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RULE 6

Spouses Mendiola vs Court of Appeals

GR No. 159746
July 18, 2012

Facts
Shell entered into an agreement for the distribution of their products by Pacific Management
and Development belonging to petitioner Ramon Mendiola. Petitioner executed a real estate
mortgage in favor of Shell covering their real estate and its improvement. Pacific defaulted in their
obligation, impelling Shell to commence extrajudicial foreclosure proceeding. Having received a notice
for the foreclosure proceeding, petitioners went to Parañaque Municipal Hall on May 14, 1987 but did
not witness any auction being conducted. They later learned that the auction has been held as
scheduled in RTC Makati and Tabangao Realty Corporation has the winning bid.

After application of the proceeds, a deficiency of Php 170,228 remained and such deficiency
was not paid by Ramon. Shell sued in the RTC in Manila to recover the deficiency. In his answer with
counterclaim, Ramon asserted that the extra-judicial foreclosure of the mortgage had been devoid of
basis in fact and in law; and that the foreclosure and the filing of the action were made in bad faith,
with malice, fraudulently and in gross and wanton violation of his rights.

Petitioners commenced in the RTC in Makati an action to annul the extrajudicial foreclosure.

As defendants in the Makati case, Shell and Tabangao separately moved for dismissal,
stating similar grounds, namely: (a) that the Makati RTC had no jurisdiction due to the pendency of
the Manila case; (b) that the complaint stated no cause of action, the Makati case having been filed
more than a year after the registration of the certificate of sale; (c) that another action (Manila case)
involving the same subject matter was pending; (d) that the venue was improperly laid; and (e) that
the Makati case was already barred by petitioners’ failure to raise its cause of action as a compulsory
counterclaim in the Manila case.

RTC Makati denied both motions. Shell filed its answer, denying petitioners’ allegations.

RTC Manila rendered its judgment in favor of Shell. Ramon appealed but his appeal was
decided adversely to him with the CA affirming RTC Manila’s decision and finding him guilty of forum
shopping for instituting the Makati case. Petitioner appealed to SC but such was denied. The decision
of the court became final and executory.

Nonetheless, RTC Makati rendered its judgment in favor of the petitioner.

Shell sought the reconsideration of the decision, maintaining that the issues raised on the
validity of the foreclosure sale and on the amount of the outstanding obligation of Pacific had been
settled in the Manila case; and that the Makati RTC became bereft of jurisdiction to render judgment
on the same issues pursuant to the principle of res judicata.

RTC Makati denied the motion for reconsideration. Shell and Tabangao filed a joint notice of
appeal. Petitioners filed a motion to dismiss appeal but such was denied. Motion for
reconsiderationwas likewise denied.

Issue:
Whether or not petitioner is guilty of forum shopping

Held:
Yes. The Makati case should have been earlier disallowed to proceed on the ground of litis
pendentia, or, once the decision in the Manila case became final, should have been dismissed on the
ground of being barred by res judicata. Petitoners’ pleading showed that the cause of action he later
pleaded in the Makati case - that of annulment of the foreclosure sale - was identical to the
compulsory counterclaim he had set up in the Manila case.
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Accordingly, a counterclaim is compulsory if: (a) it arises out of or is necessarily connected

with the transaction or occurrence which is the subject matter of the opposing party’s claim; (b) it
does not require for its adjudication the presence of third parties of whom the court cannot acquire
jurisdiction; and (c) the court has jurisdiction to entertain the claim both as to its amount and nature,
except that in an original action before the RTC, the counterclaim may be considered compulsory
regardless of the amount.

The four tests to determine whether a counterclaim is compulsory or not are the following, to
wit: (a) Are the issues of fact or law raised by the claim and the counterclaim largely the same? (b)
Would res judicata bar a subsequent suit on defendant’s claims, absent the compulsory
counterclaim rule? (c) Will substantially the same evidence support or refute plaintiff’s claim as well as
the defendant’s counterclaim? and (d) Is there any logical relation between the claim and the
counterclaim, such that the conduct of separate trials of the respective claims of the parties would
entail a substantial duplication of effort and time by the parties and the court?

The four tests are affirmatively met as far as the Makati case was concerned.

We hold, therefore, that the Makati case was already barred by res judicata.

Hence, its immediate dismissal is warranted. Bar by res judicata avails if the following
elements are present, to wit: (a) the former judgment or order must be final; (b) the judgment or order
must be on the merits; (c) it must have been rendered by a court having jurisdiction over the subject
matter and the parties; (d) there must be, between the first and the second action, identity of parties,
of subject matter and cause of action.

