 15 years thereafter, and after receiving an
adverse Decision on the merits from the appellate court, did the party-litigant question the
lower courts jurisdiction. Considering the unique facts in that case, we held that estoppel
by laches had already precluded the party-litigant from raising the question of lack of
jurisdiction on appeal. In Figueroa v. People,24 we cautioned that Tijam must be construed
as an exception to the general rule and applied only in the most exceptional cases whose
factual milieu is similar to that in the latter case.
The facts are starkly different in this case, making the exceptional rule in Tijam
inapplicable. Here, petitioner Republic filed its Opposition to the application for registration
when the records were still with the RTC.25 At that point, petitioner could not have
questioned the delegated jurisdiction of the MTC, simply because the case was not yet
with that court. When the records were transferred to the MTC, petitioner neither filed
pleadings nor requested affirmative relief from that court. On appeal, petitioner
immediately raised the jurisdictional question in its Brief.26Clearly, the exceptional doctrine
of estoppel by laches is inapplicable to the instant appeal.
Laches has been defined as the "failure or neglect, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or should have been
done earlier; it is negligence or omission to assert a right within a reasonable time,
warranting the presumption that the party entitled to assert it either has abandoned or
declined to assert it."27 In this case, petitioner Republic has not displayed such
unreasonable failure or neglect that would lead us to conclude that it has abandoned or
declined to assert its right to question the lower court's jurisdiction.
II
The Municipal Trial Court properly acquired jurisdiction over the case.
In assailing the jurisdiction of the lower courts, petitioner Republic raised two points of
contention: (a) the period for setting the date and hour of the initial hearing; and (b) the
value of the land to be registered.
First, petitioner argued that the lower court failed to acquire jurisdiction over the
application, because the RTC set the date and hour of the initial hearing beyond the 90-
day period provided under the Property Registration Decree. 28
We disagree.
The Property Registration Decree provides:
Sec. 23. Notice of initial hearing, publication, etc. - The court shall, within five days from
filing of the application, issue an order setting the date and hour of the initial hearing which
shall not be earlier than forty-five days nor later than ninety days from the date of the
order. x x x.
In this case, the application for original registration was filed on 17 July 1997. 29 On 18 July
1997, or a day after the filing of the application, the RTC immediately issued an Order
setting the case for initial hearing on 22 October 1997, which was 96 days from the
Order.30 While the date set by the RTC was beyond the 90-day period provided for in
Section 23, this fact did not affect the jurisdiction of the trial court. In Republic v. Manna
Properties, Inc.,31petitioner Republic therein contended that there was failure to comply
with the jurisdictional requirements for original registration, because there were 125 days
between the Order setting the date of the initial hearing and the initial hearing itself. We
ruled that the lapse of time between the issuance of the Order setting the date of initial
hearing and the date of the initial hearing itself was not fatal to the application. Thus, we
held:
x x x [A] party to an action has no control over the Administrator or the Clerk of Court
acting as a land court; he has no right to meddle unduly with the business of such official in
the performance of his duties. A party cannot intervene in matters within the exclusive
power of the trial court. No fault is attributable to such party if the trial court errs on matters
within its sole power. It is unfair to punish an applicant for an act or omission over which
the applicant has neither responsibility nor control, especially if the applicant has complied
with all the requirements of the law.32
Indeed, it would be the height of injustice to penalize respondent Corporation by
dismissing its application for registration on account of events beyond its control.
Moreover, since the RTC issued a second Order on 7 August 1997 setting the initial
hearing on 4 November 1997,33within the 90-day period provided by law, petitioner
Republic argued that the jurisdictional defect was still not cured, as the second Order was
issued more than five days from the filing of the application, again contrary to the
prescribed period under the Property Registration Decree. 34
Petitioner is incorrect.
The RTCs failure to issue the Order setting the date and hour of the initial hearing within
five days from the filing of the application for registration, as provided in the Property
Registration Decree, did not affect the courts its jurisdiction. Observance of the five-day
period was merely directory, and failure to issue the Order within that period did not
deprive the RTC of its jurisdiction over the case. To rule that compliance with the five-day
period is mandatory would make jurisdiction over the subject matter dependent upon the
trial court. Jurisdiction over the subject matter is conferred only by the Constitution or the
law.35 It cannot be contingent upon the action or inaction of the court.
This does not mean that courts may disregard the statutory periods with impunity. We
cannot assume that the law deliberately meant the provision "to become meaningless and
to be treated as a dead letter."36 However, the records of this case do not show such
blatant disregard for the law. In fact, the RTC immediately set the case for initial hearing a
day after the filing of the application for registration,37 except that it had to issue a second
Order because the initial hearing had been set beyond the 90-day period provided by law.
Second, petitioner contended38 that since the selling price of the property based on the
Deed of Sale annexed to respondents application for original registration was
160,000,39 the MTC did not have jurisdiction over the case. Under Section 34 of the
Judiciary Reorganization Act, as amended,40 the MTCs delegated jurisdiction to try
cadastral and land registration cases is limited to lands, the value of which should not
exceed 100,000.
We are not persuaded.
The delegated jurisdiction of the MTC over cadastral and land registration cases is indeed
set forth in the Judiciary Reorganization Act, which provides:
Sec. 34. Delegated Jurisdiction in Cadastral and Land Registration Cases. - Metropolitan
Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts may be assigned by
the Supreme Court to hear and determine cadastral or land registration cases covering lots
where there is no controversy or opposition, or contested lots where the value of which
does not exceed One hundred thousand pesos (100,000.00), such value to be
ascertained by the affidavit of the claimant or by agreement of the respective claimants if
there are more than one, or from the corresponding tax declaration of the real property.
Their decision in these cases shall be appealable in the same manner as decisions of the
Regional Trial Courts. (As amended by R.A. No. 7691) (Emphasis supplied.)
Thus, the MTC has delegated jurisdiction in cadastral and land registration cases in two
instances: first, where there is no controversy or opposition; or, second, over contested
lots, the value of which does not exceed 100,000.
The case at bar does not fall under the first instance, because petitioner opposed
respondent Corporations application for registration on 8 January 1998.41
However, the MTC had jurisdiction under the second instance, because the value of the lot
in this case does not exceed 100,000.
Contrary to petitioners contention, the value of the land should not be determined with
reference to its selling price. Rather, Section 34 of the Judiciary Reorganization Act
provides that the value of the property sought to be registered may be ascertained in three
ways: first, by the affidavit of the claimant; second, by agreement of the respective
claimants, if there are more than one; or, third, from the corresponding tax declaration of
the real property.42
In this case, the value of the property cannot be determined using the first method,
because the records are bereft of any affidavit executed by respondent as to the value of
the property. Likewise, valuation cannot be done through the second method, because this
method finds application only where there are multiple claimants who agree on and make
a joint submission as to the value of the property. Here, only respondent Bantigue Point
Development Corporation claims the property.
The value of the property must therefore be ascertained with reference to the
corresponding Tax Declarations submitted by respondent Corporation together with its
application for registration. From the records, we find that the assessed value of the
property is 4,330, 1,920 and 8,670, or a total assessed value of 14,920 for the entire
property.43 Based on these Tax Declarations, it is evident that the total value of the land in
question does not exceed 100,000. Clearly, the MTC may exercise its delegated
jurisdiction under the Judiciary Reorganization Act, as amended.
III
A certification from the CENRO is not sufficient proof that the property in question is
alienable and disposable land of the public domain.
Even as we affirm the propriety of the MTCs exercise of its delegated jurisdiction, we find
that the lower court erred in granting respondent Corporations application for original
registration in the absence of sufficient proof that the property in question was alienable
and disposable land of the public domain.
The Regalian doctrine dictates that all lands of the public domain belong to the State. 44 The
applicant for land registration has the burden of overcoming the presumption of State
ownership by establishing through incontrovertible evidence that the land sought to be
registered is alienable or disposable based on a positive act of the government. 45 We held
in Republic v. T.A.N. Properties, Inc. that a CENRO certification is insufficient to prove the
alienable and disposable character of the land sought to be registered. 46 The applicant
must also show sufficient proof that the DENR Secretary has approved the land
classification and released the land in question as alienable and disposable. 47
Thus, the present rule is that an application for original registration must be accompanied
by (1) a CENRO or PENRO48 Certification; and (2) a copy of the original classification
approved by the DENR Secretary and certified as a true copy by the legal custodian of the
official records.49
Here, respondent Corporation only presented a CENRO certification in support of its
application.50 Clearly, this falls short of the requirements for original registration.1wphi1
We therefore remand this case to the court a quo for reception of further evidence to prove
that the property in question forms part of the alienable and disposable land of the public
domain. If respondent Bantigue Point Development Corporation presents a certified true
copy of the original classification approved by the DENR Secretary, the application for
original registration should be granted. If it fails to present sufficient proof that the land in
question is alienable and disposable based on a positive act of the government, the
application should be denied.
WHEREFORE, premises considered, the instant Petition for Review is DENIED. Let this
case be REMANDED to the Municipal Trial Court of San Juan, Batangas, for reception of
evidence to prove that the property sought to be registered is alienable and disposable
land of the public domain.
SO ORDERED.
 SECOND DIVISION
[G.R. No. 114928. January 21, 1997]
THE ANDRESONS GROUP, INC., petitioner, vs. COURT OF APPEALS, SPOUSES
WILLIE A. DENATE and MYRNA LO DENATE, respondents.
DECISION
ROMERO, J.:
[1]
Petitioner, The Andresons Group, Inc., questions the decision of the Court of
Appeals which set aside the two orders of the Regional Trial Court of Kalookan City,
Branch 122 which denied private respondents' Motion to Dismiss petitioner's complaint on
the ground of lis pendens.
The facts, as found by the Court of Appeals, show that private respondent Willy
Denate entered into an agency agreement with petitioner as its commission agent for the
sale of distilled spirits (wines and liquors) in Davao City, three Davao provinces and North
Cotabato.
On November 18, 1991, private respondents filed a civil action for collection of sum
of money against petitioner before the Regional Trial Court of Davao City, docketed as
Civil Case No. 21, 061-91. In the complaint, private respondent Willie Denate alleged that
he was entitled to the amount of P882,107.95, representing commissions from petitioner
but that the latter had maliciously failed and refused to pay the same.
A month later, or on December 19, 1991, petitioner likewise filed a complaint for
collection of sum of money with damages and prayer for the issuance of a writ of
preliminary attachment against private respondent with the Regional Trial Court of
Kalookan City, Branch 22, docketed as Civil Case No. C-15214. Petitioner alleged in the
complaint that private respondent still owed it the sum of P1,618,467.98 after deducting
commissions and remittances.
On February 5, 1992, private respondent filed a Motion to Dismiss Civil Case No. C-
15214 with the Kalookan RTC on the ground that there was another action pending
between the same parties for the same cause of action, citing the case earlier filed with the
RTC of Davao City.
On February 14, 1992, petitioner filed its opposition to the Motion to Dismiss on the
ground that the RTC of Davao had not acquired jurisdiction over it.
On April 24, 1992, the RTC of Kalookan City issued the questioned order, the
decretal portion of which states:
"The Court finds the instant motion without merit.
Admittedly, the Davao case involves the same parties, and involves substantial identity in
the case of action and reliefs sought, as in the instant case.
Perusal of the record in this case, however, shows that jurisdiction over the parties has
already been acquired by this Court, as herein defendants received their summons as
early as January 8, 1992, and the plaintiff's prayer for issuance of a writ of preliminary
attachment has been set for hearing last January 21, 1992, but which hearing was
cancelled until further notice because of the filing of the instant motion to dismiss by the
defendants herein on February 17, 1992, after asking for extension of time to file their
responsive pleading. Clearly, the instant case has been in progress as early as January of
this year. On the other hand, the summons in the Davao case has not yet been served as
of April 21, 1992, the date of the hearing of the instant motion, so much so that the said
Davao Court has not yet acquired jurisdiction over the parties."
On May 29, 1992, private respondents filed a Motion for Reconsideration, which was
denied by the trial court on July 1, 1992. The case was then elevated to the Court of
Appeals which set aside the order of the trial court.
Hence, this petition.
The sole issue set for resolution before the Court is: Should the action in the
Kalookan RTC be dismissed on the ground of lis pendens?
We hold in the affirmative.
Lis pendens as a ground for the dismissal of a civil action refers to that situation
wherein another action is pending between the same parties for the same cause of
action.[2] To constitute the defense of lis pendens, it must appear that not only are the
parties in the two actions the same but there is substantial identity in the cause of action
and relief sought.[3]Further, it is required that the identity be such that any judgment which
may be rendered in the other would, regardless of which party is successful, amount to res
judicata on the case on hand.[4]
All these requisites are present in the instant case. The parties in the Davao and
Caloocan cases are the same. They are suing each other for sums of money which arose
from their contract of agency. As observed by the appellate court, the relief prayed for is
based on the same facts and there is identity of rights asserted. Any judgment rendered in
one case would amount to res judicata in the other.
In conceptualizing lis pendens, we have said that like res judicata as a doctrine, litis
pendentia is a sanction of public policy against multiplicity of suits. [5] The principle upon
which a plea of another action pending is sustained is that the latter action is deemed
unnecessary and vexatious.[6]
Petitioner asserts that the Davao Court had not yet acquired jurisdiction over the
parties as the summons had not been served as of April 21, 1992 and it claims that
pendency of a case, as contemplated by the law on lis pendens, presupposes a valid
service of summons.
This argument is untenable. A civil action is commenced by filing a complaint with the
court.[7] The phraseology adopted in the Rules of Court merely states that another action
pending between the same parties for the same cause is a ground for motion to dismiss.
As worded, the rule does not contemplate that there be a prior pending action, since it is
enough that there is a pending action.[8] Neither is it required that the party be served with
summons before lis pendens should apply.
In Salacup v. Maddela,[9] we said:
"The rule of lis pendens refers to another action. An action starts only upon the filing of a
complaint in court.

The fact that when appellant brought the present case, it did not know of the filing of a
previous case against it by appellees, and it received the summons and a copy of the
complaint only after it had filed its own action against them, is immaterial. Suffice it to state
that the fact is, at the time it brought the present case, there was already another pending
action between the same parties seeking to assert identical rights with identical prayers for
relief based on the same facts, the decision in which would be res judicata herein."

It must be emphasized that the rule on litis pendentia does not require that the later
case should yield to the earlier.[10] The criterion used in determining which case should be
abated is which is the more appropriate action[11] or which court would be "in a better
position to serve the interests of justice."[12]

Applying these criteria, and considering that both cases involve a sum of money
collected in and around Davao, the Davao Court would be in a better position to hear and
try the case, as the witnesses and evidence would be coming from said area.
WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED. Costs
against petitioner.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-45107 November 11, 1991
BENEDICTO RAMOS, petitioner,
vs.
HON. ELVIRO L. PERALTA, Presiding Judge, Branch XVII, Court of First Instance of
Manila, SPOUSES JUVENCIO ORTANEZ and JULIANA S. ORTANEZ, MINDANAO
INSURANCE CO., INC. and P. R. ROMAN, INC.,respondents.
Angel Suntay, Jr. and Renato M. Coronado for petitioner.
Tolentino, Garcia, Cruz & Reyes for respondents Ortanez.
FERNAN, C.J.:
Put in issue in this petition for review on certiorari is the propriety of the dismissal by the
then Court of First Instance of (CFI) of Manila, Branch XVII of petitioner's action for
consignation of the sum of P70,000.00 representing advance rentals for the 101-hectare
Salgado fishpond located in Bo. Balut, Pilar, Bataan.
Petitioner started occupying the Salgado fishpond in 1964 by virtue of a lease contract
executed in his favor by private respondents spouses Juvencio and Juliana Ortanez. The
original lease for a term of five (5) years from January 1, 1964 to January 1, 1990, was
renewed several times, the last renewal being on June 28, 1974 under a "Kasunduan sa
Pag-upa" for a period of three (3) years starting January 1, 1975 to December 31, 1977.
Unknown to petitioner, title 1 to said property was in the name of Philippine International
Surety Co., Inc., a corporation founded, organized and 99.5%-owned by the Salgado
spouses. Later renamed Mindanao Insurance Co., Inc., 2 said corporation was placed
under receivership and liquidation on June 20, 1968 in Civil Case No. Q-10664 of the then
CFI of Rizal, Branch IV, Quezon City, upon application of Insurance Commissioner
Gregoria Cruz-Ansaldo who was appointed receiver.
Thereafter on February 23, 1976, respondent P. R. Roman, Inc. purchased from Mindanao
Insurance the Salgado fishpond for P950,000.00. The deed of sale was signed by the
receiver and duly approved by the liquidation court.
Apparently due to this development, the spouses Ortanez refused to accept from petitioner
the advance rentals on the fishpond due on March 15, 1976 in the amount of P30,000.00.
On or about May 1, 1976, petitioner received a letter from Don Pablo R. Roman informing
him of the latter's acquisition of the fishpond and intention to take possession thereof on
May 16, 1976. In his letter-reply, petitioner reminded Mr. Roman of his lease contract over
the fishpond and refused to consent to the intended take over. Notwithstanding petitioner's
objection, P. R. Roman, Inc. took over possession of the fishpond.
On August 2, 1976, petitioner filed before the CFI of Manila the aforesaid complaint,
docketed as Civil Case No. 103647, 3 against private respondents Juvencio and Juliana
Ortanez, Mindanao Insurance and P. R. Roman, Inc. for consignation of the sum of
P70,000.00 representing advance rentals on the fishpond in the amounts of P30,000.00
and P40,000.00 respectively due on March 15, 1976 and June 15, 1976, which he had
previously tendered to, but refused by the spouses Ortanez and Pablo Roman.
P. R. Roman, Inc. filed a motion to dismiss on the grounds that venue was improperly laid,
the complaint states no cause of action and the court has no jurisdiction over the subject of
the action or suit. In its motion to dismiss, P. R. Roman, Inc. cited the pendency before the
then CFI of Bataan of Civil Case No 4102 instituted by P.R. Roman, Inc. against petitioner
Benedicto Ramos on August 13, 1976 to quiet its title over the Salgado fishpond.
On August 27, 1976, respondent CFI of Manila issued an order 4 dismissing Civil Case No.
103647, stating in part:
Without discussing in detail the grounds mentioned above, the Court really sees
that this case should be dismissed not only insofar as against P. R. Roman, Inc.
but also as against the other defendants mentioned above for the reason,
principally, that there is already a case pending between the same parties and for
the same cause in Civil Case No. 4102 of Branch II of the Court of First Instance
of Bataan, entitled P. R. Roman, Inc. vs. Benedicto Roman, which is precisely for
the ownership of the subject matter of the property allegedly leased to the plaintiff
herein (Exhibit "A"-Motion). In the said case, the defendant therein, Benedicto
Ramos, who is the plaintiff in the case at bar, filed a motion for leave to file a
third-party complaint against the spouses surnamed Ortanez and the Mindanao
Insurance Company Inc. All the issues respecting the fishpond, including the
lease contract, are necessarily involved in the case pending now in Bataan.
Aside from the above, the Court cannot decide this case because it cannot pre-
empt the Court of Bataan on whether or nor the P. R. Roman, Inc. is already the
owner because if it finds that the said defendant P. R. Roman, Inc. is really the
owner of the fishpond, there is no more lease for which rentals are to be paid.
Petitioner moved for reconsideration, but was unsuccessful, the court a quo, standing "pat
on its previous order and reiterat(ing) its dismissal of the case, without costs." 5
Hence this petition anchored on the following ascribed errors of law: 6
1. The respondent court erred in not holding that the only issue in consignation of funds is whether the defendant is willing to
accept the proffered payment or not.
2. The respondent court erred in not holding that the prerogative of choosing the proper venue belongs to the plaintiff.
 3. The respondent court erred in holding that the subsequent filing of Civil Case No. 4102 before the Court of First Instance of
Bataan is a bar to the prosecution of Civil Case No. 103647 before it.
Petitioner contends that the Bataan quieting-of-title Civil Case No. 4102 cannot serve as a bar to his Manila consignation Civil Case No.
103647 because they involve different issues. Civil Case No. 4102 deals with the question of ownership while the only issue involved in his
consignation case is whether or not the defendant is willing to accept the proffered payment. In fact, petitioner posits, the action to quiet title
is a useless futile exercise as he does not question P. R. Roman Inc.'s ownership of the fishpond under consideration, but merely wishes to
assert his leasehold and possessory rights over said property under the "Kasunduan sa Pag-upa." He further contends that compelling him
to litigate before the Bataan court would render nugatory his right as a plaintiff to choose the venue of his action. Besides, Civil Case No.
103647 was filed on August 2, 1976, ahead of Civil Case No. 4102 which was filed on a much later date, August 13, 1976, after the Manila
CFI had already acquired jurisdiction over Civil Case No. 103647.
Private respondents counter that the view taken by petitioner of the Manila consignation case is quite limited and bookish, because while it
may be true that theoretically, the main issue involved in a consignation case is whether or not the defendant is willing to accept the
proffered payment, in the consignation case brought by petitioner, other issues were pleaded by petitioner himself, such as the validity and
binding effect of the lease contract and the existence of the supposed obligor-obligee relationship. They further contend that a plaintiffs right
of choice of venue is not absolute, but must invariably how to the dismissal of the case because of litis pendentia which, in refutation of
petitioner's argument, does not require that there is a prior pending action, merely that there is a pending action.
We find for respondents.
Under the rules and jurisprudence, for litis pendentia to be invoked as a ground for the dismissal of an action, the concurrence of the
following requisites is necessary: (a) Identity of parties or at least such as represent the same interest in both actions; (b) Identity of rights
asserted and relief prayed for, the relief being founded on the same facts; and (c) The identity in the two cases should be such that the
judgment that may be rendered in one would, regardless of which party is successful, amount to res judicata in the other. 7
These requisites are present in the case at bar. It is worthwhile mentioning that in his basic petition for review, one of the assigned errors of
petitioner is that the respondent court erred in not holding that the parties in Civil Case No. 4102 are not the same as the parties in Civil
Case No. 103647. 8
However, in his brief, no further mention of this assigned error was made; a
clear indication of petitioner's admission of the identity of parties in Civil Case No. 4102
and Civil Case No. 103647, particularly as he filed a third party complaint in Civil Case No.
4102 against the spouses Ortanez and Mindanao Insurance.
Anent the second element, we agree with private respondents' observation that petitioner's
approach to his consignation case is quite constricted. His contention that the only issue in
a consignation case is whether or not the defendant is willing to accept the proffered
payment is true only where there is no controversy with respect to the obligation sought to
be discharged by such payment. His consignation case, however, is not as simple. While
ostensibly, the immediate relief sought for in his consignation case is to compel therein
defendants to accept his advance rentals, the ultimate purpose of such action is to compel
the new owner of the fishpond to recognize his leasehold rights and right of occupation. In
the last analysis, therefore, the issue involved in Civil Case No. 103647 is the right of
possession over the fishpond intertwined with the validity and effectivity of the lease
contract.
This is the same issue involved in Civil Case No. 4102. Although an action for quieting of
title refers to ownership, P. R. Roman, Inc. in its
complaint 9 in Civil Case No. 4102 alleged:
5. There is a cloud on the aforesaid titles of plaintiff on the said agricultural land,
marked Annexes "A", "B" and "C" hereof, as well as on its right of possession
over that real property by reason of a certain "Kasunduan sa Pagupa" (Contract
of Lease) dated June 28, 1974 executed by and between the spouses Jovencio
Ortanez and Juliana S. Ortanez purportedly as "may-ari/Nagpapaupa"
(owner/lessor) and the defendant as lessee, which instrument is apparently valid
or effective but in truth and in fact invalid, ineffective, voidable or unenforceable,
and is prejudicial to the said titles of plaintiff as well as to its right of possession
over the same fishpond/agricultural land in Barrio Balut, Pilar, Bataan.
Thus, while the respondent court in the assailed order of dismissal dated August 27, 1976
described Civil Case No. 4102 as "precisely for the ownership of the subject matter of the
property allegedly leased to the plaintiff herein," 10its order dated October 22, 1976 denying
petitioner's motion for reconsideration, more perceptively stated: 11
In Civil Case No. 4102 of the Court of First Instance of Bataan, entitled P. R. Roman, Inc. vs. Benedicto Ramos one of the
principal issues is the possession of the fishpond subject matter of the lease supposed rents of which are supposed to be
consignated in the instant case, plaintiff P. R. Roman, Inc. there, claiming to be entitled to the possession of said property as
owner under a certificate of title and defendant Benedicto Ramos, plaintiff here, anchoring his claim of possession upon his
lease with the Ortanez spouses against whom, on his motion, he filed a third party complaint in which he prayed in the
alternative, that should he lose possession of the fishpond in favor of P. R. Roman, Inc., the Ortanezes should be condemned
to reimburse him the rentals he has already paid for the unexpired portion of the lease. The issue of whether or not the lease
subsists even as regards P. R. Roman, Inc., for it is the view of Ramos that it bought the property with knowledge of the
lease, is squarely planted in the case before the Court of First Instance of Bataan, and, consequently, the more appropriate
court with which rents are to be consignated. . . .
That whatever decision may be handed down in Civil Case No. 4102 would constitute res judicata in Civil Case No. 103647 is beyond cavil.
Should the Bataan court rule that the lease contract is valid and effective against P. R. Roman, Inc., the petitioner can compel it to accept his
proffered payment of rentals; otherwise, he may not do so.
Petitioner next contends that the dismissal of Civil Case No. 103647 deprived him of his right to choose the venue of his action. Verily, the
rules on the venue of personal actions are laid down generally for the convenience of the plaintiff and his witnesses. But, as observed by
private respondents, this right given to the plaintiff is not immutable. It must yield to the greater interest of the orderly administration of
justice, which as in this case, may call for the dismissal of an action on the basis of litis pendentia to obviate the possibility of conflicting
decisions being rendered by two different courts. 12
As private respondents would put it, "(T)he Rules of Court are not perfect. It does not pretend to be able to make everyone happy
simultaneously or consecutively or all the time. Even the Rules of Court has hierarchy of values; thus, the choice of venue may bow to
dismissal of the case because of litis pendentia. 13
At any rate, petitioner cannot complain of any
inconvenience arising from the dismissal of Civil Case No. 103647. Being the defendant in
Civil Case No. 4102, he cannot but litigate before the Bataan court, and bringing his
consignation case before the same court would actually save him time, effort and litigation
expenses.
Finally, the rule on litis pendentia does not require that the later case should yield to the
earlier case. What is required merely is that there be another pending action, not
a prior pending action. Considering the broader scope of inquiry involved in Civil Case No.
4102 and the location of the property involved, no error was committed by the lower court
in deferring to the Bataan court's jurisdiction.

WHEREFORE, the assailed decision dated August 27, 1976 of the then Court of First
Instance of Manila, Branch XVII, is AFFIRMED in toto. This decision is immediately
executory, with costs against petitioner.

SO ORDERED.
 SO ORDERED.[3]
Republic of the Philippines
Supreme Court
Manila On January 9, 2004, petitioner Jesse Yap (Yap) filed a complaint against

respondents Eliza Chua (Chua) and Evelyn Te (Te) with the Regional Trial Court (RTC)

of MakatiCity principally praying for the cancellation or discharge of several checks that he
SECOND DIVISION
drew against his account with the Bank of the Philippine Islands (BPI). Yaps complaint was

JESSE YAP, G.R. No. 186730 docketed as Civil Case No. 04-030 and raffled to Branch 66.
Petitioner,
Present:
Yap alleged that he purchased several real properties through Te, a real estate
- versus - CARPIO, J.,
Chairperson, broker, and as payment, delivered to her a number of checks either payable to her, the
BRION,
COURT OF APPEALS (SPECIAL PEREZ, property owners or to the various individuals who agreed to finance his acquisitions. He
ELEVENTH [11TH] DIVISION), SERENO, and
and ELIZA CHUA and EVELYN TE, REYES, JJ. agreed to effect payment in such manner on Tes claim that this will expedite the transfer of
Respondents.
Promulgated: the titles in his favor.

June 13, 2012

Chua, one of those who funded his purchases, asked him to issue checks with
x----------------------------------------------------------------------------------------x her as payee to replace the checks he delivered to Te. Obliging, he drew six (6) checks

payable to her against his account with BPI, which were uniformly postdated July 30,
RESOLUTION 1997. Particularly:

Check No. Amount

REYES, J.:
659599 P3,000,000.00
708158 P2,500,000.00
This is a petition for review on certiorari of the Decision[1] dated December 10, 2008 and
708160 P2,756,666.00
Resolution[2] dated February 19, 2009 of the Court of Appeals (CA) in CA-G.R. SP No.
712418 P10,900,000.00
93974. The dispositive portion of the CAs assailed Decision states: 712417 P10,900,000.00
727214 P960,000.00

WHEREFORE, in view of the foregoing premises, judgment is hereby

rendered by us GRANTING the petition filed in this case and the
Orders issued by the public respondent Judge Rommel O. Baybay He stopped payment on the above checks and closed his account when Te failed to
dated October 21, 2005 and January 18, 2006 are hereby SET ASIDE.
Consequently, Civil Case No. 04-030 is hereby ordered deliver the titles on the properties. He also did the same on the following checks that Te
as DISMISSED on account of litis pendentia and violation of the rule
endorsed to Chua for rediscounting without his consent:
against forum-shopping.
 Check No. Date Amount
Apparently, Yap also delivered to Chua BPI Check Nos. 659599 and 708158 to replace the
0727205 September 15, 1997 P770,833.33
checks drawn against his account, which a certain Jesus Dy endorsed to her. Yaplikewise
0727206 September 30, 1997 P770,833.33
delivered a check payable to Canda Medical Clinic and Hospital to Te, who in turn,

endorsed it to Chua for rediscounting. Sometime in June 1997, Yap replaced this check

He delivered to Te these checks, which were payable to a certain Badoria Bagatao with BPI Check No. 708160 to cover the interest from March to May 1997. Yap also gave

(Bagatao), for the purchase of a parcel of land that, as Te represented, Bagatao Te two (2) checks payable to Bagatao, BPI Check Nos. 0727205 and 0727206, which

supposedly owns. He, however, was later informed of the contrary leading to the were subsequently endorsed to Chua for rediscounting.

conclusion that as no consideration attended the contract with Bagatao and all the other

contracts of sale that he entered into through Te, it was just proper that the checks he BPI Check Nos. 659599, 708158, 708160, 712418, 712417 and 727214 were dishonored

issued as payment be cancelled or annulled. for the reason account closed. On the other hand, Yap stopped payment on BPI Check

Nos. 727205 and 727206.[4]

Chua presented an altogether different version of the facts. According to Chua, she

released P9,415,000.00 to Yap through a certain Jovita Dimalanta (Dimalanta) sometime Verbal demands for Yap to make good the checks he issued proved to be futile. Thus,

in January 1997 in exchange for two (2) postdated checks payable to her with a face value Chua filed with the RTC of General Santos City a complaint [5] for sum of money

of P5,000,000.00 each. A similar transaction took place in February 1997, where she against Yap and his wife, Bessie. Chuas complaint was docketed as Civil Case No. 6236

delivered to Dimalanta P9,415,000.00 upon request of Yap, with the latter issuing in her and raffled to Branch 23.

favor two (2) postdated checks payable to her in the total amount

of P10,000,000.00. Yaptwice requested for an extension and for Chua not to encash the On June 8, 2001, the RTC of General Santos City issued a Decision, [6] the dispositive

four (4) checks. In return, he issued two (2) checks payable to Chua with a face value portion of which states:

of P1,400,000.00 and P1,206,066.66 to cover the interest due.

WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against defendants, ordering the latter to pay the former the following:

Yap later replaced the four (4) checks with a face value of P5,000,000.00 each with a 1. P32,558,332.00 as principal with interest at 6% per annum
from the date of the filing of the case until the whole
check payable to Chua for P20,000,000.00 and postdated April 22, 1997. When this check amount is fully paid;
2. P150,000.00 as moral damages;
became due, Yap once again requested Chua for an extension and replaced it with BPI 3. P50,000,00 as exemplary damages;
4. P1,000,000.00 in concept of attorneys fees; and
Check Nos. 712418 and 712417 to include the interest that would accrue until June 15, 5. The cost of suit.
1997. Thereafter, Yap, who asked for another extension, issued to Chua BPI Check No.
The third-party complaint is DISMISSED.[7]
727214 to include payment of the interest that would accrue until July 30, 1997 on

the P20,000,000.00 covered by BPI Check Nos. 712418 and 712417.

Armed with the foregoing narration, Chua moved for the dismissal of Civil Case No. 04-030

on the twin grounds of litis pendentia and forum shopping. Chua averred that Yapviolated

the rule against forum shopping when he failed to inform the RTC of Makati City of Civil
Case No. 6236 and the pendency of his appeal of the decision rendered therein.The
elements of litis pendentia exist, and forum shopping as the logical consequence thereof,
considering that the two (2) cases arose from the same set of facts and involve the same
parties.
In an Order[8] dated October 21, 2005, the RTC of Makati City refused to dismiss the case,
ratiocinating as follows:
On litis pendentia as a ground for dismissal, the Court is not
convinced. As correctly stated by the plaintiff, the reliefs prayed for in
the two cases are different from each other considering that the
collection case before the RTC of General Santos City is different from
the instant case praying for the discharge/annulment of issued
checks. As such the fundamental requisites of [litis pendentia] have not
been met.
Anent dismissal on ground of forum shopping, the same is likewise
denied for lack of merit. It is well-settled that it is the duty of the plaintiff,
not the defendant, to declare pending suits it initiated between and
among parties in its verification and certificate of non-forum shopping
and not the other way around. A plaintiff in a civil case therefore, is not
mandated under the Rules to declare that said plaintiff was a defendant
in a prior suit instituted against him and other defendants by the
defendant in a subsequent case of different nature. [9]
In an Order[10] dated January 18, 2006, the RTC of Makati City denied Chuas
motion for reconsideration.
Chua filed a petition for certiorari with the CA, alleging that grave abuse of
discretion attended the Orders of the RTC of Makati City dated October 21, 2005 and
January 18, 2006. By virtue of the assailed decision, this was given due course and the CA
ordered the dismissal of Civil Case No. 04-030.
After a careful and judicious scrutiny of the whole matter,
together with the applicable laws and jurisprudence on the premises,
we have come up with a finding that the respondent judge committed
grave abuse of discretion in issuing the assailed orders.
The requisites of [litis pendentia] are: (a) the identity of parties
or at least such as representing the same interests in both actions; (b)
the identity of rights asserted and the relief prayed for, the relief being
founded on the same facts; and (c) the identity of the two cases such
that judgment in one, regardless of which party is successful, would
amount to res judicata in the other.
The relief sought in Chua in Civil Case No. 6236 was
for Yap to pay the amount that he owed to Chua based on BPI Checks
(sic) Nos. 0727205, 0727206, 659599, 708158, 708160, 712418,
712417 and 727214 that he issued. On the other hand, the relief prayed
for by Yap in Civil Case No. 04-030 was for BPI Checks (sic) Nos.
0727205, 0727206, 659599, 708158, 708160, 712418, 712417 and
727214 that he issued to Chua purportedly without any valid
consideration to be declared as null and void.
The cause of action of Yap in Civil Case No. 04-030 was also
his defense in Civil Case No. 6236. Necessarily, in determining the
liability of Yap in Civil Case No. 6236, the lower court addressed the
issue of the validity of the subject checks. Branch 23 of the RTC
in General Santos City ruled that the checks were validly issued and
declared Chua as a holder in due course thereof. Moreover, the lack of
consideration was raised as an affirmative defense and as the basis for
his counterclaim and third-party complaint by Yap in Civil Case No.
6236. Therefore, Branch 66 of the RTC in Makati City committed grave
abuse of discretion amounting to lack of jurisdiction when it took
cognizance of Civil Case No. 04-030 and denied Chuas motion to
dismiss it on account of the pendency of another action in another court
between them for the same case.
Yap, in filing Civil Case No. 04-030, also violated the rule
against forum shopping. In the test to determine whether a party
violated the rule against forum shopping, the most important factor to
ask is whether the elements of litis pendencia (sic) are present, or
whether a final judgment in one case will amount to res judicata in
another, i.e., whether in the two or more cases pending, there is identity
of parties, rights or causes of action, and the reliefs sought.
A Motion to Dismiss was timely filed by Chua invoking litis
pendencia (sic) and violation of the rule against forum shopping. After
having been appraised of the pending appeal before the Supreme
Court of a case involving the same parties based on the same rights
and reliefs sought, the respondent judge should have granted the said
motion of Chua and dismissed Civil Case No. 04-030.[11] (Citations
omitted)
Yap urges this Court to reverse and set aside the CAs dismissal of his complaint
against Chua and Te, claiming that he is not guilty of forum shopping as the alleged
existence of litis pendentia is belied by the incomparable causes of action he and Chua
advanced in the separate complaints they initiated against each other. Yap claimed that
his prayer for the cancellation or discharge of the subject checks entails a determination of theory is founded on the public policy that the same subject matter should not be the

their validity and on whether a valid consideration exists for their issuance, which is subject of controversy in courts more than once, in order that possible conflicting

immaterial or irrelevant in determining whether he should be liable for the amounts that judgments may be avoided for the sake of the stability of the rights and status of persons.

Chua released to Te and Dimalanta.

The requisites of litis pendentia are: (a) the identity of parties, or at least such as

Forum shopping is the institution of two or more actions or proceedings involving representing the same interests in both actions; (b) the identity of rights asserted and relief

the same parties for the same cause of action, either simultaneously or successively, on prayed for, the relief being founded on the same facts; and (c) the identity of the two cases

the supposition that one or the other court would make a favorable disposition. Forum such that judgment in one,

shopping may be resorted to by any party against whom an adverse judgment or order has regardless of which party is successful, would amount to res judicata in the other.[16]

been issued in one forum, in an attempt to seek a favorable opinion in another, other than

by appeal or a special civil action for certiorari. Forum shopping trifles with the courts, The foregoing guided this Court in determining whether Yap is liable for forum

abuses their processes, degrades the administration of justice and congest court shopping for filing a complaint for annulment or discharge of checks following Chuas filing

dockets.[12] What is critical is the vexation brought upon the courts and the litigants by a of a complaint for a sum of money with the two cases allegedly involving the same factual

party who asks different courts to rule on the same or related causes and grant the same antecedents, issues and arguments. In so doing, this Court agrees with the CA that all the

or substantially the same reliefs and in the process creates the possibility of conflicting elements of litis pendentia exist and that Yap had indulged in the detestable act of forum
[13]
decisions being rendered by the different fora upon the same issues. Willful and shopping, warranting the outright and summary dismissal of Civil Case No. 04-030.

deliberate violation of the rule against forum shopping is a ground for summary

dismissal of the case; it may also constitute direct contempt.[14] The first requisite of litis pendentia is present as there is identity of parties. The

second and third requisites are likewise present. Apart from the fact that the same factual

To determine whether a party violated the rule against forum shopping, the most antecedents prompted the filing of the two cases, that Yaps defense in Civil Case No.

important factor to ask is whether the elements of litis pendentia are present, or whether a 6236 constitutes his cause of action in Civil Case No. 04-030 necessarily implies reliance

final judgment in one case will amount to res judicata in another; otherwise stated, the test on the same evidence for the resolution of both cases.

for determining forum shopping is whether in the two (or more) cases pending, there is

identity of parties, rights or causes of action, and reliefs sought. [15] Hornbook is the rule that identity of causes of action does not mean absolute

identity; otherwise, a party could easily escape the operation of res judicata by changing

Litis pendentia as a ground for the dismissal of a civil action refers to that the form of the action or the relief sought. The test to determine whether the causes of

situation wherein another action is pending between the same parties for the same cause action are identical is to ascertain whether the same evidence will sustain both actions, or

of action, such that the second action becomes unnecessary and vexatious. The whether there is an identity in the facts essential to the maintenance of the two actions. If

underlying principle of litis pendentia is the theory that a party is not allowed to vex another the same facts or evidence would sustain both, the two actions are considered the same,

more than once regarding the same subject matter and for the same cause of action. This and a judgment in the first case is a bar to the subsequent action. Hence, a party cannot,

by varying the form of action or adopting a different method of presenting his case, escape
the operation of the principle that one and the same cause of action shall not be twice
litigated between the same parties or their privies. Among the several tests resorted to in
ascertaining whether two suits relate to a single or common cause of action are: (1)
whether the same evidence would support and sustain both the first and second causes of
Other permutations depending on the rulings of the two courts
and the timing of these rulings are possible. In every case, our justice
system suffers as this kind of sharp practice opens the system to the
possibility of manipulation; to uncertainties when conflict of rulings
arise; and at least to vexation for complications other than conflict of
rulings. Thus, it matters not that ultimately the Court of Appeals may
completely agree with the RTC; what the rule on forum shopping
addresses are the possibility and the actuality of its harmful effects on
our judicial system.[20]

action; and (2) whether the defenses in one case may be used to substantiate

the complaint in the other.[17] Also fundamental is the test of determining whether the cause

of action in the second case existed at the time of the filing of the first complaint. [18] WHEREFORE, premises considered, the petition is DENIED. The Decision dated

December 10, 2008 and Resolution dated February 19, 2009 of the Court of Appeals in
This Court takes note of the fact that Yap filed his complaint for the annulment of CA-G.R. SP No. 93974 are AFFIRMED. Costs against the petitioner.
the checks he issued to Chua after he was adjudged by the RTC of General Santos City So ordered.
liable. This strikes the Court as indicative of his deliberate and willful attempt to render

nugatory and defeat the adverse decision of the RTC of General Santos City and relieve

himself of his obligation to pay by having the checks he issued annulled, albeit the remedy

of appeal was available and which he, in fact, resorted to. Chuas complaint is anchored on

the amounts Yap received from her and the RTC of General Santos City decided in her

favor on the strength of the checks that Yap issued and endorsed to her. By seeking to

cancel or discharge such checks, Yap attempted to use the RTC of Makati City to destroy

the evidentiary foundation of the decision of the RTC of General Santos City. In doing

so, Yap trifled with court processes and exposed the courts to the possibility of rendering

conflicting decisions. Worse, Yap sought to accomplish the prohibited - a court reversing a

decision rendered by a court of co-equal rank. Thus, it matters not that the factual findings

and conclusions of law of the RTC of General Santos City, the RTC of Makati City, the CA

and even of this Court may concur. It is the fact that our judicial system is rendered

vulnerable to such uncertainties and vexations that any and all efforts to forum shop

should be treated with aversion.

As this Court held in Madara v. Perello:[19]

 Republic of the Philippines prepared a deed of agreements 3 which, by reason of its importance, is herein quoted in
SUPREME COURT full:
Manila
City of Ozamiz
SECOND DIVISION

G.R. Nos. 75109-10 June 28, 1989

BIENVENIDA MACHOCA ARCADIO VDA. DE CRUZO, ELENA MACHOCA ARCADIO

VDA. DE PINTON, INOCENTA MACHOCA ARCADIO VDA. DE PLIEGO, ISIDORA
MACHOCA ARCADIO DE PLIEGO (Deceased) represented by daughter Natividad
Pliego de Ceballos and ARISTON "RICARDO" MACHOCA ARCADIO (Deceased)
represented by daughter Virginia Arcadio de Evangelista: Represented by
INOCENTA MACHOCA ARCADIO VDA. DE PLIEGO, petitioners,
vs.
HON. GLICERIO V. CARRIAGA, JR., FRANKLIN ANG and MELECIO SUAREZ
(Deceased) represented by the surviving spouse, Pilar de los Reyes, respondents.

Placidtrank B. Osorio for petitioners.

Donatilo C. Macamay for respondents. DEED OF AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

REGALADO, J.:
This is an appeal from the order 1 of respondent Judge Glicerio V. Carriaga, Jr., dated
February 26, 1986, dismissing petitioners' complaint in Special Civil Action No. OZ-0751 of
the Regional Trial Court, Branch XV, Ozamiz City, on the ground of res judicata.
Lot No. 1131 of the Misamis Cadastre, subject matter of this case, was originally
registered in the name of Gabina Machoca, as her paraphernal property, under Original
Certificate of Title No. 682. 2 Petitioners herein are the children of the late spouses
Leonardo Arcadio and said Gabina Machoca.
On February 4, 1954, Gabina Machoca mortgaged Lot No. 1131 for P 425.00 to private
respondent Franklin Ang and delivered to him her aforesaid certificate of title in connection
therewith.
On October 4, 1954, Gabina again borrowed an additional sum of P 175.00 from Ang as a
result of which her total obligation to the latter was in the sum of P 600.00. Petitioners
claim that on the same date, Ang caused the preparation of a deed of sale over the subject
lot to which document Gabina Machoca, being illiterate, affixed her thumb-mark in the
belief that this second instrument was similar to the deed of mortgage executed by her on
February 4, 1954. When Gabina went home, her children, herein petitioners, informed her
that the second document was not a deed of mortgage but a contract of sale.
That I, FRANKLIN ANG, of legal age, married and with residence and
postal address at Gango, City of Ozamiz, Philippines, VENDEE in the
Deed of Sale executed by the Vendor, GAVINA MACHOCA, as
recorded by Notary Public Manuel C. Manago in Doc. No. 284, Page
No. 58, Book No. 1, Series of 1954, hereby grants and obligates
himself (sic) to resell the property therein sold within a period of three
(3) years from and after the date of the said instrument, for the same
price of SIX HUNDRED PESOS ( P 600.00 ), Philippine Currency, to
the said VENDOR: PROVIDED, however, That if the Vendor shall fail to
exercise her right to redeem as herein granted within the stipulated
period, then this conveyance shall be deemed to be absolute and
irrevocable.
IN WITNESS WHEREOF, the party herein hereto have (sic) set his
hands (sic) at Ozamiz City, Philippines, on this 5th day of October,
1954.

On the following day, October 5, 1954, Gabina went back to Ang and demanded the
reformation of the aforesaid instrument. Franklin Ang, instead of reforming the instrument,

Pursuant to the provisions of said deed of agreement, Gabina's right to repurchase the
property was to expire on October 4, 1957, that is, three years from October 4, 1954 when
the deed of sale was executed.
As early as June 10, 1955, however, Ang caused the registration of the deed of sale,
resulting in the subsequent cancellation of Original Certificate of Title No. 682 and the
consequent issuance of Transfer Certificate of Title No. T-161 for the same property in the
name of Franklin Ang. 4
On June 24, 1963, no redemption having been made, Ang sold said Lot No. 1131 to herein
private respondent Melecio Suarez who then obtained Transfer Certificate of Title No. T-
945 therefore in his name. 5 Gabina Machoca died on April 21, 1966 leaving herein
petitioners as her only heirs.
It appears that petitioners remained in possession of the disputed land until March 14,
1977 when herein private respondents Melecio Suarez and Pilar de los Reyes filed an
action against Pedro, Inocenta and Lazaro, all surnamed Pliego before the City Court of
the City of Ozamiz, docketed as Civil Case No. C-1 6 thereof, for unlawful detainer with
damages. On July 21, 1978, the city court rendered a decision 7 declaring the plaintiffs
therein to be the real owners of Lot No. 1131 and ordering the defendants to vacate the
premises and pay the costs. 8 The appeal from said decision by the defendants therein to
the Court of Appeals in CA-G.R. No. 66511-R was dismissed, which dismissal became
final and executory, hence judgment was entered by the Court of Appeals on July 10,
1981. 9Consequently, a writ of execution and an order of demolition 10 were issued by the
city court on September 17, 1981 and October 12, 1983, respectively, in Civil Case No. C-
1 We shall first resolve the procedural objections, which auspiciously present the necessity
Disgressing backward in time from the foregoing incidents, the records reveal that during
the pendency of the aforesaid unlawful detainer case (Civil Case No. C-1), herein
petitioners filed on September 6, 1977 a petition for prohibition, Civil Case No. OZ-665 of
the erstwhile Court of First Instance of Mizamis Occidental, Branch II, Ozamiz City, against
City Court Judge Ceferino Ong and herein private respondents to restrain Judge Ong from
further proceeding with the trial in Civil Case No. C-1 for alleged lack of jurisdiction. The
petition was dismissed on March 15, 1978 and no appeal was taken by said petitioners. 11
It further appears that likewise during the pendency of Civil Case No. C-1, petitioners filed
a complaint, dated June 7, 1977, with the same Court of First Instance, Branch II, at
Ozamiz City, involving Lot No. 1131 and docketed as Civil Case No. OZ-648, against
Franklin Ang, Bonifacio Longayan, Melecio Suarez and Pilar de los Reyes, for "removal of
clouds of title and declaring title of defendants as null and void or cancelled, or
reconveyance and damages." 12 On December 18, 1984, the complaint was dismissed for
failure to prosecute. 13 Petitioners moved for the reconsideration of the order but the
K was likewise denied. 14No appeal
motion was denied. A second motion for reconsideration
having been made, the order of dismissal became final.
L
I
N
Finally, on December 14, 1985, the same petitioners filed Special Civil Case No. OZ-0751
with the Regional Trial Court, Branch XV, Ozamiz City, for conventional redemption and
damages against herein private respondents over theAsame subject lot. Upon motion of the
N the court on February 26, 1986 on
defendants therein, 15 the complaint was dismissed by
the ground of res judicata. 16 G
Hence, this petition assailing said dismissal order.
The main substantive issue posed for resolution is whether or not the petitioners can still
exercise the right to redeem Lot No. 1131. A corollary issue is whether or not the private
deed of agreement has converted the deed of sale into an equitable mortgage.
Petitioners submit that the deed of sale, in relation to the deed of agreement executed on
October 4, 1954, should be considered as an equitable mortgage because (a) the
petitioners have been in continuous possession of the subject lot up to the present time;
and (b) the price of P 600.00 is unusually inadequate considering that the land is along the
road going to the airport of Ozamiz City, is only about three kilometers from the center of
the city, and has an area of 3,408 square meters. It is likewise contended that petitioners
have the right to redeem the property, there have been no foreclosure proceedings as yet,
aside from the fact that private respondent Ang acted in evident bad faith and with fraud
when he obtained title to the lot in his name prior to the expiration of the stipulated
redemption period.
On the other hand, private respondents maintain that the action for conventional
redemption (Civil Case No. OZ-0751) is already barred by the order of dismissal rendered
in the action for removal of clouds on the title (Civil Case No. OZ-648), since both cases
involved the same subject matter and raised the same issues between the same parties;
and, further, that petitioners may no longer redeem the property for failure to exercise the
right within the stipulated period.
to clarify the doctrine of res judicata 17 and its implications.
The principle of res judicata in actions in personam is found in Section 49 (b) and (c), Rule
39 of the Rules of Court which provides:
Sec. 49. Effect of judgments. The effect of a judgment or final order
rendered by a court or judge of the Philippines, having jurisdiction to
pronounce the judgment or order, may be as follows:
xxx
(b) In other cases the judgment or order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised
in relation thereto, conclusive between the parties and their successors
in interest by title subsequent to the commencement of the action or
 special proceeding, litigating for the same thing and under the same
title and in the same capacity;
(c) In any other litigation between the same parties or their successors
in interest, that only is deemed to have been adjudged in a former
judgment which appears upon its face to have been so adjudged, or
which was actually and necessarily included therein or necessary
thereto.
The doctrine of res judicata thus lays down two main rules which may be stated as follows:
(1) The judgment or decree of a court of competent jurisdiction on the merits concludes the
parties and their privies to the litigation and constitutes a bar to a new action or suit
involving the same cause of action either before the same or any other tribunal; and (2)
Any right, fact, or matter in issue directly adjudicated or necessarily involved in the
determination of an action before a competent court in which a judgment or decree is
rendered on the merits is conclusively settled by the judgment therein and cannot again be
litigated between the parties and their privies whether or not the claim or demand,
purpose, or subject matter of the two suits is the same. These two main rules mark the
distinction between the principles governing the two typical cases in which a judgment may
operate as evidence. In speaking of these cases, the first general rule above stated, and
which corresponds to the aforequoted paragraph (b) of Section 49, is referred to as "bar by
former judgment" while the second general rule, which is embodied in paragraph (c) of the
same section, is known as "conclusiveness of judgment. 18
Stated otherwise, when we speak of resjudicata in its concept as a "bar by former
judgment," the judgment rendered in the first case is an absolute bar to the subsequent
action since said judgment is conclusive not only as to the matters offered and received to
sustain that judgment but also as to any other matter which might have been offered for
that purpose and which could have been adjudged therein. This is the concept in which the
term res judicata is more commonly and generally used and in which it is understood as
the bar by prior judgment constituting a ground for a motion to dismiss in civil cases. 19
On the other hand, the less familiar concept or less terminological usage of res judicata as
a rule on conclusiveness of judgment refers to the situation where the judgment in the prior
action operates as an estoppel only as to the matters actually determined therein or which
were necessarily included therein. Consequently, since other admissible and relevant
matters which the parties in the second action could properly offer are not concluded by
the said judgment, the same is not a bar to or a ground for dismissal of the second action.
At bottom, the other elements being virtually the same, the fundamental difference
between the rule of res judicataas a bar by former judgment and as merely a rule on the
conclusiveness of judgment is that, in the first, there is an identity in the cause of action in
both cases involved whereas, in the second, the cause of action in the first case is different
from that in the second case.
The diversity in results, in the instances where there is identity of cause of action in the two
cases and those wherein there is no such identity, is not a caprice of mere mechanistic
considerations or taxonomic niceties. In the latter situation, where the second case is
based on a cause of action different from the first, the constituent elements of the second
cause of action, the specie of proof necessary to establish the same, and the relief which
may be granted in such second action are consequently at variance with those obtaining or
sought in the first action. As a logical and rational consequence, therefore, only the
findings in the first judgment are conclusive and deemed established if raised in and for
purposes of the second action which, therefore, may proceed independently of the anterior
case. However, where the same cause of action is involved in both cases, the foregoing
considerations cannot apply since discrete facts and results would not generally arise from
the same procedural and evidentiary foundations which inhere in the same cause of
action. Even if diverse reliefs should be awarded due to contingencies in the results of
proof, the judgment in the first action bars the second since the defendant admittedly
committed one and the same wrong for which he should not be twice tried under the time-
honored rule of non bis in idem.
Now, it has been a consistent rule, to cite just a few representative cases, 20 that the
following requisites must concur in order that a prior judgment may bar a subsequent
action, viz: (1) the former judgment or order must be final; (2) it must be a judgment or
order on the merits, that is, it was rendered after a consideration of the evidence or
stipulations submitted by the parties at the trial of the case; (3) it must have been rendered
by a court having jurisdiction over the subject matter and the parties; and (4) there must
be, between the first and second actions, identity of parties, of subject matter and of cause
of action.
There is no question that the order of dismissal rendered in the prior action, Civil Case No.
OZ-648, had become final for failure of herein petitioners to appeal the same after their
motions for reconsideration were denied. Furthermore, while the dismissal was for failure
to prosecute, it had the effect of an adjudication on the merits, and operates as res
judicata, 21 since the court did not direct that the dismissal was without prejudice. 22
The fact remains that Civil Case No. OZ-648 for removal of clouds on title has, as parties,
the same set of plaintiffs and defendants as Special Civil Case No. OZ-0751 for
conventional redemption and damages, and both cases involve Lot No. 1131 only.
Petitioners submit, however, that res judicata will nevertheless not apply since there is no
identity of causes of action. It is their theory that since the issue of redemption was not
raised in Civil Case No. OZ-648, it is paragraph (c) of Section 49, Rule 39 that applies, that
is, the rule on conclusiveness of judgment, hence the dismissal of said former action does
not constitute res judicata to bar Special Civil Case No. OZ-0751. We find no merit in such
submission.
Petitioners appear to labor under an erroneous conceptualization of what constitutes a
cause of action. They postulate that the causes of action in the cases involved are not
identical, thus: "In Civil Case C-1, the cause of action is physical possession. In Civil Case
OZ-648, the cause of action is removal of clouds of title. In Civil Case OZ-0751, the cause
of action is conventional redemption ...." 23
It is elementary that, in adjective law, a cause of action is the delict or the wrongful act or
omission committed by the defendant in violation of the primary rights of the plaintiff. 24 In
all these cases, petitioners have imputed to private respondents and their predecessor in
interest the same alleged wrongful act, that is, acts of evident bad faith and fraud which
supposedly divested petitioner's mother of her rights and title to the property in dispute.
There is, consequently, an identical cause of action claimed by petitioners in these cases.
A well-entrenched rule declares that a party cannot, by varying the form of action or
adopting a different method of presenting his case, escape the operation of the principle
that one and the same cause of action shall not be twice litigated. 25 In fact, authorities
tend to widen rather than to restrict the doctrine of res judicata on the ground that public
interest, as well as private interest, demand the ending of suits by requiring the parties to
sue once and for all in the same case all the special proceedings and remedies to which
they are entitled. 26
In determining whether causes of action are identical so as to warrant application of the
rule of res judicata, the test most commonly stated is to ascertain whether the same
evidence which is necessary to sustain the second action would have been sufficient to
authorize a recovery in the first, 27 even if the forms or nature of the two actions be
different. 28 If the same facts or evidence would sustain both, the two actions are
considered the same within the rule that the judgment in the former is a bar to the
subsequent action; otherwise it is not. It has been said that this method is the best and
most accurate test as to whether a former judgment is a bar in subsequent proceedings
between the same parties, and it has even been designated as infallible. 29
In their motion to dismiss filed in Special Civil Case No. OZ-0751, private respondents
made a comparative analysis of the reliefs prayed for therein and those in Civil Case No.
OZ-648 which became the criterion in the court's order of dismissal. A perusal thereof
reveals that both actions seek to have the deed of agreement of October 5, 1954
considered as a mere equitable mortgage and to have the titles issued in the name of
private respondents declared null and void on the ground of fraud. Although ostensibly of
different forms, the inescapable conclusion is that the parties are in effect litigating for the
same thing and seeking the same relief, that is, to recover possession and ownership of
Lot No. 1131. It is of no moment that the later remedy is for conventional redemption while
the former case was for removal of clouds on the title, since both actions are anchored on
exactly the same cause of action, are based on identical facts, and even claim the same
relief. The present petition is, therefore, although presented in a different form, barred by
the former decision in the case for removal of clouds on the title.
We do not intend, however, to have the adjudication of this case go off purely on
procedural points. Even assuming that res judicata would not bar Special Civil Case No.
OZ-0751, the instant petition will nevertheless not prosper.
It must be remembered that after the execution of the deed of sale on October 4, 1954, a
second document was made wherein Franklin Ang undertook to resell the property, if
Gabina Machoca elects to redeem the same, within three years from the date of the deed
of sale. With respect, therefore, to the last transaction entered into by the parties, there
were two documents involved, one of which is the deed of sale and the other, the right to
repurchase. However, We find and so hold that there is no pacto de retro sale in this case,
within the contemplation of the Civil Code which provides:
Art. 1601. Conventional redemption shall take place when the vendor
reserves the right to repurchase the thing sold, with the obligation to
comply with the provisions of Article 1616 and other stipulations which
may been agreed upon.
30
In Villarica, et al. vs. The Court of appeals, et al., We had the occasion to interpret this
provision of law, to wit:
The right of repurchase is not a right granted the vendor by the vendee
in a subsequent instrument, but is a right reserved by the vendor in the
same instrument of sale as one of the stipulations of the contract. Once
the instrument of absolute sale is executed, the vendor can no longer
reserve the right to repurchase, and any right thereafter granted the
vendor by the vendee in a separate instrument cannot be a right of
repurchase but some other right like the option to buy in the instant
case.
We have similarly held in a prior case that an agreement to repurchase becomes a
promise to sell when made after an absolute sale because where the sale is made without
such an agreement, the purchaser acquires the thing sold absolutely. 31
Clearly, therefore, an option to buy or a promise to sell is different and distinct from the
right of repurchase which must be reserved by the vendor, by stipulation to that effect, in
the contract of sale.
Hence, there having been an absolute sale of the land, respondent Ang was acting well
within the ambit of his now inviolable right to register the land in his own name,
notwithstanding the unexpired stipulated period of redemption in the deed of agreement.
Granting, for the sake of argument, that the transaction actually involves a pacto de retro
sale. petitioners failure to exercise their right of redemption within the stipulated period
dictates that the instant petition must necessarily fail. The averment that petitioners were
forestalled by respondent Ang from redeeming the property appears to be a frivolous
afterthought since the former were not without recourse. There were several legal
remedies available to them which, if duly resorted to, could have worked favorably for their
cause. As it is, their silent acquiescence for an inexplicable length of time worked greatly to
their disadvantage. Not only did petitioners fail to repurchase the property within the
stipulated period but they continued to sleep on their rights even beyond the allowable
statutory period for the enforcement of such right of redemption. They are now barred by
laches. Laches, in a general sense, is failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence, could or should
have been done earlier; it is negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert it either has abandoned it or
declined to assert it. 32
Petitioners' feigned ignorance regarding the registration of the property in the name of
respondent spouses, even disregarding the constructive notice thereof to them under the
law, is belied by the fact that petitioner Inocenta Pliego and Pedro Pliego signed a written
commitment that "if Pilar Suarez will use their land for the construction of their house, we
are ready and agreed (sic) to transfer our house to another place." 33 This instrument was
never refuted, aside from the categorical admission of the petitioners during the trial of the
ejectment case that private respondents were already enjoying the fruits of the land since
1963. 34 If petitioners were not disturbed in their possession until the ejectment case was
filed, it could only have been out of sheer generosity and tolerance of private respondent
spouses.
Treading on the same supposition that there existed such a right to repurchase, petitioners
insist that the pacto de retro sale is, for all intents and purposes, an equitable mortage on
the pretext that they have been in continuous possession of the land from the time of the
execution of the document. This again is a result of the distorted notion that petitioners'
possession is in the concept of that of an owner. Petitioners cannot be credited with good
faith in insinuating that their mother, Gabina Machoca, was deceived into believing that the
deed of agreement was a mortgage contract similar to the first document she executed. As
earlier explained, after the second deed was executed and Gabina Machoca showed the
same to herein petitioners, it was the latter who advised her that the contract be reformed,
as a consequence of which the separate deed of agreement of October 5, 1954 was
executed. It would be safe to conclude then that petitioners had approved of and
consented to the provisions of both contracts. It will readily be noted that the deed of
agreement specifically provided: "That if the Vendor shall fail to exercise her right to
redeem as herein granted within the stipulated period, then this conveyance shall be
deemed to be absolute and irrevocable." The contract, not being contrary to law, morals
and public policy, is binding and enforceable against Gabina Machoca and her successors
in interest. Petitioners cannot now be heard to claim otherwise after having been remiss in
their obligations. They are further estopped from asserting that the parties intended
differently, contrary to what the written contracts provide, in violation of the parol evidence
rule.

Furthermore, the inadequacy of the price does not on that account alone support the
conclusion that the land was not sold to private respondent Ang, since the parties entered
into a conventional, and not a forced, sale of the property and both parties were in a
position to form an independent judgment of the transaction. 35 From the legal viewpoint,
even if the property was sold for a comparatively low price, but the seller did nothing about
it for a number of years, the contract of sale is not invalid. 36 Besides, in a contract of sale
with right of repurchase, the price is usually less than in absolute sales since in the former
the vendor expects to reacquire or redeem the property sold, 37 hence the inadequacy of
the price is not an overriding determinant to set aside the sale. 38 The same rationale
obtains where, as in this case, there was a separate agreement to resell the property to
the original vendor.

Anent the imputation of evident bad faith and fraud to respondent Ang for obtaining title to
the land in his own name prior to the expiration of the agreed period, the records do not
yield the requisite proof that he was so motivated or had deliberately resorted to fraudulent
deception. In the absence of concrete evidence of bad faith or fraud, neither of which can
be presumed, We cannot hold otherwise. Besides, it is of essence of a contract of sale
with pacto de retro that the vendee shall immediately acquire title to and possession of the
land sold, subject only to the vendor's right of redemption. With much more reason does
this hold true where a deed of absolute sale was merely complemented by a subsequently
executed and separate agreement of resale.

WHEREFORE, the order appealed from is hereby AFFIRMED. The temporary restraining
order issued pursuant to the resolution of August 3, 1987 is hereby LIFTED and SET
ASIDE.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 174160 April 20, 2010
HACIENDA BIGAA, INC., Petitioner,
vs.
EPIFANIO V. CHAVEZ (deceased), substituted by SANTIAGO V.
CHAVEZ, Respondent.
DECISION
BRION, J.:
This petition for review on certiorari1 challenges the Court of Appeals (CA) decision of May
31, 20012 and resolution of August 2, 20063 in CA-G.R. SP No. 46176, affirming in toto the
judgments of both the Municipal Trial Court (MTC) of Calatagan and the Regional Trial
Court (RTC) of Batangas dismissing the complaint for forcible entry in Civil Case No. 129.
THE FACTS
We summarize below the factual antecedents of the present case based on the records
before us.
On June 5, 1996, petitioner Hacienda Bigaa, Inc. (Hacienda Bigaa) filed with the Municipal
Trial Court (MTC) of Calatagan, Batangas a complaint4 for ejectment (forcible entry) and
damages with application for writ of preliminary injunction against respondent Epifanio V.
Chavez (Chavez), docketed as Civil Case No. 129. The complaint alleged that Chavez, by
force, strategy and/or stealth, entered on April 29, 1996 the premises of Hacienda Bigaa's
properties covered by Transfer Certificate of Title (TCT) Nos. 44695 and 56120 by cutting
through a section of the barbed wire fence surrounding the properties and destroying the
lock of one of its gates, subsequently building a house on the property, and occupying the
lots without the prior consent and against the will of Hacienda Bigaa.
The records show that the lots were originally covered by TCT No. 722 owned by
Ayala y Cia5 and/or Alfonso, Jacobo and Enrique Zobel, with an area of 9,652.583
hectares, known as Hacienda Calatagan. Ayala and/or the Zobels expanded TCT No. 722
to cover an additional 2,000 hectares of land consisting, among others, of beach,
foreshore and bay areas, and navigable waters (excess areas), making it appear that
these excess areas are part of Hacienda Calatagan's TCT No. 722. The Ayalas and/or the
Zobels later ordered the subdivision of the hacienda, including these excess areas, and
sold the subdivided lots to third parties. 6
Among the buyers or transferees of the expanded and subdivided areas was Hacienda
Bigaa which caused the issuance of titles TCT Nos. 44695 and 56120 under its name
covering the purchased subdivided areas. Thus, in his answer before the MTC of
Calatagan, then defendant (now respondent) Epifanio V. Chavez alleged that then plaintiff
(now petitioner) Hacienda Bigaa is the successor-in-interest of Ayala y Cia, Hacienda
Calatagan, Alfonso Zobel, Jacobo Zobel and Enrique Zobel the original titular owners of
TCT No. 722.
Portions of the same lands foreshore lands were leased out by the Republic, through
the Bureau of Fisheries, to qualified applicants in whose favor fishpond permits were
issued. The government-issued fishpond permits pertaining to lands covered by titles
derived from TCT No. 722 of Ayala y Cia and/or the Zobels, gave rise to ownership and/or
possessory disputes between the owners of Hacienda Calatagan and their privies and/or
successors-in-interest, on the one hand, and the Republic or its lessees or fishpond
permittees, on the other.
Suits were filed in various courts in Batangas for the recovery of the areas in excess of the
area originally covered by TCT No. 722, which suits ultimately reached the Supreme
Court. In the Court's 1965 decisions in Dizon v. Rodriguez7 (for quieting of title)
and Republic v. Ayala y Cia and/or Hacienda Calatagan, et al. 8 (for annulment of titles), the
excess areas of TCT No. 722 were categorically declared as unregisterable lands of the
public domain such that any title covering these excess areas are necessarily null and
void. In these cases, the Ayalas and the Zobels were found to be mere usurpers of public
domain areas, and all subdivision titles issued to them or their privies and covering these
areas were invalidated; the wrongfully registered public domain areas reverted to the
Republic. In Dizon, the Court declared as void the Zobels' TCT No. 2739 and its derivative
titles covering subdivision Lots 1 and 49 areas sold to the Dizons as areas in excess of
TCT No. 722 and are properly part of the public domain. In Ayala y Cia, the Court
invalidated TCT No. 9550 and "all other subdivision titles" issued in favor of Ayala y Cia
and/or the Zobels of Hacienda Calatagan over the areas outside its private land covered
by TCT No. 722. These areas, including the lots covered by TCT No. 9550, reverted to
public dominion.9
The pronouncement in the above cases led to the Court's 1988 decision in Republic v. De
los Angeles,10 a case covering the same excess areas under a reinvindicatory claim of the
Republic aimed at recovering lands usurped by the Ayalas and the Zobels and at placing
the Republics lessees and fishpond permittees in possession. The Court effectively held
that as owner of the excess lands, the Republic has the right to place its lessees and
fishpond permittees among them Zoila de Chavez, predecessor-in-interest of Chavez
in possession. The Court invalidated TCT Nos. 3699 and 9262 for being among the "other
subdivision titles" declared void and ordered reverted to public dominion.
To return to the forcible entry case, then defendant (now respondent) Chavez alleged in
his answer before the MTC of Calatagan that his mother, Zoila de Chavez (who died
intestate on September 14, 1979) was a fishpond permittee/lessee under Fishpond Permit
Nos. F-4572-0 and F-24735 issued by the Bureau of Fisheries on April 21, 1959 and June
3, 1966, respectively; that the areas covered by the permits are the same parcels of land
which he presently occupies as Zoila's successor-in-interest and which Hacienda Bigaa
also claims.
Chavez likewise asserted that Hacienda Bigaa is the successor-in-interest of Ayala y Cia,
Hacienda Calatagan, Alfonso Zobel, Jacobo Zobel and Enrique Zobel who owned land
with an area of 9,652.583 hectares, covered by TCT No. 722 in the Registry of Deeds of
Batangas; that Ayala y Cia, the Zobels, or Hacienda Calatagan, illegally expanded the
original area of TCT No. 722 by 2,000 hectares; that suits were filed to recover the
expanded area; that these suits reached the Supreme Court which declared that these
excess areas are part of the public domain and ordered their reversion to the Republic;
that the Supreme Court likewise declared certain TCTs covering the subdivision lots
outside the area of TCT No. 722 and issued to transferees as null and void; therefore,
Hacienda Bigaa's titles TCT Nos. 44695 and 56120 carry no probative value as they
are of dubious origins and have been nullified by the Supreme Court.11
Chavez further argued that the suit is barred by prior judgment in two prior cases (1) Civil
Case No. 78, a suit for unlawful detainer filed by the Zobels against Chavezs predecessor-
in-interest, Zoila de Chavez, before the then Justice of the Peace Court (now Municipal
Trial Court) of Calatagan, Batangas; and (2) Civil Case No. 653, a case of accion
reinvindicatoria with prayer for preliminary mandatory injunction filed by the Republic, Zoila
de Chavez, and other lessees or fishpond permittees of the Republic, against Enrique
Zobel (Hacienda Bigaa's predecessor-in-interest) before the then Court of First Instance of
Batangas. This case reached this Court as G.R. No. L-30240 entitled "Republic of the
Philippines v. De los Angeles, Enrique Zobel, et al."12 and was decided in 1988. Chavez
asserts that the subject matter and the issues involved in these cases are squarely similar
and/or identical to the subject matter and issues involved in the present forcible entry suit;
the rulings in these two cases, therefore constitute res judicata with respect to the present
case.
The MTC held a preliminary conference where the parties stipulated and identified the
issues in the forcible entry case, viz: (1) who between the parties has a better right of
possession over the premises in question; (2) whether there is res judicata; and (3)
whether the parties are entitled to damages. 13 These are essentially the same basic issues
that are before us in the present petition.
The MTC, the RTC and the CAs Decision
The MTC rendered a decision14 dismissing Hacienda Bigaa's complaint, holding that the
disputed lots form part of the areas illegally expanded and made to appear to be covered
by TCT No. 722 of Hacienda Bigaa's predecessors-in-interest (Ayala y Cia and/or the
Zobels of Hacienda Calatagan); hence, the Hacienda's title are null and void. In so ruling,
the MTC applied this Court's pronouncements in the antecedent cases of Dizon v.
Rodriguez,15 Republic v. Ayala y Cia and/or Hacienda Calatagan, Zobel, et
al.,16 and Republic v. De los Angeles.17
The MTC added that since Hacienda Bigaa did not present proof to counter Chavez's
claim that the disputed lots form part of the illegally expanded areas of Hacienda
Calatagan, these lots are deemed to be the same lots litigated in the previous cases. The
MTC also found prior possession in favor of Chavez, as revealed by the antecedent cases
particularly, De los Angeles where Chavezs mother, Zoila de Chavez, had been ousted
by the Zobels from the fishpond lots she occupied. The MTC reasoned out that Zoila could
not have been ousted from the premises had she not been in prior possession. Since
Epifanio succeeded Zoila in the possession of the property, he inherited the latters prior
possession and cannot now be ousted by Hacienda Bigaa.
The MTC likewise rejected Hacienda Bigaa's contention that the subdivision titles covering
the disputed lots TCT Nos. 44695 and 56120 which were not specifically canceled by the
previous decisions of the Court should be given probative value. The MTC ruled that the
subsequent issuance of a certificate of title in favor of the plaintiff does not vest title on it as
the lands belong to the public domain and cannot be registered. 18 The MTC stressed that
the titles of Hacienda Bigaa were among the "other subdivision titles" declared void in the
case of Ayala y Cia as areas not legitimately covered by TCT No. 722 and which are
therefore part of the public domain. As ordered in the three antecedent cases
of Dizon,19 Ayala y Cia,20 and De los Angeles,21 they should revert to the Republic. The
MTC opined that Hacienda Bigaa has the burden of proving that the subject lots are not
part of the illegally expanded areas; Hacienda Bigaa failed to discharge this duty when it
did not present proof to controvert Chavez's allegation that the lots covered by Haciendas
TCTs are among the lots litigated in the cited cases. The MTC reiterated the following
ruling of the Court in Republic v. De los Angeles:
x x x [F]or almost 23 years now execution of the 1965 final judgment in G.R. No. L-20950,
ordering the cancellation of the subdivision titles covering the expanded areas outside the
private lands of Hacienda Calatagan, is being frustrated by respondent Zobel, the Ayala
and/or Hacienda Calatagan. As a consequence, the mass usurpation of lands of public
domain consisting of portions of the territorial sea, the foreshore, beach and navigable
water bordering the Balayan Bay, Pagaspas Bay and the China Sea, still remain unabated.
The efforts of Ayala and Zobel to prevent execution of said final judgment are evident from
the heretofore-mentioned technical maneuvers they have resorted to.
Clearly, the burden of proof lies on respondent Zobel and other transferees to show that
his subdivision titles are not among the unlawful expanded subdivision titles declared null
and void by the said 1965 judgment. Respondent Zobel not only did not controvert the
Republic's assertion that his titles are embraced within the phrase "other
subdivision titles" ordered canceled but failed to show that the subdivision titles in
his name cover lands within the original area covered by Ayala's TCT No. 722
(derived from OCT No. 20) and not part of the beach, foreshore and territorial sea
belonging and ordered reverted to public dominion in the aforesaid 1965
judgment.22 x x x (Emphasis supplied.)
Based on the above disquisition and taking into account the consistent efforts of Hacienda
Bigaa's predecessors-in-interest in "thwarting the execution" of the Court's decision in the
antecedent cases, the MTC declared that the Chavezes, as the Republics
lessees/permittees, should have been in possession long ago. The MTC held:
Thus, the court holds that the land now in litigation forms part of the public dominion which
properly belongs to the State. Suffice it to say that when the defendant [Epifanio V.
Chavez] entered and occupied the same on April 29, 1996, it was in representation of
the State being the successor-in-interest of Zoila de Chavez, a government fishpond
permittee and/or lessee. It should be recounted that Zoila de Chavez was in actual
physical possession of the land until she was ousted by Enrique Zobel by bulldozing and
flattening the area.
The recovery of this public land in favor of the State is long overdue. Zoila de Chavez or
her successor-in-interest should have been in actual and adequate possession and
occupation thereof long time ago by virtue of the Supreme Court decisions anent
the matter in 1965 which were reiterated in 1988 had not the plaintiff and its
predecessors-in-interest succeeded in defeating the enforcement of the said
decisions. To allow the plaintiff to retain possession of these usurped public lands by
ousting the government's fishpond permittees and/or lessees such as the defendant is to
further frustrate the decisions of the Supreme Court on the matter. (Emphasis supplied.)
The MTC finally ruled that the elements of res judicata are present. The forcible entry case
before it shared an identity of parties with Civil Case No. 78 for unlawful detainer and
Civil Case No. 653 (the Delos Angeles case) of accion reinvindicatoria because all of these
cases involve the predecessors-in-interest of the present parties. In Civil Case No. 78, the
plaintiff was Enrique Zobel, predecessor of Hacienda Bigaa, and the defendant was Zoila
de Chavez, mother and predecessor of Epifanio V. Chavez. In Civil Case No. 653 which
reached and was decided by this Court in 1988 as Republic vs. De los Angeles, Zoila de
Chavez was one of the plaintiffs and Enrique Zobel was one of the defendants. 23 The MTC
also found identity of subject matter because the forcible entry case shared with the
previous cases the same subject matter, i.e., the same lands adjudged by the Supreme
Court as part of the public domain usurped by the Zobels, et al. through their illegally
expanded titles.24 As to identity of causes of action, the MTC held that although the
previous cases were for unlawful detainer and accion reinvindicatoria while the case
before it was for forcible entry, an identity of issues existed because all these cases
involved conflicting claims of ownership, occupation and possession of the property which
have long been settled by the Supreme Court. It recognized that under the concept of
conclusiveness of judgment, res judicata merely requires an identity of issue, not an
absolute identity of causes of action.25
On October 1, 1996, Hacienda Bigaa appealed the MTC's decision to the Regional Trial
Court (RTC) of Batangas26which affirmed in toto the appealed decision.
On February 16, 1998, Hacienda Bigaa filed its petition for review 27 with the Court of
Appeals (CA), docketed as CA-G.R. SP No. 46716. The CA in its decision of June 1, 2001
dismissed the petition for review, totally affirming the RTC and MTC decisions. 28 Hacienda
Bigaa timely filed a motion for reconsideration. However, while the motion was pending,
Associate Justice Salvador J. Valdez, Jr., the ponente of the decision sought to be
reconsidered, retired from the Judiciary. As a result, the motion "slipped into hibernation"
for five years.29
The CA, on August 2, 2006, this time through Associate Justice Juan Q. Enriquez, Jr.,
rendered its resolution on the motion for reconsideration.30 It denied reconsideration on the
reasoning that the grounds and arguments raised were mere iterations of those already
raised in the petition for review.
THE PETITION
Hacienda Bigaa is now before us via a petition for review under Rule 45 of the Rules of
Court to assail the CA ruling. Among other things, it argues that the CA's Resolution is
patently erroneous because the grounds and arguments raised in its motion for
reconsideration were not mere reiterations; it claims, as one of the grounds in its motion for
reconsideration, that the "final determination of the scope and extent" of the area allegedly
in excess of that covered by TCT No. 722 of Ayala y Cia was made only after the petition
for review was filed on February 16, 1998.
In its petition, Hacienda Bigaa raises the following issues of law:
I. WHETHER THE REGISTERED OWNER OF LAND IN POSSESSION OF A
TORRENS CERTIFICATE OF TITLE MUST ENJOY THE OWNERSHIP AND
POSSESSION, AMONG OTHERS, OF THE LAND COVERED THEREBY,
WHERE THE SAID TITLE HAS NOT BEEN DECLARED NULL AND VOID,
SUCH THAT THE TITLE MUST BE GIVEN PROBATIVE VALUE.
II. WHETHER IT IS PETITIONER HACIENDA BIGAA OR ZOILA DE CHAVEZ
(OR HER SUCCESSOR, RESPONDENT EPIFANIO V. CHAVEZ) WHO HAS A
BETTER RIGHT OF POSSESSION OVER THE SUBJECT LOTS.
THE COURT'S RULING
We find the petition unmeritorious.
We note at the outset that the objection on the delineation of the scope and extent of the
excess areas of TCT No. 722 came too late in the day; it is an issue that the Hacienda
admits to have raised for the first time when it sought reconsideration of the CA decision.
We significantly note, too, that this issue involves a question of fact whose determination is
improper in a Rule 45 proceeding before this Court.
Thus, to our mind, the only real questions appropriate for resolution at this stage of the
case are: (1) Do the TCTs of Hacienda Bigaa have probative value in determining the
issues of ownership and possession of the disputed lots? (2) Is Chavez as successor-in-
interest of government lessee or fishpond permittee Zoila de Chavez entitled to
possession of these lots? In these lights, the resolution of this case hinges on the question
of better title who, between the petitioner and the respondent, has the better right of
possession of the disputed lots.
Are these issues misplaced in a forcible entry case?
To answer this, we hark back to the origins of the present case a complaint for forcible
entry that the MTC of Calatagan, Batangas dismissed. Both the RTC and the CA
subsequently affirmed this dismissal. As a forcible entry suit, the threshold question
presented is: was the prior possession of the then plaintiff (now petitioner) Hacienda Bigaa
over the disputed lots sufficiently established to give it cause for the ejectment of then
defendant (now respondent) Epifanio Chavez?
We recall in this regard that the MTC issued a pre-trial order identifying the issues of (1)
who has the better right of possession; and (2) res judicata.31 On the issue of possession,
the MTC found the need to determine the question of title or ownership in passing upon
the question of possession after Chavez raised the issue of ownership at that level. As a
general rule in forcible entry cases, ownership or title is inconsequential; the primordial
issue is possession de facto and not possession de jure. The court, however, may tackle
the issue of ownership or title, if raised, if this issue is indispensable in resolving the issue
of possession.32 Since Chavez raised the question of ownership or title in his answer, the
issue of ownership became a material consideration in the lower court's inquiry into the
character, nature and extent of the parties claimed possession.
The MTC tackled the issue of prior possession by taking judicial notice of our factual
determination in De los Angeles that Zobel of Hacienda Calatagan Hacienda Bigaa's
predecessor-in-interest had ousted Zoila de Chavez Chavez's predecessor-in-interest
from the lots she occupied as a holder of government-issued fishpond permits. The MTC
in this regard held
[T]he court holds that the land now in litigation forms part of the public dominion which
properly belongs to the State. Suffice it to say that when [respondent Chavez] entered and
occupied the [premises] on April 29, 1996, it was in representation of the State being
the successor-in-interest of Zoila de Chavez, a government fishpond permittee and/or
lessee. It should be recounted that Zoila de Chavez was in actual physical possession
of the land until she was ousted by Enrique Zobel by bulldozing and flattening the
area. (Emphasis supplied.)
Zoila de Chavez's ouster from the premises became the basis of the MTCs conclusion
that she had prior possession as she could not have been ousted from the premises had
she not been in prior possession. This point was reiterated in the present petition by
Chavez who died pending the resolution of this case and has been substituted by his
brother, Santiago V. Chavez.33 The respondents comment before us states:34
Of note, as hereafter shown, [in the case of Republic vs. De los Angeles, G.R. No. L-
30240, March 25, 1988], the Supreme Court explicitly recognized the priority of possession
of the respondent [Chavez] over the subject lots:
[Respondent therein] Zobel had ousted Zoila de Chavez, a government fishpond
permittee, from a portion of subject fishpond lot described as Lot 33 of Plan Swo-
30999 (also known as Lots 55 and 56 of subdivision TCT No. 3699) by bulldozing the
same, and [threatening] to eject fishpond permittees Zoila de Chavez, Guillermo Mercado,
Deogracias Mercado, and Rosendo Ibaez from their respective fishpond lots described as
Lots 4, 5, 6, and 7, and Lots 55 and 56, of Plan Swo-30999, embraced in the void
subdivision titles TCT No. 6399 and TCT No. 9262 claimed by said respondent. Thus, on
August 2, 1967, the Republic filed an Amended Complaint captioned "Accion
Reinvindicatoria with Preliminary Injunction" against respondent Zobel and the Register of
Deeds of Batangas, docketed as Civil Case No. 653, for cancellation of Zobel's void
subdivision titles TCT No. 3699 and TCT No. 9262 and the reconveyance of the same to
the government; to place aforenamed fishpond permittees in peaceful and adequate
possession thereof; to require respondent Zobel to pay back rentals to the Republic, and to
enjoin said respondent from usurping and exercising further acts of dominion and
ownership over the subject land of public domain. 35 (Emphasis supplied.)
This argument on the direct issue of prior possession is separate from the issue of
ownership that Chavez raised as an issue determinative of possession. The issue of
ownership shifts our determination to who, between the parties, has title and the
concomitant right of possession to the disputed lots.
The issue of possession, as it relates with the ownership of the disputed property, has
been conclusively resolved in the antecedent cases.
As framed above, the case before us inevitably brings to memory the antecedent decided
cases touching on the ownership of the vast tract of land in Calatagan, Batangas, covered
by Transfer Certificate of Title (TCT) No. 722in the name/s of Ayala y Cia, Alfonso Zobel,
Jacobo Zobel and Enrique Zobel and/or Hacienda Calatagan the predecessors-in-
interest of petitioner Hacienda Bigaa. We ruled in the antecedent cases of Dizon,36 Ayala y
Cia,37and De los Angeles,38 that: (1) all expanded subdivision titles issued in the name of
Ayala y Cia, the Zobels and/or Hacienda Calatagan covering areas beyond the true extent
of TCT No. 722 are null and void because they cover areas belonging to the public
domain; (2) Ayala y Cia and the Zobels of Hacienda Calatagan are mere usurpers of
these public domain areas; and that (3) these areas must revert to the Republic.
Significantly, we declared in De los Angeles that the Republic, as the rightful owner of the
expanded areas portions of the public domain has the right to place its lessees and
permittees (among them Zoila de Chavez) in possession of the fishpond lots whose
ownership and possession were in issue in the case.
These antecedent cases lay to rest the issues of ownership and of possession as an
attribute thereof, which we both ruled to be in favor of the Republic and its lessees or
permittees.
The present case is a stark repetition of scenarios in these cases. The protagonists remain
virtually the same with petitioner Hacienda Bigaa taking the place of its predecessors-in-
interest Ayala y Cia and/or the Zobels of Hacienda Calatagan, and respondent Epifanio V.
Chavez taking the place of his predecessor-in-interest Zoila de Chavez whose possession
was under bona fide authority from the Republic. Considering that in this case the disputed
lots are among those litigated in the antecedent cases and the issues of ownership and
possession are again in issue, the principle of res judicata inevitably must be considered
and applied, if warranted.
The doctrine of res judicata is set forth in Section 47 of Rule 39 of the Rules of Court,
which in its relevant part reads:
Sec. 47. Effect of judgments or final orders. The effect of a judgment or final order
rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or
final order, may be as follows:
xxxx
(b) In other cases, the judgment or final order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in relation
thereto, conclusive between the parties and their successors in interest by title
subsequent to the commencement of the action or special proceeding, litigating
for the same thing and under the same title and in the same capacity; and
(c) In any other litigation between the same parties or their successors in interest,
that only is deemed to have been adjudged in a former judgment or final order
which appears upon its face to have been so adjudged, or which was actually
and necessarily included therein or necessary thereto.
This provision comprehends two distinct concepts of res judicata: (1) bar by former
judgment and (2) conclusiveness of judgment. Under the first concept, res judicata
absolutely bars any subsequent action when the following requisites concur: (a) the former
judgment or order was final; (b) it adjudged the pertinent issue or issues on their merits; (c)
it was rendered by a court that had jurisdiction over the subject matter and the parties; and
(d) between the first and the second actions, there was identity of parties, of subject
matter, and of causes of action.39
Where no identity of causes of action but only identity of issues exists, res judicata comes
under the second concept i.e., under conclusiveness of judgment. Under this concept,
the rule bars the re-litigation of particular facts or issues involving the same parties even if
raised under different claims or causes of action. 40 Conclusiveness of judgment finds
application when a fact or question has been squarely put in issue, judicially passed upon,
and adjudged in a former suit by a court of competent jurisdiction. The fact or question
settled by final judgment or order binds the parties to that action (and persons in privity
with them or their successors-in-interest), and continues to bind them while the judgment
or order remains standing and unreversed by proper authority on a timely motion or
petition; the conclusively settled fact or question furthermore cannot again be litigated in
any future or other action between the same parties or their privies and successors-in-
interest, in the same or in any other court of concurrent jurisdiction, either for the same or
for a different cause of action. Thus, only the identities of parties and issues are required
for the operation of the principle of conclusiveness of judgment. 41
While conclusiveness of judgment does not have the same barring effect as that of a bar
by former judgment that proscribes subsequent actions, the former nonetheless estops the
parties from raising in a later case the issues or points that were raised and controverted,
and were determinative of the ruling in the earlier case.42 In other words, the dictum laid
down in the earlier final judgment or order becomes conclusive and continues to be
binding between the same parties, their privies and successors-in-interest, as long as the
facts on which that judgment was predicated continue to be the facts of the case or
incident before the court in a later case; the binding effect and enforceability of that earlier
dictum can no longer be re-litigated in a later case since the issue has already been
resolved and finally laid to rest in the earlier case. 43
a. Identity of Parties
As already stated above, the parties to the present case are virtually the same as those in
the antecedent cases. Specifically in De los Angeles, the parties were Enrique Zobel, the
predecessor-in-interest of petitioner Hacienda Bigaa, and Zoila de Chavez, the mother and
predecessor-in-interest of Chavez.
b. Identity of Subject Matter
Hacienda Bigaa and Chavez are litigating the same properties subject of the antecedent
cases inasmuch as they claim better right of possession to parcels of land covered by
subdivision titles derived from Hacienda Calatagan's TCT No. 722 and by government-
issued fishpond permits. Specifically in De los Angeles, the Zobels and Zoila de Chavez
litigated the disputed lots covered by subdivision titles in Zobels name and by fishpond
permits the Republic issued in favor of de Chavez.
In ruling that the subject lots are the same lots litigated in the previously decided cases,
the courts below based their findings on De los Angeles that in turn was guided by our
rulings in Dizon and Ayala y Cia. For emphasis, we reiterate our ruling in De los Angeles:
all areas the Ayalas and/or the Zobels made to appear to be covered by TCT No. 722 are
owned by the Republic because they form part of the public domain; specifically, portions
of the navigable water or of the foreshores of the bay converted into fishponds are parts of
the public domain that cannot be sold by the Ayalas and/or the Zobels to third parties.
In his answer before the MTC, Chavez asserted that the areas covered by the fishpond
permits of Zoila de Chavez are the same parcels of land that he now occupies as Zoila's
successor-in-interest. Given the rulings in the antecedent cases that Chavez invoked,
Hacienda Bigaa never bothered to object to or to rebut this allegation to show that the
presently disputed lots are not part of the expanded areas that, apart from the specifically
described titles, Ayala y Cia described as "other subdivision titles" covering unregisterable
lands of the public domain that must revert to the Republic.44 Hacienda Bigaa should have
objected as we held in De los Angeles that the onus is on Ayala and the Zobels
Hacienda Bigaas predecessors-in-interest to show that their titles do not cover the
expanded areas whose titles were declared null and void. 45 We find no cogent reason to
depart from our past rulings in the antecedent cases, and from the ruling of the courts
below in this case that the lots claimed by Hacienda Bigaa are the same lots covered by
our rulings in the antecedent cases.
c. Identity of Issues
This case and the antecedent cases all involve the issue of ownership or better right of
possession. In Ayala y Cia, we affirmed an RTC decision that decreed:
WHEREFORE, judgment is hereby rendered as follows:
(a) Declaring as null and void Transfer Certificate of Title No. T-9550 (or Exhibit "24") of
the Register of Deeds of the Province of Batangas and other subdivision titles issued in
favor of Ayala y Cia and;or Hacienda de Calatagan over the areas outside its private land
covered by TCT No. 722, which, including the lots in T-9550 (lots 360, 362, 363 and 182)
are hereby reverted to public dominion.46 (Emphasis supplied, italics in the original.)
Consequently, lots and their titles derived from the Ayalas and the Zobels TCT No. 722
not shown to be within the original coverage of this title are conclusively public domain
areas and their titles will be struck down as nullities.
Thus, De los Angeles47 effectively annulled the subdivision titles disputed in the case for
being among the "other subdivision titles" declared void for covering public domain areas,
and ordered their reversion to the Republic. De los Angeles recognized, too, the right of
the Republic's lessees and public fishpond permittees (among them Zoila de
Chavez, mother and predecessor-in-interest of Chavez) to possess the fishpond lots
in question because they derive their right of possession from the Republic the
rightful owner of these lots.
We reject, based on these discussions, Hacienda Bigaa's position that there could be
no res judicata in this case because the present suit is for forcible entry while the
antecedent cases adverted were based on different causes of action i.e., quieting of title,
annulment of titles and accion reinvindicatoria. For, res judicata, under the concept of
conclusiveness of judgment, operates even if no absolute identity of causes of action
exists. Res judicata, in its conclusiveness of judgment concept, merely requires identity of
issues. We thus agree with the uniform view of the lower courts the MTC, RTC and the
CA on the application of res judicata to the present case.
Hacienda Bigaa's Titles Carry No Probative Value
Hacienda Bigaa contends that the rulings in the antecedent cases on the nullity of its
subdivision titles should not apply to the present case because the titles TCT Nos. 44695
and 56120 have not been specifically declared void by court order and must be given
probative value. It likewise posits that Chavez failed to introduce evidence before the MTC
that the land subject matter of the suit is the same land covered by the decision of the
Supreme Court in the antecedent cases.
We reject this contention in light of our holding in the Ayala y Cia and De los
Angeles cases that apart from those expressly litigated and annulled, all "other subdivision
titles" over the excess areas of Hacienda Calatagan must be nullified for covering FINALITY the complaint for forcible entry in Civil Case No. 129 before the Municipal Trial
unregisterable lands of the public domain that must revert to the Republic. 48 To Court of Calatagan.
reiterate, lots and their titles derived from the Ayalas and the Zobels TCT No. 722 not
shown to be within the original coverage of this title are conclusively public domain areas
SO ORDERED.
and their titles will be struck down as nullities. What could have savedHacienda Bigaa, as
successor-in-interest of the Ayalas and the Zobels, is competent evidence that the
subdivision titles in its possession do not fall within the excess areas of TCT No. 722 that
are null and void because they are lands of the public domain. Hacienda Bigaa however
failed to discharge this burden.