Government Service Insurance System vs. Heirs of Fernando F. Caballero

G.R. No 158090, 4 October 2010

FACTS:
Fernando Caballero was the registered owner of a residential lot in Mlang, Cotabato, wherein he built
a residential/commercial building consisting of two stories. In 1968, Fernando and his wife, Sylvia,
secured a loan from petitioner GSIS in the amount of P20,000.00, as evidenced by a promissory note.
Fernando and his wife likewise executed a real estate mortgage on the same date, mortgaging the
afore-stated property as security.
When Fernando defaulted on his loan payment, the mortgage was foreclosed, and the subject
property was sold at a public auction in which the petitioner was the only bidder. When Fernando
failed to redeem the property, the title was consolidated to petitioner. Petitioner GSIS then scheduled
the subject property into public bidding, wherein Fernando’s daughter, Jocelyn, submitted a bid worth
P350,000, while Carmelita Mercantile Trading Corporation (CMTC) offered the amount of P450,000.
The CMTC being the highest bidder, the petitioner sold and transferred the title of the subject property
to the same. Thus, Fernando, through his daughter and attorney-in-fact, Jocelyn, filed a Complaint
against CMTC, the GSIS and its responsible officers, and the Register of Deeds of Kidapawan,
alleging irregularities in the conduct of the bidding. Petitioner and its officers filed their Answer with
Affirmative Defenses and Counterclaim, alleging that Fernando had already lost his right of
redemption despite repeated demands.
After trial, the RTC rendered its decision in favor of the petitioners, and thus dismissed the complaint.
The RTC had likewise granted GSIS’ counterclaim and directed Fernando to pay the amount which
he received from CMTC that was not turned over to the petitioner. Elevating the matter to the CA after
RTC’s denial of their motion for reconsideration, the appellate court affirmed the RTC decision with
modification on the payment of the rentals by Fernando to GSIS, was deleted. Their motion for
reconsideration being denied, the petitioner filed the petition for certiorari under Rule 45 of the Rules
of Court.

ISSUE:
Did the CA commit an error of law in holding that petitioner GSIS’ counterclaim is in the nature of a
permissive counterclaim, which required the payment by GSIS of docket fees before the trial court
can acquire jurisdiction over said counterclaim?

RULING:
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NO, the appellate court did not err. The Supreme Court agrees with the CA’s view that petitioner's
counterclaim for the recovery of the amount representing rentals collected by Fernando from the
CMTC is permissive. The evidence needed by Fernando to cause the annulment of the bid award,
deed of absolute sale and TCT is different from that required to establish petitioner's claim for the
recovery of rentals.
The rule in permissive counterclaims is that for the trial court to acquire jurisdiction, the
counterclaimant is bound to pay the prescribed docket fees. This, petitioner did not do, because it
asserted that its claim for the collection of rental payments was a compulsory counterclaim. Since
petitioner failed to pay the docket fees, the RTC did not acquire jurisdiction over its permissive
counterclaim. The judgment rendered by the RTC, insofar as it ordered Fernando to pay petitioner the
rentals which he collected from CMTC, is considered null and void. Any decision rendered without
jurisdiction is a total nullity and may be struck down at any time, even on appeal before the Supreme
Court.
Petitioner further argues that assuming that its counterclaim is permissive, the trial court has
jurisdiction to try and decide the same, considering petitioner's exemption from all kinds of fees.
In In Re: Petition for Recognition of the Exemption of the Government Service Insurance System from
Payment of Legal Fees, the Supreme Court ruled that the provision in the Charter of the GSIS, i.e.,
Section 39 of Republic Act No. 8291, which exempts it from all taxes, assessments, fees, charges or
duties of all kinds, cannot operate to exempt it from the payment of legal fees. This was because,
unlike the 1935 and 1973 Constitutions, which empowered Congress to repeal, alter or supplement
the rules of the Supreme Court concerning pleading, practice and procedure, the 1987 Constitution
removed this power from Congress. Hence, the Supreme Court now has the sole authority to
promulgate rules concerning pleading, practice and procedure in all courts.
Petitioner also invoked the Supreme Court ruling in Sun Insurance Office, Ltd. v. Judge Asuncion,
where the Court held that “Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards
a claim not specified in the pleading, or if specified the same has been left for determination by the
court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the
responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and
collect the additional fee.”
In Ayala Corporation v. Madayag, the Court, in interpreting the third rule laid down in Sun Insurance
Office, Ltd. v. Judge Asuncion regarding awards of claims not specified in the pleading, held that the
same refers only to damages arising after the filing of the complaint or similar pleading as to which the
additional filing fee therefor shall constitute a lien on the judgment.