Therefore, the Court of Appeals, citing Ayala y Cia and De los Angeles, correctly held that

x x x [S]uffice it to state that as heretofore shown, the Supreme Court took cognizance of
the fact that Zoila de Chavez's fishpond permit is within the land covered by the cited
decision. Moreover, the Supreme Court has shifted the burden of proof in this regard to
Zobel or Ayala y Cia when it declared that, "Clearly, the burden of proof lies on
respondent Zobel and other transferees to show that his subdivision titles are not
among the unlawful expanded subdivision titles declared null and void by the said
1965 judgment."49 (Emphasis supplied.)

In any event, Hacienda Bigaa can never have a better right of possession over the subject
lots above that of the Republic because the lots pertain to the public domain. All lands of
the public domain are owned by the State the Republic. Thus, all attributes of ownership,
including the right to possess and use these lands, accrue to the Republic. Granting
Hacienda Bigaa the right to possess the subject premises would be equivalent to
"condoning an illegal act" by allowing it to perpetuate an "affront and an offense against
the State" i.e., occupying and claiming as its own lands of public dominion that are not
susceptible of private ownership and appropriation. 50 Hacienda Bigaa like its
predecessors-in-interests, the Ayalas and the Zobels is a mere usurper in these public
lands. The registration in Hacienda Bigaa's name of the disputed lots does not give it a
better right than what it had prior to the registration;51 the issuance of the titles in its favor
does not redeem it from the status of a usurper. We so held in Ayala y Cia and we
reiterated this elementary principle of law in De los Angeles.52 The registration of lands of
the public domain under the Torrens system, by itself, cannot convert public lands into
private lands.531avvphi1

As our last word, we find it particularly relevant to state here that we issued on October 6,
2008 a Resolution in relation with the execution of our decision in the antecedent cases of
Ayala y Cia and De los Angeles.54 In this Resolution, we emphasized that the decision we
consistently affirmed ordered the following: (1) the nullification of all subdivision titles
that were issued in favor of Ayala y Cia and/or Hacienda Calatagan (and their
successors-in-interest) over the areas outside its private land covered by TCT No.
722; and (2) the declaration that all lands or areas covered by these nullified titles
are reverted to the public domain. This should write finis to Hacienda Bigaas claim that
its titles are beyond the reach of our decision in the antecedent cases.

In sum, we find no reversible errors of law in the appealed decision of the Court of
Appeals.

WHEREFORE, we DENY the present petition and AFFIRM the Court of Appeals decision
of May 31, 2001 and resolution of August 2, 2006. We accordingly DISMISS WITH
G.R. No. 124242 January 21, 2005
SAN LORENZO DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA
ZAVALLA LU, respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and
Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta.
Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both measuring 15,808
square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent
Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos (15.00) per
square meter. Babasanta made a downpayment of fifty thousand pesos (50,000.00) as
evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other
payments totaling two hundred thousand pesos (200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of
a final deed of sale in his favor so that he could effect full payment of the purchase price.
In the same letter, Babasanta notified the spouses about having received information that
the spouses sold the same property to another without his knowledge and consent. He
demanded that the second sale be cancelled and that a final deed of sale be issued in his
favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having
agreed to sell the property to him at fifteen pesos (15.00) per square meter. She,
however, reminded Babasanta that when the balance of the purchase price became due,
he requested for a reduction of the price and when she refused, Babasanta backed out of
the sale. Pacita added that she returned the sum of fifty thousand pesos (50,000.00) to
Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court
(RTC), Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance and
Damages1 against his co-respondents herein, the Spouses Lu. Babasanta alleged that the
lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the spouses at
fifteen pesos (15.00) per square meter. Despite his repeated demands for the execution
of a final deed of sale in his favor, respondents allegedly refused.
In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta
and when the total advances of Pacita reached fifty thousand pesos (50,000.00), the
latter and Babasanta, without the knowledge and consent of Miguel Lu, had verbally
agreed to transform the transaction into a contract to sell the two parcels of land to
Babasanta with the fifty thousand pesos (50,000.00) to be considered as the
downpayment for the property and the balance to be paid on or before 31 December 1987.
Respondents Lu added that as of November 1987, total payments made by Babasanta
amounted to only two hundred thousand pesos (200,000.00) and the latter allegedly
failed to pay the balance of two hundred sixty thousand pesos (260,000.00) despite
repeated demands. Babasanta had purportedly asked Pacita for a reduction of the price
from fifteen pesos (15.00) to twelve pesos (12.00) per square meter and when the
Spouses Lu refused to grant Babasantas request, the latter rescinded the contract to sell
and declared that the original loan transaction just be carried out in that the spouses would
be indebted to him in the amount of two hundred thousand pesos (200,000.00).
Accordingly, on 6 July 1989, they purchased Interbank Managers Check No. 05020269 in
the amount of two hundred thousand pesos (200,000.00) in the name of Babasanta to
show that she was able and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 19903 wherein he prayed
for the issuance of a writ of preliminary injunction with temporary restraining order and the
inclusion of the Register of Deeds of Calamba, Laguna as party defendant. He contended
that the issuance of a preliminary injunction was necessary to restrain the transfer or
conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition4 to the amended complaint contending that it raised
new matters which seriously affect their substantive rights under the original complaint.
However, the trial court in its Order dated 17 January 19905 admitted the amended
complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed
a Motion for Intervention6 before the trial court. SLDC alleged that it had legal interest in
the subject matter under litigation because on 3 May 1989, the two parcels of land
involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale
with Mortgage.7 It alleged that it was a buyer in good faith and for value and therefore it
had a better right over the property in litigation.
In his Opposition to SLDCs motion for intervention,8 respondent Babasanta demurred and
argued that the latter had no legal interest in the case because the two parcels of land
involved herein had already been conveyed to him by the Spouses Lu and hence, the
vendors were without legal capacity to transfer or dispose of the two parcels of land to the
intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene.
SLDC filed its Complaint-in-Intervention on 19 April 1990.9 Respondent Babasantas
motion for the issuance of a preliminary injunction was likewise granted by the trial court in
its Order dated 11 January 199110 conditioned upon his filing of a bond in the amount of
fifty thousand pesos (50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu
executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it paid
an option money in the amount of three hundred sixteen thousand one hundred sixty
pesos (316,160.00) out of the total consideration for the purchase of the two lots of one
million two hundred sixty-four thousand six hundred forty pesos (1,264,640.00). After the
Spouses Lu received a total amount of six hundred thirty-two thousand three hundred
twenty pesos (632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with
Mortgage in its favor. SLDC added that the certificates of title over the property were
delivered to it by the spouses clean and free from any adverse claims and/or notice of lis
pendens. SLDC further alleged that it only learned of the filing of the complaint sometime
in the early part of January 1990 which prompted it to file the motion to intervene without
delay. Claiming that it was a buyer in good faith, SLDC argued that it had no obligation to
look beyond the titles submitted to it by the Spouses Lu particularly because Babasantas
claims were not annotated on the certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale
of the property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two
hundred thousand pesos (200,000.00) with legal interest plus the further sum of fifty
thousand pesos (50,000.00) as and for attorneys fees. On the complaint-in-intervention,
the trial court ordered the Register of Deeds of Laguna, Calamba Branch to cancel the
notice of lis pendens annotated on the original of the TCT No. T-39022 (T-7218) and No.
T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and
SLDC did not register the respective sales in their favor, ownership of the property should
pertain to the buyer who first acquired possession of the property. The trial court equated
the execution of a public instrument in favor of SLDC as sufficient delivery of the property
to the latter. It concluded that symbolic possession could be considered to have been first
transferred to SLDC and consequently ownership of the property pertained to SLDC who
purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging
in the main that the trial court erred in concluding that SLDC is a purchaser in good faith
and in upholding the validity of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that
the trial court erred in failing to consider that the contract to sell between them and
Babasanta had been novated when the latter abandoned the verbal contract of sale and
declared that the original loan transaction just be carried out. The Spouses Lu argued that
since the properties involved were conjugal, the trial court should have declared the verbal
contract to sell between Pacita Lu and Pablo Babasanta null and void ab initio for lack of
knowledge and consent of Miguel Lu. They further averred that the trial court erred in not
dismissing the complaint filed by Babasanta; in awarding damages in his favor and in
refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision11 which set aside the
judgment of the trial court. It declared that the sale between Babasanta and the Spouses
Lu was valid and subsisting and ordered the spouses to execute the necessary deed of
conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price
in the amount of two hundred sixty thousand pesos (260,000.00). The appellate court
ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC was null and void on
the ground that SLDC was a purchaser in bad faith. The Spouses Lu were further ordered
to return all payments made by SLDC with legal interest and to pay attorneys fees to
Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate
court.12 However, in a Manifestation dated 20 December 1995,13 the Spouses Lu informed
the appellate court that they are no longer contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,14 the appellate court considered as withdrawn the
motion for reconsideration filed by the Spouses Lu in view of their manifestation of 20
December 1995. The appellate court denied SLDCs motion for reconsideration on the
ground that no new or substantial arguments were raised therein which would warrant
modification or reversal of the courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A
BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU
OBTAINED FROM IT THE CASH ADVANCE OF 200,000.00, SAN LORENZO WAS PUT
ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED
FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN
POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND
TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT
RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN
LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED
PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL
CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED
AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF
SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH. 15
SLDC contended that the appellate court erred in concluding that it had prior notice of
Babasantas claim over the property merely on the basis of its having advanced the
amount of two hundred thousand pesos (200,000.00) to Pacita Lu upon the latters
representation that she needed the money to pay her obligation to Babasanta. It argued
that it had no reason to suspect that Pacita was not telling the truth that the money would
be used to pay her indebtedness to Babasanta. At any rate, SLDC averred that the amount
of two hundred thousand pesos (200,000.00) which it advanced to Pacita Lu would be
deducted from the balance of the purchase price still due from it and should not be
construed as notice of the prior sale of the land to Babasanta. It added that at no instance
did Pacita Lu inform it that the lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately
took possession of the property and asserted its rights as new owner as opposed to
Babasanta who has never exercised acts of ownership. Since the titles bore no adverse
claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it had every
reason to rely on the correctness of the certificate of title and it was not obliged to go
beyond the certificate to determine the condition of the property. Invoking the presumption
of good faith, it added that the burden rests on Babasanta to prove that it was aware of the
prior sale to him but the latter failed to do so. SLDC pointed out that the notice of lis
pendens was annotated only on 2 June 1989 long after the sale of the property to it was
consummated on 3 May 1989.1awphi1.nt
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu
informed the Court that due to financial constraints they have no more interest to pursue
their rights in the instant case and submit themselves to the decision of the Court of
Appeals.16
On the other hand, respondent Babasanta argued that SLDC could not have acquired
ownership of the property because it failed to comply with the requirement of registration of
the sale in good faith. He emphasized that at the time SLDC registered the sale in its favor
on 30 June 1990, there was already a notice of lis pendens annotated on the titles of the
property made as early as 2 June 1989. Hence, petitioners registration of the sale did not
confer upon it any right. Babasanta further asserted that petitioners bad faith in the
acquisition of the property is evident from the fact that it failed to make necessary inquiry
regarding the purpose of the issuance of the two hundred thousand pesos (200,000.00)
managers check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and
Babasanta has a better right over the two parcels of land subject of the instant case in
view of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a
document signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos
(50,000.00) as partial payment for 3.6 hectares of farm lot situated at Barangay Pulong,
Sta. Cruz, Sta. Rosa, Laguna.17 While the receipt signed by Pacita did not mention the
price for which the property was being sold, this deficiency was supplied by Pacita Lus
letter dated 29 May 198918 wherein she admitted that she agreed to sell the 3.6 hectares
of land to Babasanta for fifteen pesos (15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the
parties, irresistibly leads to the conclusion that the agreement between Babasanta and the
Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent, 19 which is manifested by the meeting
of the offer and the acceptance upon the thing which are to constitute the contract. The
offer must be certain and the acceptance absolute.20 Moreover, contracts shall be
obligatory in whatever form they may have been entered into, provided all the essential
requisites for their validity are present.21
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand
pesos (50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot situated
in Sta. Rosa, Laguna. While there is no stipulation that the seller reserves the ownership of
the property until full payment of the price which is a distinguishing feature of a contract to
sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to
transfer ownership to Babasanta except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could
effect full payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta
himself recognized that ownership of the property would not be transferred to him until
such time as he shall have effected full payment of the price. Moreover, had the sellers
intended to transfer title, they could have easily executed the document of sale in its
required form simultaneously with their acceptance of the partial payment, but they did not.
Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected
contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a
contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas in a
contract to sell, by agreement the ownership is reserved in the vendor and is not to pass
until the full payment of the price.22 In a contract of sale, the vendor has lost and cannot
recover ownership until and unless the contract is resolved or rescinded; whereas in a
contract to sell, title is retained by the vendor until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach but an
event that prevents the obligation of the vendor to convey title from becoming effective. 23
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance
of the purchase price. There being an obligation to pay the price, Babasanta should have
made the proper tender of payment and consignation of the price in court as required by
law. Mere sending of a letter by the vendee expressing the intention to pay without the
accompanying payment is not considered a valid tender of payment. 24 Consignation of the
amounts due in court is essential in order to extinguish Babasantas obligation to pay the
balance of the purchase price. Glaringly absent from the records is any indication that
Babasanta even attempted to make the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a
contract to sell, Babasantas claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent 25 and from that moment,
the parties may reciprocally demand performance.26 The essential elements of a contract
of sale, to wit: (1) consent or meeting of the minds, that is, to transfer ownership in
exchange for the price; (2) object certain which is the subject matter of the contract; (3)
cause of the obligation which is established. 27
The perfection of a contract of sale should not, however, be confused with its
consummation. In relation to the acquisition and transfer of ownership, it should be noted
that sale is not a mode, but merely a title. A mode is the legal means by which dominion or
ownership is created, transferred or destroyed, but title is only the legal basis by which to
affect dominion or ownership.28 Under Article 712 of the Civil Code, "ownership and other
real rights over property are acquired and transmitted by law, by donation, by testate and
intestate succession, and in consequence of certain contracts, by tradition." Contracts only
constitute titles or rights to the transfer or acquisition of ownership, while delivery or
tradition is the mode of accomplishing the same. 29 Therefore, sale by itself does not
transfer or affect ownership; the most that sale does is to create the obligation to transfer
ownership. It is tradition or delivery, as a consequence of sale, that actually transfers
ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways specified in Article 1497 to
1501.30 The word "delivered" should not be taken restrictively to mean transfer of actual
physical possession of the property. The law recognizes two principal modes of delivery, to
wit: (1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the
vendee.31 Legal or constructive delivery, on the other hand, may be had through any of the
following ways: the execution of a public instrument evidencing the sale; 32 symbolical
tradition such as the delivery of the keys of the place where the movable sold is being
kept;33 traditio longa manu or by mere consent or agreement if the movable sold cannot
yet be transferred to the possession of the buyer at the time of the sale; 34 traditio brevi
manu if the buyer already had possession of the object even before the sale; 35 and traditio
constitutum possessorium, where the seller remains in possession of the property in a
different capacity.36
Following the above disquisition, respondent Babasanta did not acquire ownership by the
mere execution of the receipt by Pacita Lu acknowledging receipt of partial payment for the
property. For one, the agreement between Babasanta and the Spouses Lu, though valid,
was not embodied in a public instrument. Hence, no constructive delivery of the lands
could have been effected. For another, Babasanta had not taken possession of the
property at any time after the perfection of the sale in his favor or exercised acts of
dominion over it despite his assertions that he was the rightful owner of the lands. Simply
stated, there was no delivery to Babasanta, whether actual or constructive, which is
essential to transfer ownership of the property. Thus, even on the assumption that the
perfected contract between the parties was a sale, ownership could not have passed to
Babasanta in the absence of delivery, since in a contract of sale ownership is transferred
to the vendee only upon the delivery of the thing sold. 37
However, it must be stressed that the juridical relationship between the parties in a double
sale is primarily governed by Article 1544 which lays down the rules of preference between
the two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable property. When the thing sold twice is an
immovable, the one who acquires it and first records it in the Registry of Property, both
made in good faith, shall be deemed the owner. 38 Verily, the act of registration must be
coupled with good faith that is, the registrant must have no knowledge of the defect or
lack of title of his vendor or must not have been aware of facts which should have put him
upon such inquiry and investigation as might be necessary to acquaint him with the defects
in the title of his vendor.39
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired
knowledge of Babasantas claim. Babasanta, however, strongly argues that the registration
of the sale by SLDC was not sufficient to confer upon the latter any title to the property
since the registration was attended by bad faith. Specifically, he points out that at the time
SLDC registered the sale on 30 June 1990, there was already a notice of lis pendens on
the file with the Register of Deeds, the same having been filed one year before on 2 June
1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate
the effects of delivery and possession in good faith which admittedly had occurred prior to
SLDCs knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed
the Option to Buy in favor of SLDC upon receiving 316,160.00 as option money from
SLDC. After SLDC had paid more than one half of the agreed purchase price of
1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute
Salein favor or SLDC. At the time both deeds were executed, SLDC had no knowledge of
the prior transaction of the Spouses Lu with Babasanta. Simply stated, from the time of
execution of the first deed up to the moment of transfer and delivery of possession of the
lands to SLDC, it had acted in good faith and the subsequent annotation of lis
pendens has no effect at all on the consummated sale between SLDC and the Spouses
Lu.
A purchaser in good faith is one who buys property of another without notice that some
other person has a right to, or interest in, such property and pays a full and fair price for
the same at the time of such purchase, or before he has notice of the claim or interest of
some other person in the property.40 Following the foregoing definition, we rule that SLDC
qualifies as a buyer in good faith since there is no evidence extant in the records that it had
knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the
property to SLDC, the vendors were still the registered owners of the property and were in
fact in possession of the lands.l^vvphi1.net Time and again, this Court has ruled that a
person dealing with the owner of registered land is not bound to go beyond the certificate
of title as he is charged with notice of burdens on the property which are noted on the face
of the register or on the certificate of title.41 In assailing knowledge of the transaction
between him and the Spouses Lu, Babasanta apparently relies on the principle of
constructive notice incorporated in Section 52 of the Property Registration Decree (P.D.
No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if
registered, filed, or entered in the office of the Register of Deeds for the province or city
where the land to which it relates lies, be constructive notice to all persons from the time of
such registering, filing, or entering.
However, the constructive notice operates as suchby the express wording of Section
52from the time of the registration of the notice of lis pendens which in this case was
effected only on 2 June 1989, at which time the sale in favor of SLDC had long been
consummated insofar as the obligation of the Spouses Lu to transfer ownership over the
property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta
the annotation of the notice of lis pendens cannot help Babasantas position a bit and it is
irrelevant to the good or bad faith characterization of SLDC as a purchaser. A notice of lis
pendens, as the Court held in Natao v. Esteban,42 serves as a warning to a prospective
purchaser or incumbrancer that the particular property is in litigation; and that he should
keep his hands off the same, unless he intends to gamble on the results of the litigation."
Precisely, in this case SLDC has intervened in the pending litigation to protect its rights.
Obviously, SLDCs faith in the merit of its cause has been vindicated with the Courts
present decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital43 of SLDCs averment in its Complaint-in-
Intervention44 that at the instance of Pacita Lu it issued a check for 200,000.00 payable to
Babasanta and the confirmatory testimony of Pacita Lu herself on cross-
examination.45 However, there is nothing in the said pleading and the testimony which
explicitly relates the amount to the transaction between the Spouses Lu and Babasanta for
what they attest to is that the amount was supposed to pay off the advances made by
Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu had
already executed the Deed of Absolute Sale with Mortgage in favor of SLDC and therefore,
as previously explained, it has no effect on the legal position of SLDC.

Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the
prior notice of lis pendensand assuming further for the same nonce that this is a case of
double sale, still Babasantas claim could not prevail over that of SLDCs. In Abarquez v.
Court of Appeals,46 this Court had the occasion to rule that if a vendee in a double sale
registers the sale after he has acquired knowledge of a previous sale, the registration
constitutes a registration in bad faith and does not confer upon him any right. If the
registration is done in bad faith, it is as if there is no registration at all, and the buyer who
has taken possession first of the property in good faith shall be preferred.

In Abarquez, the first sale to the spouses Israel was notarized and registered only after the
second vendee, Abarquez, registered their deed of sale with the Registry of Deeds, but the
Israels were first in possession. This Court awarded the property to the Israels because
registration of the property by Abarquez lacked the element of good faith. While the facts in
the instant case substantially differ from that in Abarquez, we would not hesitate to rule in
favor of SLDC on the basis of its prior possession of the property in good faith. Be it noted
that delivery of the property to SLDC was immediately effected after the execution of the
deed in its favor, at which time SLDC had no knowledge at all of the prior transaction by
the Spouses Lu in favor of Babasanta.1a\^/phi1.net

The law speaks not only of one criterion. The first criterion is priority of entry in the registry
of property; there being no priority of such entry, the second is priority of possession; and,
in the absence of the two priorities, the third priority is of the date of title, with good faith as
the common critical element. Since SLDC acquired possession of the property in good
faith in contrast to Babasanta, who neither registered nor possessed the property at any
time, SLDCs right is definitely superior to that of Babasantas.

At any rate, the above discussion on the rules on double sale would be purely academic
for as earlier stated in this decision, the contract between Babasanta and the Spouses Lu
is not a contract of sale but merely a contract to sell. In Dichoso v. Roxas,47 we had the
occasion to rule that Article 1544 does not apply to a case where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at
most an actual assignment of the right to repurchase the same land. Accordingly, there
was no double sale of the same land in that case.

WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of
Appeals appealed from is REVERSED and SET ASIDE and the decision of the Regional
Trial Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 74613 February 27, 1991
SPOUSES DR. FIDEL CALALANG and DRA. MARIA GENER CALALANG, and
FERDINAND CALALANG,petitioners,
vs.
INTERMEDIATE APPELLATE COURT (FOURTH CIVIL CASES DIVISION), and HEIRS
OF ERLINDA GRUTA,respondents.
Francisco A. Lava, Jr., for petitioners.
Jose L. Aguilar for private respondents.
PARAS, J.:
This is a petition for review on certiorari which seeks to reverse, nullify and set aside: (a)
the June 28, 1985 decision1 of the Intermediate Appellate Court (now Court of Appeals) in
AC-G.R. No. CV 04384 entitled "Heirs of Erlinda Gruta vs. Ferdinand Calalang, et al."
setting aside the decision of the trial court in Civil Case No. 83-18019 (for damages)
between the same parties. The trial court had dismissed the case on the ground of lack of
cause of action but the Court of Appeals ordered the case to be remanded to the lower
court for further proceedings; and (b) the resolution dated April 28, 1986 denying the
motion for reconsideration.
As gathered from the records, the facts of the case are as follows:
Erlinda Gruta, 15 years old, from the province of Samar, was employed as househelper in
the household of petitioners spouses Dr. Fidel Calalang and Dra. Maria Gener Calalang
and their son Ferdinand Calalang, in Bulacan (Rollo, pp. 357; 393).
On October 31, 1981, Erlinda Gruta died of malathion poisoning. Ferdinand Calalang, son
of the spouses Calalang, who brought Erlinda first to the Calalang's Clinic and then to Jose
Reyes Memorial Hospital where she died, was charged with murder for allegedly poisoning
her (Rollo, pp. 164; 393).
The case was investigated by the National Bureau of Investigation (NBI). Then the case
was referred to the Office of the Provincial Fiscal, Malolos, Bulacan, for preliminary
investigation (Rollo, p. 164).
When the parents of the deceased arrived from Samar and after obtaining the Necropsy
Report from the NBI, a complaint for Murder was filed against Ferdinand Calalang with the
Provincial Fiscal of Malolos, Bulacan. Complainant Juanita Gruta, mother of the deceased,
presented the sworn statement of Dolores Ayuste, the aunt of the deceased maid who was
summoned during the incident and who was able to see her before she died, the death
certificate and the necropsy report (Rollo, p. 393).
Respondent Ferdinand Calalang never appeared nor presented his counter affidavit,
instead his mother Maria Gener Calalang presented a counter affidavit and two affidavits
of her maids who saw the deceased take a lethal dose of malathion and the report of Pat.
Bernabe (Rollo, p. 394).
After clarificatory questioning, the parties submitted their memoranda and later the
Investigating Fiscal Liberato Reyes dismissed the complaint on the ground of failure to
prove a prima facie case of the offense charged (Rollo, Annex "F" of request, pp. 74-80).
Complainant Juanita Gruta did not file a motion for reconsideration nor appeal to the
Ministry (now Department) of Justice.
On June 8, 1983, nearly two (2) years after the death of Erlinda Gruta and over a year
after the resolution of the Assistant Fiscal dated May 27, 1982, dismissing the murder
charge, a complaint for damages was filed by the private respondents against Ferdinand
Calalang impleading the spouses Calalang docketed as Civil Case No. 83-18019 in the
Regional Trial Court of Manila on the claim that they are jointly and severally liable (Rollo,
Annex "A", pp. 42-45; 163) for actual and compensatory damages in the amount of
P50,000.00 for moral damages; P72,000.00 for loss of earnings; and finally P30,000.00 for
attorney's fees aside from incidental expenses of P10,000.00 (Rollo, Annex "A", p. 44).
Plaintiffs, the heirs of Erlinda Gruta, Rogelio Gruta and Juanita Gruta in their own
rights and co-heirs of the late Erlinda Gruta, are all with capacity to sue and be
sued and are residents of 617 Carbajal Street, Binondo, Manila; while defendants
are likewise with capacity to sue and be sued and are residents of 41 A.
Fernando St., Valenzuela, Metro Manila, where they all may be served with
summons, writs and other court processes;
Erlinda Gruta is a 15 year old girl and one of the children of Rogelio Gruta and
Juanita Gruta;
Erlinda Gruta is now demise, she died on October 31, 1981 at Jose Reyes
Memorial Hospital of poisoning, per necropsy report of the NBI.
Erlinda Gruta at that time of her death was a domestic helper or servant of Dra.
Maria G. Calalang, of Marulas, Valenzuela, Metro Manila, receiving a salary
wage of P200.00 a month;
On October 30, 1981, she was poisoned by defendant Ferdinand Calalang, son
of the other defendants Spouses Calalang, resulting in her death on October 31,
1981;
The case was investigated by the NBI, after which the case was referred to the
fiscal's office for preliminary investigation;
Subsequently later, a case of Murder by poisoning was filed against defendant
Ferdinand Calalang with the fiscal's office of Bulacan, which was however
 dismissed on the alleged ground of failure to prove a prima faciecase of the
offense charged;
As a resulting consequences of the death of Erlinda Gruta, the parents and
relatives suffered actual and compensatory damages in the amount of
P50,000.00 more or less, resulting from burial expenses and others;
Also as a result of the death of Erlinda Gruta, the parents and relatives suffered
mental anguish, wounded feelings, anxiety and shock and for which plaintiff
demand P50,000.00 in Moral Damages from defendants jointly and solidarily;
The parents of the late Erlinda Gruta, who received the meager salary of
P200.00 a month, lost such earning as a direct result of her untimely death,
which if computed to the age of 30 years old, the parents would be deprived of at
least P72,000.00 in earnings;
In prosecuting this case, plaintiffs obligated themselves to pay their lawyer the
sum of P 30,000.00 contingent attorney's fee and will probably incur
consequential expenses and costs to the tune of P10,000.00 more or less.
WHEREFORE, after hearing, judgment issue:
1. Ordering defendants to jointly and severally pay plaintiffs the sum of
P50,000.00 as actual or compensatory damages;
2. Ordering defendants to jointly and severally pay plaintiffs the sum of P
50,000.00 as Moral Damages;
3. Ordering defendants to jointly and severally pay P72,000.00 as loss of
earnings to the plaintiffs;
4. Ordering defendants to jointly and several pay plaintiff the sum of P40,000.00
for attorney's fee and consequential expenses and costs;
5. Praying for such other reliefs which are just and equitable under the premises.
(pp. 42-45, Rollo)
On August 2, 1983, petitioners filed their Answer with Affirmative Defenses and
Counterclaim (Annex "B"). As the issues were joined, petitioners submitted a Request for
Admission (Annex "C"), under Rule 26. Private respondents, however, filed an Opposition
to the Motion for Admission (p. 123, CA's Original Record) which was not resolved by the
trial court.
On February 27, 1984, a preliminary hearing was conducted by the trial court on the
affirmative defenses of the defendants. Thereafter, on March 30, 1984, Hon. Judge
Antonio M. Martinez, RTC-Manila, Branch 20, issued an Order dismissing the case, the
dispositive portion of which reads:
WHEREFORE, finding merit to the prayer for dismissal of the case at bar on the
ground of lack of cause of action, based on the affirmative defenses in the
answer, this complaint should be, as it is hereby, DISMISSED.
No pronouncement as to cost.
SO ORDERED.
(Rollo, Annex "D", p. 84)
However, on appeal, the Intermediate Appellate Court rendered its decision dated June
28, 1986, reversing the order of the lower court, the dispositive portion of which reads:
WHEREFORE, the order of the trial court dismissing this case, dated March 30,
1984, is hereby SET ASIDE and the original records are ordered remanded to
the court below for further proceedings. With costs against the defendants-
appellees.
SO ORDERED.
(Rollo, Annex "G", p. 174)
A motion for reconsideration was filed by petitioners on August 1, 1985 (Rollo, Annex "H",
pp. 175-201) and a resolution was rendered on April 28, 1986, denying the motion for
reconsideration (Rollo, Annex "M", pp. 241-245).
Hence, this petition.
Under Section 5, Rule 16 "Any of the grounds for dismissal provided for in this rule, except
improper venue, may be pleaded as an affirmative defense, and preliminary hearing may
be had thereon as if a motion to dismiss had been Med." This is to save the expense
involved in the preparation and trial when the case can be otherwise disposed of. The
preliminary hearing should be conducted as ordinary hearings: the parties should be
allowed to present evidence and the evidence recorded (Asejo vs. Leonosa, 78 Phil. 467),
except when the affirmative defense is based on par. g., Section 1, Rule 16 "that the
complaint states no cause of action." In determining sufficiency of cause of action, only the
facts alleged in the complaint should be considered. (De Jesus, et al., vs. Belarmino, et al.,
95 Phil. 365; Dimayuga vs. Dimayuga, 96 Phil. 859).
It is a well-settled rule that in a motion to dismiss based on the failure of the complaint to
state a cause of action, the question submitted for determination is sufficiency of allegation
in the complaint itself. The sufficiency of the cause of action must appear on the face of the
complaint itself in order to sustain a dismissal on the ground. (Clavano vs. Genato, 80
SCRA 217). This rule applies when the only affirmative defense is the failure of the
complaint to state a cause of action. It does not apply when the grounds relied upon by
way of affirmative defenses state other matters. Thus the trial court, in the case at bar, did
not commit any error in conducting a preliminary hearing on the affirmative defenses of
herein petitioners.
The finding of IAC that there was no preliminary hearing (tsn., February 27, 1984) has no
basis that can be verified from the records. The trial court set the case for preliminary
hearing on February 27, 1984 as per Order dated February 3, 1984: and the records bear
"minutes" of the preliminary hearing conducted on February 27, 1987. The rule that the
findings of fact of the Court of Appeals (formerly IAC) are entitled to great respect is not
inflexible. They are subject to some established exceptions. (Layugan vs. IAC, 167 SCRA
363). And one of these exceptions is when judgment is based on misapprehension of facts
(Castillo vs. CA., G.R. No. 48541, August 21, 1989). IAC relied solely on the statement of
the Clerk of Court that "this case was decided on the basis of pleadings, memorandum,
motion for reconsideration and opposition. No oral or documentary evidence was
presented" (Decision of IAC, p. 3; Rollo, Annex "G", p. 163) without going to the records of
the case.
A perusal of the preliminary hearing indicates that the cause of action of respondents
(plaintiffs in the Civil Case) is based on the crime of murder allegedly committed by
Ferdinand Calalang.
Court
So you are basing your claim on the murder case?
Atty. Aguilar
Yes, your Honor.
(tsn., February 27,1984, p. 12)
The alleged ambiguity of the cause of action in the complaint was clarified by the
admission of the respondents' counsel. Thus, the trial court concluded:
Court
So you are basing this case on the murder case. That is what I want to make
clear (in) this case, and I wanted to have all the facts clear because your
complaint, based on par. 7, states: subsequently, later, a case of murder by
poisoning was filed against defendant Ferdinand Calalang with the fiscal's office
of Bulacan, which was however dismissed on the alleged ground of failure to
prove a prima facie case of the offense charged; and then on par. 8, states that
as a resulting consequence of the death of Erlinda Gruta, her parents and
relatives suffered actual and compensatory damages to the tune of P50,000
more or less, resulting from burial expenses and others; loss of income in the
amount of P72,000 and in the total amount more or less P220,000. So we may
now have a clear case, that is whether or not it is a murder case which lead to
the filing of civil case for damages. (tsn., February 27,1984, pp. 12-13)
Since the only cause of action of the case is based on the criminal act, there is no reason
to implead the Calalang spouses. In their Memorandum in Support of Affirmative
Defenses, the Calalang spouses reiterated that:
. . . the complaint does not show any legal, statutory basis as to why and under
what law are they being included as defendants since the complaint admits that
Ferdinand Calalang has the capacity to sue; the truth is he Ferdinand Calalang)
is of age . . . . (Emphasis supplied) (Memorandum in Support of Affirmative
Defenses, p. 1; Rollo, p. 135)
Thus, We find merit in the finding of the trial court that:
. . . There is no valid legal ground for impleading the spouses Dr. and Mrs. Maria
Calalang. The complaint shows that except for the fact that the spouses Calalang
are said to be the employer of the deceased Erlinda Gruta; and, that the other
defendant Ferdinand Calalang is their son, there is nothing in the complaint
which would connect them to the untimely death of Erlinda Gruta. . . .
It is further observed that the complaint alleges that all of the defendants
(Ferdinand Calalang and spouses Calalang) are said to have the "capacity to sue
and be sued." Therefore, if Ferdinand Calalang has the "capacity to sue and be
sued," then the spouses Calalang can no longer be held civilly liable for any of
his misdeeds, if any. . . . There being no legal ground to implead the defendants-
spouses Calalang, the case against them should be dismissed. (Order, p.
2; Rollo, Annex "D", p. 82)
A close scrutiny of the Order of Dismissal of the Regional Trial Court indicates that the
present case was not dismissed solely on the ground that the complaint failed to state a
cause of action, but also on the ground that there is no valid cause of action against
Ferdinand Calalang, upon considering the "pleadings, memorandum, motion for
reconsideration and opposition" therein.
Generally, the basis of civil liability from crime is the fundamental postulate of our law that
"every person criminally liable for a felony is also civilly liable" (Art. 100, Revised Penal
Code). In other words, criminal liability will give rise to civil liability only if the same
felonious act or omission results in damage or injury to another and is the direct and
proximate cause thereof (Banal vs. Tadeo, Jr., 156 SCRA 325)
In the case at bar, counsel for private respondents admitted that his complaint for
damages is based on the commission of the crime. Stress must be made, however, that
under circumstances, it is a fundamental rule that the facts upon which the civil liability
might arise must exist to warrant the filing of a civil action.
Thus, "the acquittal of the accused from the criminal charge will not necessarily extinguish
the civil liability unlessthe Court declares in the judgment that the fact from which the civil
liability might arise did not exist." (Tan vs. Standard Vacuum Oil Co., et al., 97 Phil. 672).
Similarly, "extinction of the penal action does not carry with it the extinction of civil liability
unless the extinction proceeds from a declaration in a final judgment that the fact from
which the civil might arise did not exist." (De Mesa vs. Priela, 24 SCRA 582; par. (b), Sec.
2, Rule 111, Rules of Court)
Verily, the dismissal of this criminal case as found by IAC is only by resolution of the
provincial fiscal and does not proceed from a declaration in a final judgment that the fact
from which the civil case might arise did not exist, so that said case may be refiled anytime
without the effect of double jeopardy. (Rollo, p. 173). We held as early as the case of
People v. Velez, 77 Phil. 1026, that the dismissal of the information or the criminal action
(upon motion of the fiscal) does not affect the right of the offended party to institute or
continue the civil action already instituted arising from the offense, because such dismissal
or extinction of the penal action does not carry with it the extinction of the civil action. The
reason most often given for this holding is that the two proceedings are not between the
same parties. Different rules as to the competency of witnesses and weight of evidence
necessary to the findings in the two proceedings also exist. In a criminal action the State
must prove its case by evidence which shows the guilt of the defendant beyond
reasonable doubt, while in a civil action it is sufficient for the plaintiff to sustain his cause
by preponderance of evidence only (Ocampo vs. Jenkins, 14 Phil. 681). Therefore, the
insufficiency of evidence to support a murder charge does not imply that there is no
sufficient evidence to support the civil case based on the same alleged act.

It is highly speculative to conclude that the plaintiffs' cause of action would stand or fall on
the strength of the testimony of Dolores Ayuste who was convicted of perjury on such
alleged testimony. A decision should be based on facts not on mere speculations or
beliefs.1wphi1

Finally, the trial court dismissed the case against Ferdinand Calalang motu proprio based
on the ground that there is no valid cause of action against him. This is not a ground for
dismissal of action under Rule 16; but the failure of the complaint to state a cause of
action. The pleadings, memorandum and motion for reconsideration and opposition,
thereto, might show that there is no valid cause of action against Ferdinand Calalang; still,
the court is not allowed by law to dismiss the case motu proprio. As long as there is a
cause of action in the complaint itself, procedural due process demands that there must be
a hearing on the merits with the complaint as "prima facie evidence of the facts therein
stated." (People vs. Dy, 158 SCRA 111). Therefore, the plaintiffs should be given their day
in court to vindicate their claim to the fullest.

WHEREFORE, the appealed decision remanding this case to the court a quo for further
proceedings is hereby AFFIRMED with the MODIFICATION that the case against Dr. and
Mrs. Fidel Calalang is hereby DISMISSED.

SO ORDERED.
 Republic of the Philippines 1.7. Defendant Jose Jalandoni is impleaded herein in his personal
SUPREME COURT capacity also as alternative Defendant, as the owner of 94% of the
Manila subscribed capital stock Defendant Corporation if it be shown that the
corporate privilege of Defendant Corporation was used by Defendant
THIRD DIVISION Jalandoni to secure the loan and the proceeds thereof for his own
personal benefit fully knowing that the Defendant Corporation was with
inadequate capital to meet its debts and thereby evade the obligation
under the Promissory Note.

G.R. No. 79760 June 28, 1993 xxx xxx xxx

PERPETUAL SAVINGS BANK, HON. JOSE L. COSCOLLUELA, Presiding Judge,
Regional Trial Court, NCJR, Branch 146, petitioners,
vs.
JOSE ORO B. FAJARDO and EMMANUEL F. DEL MUNDO, respondents.
Yngson & Associates for petitioner.
2.1. On 29 December 1982, Defendant Corporation for value received
thru Defendants Fajardo and Del Mundo, executed and delivered to
Plaintiff a Promissory Note in the sum of Seven Hundred Fifty
Thousand Pesos (P750,000.00) payable in lumpsum upon maturity,
thereof on 29 January 1984 with interest at 23% per annum from the
date thereof;

Cruz, Enverga, Fajardo & Del Mundo for respondents. 2.2. Upon maturity of the Promissory Note, Defendants defaulted and
failed to satisfy the entire amount of indebtedness.

xxx xxx xxx

FELICIANO, J.:
3.1. Per the records of the Securities & Exchange Commission, the
paid-up capital of Defendant Corporation amounts to only P100,000.00,
On 29 December 1982, J.J. Mining and Exploration Corporation ("J.J. Mining") executed broken down as follows:
and delivered to petitioner Perpetual Savings Bank ("Bank") a promissory note in the
amount, of P750,000.00 payable in one lump sum upon maturity on 29 January 1984, with
interest at 23% per annum. The note also contained, inter alia, a clause providing for Name and Address Amount Amount
penalty interest at the rate of 3% per month on the amount due, compounded monthly. The of Stockholders Subsribed Paid
promissory note was executed for J.J. Mining by respondents Jose Oro B. Fajardo and
Emmanuel F. Del Mundo. Messrs. Fajardo and Del Mundo are said to be officers of J.J. 1. Jose Emmanuel Jalandoni P368,000.00 P92,000.00
Mining; respondent Del Mundo was apparently also counsel for J.J. Mining. 1 44 San Mateo
Bo. Capitolyo
Upon maturity of the promissory note, neither J.J. Mining nor anyone else paid the amount Pasig, Rizal
of the indebtedness, notwithstanding petitioner's repeated written demands for payment.
2. Maria Theresa Jalandoni 8,000.00 2,000.00
On 31 July 1986, petitioner Bank filed a complaint with the Regional Trial Court, Makati, 44 San Mateo
Metro Manila (Civil Case No. 14501) against J.J. Mining, Jose Emmanuel Jalandoni and Bo. Capitolyo,
herein respondents Fajardo and Del Mundo, for collection of the amounts due under the Pasig, Rizal
promissory note. In its complaint petitioner Bank alleged, among other things, the
following: 3. Florentino Ampil 8,000.00 2,000.00
Bian, Laguna
1.6. Defendants Fajardo and Del Mundo are impleaded herein as
agents/or representatives of Defendant Corporation who were 4. Rafael Hocson 8,000.00 2,000.00
signatories in the Promissory Note or alternatively, in their personal Bian, Laguna
capacities if it be shown that they contracted the loan fully knowing that
the Defendant Corporation would be unable to pay the same upon
maturity and/or that they used the proceeds of the loan for their own 5. Tranquilino Mendiola 8,000.00 2,000.00
personal benefit; Mandaluyong, Rizal

P400,000.00 P100,000.00
 (Copy of the Articles of Incorporation of Defendant Corporation is
herewith attached as Annex "E" and made an integral part hereof.)
3.2. Pursuant to such records, Defendant Jalandoni and his spouse
Maria Theresa Jalandoni own 94 % of the total shares of stock of
Defendant Corporation giving them total control of the corporation;
3.3. Despite the fact that the paid up capital of Defendant Corporation
was only P100,000.00 it managed to borrow P750,000.00 from Plaintiff
Bank secured only by shares of stocks of Pamana Mining Corp. also
owned by Defendant Jalandoni. (Copy of Pledge of Shares of Stock is
herewith attached as ANNEX "F" and made an integral part hereof.)
xxx xxx xxx
Respondents Fajardo and Del Mundo filed a Motion to Dismiss on the ground that the
complaint had failed to state a cause of action against them. Petitioner Bank filed an
Opposition to the Motion to Dismiss, citing paragraph 1.6 of its complaint and invoking,
among other things, Section 13, Rule 3 of the Rules of Court, provides that:
Alternative defendants. Where the plaintiff is uncertain against which
of several persons he is entitled to relief, he may join any or all of them
as defendants in the alternative, although aright to relief against one
may be inconsistent with a right to relief against the other.
Respondents in turn filed a Reply to petitioner Bank's Opposition.
The Regional Trial Court then resolved respondents' Motion to Dismiss by issuing an
Order dated 9 October 1986 denying that Motion "considering that the grounds raised by
[respondents] Emmanuel F. Del Mundo and Jose V. Fajardo in their motion to dismiss
are not indubitable."2
Respondents Del Mundo and Fajardo moved for reconsideration of the trial court's Order.
After additional pleadings and counter-pleadings, the trial court denied the Motion for
Reconsideration.
Respondents Fajardo and Del Mundo then went directly to this Court on Petition
for Certiorari (G.R. No. 77100, entitled "Jose Oro B. Fajardo and Emmanuel E. Del Mundo
v. Hon. Jose Coscolluela, etc., et al."). On 23 February 1987, however, this Court resolved
to refer the case to the Court of Appeals.
Before the Court of Appeals, respondents Fajardo and Del Mundo basically alleged that
petitioner Bank's complaint did not set forth any cause of action as against them
personally, and that Section 13, Rule 3 of the Rules of Court on alternative defendants was
not applicable to the case at bar. On 25 August 1987, the Court of Appeals rendered a
Decision which granted respondents' Petition and reversed and set aside the trial court's
Orders which had denied respondents' Motion to Dismiss and Motion for Reconsideration,
and dismissed petitioner Bank's complaint in Civil Case No. 14501.
In the present Petition for Review on Certiorari brought by the Bank now represented by a
Liquidator, the parties have raised the following issues for our consideration:
1. Did the complaint filed in Civil Case No. 14501 state a cause of
action against respondents Fajardo and Del Mundo, as distinguished
from J.J. Mining, on whose behalf they had purported to act?
2. Is the rule on alternative defendants set out in Section 13, Rule 3 of
the Rules of Court applicable to the case at bar?
These two (2) issues are obviously related one to the other and need to be addressed
together.
Paragraph 1.6 of petitioner Bank's complaint is quoted again in full for convenience:
1.6 Defendants Fajardo and Del Mundo are impleaded herein as agents/or representatives
of Defendant Corporation who were signatories in the Promissory Note or alternatively, in
their personal capacities if it be shown that they contracted the loan fully knowing that the
Defendant Corporation would be unable to pay the same upon maturity, and/or that they
used the proceeds of the loan for their own personal benefit.
xxx xxx xxx
(Emphasis supplied)
Examination of paragraph 1.6 shows that petitioner Bank there seeks to distinguish
between (a) respondents Fajardo and Del Mundo in their capacity as "agents and/or
representative of" J.J. Mining; and (b) respondents Fajardo and Del Mundo in their
individual and personal capacities. As noted earlier, the text of the promissory note shows
that respondents Fajardo and Del Mundo had signed for and in behalf of J.J. Mining.
If it be assumed that respondents Fajardo and Del Mundo were properly authorized,
and acted within the scope of their authority, to sign for and in behalf of J.J. Mining when
the latter borrowed P750,000 from petitioner Bank and signed the promissory note in that
connection, then it is J.J. Mining as maker of the note which is directly liable to petitioner
Bank for repayment of such loan, and not Messrs. Fajardo and Del Mundo who merely
acted for J.J. Mining in that transaction.3 This follows from the elementary proposition that
J.J. Mining, the borrowing corporation, has a personality separate and distinct from the
persons who have been duly authorized to represent the corporation in that particular
transaction.
If it be assumed, upon other hand, that when Fajardo and Del Mundo purported to act for
and in behalf of J.J. Mining in executing the promissory note here involved, were either not
authorized at all to do so or somehow acted in excess of their authority as agents or
representatives of J.J. Mining, then in principle Fajardo and Del Mundo would
be personally liable upon the promisorry note, instead of the borrower corporation.4 J.J.
Mining as a separate juridical person would not be so liable, unless it be shown that J.J.
Mining actually received all or part of the proceeds of the loan and (presumably) benefited
from such loan proceeds, and to that extent, had impliedly ratified the transaction. 5
Respondents Fajardo and Del Mundo were, in the same complaint, and in the alternative,
sued in their personal and individual capacities. In this respect, the complaint alleges two
(2) distinguishable bases for sustaining the suit. Firstly, Fajardo and Del Mundo are being
sued as tort-feasors who contracted the loan although they allegedly knew that the
apparent principal obligor, J.J. Mining, would never be able to pay the loan upon maturity.
The cause of action here is basically fraudulent inducement, concealment or
misrepresentation exercised upon petitioner Bank which was misled into granting and
releasing the loan.6 The second basis for suing Fajardo and Del Mundo in their personal
and individual capacities is that they allegedly used the proceeds of the loan for their own
personal benefit, rather than for the benefit of the borrower corporation. 7 In respect of
these twin, related, bases for personal liability to the creditor, the Bank stated in paragraph
2.1 of its complaint that J.J. Mining had "received value" "thru [respondents] Fajardo and
Del Mundo." Thus, the Bank has alleged that the proceeds of the loan were delivered to
the borrower corporation by delivering them to respondents Fajardo and Del Mundo. The
Bank has also stressed, in paragraph 3.1 of its complaint, that the paid-up capital of the
borrower corporation, was only P100,000.00 which, according to petitioner Bank, was
obviously disproportionately small compared to the P750,000.00 borrowed from the Bank.
Analysis of the allegations of the petitioner Bank's complaint thus shows, firstly, that the
defendants who are being sued in the alternative are the following:
(a) the borrowing corporation, J.J. Mining; and
(b) respondents Fajardo and Del Mundo in their personal and individual
capacities,
and, secondly, that two (2) alternative but related grounds for holding Fajardo and Del
Mundo responsible to petitioner Bank, personally and individually, have been pleaded by
the Bank. There is, as previously noted, a third possible basis for seeking to hold Fajardo
and Del Mundo liable in their personal capacities: that they acted without or in excess of
their authority as agents or representatives of the borrower corporation. This third basis,
however, was not explicitly set out by the Bank in its complaint. The complaint did
not directly allege that respondents Fajardo and Del Mundo had acted without or in excess
of their authority as agents and representatives of J.J. Mining, in executing the Promissory
Note for J.J. Mining and receiving the proceeds thereof. However, such an allegation may
be said to have been implicitly made along with the allegation that respondents had
knowingly induced petitioner to grant the loan though J.J. Mining had no capacity to pay, or
with the allegation that respondents had converted the loan proceeds to their personal
benefit.
The familiar test for determining whether a complaint did or did not state a cause of action
against the defendants is whether or not, admitting hypothetically the truth of the
allegations of fact made in the complaint, a judge may validly grant the relief demanded in
the complaint. In Rava Development Corporation v. Court of Appeals,8 the Court
elaborated on this established standard in the following manner:
The rule is that a defendant moving to dismiss a complaint on the
ground of lack of cause of action is regarded as having hypothetically
admitted all the averments thereof. The test of the sufficiency of the
facts found in a petition as constituting a cause of action is whether or
not, admitting the facts alleged, the court can render a valid judgment
upon the same in accordance with the prayer thereof (Consolidated
Bank and Trust Corp. v. Court of Appeals, 197 SCRA 663 [1991]).
In determining the existence of a cause of action, only the statements in
the complaint may properly be considered. It is error for the court to
take cognizance of external facts or hold preliminary hearings to
determine their existence. If the allegation in a complaint furnish
sufficient basis by which the complaint may be maintained, the same
should not be dismissed regardless of the defenses that may be
assessed by the defendants (supra).
A careful review of the records of this case reveals that the allegations
set forth in the complaint sufficiently establish a cause of action. The
following are the requisites for the existence of a cause of action: (1) a
right in favor of the plaintiff by whatever means and under whatever law
it arises or is created; (2) an obligation on the part of the named
defendant to respect, or not to violate such right; and (3) an act or
omission on the part of the said defendants constituting a violation of
the plaintiff's right or a breach of the obligation of the defendant to the
plaintiff (Heirs of Ildefonso Coscolluela, Sr., Inc. v. Rico General
Insurance Corporation, 179 SCRA 511 [1989])."9 (Emphasis supplied)
In its Decision, the Court of Appeals said, among other things, that petitioner Bank's
complaint did not state a cause of action against respondents Fajardo and Del Mundo in
their personal and individual capacities for the reason that no evidence had been
presented to support such alleged liability on the "so called alternative cause of action."
The Court of Appeals said:
Petitioners' participation, if any, in the execution of the promissory note
in question, is that merely of agents and/or representatives of
defendant corporation. Their alleged liability in the so-called alternative
cause of action is predicted on hearsay and/or third-hand information.
According to private respondent, herein petitioners "must have
known" the capital structure of the corporation and therefore, they are
guilty of fraud because through false representations they succeeded in
inducing plaintiff-respondent to grant or release the loan with full
knowledge on their part that defendant corporation was in no position to
comply with the obligation it had assumed.
But what is the factual basis of private-respondents allegations. Saved
for its allegation in its Opposition to defendants-petitioners Motion to
Dismiss that the latter "must have known" the capital structure of the
corporation and its allegation in the complaint that "if it be shown" that
defendants-petitioners "contracted the loan fully knowing that defendant
corporation would be unable to pay the same upon maturity", there is
no evidence on record showing that defendants-petitioners had such a
knowledge of the financial incapacity of defendant corporation to meet
its financial obligations at its maturity. Private respondents' allegation in
the complaint are based on pure speculations and fantasies and
nothing more." 10 (Emphasis supplied)
We consider that the Court of Appeals here was in reversible error. It was quite premature
for the Court of Appeals to consider evidence (or lack of evidence) outside the four corners
of the complaint and to reach the above conclusion, since the fraud consisting of false
representations has yet to be proved by petitioner Bank in the course of the trial before the
court a quo. By the same token, respondents' innocence and non-utilization, or fraud and
conversion, of the loan proceeds for their private and personal benefit are precisely
defenses to be proved by respondents in the course of the trial. Evidently, the Court of
Appeals overlooked the fact that the trial has yet to begin; for it assumed as real and
established the defenses which need to be proved during that trial.
Having examined the record here carefully, and while the complaint filed in the trial court is
not exactly a model of draftmanship, we consider that it substantially meets the established
test and that the complaint does state cause(s) of action not only against the borrower
corporation, J.J. Mining, but also against respondents Fajardo and Del Mundo in their
personal and individual capacities.
1. that, at the present, J.J. Mining is no longer a going concern "its
office and assets nowhere to be found;" and
2. that J.J. Mining has outstanding obligations to different banks which,
like petitioner Bank, are undergoing liquidation i.e., Admiral Savings
and Loan Bank; Development Bank of Rizal; and petitioner Bank in
the aggregate principal amount (as of 1984) of P2,750,000.00; that in
the transactions with all three (3) banks, the signatories of the
promisorry notes were the two (2) respondents in the case at bar,
Messrs. Fajardo and Del Mundo. 12
The essential thing is that petitioner Bank must be given an opportunity to prove its
allegations in all necessary detail at the trial on the merits. There the respondents will have
the opportunity to controvert and refute petitioner's detailed assertions. 13

Turning to the applicability of Section 13, Rule 3 of the Rules of Court to the complaint in
the case at bar, the Court observes that the Court of Appeals found that Section not
applicable to the present case. The Court of Appeals said on this point:
Private respondent [petitioner Bank] also invokes the rule on alternative
defendants found in Section 13, Rule 3 of the Revised Rules of Court
which state:
WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 25 August
1987 in C.A.-G.R. SP No. 11547 is hereby REVERSED and SET ASIDE. The Orders of
the trial court dated 9 October 1986 and 22 December 1986 in Civil Case No. 14501 are
hereby REINSTATED. This case is hereby REMANDED to the trial court for further
proceedings not inconsistent with this Decision. Costs against respondents.
SO ORDERED.

xxx xxx xxx

But private respondents was never "uncertain" against which of several

persons it is entitled to relief. As shown in paragraph 2.1 of the
complaint which were previously cited, it was dead sure, as night
follows day, that the "defendant corporation for value
received thru" petitioners, "executed and delivered to plaintiff a
promissory note" for the amount P750,000.00. 11

We believe that here, too, the Court of Appeals was in error. Firstly, the state of
mind of petitioner Bank whether it was "uncertain" or whether it was "dead
sure as night follows day" against which of several defendants it is entitled to
relief is, of course, immaterial, except to the extent that such state of minds is
externalized by the allegations of the complaint. Petitioner Bank, in paragraph 1.6
in relation to paragraphs 2.1 and 2.2 of its complaint, had pleaded, with sufficient
clarity, its claimed rights against alternative defendants: the borrower corporation
and respondents Fajardo and Del Mundo. That the rights pleaded against the
borrower corporation are prima facie inconsistent with the rights pleaded against
respondents Fajardo and Del Mundo, is also clear: either the borrower
corporation alone is liable; or respondents Fajardo and Del Mundo are alone
liable in lieu of J.J. Mining; or respondents Fajardo and Del Mundo are solidarily
liable with J.J. Mining.

To bolster its position, petitioner Bank in its Memorandum filed with this Court referred to
certain additional circumstances which are, of course, more properly alleged and proved
before the trial court:
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 109173 July 5, 1996
CITY OF CEBU, petitioner,
vs.
THE HON. COURT OF APPEALS (SIXTEENTH DIVISION), HON. JUDGE RODOLFO
BELLAFLOR and MERLITA CARDENO, respondents.
RESOLUTION
FRANCISCO, R., J.:p
One of the basic tenets of procedural law is a liberal interpretation of Rules of Court in
order to promote their object and to assist the parties in obtaining just, speedy, and
inexpensive determination of every action and proceeding. 1 Time and again, this Court has
stressed that the primordial concern of rules of procedure is to secure substantial justice.
Otherwise stated, they are but a means to an end. Hence, a rigid and technical
enforcement of these rules which overrides the ends of justice shall not be countenanced.
Substance cannot be subordinated to procedure when to do so would deprive a party of
his day in court on the basis solely of a technicality. 2 The case before us illustrates how a
stringent application of procedural rules, when uncalled for, can result in a contravention of
the foregoing principle and the consequent subversion of justice.
The antecedent facts are undisputed. Private respondent Merlita Cardeno is the owner of a
parcel of land with an area of 2,019 square meters located at Sitio Sto. Nino, Alaska-
Mambaling and covered by Transfer Certificate of Title No. 116692. On February 25, 1992,
the petitioner, City of Cebu, filed a complaint for eminent domain against private
respondent with Branch II of the Regional Trial Court (RTC) of Cebu City seeking to
expropriate the said parcel of land. The complaint was initiated pursuant to Resolution No.
404 and Ordinance No. 1418, dated February 17, 1992, of the Sangguniang Panlungsod
of Cebu City authorizing the City Mayor to expropriate the said parcel of land for the
purpose of providing a socialized housing project for the landless and low-income city
residents.3
Private respondent filed a motion to dismiss the said complaint on the ground of lack of
cause of action. She asseverated that the allegations contained in paragraph VII of the
complaint, to wit:
That repeated negotiations had been made with the defendant to have
the aforementioned property purchased by the plaintiff through
negotiated sale without resorting to expropriation, but said negotiations
failed.4
do not show compliance with one of the conditions precedent to the exercise of
the power of eminent domain by a local government unit as enunciated in
Section 19 of R.A. 71605 which provides in part that:
A local government unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of eminent domain . . .
; Provided however, That the power of eminent domain may not be
exercised unless a valid and definite offer has been previously made to
the owner, and such offer was not accepted . . . . [Emphasis provided.]
Petitioner sought to establish compliance with the abovecited requirement by alleging in its
"Comment and Opposition" to private respondent's Motion to Dismiss, the following facts:
7. To further pursue its desire to acquire the property concerned, the
plaintiff made on October 28, 1991, another offer to Mrs. Cardeno,
through her lawyer, Atty. Omar Redula, for the purchase of her property
in the amount of Four Hundred Seventy Eight Thousand (P478,000.00)
Pesos. . . . ;
8. The said offer was again refused, thus the resort by the plaintiff to
expropriation.6
The RTC nevertheless dismissed the complaint and ruled as follows:
The allegations in the complaint which is (sic) relevant to the seemingly
or apparent compliance of (sic) that condition precedent is found in
paragraph VII thereto (sic) which reads:
That repeated negotiations had been made with the
defendant to have the aforementioned property
purchased by the plaintiff through negotiated sale
without resorting to expropriation, but said
negotiations failed.
The import or meaning of the said allegation in paragraph VII of the
complaint aforequoted to the mind of the Court does not convey or
connote the same meaning or import or even approximate, the
condition precedent required,
Unless a valid and definite offer has been previously
made to the owner and such offer was not accepted.
The Court is of the opinion that the City of Cebu has not complied with
the condition precedent, hence, the complaint does not state a cause of
action.7
Furthermore, in disregarding petitioner's allegations in its "Comment and Opposition", the
RTC invoked the oft-cited rule that where the ground for dismissal is that the complaint
states no cause of action, its sufficiency can only be determined from the facts alleged in
the complaint and no other.8
Aggrieved, petitioner filed a special civil action for certiorari before the Court of Appeals
which, however, affirmed the above ruling of the RTC. According to the Court of Appeals,
an allegation of repeated negotiations made with the private respondent for the purchase
of her property by the petitioner, "cannot by any stretch of imagination, be equated or
likened to the clear and specific requirement that the petitioner should have previously
made a valid and definite offer to purchase."9 It further added that the term "negotiation"
which necessarily implies uncertainty, it consisting of acts the purpose of which is to arrive
at a conclusion, may not be perceived to mean the valid and definite offer contemplated by
law. 10
Petitioner's contention that it could have presented evidence in the course of the trial to
prove full compliance with Section 19 of R.A. No. 7160 had the RTC not dismissed the
case outrightly, fell on deaf ears. 11 The Court of Appeals declared it procedurally
unacceptable to ascertain the existence of a cause of action from any source other than
the allegations in petitioner's complaint.
An offshoot of the foregoing is the instant petition for review on certiorari which has
essentially become a battle of semantics being waged before this Court. While petitioner
reiterates that paragraph VII of the complaint sufficiently states compliance with the
requirement of "a valid and definite offer", private respondent insists that the term
"negotiations" is too broad to be equated with the said requirement. 12 Elaborating, private
respondent posited that by definition, "negotiations run the whole range of acts preparatory
to concluding an agreement, from the preliminary correspondence; the fixing of the terms
of the agreement; the price; the mode of payment; obligations of (sic) the parties may
conceive as necessary to their agreement."13 Thus, "negotiations" by itself may pertain to
any of the foregoing and does not automatically mean the making of "a valid and definite
offer."
At the outset, it must be said that without necessarily delving into the parties' semantical
arguments, this Court finds that the complaint does in fact state a cause of action. What
may perhaps be conceded is only the relative ambiguity of the allegations in paragraph VII
of the complaint. However, as We have previously held, a complaint should not be
dismissed upon a mere ambiguity, indefiniteness or uncertainty of the cause of action
stated therein
for these are not grounds for a motion to dismiss but rather for a bill of particulars. 14 And,
. . . though the allegations in the complaint are ambiguous, indefinite or
uncertain but, nevertheless, a cause of action can, in any manner, be
made out therefrom, and the plaintiff would be entitled to recover in any
aspect of the facts or any combination of the facts alleged, if they were
to be proved, then the motion to dismiss should be denied. 15
In other words, a complaint should not be dismissed for insufficiency unless it appears
clearly from the face of the complaint that the plaintiff is not entitled to any relief under any
state of facts which could be proved within the facts alleged therein. 16
The error of both the RTC and respondent Court of Appeals in holding that the complaint
failed to state a cause of action stems from their inflexible application of the rule that: when
the motion to dismiss is based on the ground that the complaint states no cause of action,
no evidence may be allowed and the issue should only be determined in the light of the
allegations of the complaint. 17 However, this rule is not without exceptions. In the case
of Tan v. Director of Forestry, 18 this Court departed from the aforementioned rule and held
that, ". . . although the evidence of the parties were on the question of granting or denying
the petitioner-appellant's application for a writ of preliminary injunction, the trial court
correctly applied said evidence in the resolution of the motion to dismiss." 19 Likewise,
in Marcopper Mining Corporation v. Garcia, 20 we sanctioned the act of the trial court in
considering, in addition to the complaint, other pleadings submitted by the parties in
deciding whether or not the complaint should be dismissed for lack of cause of action. This
Court deemed such course of action but logical where the trial court had the opportunity to
examine the merits of the complaint, the answer with counterclaim, the petitioner's answer
to the counterclaim and its answer to the request for admission. 21 The same liberality
should be applied in the instant case where an examination of petitioner's "Comment and
Opposition" to private respondent's Motion to Dismiss leaves no room for doubt that
petitioner had indeed made "a valid and definite offer" to private respondent as required by
law.
Furthermore, a closer scrutiny reveals that even on the face of the complaint alone, there
is extant a cause of action. Petitioner avers in paragraph I thereof that,
. . . . Under R.A. 7160, Sec. 9 thereof, the City of Cebu is legally vested
with the power of eminent domain and pursuant thereto is filing this
petition/complaint as authorized by Ordinance No. 1418 passed by the
Sangguniang Panlungsod on February 17, 1992, a photocopy of which
is herein attached as Annex "A", and made an integral part of this
complaint. . . 22 [Emphasis provided]
All documents attached to a complaint, the due execution and genuineness of
which are not detained under oath by the defendant, must be considered as part
of the complaint without need of introducing evidence thereon. 23 Additionally, the
general rule is that a motion to dismiss hypothetically admits the truth of the facts
alleged in the complaint. 24 Thus, Ordinance No. 1418, with all its provisions, is
not only incorporated into the complaint for eminent domain filed by petitioner,
but is also deemed admitted by private respondent. A perusal of the copy of said
ordinance which has been annexed to the complaint shows that the fact of
petitioner's having made a previous valid and definite offer to private respondent
is categorically stated therein. Thus, the second whereas clause of the said
ordinance provides as follows:
WHEREAS, the city government has made a valid and definite offer to
purchase subject lot(s) for the public use aforementioned but the
registered owner Mrs. Merlita Cardeno has rejected such offer. 25
The foregoing should now put to rest the long drawn argument over the alleged failure of
the complaint to state a cause of action. There is no longer any room for doubt that as
alleged in the complaint, and as admitted by private respondent, the petitioner had in fact
complied with the condition precedent of "a valid and definite offer" set forth in Sec. 19 of
R.A. 7160.
And as a fitting finale to this controversy, the principle enunciated in both
the Tan and Marcopper cases is here reiterated:

The rules of procedure are not to be applied in a very rigid, technical

sense; rules of procedure are used only to help secure substantial
justice. If a technical and rigid enforcement of the rules is made their
aim would be defeated. Where the rules are merely secondary in
importance are made to override the ends of justice; the technical rules
had been misapplied to the prejudice of the substantial right of a party,
said rigid application cannot be countenanced. 26

The aforequoted doctrine finds compelling application in the case at bench. For as
correctly averred by petitioner, nothing else was accomplished by the dismissal of the
complaint for eminent domain but a considerable delay in the proceedings. The dismissal
of the complaint did not bar petitioner from filing another eminent domain case and from
correcting its alleged error by the mere expedient of changing paragraph VII thereof.
Indeed, precious time has been wasted while the salutary objectives of Ordinance No.
1418 of the City of Cebu have been put on hold by a quarrel over technical matters.

WHEREFORE, the petition is hereby GRANTED and the decision appealed from is
REVERSED and SET ASIDE. The case is ordered remanded to the RTC which shall
proceed to the hearing and final determination thereof.

SO ORDERED.
G.R. No. 139371 April 4, 2001
INDIANA AEROSPACE UNIVERSITY, petitioner,
vs.
COMMISSION ON HIGHER EDUCATION (CHED), respondent.
PANGANIBAN, J.:
When the delayed filing of an answer causes no prejudice to the plaintiff, default orders
should be avoided. Inasmuch as herein respondent was improvidently declared in default,
its Petition for Certiorari to annul its default may be given due course. The act of the
Commission on Higher Education enjoining petitioner from using the word "university" in its
corporate name and ordering it to revert to its authorized name does not violate its
proprietary rights or constitute irreparable damage to the school. Indeed, petitioner has no
vested right to misrepresent itself to the public. An injunction is a remedy in equity and
should not be used to perpetuate a falsehood.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
challenging the July 21, 1999 Decision1 of the Court of Appeals (CA) in CA-GR SP No.
51346. The appellate court directed the Regional Trial Court (RTC) of Makati City, Branch
136, to cease and desist from proceeding with Civil Case No. 98-811 and to dismiss the
Complaint for Damages filed by the "Indiana Aerospace University" against the
Commission on Higher Education (CHED). The dispositive portion of the CA Decision
reads as follows:
"WHEREFORE, in the light of the foregoing consideration, and pursuant to
pertinent existing laws and jurisprudence on the matter, [the trial court] is hereby
DIRECTED to cease and desist from proceeding with Civil Case No. 98-811 and
to order the dismissal of [petitioner's] Petition dated March 31, 1999 in Civil Case
No. 98-911 for lack of merit and valid cause of action."2
The Facts
The facts of this case are summarized by the CA, as follows:
"Sometime in October 1996, Dr. Reynaldo B. Vera, Chairman, Technical Panel
for Engineering, Architecture, and Maritime Education (TPRAM) of [CHED],
received a letter dated October 18, 1998 (Annex 'C') from Douglas R. Macias,
Chairman, Board of Aeronautical Engineering, Professional Regulat[ory]
Commission (PRC) and Chairman, Technical Committee for Aeronautical
Engineering (TPRAME) inquiring whether [petitioner] had already acquired
[u]niversity status in view of the latter's advertisement in [the] Manila Bulletin.
"In a letter dated October 24, 1996, Dr. Vera formally referred the aforesaid letter
to Chairman Alcala with a request that the concerned Regional Office of [CHED]
be directed to conduct appropriate investigation on the alleged misrepresentation
by [petitioner]. Thereafter, [CHED] referred the matter to its Regional Director in
Cebu City, requesting said office to conduct an investigation and submit its
report. The [R]eport submitted in January 1997, stated in substance:
'x x x xxx xxx
'To recall it was in the month of May 1996, [that] Director Ma. Lilia
Gaduyon met the school [p]resident in the regional office and verbally
talked [with] and advised them not to use University when it first came
out in an advertisement column of a local daily newspaper in Cebu City.
It was explained that there was a violation [committed by] his institution
[when it used] the term university unless the school ha[d] complied
[with] the basic requirement of being a university as prescribed in
CHED Memorandum Order No. 48, s. 1996.'
xxx xxx x x x.'
"As a consequence of said Report, [respondent's] Legal Affairs Service was
requested to take legal action against [petitioner]. Subsequently, on February 3,
1997, [respondent] directed [petitioner] to desist from using the term University,
including the use of the same in any of its alleged branches. In the course of its
investigation, [respondent] was able to verify from the Securities and Exchange
Commission (SEC) that [petitioner had] filed a proposal to amend its corporate
name from Indiana School of Aeronautics to Indiana Aerospace University, which
was supposedly favorably recommended by the Department of Education,
Culture and Sports (DECS) per its Indorsement dated 17 July 1995, and on [that]
basis, SEC issued to [petitioner] Certificate of Registration No. AS-083-002689
dated August 7, 1995. Surprisingly, however, it ought to be noted, that SEC
Chairman Perfecto R. Yasay, Jr. wrote the following letter to the [c]hairman of
[respondent]:
'Hon. Angel C. Alcala
Chairman
Commission on Higher Education
DAP Bldg., San Miguel Avenue
Ortigas Center, Pasig City
Dear Chairman Alcala:
This refers to your letter dated September 18, 1997 requesting this
Commission to make appropriate changes in the Articles of
Incorporation of Indiana School of Aeronautics, Inc. due to its
unauthorized use of the term 'University' in its corporate name.
Relative thereto, please be informed that our records show that the
above-mentioned corporation has not filed any amended articles of
incorporation that changed its corporate name to include the term
'University.'
In case the corporation submit[s] an application for change of name,
your Cease and Desist Order shall be considered accordingly.
 Very Truly yours,
(SGD.) PERFECTO R.
YASAY, JR.
Chairman'
"In reaction to [respondent's] order for [petitioner] to desist from using the word
'University', Jovenal Toring, [c]hairman and [f]ounder of [petitioner] wrote a letter
dated February 24, 1997 (Annex 'G') appealing for reconsideration of
[respondent's] Order, with a promise to follow the provisions of CMO No. 48,
pertinent portions of which have been quoted in the Petition, to wit:
'On 07 August 1995, in line with the call of the government to go for
global competitiveness and our vision to help in the development of
aerospace technology, the Board of Directors applied with the SEC for
the amendment of Article I of the Articles of Incorporation to read as
'Indiana Aerospace University' instead of 'Indiana School of
Aeronautics, Inc.'
xxx xxx xxx
'In view thereof, we would like to appeal to you Fr. Delagoza to please
reconsider your order of February 3, 1997, otherwise the school will
encounter financial difficulties and suffer damages which will eventually
result in the mass dislocation of x x x thousand[s] of students. The
undersigned, being the [c]hairman and [f]ounder, will try our very best
to follow the provisions of CHED MEMO No. 48, series of 1996 that
took effect last June 18, 1996.
xxx xxx xxx
Thank you very much for giving me a copy of said CHED MEMO Order
No. 48. More power and God Bless You.
xxx xxx xxx
"The appeal of [petitioner] was however rejected by [respondent] in its decision
dated July 30, 1998 and [the latter] ordered the former to cease and desist from
using the word 'University.' However, prior to said date, on April 2, 1998,
[petitioner] filed a Complaint for Damages with prayer for Writ of Preliminary and
Mandatory Injunction and Temporary Restraining Order against [respondent],
docketed as Civil Case No. 98-811 before public respondent judge.
"On April 7, 1998, [respondent] filed a Special Appearance with Motion to
Dismiss, based on 1) improper venue; 2) lack of authority of the person instituting
the action; and 3) lack of cause of action. On April 17, 1998, [petitioner] filed its
Opposition to the Motion to Dismiss [on] grounds stated therein, to which
[respondent] filed a Reply on April 21, 1998, reiterating the same arguments in its
Motion to Dismiss. After due hearing, [petitioner] formally offered its evidence on
July 23, 1998 while [respondent] made a formal offer of evidence on July 28,
1998 to which [petitioner] filed its Comments/Objections and finally, [respondent]
submitted its Memorandum relative thereto on October 1, 1998.
"Public respondent judge, in an Order dated August 14, 1998, denied
[respondent's] Motion to Dismiss and at the same time, issued a Writ of
Preliminary Injunction in favor of [petitioner]. [Respondent], in the same Order,
was directed to file its Answer within fifteen (15) days from receipt of said Order,
which was August 15, 1998.
xxx xxx xxx
'WHEREFORE, and in consideration of all the foregoing, [respondent's]
Motion to Dismiss is hereby denied, and the [respondent] is directed to
file its [A]nswer to the [C]omplaint within fifteen (15) days from receipt
of this order.
In the meantime, [respondent], its officials, employees and all parties
acting under its authority are hereby enjoined to observe the following
during the pendency of this case:
1. Not to publish or circulate any announcement in the newspaper,
radio or television regarding its Cease and Desist Order against x x x
[petitioner];
2. Not to enforce the Cease and Desist Order issued against x x x
[petitioner];
3. To maintain the status quo by not withholding the issuance of yearly
school permits and special order to all graduates.
Let a Writ of Preliminary Injunction to that effect issue upon posting by
[petitioner] of an injunction bond in the amount of One Hundred
Thousand Pesos (P100,000.00), and subject to the approval of the
Court.
SO ORDERED.'
"On September 22, 1998, [petitioner] filed before public respondent a Motion To
Declare [Respondent] in [D]efault pursuant to Section 3, Rule 9 in relation to
Section 4, Rule 16 of the Rules of Court, as amended, and at the same time
praying [for] the Motion to [S]et for [H]earing on October 30, 1998 at 8:30 a.m.
On the same date, [respondent] filed a Motion For Extension of Time to File its
Answer, x x x until November 18, 1998. On November 17, 1998, [respondent]
filed its [A]nswer.
"[Petitioner], on November 11, 1998 filed its Opposition to the Motion for
Extension of Time to File [Respondent's] Answer and on November 9, 1998, a
Motion to Expunge [Respondent's] Answer and at the same time praying that its
[M]otion be heard on November 27, 1998 at 9:00 a.m. On even date, public
respondent judge issued an Order directing the Office of the Solicitor General to
 file within a period of ten (10) days from date its written Opposition to the Motion
to Expunge [Respondent's] Answer and within the same period to file a written
[N]otice of [A]ppearance in the case. Unable to file their written Opposition to the
Motion to Expunge within the period given by public respondent, the OSG filed a
Motion to Admit Written Opposition stating the reasons for the same, attaching
thereto the Opposition with [F]ormal [E]ntry of [A]ppearance.
"In an Order dated December 9, 1998, (Annex 'A'), public respondent judge ruled
on [Petitioner's] Motion to Declare [Respondent in Default], to wit:
"WHEREFORE, and in view of all the foregoing, the present motion is
granted. [Petitioner] is hereby directed to present its evidence ex-parte
before the [b]ranch [c]lerk of [c]ourt, who is designated as
[c]ommissioner for the purpose, within ten (10) days from receipt of this
[O]rder, and for the latter to submit his report within twenty (20) days
from the date the case is submitted for decision."
SO ORDERED.'"3
On February 23, 1999, respondent filed with the CA a Petition for Certiorari, arguing that
the RTC had committed grave abuse of discretion (a) in denying the former's Motion to
Dismiss, (b) in issuing a Writ of Preliminary Injunction, and (c) in declaring respondent in
default despite its filing an Answer.
Ruling of the Court of Appeals
The CA ruled that petitioner had no cause of action against respondent. Petitioner failed to
show any evidence that it had been granted university status by respondent as required
under existing law and CHED rules and regulations. A certificate of incorporation under an
unauthorized name does not confer upon petitioner the right to use the word "university" in
its name. The evidence submitted by respondent showed that the Securities and
Exchange Commission (SEC) had denied that petitioner had ever amended its Articles of
Incorporation to include "university" in its corporate name. For its part, the Department of
Education, Culture and Sports (DECS) denied having issued the alleged Certification
dated May 18, 1998, indorsing the change in petitioner's corporate name. Besides, neither
the Corporation Code nor the SEC Charter vests the latter with the authority to confer
university status on a corporation that it regulates.
For the same reason, the appellate court also ruled that the Writ of Preliminary Injunction
had improvidently been issued. The doubtful right claimed by petitioner is subordinate to
the public interest to protect unsuspecting students and their parents from the
unauthorized operation and misrepresentation of an educational institution.
Respondent should not have been declared in default, because its Answer had been filed
long before the RTC ruled upon petitioner's Motion to declare respondent in default. Thus,
respondent had not obstinately refused to file an Answer; on the contrary, its failure to do
so on time was due to excusable negligence. Declaring it in default did not serve the ends
of justice, but only prevented it from pursuing the merits of its case.1wphi1.nt
Hence, this Petition.4
Issues
Petitioner alleges that the appellate court committed the following reversible errors:
"A. In giving due course to respondent CHED's Petition for Certiorari filed way
beyond the 60-day reglementary period prescribed by Section 4, Rule 65 of the
Rules of Court;
B. In not requiring Respondent CHED to first file a Motion to Set Aside the Order
of Default dated December 9, 1998; and
C. In ordering the dismissal of Civil Case No. 98-811."5
In its Memorandum, petitioner adds that the CA erred in dissolving the Writ of Preliminary
Injunction issued by the RTC. We shall take up these issues in the following order: (1)
timeliness of the certiorari petition, (2) validity of the default order, 93) validity of the
preliminary injunction, and (4) dismissal of the Complaint.
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Timeliness of Certiorari
Petitioner claims that the Petition for Certiorari of respondent should have been dismissed
by the CA, because it was filed out of time and was not preceded by a motion for
reconsideration in the RTC. The copy of the Order of August 14, 1998 had been served at
respondent's office on August 15, 1998, but its Answer was filed only after 180 days which,
according to petitioner, could not be considered a reasonable period. On the other hand,
the Office of the Solicitor General (OSG) argues that the Order is null and void and, hence,
may be assailed at any time.
We hold that respondent's Petition for Certiorari was seasonably filed. In computing its
timeliness, what should have been considered was not the Order of august 14, 1998, but
the date when respondent received the December 9, 1998 Order declaring it in default.
Since it received this Order only on January 13, 1999, and filed its Petition for Certiorari on
February 23, 1999, it obviously complied with the sixty-day reglementary period stated in
Section 4, Rule 65 of the 1997 Rules of Court. Moreover, the August 14, 1998 Order was
not a proper subject of certiorari or appeal, since it was merely an interlocutory order.
Exhaustion of Available Remedies
Petitioner also contends that certiorari cannot prosper in this case, because respondent
did not file a motion for reconsideration before filing its Petition for Certiorari with the CA.
Respondent counters that reconsideration should be dispensed with, because the
December 9, 1998 Order is a patent nullity.
The general rule is that, in order to give the lower court the opportunity to correct itself, a
motion for reconsideration is a prerequisite to certiorari. It is also basic that a petitioner
must exhaust all other available remedies before resorting to certiorari. This rule, however,
is subject to certain exceptions such as any of the following: (1) the issues raised are
purely legal in nature, (2) public interest is involved, (3) extreme urgency is obvious or (4)
special circumstances warrant immediate or more direct action.6 It is patently clear that the
regulation or administration of educational institutions, especially on the tertiary level, is
invested with public interest. Hence, the haste with which the solicitor general raised these
issues before the appellate court is understandable. For the reason mentioned, we rule
that respondent's Petition for Certiorari did not require prior resort to a motion for
reconsideration.
Second Issue:
Validity of the Default Order
Petitioner avers that the RTC was justified in declaring respondent in default, because the
August 14, 1998 Order directing the filing of an answer had been served on August 25,
1998. And as late as October 30, 1998, respondent could only file a Motion for Extension
of Time, which the trial court denied because of the expiry of the fifteen-day period.
Petitioner adds that respondent's proper remedy would have been a Motion to Set Aside
the Order of Default, pursuant to Section 3(b), Rule 9 of the Rules of Court.
Respondent, in turn, avers that certiorari was the only plain, speedy and adequate remedy
in the ordinary course of law, because the default Order had improvidently been issued.
We agree with respondent. Lina v. Court of Appeals7 discussed the remedies available to a
defendant declared in default, as follows: (1) a motion to set aside the order of default
under Section 3(b), Rule 9 of the Rules of Court, if the default was discovered before
judgment could be rendered; (2) a motion for new trial under Section 1(a) of Rule 37, if the
default was discovered after judgment but while appeal is still available; (3) a petition for
relief under Rule 38, if judgment has become final and executory; and (4) an appeal from
the judgment under Section 1, Rule 41, even if no petition to set aside the order of default
has been resorted to.
These remedies, however, are available only to a defendant who has been validly declared
in default. Such defendant irreparably loses the right to participate in the trial. On the other
hand, a defendant improvidently declared in default may retain and exercise such right
after the order of default and the subsequent judgment by default are annulled, and the
case remander to the court of origin. The former is limited to the remedy set forth in
Section 2, paragraph 3 of Rule 41 of the pre 997 Rules of Court, and can therefore contest
only the judgment by default on the designated ground that it is contrary to evidence or
law. The latter, however, has the following options: to resort to this same remedy; to
interpose a petition for certiorari seeking the nullification of the order of default, even
before the promulgation of a judgment by default; or in the event that judgment has been
rendered, to have such order and judgment declared void.
In prohibiting appeals from interlocutory orders, the law does not intend to accord
executory force to such writs, particularly when the effect would be to cause irreparable
damage. If, in the course of trial, a judge proceeds without or in excess of jurisdiction, this
rule prohibiting an appeal does not leave the aggrieved party without any remedy. 8In a
case like this, a special civil action of certiorari is the plain, speedy and adequate remedy.
Herein respondent controverts the judgment by default, not on the ground that it is
unsubstantiated by evidence or that it is contrary to law, but on the ground that it is
intrinsically void for having been rendered pursuant to a patently invalid order of default. 9
Grave Abuse of Discretion
Petitioner claims that in issuing the default Order, the RTC did not act with grave abuse of
discretion, because respondent had failed to file its answer within fifteen days after
receiving the August 14, 1998 Order.
We disagree. Quite the contrary, the trial court gravely abused its discretion when it
declared respondent in default despite the latter's filing of an Answer. 10 Placing respondent
in default thereafter served no practical purpose.
Petitioner was lax in calling the attention of the Court to the fifteen-day period for filing an
Answer. It moved to declare respondent in default only on September 20, 1998, when the
filing period had expired on August 30, 1998. The only conclusion in this case is that
petitioner has not been prejudiced by the delay. The same leniency can also be accorded
to the RTC, which declared respondent in default only on December 9, 1998, or twenty-two
days after the latter had filed its Answer on November 17, 1998. Defendant's Answer
should be admitted, because it had been filed before it was declared in default, and no
prejudice was caused to plaintiff. The hornbook rule is that default judgments are generally
disfavored.11
While there are instances when a party may be properly declared in default, these cases
should be deemed exceptions to the rule and should be resorted to only in clear cases of
obstinate refusal or inordinate neglect in complying with the orders of the court. 12 In the
present case, however, no such refusal or neglect can be attributed to respondent.
It appears that respondent failed to file its Answer because of excusable negligence. Atty.
Joel Voltaire Mayo, director of the Legal Affairs Services of CHED, had to relinquish his
position in accordance with the Memorandum dated July 7, 1998, requiring all non-CESO
eligibles holding non-career positions to vacate their respective offices. It was only on
September 25, 1998, after CHED Special Order No. 63 had been issued, when he
resumed his former position. Respondent also presented a meritorious defense in its
Answer that it was duty-bound to pursue the state policy of protecting, fostering and
promoting the right of all citizens to affordable quality education at all levels. In stark
contrast, petitioner neither qualified for nor was ever conferred university status by
respondent.
Judges, as a rule, should avoid issuing default orders that deny litigants the chance to be
heard. Instead, the former should give the latter every opportunity to present their
conflicting claims on the merits of the controversy, as much as possible avoiding any resort
to procedural technicalities.13
Third Issue:
Preliminary Injunction
Petitioner contends that the RTC validly issued the Writ of Preliminary Injunction.
According to the trial court, respondent's actions adversely affected petitioner's interests,
faculty and students. In fact, the very existence of petitioner as a business concern would
have been jeopardized had its proprietary rights not been protected.
We disagree. We concur with the CA that the trial court acted with grave abuse of
discretion in issuing the Writ of Preliminary Injunction against respondent. Petitioner failed
to establish a clear right to continue representing itself to the public as a university. Indeed,
it has no vested right to misrepresent itself. Before an injunction can be issued, it is
essential that (1) there must be a right in esse to be protected, and (2) the act against
which the injunction is to be directed must have violated such right.14 The establishment
and the operation of schools are subject to prior authorization from the government. No
school may claim to be a university unless it has first complied with the prerequisites
provided in Section 34 of the Manual of Regulations for Private Schools. Section 3, Rule
58 of the Rules of Court, limits the grant of preliminary injunction to cases in which the
plaintiff is clearly entitled to the relief prayed for.
We also agree with the finding of the CA that the act sought to be enjoined by petitioner is
not violative of the latter's rights. Respondent's Cease and Desist Order of July 30, 1997
merely restrained petitioner from using the term "university" in its name. It was not ordered
to close, but merely to revert to its authorized name; hence, its proprietary rights were not
violated.
Fourth Issue:
Dismissal of the Complaint
Petitioner claims that the CA went beyond its limited jurisdiction under Rule 65 when it
reversed the trial court and dismissed the Complaint on the ground that petitioner had
failed to state a cause of action. The RTC had yet to conduct trial, but the CA already
determined the factual issue regarding petitioner's acquisition of university status, a
determination that is not permitted in certiorari proceedings.
The CA ruled that the trial court gravely abused its discretion in denying respondent's
Motion to Dismiss on the ground of lack of cause of action because of petitioner's lack of
legal authority or right to use the word "university." Said the appellate court:
"x x x. No matter how we interpret the Corporation Code and the law granting the
Securities and Exchange Commission its powers and duties, there is nothing
there which grants it the power or authority to confer University Status to an
educational institution. Fundamental is the rule that when there is no power
granted, none exist[s], not even implied ones for there is none from where to
infer. The mere fact of securing an alleged Certificate of Incorporation under an
unauthorized name does not confer the right to use such name.
"But what makes the conclusion of [the trial court] even anomalous, to say the
least, is that no less than the Chairman of the SEC in his letter to the
[respondent] (Exh. "J") expressly said that [petitioner] never filed any Amended
Articles of Incorporation so as to have a change of corporate name to include the
term "University". Worse, the records officer of DECS issued a Certification dated
May 18, 1998 (Annex "AA") to the effect that there was no Indorsement made by
that office addressed to the SEC or the Proposed Amended Article of
Incorporation of Indiana Aeronautics. x x x.
"Under such clear pattern of deceitful maneuvering to circumvent the requirement
for acquiring University Status, it is [a] patently reversible error for [the trial court]
to hold that [petitioner] has a right to use the word "University" which must be
protected. Dismissal of [petitioner's] Complaint for lack of a valid cause of action
should have been the proper action taken by [the trial court] judge." 15
An order denying a motion to dismiss is interlocutory, and so the proper remedy in such a
case is to appeal after a decision has been rendered. A writ of certiorari is not intended to
correct every controversial interlocutory ruling; it is resorted to only to correct a grave
abuse of discretion or a whimsical exercise of judgment equivalent to lack of jurisdiction.
Its function is limited to keeping an inferior court within its jurisdiction and to relieve
persons from arbitrary acts acts which courts or judges have no power or authority in law
to perform. It is not designed to correct erroneous findings and conclusions made by the
court.16
In the case at bar, we find no grave abuse of discretion in the RTC's denial of the Motion to
Dismiss, as contained in the August 14, 1998 Order. The CA erred in ruling otherwise. The
trial court stated in its Decision that petitioner was an educational institution, originally
registered with the Securities and Exchange Commission as the "Indiana School of
Aeronautics, Inc." That name was subsequently changed to "Indiana Aerospace
University" after the Department of Education, Culture and Sports had interposed no
objection to such change.17
Respondent issued a formal Cease and Desist Order directing petitioner to stop using the
word "university" in its corporate name. The former also published an announcement in the
March 21, 1998 issue of Freeman, a local newspaper in Cebu City, that there was no
institution of learning by that name. The counsel of respondent was quoted as saying in
the March 28, 1998 issue of the newspaper Today that petitioner had been ordered closed
by the respondent for illegal advertisement, fraud and misrepresentation of itself as a
university. Such acts, according to the RTC undermined the public's confidence in
petitioner as an educational institution.18 This was a clear statement of a sufficient cause of
action.
When a motion to dismiss is grounded on the failure to state a cause of action, a ruling
thereon should be based only on the facts alleged in the complaint.19 The court must pass
upon this issue based solely on such allegations, assuming them to be true. For it to do
otherwise would be a procedural error and a denial of plaintiff's right to due process. 20
WHEREFORE, the Petition is hereby GRANTED IN PART, and the assailed
Decision MODIFIED. The trial court is DIRECTED to SET ASIDE the Order of Default of
December 9, 1998; to ADMIT the Answer dated November 5, 1998; to LIFT the
preliminary injunction; and to CONTINUE, with all deliberate speed, the proceedings in
Civil Case NO. 98-811.1wphi1.nt
SO ORDERED.
G.R. No. 110480 June 29, 2001
BANGKO SILANGAN DEVELOPMENT BANK, petitioner,
vs.
COURT OF APPEALS, JUDGE PABLO D. ATIENZA, in his capacity as Presiding
Judge of Branch 14, Regional Trial Court, Fourth Judicial Region, Nasugbu,
Batangas and LEONIDA UMANDAL-BAUSAS,respondents.
DE LEON, JR., J.:
Challenged in this petition for review on certiorari is the Decision 1 dated February 26,1993
of the Court of Appeals in CA-G.R. No. SP-29659 which affirmed the Resolution2 dated
September 10, 1992 of the Regional Trial Court of Batangas, Branch 14, Nasugbu,
Batangas in Civil Case No. 221. The said Regional Trial Court (RTC) denied the motion to
dismiss filed by petitioner Bangko Silangan Development Bank (BSDB), Nasugbu Branch,
Batangas.
The motion to dismiss was based on the ground of litis pendentia allegedly arising from the
same controversy, subject of Civil Case No.91-56185, then pending before the Regional
Trial Court of Manila.
The antecedent facts are as follows:
Private respondent Leonida Umandal-Bausas had been maintaining Savings Account
No.04-3652 as depositor of petitioner BSDB, Nasugbu Branch, Batangas since 1985. As of
April 1990, she had Fifteen Thousand Pesos (P15,000.00) deposited under her Savings
Account No. 04-3652. On April 23, 1990, respondent Leonida Umandal-Bausas attempted
to withdraw Five Thousand Pesos (P5,000.00) from that savings account but, to her
surprise, the bank teller told her that the withdrawal could not be done because her
brother, Antonio Umandal, had already withdrawn on April 16, 1990 the amount of Fifteen
Thousand Pesos (P15,000.00) allegedly with her written authorization and that her
remaining balance was only Eight Hundred Pesos (P800.00). Respondent Bausas then
inquired about the withdrawal slip and found that the signatures appearing thereon were
not hers and neither that of her brother.3
Dismayed by the turn of events, respondent Bausas sought the assistance of a family
friend, Edmundo Villadolid, who was then the President-Manager of the Rural Bank of
Nasugbu, Batangas. On the following day, Villadolid sent petitioner BSDB a letter, dated
April 24, 1990, together with an affidavit executed by respondent Bausas. In substance,
Villadolid in his letter, informed petitioner BSDB of the "sad experience" of respondent
Bausas, a daughter of his kumadre, whose savings passbook had since been withheld by
the petitioner bank which allowed the withdrawal of the amount of Fifteen Thousand Pesos
(P15,000.00) from her savings account without verifying whether the withdrawal was duly
authorized by respondent Bausas. Claiming that the withdrawal smacked of "foul play" and
"dubious exercise of unwarranted banking operation", Villadolid warned the petitioner bank
that he would be constrained to elevate the matter to "higher authorities" should there be
no "reasonable and convincing results at the earliest (sic) possible". 4
Upon receipt of the letter, petitioner BSDB caused an investigation on the matter through
its auditor, Benedicto I. Ramirez. On May 4, 1990, Ramirez submitted a report, a portion of
which reads:
"Savings ledger No. 3652 under the name Leonida B. Umandal shows a
FIFTEEN THOUSAND PESO (P15,000.00) withdrawal made last April 16. Said
withdrawal is evidenced by a withdrawal slip bearing the signatures of both the
depositor, Leonida B. Umandal and her representative, Antonio Umandal, which
are genuine. Both Leonida B. Umandal and her brother Antonio Umandal, who
dropped by to complaint (sic) sometime after April 22, 1990, denied having
signed said withdrawal slip as per statements gathered from the officers and staff
of Nasugbu Branch. Said withdrawal was processed in accordance with the
standard operating procedure."5
Subsequently, on May 15, 1990, Villadolid requested the Central Bank of the Philippines to
intervene and conduct an investigation on petitioner BSDB's banking operations on
account of the petitioner bank's "indifference" in the conduct of its investigation on the
unauthorized withdrawal from respondent Bausas' savings account. This was
subsequently referred by the Central Bank to petitioner BSDB's Head Office in Batangas
City.
On May 31, 1990, Villadolid wrote petitioner BSDB another letter, a copy of which was
furnished the Central Bank. He reminded the petitioner bank that it had been forty-five (45)
days since the failed withdrawal and that, notwithstanding the attempt of respondent
Bausas' father to thresh out the matter with Sofronio Comia, petitioner bank's officer-in-
charge, no "concrete results and/or remedies" has been arrived at. He warned that if,
within five (5) days, the petitioner bank would continue its "insulting treatment" on the
matter, respondent Bausas would be constrained to hire the services of a lawyer in order
that the proper charges would be filed against the petitioner bank. 6
In a letter dated June 6, 1990, petitioner BSDB, through Alberto Buquid, informed
respondent Bausas that the investigation it had conducted on the matter revealed that on
April 16, 1990, her brother, Antonio Umandal, bearing her passbook under Savings
Account No. 04-3652 and the withdrawal slip to which her signature was affixed, withdrew
the amount of Fifteen Thousand Pesos (P15,000.00). The petitioner bank asserted that it
observed the usual procedure in bank transactions - it made the proper verification, posted
the withdrawal on the passbook and the bank ledger, and approved the withdrawal. 7
As a result of that information, respondent Bausas sought the help of the National Bureau
of Investigation (NBI) in Region IV, Batangas City. After an investigation, a case was filed
with the Office of the Provincial Prosecutor of Batangas on February 21, 1993 and
docketed therein as Investigation Slip (I.S.) No. 91-37.8
It appears that respondent Bausas sought another venue for airing her complaint - the
press. Thus, in the September 17, 1990 issue of the People's Journal Tonight, the
following headline appeared: "Bank Money Withdrawn w/o Depositor's Knowledge". 9 Aside
from that publication, respondent Bausas and Villadolid reproduced by xerox machine the
said news item and posted the xerox copies in conspicuous places within the municipal
hall of Nasugbu.
Aggrieved, on February 22, 1991, petitioner BSDB filed in the RTC of Manila a complaint
for damages10 against respondent Bausas, Villadolid, the Philippine Journalists, Inc.,
Zacarias Nuguid, Jr. (publisher), Alfredo M. Marquez (managing editor), Franklin Cabaluna
(news editor), Benjamin Ayllon (city editor) and Raul S. Beltran (reporter). Docketed as
Civil Case No. 91-56185 in the RTC of Manila, Branch 24, the complaint alleged that the
"series of publications" were "clearly defamatory and libelous", and that the publication
constituted the crime defined and penalized under Article 353 of the Revised Penal Code
that damaged the "goodwill, integrity and good reputation" of the 21-year old
bank.11 Petitioner BSDB prayed for compensatory damages of One Hundred Thousand
Pesos (P100,000.00), moral damages of One Million Five Hundred Thousand Pesos
(P1,500,000.00), exemplary damages of Seven Hundred Thousand Pesos (P700,000.00),
and attorney's fees of Two Hundred Thousand Pesos (P200,000.00).
In their answer with compulsory counterclaim, 12 In Civil Case No. 91-56185 respondent
Bausas and Villadolid alleged that the withdrawal slip was a forgery and that Villadolid's
actions were moved by a "sense of moral duty" to respondent Bausas and her family. They
raised lack of actual malice as a defense and interposed a compulsory counterclaim for
One Million Pesos (P1,000,000.00) in moral damages, Two Hundred Fifty Thousand
Pesos (P250,000.00) in litigation expenses and other damages, Five Hundred Thousand
Pesos (P500,000.00) in exemplary damages, and Fifty Thousand Pesos (P50,000.00) plus
Two Thousand Pesos (P2,000.00) per appearance as attorney's fees.
While Civil Case No.91-56185 was pending in the RTC of Manila, or on February 13, 1992,
respondent Bausas, joined by her husband Ricardo, filed Civil Case No. 221, a complaint
for a sum of money, with damages, against petitioner BSDB before the RTC of Batangas,
Branch 14 in Nasugbu, Batangas. The complaint specifically prayed that petitioner BSDB
be ordered to pay them (a) Fifteen Thousand Pesos (P15,000.00) "plus whatever balance"
remained of her deposit, including accrued interests thereon; (b) Twenty Thousand Pesos
(P20,000.00) as litigation expenses and/or damages; and (c) Ten Thousand Pesos
(P10,000.00) as attorney's fees plus One Thousand Pesos (P1,000.00) per hearing
attended by their lawyer.13
Instead of filing a responsive pleading to the complaint, petitioner BSDB filed a motion to
dismiss,14 alleging that (a) there was another action pending between the same parties for
the same case (sic); (b) the action caused the splitting of the cause of action raised in the
answer and counterclaim in Civil Case No. 91-56185; (c) the action violated the principle of
multiplicity of suits, and; (d) the filing of the complaint constituted forum-shopping.
On September 10, 1982, the RTC of Batangas15 issued a Resolution16 denying the motion
to dismiss.
Petitioner BSDB then filed a motion for reconsideration17 which the RTC of Batangas,
however, denied in an Order18 dated November 19, 1992.
Petitioner BSDB elevated the matter to the Court of Appeals via a petition for certiorari,
prohibition and mandamus,19 seeking the reversal of the said Resolution and Order of the
RTC of Batangas.
On February 26, 1993, the Court of Appeals rendered the now assailed Decision
dismissing petitioner BSDB's petition for certiorari, prohibition and mandamus and
upholding the denial of its motion to dismiss Civil Case No. 221. 20 The appellate court held
that an order denying a motion to dismiss, being interlocutory, cannot be the subject of a
petition for certiorari.
Besides, the principle of litis pendentia invoked by petitioner BSDB is not applicable to the
case at bar. The appellate court correctly found and declared that:
"In the present case, while concededly, certain pieces of evidence may be identical (to)
both Civil Case No. 91-56185 and Civil Case No. 221, it cannot be said however, that
exactly the same evidence will support the decisions in both. In Civil Case No. 91-56185
pending before the Regional Trial Court of Manila, the issues raised are (1) whether the
publication in the September 17, 1990 issue of the People's Journal Tonight is false and
libelous and the action is directed, not only against private respondent Leonida Umandal-
Bausas but also against the publisher and editorial staff of the publication concerned; and
(2) whether Leonida Umandal-Bausas acted with malice in causing the posting of xerox
copies of said publication at conspicuous places at the Municipal Building of Nasugbu,
Batangas. In Civil Case No. 221, however, the primary issue, shown (sic) of unessential
trimmings, is whether or not petitioner Bank could be held liable to Leonida Umandal-
Bausas for the withdrawal from her savings account in the amount of P15,000.00.
Private respondent Bausas did not invoke as a permissive counterclaim in Civil Case No.
91-56185, that petitioner indemnify her of her savings deposit which she claims to have
been withdrawn by someone else without her authority.
We therefore rule that the court a quo did not commit an abuse of discretion in denying
petitioner's motion to dismiss in Civil Case No. 221 on the ground of litis pendentia."21
Petitioner BSDB's motion for reconsideration22 thereof was denied in a Resolution,23 dated
June 7, 1993, of the appellate court.
Hence, the instant petition wherein petitioner BSDB raises the following assignment of
errors:
I
THE RESPONDENT COURT ERRED WHEN IT HELD THAT THE PETITION
FOR CERTIORARI, PROHIBITION AND MANDAMUS SEEKING TO NULLIFY
AND SET ASIDE THE ORDER OF THE RESPONDENT JUDGE DENYING
PETITIONER'S MOTION TO DISMISS "DOES NOT FALL WITHIN THE AMBIT
OF THE EXCEPTION" TO THE GENERAL RULE THAT AN ORDER DENYING
A MOTION TO DISMISS IS NOT AN INTERLOCUTORY ORDER AND CANNOT
BE THE SUBJECT OF A PETITION FOR CERTIORARI.
II
THE RESPONDENT COURT COMMITTED AN ERROR REVIEWABLE ON
APPEAL BY CERTIORARI WHEN IT DENIED DUE COURSE TO THE
PETITION AND TO HAVE DISMISSED THE SAME BECAUSE OF ITS FINDING
THAT THERE IS NO LITIS PENDENTIA BETWEEN CIVIL CASE NO. 221 AND
CIVIL CASE NO. 91-56185.
Petitioner argues that respondent RTC of Batangas acted without or in excess of
jurisdiction or was guilty of grave abuse of discretion when it refused to dismiss Civil Case
No. 221 despite the pendency of Civil Case No. 91-56185 in the RTC of Manila. It insists
that litis pendentia barred the proceedings in Civil Case No. 221 because the special and
affirmative defenses raised by respondent Bausas in Civil Case No. 91-56185 are really
the same cause of action which she relied upon in Civil Case No. 221. For that matter, it
claimed that respondent trial court abetted the possibility of conflicting decisions between
two (2) co-equal and coordinate courts that may in the end sow confusion and chaos that
would take years to untangle and settle.24
Private respondent, on the other hand, counters that an order denying a motion to dismiss
is interlocutory, and hence, cannot be the subject of a petition for certiorari. She claims that
the remedy of petitioner bank should be to proceed with the trial and, in the event of an
adverse decision, interpose an appeal to the proper forum.
As regards petitioner's claim of litis pendentia, respondent Bausas contends that the issue
in Civil Case No. 91-56185 is whether or not she and Villadolid acted with malice in
publishing the allegedly libelous letters so as to warrant their liability for damages whereas
the issue in Civil Case No. 221 which is an action for collection of a sum of money, is
whether or not there was an unauthorized withdrawal of her savings deposit that would
warrant the petitioner's liability therefor.
The petition, not being meritorious, the same should be, as it is hereby, denied.
The petition for certiorari, prohibition and mandamus interposed by petitioner before the
Court of Appeals is not the proper remedy to question the denial of its motion to dismiss in
Civil Case No. 221. The Resolution and Order of the RTC of Batangas denying the motion
to dismiss are merely interlocutory. An interlocutory order does not terminate nor finally
dispose of the case, but leaves something to be done by the court before the case is finally
decided on the merits.25 It is always under the control of the court and may be modified or
rescinded upon sufficient grounds shown at any time before final judgment. This proceeds
from the court's inherent power to control its process and orders so as to make them
conformable to law and justice. The only limitation is that the judge cannot act with grave
abuse of discretion, or that no injustice results thereby. 26 These limitations were not
transgressed by the trial court in the case at bar when it denied the petitioner's motion to
dismiss. The alleged "chaos and confusion" arising from conflicting decisions that
petitioner purportedly seeks to avert by the dismissal of Civil Case No. 221 are actually far-
fetched and contrived considering that any adverse decision of the CTA can be made the
subject of a proper appeal.
Our recent ruling in Espao, Sr. vs. Court of Appeals27 applies to the case at bar, to wit:
"We find occasion here to state the rule, once more, that an order denying a
motion to dismiss is merely interlocutory and therefore not appealable, nor can it
be the subject of a petition for review on certiorari. Such order may only be
reviewed in the ordinary course of law by an appeal from the judgment after trial.
The ordinary procedure to be followed in that event is to file an answer, go to
trial, and if the decision is adverse, reiterate the issue on appeal from the final
judgment. This is exactly what petitioner should have done in this case after his
prayer for the dismissal of Civil Case No. 21-88 was denied by the trial court.
Although the special civil action for certiorari may be availed of in case there is
grave abuse of discretion or lack of jurisdiction on the part of the lower court, that
vitiating error is indubitably not present in the instant case."
Moreover, litis pendentia as a ground for the dismissal of a civil action refers to a situation
wherein another action is pending between the same parties for the same cause of action
and that the second action becomes unnecessary and vexatious. 28 More particularly, it
must conform to the following requisites: (a) identity of parties, or at least such parties who
represent the same interests in both actions; (b) identity of rights asserted and relief
prayed for, the relief being founded on the same facts; and (c) identity with respect to the
two (2) preceding particulars in the two (2) cases is such that any judgment that may be
rendered in the pending case, regardless of which party is successful, would amount to res
judicata in the other case.29
The trial court was correct when it opined that -
"xxx[T]here has never been any allegation in the answer that would tend to show
that the herein plaintiff intended to collect her deposit of P15,000.00 from the
defendant-bank which is the subject matter of the instant complaint. Even the
complaint above-cited filed in the Regional Trial Court of Manila, the same solely
deals on the alleged damages suffered by the defendant-bank, Bangko Silangan
Development Bank in the alleged publication. On ground No. 2, the court finds
that the counterclaim interposed by the plaintiff in the instant case in Civil Case
No. 91-51685 before the Regional Trial Court of Manila is solely for moral
damages, litigation expenses; attorney's fees and exemplary damages. Nothing
about the claim for the reimbursement or release of the P15,000.00, subject
matter of the instant case is ever made therein.
Since the instant case is entirely different from the case now pending before the
court of Regional Trial Court of Manila, the court views that there is no such
multiplicity of suits."30
Clearly, the issue in Civil Case No. 221 is whether or not petitioner was negligent in
validating the withdrawal slip and the alleged authority to withdraw of respondent Bausas'
brother so that it could be held responsible for the amount withdrawn. Basically, that case
is a collection suit founded on a contract of bank deposit.
On the other hand, the issue in Civil Case No. 91-56185 is whether or not the alleged
publications of the incident made by respondent Bausas and Villadolid are defamatory so
as to warrant petitioner's entitlement to damages.
What is essential in litis pendentia is the identity and similarity of the issues under
consideration.31 There being no similarity of issues in Civil Cases No. 91-56185 and 221,
the filing of the latter case was not barred by litis pendentia.
There is neither identity of rights asserted and reliefs sought by the parties in the two (2)
cases. Petitioner asserts its right to be compensated for alleged damage to its goodwill
and reputation in Civil Case No. 91-56185 of the RTC of Manila. Respondent Bausas, on
the other hand, asserts her right to be reimbursed the amount illegally withdrawn from her
savings bank account in Civil Case No. 221 of the RTC of Batangas. As to the reliefs
sought, while both petitioner and respondent Bausas seek damages, the reasons for such
reliefs prayed for are divergent. Thus, there is no identity of causes of action in the two (2)
cases.
The test to determine identity of causes of action is to ascertain whether the same
evidence necessary to sustain the second cause of action is sufficient to authorize a
recovery in the first, even if the form or nature of the two (2) actions are different from each
other. If the same facts or evidence would sustain both, the two (2) actions are considered
the same within the rule that the judgment in the former is a bar to the subsequent action;
otherwise, it is not. This method has been considered the most accurate test as to whether
a former judgment is a bar in subsequent proceedings between the same parties. It has
even been designated as infallible.32