The amount of any claim for damages, therefore, arising on or before the filing of the complaint or any
pleading should be specified. While it is true that the determination of certain damages as exemplary
or corrective damages is left to the sound discretion of the court, it is the duty of the parties claiming
such damages to specify the amount sought on the basis of which the court may make a proper
determination, and for the proper assessment of the appropriate docket fees. The exception
contemplated as to claims not specified or to claims although specified are left for determination of the
court is limited only to any damages that may arise after the filing of the complaint or similar pleading
for then it will not be possible for the claimant to specify nor speculate as to the amount thereof.

Petitioner's claim for payment of rentals collected by Fernando from the CMTC did not arise after the
filing of the complaint; hence, the rule laid down in Sun Insurance finds no application in the present
case.

G.R. No. 161431 October 13, 2010

CALIBRE TRADERS, INC., MARIO SISON SEBASTIAN, and MINDA BLANCO SEBASTIAN,
Petitioners, vs. BAYER PHILIPPINES, INC., Respondent.

FACTS:
Calibre Traders, Inc. (Calibre) was one of Bayerphil’s distributors/dealers of its agricultural
chemicals within the provinces of Pangasinan and Tarlac. Bayerphil stopped delivering stocks to
Calibre, after the latter failed to settle its unpaid accounts in the total amount of P1,751,064.56.
As Bayerphil’s authorized dealer, Calibre then enjoyed discounts and rebates. Subsequently,
however, the parties had a disagreement as to the entitlement and computations of these discounts.
Calibre, although aware of the deadline to pay its debts with Bayerphil, nevertheless withheld
payment to compel Bayerphil to reconcile its accounts.
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In a letter, Calibre requested Bayerphil for a reconciliation of accounts. It enumerated its

claims that amounted to P968,265.82: Bayerphil’s credit and collection officer, conferred with
Calibre’s General Manager Mario Sebastian (Sebastian). The attempt to settle failed. Again, on
October 27, 1989, Bayerphils’ Sales Manager of the Agro Division, Vidal Lingan, met with Sebastian.
The results of their discussion were put in writing in Bayerphil’s letter dated November 10, 1989.
After a series of negotiations, Sebastian expressed discontent in Bayerphil’s refusal to credit his
claims in full and underscored the alleged inaction of Bayerphil in reconciling Calibre’s accounts.
This was followed by a demand letter requiring Bayerphil to pay the sum of P10,000,000.00 for the
damages it had allegedly caused to Calibre. Bayerphil replied, reminding that Calibre owed it
P1,272,103.07 as of December 31, 1989.

Calibre, on March 14, 1990, filed a suit for damages, before the Regional Trial Court (RTC) of
Pasig Accusing Bayerphil of maliciously breaching the distributorship agreement by manipulating
Calibre’s accounts, withholding discounts and rebates due it, charging unwarranted penalties,
refusing to supply goods, and favoring the new distributors/dealers to drive it out of business.
In its Answer with Counterclaim,19 Bayerphil denied its alleged wanton appointment of other
distributors, reasoning that it could not be faulted for a difference in treatment between a paying
dealer and a non-paying one. Bayerphil thus prayed for the collection of P1,272,103.07, with interest
of 14% per annum accruing daily and compounded monthly from the date of default (as provided in
the dealership agreement);P1,000,000.00 exemplary damages; and, P200,000.00 attorney’s fees and
costs of suit.

Bayerphil also moved that Mario Sebastian and his wife Minda (Sebastians) be impleaded as co-
defendants, considering that the Sebastians bound themselves as solidary debtors under the
distributorship/dealership agreement.

Calibre, moved to strike out the counterclaim, It stressed that the issues between the
damages suit it filed and Bayerphil’s counterclaim for collection of money are totally unrelated.
On the other hand, Bayerphil contended that both causes of action arose from the same contract of
distributorship, and that the Sebastians’ inclusion is necessary for a full adjudication of Bayerphil’s
counterclaim to avoid duplication of suits.