While it is true that the two (2) cases are founded on practically the same set of facts, as
correctly observed by the Court of Appeals, it cannot be said that exactly the same
evidence are needed to prove the causes of action in both cases. Thus, in Civil Case No.
91-56185 of the RTC of Manila, the evidence needed to prove that petitioner sustained
damage to its reputation and goodwill is not the same evidence needed in Civil Case No.
221 of the RTC of Batangas to prove the allegation that a substantial amount of
respondent Bausas' bank deposit in petitioner's bank was illegally withdrawn without her
consent or authority. The RTC of Batangas and the Court of Appeals, therefore, did not
abuse their discretion in denying petitioner's motion to dismiss which was based on the
ground of litis pendentia..

The petitioner's contention that private respondent is guilty of forum-shopping must

likewise fail.

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 special civil action of certiorari, or the institution of two (2) or
more actions or proceedings grounded on the same cause on the supposition that one or
the other court might look with favor upon the party."33 Where the elements of litis
pendentiaare not present or where a final judgment in one case will not amount to res
judicata in the other,34 there is no forum-shopping. In the case at bar, there is no forum
shopping, inasmuch as earlier discussed, the cause of action in Civil Case No. 91-56185 is
separate and distinct from the cause of action in Civil Case No. 221.

WHEREFORE, the instant petition for review on certiorari is hereby DENIED for lack of
merit. The challenged Decision of the Court of Appeals is AFFIRMED; and the Regional
Trial Court of Batangas, Branch 14, Nasugbu, Batangas, is hereby directed to proceed
with dispatch to resolve Civil Case No. 221.

SO ORDERED.
G.R. No. 137264 August 1, 2002
EULOGIO O. YUTINGCO and WONG BEE KUAN, petitioners,
vs.
HON. COURT OF APPEALS, HON. SALVADOR S. TENSUAN, in his capacity as
Presiding Judge of the RTC, Makati, Branch 146 and DEVELOPMENT BANK OF THE
PHILIPPINES, respondents.
RESOLUTION
QUISUMBING, J.:
This petition for review seeks the reversal of the resolutions 1 dated November 9, 1998 and
January 13, 1999 of the Court of Appeals in CA-G.R. SP No. 49404, denying the petition
for certiorari for having been filed beyond the reglementary period, as well as the
subsequent motion for reconsideration.
The facts of this case are as follows:
Private respondent Development Bank of the Philippines (DBP) filed a complaint dated
November 10, 1997, docketed as Civil Case No. 97-2653,2 against petitioners for the
collection of a sum of money with prayer for issuance of a writ of preliminary attachment,
with the Regional Trial Court of Makati, Branch 146. DBP alleged that it granted a credit
accommodation for One Hundred Fifty Million Pesos (P150,000,000) to Nikon Industrial
Corporation (Nikon) under the terms and conditions of the Credit Line Agreement dated
December 11, 1996.3 Pertinent portion of said agreement reads:
5. The following shall constitute Events of Default under this Agreement:
a. failure to pay an installment on principal or interest on the due date hereof.
xxx
c. Death (in case of natural person), dissolution, bankruptcy, reorganization,
winding-up or liquidation or any other proceedings analogous to the foregoing or
proceedings for the collection of borrowed money.4
xxx
In consideration of the credit accommodation, petitioners, as the controlling stockholders of
Nikon, bound themselves as primary obligors on any availment thereon. Nikon executed
promissory notes as guarantees.5
The complaint alleged that Nikon defaulted on the payment of the interest. 6 It likewise
alleged that on September 16, 1997, Nikon with other corporations, filed a petition for
suspension of payments with the Securities and Exchange Commission. 7 Among the
controlling stockholders were petitioners, known together as the EYCO Group of
Companies (EYCO). Also, DBP claims that the filing of the petition for suspension of
payments with the SEC constituted another default as stipulated in paragraph (c) of
Section 5 of the agreement. Thus, private respondent sought petitioners payment of the
obligation by virtue of the Continuing Suretyship Agreement by filing the collection suit
docketed as Civil Case No. 97-2653 before the Regional Trial Court.1wphi1.nt
On January 14, 1998, respondent Judge Salvador Tensuan granted private respondents
motion and issued a writ of attachment.8
On March 11, 1998, petitioners filed a Motion to Dismiss9 on the ground that (1) the
complaint failed to state a cause of action; (2) a condition precedent for the filing of the
claim was not complied with; and (3) the Court had no jurisdiction over the subject matter.
Petitioners contended that they could not be held liable under the promissory notes and
credit line agreement since EYCO had not yet defaulted on their obligations. They averred
that the mere filing of the petition for suspension of payments before the SEC did not
constitute default and that even assuming that Nikon was in default, there was yet no
extra-judicial demand, a condition precedent to the filing of the suit before the RTC against
petitioners.
On May 7, 1998, respondent Judge issued an order denying the motion to dismiss, holding
thus:
This resolves defendants motion to dismiss vis--vis plaintiffs opposition, reply,
and rejoinder in point.
After going over the exhaustive arguments of both parties, the Court on a clear
perception that the issue of default raised by the defendants is a factual one
which must await trial, hereby denies said motion to dismiss and orders
defendants to file its Answer in accordance with the rules.
SO ORDERED.10
To this, petitioners filed a Motion for Reconsideration11 which was denied by the
respondent Judge in an order dated June 29, 1998, as follows:
For resolution is the defendants Motion to Reconsider the Order dated 07 May
1998 contending that the same failed to resolve the issues raised in their Motion
to Dismiss. Plaintiff opposed the instant motion to which opposition defendants
filed a reply and to the latter plaintiff filed a rejoinder.
After a careful reading of the arguments in support of the instant motion, the
Court finds no sufficient warrant to disturb the questioned Order. Anent the issue
of jurisdiction, the Court must as it hereby declares that it has jurisdiction over the
subject matter of this case inasmuch as the properties attached are in the name
of the defendants who are being sued here in their personal capacity as sureties.
WHEREFORE, premises considered, defendants motion for reconsideration is
hereby denied for lack of merit.
SO ORDERED.12
On July 7, 1998, petitioners received a copy of the aforementioned Order dated 7 May
1998. On September 7, 1998, petitioners filed before the Court of Appeals a Motion for
Extension of Time to File Petition for Certiorari13under Rule 65 of the Rules of Court, for an
additional period of fifteen (15) days, or until 22 September 1998.
On September 22, 1998, petitioners filed their Petition for Certiorari with Urgent Prayer for
Issuance of a Writ of Temporary Restraining Order and Preliminary Injunction dated
September 21, 1998.14
On November 18, 1998, petitioners received a copy of the Resolution dated November 9,
1998, denying petitioners motion for extension of time to file petition for certiorari. It held
that:
CONSIDERING that Sec. 4, Rule 65 of the 1997 Rules of Civil
Procedure fixed the period for filing a petition for certiorari at sixty (60) days from
notice of the judgment, order or resolution sought to be assailed, petitioners
motion for extension of time of fifteen (15) days within which to file the petition is
hereby DENIED.
Consequently, it appearing that the period for filing petition for certiorari expired
on September 7, 1998 and the petition at bar was filed on September 22, 1998,
the petition is hereby DENIED due course and DISMISSED.
SO ORDERED.15
Petitioners motion for reconsideration was also denied by the Court of Appeals in
a Resolution dated January 13, 1999,16 which held that:
xxx
In their motion for reconsideration petitioners invoked substantial justice over
technical rules of procedure. Nonetheless, while it is true that litigation is not a
game of technicalities, it is equally true that every case must be prosecuted in
accordance with the prescribed procedure to insure an orderly and speedy
administration of justice.17
ACCORDINGLY, the motion for reconsideration is DENIED for lack of merit.
Now, petitioners aver before this Court that:
I. SUBSTANTIAL JUSTICE SHOULD PREVAIL OVER TECHNICAL RULES OF
PROCEDURE.
II. THE PETITION FOR CERTIORARI DATED 21 SEPTEMBER 1999 (sic) IS
MERITORIOUS AND RAISES THE ISSUE OF LACK OF JURISDICTION ON
THE PART OF THE REGIONAL TRIAL COURT A QUO IN DENYING
PETITIONERS MOTION TO DISMISS.18
The issues before us are: (1) Should the Court of Appeals have admitted, as a matter of
substantial justice, the Petition for Certiorari? (2) If so, is there merit in the petition filed
with the Court of Appeals?
Prefatorily, note should be taken that while petitioners filed a special civil action of
certiorari before the Court of Appeals, the proceedings before the Regional Trial Court
continued. Petitioners filed, before the RTC, a Motion to Take Judicial Notice of the
Order dated 18 December 1998 of the SEC in SEC Case No. 09-97-5764 with Motion to
Cancel Pre-Trial dated 02 February 1999. Private respondent opposed it. On account of
petitioners Motion to Cancel Pre-trial, respondent judge issued an Order dated 5 February
1999 re-setting the pre-trial to 12 March 1999. Thereafter, a Reply dated 19 February
1999, a Rejoinder dated 26 February 1999 and a Sur-Rejoinder dated March 8, 1999,
were filed. The incident is still pending before the RTC.
Now, on the first issue before us. The general rule is that rules of procedure must be
faithfully complied with and should not be discarded with the mere expediency of claiming
substantial merit. The rule, however, is not absolute. Under exceptional circumstances, on
the ground of justice and equity, a delay in the filing of an appeal may be excused. 19 The
inquiry on this score therefore basically boils down to whether there are ample
circumstances surrounding the present case to merit the disregard of the delay in the filing
of the petition? If there are none, such delay is fatal to petitioners plea.
The New Rules on Civil Procedure, Section 4, Rule 65, 20 prescribes a period of 60 days
within which to file a petition for certiorari. The 60-day period is deemed reasonable and
sufficient time for a party to mull over and to prepare a petition asserting grave abuse of
discretion by a lower court. The period was specifically set to avoid any unreasonable
delay that would violate the constitutional rights of parties to a speedy disposition of their
case. For these reasons, the 60-day-period ought to be considered inextendible.
Furthermore, it is a familiar and fundamental rule that a motion for extension of time to file
a pleading is best left to the sound discretion of the court and an extension will not be
allowed except for good and sufficient reason and only if the motion is filed before the
expiration of the time sought to be extended. Petitioners previous counsel filed the Petition
for Certiorari on September 22, 1998,21 thinking that the Court of Appeals would grant their
motion for extension for 15 days. They gave as reason for this assumption of leniency the
heavy workload of the law firm.22 Patently, however, this circumstance alone does not
provide the court sufficient reason to merit allowance of an extension of the 60-day period
to file the petition for certiorari. Heavy workload, which is relative and often self-serving,
ought to be coupled with more compelling reasons such as illness of counsel or other
emergencies that could be substantiated by affidavits of merit. Standing alone, heavy
workload is not sufficient reason to deviate from the 60-day rule. Thus, we are constrained
to state that the Court of Appeals did not err in dismissing the petition for having been filed
late.
Petitioners also assert that their petition should not have been dismissed on a technicality,
considering that what was being questioned in their petition for certiorari before the Court
of Appeals, was the propriety of the lower courts denying their motion to dismiss. But
again, we have to stress here and now that as a general rule, an order denying a motion to
dismiss is interlocutory and cannot be the subject of the extraordinary petition for certiorari
or mandamus. Petitioners recourse is to file an answer and to interpose as defenses the
objections raised in their motion to dismiss, proceed to trial, and in case of an adverse
decision, elevate the entire case by appeal in due course. 23
Of course, there are exceptions to the aforecited rule. Among them are: (a) when the trial
court issued the order without or in excess of jurisdiction, (b) when there is patent grave
abuse of discretion by the trial court, or (c) when appeal would not prove to be a speedy
and adequate remedy as when an appeal would not promptly relieve a defendant from the
injurious effects of the patently mistaken order maintaining the plaintiffs baseless action
and compelling the defendants to needlessly go through a protracted trial and clogging the
court dockets with another futile case.24 In the present case, however, the trial court denied
the motion to dismiss since it perceived the issue therein was one of default, a factual
issue which must await trial.25 Clearly, petitioners cause is not covered by any of the
recognized exceptions. They should proceed to trial and if the result is unfavorable to
them, then their recourse is to elevate the entire case on appeal in accordance with the
rules. For indeed, while technicalities should not unduly hamper our quest for justice,
orderly procedure is essential to the success of that quest to which all courts are
devoted.1wphi1.nt

Having resolved the first issue in the negative, we need not tarry further on the second
issue.

WHEREFORE, the petition is DENIED. The Resolutions of the Court of Appeals dated
November 9, 1998 and January 13, 1999 are AFFIRMED. The Regional Trial Court of
Makati, Branch 146, is ordered to proceed and resolve Civil Case No. 97-2653 with
dispatch.

Costs on petitioners.

SO ORDERED.
G.R. No. 170354 June 30, 2006
EDGARDO PINGA, Petitioner,
vs.
THE HEIRS OF GERMAN, SANTIAGO represented by FERNANDO
SANTIAGO, Respondents.
DECISION
TINGA, J.:
The constitutional faculty of the Court to promulgate rules of practice and
procedure1 necessarily carries the power to overturn judicial precedents on points of
remedial law through the amendment of the Rules of Court. One of the notable changes
introduced in the 1997 Rules of Civil Procedure is the explicit proviso that if a complaint is
dismissed due to fault of the plaintiff, such dismissal is "without prejudice to the right of the
defendant to prosecute his counterclaim in the same or in a separate action." 2 The
innovation was instituted in spite of previous jurisprudence holding that the fact of the
dismissal of the complaint was sufficient to justify the dismissal as well of the compulsory
counterclaim.3
In granting this petition, the Court recognizes that the former jurisprudential rule can no
longer stand in light of Section 3, Rule 17 of the 1997 Rules of Civil Procedure.
The relevant facts are simple enough. Petitioner Eduardo Pinga was named as one of two
defendants in a complaint for injunction4 filed with Branch 29 of the Regional Trial Court
(RTC)5 of San Miguel, Zamboanga del Sur, by respondent Heirs of German Santiago,
represented by Fernando Santiago. The Complaint 6 dated 28 May 1998 alleged in
essence that petitioner and co-defendant Vicente Saavedra had been unlawfully entering
the coco lands of the respondent, cutting wood and bamboos and harvesting the fruits of
the coconut trees therein. Respondents prayed that petitioner and Saavedra be enjoined
from committing "acts of depredation" on their properties, and ordered to pay damages.
In their Amended Answer with Counterclaim,7 petitioner and his co-defendant disputed
respondents ownership of the properties in question, asserting that petitioners father,
Edmundo Pinga, from whom defendants derived their interest in the properties, had been
in possession thereof since the 1930s.8 They alleged that as far back as 1968,
respondents had already been ordered ejected from the properties after a complaint for
forcible entry was filed by the heirs of Edmundo Pinga. It was further claimed that
respondents application for free patent over the properties was rejected by the Office of
the President in 1971. Defendants in turn prayed that owing to respondents forcible re-
entry in the properties and the irresponsible and reckless filing of the case, they be
awarded various types of damages instead in amounts totaling P2,100,000 plus costs of
suit.9
By July of 2005, the trial of the case had not yet been completed. Moreover, respondents,
as plaintiffs, had failed to present their evidence. It appears that on 25 October 2004, the
RTC already ordered the dismissal of the complaint after respondents counsel had sought
the postponement of the hearing scheduled then. 10 However, the order of dismissal was
subsequently reconsidered by the RTC in an Order dated 9 June 2005, which took into
account the assurance of respondents counsel that he would give priority to that case. 11
At the hearing of 27 July 2005, plaintiffs counsel on record failed to appear, sending in his
stead a representative who sought the postponement of the hearing. Counsel for
defendants (who include herein petitioner) opposed the move for postponement and
moved instead for the dismissal of the case. The RTC noted that it was obvious that
respondents had failed to prosecute the case for an unreasonable length of time, in fact
not having presented their evidence yet. On that ground, the complaint was dismissed. At
the same time, the RTC allowed defendants "to present their evidence ex-parte."12
Respondents filed a Motion for Reconsideration13 of the order issued in open court on 27
July 2005, opting however not to seek that their complaint be reinstated, but praying
instead that the entire action be dismissed and petitioner be disallowed from presenting
evidence ex-parte. Respondents claimed that the order of the RTC allowing petitioner to
present evidence ex-parte was not in accord with established jurisprudence. They cited
cases, particularly City of Manila v. Ruymann14 and Domingo v. Santos,15 which noted
those instances in which a counterclaim could not remain pending for independent
adjudication.
On 9 August 2005, the RTC promulgated an order granting respondents Motion for
Reconsideration and dismissing the counterclaim, citing as the only ground therefor that
"there is no opposition to the Motion for Reconsideration of the [respondents]." 16 Petitioner
filed a Motion for Reconsideration, but the same was denied by the RTC in an Order dated
10 October 2005.17 Notably, respondents filed an Opposition to Defendants Urgent Motion
for Reconsideration, wherein they argued that the prevailing jurisprudential rule18 is that
"compulsory counterclaims cannot be adjudicated independently of plaintiffs cause of
action," and "a conversu, the dismissal of the complaint carries with it the dismissal of the
compulsory counterclaims."19
The matter was elevated to this Court directly by way of a Petition for Review under Rule
45 on a pure question of law, the most relevant being whether the dismissal of the
complaint necessarily carries the dismissal of the compulsory counterclaim.
We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Procedure, the dismissal
of the complaint due to the fault of plaintiff does not necessarily carry with it the dismissal
of the counterclaim, compulsory or otherwise. In fact, the dismissal of the complaint is
without prejudice to the right of defendants to prosecute the counterclaim.
On a prefatory note, the RTC, in dismissing the counterclaim, did not expressly adopt
respondents argument that the dismissal of their complaint extended as well to the
counterclaim. Instead, the RTC justified the dismissal of the counterclaim on the ground
that "there is no opposition to [plaintiffs] Motion for Reconsideration [seeking the dismissal
of the counterclaim]."20 This explanation is hollow, considering that there is no mandatory
rule requiring that an opposition be filed to a motion for reconsideration without need for a
court order to that effect; and, as posited by petitioner, the "failure to file an opposition to
the Plaintiffs Motion for Reconsideration is definitely not one among the established
grounds for dismissal [of the counterclaim]."21 Still, the dismissal of the counterclaim by the
RTC betrays at very least a tacit recognition of respondents argument that the
counterclaim did not survive the dismissal of the complaint. At most, the dismissal of the
counterclaim over the objection of the defendant (herein petitioner) on grounds other than
the merits of the counterclaim, despite the provisions under Rule 17 of the 1997 Rules of
Civil Procedure, constitutes a debatable question of law, presently meriting justiciability
through the instant action. Indeed, in reviewing the assailed orders of the RTC, it is
inevitable that the Court consider whether the dismissal of the complaint, upon motion of
the defendant, on the ground of the failure to prosecute on plaintiffs part precipitates or
carries with it the dismissal of the pending counterclaims.
Our core discussion begins with Section 3, Rule 17 of the 1997 Rules of Civil Procedure,
which states:
SEC. 3. Dismissal due to fault of plaintiff.If, for no justifiable cause, the plaintiff fails to
appear on the date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply with these Rules or
any order of the court, the complaint may be dismissed upon motion of defendant or upon
the court's own motion, without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. This dismissal shall have the effect of an
adjudication upon the merits, unless otherwise declared by the court.
The express qualification in the provision that the dismissal of the complaint due to the
plaintiffs fault, as in the case for failure to prosecute, is without prejudice to the right of the
defendant to prosecute his counterclaim in the same or separate action. This stands in
marked contrast to the provisions under Rule 17 of the 1964 Rules of Court which were
superseded by the 1997 amendments. In the 1964 Rules, dismissals due to failure to
prosecute were governed by Section 3, Rule 17, to wit:
SEC. 3. Failure to prosecute. If plaintiff fails to appear at the time of the trial, or to
prosecute his action for an unreasonable length of time, or to comply with these rules or
any order of the court, the action may be dismissed upon motion of the defendant or upon
the courts own motion. This dismissal shall have the effect of an adjudication upon the
merits, unless otherwise provided by court.
Evidently, the old rule was silent on the effect of such dismissal due to failure to prosecute
on the pending counterclaims. As a result, there arose what one authority on remedial law
characterized as "the nagging question of whether or not the dismissal of the complaint
carries with it the dismissal of the counterclaim." 22 Jurisprudence construing the previous
Rules was hardly silent on the matter.
In their arguments before the RTC on the dismissal of the counterclaim, respondents cited
in support City of Manila v.
Ruymann,23 Domingo v. Santos,24 Belleza v. Huntington,25 and Froilan v. Pan Oriental
Shipping Co.,26 all of which were decided more than five decades ago. Notably though,
none of the complaints in these four cases were dismissed either due to the fault of the
plaintiff or upon the instance of the defendant. 27
The distinction is relevant, for under the previous and current incarnations of the Rules of
Civil Procedure, it is Section 3, Rule 17 that governs the dismissals due to the failure of the
plaintiff to prosecute the complaint, as had happened in the case at bar. Otherwise, it is
Section 2, Rule 17, which then, and still is now, covered dismissals ordered by the trial
court upon the instance of the plaintiff.28 Yet, as will be seen in the foregoing discussion, a
discussion of Section 2 cannot be avoided as the postulate behind that provision was
eventually extended as well in cases that should have properly been governed by Section
3.
Even though the cases cited by respondents involved different factual antecedents, there
exists more appropriate precedents which they could have cited in support of their claim
that the counterclaim should have been dismissed even if the dismissal of the complaint
was upon the defendants motion and was predicated on the plaintiffs fault. BA Finance
Corp. v. Co29 particularly stands out in that regard, although that ruling is itself grounded
on other precedents as well. Elucidation of these cases is in order.
On the general effect of the dismissal of a complaint, regardless of cause, on the pending
counterclaims, previous jurisprudence laid emphasis on whether the counterclaim was
compulsory or permissive in character. The necessity of such distinction was provided in
the 1964 Rules itself, particularly Section 2, Rule 17, which stated that in instances
wherein the plaintiff seeks the dismissal of the complaint, "if a counterclaim has been
pleaded by a defendant prior to the service upon him of the plaintiffs motion to dismiss,
the action shall not be dismissed against the defendants objection unless the counterclaim
can remain pending for independent adjudication by the court."30The
vaunted commentaries of Chief Justice Moran, remarking on Section 2, Rule 17, noted that
"[t]here are instances in which a counterclaim cannot remain pending for independent
adjudication, as, where it arises out of, or is necessarily connected with, the transaction or
occurrence which is the subject matter of the opposing partys claim." 31
This view expressed in Morans Commentaries was adopted by the Court in cases where
the application of Section 2, Rule 17 of the 1964 Rules of Court was called for, such as
in Lim Tanhu v. Ramolete,32 and Dalman v. City Court of Dipolog City.33 The latter case
warrants brief elaboration. Therein, the plaintiff in a civil case for damages moved for the
withdrawal of her own case on the ground that the dispute had not been referred to the
barangay council as required by law. Over the objection of the defendant, who feared that
her own counterclaim would be prejudiced by the dismissal, plaintiffs motion was granted,
the complaint and the counterclaim accordingly dismissed by the trial court. The Court
refused to reinstate the counterclaim, opining without elaboration, "[i]f the civil case is
dismissed, so also is the counterclaim filed therein." 34 The broad nature of that statement
gave rise to the notion that the mandatory
dismissal of the counterclaim upon dismissal of the complaint applied regardless of the
cause of the complaints dismissal.35
Notably, the qualification concerning compulsory counterclaims was provided in Section 2,
Rule 17 of the 1964 Rules, the provision governing dismissals by order of the court, and
not Section 3, Rule 17. As stated earlier, Section 3, which covered dismissals for failure to
prosecute upon motion of the defendant or upon motu proprioaction of the trial court, was
silent on the effect on the counterclaim of dismissals of such nature.
Spouses Sta. Maria, Jr. v. Court of Appeals,36 decided in 1972, ostensibly supplied the gap
on the effect on the counterclaim of complaints dismissed under Section 3. The defendants
therein successfully moved before the trial court for the dismissal of the complaint without
prejudice and their declaration in default on the counterclaim after plaintiffs therein failed to
attend the pre-trial. After favorable judgment was rendered on the counterclaim, plaintiffs
interposed an appeal, citing among other grounds, that the counterclaim could no longer
have been heard after the dismissal of the complaint. While the Court noted that the
adjudication of the counterclaim in question "does not depend upon the adjudication of the
claims made in the complaint since they were virtually abandoned by the non-appearance
of the plaintiffs themselves," it was also added that "[t]he doctrine invoked is not available
to plaintiffs like the petitioners, who prevent or delay the hearing of their own claims and
allegations."37 The Court, through Justice JBL Reyes, noted:
The doctrine that the complaint may not be dismissed if the counterclaim cannot be
independently adjudicated is not available to, and was not intended for the benefit
of, a plaintiff who prevents or delays the prosecution of his own complaint.
Otherwise, the trial of counterclaims would be made to depend upon the maneuvers of the
plaintiff, and the rule would offer a premium to vexing or delaying tactics to the prejudice of
the counterclaimants. It is in the same spirit that we have ruled that a complaint may not be
withdrawn over the opposition of the defendant where the counterclaim is one that arises
from, or is necessarily connected with, the plaintiffs action and cannot remain pending for
independent adjudication.38
There is no doubt that under the 1964 Rules, the dismissal of a complaint due to the failure
of the plaintiff to appear during pre-trial, as what had happened in Sta. Maria, fell within the
coverage of Section 3, Rule 17. On the other hand, Section 2 was clearly limited in scope
to those dismissals sustained at the instance of the plaintiff. 39Nonetheless, by the early
1990s, jurisprudence was settling on a rule that compulsory counterclaims were
necessarily terminated upon the dismissal of the complaint not only if such dismissal was
upon motion of the plaintiff, but at the instance of the defendant as well. Two decisions
from that period stand out in this regard, Metals Engineering Resources Corp. v. Court of
Appeals40 and International Container Terminal Services v. Court of Appeals.41
In Metals, the complaint was expunged from the record after the defendant had filed a
motion for reconsideration of a trial court order allowing the filing of an amended complaint
that corrected a jurisdictional error in the original complaint pertaining to the specification
of the amount of damages sought. When the defendant was nonetheless allowed to
present evidence on the counterclaim, the plaintiff assailed such allowance on the ground
that the counterclaim was compulsory and could no longer remain pending for independent
adjudication. The Court, in finding for the plaintiff, noted that the counterclaim was indeed
compulsory in nature, and as such, was auxiliary to the proceeding in the original suit and
derived its jurisdictional support therefrom. 42 It was further explained that the doctrine was
in consonance with the primary objective of a counterclaim, which was to avoid and
prevent circuitry of action by allowing the entire controversy between the parties to be
litigated and finally determined in one action, and to discourage multiplicity of suits. 43 Also,
the Court noted that since the complaint was dismissed for lack of jurisdiction, it was as if
no claim was filed against the defendant, and there was thus no more leg for the complaint
to stand on.44
In International Container, the defendant filed a motion to dismiss which was granted by
the trial court. The defendants counterclaim was dismissed as well. The Court
summarized the key question as "what is the effect of the dismissal of a complaint ordered
at the instance of the defendant upon a compulsory counterclaim duly raised in its
answer."45 Then it ruled that the counterclaim did not survive such dismissal. After
classifying the counterclaim therein as compulsory, the Court noted that "[i]t is obvious
from the very nature of the counterclaim that it could not remain pending for independent
adjudication, that is, without adjudication by the court of the complaint itself on which the
counterclaim was based."46
Then in 1993, a divided Court ruled in BA Finance that the dismissal of the complaint for
nonappearance of plaintiff at the pre-trial, upon motion of the defendants, carried with it the
dismissal of their compulsory counterclaim.47 The Court reiterated the rule that "a
compulsory counterclaim cannot remain pending for independent adjudication by the
court as it is auxiliary to the proceeding in the original suit and merely derives its
jurisdictional support therefrom."48 Express reliance was made on Metals, International
Container, and even Dalman in support of the majoritys thesis. BA Finance likewise
advised that the proper remedy for defendants desirous that their counterclaims not be
dismissed along with the main complaint was for them to move to declare the plaintiffs to
be "non-suited" on their complaint and "as in default" on their compulsory counterclaim,
instead of moving for the dismissal of the complaint. 49
Justice Regalado, joined by Chief Justice Narvasa, registered a strong objection to the
theory of the majority. They agreed that the trial court could no longer hear the
counterclaim, but only on the ground that defendants motion to be allowed to present
evidence on the counterclaim was filed after the order dismissing the complaint had
already become final. They disagreed however that the compulsory counterclaim was
necessarily dismissed along with the main complaint, pointing out that a situation wherein
the dismissal of the complaint was occasioned by plaintiffs failure to appear during pre-
trial was governed under Section 3, Rule 17, and not Section 2 of the same rule. Justice
Regalado, who ironically penned the decision in Metals cited by the majority, explained:
Turning back to Rule 17, it is readily apparent that Sections 2 and 3 thereof envisage
different factual and adjective situations. The dismissal of the complaint under Section 2 is
at the instance of plaintiff, for whatever reason he is minded to move for such dismissal,
and, as a matter of procedure, is without prejudice unless otherwise stated in the order of
the court or, for that matter, in plaintiff's motion to dismiss his own complaint. By reason
thereof, to curb any dubious or frivolous strategy of plaintiff for his benefit or to obviate
possible prejudice to defendant, the former may not dismiss his complaint over the
defendant's objection if the latter has a compulsory counterclaim since said counterclaim
would necessarily be divested of juridical basis and defendant would be deprived of
possible recovery thereon in that same judicial proceeding.
Section 3, on the other hand, contemplates a dismissal not procured by plaintiff, albeit
justified by causes imputable to him and which, in the present case, was petitioner's failure
to appear at the pre-trial. This situation is also covered by Section 3, as extended by
judicial interpretation, and is ordered upon motion of defendant or motu proprio by the
court. Here, the issue of whether defendant has a pending counterclaim, permissive or
compulsory, is not of determinative significance. The dismissal of plaintiff's complaint is
evidently a confirmation of the failure of evidence to prove his cause of action outlined
therein, hence the dismissal is considered, as a matter of evidence, an adjudication on the
merits. This does not, however, mean that there is likewise such absence of evidence to
prove defendant's counterclaim although the same arises out of the subject matter of the
complaint which was merely terminated for lack of proof. To hold otherwise would not only
work injustice to defendant but would be reading a further provision into Section 3 and
wresting a meaning therefrom although neither exists even by mere implication. Thus
understood, the complaint can accordingly be dismissed, but relief can nevertheless be
granted as a matter of course to defendant on his counterclaim as alleged and proved,
with or without any reservation therefor on his part, unless from his conduct, express or
implied, he has virtually consented to the concomitant dismissal of his counterclaim. 50
Justice Regalado also adverted to Sta. Maria and noted that the objections raised and
rejected by the Court therein were the same as those now relied upon by the plaintiff. He
pointed out that Dalman and International Container, both relied upon by the majority,
involved the application of Section 2, Rule 17 and not Section 3, which he insisted as the
applicable provision in the case at bar.51
The partial dissent of Justice Regalado in BA Finance proved opportune, as he happened
then to be a member of the Rules of Court Revision Committee tasked with the revision of
the 1964 Rules of Court. Just a few months after BA Finance was decided, Justice
Regalado proposed before the Committee an amendment to Section 3, Rule 17 that would
explicitly provide that the dismissal of the complaint due to the fault of the plaintiff shall be
"without prejudice to the right of the defendant to prosecute his counterclaim in the same
or in a separate action." The amendment, which was approved by the Committee, is
reflected in the minutes of the meeting of the Committee held on 12 October 1993:
[Justice Regalado] then proposed that after the words "upon the courts own motion" in the
6th line of the draft in Sec. 3 of Rule 17, the following provision be inserted: "without
prejudice to the right of the defendant to prosecute his counterclaim in the same or
in a separate action." The Committee agreed with the proposed amendment of
Justice Regalado.
Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not the action that is
dismissed but the complaint. He asked whether there is any distinction between
"complaint" and "action." Justice Regalado opined that the action of the plaintiff is initiated
by his complaint.
Justice Feria then suggested that the dismissal be limited to the complaint[.] Thus,
in the 1st line of Sec. 1, the words "An action" will be changed to "a complaint"; in
the 2nd line of Sec. 2, the words "an action" will be changed to "a complaint" and in
Sec. 3, the word "action" on the 5th line of the draft will be changed to "complaint."
The Committee agreed with Justice Ferias suggested amendments.
CA Pao believed that there is a need to clarify the counterclaim that the defendant
will prosecute, whether it is permissive or compulsory or all kinds of counterclaims.
Justice Regalado opined that there is no need of making a clarification because it is
already understood that it covers both counterclaims.52
It is apparent from these minutes that the survival of the counterclaim despite the dismissal
of the complaint under Section 3 stood irrespective of whether the counterclaim was
permissive or compulsory. Moreover, when the Court itself approved the revisions now
contained in the 1997 Rules of Civil Procedure, not only did Justice Regalados
amendment to Section 3, Rule 17 remain intact, but the final version likewise eliminated
the qualification formerly offered under Section 2 on "counterclaims that can remain
pending for independent adjudication by the court." 53 At present, even Section 2,
concerning dismissals on motion of the plaintiff, now recognizes the right of the defendant
to prosecute the counterclaim either in the same or separate action notwithstanding the
dismissal of the complaint, and without regard as to the permissive or compulsory nature
of the counterclaim.
In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado expounds on
the effects of the amendments to Section 2 and 3 of Rule 17:
2. Under this revised section [2], where the plaintiff moves for the dismissal of his
complaint to which a counterclaim has been interposed, the dismissal shall be limited to
the complaint. Such dismissal shall be without prejudice to the right of the defendant to
either prosecute his counterclaim in a separate action or to have the same resolved in the
same action. Should he opt for the first alternative, the court should render the
corresponding order granting and reserving his right to prosecute his claim in a separate
complaint. Should he choose to have his counterclaim disposed of in the same action
wherein the complaint had been dismissed, he must manifest such preference to the trial
court within 15 days from notice to him of plaintiffs motion to dismiss. These alternative
remedies of the defendant are available to him regardless of whether his
counterclaim is compulsory or permissive. A similar alternative procedure, with the
same underlying reason therefor, is adopted in Sec. 6, Rule 16 and Sec. 3 of this Rule,
wherein the complaint is dismissed on the motion of the defendant or, in the latter
instance, also by the court motu proprio.
xxxx
2. The second substantial amendment to [Section 3] is with respect to the disposition of
the defendants counterclaim in the event the plaintiffs complaint is dismissed. As already
observed, he is here granted the choice to prosecute that counterclaim in either the same
or a separate action. x x x x
3. With the aforestated amendments in Secs. 2 and 3 laying down specific rules on
the disposition of counterclaims involved in the dismissal actions, the controversial
doctrine in BA Finance Corporation vs. Co, et al., (G.R. No. 105751, June 30, 1993)
has been abandoned, together with the apparent confusion on the proper
application of said Secs. 2 and 3. Said sections were distinguished and discussed in the
authors separate opinion in that case, even before they were clarified by the present
amendments x x x.54
Similarly, Justice Feria notes that "the present rule reaffirms the right of the defendant to
move for the dismissal of the complaint and to prosecute his counterclaim, as stated in the
separate opinion [of Justice Regalado in BA Finance.]"55 Retired Court of Appeals Justice
Herrera pronounces that the amendment to Section 3, Rule 17 settles that "nagging
question" whether the dismissal of the complaint carries with it the dismissal of the
counterclaim, and opines that by reason of the amendments, the rulings
in Metals Engineering, International Container, and BA Finance "may be deemed
abandoned."56 On the effect of amendment to Section 3, Rule 17, the commentators are in
general agreement,57 although there is less unanimity of views insofar as Section 2, Rule
17 is concerned.58
To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including
the amended Rule 17, those previous jural doctrines that were inconsistent with the new
rules incorporated in the 1997 Rules of Civil Procedure were implicitly abandoned insofar
as incidents arising after the effectivity of the new procedural rules on 1 July 1997. BA
Finance, or even the doctrine that a counterclaim may be necessarily dismissed along with
the complaint, clearly conflicts with the 1997 Rules of Civil Procedure. The abandonment
of BA Finance as doctrine extends as far back as 1997, when the Court adopted the new
Rules of Civil Procedure. If, since then, such abandonment has not been affirmed in
jurisprudence, it is only because no proper case has arisen that would warrant express
confirmation of the new rule. That opportunity is here and now, and we thus rule that the
dismissal of a complaint due to fault of the plaintiff is without prejudice to the right of the
defendant to prosecute any pending counterclaims of whatever nature in the same or
separate action. We confirm that BA Finance and all previous rulings of the Court that are
inconsistent with this present holding are now abandoned.
Accordingly, the RTC clearly erred when it ordered the dismissal of the counterclaim, since
Section 3, Rule 17 mandates that the dismissal of the complaint is without prejudice to the
right of the defendant to prosecute the counterclaim in the same or separate action. If the
RTC were to dismiss the counterclaim, it should be on the merits of such counterclaim.
Reversal of the RTC is in order, and a remand is necessary for trial on the merits of the
counterclaim.
It would be perfectly satisfactory for the Court to leave this matter at that. Still, an
explanation of the reason behind the new rule is called for, considering that the rationale
behind the previous rule was frequently elaborated upon.
Under Act No. 190, or the Code of Procedure in Civil Actions promulgated in 1901, it was
recognized in Section 127(1) that the plaintiff had the right to seek the dismissal of the
complaint at any time before trial, "provided a counterclaim has not been made, or
affirmative relief sought by the cross-complaint or answer of the defendant."59Note that no
qualification was made then as to the nature of the counterclaim, whether it be compulsory
or permissive. The protection of the defendants right to prosecute the counterclaim was
indeed unqualified. In City of Manila, decided in 1918, the Court explained:
By paragraph 1 [of Section 127], it will be seen that, where the defendant has interposed a
counterclaim, or is seeking affirmative relief by a cross-complaint, that then, and in that
case, the plaintiff cannot dismiss the action so as to affect the right of the defendant in his
counterclaim or prayer for affirmative relief. The reason for that exception is clear. When
the answer sets up an independent action against the plaintiff, it then becomes an
action by the defendant against the plaintiff, and, of course, the plaintiff has no right
to ask for a dismissal of the defendants action.60
Nonetheless, a new rule was introduced when Act No. 190 was replaced by the 1940
Rules of Court. Section 2, Rule 30 of the 1940 Rules specified that if a counterclaim is
pleaded by a defendant prior to the service of the plaintiffs motion to dismiss, the action
shall not be dismissed against the defendants objection unless the counterclaim can
remain pending for independent adjudication by the court. This qualification remained
intact when the 1964 Rules of Court was introduced. 61 The rule referred only to
compulsory counterclaims, or counterclaims which arise out of or are necessarily
connected with the transaction or occurrence that is the subject matter of the plaintiffs
claim, since the rights of the parties arising out of the same transaction should be settled at
the same time.62 As was evident in Metals, International Container and BA Finance, the
rule was eventually extended to instances wherein it was the defendant with the pending
counterclaim, and not the plaintiff, that moved for the dismissal of the complaint.
We should not ignore the theoretical bases of the rule distinguishing compulsory
counterclaims from permissive counterclaims insofar as the dismissal of the action is
concerned. There is a particular school of thought that informs the broad proposition
in Dalman that "if the civil case is dismissed, so also is the counterclaim filed therein," 63 or
the more nuanced discussions offered in Metals, International Container, and BA Finance.
The most potent statement of the theory may be found in Metals,64 which proceeds from
the following fundamental premisesa compulsory counterclaim must be set up in the
same proceeding or would otherwise be abated or barred in a separate or subsequent
litigation on the ground of auter action pendant, litis pendentia or res judicata; a
compulsory counterclaim is auxiliary to the main suit and derives its jurisdictional support
therefrom as it arises out of or is necessarily connected with the transaction or occurrence
that is the subject matter of the complaint;65 and that if the court dismisses the complaint
on the ground of lack of jurisdiction, the compulsory counterclaim must also be dismissed
as it is merely ancilliary to the main action and no jurisdiction remained for any grant of
relief under the counterclaim.
The first point is derived from Section 4, Rule 9, of the 1964 Rules of Court, while the two
latter points are sourced from American jurisprudence. There is no disputing the theoretical
viability of these three points. In fact, the requirement that the compulsory counterclaim
must be set up in the same proceeding remains extant under the 1997 Rules of Civil
Procedure.66 At the same time, other considerations rooted in actual practice provide a
counterbalance to the above-cited rationales.
Whatever the nature of the counterclaim, it bears the same integral characteristics as a
complaint; namely a cause (or causes) of action constituting an act or omission by which a
party violates the right of another. The main difference lies in that the cause of action in the
counterclaim is maintained by the defendant against the plaintiff, while the converse holds
true with the complaint. Yet, as with a complaint, a counterclaim without a cause of action
cannot survive.
It would then seemingly follow that if the dismissal of the complaint somehow eliminates
the cause(s) of the counterclaim, then the counterclaim cannot survive. Yet that hardly is
the case, especially as a general rule. More often than not, the allegations that form
the counterclaim are rooted in an act or omission of the plaintiff other than the
plaintiffs very act of filing the complaint. Moreover, such acts or omissions imputed
to the plaintiff are often claimed to have occurred prior to the filing of the complaint
itself. The only apparent exception to this circumstance is if it is alleged in the
counterclaim that the very act of the plaintiff in filing the complaint precisely causes
the violation of the defendants rights. Yet even in such an instance, it remains
debatable whether the dismissal or withdrawal of the complaint is sufficient to
obviate the pending cause of action maintained by the defendant against the
plaintiff.67
These considerations persist whether the counterclaim in question is permissive or
compulsory. A compulsory counterclaim arises out of or is connected with the transaction
or occurrence constituting the subject matter of the opposing partys claim, does not
require for its adjudication the presence of third parties, and stands within the jurisdiction of
the court both as to the amount involved and the nature of the claim. 68 The fact that the
culpable acts on which the counterclaim is based are founded within the same transaction
or occurrence as the complaint, is insufficient causation to negate the counterclaim
together with the complaint. The dismissal or withdrawal of the complaint does not traverse
the boundaries of time to undo the act or omission of the plaintiff against the defendant, or
vice versa. While such dismissal or withdrawal precludes the pursuit of litigation
by the plaintiff, either through his/her own initiative or fault, it would be iniquitous to
similarly encumber the defendant who maintained no such initiative or fault. If the
defendant similarly moves for the dismissal of the counterclaim or neglects to timely
pursue such action, let the dismissal of the counterclaim be premised on those grounds
imputable to the defendant, and not on the actuations of the plaintiff.
The other considerations supplied in Metals are anchored on the premise that the
jurisdictional foundation of the counterclaim is the complaint itself. The theory is correct,
but there are other facets to this subject that should be taken into account as well. On the
established premise that a counterclaim involves separate causes of action than the
complaint even if derived from the same transaction or series of transactions, the
counterclaim could have very well been lodged as a complaint had the defendant filed the
action ahead of the complainant.69 The terms "ancillary" or "auxiliary" may mislead in
signifying that a complaint innately possesses more credence than a counterclaim, yet
there are many instances wherein the complaint is trivial but the counterclaim is
meritorious. In truth, the notion that a counterclaim is, or better still, appears to be merely
"ancillary" or "auxiliary" is chiefly the offshoot of an accident of chronology, more than
anything else.