Ruling of the Regional Trial Court

Trial court rendered judgment favoring Calibre. As for Bayerphil’s counterclaim, the court a quo
adjudged that aside from being unmeritorious for lack of valid demand, the counterclaim was
permissive in character. Therefore, it must be dismissed for Bayerphil’s failure to pay the required
docket fees.

Ruling of the Court of Appeals

Bayerphil’s counterclaim was compulsory hence it need not pay the docket and filing fees. It noted
that it arose out of the same dealership agreement from which the claims of Calibre in its complaint
were likewise based.

Issue:
Whether the counterclaim is compulsory of permissive.

HELD:
Counterclaim is permissive. Bayerphil’s suit may independently proceed in a separate action.
Although the rights and obligations of the parties are anchored on the same contract, the causes of
action they filed against each other are distinct and do not involve the same factual issues. We find no
logical relationship between the two actions in a way that the recovery or dismissal of plaintiff’s suit
will establish a foundation for the other’s claim. The counterclaim for collection of money is not
intertwined with or contingent on Calibre’s own claim for damages, which was based on the principle
of abuse of rights. Both actions involve the presentation of different pieces of evidence. Calibre’s suit
had to present evidence of malicious intent, while Bayerphil’s objective was to prove nonpayment of
purchases. The allegations highlighting bad faith are different from the transactions constituting the
subject matter of the collection suit. Respondent’s counterclaim was only permissive. Hence, the CA
erred in ruling that Bayerphil’s claim against the petitioners partakes of a compulsory counterclaim.
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Be that as it may, the trial court was incorrect in dismissing Bayerphil’s counterclaim for non-payment
of docket fees. Bayerphil’s counterclaim is permissive, but the trial court should have given it the
opportunity to pay the docket fees since it did not avoid paying said fees.
It is a settled doctrine that "although the payment of the prescribed docket fees is a jurisdictional
requirement, its non-payment x x x should not result in the automatic dismissal of the case provided
the docket fees are paid within the applicable prescriptive period."46 "The prescriptive period therein
mentioned refers to the period within which a specific action must be filed.
With respect to the motion to strike out the counterclaim, the Rejoinder and Reply of CALIBRE
mentioned two reasons to support it. These are: 1) that the counterclaim is not against the opposing
party only, and 2) that the plaintiff’s claim against the defendant is totally unrelated to the latter’s claim
against the Sebastian spouses because they are "not the same."
To resolve the issues abovementioned, the elements of a compulsory counterclaim are thus given:
A counterclaim is compulsory and is considered barred if not set up where the following
circumstances are present:
1) that it arises out of the, or is necessarily connected with the transaction or occurrence that is the
subject matter of the opposing party’s claim,
2) that it does not require for its adjudication the presence of third parties of whom the court cannot
acquire jurisdiction, and
3) that the court has jurisdiction to entertain the claim. (Javier vs. IAC, 171 SCRA 605)
The rules and jurisprudence do not require that the parties to the counterclaim be the original parties
only. In fact, the presence of third parties is allowed, the only provision being their capacity to be
subjected under the court’s jurisdiction. As regards the nature of the claims of the parties, neither is it
required that they be of the same nature, only that they arise from the same transaction or
occurrence.

Notes:
"A compulsory counterclaim is any claim for money or other relief, which a defending party may have
against an opposing party, which at the time of suit arises out of, or is necessarily connected with, the
same transaction or occurrence that is the subject matter of plaintiff’s complaint. It is compulsory in
the sense that it is within the jurisdiction of the court, does not require for its adjudication the presence
of third parties over whom the court cannot acquire jurisdiction, and will be barred x x x if not set up in
the answer to the complaint in the same case. Any other claim is permissive."
"[The] Court has already laid down the following tests to determine whether a counterclaim is
compulsory or not, to wit:
(1) Are the issues of fact or law raised by the claim and the counterclaim largely the same?
(2) Would res judicata bar a subsequent suit on defendant's claims, absent the compulsory
counterclaim rule?
(3) Will substantially the same evidence support or refute plaintiff's claim as well as the defendant's
counterclaim?
(4) Is there any logical relation between the claim and the counterclaim, such that the conduct of
separate trials of the respective claims of the parties would entail a substantial duplication of effort
and time by the parties and the court?" The fourth test is the ‘compelling test of compulsoriness’.

PHILTRANCO SERVICE ENTERPRISES, INC., Petitioner,

vs.
FELIX PARAS AND INLAND TRAILWAYS, INC., AND HON. COURT OF APPEALS, Respondents.
G.R. No. 161909; April 25, 2012

Facts:

Felix Paras boarded a bus operated by Inland Trailways Inc. (Inland) driven by Coner, for
transportation from Bicol to Manila. While the bus was travelling along Maharlika Highway, Quezon,
the said bus was bumped at the rear by another bus owned by Philtranco Service Entrprises, Inc.
(Philtranco) which violently pushed Inland’s bus forward, smashing a cargo truck parked along the
outer right portion of the highway. The accident damaged all the vehicles, killed Coner, and seriously
injured Paras amounting to several bone fractures.

Paras filed a complaint for damages based on breach of contract of carriage against Inland. In its
answer, Inland denied responsibility, alleging that Coner observed extraordinary diligence.
Furthermore, upon leave of court, Inland filed a third-party complaint against Philtranco and Apolinar
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Millares (driver) as Third Party defendants. In this third-party complaint, Inland, sought for exoneration
of its liabilities to Paras, asserting that the latter’s cause of action should be directed against
Philtranco considering that the accident was caused by Miralles’ lack of care, negligence and reckless
imprudence.

The RTC found Philtranco and Apolinar liable to pay plaintiff jointly and severally P54,000.00 as
actual damages, P50,000.00 as moral damages, P20,0000.00 as attorney’s fees and costs.

On appeal, the CA affirmed the decision with modifications finding P1,397.95 as actual damages,
P50,000.00 as temperate damages, P50,000.00 as moral damages, and P20,000.00 as attorney’s
fees.

Both the RTC and CA found no trace of negligence attributable to Inland’s driver, hence, they are not
guilty of breach of contract of carriage.
Philtranco contends that Paras could not recover moral damages because his suit was based on
breach of contract of carriage, pursuant to which moral damages could be recovered only if he had
died, or if the common carrier had been guilty of fraud or bad faith. It argues that Paras had suffered
only physical injuries; that he had not adduced evidence of fraud or bad faith on the part of the
common carrier; and that, consequently, Paras could not recover moral damages directly from it
(Philtranco), considering that it was only being subrogated for Inland.

Issue:
1. Was the objective of Inland merely to subrogate the defendant’s for itself?
2. Was the third party complaint proper?

Held:
1. No. The apparent objective of Inland was not to merely subrogate the third-party defendants for
itself, as Philtranco appears to suggest, but, rather, to obtain a different relief whereby the third-party
defendants would be held directly, fully and solely liable to Paras and Inland for whatever damages
each had suffered from the negligence committed by Philtranco and its driver. In other words,
Philtranco and its driver were charged here as joint tortfeasors who would be jointly and severally be
liable to Paras and Inland

2. Yes. Section 12, Rule 6 of the Revised Rules of Court provides that :

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

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

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

As the foregoing indicates, the claim that the third-party complaint asserts against the third-party
defendant must be predicated on substantive law. Here, the substantive law on which the right of
Inland to seek such other relief through its third-party complaint rested were Article 2176 and Article
2180 of the Civil Code, which read:
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Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence,
is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this chapter.
(1902a)
Article 2180. The obligation imposed by article 2176 is demandable not only for one’s own acts or
omissions, but also for those of persons for whom one is responsible.
Paras’ cause of action against Inland (breach of contract of carriage) did not need to be the same as
the cause of action of Inland against Philtranco and its driver (tort or quasi-delict) in the impleader. It
is settled that a defendant in a contract action may join as third-party defendants those who may be
liable to him in tort for the plaintiff’s claim against him, or even directly to the plaintiff.

The third-party claim need not be based on the same theory as the main claim.

Hence, the award of the moral damages based on quasi-delict, not contracts of carriage, is proper.

RULE 7

IN RE: RECONSTITUTION OF TRANSFER CERTIFICATES OF TITLE NOS. 303168 AND 303169

AND ISSUANCE OF OWNERS DUPLICATE CERTIFICATES OF TITLE IN LIEU OF THOSE LOST,
ROLANDO EDWARD G. LIM
G.R. NO. 156797
July 6, 2010