The formalistic distinction between a complaint and a counterclaim does not detract from
the fact that both of them embody causes of action that have in their end the vindication of
rights. While the distinction is necessary as a means to facilitate order and clarity in the
rules of procedure, it should be remembered that the primordial purpose of procedural
rules is to provide the means for the vindication of rights. A party with a valid cause of
action against another party cannot be denied the right to relief simply because the
opposing side had the good fortune of filing the case first. Yet this in effect was what had
happened under the previous procedural rule and correspondent doctrine, which under
their final permutation, prescribed the automatic dismissal of the compulsory counterclaim
upon the dismissal of the complaint, whether upon the initiative of the plaintiff or of the
defendant.

Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable
disposition of the counterclaims by ensuring that any judgment thereon is based on the
merit of the counterclaim itself and not on the survival of the main complaint. Certainly, if
the counterclaim is palpably without merit or suffers jurisdictional flaws which stand
independent of the complaint, the trial court is not precluded from dismissing it under the
amended rules, provided that the judgment or order dismissing the counterclaim is
premised on those defects. At the same time, if the counterclaim is justified, the amended
rules now unequivocally protect such counterclaim from peremptory dismissal by reason of
the dismissal of the complaint.

WHEREFORE, the petition is GRANTED. The Orders dated 9 August 2005 and 10
October 2005 of Branch 29, Regional Trial Court of San Miguel, Zamboanga del Sur in
Civil Case No. 98-012 are SET ASIDE. Petitioners counterclaim as defendant in Civil
Case. No. 98-012 is REINSTATED. The Regional Trial Court is ORDERED to hear and
decide the counterclaim with deliberate dispatch.

SO ORDERED.
G.R. No. 142439 December 6, 2006 Section 1. The Department of Agrarian Reform, as Administrator of the San
Pedro Tunasan Estate, is hereby ordered to convert such estate into a
FILINVEST LAND, INC., petitioner, commercial, industrial and residential site and to transfer the same to the
National Housing Authority.
vs.
HON. COURT OF APPEALS and ROMEO, ANTONIO, JOSEFINA, RICARDO (JR.), all
surnamed ALVAREZ and VENANCIA R. Vda. de ALVAREZ, for herself as guardian ad Section 2. Individuals who have legally acquired farm lots in the Estate under
litem for her minor children, RAMON, VERONICA, and FLORDELIZA, all surnamed Orders of Award or Certificates of Land Transfer or Agreement to Sell or Deeds
ALVAREZ, and as necessary and indispensable party plaintiffs JAIME, VICTORIA, of Sale, may sell or transfer their lots covered thereby or convert the same for the
and MANUEL, all surnamed ALVAREZ, and ROSARIO PARAM Vda. de purposes mentioned in Section 1 hereof.
ALVAREZ,respondents.
The Register of Deeds of the Province of Laguna issued Transfer Certificate of Title (TCT)
No. 62731, covering the subject land, in the name of Ricardo Alvarez on 25 May 1979. On
10 June 1979, only 16 days after the title was issued, Ricardo Alvarez and his wife,
Rosario Param, sold the said land to Mercedes Oliver for Ten Thousand Pesos (P10,
000.00). Oliver was not a relative within the third degree of consanguinity and had no
DECISION capacity to personally cultivate the land, as required of a qualified beneficiary. Thus, TCT
No. 62731 was cancelled, and TCT No. 64967 was issued in the name of Mercedes
Oliver.7

On 22 December 1989, Mercedes Oliver sold the subject land to Filinvest, resulting in the
issuance of TCT No. 201836 on 23 January 1990 in the name of Filinvest. 8
CHICO-NAZARIO, J.:

On 7 March 1982, the heirs of the late Ricardo Alvarez filed a case for reconveyance,
This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Court, as
redemption and damages against Mercedes Oliver, Avelino Ramos and Jose Nunez,
amended, seeking to set aside a Decision1 of the Court of Appeals dated 11 November
before the Regional Trial Court (RTC) of Bian, Laguna. 9Respondents filed an Amended
1998 in CAG.R. SP No. 48396 annulling the sale of a parcel of land specified as Lot No.
Complaint for Annulment of Title with Reconveyance, dated 4 December 1985, wherein
329, GSS-877 of the Laguna Resettlement Project, to the late Ricardo Alvarez and the
they claim that the sale of the subject land was made without their knowledge, and it was
subsequent transfers to Mercedes Oliver and petitioner Filinvest Land Inc. (Filinvest); and
only in the 1980s that they learned of such sale. They alleged that their mother and father,
the reversion of the subject property to the ownership of the government. The Court of
both illiterate, were deceived by the defendants into executing the Deed of Sale covering
Appeals in its assailed Decision affirmed the Decision2 of the Department of Agrarian
the subject land in favor of Mercedes Oliver. Respondents also argued that such sale was
Reform Adjudication Board (DARAB) dated 1 July 1998.
void since the Deed of Sale was executed in violation of the law which enjoins the sale of
the subject land.10 This case was, however, dismissed for failure of the respondents and
The subject matter in this case is a parcel of land registered as Lot No. 329 of the Laguna counsel to appear during the hearing for the reception of their evidence, despite due notice
Resettlement Project, located in Barrio San Vicente, San Pedro, Laguna, with an area of and after eight postponements11. The RTC, in its Order,12 dated 17 February 1989, ruled
16,495 square meters. The Department of Agrarian Reform (DAR) awarded to Ricardo that:
Alvarez the right to purchase the land in question, pursuant to an Order of Award dated 9
October 1973.3 On 15 August 1977, Ricardo Alvarez, with the consent of his wife,
Further considering that without the evidence of said witness and the plaintiffs
respondent Rosario Param, purchased the land, evidenced by a Deed of Sale executed by
not having presented any evidence on record, upon motion of counsel for
the DAR.4 This Deed of Sale specifically prohibited the transfer of the land within ten (10)
defendants that this case be dismissed and further manifestation by the
years from the issuance of the certificate of title to any person other than the vendees
defendants that they are waiving their right to a counterclaim, the Court hereby
relatives within the third civil degree by consanguinity or affinity who are, at the same time,
orders the dismissal of this case (both the complaint and counterclaim).
qualified beneficiaries.5 This restriction was in accordance with Section 62 of Republic Act
No. 3844, or the Agricultural Land Reform Code. 6
Let copy of this Order be furnished party plaintiff.
However, pending the issuance of the certificate of title of the said land, Presidential
Decree No. 1474, Declaring the San Pedro Tunasan Estate (also known as the Laguna The order became final and executory when the respondents failed to file a motion for
Resettlement Project) of the Department of Agrarian Reform Suitable for Residential, reconsideration of this Order, despite receipt thereof. 13
Commercial, or Industrial, or other Non-Agricultural Purposes, was enacted on 11 June
1978 and published in the Official Gazette on 27 November 1978. This effectively repealed On 26 March 1990, respondents filed a complaint against Mercedes Oliver and Filinvest
the ten-year prohibition on the transfer of agrarian lands situated in the Laguna before the Provincial Agrarian Reform Adjudication (PARAD) of Sta. Cruz, Laguna,
Resettlement Project. Presidential Decree No. 1474 provided that: seeking to annul the Deed of Sale between the Spouses Alvarez and Mercedes Oliver and
the subsequent transfer between Mercedes Oliver and Filinvest, on grounds similar to the
complaint filed before the RTC of Bian. They also sought the issuance of a restraining
order enjoining Filinvest from bulldozing the subject land, which was occupied and
cultivated by the respondents. Mercedes Oliver filed a Motion to Dismiss on the grounds
of res judicata and that the PARAD had no jurisdiction over the subject matter of the case.
Filinvest similarly filed a motion to dismiss on the grounds of res judicata and laches. It
also alleged, in its defense, that it was a purchaser for value and in good faith. In its
Position Paper, Filinvest likewise asserted that the restriction against selling the subject
land within ten years, provided under the Deed of Sale executed by DAR in favor of the
Spouses Alvarez had already been superseded by Presidential Decree No. 1474, which
took effect in 1978.14
On 25 August 1993, the PARAD of Sta. Cruz, Laguna, dismissed the complaint on the
ground of res judicata. Moreover, it ruled that the sale between the Spouses Alvarez and
Mercedes Oliver was valid.15 The dispositive part of this Decision16 reads:
WHEREFORE, in view therefrom, Judgment is hereby rendered dismissing the
instant case for lack of merit.
On appeal, the DARAB reversed and set aside the Decision dismissing the complaint, and
ordered the reversion of the subject property to the government. The dispositive portion of
the said Order,17 dated 1 July 1998 reads:
WHEREFORE, premises considered, the challenged decision dated August 25,
1993 is hereby REVERSED and SET ASIDE and a new judgment is hereby
rendered as follows:
1. Annulling the transfer of the land in question to the late Ricardo Alvarez and its
subsequent transfers to defendant Mercedes Oliver and defendant Filinvest Land
Incorporated;
2. Ordering the cancellation of Transfer Certificate of Title No. 201836, covering
the subject land, issued by the Register of Deeds for the Province of Laguna,
Calamba branch, in the name of defendant Filinvest; and
3. Directing the Register of Deeds for the Province of Laguna, Calamba branch,
to issue in lieu of TCT No. 201836, a Certificate of Title in the name of the
Republic of the Philippines, through DAR, for distribution to qualified farmer-
beneficiary in accordance with Administrative Order No. 01, Series of 1992,
which is the Revised Rules and Procedures Governing the Disposition of
Homelots and other Lots in Barangay Sites and Residential, Commercial, and
Industrial Lots in Townsites within DAR Settlement Project and Similar Other
Areas under DAR Jurisdiction.
The DARAB ruled, too, that res judicata as a bar against filing a complaint with the PARAD
is not applicable in this case since there was no adjudication of the merits before the RTC
of Bian.
The DARAB considered as self-serving and unsupported by evidence the allegations of
the respondents that the consent of the Spouses Alvarez was obtained through fraud in
connection with the sale made in favor of Mercedes Oliver. It also ruled that the sale
between Ricardo Alvarez and Mercedes Oliver was a violation of the ten-year prohibition
against the transfer of the land imposed by the Deed of Sale between the government and
Ricardo Alvarez, in accordance with Section 62 of Republic Act No. 3844. Such act
rendered the Deed of Sale executed by the DAR in favor of Ricardo Alvarez void, and,
therefore, the subsequent transfers to Mercedes Oliver and Filinvest were, likewise, void. 18
In negating Filinvests claim that Presidential Decree No. 1474 has superseded Section 62
of Republic Act No. 3844, the DARAB cited the case of Tipon v. Intermediate Appellate
Court,19 where the Court upheld the validity of the ten-year prohibition on the transfer of
land given by the government to farmer-beneficiaries. The DARAB added that the
restriction on transfer of land is contained in our present agrarian laws, particularly
Republic Act No. 6675.20
The petitioners then filed a Petition for Certiorari under Section 43 of the 1997 Rules of
Court before the Court of Appeals, but on 11 November 1998, the appeal was again
dismissed for lack of merit and the assailed Decision of the DARAB was affirmed. 21
The petitioners filed a Motion for Reconsideration, which was subsequently denied in a
Resolution dated 8 February 1999.22
Hence this petition, wherein Filinvest raised the following issues:
I
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ABUSED ITS
DISCRETION AND COMMITTED REVERSIBLE ERROR IN HOLDING THAT
THE SALE OF THE SUBJECT PARCEL OF LAND BY RICARDO ALVAREZ TO
MERCEDES OLIVER VIOLATED THE TRANSFER RESTRICTION
CONTAINED IN THE PRIOR DEED OF SALE OF THE SAME PROPERTY
EXECUTED BY THE DEPARTMENT OF AGRARIAN REFORM IN FAVOR OF
RICARDO ALVAREZ AND SECTION 62, ARTICLE II, CHAPTER III OF
REPUBLIC ACT NO. 3844
II
WHETHER OR NOT THE COURT OF APPEALS ACTED WITH GRAVE ABUSE
OF DISCRETION AND COMMITTED REVERSIBLE ERROR IN APPLYING
SECTION 1 (C), RULE II OF THE NEW RULES OF PROCEDURE OF THE
DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD (DARAB),
CONFERRING JURISDICTION OF THE DARAB OVER THE INSTANT CASE,
IN DISREGARD OF THE PROVISIONS OF PRESIDENTIAL DECREE NO. 1474
III
WHETHER OR NOT THE COURT OF APPEALS ACTED WITH GRAVE ABUSE
OF DISCRETION AND COMMITTED REVERSIBLE ERROR IN RULING THAT
THE DOCTRINE OF RES JUDICATA DOES NOT APPLY TO BAR
RESPONDENTS COMPLAINT IN DARAB CASE NO. IV-032-L
 IV
WHETHER OR NOT THE COURT OF APPEALS ACTED WITH GRAVE ABUSE
OF DISCRETION AND COMMITTED REVERSIBLE ERROR IN NOT RULING
THAT PETITIONER IS A BUYER IN GOOD FAITH WHO SHOULD BE
ENTITLED TO PROTECTION AGAINST THE ALLEGED CLAIM OF THE
RESPONDENT HEREIN, PURSUANT TO THIS HONORABLE COURTS
RULING IN AGRICULTURAL AND HOME EXTENSION DEVELOPMENT
GROUP VS. COURT OF APPEALS, ET AL., G.R. NO. 92319, SEPTEMBER 3,
199223
This petition is meritorious.
The first issue raised by Filinvest is whether the sale between Ricardo Alvarez and
Mercedes Oliver was void because it violated the prohibitory condition contained in the
Deed of Sale between Ricardo Alvarez and the Government, to wit:
2. That from the date of the pertinent Order of Award and within TEN (10) years
from the date of issuance by the proper Register of Deeds of the certificate of
title, the land subject hereof shall not, except by hereditary succession, be
subdivided, sold or in any manner transferred or encumbered except in favor of
any of the VENDEES relative within the third civil degree by consanguinity or
affinity who fulfill the four (4) requirements in Section 6 Land Authority
Administrative Order No. 4, Series of 1967, or in favor of the Government and its
financial or banking institutions or rural banks, and only upon prior written
consent of the Secretary of the Department of Agrarian Reform; and any sale,
transfer, encumberance or alienation made in violation hereof shall be null and
void: x x x24
This condition is in accordance with Section 62 of Republic Act No. 3844, The Agricultural
Land Reform Code, which provided that:
Section 62. Limitation on Land Rights. - Except in case of hereditary succession by one
heir, landholdings acquired under this Code may not be resold, mortgaged, encumbered,
or transferred until after the lapse of ten years from the date of full payment and acquisition
and after such ten-year period, any transfer, sale or disposition may be made only in favor
of persons qualified to acquire economic family-size farm units in accordance with the
provisions of this Code: Provided, That a purchaser who acquired his landholding under a
contract to sell may secure a loan on the same from any private lending institution or
individual for an amount not exceeding his equity on said landholding upon a guaranty by
the Land Bank.
Filinvest, however, contends that these restrictions were already revoked by the issuance
of Presidential Decree No. 1474, Declaring the San Pedro Tunasan Estate of the
Department of Agrarian Reform Suitable for Residential, Commercial or Industrial, or Other
Non-Agricultural Purposes. This law reclassifies the San Pedro Tunasan Estate, known as
and hereinafter referred to as the Laguna Resettlement Project, into a commercial,
industrial and residential site as it is no longer conducive to agricultural development.
The position taken by Filinvest is justified. Section 2 of Presidential Decree No.
147425 categorically empowers "individuals who have legally acquired lots in the (San
Pedro Tunasan) Estate" under Orders of Awards or Deeds of Sale, among others things,
to "sell or transfer their lots covered thereby." Therefore, transfers of land located within
the Laguna Resettlement Project, made after the law took effect, are valid and the
restriction on transfer of the land within ten years after its registration is no longer
applicable.
In the present case, the government, through the DAR had already issued an Order of
Award and a Deed of Sale in favor of Ricardo Alvarez covering a parcel of land located
within the Laguna Resettlement Project, when Presidential Decree No. 1474 was enacted
on 11 June 1978. In 1979, Alvarez, with the consent of his spouse, Rosario Param,
transferred the same parcel of land to Mercedes Oliver. Such transfer was clearly
sanctioned. As earlier adverted to, Section 2 of Presidential Decree No. 1474 revoked the
application of Section 62 of Republic Act No. 3844 and the condition prohibiting the
transfer of the land contained in the Deed of Sale executed by the DAR in favor of Alvarez,
in so far as land within the Laguna Resettlement Project was concerned. Since the transfer
made by Ricardo Alvarez to Mercedes Oliver was valid, the subsequent transfer made by
Mercedes Oliver to Filinvest is also valid.
DARABs reliance on the ruling of the Court in Tipon v. Intermediate Appellate
Court,26 upholding the ten-year prohibition on the transfer of land distributed by the
government in favor of its beneficiaries, is misplaced. This case is not applicable for it did
not take into account Presidential Decree No. 1474 because of different factual
circumstances. It is true that the Tipon case shares some similarities with the present case
- the subject property was part of the Laguna Resettlement Project, and the Deed of Sale
between the DAR and the farmer-beneficiary, Renato Tipon, was executed before the
enactment of Presidential Decree No. 1474 in 1978. However, there is a crucial difference.
Unlike the present case where the subsequent transfer by the farmer-beneficiary, Ricardo
Alvarez, to Mercedes Oliver was made in 1979 after Presidential Decree No. 1474 took
effect, the subsequent transfer by farmer-beneficiary Renato Tipon to Atty. Umiral Matic,
was made in 1976 before the enactment of Presidential Decree No. 1474. The factual
background of the Tipon case, as recounted by the Court, are thus:
Petitioner Renato Tipon acquired the lot in question (Lot No. 386 of the Laguna
Settlement Project) from the government by virtue of a Deed of Sale executed in
his favor by the Department of Agrarian Reform on November 23, 1976, for the
price of P1,251.20. x x x.
xxxx
On the day the Deed of Sale was executed in his favor, Tipon filed a request with
the Department of Agrarian Reform for permission to transfer his rights and
interest over the lot in question in favor of Atty. Umiral P. Matic (respondent
herein). This request was granted by the Regional Director of Region IV of the
Department of Agrarian Reform on December 9, 1976 "subject to the condition
that the Deed of Transfer is submitted to this department for verification and final
approval.
On December 10, 1976, Tipon submitted the Deed of Absolute Sale in favor of
Matic for approval and, on the same day, it was approved by the Regional
Director of Region IV of the Department of Agrarian Reform. Thereafter, Matic
caused the titling of the property in the name of Tipon to whom was issued
Transfer Certificate of Title No. 50617 and later, had the same transferred to his
 name under Transfer Certificate of Title No. 53850 dated July 12, 1977, of the
Registry of Deeds for the Province of Laguna. 27
A basic principle of statutory construction mandates that general legislation must give way
to special legislation on the same subject, and generally be so interpreted as to embrace
only cases in which the special provisions are not applicable. 28 There is no question that
Section 2 of Presidential Decree No. 1474 is inconsistent with Section 62 of Republic Act
No. 3844. The former authorizes the sale or transfer of agricultural lands within the Laguna
Resettlement Project, while the latter law prohibits the transfer of agricultural lands
distributed by the government to farmer-beneficiaries, at least for a limited period.
Presidential Decree No. 1474 as a special law should govern lands within the Laguna
Resettlement Project, while Republic Act No. 3844 is a law generally applied to agrarian
lands.
The second issue Filinvest raised is whether the DARAB had jurisdiction over a case
involving the subject land. Rule II, Section 1, of the DARAB Revised Rules of Procedure
provides that the DARAB shall have primary jurisdiction, both original and appellate over:
(c) Cases involving the annulment or cancellation of orders or decisions of DAR
officials other than the Secretary, lease contracts or deeds of sale or their
amendments under the administration and disposition of the DAR and LBP; x x x.
However, Filinvest argued that under Section 1 of Presidential Decree No. 1474, the
Laguna Resettlement Project was no longer agricultural land but was effectively converted
into a commercial, industrial and residential site, and was therefore outside the jurisdiction
of the DARAB. Section 1 of Presidential Decree No. 1474 reads:
Section 1. The Department of Agrarian Reform, as Administrator of the San
Pedro Tunasan Estate, is hereby ordered to convert such estate into a
commercial, industrial and residential site and to transfer the same to the
National Housing Authority.
From the aforecited provision, it is clear that the DAR had lost jurisdiction over government
lands located in the Laguna Resettlement Project formerly under its administration which it
was ordered to transfer to the National Housing Authority (NHA). More importantly, the
DARAB can no longer annul the Deed of Sale between the government and Ricardo
Alvarez, or the subsequent transfers, on the ground that Alvarez violated Section 62 of
Republic Act No. 3844 and the conditions laid down in the Deed of Sale regarding the ten-
year restriction on the transfer of the same land. At that time, the transfer between Alvarez
and Oliver was made, these aforementioned rules were repealed by the provisions of
Presidential Decree No. 1474. These rules were no longer applicable to the land in
question, as it was no longer under the administration of the DAR nor agrarian in
character. The validity of the subsequent transfer of the subject land between Ricardo
Alvarez and Mercedes Oliver, or even the later transfer between Mercedes Oliver and
Filinvest, was no longer subject to agrarian laws, as the land was already commercial,
industrial, or residential in nature at the time of the transfer. Therefore, any proceeding
which attacks the validity of the subsequent transfers are within the jurisdiction of regular
courts.
Clearly, the respondents filed the case before the PARAD, not because the case involved
a dispute that would be properly resolved by the PARAD, but because they were already
barred from filing the case before the proper forum. The allegations and relief found in the
Complaint filed by the respondents before the PARAD are conspicuously similar to those
in the Amended Complaint which they had earlier filed before the trial court of Bian. 29 As
earlier discussed, the trial court ordered the dismissal of the case for failure to prosecute.
When the respondents failed to file a motion for reconsideration, despite due notice, such
order became final.
This Court cannot countenance the party-litigants recourse to such measures. The
foundation principle upon which the doctrine of res judicata rests is that parties should not
be permitted to litigate the same issue more than once. When a right or fact has been
judicially tried and determined by a court of competent jurisdiction, or an opportunity for
such trial has been given, the judgment of the court, so long as it is not reversed, should
be conclusive upon the parties and those in privity with them in law or estate. 30
The following requisites must concur in order that a prior judgment may bar a subsequent
action: (1) the former judgment or order must be final; (2) it must be a judgment or order on
the merits, that is, it was rendered after a consideration of the evidence or stipulations
submitted by the parties at the trial of the case; (3) it must have been rendered by a court
having jurisdiction over the subject matter and the parties; and (4) there must be, between
the first and second actions, identity of parties, of subject matter and of cause of action. 31
A perusal of the records easily shows that the first, third and fourth requirements have
been complied with in this case. The Order rendered by Branch XXIV of the RTC of Bian,
dated 17 February 1989, dismissing the case, is clearly final, as it disposed of all the rights
and obligations of the parties before it.32 There was never any question raised on the
jurisdiction of Branch XXIV of the RTC to hear and decide the question of whether the sale
executed between Ricardo Alvarez and Mercedes Oliver was valid. It is also obvious that
the allegations of the respondents in their Amended Complaint filed before the RTC of
Bian are substantially identical to the Complaint filed before the PARAD; involved the
same subject matter, and raised the same causes of action.33 Filinvest was named as a
party only in the complaint before the PARAD, since it acquired the property from
Mercedes Oliver only on 22 December 1989,34 after the case before the RTC was
dismissed on 17 February 1997. Moreover, the fact that its predecessor-in interest,
Mercedes Oliver, was a party in the case filed before the RTC of Bian satisfies the
requirement on the identity of parties. In the case of Camara v. Court of Appeals,35 this
Court has ruled that, "[t]here is identity of parties not only where the parties are the same,
but also those in privity with them, as between their successors-in-interest by title
subsequent to the commencement of the action, litigating for the same thing and under the
same title and in the same capacity."
The only contention between the parties was whether the second requirement, that the
decision or order must have been based on the merits of the case, was met. In situations
contemplated in Section 3, Rule 17 of the Rules of Court,36 where a complaint is dismissed
for failure of the plaintiff to comply with a lawful order of the court, such dismissal has the
effect of an adjudication upon the merits.37 A dismissal for failure to prosecute has the
effect of an adjudication on the merits, and operates as res judicata, particularly when the
court did not direct that the dismissal was without prejudice. 38
Having complied with the four requisites needed for the doctrine of res judicata to operate,
the Order rendered by the RTC of Bian dismissing Civil Case No. B-1941 finally
determined the ownership of the subject land, the heirs of the late Ricardo Alvarez,
Mercedes Oliver, and her successor-in-interest, Filinvest, as no motion for reconsideration
on this Order was filed. Moreover, this would bar any dispute over the subject land from
being brought before any judicial forum. Rule 39, Section 47 of the Rules of
Court39 provides that in case of a judgment or final order over a specific thing, rendered by
a court having jurisdiction, the judgment or final order is conclusive upon the title to the
thing and binding upon the parties and their successors-in-interest.

Furthermore, the allegations of the private respondents of their counsels negligence

cannot be given any credence. In the Affidavit of private respondent Romeo Alvarez, and
reiterated in the Comment filed by the private respondents before the Court of Appeals, it
was alleged that on 12 December 1986, their counsel, Atty. Rosendo O. Chavez, executed
a Notice of Withdrawal, which was not filed before the trial court and did not bear the
conformity of the private respondents.40 Thereafter, Atty. Chavez allegedly stopped
attending the hearings before the trial court. As a result thereof, the private respondents
were not notified of the 17 February 1989 hearing, when the Order dismissing the case
was issued.

Records clearly show that Atty. Chavez could not have withdrawn from the case on 12
December 1986. As of 14 December 1987, Atty. Chavez presented as his witness, Rosario
Param, one of the private respondents.41 Since he requested for continuance, he was
required to bring the witness on the next hearing date. However, seven postponements
later, he was unable to bring the witness he presented.42 On 17 October 1988, Atty.
Chavez attended the hearing. He failed to attend the next hearing on 20 January 1989.
Nevertheless, he was still at that time the counsel of the private respondents and therefore
the notice to him was binding upon the parties. Moreover, the private respondent Rosario
Param was perfectly aware that her testimony was far from finished, and that she still
needed to appear before the Court. Given the foregoing facts, private respondents
allegations that their counsel was grossly negligent and that he had deceived them is not
credible.

Even if the allegations of the private respondents are to be believed, they should have
raised them in a Motion for Reconsideration, or a petition to annul the Order of the trial
court dismissing the case. While they alleged that they did not receive the Order requiring
them to appear on the 17 February 1989 hearing, they never denied receiving the Order of
dismissal. As the records stand, the counsel for the respondents received the Order
dismissing the case on 28 February 1989,43 and the respondents never filed a Motion for
Reconsideration or even a belated appeal to question the Order dismissing case. Instead,
they waited for a full year and filed with the DARAB a case which was under the
jurisdiction of the regular courts.

WHEREFORE, premises considered, this Court GRANTS this petition and REVERSES
the Decision of the Court of Appeals in CA-G.R. SP No. 48396, dated 11 November 1998,
affirming the Order of the DARAB nullifying the transfer certificate titles issued in the
names of Ricardo Alvarez, Mercedes Oliver and Filinvest Land Inc. since the DARAB was
without jurisdiction to issue the said Order. No costs.

SO ORDERED.
G.R. No. 119879 March 11, 2004
HEIRS OF JUANA GAUDIANE, namely: DATIVA M. PASTOR, MARIA M. ALCORIZA,
BEATRIZ M. PATROCIO, SOLOMON I. MARIO, BENJAMIN I. MARIO, LILI
MARIO, VERONICA I. MARIO, SEVERINA MARIO VDA. DE ISO, ROSITA ISO,
AGRIPINO ISO, ELIZABETH ISO, VIRGINIA ISO, LEOPOLDO ISO, NAPOLEON
ISO, petitioners,
vs.
COURT OF APPEALS and THE HEIRS OF FELIX GAUDIANE, namely: ARNULFO
GAUDIANE, GEORGE GAUDIANE, RODOLFO GAUDIANE, RAYMUNDO GAUDIANE,
SANDRA GAUDIANE, CEFERINA GAUDIANE, JONNA GAUDIANE, MILLARD
GAUDIANE, GLORIA TORRES-GAUDIANE, WILFREDO GAUDIANE, ROLANDO
GAUDIANE, ANTONIO GAUDIANE, KATHRYN GAUDIANE, PRISCILLA GAUDIANE,
CATALINA PACIOS, DONATELLA PACIOS, REMEDIOS PACIOS, GUALBERTO
GAUDIANE, VICTOR GAUDIANE, LORNA GAUDIANE, DOLORES
GAUDIANE, respondents.
DECISION
CORONA, J.:
Before us is a petition for review of the decision1 dated February 24, 1995 of the Court of
Appeals2 affirming the decision3 dated March 27, 1991 of the Regional Trial Court of
Dumaguete City, Branch 34, ordering the partition of Lot 4389 and directing the petitioners
to make an accounting of the rentals and profits they have obtained from the said lot from
the time the case was filed and to remit to respondents their one-half share thereof.
The facts, as found by the courts a quo, follow.
The lot in controversy is Lot 4389 located at Dumaguete City and covered by Original
Certificate of Title No. 2986-A (OCT 2986-A) in the names of co-owners Felix and Juana
Gaudiane. Felix died in 1943 while his sister Juana died in 1939. Herein respondents are
the descendants of Felix while petitioners are the descendants of Juana.
On November 4, 1927, Felix executed a document entitled Escritura de Compra-
Venta (Escritura, for brevity) whereby he sold to his sister Juana his one-half share in Lot
No. 4156 covered by Transfer Certificate of Title No. 3317-A. The Escritura described the
lot sold as follows:
A parcel of land (Lot No. 4156 of the Cadastral Survey of Dumaguete), with the
improvements thereon, situated in the Municipality of Dumaguete. Bounded on
the NE. and E. by Lot No. 4155; on the SW. by Lots Nos. 4157 and 4158; and on
the NW. by Lot No. 4154. Containing an area of five hundred and fifty-two (552)
square meters, more or less.
What muddled the otherwise clear contract of sale was a statement in the Escritura that
Lot No. 4156 was declared under Tax Declaration No. 18321. However, said tax
declaration was for another parcel of land, Lot 4389 and not Lot 4156.
Petitioners' predecessors-in-interest, Geronimo and Ines Iso (the Isos), believed that the
sale by Felix to their mother Juana in 1927 included not only Lot 4156 but also Lot 4389. In
1974, they filed a pleading in the trial court seeking to direct the Register of Deeds of
Dumaguete City to cancel OCT 2986-A covering Lot 4389 and to issue a new title in favor
of the Isos. This was later withdrawn after respondents' predecessors-in-interest, Procopio
Gaudiane and Segundo Gaudiane, opposed it on the ground that the Isos falsified their
copy of the Escritura by erasing "Lot 4156" and intercalating in its place "Lot 4389."
The Isos again tried their luck to acquire title in their name by filing in 1975 a case for
quieting of title of Lot 4389 but the same was dismissed without prejudice.
The Isos later filed another action for quieting of title, docketed as Civil Case No. 6817, but
it was again dismissed4on January 10, 1985 by the RTC of Negros Oriental, Branch 35,
due to the failure of the plaintiffs (the Isos) to prosecute and to comply with the orders of
the court. When the judgment became final, respondents sent a letter to Ines Iso asking
her to surrender the possession of the one-half portion of Lot No. 4389 comprising Felix'
share. The Isos refused.
On August 20, 1986, the respondents filed the present case for partition of Lot 4389,
accounting of proceeds and damages against herein petitioners.
On March 27, 1991, the trial court rendered a decision in favor of the respondents, the
dispositive portion of which read:
WHEREFORE, judgment is hereby rendered ordering the partition of the land in
question, i.e., Lot No. 4389 of the Dumaguete Cadastre, covered by Original
Certificate of Title No. 2986-A, in the names of Felix Gaudiane and his sister
Juana Gaudiane, consisting of 36,988 square meters, between the plaintiffs and
the defendants in the following proportion: one-half (1/2) share will go to the heirs
of the late Felix Gaudiane, (1/2) share will go to the heirs of the late Juana
Gaudiane, defendants herein.
The defendants who are in possession of the subject property are likewise
directed within thirty (30) days from receipt of this decision to make an
accounting of the rents and profits they may have obtained from the real estate in
question, from the time this action was instituted, and to remit to plaintiffs their
proportionate one-half (1/2) share thereof.5
According to the trial court, Felix did not sell to Juana his one-half share in Lot 4389.
The Escritura clearly stated and described that what was sold was Lot 4156, not Lot 4389.
Had it been his intention to include Lot 4389, he would have so identified and described it
in the deed of sale. The fact that the title to Lot 4389 was still in the names of siblings Felix
and Juana was proof that the subject lot continued to be under their co-ownership. The
trial court refused to give weight to the tax declarations supposedly evidencing petitioners'
exercise of ownership over said lot after discovering that said declarations did not state the
lot number or the certificate of title number.
The trial court also ruled that the dismissal of petitioners' second case for quieting of title
due to failure to prosecute and for failure to comply with court orders had the effect of
adjudication on the merits, pursuant to the Rules of Court. Consequently, petitioners' claim
of exclusive ownership over Lot 4389 was without merit because it was barred by the order
of dismissal dated January 10, 1985 in Civil Case No. 6817.
As to whether the respondents lost by prescription their right to their share in the lot, the
trial court held that a title, once registered, could not be defeated even by adverse, open
and notorious possession. Laches did not also set in because, when petitioners repudiated
the respondents' share in the second case for quieting of title, the latter immediately
opposed the move. They were therefore never negligent in pursuing their rights.
On appeal, the Court of Appeals affirmed the decision of the trial court.6
The appellate court reiterated the reasons of the trial court in holding that Felix never sold
his share in Lot 4389 to Juana. The order of dismissal of the action for quieting of title was
not appealed and therefore the issues raised therein involving the same lot could not be
raised in the subject action anymore. Lastly, according to the Court of Appeals, the
doctrine that a titled lot may be acquired by prescription in certain exceptional
circumstances could not apply in the case at bar for the reason that herein petitioners
employed fraud in claiming exclusive ownership over Lot 4389.
Hence, this petition for review based on the following assignment of errors:
I Petitioners' arguments are misplaced.
The respondent honorable court gravely erred in affirming that what was sold by
the late Felix Gaudiane to his sister Juana Gaudiane was his one-half (1/2) share
of another land, Lot No. 4156, covered by Original Certificate of Title No. 2986-A,
pursuant to the Escritura de Compra Venta, Exhibit "A" dated November 4, 1927,
disregarding the documentary evidence of the petitioners as well as the
testimonial evidence adduced by the petitioners;
II
That the respondent honorable court gravely erred in finding that the argument of
the petitioners with reference to the second assignment of error to the effect that
the dismissal of the complaint for questing of title, docketed as civil case no.
6817 did not bar them from interposing as a defense in the case at bar their
cause of action in civil case no. 6817;
III
That respondent honorable court gravely erred by not giving due course to the
claim of petitioners and legal effect of prescription and laches adverted by
defendants-appellants in their answer and affirmative defenses proven during the
hearing by documentary and testimonial evidence. 7
Unconvinced by the rulings of the courts a quo, petitioners reiterate their arguments to
support their claim of exclusive ownership of Lot 4389.
Petitioners insist on their ownership over Felix' share in said lot on the ground that
the Escritura expressly mentioned Tax Declaration No. 18321 representing payment of
taxes for Lot 4389. We disagree. As found by the courts a quo, a thorough reading of
the Escritura reveals that Felix intended to sell his share in Lot 4156 only. In fact, only Lot
4156 was described in the Escritura. Consequently, the citation of Tax Declaration No.
18321 vis--visLot 4156 was clearly a mistake. Even the petitioners' predecessors-in-
interest, the Isos, believed that Lot 4389 was not included in the Escritura because they
erased "Lot 4156" and fraudulently replaced it with "Lot 4389" in their prayer to cancel OCT
2986-A. Had they honestly believed that Lot 4389 was included in the sale, there would
have been no need for them to resort to falsification. Moreover, if Felix had really sold his
share in Lot 4389 to Juana, the latter would have had the title to the property transferred to
her name alone. But she never did and the title to Lot 4389 continued to be in the names
of both Felix and Juana.
According to the petitioners, the order dated January 10, 1985 in Civil Case No. 6817 of
the RTC of Negros Oreintal, Branch 35, dismissing their case for quieting of title on the
ground of failure to prosecute and to comply with the lawful orders of the court was
erroneously issued, considering that all the plaintiffs therein (petitioners), except their
counsel, failed to attend the supposed hearing. And assuming arguendo that the order was
dismissal with prejudice, petitioners contend that they are not barred from raising the
defense of exclusive ownership in the instant case for partition because their present
defense was not the issue in the case for quieting of title. Also, the effect of said order was
effectively waived when the petitioners were allowed during the trial to present evidence of
their exclusive ownership of Lot 4389 without any objection from the respondents.
We cannot delve anymore into the legality and validity of the order of dismissal dated
January 10, 1985 in Civil Case No. 6817 because it has long become final and executory
for failure of the petitioners to file an appeal. In accordance with Section 3, Rule 17 of the
1997 Rules of Civil Procedure,8 said order had the effect of judgment on the merits
although no trial was conducted because it did not contain any statement that the case
was dismissed without prejudice to the filing of a similar future action. As such, based on
the principle of res judicata,9 the petitioners are barred in another action (involving the
same subject matter, parties and issues) from raising a defense and from asking for a
relief inconsistent with an order dismissing an earlier case with prejudice.
Petitioners argue that res judicata does not apply in the case at bar for the reason that a
petition to quiet title has a cause of action different from a petition for partition.
We do not think so.
In Medija vs. Patcho, et al.,10 we ruled that a case for partition and an action for quieting of
title have identical causes of action and can therefore be the subject of res judicata:
Is there identity of cause of action between the first and second actions? The
answer is yes. The fact that Civil Case No. 1884, filed by the appellees against
the appellant was for partition of the hereditary estate with accounting of fruits of
several parcels of land, while Civil Case No. 2665, brought by appellant against
the appellees, was for quieting of title over two parcels which are parts of the
same properties subject of the previous case, does not remove the present
proceeding from the operation of the principle of bar by former judgment. As
 specifically stated in the decision of the Court of Appeals in Civil Case No. 1884, predecessor-in-interest succeeded in withholding possession of appellees' share
now final and executory, the right of therein plaintiffs (appellees herein) to in Lot No. 4389. Appellees cannot, by their own fraudulent act, benefit therefrom
partition the several parcels of land was based on Article 1103 of the Civil Code. by alleging prescription and laches. 14
The appellees' right to ownership is based on succession they being heirs of the
deceased Lorenzo Morante. What the appellant did is to institute another action WHEREFORE, the petition is DENIED. Costs against the petitioners.
which would preclude the execution of the judgment of the lower court in Civil
Case No. 1884. It must be remembered that a change in the form of action or in
the relief sought does not remove a proper case from the application of res SO ORDERED.
judicata. In other words, a party cannot, by varying the form of action, or adopting
a different method of presenting his case, escape the operation of the principle
that one and the same cause of action shall not be twice litigated between the
same parties (Ramos vs. Pangasinan Transportation Company, Inc., 79 SCRA
171; Aguila vs. J.M. Tuason & Co., Inc., 22 SCRA 690, citing Clemente vs. H.E.
Heacock Co., G.R. No. L-23212, May 18, 1967; Francisco vs. Blas, 93 Phil.
43).11

Petitioners filed an action to quiet title for the sole purpose of claiming for themselves
exclusive ownership of Lot 4389. On the other hand, in the case for partition filed by
respondents, petitioners set up the defense of sole dominion in order to frustrate the equal
division of the property between the heirs of Felix and Juana. Considering the similarity of
petitioners' defense in this case with their main averment in the case for quieting of title,
petitioners are barred by res judicata from claiming sole ownership of Lot 4389.