FACTS:
On December 29, 1998, Lim filed in the RTC his petition for judicial reconstitution of TCT No. 303168
and TCT No. 303169 of the Registry of Deeds for Quezon City, and for the issuance of owners
duplicate copies of said TCTs. He alleged that he was a registered co-owner of the parcels of land
covered by the TCTs, and that he was filing the petition for the beneficial interest of all the registered
owners thereof; that the original copies of the TCTs kept in the custody of the Registry of Deeds for
Quezon City had been lost or destroyed as a consequence of the fire that had burned certain portions
of the Quezon City Hall, including the Office of said Registry of Deeds, on July 11, 1988; that the
originals of the owners duplicates of the TCTs kept in his custody had also been lost or destroyed in a
fire that had gutted the commercial establishment located at 250 Villalobos Street, Quiapo, Manila on
February 24, 1998; and that no co-owners, mortgagees, or lessees TCTs had ever been issued.
The RTC dismissed Lim’s petition on the basis of the LRA Report stating that the subject titles are
also applied for reconstitution of titles under Administrative Reconstitution Proceedings which is
tantamount to forum shopping. Lims motion for reconsideration was denied for lack of merit. Hence,
this appeal directly to the Court via petition for review on certiorari.

ISSUE:
Whether or not the RTC correctly dismiss the petition of Lim on the ground of forum shopping.

RULING:
No. Lim was not guilty of forum shopping, because the factual bases of his application for the
administrative reconstitution of the TCTs and of his petition for their judicial reconstitution, and the
reliefs thereby sought were not identical. For forum shopping to exist, both actions must involve the
same transaction, same essential facts and circumstances and must raise identical causes of action,
subject matter and issues. Clearly, it does not exist where different orders were questioned, two
distinct causes of action and issues were raised, and two objectives were sought.

The motu proprio dismissal of the petition for judicial reconstitution by the RTC although the
Government did not file a motion to dismiss grounded on the petitioners supposed failure to comply
with the contents of the required certification was yet another glaring error of the RTC. A violation of
the rule against forum-shopping other than a willful and deliberate forum shopping did not authorize
the RTC to dismiss the proceeding without motion and hearing. Specifically, the submission of a false
certification of non-forum shopping did not automatically warrant the dismissal of the proceeding,
even if it might have constituted contempt of court, for Section 5, Rule 7, of the 1997 Rules of Civil
Procedure, has been clear and forthright.
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WHEREFORE, The petition for the judicial reconstitution of the petitioners Transfer Certificate of Title
No. 303168 and Transfer Certificate of Title No. 303169 of the Registry of Deeds for Quezon City, and
for the issuance of the owners duplicate copies thereof, is reinstated. The Regional Trial Court,
Branch 226, in Quezon City is directed to forthwith resume proceedings thereon, and to render its
decision on the merits as soon as practicable.

Formoso vs Philippine National Bank

G.R. No. 154704
June 1, 2011

FACTS:

Nellie and her children executed a special power of attorney in favour of Primitivo Malacaba
authorising him, among others, to secure all papers and documents including the owners copies of
the titles of real properties pertaining to the loan with real estate mortgage originally secured by Nellie
and her late husband, Benjamin, from the PNB, Vigan Branch. Subsequently, the Formosos sold the
subject mortgaged real properties to Malacaba through a Deed of Absolute Sale. Thereafter, Malacba
and his lawyer went to PNB to fully pay the loan obligation. PNB, however, allegedly refused to accept
Malacaba’s tender of payment and to release the mortgage or surrender the titles of the subject
mortgaged real properties.

Petitioners filed a Complaint for specific performance against PNB before the RTC.

The RTC rendered its decision in favour of petitioner but denied their prayer for exemplary or
corrective damages, attorney’s fees, and annual interest and daily interest due to lack of evidence.

The petitioners received their copy of the decision on November 26, 1999, and on January 25, 2001,
they filed their Petition for Relief from Judgment questioning the RTC decision that there was no
testimonial evidence presented to warrant the award for moral and exemplary damages. They
reasoned out that they could not then file a motion for reconsideration because they could not get
hold of a copy of the transcripts of stenographic notes. In its August 6, 2001 Order, the RTC denied
the petition for lack of merit.

On September 7, 2001, the petitioners moved for reconsideration but it was denied by the RTC in its
Omnibus Order of September 26, 2001.

The petitioners filed a petition for certiorari before the CA but it dismissed the petition stating that the
verification and certification of non-forum shopping was signed by only one (Malacaba) of the many
petitioners which was contrary to the rules provided by law.

ISSUE:
Whether or not all the petitioners must sign the verification and certification of non-forum shopping in
a petition for certiorari wherein only questions of law are involved.

HELD:
Yes. Certiorari is an extraordinary, prerogative remedy and is never issued as a matter of right.
Accordingly, the party who seeks to avail of it must strictly observe the rules laid down by law.
The acceptance of a petition for certiorari as well as the grant of due course thereto is, in general,
addressed to the sound discretion of the court. Although the Court has absolute discretion to reject
and dismiss a petition for certiorari, it does so only (1) when the petition fails to demonstrate grave
abuse of discretion by any court, agency, or branch of the government; or (2) when there are
procedural errors, like violations of the Rules of Court or Supreme Court Circulars.

In the case at bench, the petitioners claim that the petition for certiorari that they filed before the CA
substantially complied with the requirements provided for under the 1997 Rules of Civil Procedure on
Verification and Certification of Non-Forum Shopping.
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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. x x x.

Admittedly, among the seven (7) petitioners mentioned, only Malcaba signed the verification and
certification of non-forum shopping in the subject petition. There was no proof that Malcaba was
authorized by his co-petitioners to sign for them. There was no special power of attorney shown by
the Formosos authorizing Malcaba as their attorney-in-fact in filing a petition for review on certiorari.
Neither could the petitioners give at least a reasonable explanation as to why only he signed the
verification and certification of non-forum shopping.

The petitioners were given a chance by the CA to comply with the Rules when they filed their motion
for reconsideration, but they refused to do so. Despite the opportunity given to them to make all of
them sign the verification and certification of non-forum shopping, they still failed to comply. Thus, the
CA was constrained to deny their motion and affirm the earlier resolution.

Indeed, liberality and leniency were accorded in some cases. In these cases, however, those who did
not sign were relatives of the lone signatory, so unlike in this case, where Malcaba is not a relative
who is similarly situated with the other petitioners and who cannot speak for them.

METROBANK v ABAD-SANTOS
DECEMBER 15, 2009

FACTS:
Respondent Manfred De Koning obtained a loan from Metrobank worth P 2.19M. As a security, he
issued a promissory note and a real estate mortgage in favour of Metrobank over a condominium unit
in Makati City. When De Koning failed to pay despite demands, Metrobank instituted extrajudicial
foreclosure proceedings against the REM, where Metrobank was the highest bidder. De Koning failed
to redeem the property within the prescribed redemption period but he nevertheless refused to turn
over the possession of the property. Metrobank then filed an ex parte petition for a writ of possession
over the foreclosed property. De Koning filed a motion to dismiss on the ground that Metrobank’s
petition violated Section 5 Rule 7 of the RoC which requires the attachment of a certification against
forum shopping to a complaint or other initiatory pleading.

Metrobank claims that an ex parte petition for the issuance of a writ of possession is not an initiatory
pleading asserting a claim. Rather, it is a mere incident in the transfer of title over the real property
which was acquired by Metrobank through an extrajudicial foreclosure sale, in accordance with
Section 7 of Act No. 3135, as amended. Thus, the petition is not covered by Section 5, Rule 7 of the
Rules and a certification against forum shopping is not required.

The RTC and the CA agreed with De Koning. The CA explained that Sec 5 Rule 7 is not limited to
actions, but covers any initiatory pleading that asserts a claim for relief. Since Metrobank’s petition for
writ of possession is an initiatory pleading, it must perforce be covered by this rule. Thus, Metrobank’s
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failure to disclose in the verification and certification the existence of the two cases filed by De Koning
rendered the petition dismissable.

ISSUE:
Whether or not an ex parte petition for the issuance of a writ of possession is an initiatory pleading
asserting a claim.

HELD: NO.
A writ of possession is defined as "a writ of execution employed to enforce a judgment to recover the
possession of land. It commands the sheriff to enter the land and give its possession to the person
entitled under the judgment."

There are three instances when a writ of possession may be issued: (a) in land registration
proceedings under Section 17 of Act No. 496; (b) in judicial foreclosure, provided the debtor is in
possession of the mortgaged realty and no third person, not a party to the foreclosure suit, had
intervened; and (c) in extrajudicial foreclosure of a real estate mortgage under Section 7 of Act No.
3135, as amended by Act No. 4118. The present case falls under the third instance.

a writ of possession may issue either (1) within the one year redemption period, upon the filing of a
bond, or (2) after the lapse of the redemption period, without need of a bond. In order to obtain a writ
of possession, the purchaser in a foreclosure sale must file a petition, in the form of an ex parte
motion, in the registration or cadastral proceedings of the registered property.

The right to possess a property merely follows the right of ownership. Thus, after the consolidation of
title in the buyers name for failure of the mortgagor to redeem, the writ of possession becomes a
matter of right and its issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial
function.