We also find that respondents never waived their right to object to petitioners' barred
defense of exclusive ownership. While the petitioners were allowed in the subject case for
partition, accounting and damages to present their evidence of exclusive ownership, the
respondents' failure to oppose did not mean that the latter waived their right to object to the
petitioners' evidence. For reasons of public policy, res judicata cannot be waived by a party
because the time and energy of the State and the taxpayers are wasted by the re-litigation
of settled issues. That is the reason why, under Rule 9 of the 1997 Rules of Civil
Procedure, a trial court may dismiss a case motu proprio on grounds of res
judicata although it is not raised, and apparently waived, in a motion to dismiss or answer.
Conversely, a plaintiff, or the trial court itself, may invoke res judicata to resist a defense
barred by prior judgment even after trial on the merits.

Lastly, petitioners argue that they acquired Felix' share in the lot in question through
prescription and laches. As a general rule, ownership over titled property cannot be lost
through prescription.12 Petitioners, however, invoke our ruling in Tambot vs. Court of
Appeals13 which held that titled property may be acquired through prescription by a person
who possessed the same for 36 years without any objection from the registered owner
who was obviously guilty of laches.

Petitioners' claim is already rendered moot by our ruling barring petitioners from raising the
defense of exclusive ownership due to res judicata. Even assuming arguendo that
petitioners are not so barred, their contention is erroneous. As correctly observed by the
appellate court:

The TAMBOT case is inapplicable. The case of Bicarme vs. Court of Appeals
would be more in point. In the case at bar, appellees' predecessor-in-interest
fraudulently denied possession of one-half of Lot No. 4389 to appellants by
misrepresenting the Escritura executed by Felix Gaudiane included not only Lot
No. 4156 but also Lot No. 4389. That of course is not true. As explained earlier,
only Lot No. 4156 was sold. It was through this misrepresentation that appellees'
G.R. No. 164797 February 13, 2006
JOSEFINA M. CRUZ and ERNESTINA M. CONCEPCION, Petitioners,
vs.
THE HON. COURT OF APPEALS, SECOND DIVISION, MARIANO "BOY" BUNAG and
ROLANDO BUNAG,Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Certiorari under Rule 65 of the Rules of Court which seeks to
reverse and set aside the decision1 of public respondent Court of Appeals dated 19 March
2004 which dismissed the petition for certiorari asking for the nullity of the 13 May 2003
Order of the Regional Trial Court of Gapan, Nueva Ecija, Branch 35, in Civil Case No.
2583-02, and its Resolution2 dated 29 June 2004 denying petitioners' motion for
reconsideration.
The antecedents are substantially stated by the Court of Appeals as follows:
There are four (4) cases involved in this controversy. The first case that was filed between
the parties is Civil Case No. 4365 for Unlawful Detainer litigated before the Municipal Trial
Court of Gapan, Nueva Ecija entitled "Josefina M. Cruz and Ernestina M. Concepcion,
plaintiffs, vs. Mariano `Boy' Bunag, Rolando Bunag, Remedios Bunag, et al., Defendants."
This case was decided on 6 November 1998 by the Municipal Trial Court in favor of herein
petitioner Josefina M. Cruz and Ernestina M. Concepcion.
The second case is Civil Case No. 1600 for Quieting of Title, filed before the Regional Trial
Court of Gapan, Nueva Ecija, Branch 36 with "Carlos L. Bunag, Elias Bunag Natividad,
Mariano Bunag, Salud Bunag Clanaoc and Juliana Bunag Arevalo, as Plaintiffs and
Josefina M. Cruz and Ernestina M. Concepcion as Heirs of Sps. Carlos Maniquis and
Marina Bunag, as Defendants." This case was dismissed for failure to prosecute as
evidenced by the Regional Trial Court Order dated 10 March 2000.
The third case is Civil Case No. 2573-02 for Injunction, with "Mariano `Boy' Bunag and
Rolando Bunag as Petitioners against Carlos Bunag, Elias Bunag Natividad, Mariano
Bunag, Salud Bunag Clanaoc and Juliana Bunag Arevalo as Defendants." This case,
which was filed before the Regional Trial Court of Gapan City, Branch 35, was dismissed
on ground of res judicata. The 6 November 2002 Order, in effect, ruled that there is a
substantial identity of parties in this case and in Civil Case No. 1600, a Petition for Quieting
of Title.
The fourth case is the instant controversy for Annulment of Title With Damages. Docketed
as Civil Case No. 2583-02, it was lodged by herein private respondents Mariano "Bo[y]"
Bunag and Rolando Bunag against herein petitioners Josefina M. Cruz and Ernestina M.
Concepcion before the sala of Branch 35, Regional Trial Court of Gapan City.
It appears that herein petitioners interposed a Motion for Outright Dismissal of Civil Case
No. 2583 which was granted by the Court a quo as evidenced by an Order dated 18
February 2003, ratiocinating:
xxx xxx xxx
After a careful study of the arguments of both parties, the Court has found that herein case
(2583) involve the same parties, subject matter and issue as that in Civil Case No. 1600
which has become final and executory and Civil Case No. 2573-02 which was already
dismissed by this Court on the ground of res judicata. In all three cases, Mariano Bunag
was included as party-plaintiff and Ernestina Concepcion as party-defendant. The subject
matter involves a parcel of land located in San Nicolas, Gapan City with an area of 1,160
square meters, more or less, and the issue is who between the two parties has the lawful
title over the same. Clearly, not only res judicata but also accion pendente lite is present in
herein case which the plaintiffs and their counsel should have revealed in the
Certificate/Verification of their complaint. The allegation that it is only now that they have
learned of the existence of Civil Case No. 1600 is without merit considering that in the
Motion for the Outright Dismissal of Civil Case No. 2573, dated September 19, 2002, its
existence was already disclosed and even became the ground for the dismissal of Civil
Case No. 2573 on the ground of res judicata.
Moreover, the Certification against forum shopping does not only refer to final and
executory actions but also to pending controversies. Considering that plaintiffs have been
represented by the same counsel in Civil Case No. 2573 and herein case (Civil Case No.
2583-02), it is very clear that plaintiffs counsel is appraised (sic) of the existence of Civil
Case No. 1600 and Civil Case No. 2573.
WHEREFORE, premises considered, the Motion for Outright Dismissal is granted by
reason of res judicata and accion pendente lite and the plaintiffs and their counsel are
declared guilty of indirect Contempt of Court by reason of non-disclosure of Civil Case No.
1600 and Civil Case No. 2573 as required by Section 5, Rule 7 of the Revised Rules of
Court and ordered them to pay a fine of P1,000.00 each.
SO ORDERED. (Rollo, p. 36)
xxx xxx xxx
However, when herein private respondents interposed their Motion for Reconsideration,
the court a quo reversed itself and reinstated the present case, the fallo of the herein
assailed Order reads:
xxx xxx xxx
In the light of the foregoing, the Order dated February 18, 2003 of this Court, granting
defendants' Motion for the Outright Dismissal of this case and citing plaintiffs and counsel
for contempt of court is hereby reconsidered and set aside. Accordingly, the instant case is
reinstated and the defendants are directed to file their answer/responsive pleading within
fifteen (15) days from receipt of this order.
SO ORDERED. (Rollo, pp. 11-13)3
Via petition for review, petitioners went to the Court of Appeals. The latter dismissed the
petition for lack of merit. It ruled that one of the elements of res judicata, i.e., that there
must be, between the first and the second actions, identity of parties, of subject matter and
of cause of action, is lacking. It explained:
First. The issue in the Injunction case is the propriety of the demolition order; while in the
present action (Petition for Annulment of Title With Damages), the pivot of inquiry is the
ownership of the controversial estate.
Second. Private respondent Mariano Bunag denied that he authorized Carlos Bunag to
sign the Verified Complaint in his behalf. Because of this, Mariano Bunag cannot be
considered as a party litigant in the Injunction case. Concomitantly, there is no identity of
parties between the present case and in Civil Case No. 2573-02 (Injunction). As correctly
ruled by the trial court, thus:
xxx xxx xxx
While it is true that this Court has earlier made a declaration in Civil Case No. 2573 that
Carlos Bunag was authorized by his co-plaintiffs to file Civil Case No. 1600 including
herein plaintiff Mariano Bunag, against herein defendants, such declaration was based on
the verified complain[t] signed by Carlos Bunag. In the absence of any evidence to the
contrary, the Court has to assume that indeed Carlos Bunag was authorized by his co-
plaintiff Mariano Bunag to file Civil Case No. 1600. However, with the submission of the
affidavit of Mariano Bunag on April 14, 2003, wherein he claimed that Civil Case No. 1600
for quieting of title was filed without his knowledge by Carlos Bunag for and in behalf of the
other plaintiffs including himself, the verified complaint of Carlos Bunag is now disputed.
The categorical denial of Mariano Bunag that he was not aware that Carlos included him
as one of the plaintiffs in Civil Case No. 1600 for quieting of title has disputed the verified
complaint of Carlos Bunag. What is more, Rolando Bunag, one of the herein plaintiffs was
never made a party in the said Civil Case No. 1600 for quieting of title. Since Mariano
Bunag did not authorize nor give his consent to Carlos Bunag to include him as one of the
plaintiffs in Civil Case No. 1600 and that herein plaintiffs Rolando Bunag is not a party to
the said case, the dismissal of Civil Case No. 1600 will not bind them. Hence, the
dismissal of Civil Case No. 1600 will not bar the filing of the instant complaint as one of the
requisites of res judicata is absent. There is no identity of parties between Civil Case No.
1600 and the instant case for the simple reason that herein plaintiffs were not parties in
Civil Case No. 1600 as discussed above. Consequently, plaintiffs and their counsel can
not be said to have violated the rule against forum shopping. Plaintiffs and their counsel
did not file Civil Case No. 1600 and therefore they are not obligated to inform this Court
that they have filed a similar action involving the same issue with other court.
x x x"
Third. As the court of justice abhors the disposition of the case based on technicalities, this
Court further concurs with the trial court's disquisition, to quote:
xxx xxx xxx
Moreover, substantial justice demands that technicalities should not be allowed to prevail
over the substantive rights of a party-litigant. If the subject property is really owned by the
plaintiffs, then it would be the height of injustice if they are not allowed to prove their cause
of action because of mere technicality. It would amount to deprivation of their property
without due process.4
Petitioners filed a motion for reconsideration5 which was denied in a resolution dated 29
June 2004.6
Dissatisfied, petitioners are now before us charging that the Court of Appeals committed
grave abuse of discretion amounting to lack or excess of jurisdiction in rendering the
assailed decision and resolution.7
Petitioners contend that all the elements of res judicata are present in the instant case.
They argue that the shuffling of parties should not prevent the application of res judicata
considering that three prior cases (Civil Case No. 4365 for Unlawful Detainer, Civil Case
No. 1600 for Quieting of Title and Civil Case No. 2573 for Injunction) against substantially
the same parties over the same subject matter and cause of action have all been decided
in their favor. They point out that private respondent Mariano "Boy" Bunag was one of the
parties in the Ejectment and Quieting of Title cases (and Injunction), and that his allegation
in his affidavit that he neither authorized Carlos Bunag to include him in the Quieting of
Title case nor was he (Mariano) informed thereof, leaves too much to be desired and that
same was merely intended for delay. As regards the non-inclusion of private respondent
Rolando Bunag in the case for Quieting of Title but who was a party in the Ejectment case
(as well as in the Injunction case), they claim that same was in preparation for this stage of
the proceedings. They added that insofar as identity of causes of action is concerned, it
cannot be denied that the ownership and its concomitant right of possession are the issues
in the cases for Quieting of Title, Injunction and Annulment of Title.
In their comment,8 private respondents Rolando Bunag and Monina Luzong Vda. de
Bunag9 maintain that the public respondent did not err when it held that there was no res
judicata in the instant case and that the disposition of the case should not be based on
technicalities.
The question to be resolved is: Does res judicata apply in the case at bar?
Under the rule of res judicata, also known as "bar by prior judgment," a final judgment or
order on the merits, rendered by a Court having jurisdiction of the subject matter and of the
parties, is conclusive in a subsequent case between the same parties and their successor-
in-interest by title subsequent to the commencement of the action or special proceeding,
litigating for the same thing and under the same title and in the same capacity. The
requisites essential for the application of the principle are: (1) there must be a final
judgment or order; (2) said judgment or order must be on the merits; (3) the Court
rendering the same must have jurisdiction on the subject matter and the parties; and (4)
there must be between the two cases identity of parties, identity of subject matter, and
identity of causes of action.10
Petitioners claim res judicata applies in this case because all the elements thereof are
present. On the other hand, private respondents argue the contrary alleging that the
second and fourth elements are lacking.
There being no dispute as to the presence of the first and third elements, we now
determine if the second and fourth elements are attendant in the case.
On the second element, private respondents argue that the dismissal of Civil Case No.
1600 (for Quieting of Title) was not a dismissal on the merits. The dismissal of this case,
they claim, will not bar the filing of the instant case (Civil Case No. 2583-02 for Annulment
of Title) because there was neither litigious consideration of the evidence nor any
stipulations submitted by the parties at the trial. In fact, there was no pre-trial conference
and that after four years of court inactivity, the case was dismissed for failure to
prosecute.11
Their argument does not hold water. Section 3 of Rule 17 of the 1997 Rules of Civil
Procedure provides:
Section 3. Dismissal due to fault of plaintiff. - If, for no justifiable cause, the plaintiff fails to
appear on the date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply with these Rules or
any order of the court, the complaint may be dismissed upon motion of the defendant or
upon the court's own motion, without prejudice to the right of the defendant to prosecute
his counterclaim in the same or in a separate action. This dismissal shall have the effect of
an adjudication upon the merits, unless otherwise declared by the court. 12
The rule enumerates the instances where the complaint may be dismissed due to plaintiff's
fault: (1) if he fails to appear on the date for the presentation of his evidence in chief; (2) if
he fails to prosecute his action for an unreasonable length of time; or (3) if he fails to
comply with the rules or any order of the court. Once a case is dismissed for failure to
prosecute, this has the effect of an adjudication on the merits and is understood to be with
prejudice to the filing of another action unless otherwise provided in the order of dismissal.
In other words, unless there be a qualification in the order of dismissal that it is without
prejudice, the dismissal should be regarded as an adjudication on the merits and is with
prejudice.13 The order dismissing Civil Case No. 1600 reads:
For failure of the plaintiffs as well as counsel to appear on several settings despite due
notices, precisely for the reception of plaintiffs' evidence, upon motion of the defendant
through Atty. Mark Arcilla, this case is dismissed for failure to prosecute. 14
It is clear from the afore-mentioned order that said case was dismissed, upon petitioners'
motion, for failure of private respondents and their counsel to attend several scheduled
hearings for the presentation of their evidence. Since the order did not contain a
qualification whether same is with or without prejudice, following Section 3, it is deemed to
be with prejudice and shall have the effect of an adjudication on the merits. A ruling based
on a motion to dismiss, without any trial on the merits or formal presentation of evidence,
can still be a judgment on the merits.15
We now go to the fourth element - identity of parties, subject matter and cause of action.
Petitioners, citing jurisprudence, argue that res judicata is not defeated by a minor
difference of parties, as it does not require absolute but only substantial identity of
parties16 in light of the fact that three prior cases before the instant case have been
decided in their favor against substantially the same parties over the same subject matter
and cause of action.lavvphil.e+
Public respondent ruled there was no identity of parties for two reasons: (1) Private
respondent Mariano Bunag was not a party litigant in the Quieting of Title17 case because
he denied in an affidavit that he authorized Carlos Bunag to sign the Verified Complaint
and to make him a party thereof; (2) Private respondent Rolando Bunag was not made a
party in the Quieting of Title case.
Private respondent Mariano "Boy" Bunag's claim that the Quieting of Title case was filed
without his knowledge does not inspire belief. In the decision of the trial court in Civil Case
No. 4365 (for Unlawful Detainer), it is very clear that the defendants in said case that
included both private respondents, have knowledge of the pendency of the Quieting of
Title case. A portion of the decision18 reads:
Defendants claim of ownership of the property involved in this case which is now pending
with the Regional Trial Court of Gapan, Nueva Ecija (paragraph 3, Pre-Trial brief of
defendants) where the issue of ownership is the subject of the proceedings x x x.
It was the defendants, through their trial brief, that informed the court hearing the
ejectment case that a case (Civil Case No. 1600 for Quieting of Title) is pending where the
issue of ownership is the subject of the proceedings. Thus, as early as the pendency of the
Ejectment case, private respondents had known of the case for Quieting of Title. If he
really did not authorize Carlos Bunag to include him as one of the plaintiffs in the Quieting
of Title case, he could have easily questioned his inclusion therein at an earlier time. This,
he did not do. He executed his affidavit only on 14 April 2003 or more that three years after
the case for Quieting of Title has been dismissed, and after the Injunction case which he
and private respondent Rolando Bunag filed, was dismissed. It is evident that his affidavit
is a mere afterthought executed after his Motion for Reconsideration in the injunction case
was denied because the court gave no weight on his counsel's allegation that he (Mariano
Bunag) was unaware of the complaint signed and filed by Carlos Bunag. It is too late in the
day for him to claim lack of knowledge. It is very clear that the execution of the affidavit is
to make it appear that there is no identity of parties in the instant case and in the case for
Quieting of Title.
Private respondents add that since Rolando Bunag was not a party in the Quieting of Title
case, the dismissal of said case will not bind him and thus not bar the filing of the instant
case.
We do not agree. The principle of res judicata may not be evaded by the mere expedient
of including an additional party to the first and second action. Only substantial identity is
necessary to warrant the application of res judicata. The addition or elimination of some
parties does not alter the situation. There is substantial identity of parties when there is a
community of interest between a party in the first case and a party in the second case
albeit the latter was not impleaded in the first case. 19
In the case at bar, it is apparent that from the face of the complaint for Quieting of Title,
private respondent Rolando Bunag was not a party therein as his name does not appear in
the title. This, notwithstanding, his claim and that of the plaintiffs therein, which included
private respondent Mariano Bunag, are the same - to be declared the true owners of the
parcel of land covered by Original Certificate of Title (OCT) No. 22262 and Transfer
Certificate of Title (TCT) No. 67161 of the Registry of Deeds of Nueva Ecija. Private
respondent Rolando Bunag and the plaintiffs are all heirs of the alleged owners of the
parcel of land covered by OCT No. 22262. Private respondent Rolando Bunag, though not
a party therein, shared an identity of interest from which flowed an identity of relief sought,
namely, to declare them the true owners of the parcel of land covered by OCT No. 22262
and TCT No. 67161. Such identity of interest is sufficient to make them privy-in-law, failed to do so. It is undeniable that there was no denial of due process in this
thereby satisfying the requisite of substantial identity of parties. case.lavvphil.e+

As regards the identity of subject matter, we find that there is. In both Civil Case No. 1600
(for Quieting of Title) and Civil Case No. 2583 (for Annulment of Title), what is involved is
one and the same parcel of land covered by TCT No. 67161.
We likewise rule that there is identity of causes of action. Hornbook is the rule that identity
of causes of action does not mean absolute identity. Otherwise, a party could easily
escape the operation of res judicata by changing the form of the action or the relief sought.
The test to determine whether the causes of action are identical is to ascertain whether the
same evidence will sustain both actions, or whether there is an identity in the facts
essential to the maintenance of the two actions. If the same facts or evidence would
sustain both, the two actions are considered the same, and a judgment in the first case is a
bar to the subsequent action.20 In Stilianopulos v. The City of Legaspi,21 this Court had this
to say:
The underlying objectives or reliefs sought in both the quieting-of-title and the annulment-
of-title cases are essentially the same -- adjudication of the ownership of the disputed lot
and nullification of one of the two certificates of title. Thus, it becomes readily apparent that
the same evidence or set of facts as those considered in the quieting-of-title case would
also be used in this Petition.
The doctrine of res judicata is a rule which pervades every well-regulated system of
jurisprudence and is founded upon two grounds embodied in various maxims of the
common law, namely: (1) public policy and necessity, which makes it to the interest of the
State that there should be an end to litigation - republicae ut sit litium, and (2) the hardship
on the individual that he should be vexed twice for the same cause - nemo debet bis vexari
et eadem causa. A contrary doctrine would subject the public peace and quiet to the will
and neglect of individuals and prefer the gratification of the litigious disposition on the part
of suitors to the preservation of the public tranquility and happiness. 22 lavvphil.e+
WHEREFORE, premises considered, the petition is GRANTED. The decision of the Court
of Appeals dated 19 March 2004 and its resolution dated 29 June 2004 are REVERSED
and SET ASIDE. Civil Case No. 2583-02 for Annulment of Title with Damages, pending
before Branch 35 of the Regional Trial Court of Gapan City, Nueva Ecija, is herby ordered
DISMISSED. With costs.
SO ORDERED.

The difference in form and nature of the two actions is immaterial and is not a reason to
exempt petitioner from the effects of res judicata. The philosophy behind this rule prohibits
the parties from litigating the same issue more than once. When a right or fact has been
judicially tried and determined by a court of competent jurisdiction or an opportunity for
such trial has been given, the judgment of the court, as long as it remains unreversed,
should be conclusive upon the parties and those in privity with them. Verily, there should
be an end to litigation by the same parties and their privies over a subject, once it is fully
and fairly adjudicated.

Civil Case No. 1600 was for Quieting of Title, while Civil Case No. 2583 is for Annulment of
Title with Damages. The two cases are different only in the form of action but an
examination of the allegations in the second case would reveal that the issue raised -
ownership of the land -- and the relief sought - be declared as owner and TCTs be issued
in their names -- are substantially the same. The evidence required to substantiate their
claims are likewise the same. The proceedings in the instant case, if permitted to continue,
would entail the presentation of evidence which should have been adduced in the case for
Quieting of Title. The case for Annulment of Title is simply a second cycle of review
involving a subject matter that has already been decided with finality in the Quieting of Title
case.

Finally, private respondents ask that the instant case be not decided based on
technicalities, for substantial justice demands that technicalities should not be allowed to
prevail over the substantive right of a party litigant.lavvphil.e+

We find no reason not to adhere to the doctrine of res judicata. A case for Quieting of Title
had been filed for the purpose of determining the ownership of the subject land, but same
was dismissed because the plaintiffs therein failed to attend the scheduled hearings for the
presentation of their evidence. As above discussed, the dismissal was an adjudication on
the merits. They had all the opportunity to present all the evidence for their cause but they
G.R. No. 156470 April 30, 2008
FREDERICK DAEL, petitioner,
vs.
SPOUSES BENEDICTO and VILMA BELTRAN, respondents.
DECISION
QUISUMBING, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure raising pure questions of law, and seeking a reversal of the Resolution 1 dated
May 28, 2002 of the Regional Trial Court (RTC), Branch 34, Negros Oriental, Dumaguete
City, in Civil Case No. 13072, which dismissed with prejudice, petitioner's complaint for
breach of contract and damages against the respondents. Also assailed is the trial court's
Resolution2dated December 5, 2002, denying petitioner's motion for reconsideration.
The facts are as follows:
On November 23, 2001, petitioner Frederick Dael filed before the RTC, Branch 34, Negros
Oriental, a Complaint3for breach of contract and damages against respondent-spouses
Benedicto and Vilma Beltran. In his complaint, petitioner alleged that respondents sold him
a parcel of land covering three hectares located at Palayuhan, Siaton, Negros Oriental.
Petitioner alleged that respondents did not disclose that the land was previously
mortgaged. Petitioner further alleged that it was only on August 6, 2001 when he
discovered that an extrajudicial foreclosure over the property had already been instituted,
and that he was constrained to bid in the extrajudicial sale of the land conducted on
August 29, 2001. Possession and ownership of the property was delivered to him when he
paid the bid price of P775,100. Petitioner argued that respondents' non-disclosure of the
extrajudicial foreclosure constituted breach of contract on the implied warranties in a sale
of property as provided under Article 15474 of the New Civil Code. He likewise claimed that
he was entitled to damages because he had to pay for the property twice.
On January 10, 2002, respondents filed a Motion to Dismiss 5 on the ground that petitioner
had no cause of action since the contract to sell stated that the vendor was Benedicto
Beltran and the vendee was Frederick George Ghent Dael, not the petitioner.
On February 12, 2002, in a hearing on the motion, Atty. Dirkie Y. Palma, petitioner's
counsel, disclosed that petitioner is the father of Frederick George Ghent Dael whose
name appears as the contracting party in the Contract to Sell dated July 28, 2000. Atty.
Palma moved to reset the hearing to enable the petitioner to withdraw and have the
complaint dismissed, amended, or to enter into a compromise agreement with
respondents.
The RTC on the same day ordered petitioner to clarify whether or not he and Frederick
George Ghent Dael were one and the same person; whether or not they were Filipinos and
residents of Dumaguete City; and whether or not Frederick George Ghent Dael was of
legal age, and married, as stated in the Contract to Sell. 6 Petitioner did not comply.
Instead, he filed a Notice of Dismissal on February 20, 2002. The Notice of Dismissal
states:
Plaintiff, through counsel, unto this Honorable Court, respectfully files this notice
of dismissal of the above-captioned case without prejudice by virtue of Rule 17,
Section 1 of the 1997 Rules of Civil Procedure. By this notice, defendants[']
Motion to Dismiss is then rendered moot and academic.
WHEREFORE, plaintiff Frederick Dael respectfully prays that this Honorable
Court dismiss the above-captioned case without prejudice.
RESPECTFULLY SUBMITTED.7
On May 28, 2002, the RTC dismissed the complaint with prejudice. The dispositive portion
of the Resolution reads thus:
WHEREFORE, finding merit to defendants' contention that plaintiff Frederick
Dael has no cause of action against them since said plaintiff is not one of the
contracting parties in the Contract to Sell, which is allegedly breached, the
Motion to Dismiss filed by defendants is granted. Consequently, the case at bar
is DISMISSED, with prejudice.
SO ORDERED.8 [Emphasis supplied.]
Arguing that the RTC erred in dismissing the complaint with prejudice based on
respondents' Motion to Dismiss, and not without prejudice based on his Notice of
Dismissal, petitioner filed a Motion for Reconsideration 9 but it was denied by the RTC in a
Resolution dated December 5, 2002.
Hence, this petition.
Petitioner raises the following issues for our resolution:
I.
WHETHER [OR] NOT THE REGIONAL TRIAL COURT ERRED IN DISMISSING
THE COMPLAINT FOR BREACH OF CONTRACT AND DAMAGES BASED ON
THE MOTION TO DISMISS FILED BY HEREIN RESPONDENTS AND NOT ON
THE NOTICE OF DISMISSAL PROMPTLY [FILED] BY HEREIN PETITIONER
BEFORE RESPONDENTS COULD FILE A RESPONSIVE PLEADING, UNDER
RULE 17, SECTION 1 OF THE 1997 RULES O[F] CIVIL PROCEDURE.
II.
WHETHER OR NOT THE REGIONAL TRIAL COURT ERRED IN DISMISSING
THE COMPLAINT FOR BREACH OF CONTRACT AND DAMAGES WITH
PREJUDICE.10
On the other hand, respondents raise the following issues:
I.
 WHETHER OR NOT THE REGIONAL TRIAL COURT ERRED IN DISMISSING
THE ACTION FOR BREACH OF CONTRACT AND DAMAGES ON THE BASIS
OF THE MOTION TO DISMISS FILED BY THE DEFENDANT AND NOT ON
THE BASIS OF THE NOTICE OF DISMISSAL FILED BY THE PLAINTIFF.
II.
WHETHER OR NOT THE REGIONAL TRIAL COURT IS CORRECT IN
DISMISSING THE CASE WITH PREJUDICE.
III.
WHETHER OR NOT PETITIONER'S RECOURSE UNTO THIS HONORABLE
COURT BY WAY OF PETITION FOR REVIEW ON CERTIORARI IS PROPER.11
Essentially, the issues are (1) Did the RTC err in dismissing the complaint with prejudice?
and (2) Was petitioner's recourse to this Court by way of a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil Procedure proper?
Petitioner, citing Serrano v. Cabrera and Makabulo12 in his Memorandum,13 argues that the
1997 Rules of Civil Procedure expressly states that before the defendant has served his
answer or moved for a summary judgment, he has, as a matter of right, the prerogative to
cause the dismissal of a civil action filed, and such dismissal may be effected by a mere
notice of dismissal. He further argues that such dismissal is without prejudice, except (a)
where the notice of dismissal so provides; (b) where the plaintiff has previously dismissed
the same case in a court of competent jurisdiction; or (c) where the dismissal is premised
on payment by the defendant of the claim involved. He asserts it is the prerogative of the
plaintiff to indicate if the Notice of Dismissal filed is with or without prejudice and the RTC
cannot exercise its own discretion and dismiss the case with prejudice.
On the other hand, respondents in their Memorandum, 14 counter that the RTC is correct in
dismissing the case with prejudice based on their Motion to Dismiss because they filed
their motion on January 10, 2002, ahead of petitioner who filed his Notice of Dismissal only
on February 20, 2002. They further argue that although it is correct that under the 1997
Rules of Civil Procedure a complaint may be dismissed by the plaintiff by filing a notice of
dismissal before service of the answer or of a motion for summary judgment, the petitioner
filed the Notice of Dismissal only as an afterthought after he realized that the Motion to
Dismiss was meritorious.
Further, they point out that petitioner deceived the court when he filed the action knowing
fully well that he was not the real party-in-interest representing himself as Frederick
George Ghent Dael.
Respondents also argue that petitioner's recourse to this Court by way of a petition for
review on certiorari was not proper since the proper remedy should have been to file an
appeal of the order granting the Motion to Dismiss. He contends that the petitioner should
have appealed to the Court of Appeals under Rule 4115 instead of assailing the ruling of
the RTC by way of a petition for review on certiorari before the Supreme Court.
As to the propriety of dismissal of the complaint with prejudice, Section 1, Rule 17 of the
1997 Rules of Civil Procedure provides:
SECTION 1. Dismissal upon notice by plaintiff. - A complaint may be dismissed
by the plaintiff by filing a notice of dismissal at any time before service of the
answer or of a motion for summary judgment. Upon such notice being filed,
the court shall issue an order confirming the dismissal. Unless otherwise stated
in the notice, the dismissal is without prejudice, except that a notice operates
as an adjudication upon the merits when filed by a plaintiff who has once
dismissed in a competent court an action based on or including the same claim.
[Emphasis supplied.]
Under this provision, it is mandatory that the trial court issue an order confirming such
dismissal and, unless otherwise stated in the notice, the dismissal is without prejudice and
could be accomplished by the plaintiff through mere notice of dismissal, and not through
motion subject to approval by the court. Dismissal is ipso facto upon notice, and without
prejudice unless otherwise stated in the notice. 16 The trial court has no choice but to
consider the complaint as dismissed, since the plaintiff may opt for such dismissal as a
matter of right, regardless of the ground.17
Respondents argue that the Motion to Dismiss they filed precedes the Notice of Dismissal
filed by petitioner and hence, the trial court correctly gave it precedence and ruled based
on the motion.
This argument is erroneous. Section 1 of Rule 17 does not encompass a Motion to
Dismiss. The provision specifically provides that a plaintiff may file a notice of dismissal
before service of the answer or a motion for summary judgment. Thus, upon the filing of
the Notice of Dismissal by the plaintiff, the Motion to Dismiss filed by respondents became
moot and academic and the trial court should have dismissed the case without prejudice
based on the Notice of Dismissal filed by the petitioner.
Moreover, to allow the case to be dismissed with prejudice would erroneously result in res
judicata18 and imply that petitioner can no longer file a case against respondents without
giving him a chance to present evidence to prove otherwise.
As to the second issue, petitioner's recourse to this Court by way of a petition for review on
certiorari under Rule 45 is proper. An order of dismissal, whether correct or not, is a final
order. It is not interlocutory because the proceedings were terminated; it leaves nothing
more to be done by the lower court. Therefore, the remedy of the plaintiff is to appeal the
order.19 Under the Rules of Court, a party may directly appeal to the Supreme Court from a
decision of the trial court only on pure questions of law. 20
WHEREFORE, the petition is GRANTED. The assailed Resolutions dated May 28, 2002
and December 5, 2002 of the Regional Trial Court, Branch 34, Negros Oriental
are AFFIRMED with MODIFICATION such that the case isdismissed without prejudice.
No pronouncement as to costs.
SO ORDERED.
 Republic of the Philippines 4. To do and perform such acts and things that may be necessary and/or
SUPREME COURT required to make the herein authority effective. 4
Manila
On September 29, 1999, EMPCT, through MENDOZA, participated in the bidding of the
THIRD DIVISION NIA-Casecnan Multi-Purpose Irrigation and Power Project (NIA-CMIPP) and was awarded
Packages A-10 and B-11 of the NIA-CMIPP Schedule A. On November 16, 1999,
G.R. No. 175885 February 13, 2009 MENDOZA received the Notice of Award which was signed by Engineer Alexander M.
Coloma (COLOMA), then Acting Project Manager for the NIA-CMIPP. Packages A-10 and
B-11 involved the construction of a road system, canal structures and drainage box
ZENAIDA G. MENDOZA, Petitioner, culverts with a project cost of P5,613,591.69.
vs.
ENGR. EDUARDO PAULE, ENGR. ALEXANDER COLOMA and NATIONAL
When Manuel de la Cruz (CRUZ) learned that MENDOZA is in need of heavy equipment
IRRIGATION ADMINISTRATION (NIA MUOZ, NUEVA ECIJA), Respondents.
for use in the NIA project, he met up with MENDOZA in Bayuga, Muoz, Nueva Ecija, in
an apartment where the latter was holding office under an EMPCT signboard. A series of
x - - - - - - - - - - - - - - - - - - - - - - -x meetings followed in said EMPCT office among CRUZ, MENDOZA and PAULE.

G.R. No. 176271 February 13, 2009
MANUEL DELA CRUZ Petitioner,
vs.
ENGR. EDUARDO M. PAULE, ENGR. ALEXANDER COLOMA and NATIONAL
IRRIGATION ADMINISTRATION (NIA MUOZ, NUEVA ECIJA), Respondents.
DECISION
YNARES-SANTIAGO, J.:
These consolidated petitions assail the August 28, 2006 Decision 1 of the Court of Appeals
in CA-G.R. CV No. 80819 dismissing the complaint in Civil Case No. 18-SD (2000),2 and
its December 11, 2006 Resolution3 denying the herein petitioners motion for
reconsideration.
Engineer Eduardo M. Paule (PAULE) is the proprietor of E.M. Paule Construction and
Trading (EMPCT). On May 24, 1999, PAULE executed a special power of attorney (SPA)
authorizing Zenaida G. Mendoza (MENDOZA) to participate in the pre-qualification and
bidding of a National Irrigation Administration (NIA) project and to represent him in all
transactions related thereto, to wit:
1. To represent E.M. PAULE CONSTRUCTION & TRADING of which I (PAULE)
am the General Manager in all my business transactions with National Irrigation
Authority, Muoz, Nueva Ecija.
2. To participate in the bidding, to secure bid bonds and other documents pre-
requisite in the bidding of Casicnan Multi-Purpose Irrigation and Power Plant
(CMIPPL 04-99), National Irrigation Authority, Muoz, Nueva Ecija.
On December 2 and 20, 1999, MENDOZA and CRUZ signed two Job
Orders/Agreements5 for the lease of the latters heavy equipment (dump trucks for hauling
purposes) to EMPCT.
On April 27, 2000, PAULE revoked6 the SPA he previously issued in favor of MENDOZA;
consequently, NIA refused to make payment to MENDOZA on her billings. CRUZ,
therefore, could not be paid for the rent of the equipment. Upon advice of MENDOZA,
CRUZ addressed his demands for payment of lease rentals directly to NIA but the latter
refused to acknowledge the same and informed CRUZ that it would be remitting payment
only to EMPCT as the winning contractor for the project.
In a letter dated April 5, 2000, CRUZ demanded from MENDOZA and/or EMPCT payment
of the outstanding rentals which amounted to P726,000.00 as of March 31, 2000.
On June 30, 2000, CRUZ filed Civil Case No. 18-SD (2000) with Branch 37 of the Regional
Trial Court of Nueva Ecija, for collection of sum of money with damages and a prayer for
the issuance of a writ of preliminary injunction against PAULE, COLOMA and the NIA.
PAULE in turn filed a third-party complaint against MENDOZA, who filed her answer
thereto, with a cross-claim against PAULE.
MENDOZA alleged in her cross-claim that because of PAULEs "whimsical revocation" of
the SPA, she was barred from collecting payments from NIA, thus resulting in her inability
to fund her checks which she had issued to suppliers of materials, equipment and labor for
the project. She claimed that estafa and B.P. Blg. 22 cases were filed against her; that she
could no longer finance her childrens education; that she was evicted from her home; that
her vehicle was foreclosed upon; and that her reputation was destroyed, thus entitling her
to actual and moral damages in the respective amounts of P3 million and P1 million.
Meanwhile, on August 23, 2000, PAULE again constituted MENDOZA as his attorney-in-
fact

3. To receive and collect payment in check in behalf of E.M. PAULE 1. To represent me (PAULE), in my capacity as General Manager of the E.M.
CONSTRUCTION & TRADING. PAULE CONSTRUCTION AND TRADING, in all meetings, conferences and
transactions exclusively for the construction of the projects known as Package A-
10 of Schedule A and Package No. B-11 Schedule B, which are 38.61% and
 63.18% finished as of June 21, 2000, per attached Accomplishment Reports x x
x;
2. To implement, execute, administer and supervise the said projects in whatever
stage they are in as of to date, to collect checks and other payments due on said
projects and act as the Project Manager for E.M. PAULE CONSTRUCTION AND
TRADING;
3. To do and perform such acts and things that may be necessary and required
to make the herein power and authority effective. 7
At the pre-trial conference, the other parties were declared as in default and CRUZ was
allowed to present his evidence ex parte. Among the witnesses he presented was
MENDOZA, who was impleaded as defendant in PAULEs third-party complaint.
On March 6, 2003, MENDOZA filed a motion to declare third-party plaintiff PAULE non-
suited with prayer that she be allowed to present her evidence ex parte.
However, without resolving MENDOZAs motion to declare PAULE non-suited, and without
granting her the opportunity to present her evidence ex parte, the trial court rendered its
decision dated August 7, 2003, the dispositive portion of which states, as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff as follows:
1. Ordering defendant Paule to pay the plaintiff the sum of P726,000.00 by way
of actual damages or compensation for the services rendered by him;
2. Ordering defendant Paule to pay plaintiff the sum of P500,000.00 by way of
moral damages;
3. Ordering defendant Paule to pay plaintiff the sum of P50,000.00 by way of
reasonable attorneys fees;
4. Ordering defendant Paule to pay the costs of suit; and
5. Ordering defendant National Irrigation Administration (NIA) to withhold the
balance still due from it to defendant Paule/E.M. Paule Construction and Trading
under NIA-CMIPP Contract Package A-10 and to pay plaintiff therefrom to the
extent of defendant Paules liability herein adjudged.
SO ORDERED.8
In holding PAULE liable, the trial court found that MENDOZA was duly constituted as
EMPCTs agent for purposes of the NIA project and that MENDOZA validly contracted with
CRUZ for the rental of heavy equipment that was to be used therefor. It found unavailing
PAULEs assertion that MENDOZA merely borrowed and used his contractors license in
exchange for a consideration of 3% of the aggregate amount of the project. The trial court
held that through the SPAs he executed, PAULE clothed MENDOZA with apparent
authority and held her out to the public as his agent; as principal, PAULE must comply with
the obligations which MENDOZA contracted within the scope of her authority and for his
benefit. Furthermore, PAULE knew of the transactions which MENDOZA entered into
since at various times when she and CRUZ met at the EMPCT office, PAULE was present
and offered no objections. The trial court declared that it would be unfair to allow PAULE to
enrich himself and disown his acts at the expense of CRUZ.
PAULE and MENDOZA both appealed the trial courts decision to the Court of Appeals.
PAULE claimed that he did not receive a copy of the order of default; that it was improper
for MENDOZA, as third-party defendant, to have taken the stand as plaintiff CRUZs
witness; and that the trial court erred in finding that an agency was created between him
and MENDOZA, and that he was liable as principal thereunder.
On the other hand, MENDOZA argued that the trial court erred in deciding the case without
affording her the opportunity to present evidence on her cross-claim against PAULE; that,
as a result, her cross-claim against PAULE was not resolved, leaving her unable to collect
the amounts of P3,018,864.04, P500,000.00, and P839,450.88 which allegedly represent
the unpaid costs of the project and the amount PAULE received in excess of payments
made by NIA.
On August 28, 2006, the Court of Appeals rendered the assailed Decision which dismissed
CRUZs complaint, as well as MENDOZAs appeal. The appellate court held that the SPAs
issued in MENDOZAs favor did not grant the latter the authority to enter into contract with
CRUZ for hauling services; the SPAs limit MENDOZAs authority to only represent EMPCT
in its business transactions with NIA, to participate in the bidding of the project, to receive
and collect payment in behalf of EMPCT, and to perform such acts as may be necessary
and/or required to make the said authority effective. Thus, the engagement of CRUZs
hauling services was done beyond the scope of MENDOZAs authority.
As for CRUZ, the Court of Appeals held that he knew the limits of MENDOZAs authority
under the SPAs yet he still transacted with her. Citing Manila Memorial Park Cemetery,
Inc. v. Linsangan,9 the appellate court declared that the principal (PAULE) may not be
bound by the acts of the agent (MENDOZA) where the third person (CRUZ) transacting
with the agent knew that the latter was acting beyond the scope of her power or authority
under the agency.
With respect to MENDOZAs appeal, the Court of Appeals held that when the trial court
rendered judgment, not only did it rule on the plaintiffs complaint; in effect, it resolved the
third-party complaint as well;10 that the trial court correctly dismissed the cross-claim and
did not unduly ignore or disregard it; that MENDOZA may not claim, on appeal, the
amounts of P3,018,864.04, P500,000.00, and P839,450.88 which allegedly represent the
unpaid costs of the project and the amount PAULE received in excess of payments made
by NIA, as these are not covered by her cross-claim in the court a quo, which seeks
reimbursement only of the amounts of P3 million and P1 million, respectively, for actual
damages (debts to suppliers, laborers, lessors of heavy equipment, lost personal property)
and moral damages she claims she suffered as a result of PAULEs revocation of the
SPAs; and that the revocation of the SPAs is a prerogative that is allowed to PAULE under
Article 192011 of the Civil Code.
CRUZ and MENDOZAs motions for reconsideration were denied; hence, these
consolidated petitions:
 G.R. No. 175885 (MENDOZA PETITION)
a) The Court of Appeals erred in sustaining the trial courts failure to resolve her
motion praying that PAULE be declared non-suited on his third-party complaint,
as well as her motion seeking that she be allowed to present evidence ex
parte on her cross-claim;
b) The Court of Appeals erred when it sanctioned the trial courts failure to
resolve her cross-claim against PAULE; and,
c) The Court of Appeals erred in its application of Article 1920 of the Civil Code,
and in adjudging that MENDOZA had no right to claim actual damages from
PAULE for debts incurred on account of the SPAs issued to her.
G.R. No. 176271 (CRUZ PETITION)
CRUZ argues that the decision of the Court of Appeals is contrary to the provisions of law
on agency, and conflicts with the Resolution of the Court in G.R. No. 173275, which
affirmed the Court of Appeals decision in CA-G.R. CV No. 81175, finding the existence of
an agency relation and where PAULE was declared as MENDOZAs principal under the
subject SPAs and, thus, liable for obligations (unpaid construction materials, fuel and
heavy equipment rentals) incurred by the latter for the purpose of implementing and
carrying out the NIA project awarded to EMPCT.
CRUZ argues that MENDOZA was acting within the scope of her authority when she hired
his services as hauler of debris because the NIA project (both Packages A-10 and B-11 of
the NIA-CMIPP) consisted of construction of canal structures, which involved the clearing
and disposal of waste, acts that are necessary and incidental to PAULEs obligation under
the NIA project; and that the decision in a civil case involving the same SPAs, where
PAULE was found liable as MENDOZAs principal already became final and executory;
that in Civil Case No. 90-SD filed by MENDOZA against PAULE,12 the latter was adjudged
liable to the former for unpaid rentals of heavy equipment and for construction materials
which MENDOZA obtained for use in the subject NIA project. On September 15, 2003,
judgment was rendered in said civil case against PAULE, to wit:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff (MENDOZA) and
against the defendant (PAULE) as follows:
1. Ordering defendant Paule to pay plaintiff the sum of P138,304.00 representing
the obligation incurred by the plaintiff with LGH Construction;
2. Ordering defendant Paule to pay plaintiff the sum of P200,000.00 representing
the balance of the obligation incurred by the plaintiff with Artemio Alejandrino;
3. Ordering defendant Paule to pay plaintiff the sum of P520,000.00 by way of
moral damages, and further sum of P100,000.00 by way of exemplary damages;
4. Ordering defendant Paule to pay plaintiff the sum of P25,000.00 as for
attorneys fees; and
5. To pay the cost of suit.13
PAULE appealed14 the above decision, but it was dismissed by the Court of Appeals in a
Decision15 which reads, in part:
As to the finding of the trial court that the principle of agency is applicable in this case, this
Court agrees therewith. It must be emphasized that appellant (PAULE) authorized
appellee (MENDOZA) to perform any and all acts necessary to make the business
transaction of EMPCT with NIA effective. Needless to state, said business transaction
pertained to the construction of canal structures which necessitated the utilization of
construction materials and equipments.1avvphi1 Having given said authority, appellant
cannot be allowed to turn its back on the transactions entered into by appellee in behalf of
EMPCT.
The amount of moral damages and attorneys fees awarded by the trial court being
justifiable and commensurate to the damage suffered by appellee, this Court shall not
disturb the same. It is well-settled that the award of damages as well as attorneys fees lies
upon the discretion of the court in the context of the facts and circumstances of each case.
WHEREFORE, the appeal is DISMISSED and the appealed Decision is AFFIRMED.
SO ORDERED.16
PAULE filed a petition to this Court docketed as G.R. No. 173275 but it was denied with
finality on September 13, 2006.
MENDOZA, for her part, claims that she has a right to be heard on her cause of action as
stated in her cross-claim against PAULE; that the trial courts failure to resolve the cross-
claim was a violation of her constitutional right to be apprised of the facts or the law on
which the trial courts decision is based; that PAULE may not revoke her appointment as
attorney-in-fact for and in behalf of EMPCT because, as manager of their partnership in
the NIA project, she was obligated to collect from NIA the funds to be used for the payment
of suppliers and contractors with whom she had earlier contracted for labor, materials and
equipment.
PAULE, on the other hand, argues in his Comment that MENDOZAs authority under the
SPAs was for the limited purpose of securing the NIA project; that MENDOZA was not
authorized to contract with other parties with regard to the works and services required for
the project, such as CRUZs hauling services; that MENDOZA acted beyond her authority
in contracting with CRUZ, and PAULE, as principal, should not be made civilly liable to
CRUZ under the SPAs; and that MENDOZA has no cause of action against him for actual
and moral damages since the latter exceeded her authority under the agency.
We grant the consolidated petitions.
Records show that PAULE (or, more appropriately, EMPCT) and MENDOZA had entered
into a partnership in regard to the NIA project. PAULEs contribution thereto is his
contractors license and expertise, while MENDOZA would provide and secure the needed
funds for labor, materials and services; deal with the suppliers and sub-contractors; and in
general and together with PAULE, oversee the effective implementation of the project. For
this, PAULE would receive as his share three per cent (3%) of the project cost while the
rest of the profits shall go to MENDOZA. PAULE admits to this arrangement in all his
pleadings.17
Although the SPAs limit MENDOZAs authority to such acts as representing EMPCT in its
business transactions with NIA, participating in the bidding of the project, receiving and
collecting payment in behalf of EMPCT, and performing other acts in furtherance thereof,
the evidence shows that when MENDOZA and CRUZ met and discussed (at the EMPCT
office in Bayuga, Muoz, Nueva Ecija) the lease of the latters heavy equipment for use in
the project, PAULE was present and interposed no objection to MENDOZAs actuations. In
his pleadings, PAULE does not even deny this. Quite the contrary, MENDOZAs actions
were in accord with what she and PAULE originally agreed upon, as to division of labor
and delineation of functions within their partnership. Under the Civil Code, every partner is
an agent of the partnership for the purpose of its business; 18 each one may separately
execute all acts of administration, unless a specification of their respective duties has been
agreed upon, or else it is stipulated that any one of them shall not act without the consent
of all the others.19 At any rate, PAULE does not have any valid cause for opposition
because his only role in the partnership is to provide his contractors license and expertise,
while the sourcing of funds, materials, labor and equipment has been relegated to
MENDOZA.
Moreover, it does not speak well for PAULE that he reinstated MENDOZA as his attorney-
in-fact, this time with broader powers to implement, execute, administer and supervise the
NIA project, to collect checks and other payments due on said project, and act as the
Project Manager for EMPCT, even after CRUZ has already filed his complaint. Despite
knowledge that he was already being sued on the SPAs, he proceeded to execute another
in MENDOZAs favor, and even granted her broader powers of administration than in those
being sued upon. If he truly believed that MENDOZA exceeded her authority with respect
to the initial SPA, then he would not have issued another SPA. If he thought that his trust
had been violated, then he should not have executed another SPA in favor of MENDOZA,
much less grant her broader authority.
Given the present factual milieu, CRUZ has a cause of action against PAULE and
MENDOZA. Thus, the Court of Appeals erred in dismissing CRUZs complaint on a finding
of exceeded agency. Besides, that PAULE could be held liable under the SPAs for
transactions entered into by MENDOZA with laborers, suppliers of materials and services
for use in the NIA project, has been settled with finality in G.R. No. 173275. What has been
adjudged in said case as regards the SPAs should be made to apply to the instant case.
Although the said case involves different parties and transactions, it finally disposed of the
matter regarding the SPAs specifically their effect as among PAULE, MENDOZA and
third parties with whom MENDOZA had contracted with by virtue of the SPAs a
disposition that should apply to CRUZ as well. If a particular point or question is in issue in
the second action, and the judgment will depend on the determination of that particular
point or question, a former judgment between the same parties or their privies will be final
and conclusive in the second if that same point or question was in issue and adjudicated in
the first suit. Identity of cause of action is not required but merely identity of issues. 20
There was no valid reason for PAULE to revoke MENDOZAs SPAs. Since MENDOZA
took care of the funding and sourcing of labor, materials and equipment for the project, it is
only logical that she controls the finances, which means that the SPAs issued to her were
necessary for the proper performance of her role in the partnership, and to discharge the
obligations she had already contracted prior to revocation. Without the SPAs, she could
not collect from NIA, because as far as it is concerned, EMPCT and not the PAULE-
MENDOZA partnership is the entity it had contracted with. Without these payments from
NIA, there would be no source of funds to complete the project and to pay off obligations
incurred. As MENDOZA correctly argues, an agency cannot be revoked if a bilateral
contract depends upon it, or if it is the means of fulfilling an obligation already contracted,
or if a partner is appointed manager of a partnership in the contract of partnership and his
removal from the management is unjustifiable. 21
PAULEs revocation of the SPAs was done in evident bad faith. Admitting all throughout
that his only entitlement in the partnership with MENDOZA is his 3% royalty for the use of
his contractors license, he knew that the rest of the amounts collected from NIA was
owing to MENDOZA and suppliers of materials and services, as well as the laborers. Yet,
he deliberately revoked MENDOZAs authority such that the latter could no longer collect
from NIA the amounts necessary to proceed with the project and settle outstanding
obligations.lawphil.net
From the way he conducted himself, PAULE committed a willful and deliberate breach of
his contractual duty to his partner and those with whom the partnership had contracted.
Thus, PAULE should be made liable for moral damages.
Bad faith does not simply connote bad judgment or negligence; it imputes a dishonest
purpose or some moral obliquity and conscious doing of a wrong; a breach of a sworn duty
through some motive or intent or ill-will; it partakes of the nature of fraud (Spiegel v.
Beacon Participation, 8 NE 2nd Series, 895, 1007). It contemplates a state of mind
affirmatively operating with furtive design or some motive of self-interest or ill will for
ulterior purposes (Air France v. Carrascoso, 18 SCRA 155, 166-167). Evident bad faith
connotes a manifest deliberate intent on the part of the accused to do wrong or cause
damage.22
Moreover, PAULE should be made civilly liable for abandoning the partnership, leaving
MENDOZA to fend for her own, and for unduly revoking her authority to collect payments
from NIA, payments which were necessary for the settlement of obligations contracted for
and already owing to laborers and suppliers of materials and equipment like CRUZ, not to
mention the agreed profits to be derived from the venture that are owing to MENDOZA by
reason of their partnership agreement. Thus, the trial court erred in disregarding and
dismissing MENDOZAs cross-claim which is properly a counterclaim, since it is a claim
made by her as defendant in a third-party complaint against PAULE, just as the appellate
court erred in sustaining it on the justification that PAULEs revocation of the SPAs was
within the bounds of his discretion under Article 1920 of the Civil Code.
Where the defendant has interposed a counterclaim (whether compulsory or permissive)
or is seeking affirmative relief by a cross-complaint, the plaintiff cannot dismiss the action
so as to affect the right of the defendant in his counterclaim or prayer for affirmative relief.
The reason for that exception is clear. When the answer sets up an independent action
against the plaintiff, it then becomes an action by the defendant against the plaintiff, and,
of course, the plaintiff has no right to ask for a dismissal of the defendants action. The
present rule embodied in Sections 2 and 3 of Rule 17 of the 1997 Rules of Civil Procedure
ordains a more equitable disposition of the counterclaims by ensuring that any judgment
thereon is based on the merit of the counterclaim itself and not on the survival of the main
complaint. Certainly, if the counterclaim is palpably without merit or suffers jurisdictional
flaws which stand independent of the complaint, the trial court is not precluded from
dismissing it under the amended rules, provided that the judgment or order dismissing the
counterclaim is premised on those defects. At the same time, if the counterclaim is
justified, the amended rules now unequivocally protect such counterclaim from peremptory
dismissal by reason of the dismissal of the complaint. 23

Notwithstanding the immutable character of PAULEs liability to MENDOZA, however, the

exact amount thereof is yet to be determined by the trial court, after receiving evidence for
and in behalf of MENDOZA on her counterclaim, which must be considered pending and
unresolved.

WHEREFORE, the petitions are GRANTED. The August 28, 2006 Decision of the Court of
Appeals in CA-G.R. CV No. 80819 dismissing the complaint in Civil Case No. 18-SD
(2000) and its December 11, 2006 Resolution denying the motion for reconsideration are
REVERSED and SET ASIDE. The August 7, 2003 Decision of the Regional Trial Court of
Nueva Ecija, Branch 37 in Civil Case No. 18-SD (2000) finding PAULE liable is
REINSTATED, with the MODIFICATION that the trial court is ORDERED to receive
evidence on the counterclaim of petitioner Zenaida G. Mendoza.

SO ORDERED.
G.R. No. 141508 May 5, 2010
ROBERTO S. BENEDICTO and TRADERS ROYAL BANK, Petitioners,
vs.
MANUEL LACSON, A & A MONTELIBANO HIJOS, INC., ROBERTO ABELLO,
DOMINADOR AGRAVANTE, LUISA ALANO, ALEXANDER FARMS, INC., ANGELA
ESTATE, INC., GUILLERMO and DOROTHY ARANETA, LETECIA ARANETA, ARCEO
RAMOS & SONS, INC., SPOUSES GEORGE & LOURDES ARGUELLES, ASOSACION
DE HACENDEROS DE SILAY-SARAVIA, INC. (AHSSI), SALVADOR BAUTISTA, BJB
AGRO-INDUSTRIAL CORP., EUGENIO BAUTISTA, LUZ RAMOS BAYOT, CYNTHIA
BENEDICTO, EVA BENEDICTO, LEOPOLDO BENEDICTO, MARY JANE BENEDICTO,
FLORO BONGCO, FRANCISCO BONGCO, GERARDO BONGCO, MAXCY
BORROMEO, QUIRICO CAMUS, CELSO AGRO INDUSTRIAL CORP., JULIA SO DE
UYCHIAT, ARTURO UYCHIAT, LUIS UYCHIAT, ELISE UYCHIAT, CIRO LOCSIN
AGRICULTURAL CORPORATION, CLAMONT FARMS, INC., SAGRARIO
CLAPAROLS, JAIME CLAPAROLS, CLAUDIO LOPEZ, INC., RAMON CLEMENTE,
SPOUSES ROMY CONLU and ASUCENA DIASATA, SPOUSES CORNELIO and
DOLORES CONSING, LOPE CONSING, SPOUSES RAFAEL and JULIETA
CONSOLACION, BALCONER CORDOVA, CONSOLING CORDOVA, RAFAEL
COSCULLUELA, CLK AGRO DEVELOPMENT CORP., EMILIO CUAYCONG, JR.,
SPOUSES JOSE ROBERTO and PATRICIO CUAYCONG, ROMELI CUAYCONG,
SONYA CUAYCONG, FELIPE DALIMO-OS, UBERTA DALIMO-OS, DELARICA
REALTY, DOLL AGRICULTURAL CORP., DR. ANTONIO LIZARES CO., INC.,
SPOUSES BONIFACIO and URBANA DUJON, ELAR AGRO INDUSTRIAL CORP.,
ELCEE FARMS, INC., ESTATE OF FERNANDO ERENETA, SPOUSES BENJAMIN and
TERESITA ESTACIO, EUSEBIO INCORPORATED, FARMLAND INCORPORATED,
FELICIA AGRI DEVELOPMENT CORP., FELISA AGRI CORPORATION, SPOUSES
ROLANDO and NELLY FERMIN, FERTI-ACRES AGRI-CULTURAL CORPORATION,
FRANCISCO JAVIER LACSON Y HERMANOS, GAMBOA HERMANOS, INC.,
HONORATO GAMBOA, ESTATE OF REMEDIOS GAMBOA, ANTONIO GASTON,
HEIRS OF GERARDO GASTON, ESTATE OF JOSE MA. GASTON, VICTOR MA.
GASTON, JOSE MA. GASTON, JOSE MA. GOLEZ, ANTONIO GONZAGA, ERNESTO
GONZAGA, JESUS GONZAGA, LUIS GONZAGA, GONZAGA REAL ESTATE
ENTERPRISES, INC., ROBERT GONZAGA, GREEN SOILS AGRICULTURE, INC.,
ESTATE OF REMEDIOS L. VDA. DE GUINTO, WARLITO USTILO, G.V. & SONS, INC.,
ENCARNACION HERNAEZ, SPOUSES MIGUEL and CECILIA MAGSAYSAY,
ADELINO HERNANDEZ, SPOUSES ABELARDO and EMILY HILADO, SPOUSES
ALFREDO and TERESITA HILADO, RAMON HILADO, SPOUSES REMO and ELSIE
HINLO, SPOUSES DANILO and NIMFA HINLO, MA. CRISTINA HOJILLA, DIOSDADO
and DIONISIO HOSALLA, JALIMONT REALTY, INC., ALBERTO and BENJAMIN
JALANDONI, DANIEL JALANDONI, JALKK CORPORATION, LEONOR JAVELLANA,
ERIBERTO JESENA, PISON JESUSA and SISTERS, JISARA AGRI DEVELOPMENT
CORPORATION, J.H. TAMPINCO AGRICULTURAL CORP., LILIA LOPEZ DE JISON,
ROBERTO JISON, JOMILLA AGRO INDUSTRIAL VENTURES, INC., BENIGNA
JONOTA, JOSEFINA RODRIGUEZ AGRICULTURAL CORP., JT ALUNAN AGRI.
CORP., ANTONIO JUGO, SPOUSES JUANITO JUMILLA and SANTAS DALIMO-OS,
ESTATE OF CASILDA JUSTINIANI, SPOUSES ALEJANDRO and ANTONIO KANA-AN,
AGUSTIN KILAYCO, SPOUSES RODOLFO and EMMA LACSON, EMMANUEL
LACSON, ESTATE OF ERNESTO LACSON, LACSON HERMANOS, INC., ESTATE OF
FELIPE LACSON, MANUEL LACSON, ESTATE OF MANUELA VDA. DE LACSON,
PEDRO LACSON, RAMON LACSON, SR., TERESA LACSON, RODRIGO LACSON,
LACTOR ESTATE DEVELOPMENT CORP., LIBERTINO AGUTANG, CARMEN
CONSING LA'O, JOSE LA'O, JULIA LA'O, LA SALVACION AGRICULTURAL CORP.,
ENRIQUE LEDESMA, LEDESMA HERMANOS, INC., JESUS LEDESMA, SPOUSES
JOSE MA. and EVA LEDESMA, LEGA FARMS, CORP., ESTATE OF ANASTACIO
LEGARDE, LIMJAP-ALUNAN AGRI, JESUS LIZARES, JOSE LIZARES, LUIS
LIZARES, NILO LIZARES, SR. and JR., SPOUSES JOSE and PERLA LIZARES,
ROBERTO LIZARES, ANTONIO LOCSIN, FEDERICO LOCSIN, JR., SPS. ROBERT and
JEAN MARIE WINEBURGER, ESTATE OF JOSE LOCSIN, OSCAR LOCSIN, SPOUSES
JOSE MA. and MARGARITA LOCSIN, VICENTE LOCSIN, LONOY AGRICULTURAL
CORP., DOLORES LOLITA VDA. DE LOPEZ, FORTUNATO LOPEZ, NER LOPEZ,
ESTATE OF NIEVES LOPEZ, POMPEYO LOPEZ, ROSENDO LOPEZ, ARTURO DE
LUZURIAGA, CLAUDIO DE LUZURIAGA, CATALINA VDA. DE MAKILAN, BENITO
MALAN, BASILIO MANALO, MANCY & SONS, INC., MANILAC AGRO COMMERCIAL
CORP., SPOUSES MANUEL and LUISA MANOSA, JULIO and GENEVIEVE MAPA,
MAPLE AGRI-CORP., INC., MARLAND AGRICULTURAL CORP., MARVIA & CO., INC.,
ANTONIO MENDOZA, BERNARDO MENDOZA, JR., SPOUSES BERNARDO and
ROSARIO MENDOZA, MALAURIE AGRICULTURAL DEVELOPMENT CORP., HEIRS
OF MANUEL and CEFERINO MONFORT, ESTATE OF MANUEL MONFORT, JR.,
SPOUSES EMILIO and LINDA MONTALVO, MONTILLA SISTERS AGRICULTURAL
CORP., ANTONIO MONTINOLA, NIEVES AGRO-INDUSTRIAL DEVELOPMENT CORP.,
MAMERTO DE OCA, O. LEDESMA & CO., INC., HEIRS OF MERCEDES PABIANA,
TEODULO PABIANA, ESTATE OF ROSARIO PALENZUELA, ESTATE OF
ENCARNACION PANLILIO, JOSE PASCUAL, JOHNNY DE LA PENA, ANICETA
PERDIGUEROS, AQUILES PERDIGUEROS, LUISA PEREZ, CRISTINA PERTIERRA,
PHISON FARMS, INC., ESTATE OF JOSEFINA PICCIO, PISON-LOCSIN KAUTURAN,
NICOLAS POLINARIO, PUYAS AGRO, INC., ESTATE OF LEONOR DE LA RAMA,
LUIS RAMA, RAMON DE LA RAMA AGRO DEVELOPMENT CORP., REMO RAMOS,
BENJAMIN RAMOS, MARIANO RAMOS, SPOUSES ENRIQUE and TERESITA
REGALADO, SPS. JOSE MA. and AMELIA REGALADO, MANUEL REGALADO,
AQUILINO REONIR, RHE & SONS AGRO INDUSTRIAL CORP., ROAM
AGRICULTURAL CORP., AMANDO ROBILLO, ROMALUX AGRI FARMS, INC.,
LETECIA DEL ROSARIO, MANUEL DEL ROSARIO, EULALIA ROSELLO, ROSENDO
H. DE LA RAMA & CO., BIBIANO SABINO, SPOUSES REINHARDT and CORAZON
SAGEMULLER, PEDRO SAJO, SPOUSES AQUILES and MA. CRISTINA SAJO, SAN
ANTONIO FARMS, JOSE MA. SANTOS, MARCELINO SAUSI, STA. CLARA ESTATE,
INC., SPOUSES FRANCISCO and JULITA SERRIOS, ANTONIO SIAN, SIASON-
DITCHING AGRO INDUSTRIAL CORP., SPOUSES LUCRECIO SORIANO and
LIBERATA DALIMO-OS, IMELDA TAMPINCO, T. GENSOLI & CO., TINIHABAN
AGRICULTURAL CORP., SPOUSES LINO and THELMA TOLEDO, FRANCISCO
TORIANO, GODOFREDO TORIANO, LUCRECIO TORIANO, MOISES TORIANO, TOTA,
INC., DEMOCRITO TRECHO, JESUSA TRECHO, PABIO TRECHO, RUFINO TRECHO,
ESTATE OF FLORENTINO TREYES, ESTATE OF VICTOR TREYES, FERNANDO
TREYES, LILIA TREYES, SOCORRO TUVILLA, FRANCIS TUVILLA, SPS. JOE MARIE
and VICTORIA TUVILLA, JOSE URBANOZO, JR., ESTATE OF ROSARIO VALENCIA,
EDUARDO DE VENECIA, VICTORIAS MILLING, CO., INC., SPOUSES EDSEL and
RITA VILLACIN, JOSEFA VILLAERA, VILLALAYA AGRO DEVELOPMENT, SERAFIN
VILLANUEVA, IRVING VILLASOR, DOMINICIANO VINARTA, ROSENDO and
CANDIDO VINARTA, BERNARD YBIERNAS, ESTRELLA YBIERNAS, SPOUSES
CARLOS and EDITH YLANAN, BENITO YOUNG, SPOUSES RENATO and VICTORIA
YULO, and JESUS YUSAY, Respondents.
DECISION
PERALTA, J.:
Before this Court is a Petition for Review on certiorari,1 under Rule 45 of the Rules of
Court, seeking to set aside the September 30, 1999 Decision 2 and January 10, 2000
Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 53841.
The facts of the case are as follows:
Under Presidential Decree No. 388,4 the Philippine Sugar Commission (PHILSUCOM) was
created and vested with the power to act as the single buying and selling agency of sugar
in the Philippines. On September 7, 1977, PHILSUCOM further organized the National
Sugar Trading Corporation (NASUTRA) as its buying marketing arm. Petitioner Robert S.
Benedicto5 was the concurrent Chairman and President of Traders Royal Bank 6 and
NASUTRA.
The case stems from a Complaint,7 docketed as Civil Case No. 95-9137 (Bacolod Case),
filed by respondents, individual sugar planters and agricultural corporations Manuel
Lacson et al., on November 23, 1995, in the Regional Trial Court (RTC) of Bacolod City,
Branch 44. Respondents complaint was premised on a claim for unpaid shares based on
Sugar Order No. 2, series of 1979-19808 and Sugar Order No. 1, series of 1980-
19819 issued by PHILSUCOM. The claims cover the sugar export sales 10 supposedly
undervalued by NASUTRA and coursed through Traders Royal Bank, the total amount of
which is claimed by respondents to be $33,907,172. 47, to wit:
SUMMARY OF CLAIMS UNDER THE FIRST TO FIFTEENTH
CAUSES OF ACTION
92. As tabulated in Annex C hereof, while the total amount actually paid by the buyers and
collected by the PHILSUCOM and the Defendants NASUTRA, BENEDICTO, MONTEBON
and TRB on the sales of export sugar subject of the preceding Causes of Action,
amounted to US$ 94,146,954.03, the PHILSUCOM and the said Defendants recorded and
reported a total collection of only US$60,239,781.56, resulting in an undervaluation of
Defendant NASUTRAs export sales by US$ 33, 907,172.74 and, correspondingly, in an
equivalent understatement of the amount due the Plaintiffs and other sugar producers in
the profits realized from such sales, pursuant to the directive of then President Marcos as
implemented in the PHILSUCOM SUGAR ORDERS hereto attached as Annexes B and B-
1 hereof.
93. Accordingly, on the basis of their respective production of "A" and "C" sugar for the
1980-1981 crop year vis--vis the national production of 20,474,653 piculs of the same
classes of sugar for the same crop year, the Plaintiffs are entitled to the payment by
Defendants of their pro rata share, in the amounts indicated opposite their respective
names in Annex C-1 hereof, in the undeclared profit of US$33,907,172.74 realized from
the export sales, subject of the preceding Causes of Action, during the said crop year. 11
Petitioner, as President and concurrent Chairman of both Traders Royal Bank and
NASUTRA, was charged by respondents with fraud and bad faith, not only in refusing to
furnish them accurate data on NASUTRAs export sugar sales, but, more importantly, in
under-reporting and under-declaring the true prices of the shipments. 12Respondents, thus,
prayed for a refund of their shares in the undervalued shipments.
On December 27, 1995, petitioner filed a Motion to Dismiss, 13 arguing therein (1) that
respondents had violated the rule on forum shopping; (2) that respondents have no cause
of action; (3) that the issues involved are res judicata or rendered moot by case law; and
(4) that the claim or demand has already been paid.
On the issue of forum shopping, petitioner argued that respondents have already filed the
following cases beforehand, viz.: (a) Civil Case No. 4301, before Branch 51 of the RTC of
Bacolod, entitled Hector Lacson, et al. v. NASUTRA et al., (Hector Lacson Case); (b) Civil
Case No. 88-46368, before Branch 23 of the RTC of Manila, entitled Ramon Monfort et al.
v. NASUTRA et al. (Ramon Monfort Case); and (c) Civil Case No. 65156, before Branch
264 of the RTC of Pasig, entitled Manuel Lacson, et al. v. NASUTRA, et al. (Pasig Case). 14
On the issue of no cause of action, petitioner argued that: (a) not being their agent,
NASUTRA had no obligation to share its profits with respondents; (b) the questioned
transactions were already perfected and consummated both with respect to the delivery of
the sugar and full payment of the price; (c) respondents are estopped from questioning the
subject transactions, having executed in favor of NASUTRA a "Chattel Mortgage on
Standing Crop" which authorized the latter, among others, to sell or dispose of the same at
the time, place, and for the price which it may deem convenient and reasonable; and (d)
NASUTRA had long been dissolved and liquidated under Presidential Decree No. 2005
and Executive Order No. 114.15
Lastly, petitioner argued that the issues posed by respondents are barred by res
judicata and/or rendered moot by the decisions in the following cases, viz.: (a) G.R. No.
55798, entitled Corazon Zayco, et al. v. NASUTRA et al.; (b) Civil Case No. Q- 33723,
entitled Hortensia Starke v. NASUTRA, et al.; (c) Civil Case No. 3265, entitled Cecilia
Magsaysay, et al. v. NASUTRA et al.; and (d) Civil Case No. 16439, entitled John Keng
Seng v. NASUTRA, et al.16
On March 26, 1996, respondents filed a Consolidated Opposition to Motion to
Dismiss.17 Simultaneous thereto, respondents also filed an "Amended Certification" to the
following effect:
xxxx
2. That, except for the case entitled Manuel Lacson v. Roberto S. Benedicto, et al., Civil
Case 65156, Pasig, RTC Branch 264, filed by some of the Plaintiffs on June 20, 1995 and
subsequently withdrawn by them without prejudice on November 14, 1995 pursuant to
Sec. 1, Rule 17 prior to the filing of the present suit, Plaintiffs have not commenced any
other action or proceeding involving the same issues in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; that to the best of my knowledge, no such action
or proceeding is pending the Supreme Court, the Court of Appeals, or any other tribunal or
agency; and if I or they should hereafter learn that a similar action or proceeding has been
filed or pending before the Supreme Court , Court of Appeals, or any other tribunal or
agency, Plaintiffs and I hereby undertake to report such fact within five (5) days therefrom
to this Honorable Court.18
On June 5, 1996, the RTC issued an Order19 granting petitioners motion to dismiss the
complaint, the dispositive portion of which reads:
WHEREFORE, premises considered, the Motions to Dismiss are hereby GRANTED. The
case against all the defendants is ordered DISMISSED.
Furnish copies of this Order all counsel on record for their information.
20
SO ORDERED.
The RTC ruled that a perusal of the copies of the complaints in two cases, namely: Hector
Lacson Case and Ramon Monfort Case show similarities with the present Bacolod Case
such that different decisions or rulings would give rise to conflicting rules on law on similar
issues.21 The RTC also held that respondents were guilty of forum shopping for failure to
report in their original anti-forum shopping certification in the Bacolod Case that they had
filed a similar case with the RTC of Pasig notwithstanding that the same had been
withdrawn by them. The RTC ruled that even if the Pasig Case had been withdrawn, the
same had already been commenced.22 Thus, the RTC held that there was a need to report
the same in the anti-forum shopping certification in the Bacolod Case. Lastly, the RTC
ruled that NASUTRA had already been dissolved and hence, respondents have no cause
of action against NASUTRA.23 The other grounds raised, however, by petitioner in support
of its motion to dismiss were denied by the RTC, as the same did not appear to be
indubitable without further evidence.24
Respondents appealed the RTC Order to the CA.
On September 30, 1999, the CA rendered a Decision reversing the assailed RTC Order.
The CA found merit in respondents appeal and ordered for the remand of the case to the
RTC. The dispositive portion of the Decision reads:
WHEREFORE, the appeal is GRANTED and the Assailed Order dated June 5, 1996 is
REVERSED and SET ASIDE, and in lieu thereof, a new one is entered ordering the
REMAND of the case to the court of origin for further proceedings.
SO ORDERED.25
Aggrieved by the CA Decision, petitioner filed a Motion for Reconsideration 26, which was,
however, denied by the CA in a Resolution dated January 10, 2000.
Hence, herein petition, with petitioner raising the following errors committed by the CA, to
wit:
5.1. WHEN IT ABSOLVED THE PRIVATE RESPONDENTS OF ANY VIOLATION OF THE
ANTI-FORUM SHOPPING RULE NOTWITHSTANDING THEIR (CONCEDED) FAILURE
TO SEASONABLY APPRISE THE BACOLOD COURT OF THE EARLIER FILING OF A
SIMILAR CASE BEFORE THE PASIG COURT, THE SAME BEING A MATERIAL
INFORMATION THE NON-DISCLOSURE OR CONCEALMENT THEREOF
CONSTITUTING AN INEXCUSABLE OMISSION CLEARLY PENALIZED UNDER THE
PERTINENT SC CIRCULARS AND SECTION 5, RULE 7 OF THE NEW RULES OF CIVIL
PROCEDURE;
5.2. WHEN IT REFUSED TO APPLY THE PRINCIPLE OF LITIS PENDENTIA
NOTWITHSTANDING THE (CONCEDED) SIMILARITIES IN THE CIRCUMSTANCES OF
THE PLAINTIFFS, THE IDENTITIES OF THE DEFENDANTS AND, MOREOVER, THE
SIMILARITIES IN SOME OF THE ANTECEDENT ISSUES IN CIVIL CASE NO. 95-9137
AND IN THE OTHER PENDING CASES AGAINST THE HEREIN PETITIONERS; and
5.3. WHEN IT FAILED TO CONSIDER THAT CIVIL CASE NO. 95-9137 DESERVES
DISMISSAL, AT ANY RATE, BASED ON THE OTHER GROUNDS INVOKED BY THE
HEREIN PETITIONERS, NAMELY, LACK OF CAUSE OF ACTION, RES JUDICATA,
PAYMENT AND PRESCRIPTION.27
The petition is not meritorious.
On Forum Shopping: Civil Case No. 95-9137 (Bacolod Case) vis-a-vis Civil Case No.
65156 (Pasig Case)
Petitioner contends that respondents are guilty of forum shopping because they failed to
disclose, at the time of the filing of the Bacolod Case, the fact that some of the
respondents had earlier commenced a similar action in Pasig. Petitioner claims that
respondents should have informed the RTC of Bacolod of the commencement and
subsequent withdrawal of the Pasig Case in the certificate of non-forum shopping.
Petitioner insists that even if the Pasig Case was subsequently withdrawn, the same still
constituted a "commenced action," which is required to be disclosed under the rules of
forum shopping.
Section 5, Rule 7 of the 1997 Rules of Civil Procedure provides that:
SEC. 5. Certification against forum shopping. The plaintiff or principal party shall certify
under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a
sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not
theretofore commenced any action or filed any claim involving the same issues in any
court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other pending action or claim, a
complete statement of the present status thereof; and (c) if he should thereafter learn that
the same or similar action or claim has been filed or is pending, he shall report that fact
within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and after
hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt of court, without prejudice to the
corresponding administrative and criminal actions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be ground for
summary dismissal with prejudice and shall constitute direct contempt as well as a cause
for administrative sanctions.
A perusal of the records shows that, with the exception of additional party-plaintiffs, the
Pasig Case actually has a strong resemblance to the Bacolod Case. The Pasig Case,
however, was dismissed upon the instance of the plaintiffs even before the Bacolod Case
was filed. The RTC Order28 allowing the dismissal of the complaint in the Pasig Case is
hereunder reproduced, to wit:
xxxx
On November 14, 1995, A Notice of Dismissal was filed by plaintiffs thru counsel, Attys.
Ricardo G. Nepomuceno, Jr. and Epifanio Sedigo, Jr., pursuant to Section 1, Rule 17 of
the Rules of Court.
According to the said Rule, plaintiff may, at any time before service of answer, dismiss an
action by filing a notice of dismissal.
Records show that no answer has yet been filed by defendants.
Being in conformity to the Rules, the same is hereby granted.
WHEREFORE, herein complaint is hereby DISMISSED and without prejudice to the re-
filing thereof.
Notify parties and counsel of this Order.
SO ORDERED.29
The essence of forum shopping is the filing by a party against whom an adverse judgment
has been rendered in one forum, seeking another and possibly favorable opinion in
another suit other than by appeal or special civil action for certiorari;30 the act of filing of
multiple suits involving the same parties for the same cause of action, either
simultaneously or successively for the purpose of obtaining a favorable judgment. 31 Forum
shopping exists where the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in the action under consideration.32
There is no dispute that the dismissal of the complaint in the Pasig case, upon notice of
the plaintiffs therein, was sanctioned by Section 1, Rule 17 of the Revised Rules of
Court.33 Quite clearly, the Order declared that the dismissal of the complaint was without
prejudice to the re-filing thereof. Moreover, even if the same were tested under the rules
on litis pendentia and res judicata, the danger of conflicting decisions cannot be present,
since the Pasig case was dismissed even before a responsive pleading was filed by
petitioner. Since a party resorts to forum shopping in order to increase his chances of
obtaining a favorable decision or action, it has been held that a party cannot be said to
have sought to improve his chances of obtaining a favorable decision or action where no
unfavorable decision has even been rendered against him in any of the cases he has
brought before the courts.34
While the RTC may have been of the opinion that the Pasig Case was nevertheless
"commenced" and, therefore, the same should have been stated by respondents in their
certification of non-forum shopping in the Bacolod case, this Court does not share the
same view.
In Roxas v. Court of Appeals,35 this Court had on occasion ruled that when a complaint is
dismissed without prejudice at the instance of the plaintiff, pursuant to Section 1, Rule 17
of the 1997 Rules of Civil Procedure, there is no need to state in the certificate of non-
forum shopping in a subsequent re-filed complaint the fact of the prior filing and dismissal
of the former complaint, thus:
Considering that the complaint in Civil Case No. 97-0523 was dismissed without prejudice
by virtue of the plaintiffs (herein petitioners) Notice of Dismissal dated November 20, 1997
filed pursuant to Section 1, Rule 17 of the 1997 Rules of Civil Procedure, there is no need
to state in the certificate of non-forum shopping in Civil Case No. 97-0608 about the prior
filing and dismissal of Civil Case No. 97-0523. In Gabionza v. Court of Appeals, we ruled
that it is scarcely necessary to add that Circular No. 28-91 (now Section 5, Rule 7 of the
1997 Rules of Civil Procedure) must be so interpreted and applied as to achieve the
purposes projected by the Supreme Court when it promulgated that Circular. Circular No.
28-91 was designed to serve as an instrument to promote and facilitate the orderly
administration of justice and should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective or the goal of all rules or procedure
which is to achieve substantial justice as expeditiously as possible. The fact that the
Circular requires that it be strictly complied with merely underscores its mandatory nature
in that it cannot be dispensed with or its requirements altogether disregarded, but it does
not thereby interdict substantial compliance with its provisions under justifiable
circumstances.1avvphi1
Thus, an omission in the certificate of non-forum shopping about any event that would not
constitute res judicataand litis pendencia as in the case at bar, is not fatal as to merit the
dismissal and nullification of the entire proceedings considering that the evils sought to be
prevented by the said certificate are not present. It is in this light that we ruled in Maricalum
Mining Corp. v. National Labor Relations Commission that a liberal interpretation of
Supreme Court Circular No. 04-94 on non-forum shopping would be more in keeping with
the objectives of procedural rules which is to "secure a just, speedy and inexpensive
disposition of every action and proceeding."36
Verily, in numerous occasions, this Court has relaxed the rigid application of the rules to
afford the parties the opportunity to fully ventilate their cases on the merits. This is in line
with the time-honored principle that cases should be decided only after giving all parties
the chance to argue their causes and defenses. Technicality and procedural imperfection
should thus not serve as basis of decisions. 37 Technicalities should never be used to
defeat the substantive rights of the other party. 38 Every party-litigant must be afforded the
amplest opportunity for the proper and just determination of his cause, free from the
constraints of technicalities.39 In that way, the ends of justice would be better served. 40 For,
indeed, the general objective of procedure is to facilitate the application of justice to the
rival claims of contending parties, bearing always in mind that procedure is not to hinder
but to promote the administration of justice.41 In the case at bar, considering that the same
involves the various claims of 371 respondents, this Court finds that justice and equity are
best served by allowing respondents to prove their case on the merits rather than denying
them their day in court on a strict application of the rules.
On Litis Pendentia: Bacolod Case, Hector Lacson Case, Ramon Monfort Case
Petitioner contends that the CA erred when it refused to apply the principle of litis
pendentia notwithstanding the similarities in the circumstances of the plaintiffs, the
identities of the defendants and the similarities in some of the antecedent issues in the
Bacolod Case, the Hector Lacson Case and Ramon Monfort Case.
The requisites of litis pendentia are: (a) the identity of parties, or at least, such as
representing the same interests in both actions; (b) the identity of rights asserted and relief
prayed for, the relief being founded on the same facts; and (c) the identity of the two
cases, such that judgment in one, regardless of which party is successful, would amount
to res judicata in the other.42
The underlying principle of litis pendentia is the theory that a party is not allowed to vex
another more than once regarding the same subject matter and for the same cause of
action.43 This theory is founded on the public policy that the same subject matter should
not be the subject of controversy in courts more than once, in order that possible
conflicting judgments may be avoided for the sake of the stability of the rights and status of
persons.44
The CA was correct when it opined that:
Our perusal of the record reveals that forum shopping cannot, indeed, be attributed to the
appellants. While it may be readily conceded that the plaintiffs in the instant case are more
or less similarly situated as the plaintiffs in the cases previously filed and that the
defendants, or at least the interest they represent, are basically the same, the fact remains
that there is no identity of causes of action and issues in the cases so far filed against the
latter. The instant suit, as may be gleaned from the complaint, concerns the supposed
undervaluation by the appellees of fifteen (15) sugar export sales of the appellants export
sugar production for the crop years 1979-1980 and 1980-1981 (pp. 3-32, Orig. Rec.). In
contrast, Civil Case No. 4301, entitled "Hector Lacson, et al. vs. National Sugar Trading
Corporation, et al." concerns the overcharging of trading costs for the plaintiffs export
sugar production for the crop years 1981-1982 and 1982-1983, underpayment resulting
from the defendants use of an erroneous peso-dollar exchange rate and reimbursement
for amounts alleged to have been wrongfully withheld by the latter (pp. 163-171, ibid.) On
the other hand, Civil Case No. 88-46368 entitled "Ramon Monfort, et al. vs. Philippine
Sugar Commission, et al." concerned the deficiency due the plaintiffs therein from sugar
export sales for which a lower exchange rate was allegedly used by the defendants, the
recovery, among others, of excessive trading costs charged, unauthorized deductions,
damages, premiums and other sums supposedly still due from the defendants, as well as a
detailed accounting of the sales of the export sugar produced by the plaintiffs therein.
While the amended complaint filed in the case also sought to claim differentials for three
(3) under-valued/under-declared NASUTRA export sales from the crop year 1980-1981
harvest, the same significantly pertained to different shipments and were coursed not
through appellee Traders Royal Bank but through the Republic Planters Bank (pp. 246-
271, ibid). The variance in the subject matters of the instant case and the aforesaid cases
are even conceded in the brief filed by appellee Roberto Benedicto (pp. 153-155, Rollo).45
The test to determine identity of causes of action is to ascertain whether the same
evidence necessary to sustain the second cause of action is sufficient to authorize a
recovery in the first, even if the forms or the nature of the two (2) actions are different from
each other. If the same facts or evidence would sustain both, the two (2) actions are
considered the same within the rule that the judgment in the former is a bar to the
subsequent action; otherwise, it is not. This method has been considered the most
accurate test as to whether a former judgment is a bar in subsequent proceedings
between the same parties. It has even been designated as infallible. 46
While the plaintiffs in the Bacolod Case are more or less similarly situated as the plaintiffs
in the Hector Lacson Case and Ramon Monfort Case, the CA was correct when it ruled
that there was no identity of causes of action and issues 47 as it cannot be said that exactly
the same evidence are needed to prove the causes of action in all three cases.
Thus, in the Bacolod Case, the evidence needed to prove that petitioner undervalued
fifteen sugar export sales of respondents export sugar production for the crop years 1979-
1980 and 1980-1981 is not the same evidence needed in the Hector Lacson Case to prove
the over-charging of trading costs for respondents export sugar production for the crop
years 1981-1982 and 1982-1983, underpayment resulting from the petitioners use of an
erroneous peso-dollar exchange rate and reimbursement for amounts alleged to have
been wrongfully withheld by the latter. The same holds true for the Ramon Monfort Case
where the same significantly pertained to different shipments and were coursed not thru
the Traders Royal Bank, but thru the Republic Planters Bank. The Court of Appeals,
therefore, did not abuse its discretion in finding that no litis pendentia existed in the case at
bar.
On the "other grounds" which warrant the dismissal of the action
It is the position of petitioner that the CA erred when it chose not to dismiss the case based
on the "other grounds" petitioner had earlier raised in its motion to dismiss. More
specifically, petitioner claims that the grounds of lack of cause of action, res judicata,
payment and prescription warrant the dismissal of the complaint.
The same deserves scant consideration.
It bears to stress that the RTC, in its June 5, 1996 Order, did not also consider the other
grounds now raised by petitioner, to wit:
In view of the sufficiency of the grounds for dismissal discussed above, the other grounds
invoked by the defendants in their Motion to Dismiss, which do not appear to be
indubitable without additional evidence need not be considered. 48
While petitioners Motion to Dismiss was granted by the RTC in its June 5, 1996 Order, the
same Order, however, effectively denied the other grounds raised by petitioner as the
same did not appear to be indubitable without additional evidence.
It is a settled rule that an Order denying a motion to dismiss is merely interlocutory and,
therefore, not appealable, nor can it be subject of a petition for review on certiorari. Such
order may only be reviewed in the ordinary course of law by an appeal from the judgment
after trial. The ordinary procedure to be followed in that event is to file an answer, go to
trial, and if the decision is adverse, reiterate the issue on appeal from the final judgment. 49
While the rule refers to instances when a motion to dismiss is completely denied, this
Court finds no reason not to apply the same in instances when some of the grounds raised
in a motion to dismiss are denied by the lower court. The "other grounds" now raised by
petitioner were not before the CA because the same were not put in issue by respondents
when they chose to assail the RTCs Order to dismiss the complaint. This is
understandable especially since the "other grounds" were not made the basis of the RTCs
Order. Procedurally then, the proper remedy of petitioner, should he choose to reassert the
"other grounds," is to interpose the same as defenses in his answer and not to put them in
issue in this appeal.
WHEREFORE, premises considered, the petition is DENIED. The September 30, 1999
Decision and January 10, 2000 Resolution of the Court of Appeals in CA-G.R. CV No.
53841, directing for the remand of the case, are AFFIRMED. The Regional Trial Court of
Bacolod City, Branch 44, is hereby ordered to hear the case on the merits and decide the
same with deliberate dispatch. SO ORDERED.