Since a petition for a writ of possession under Section 7 of Act No. 3135, as amended, is neither a
complaint nor an initiatory pleading, a certificate against non-forum shopping is not required. The
certificate that Metrobank attached to its petition is thus a superfluity that the lower court should have
disregarded.

Mid-Pasig Land Development Corporation v Mario Tablante doing business under the name
and style ECRM ENTERPRISES; ROCKLAND CONSTRUCTION COMPANY; LAURIE LITAM; and
MC HOME DEPOT, INC.,

FACTS:
Petitioner is the registered owner of a piece of land situated in Pasig City. Petitioner, through its
chairperson and president, and ECRM Enterprises by its proprietor, Tablante executed agreement
whereby the former would lease to the latter an area (1hectare) for period of 3 months. On the date of
expiration Lease Agreement, Tablante assigned all his rights and interests under the said agreement
to respondents Laurie M. Litam and/or Rockland Construction Company, Inc. (Rockland) under a
Deed of Assignment of the same date. Petitioner eventually learned that Tablante had executed a
Contract of Lease with respondent MC Home Depot, Inc. over the same parcel of land. Thereafter,
respondent MC Home Depot, Inc. constructed improvements on the land and subdivided the area,
which it leased to various entities. Upon the expiration of the lease on March 6, 2000, petitioner
demanded that respondents vacate the land. A final demand was made in a letter dated December
20, 2000.

In order to forestall ejectment, Rockland filed a case for specific performance with RTC Pasig (Civil
Case No. 68213,) compelling petitioner to execute a new lease of contract for another 3 years.
Consequently, petitioner filed for unlawful detainer against respondents raffled to MTC Pasig Branch
70, simultaneously filed supplemental motion to dismiss Civil Case No. 68213, on the ground of litis
pendentia. Motion to dismiss was denied.
MTC held that it has no jurisdiction over the unlawful detainer (ejectment) case. It ruled that the issue
did not involve material or physical possession, but rather, whether or not ECRM had the right to
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exercise an option to renew its lease contract. Issue involved is incapable of pecuniary estimation,
jurisdiction over case was vested in RTC.

On appeal, CA dismissed petition on grounds:

1) verification and certification against non-forum shopping was signed by a certain Antonio A.
Merelos as General Manager of the petitioner-corporation without attaching therewith a
Corporate Secretarys certificate or board resolution that he is authorized to sign for and on
behalf of the petitioner;

Issue:
WON failure to attach Secretary's Certificate, attesting General Manager's authority to sign
Verification and Certification of Non-Forum shopping is fatal.

Held:
No.
CA erred in dismissing the petition before it. The determination of the sufficiency of the authority was
done on case to case basis. In many cases, authority of some corporate officers to sign verification
and certification against forum shopping was recognized, being in a position to verify the truthfulness
and correctness of the allegations in petition.

Failure to attach the Secretarys Certificate, attesting to General Manager Antonio Mereloss authority
to sign the Verification and Certification of Non-Forum Shopping, should not be considered fatal to the
filing of the petition. Nonetheless, the requisite board resolution was subsequently submitted to the
CA, together with the pertinent documents. Considering that petitioner substantially complied with the
rules, the dismissal of the petition was, therefore, unwarranted.

Dismissal of an appeal on a purely technical ground is frowned upon especially if it will result in
unfairness. The rules of procedure ought not to be applied in a very rigid, technical sense for they
have been adopted to help secure, not override, substantial justice.

In view of the developments which have rendered the issue of the right of possession over the subject
property moot and academic, the main case is hereby considered CLOSED AND TERMINATED.
Since the claimed lease contract had already expired as of July or August 2003, there appears no
reason why respondents should continue to have any claim to further possession of the property and
respondent wasno longer in possession of subject property.

ANITA MONASTERIO-PE and the SPOUSES ROMULO TAN and EDITHA PE-TAN, Petitioners, v.
JOSE JUAN TONG, herein represented by his Attorney-in-Fact, JOSE Y. ONG, Respondent.

G.R. No. 151369 March 23, 2011

FACTS:
The instant petition stemmed from an action for ejectment filed by herein respondent Tong through his
representative Ong against herein petitioners.The suit was filed with the Municipal Trial Court in Cities
(MTCC), Branch 3, Iloilo City. It was alleged that Tong is the registered owner of two parcels of land
known as Lot Nos. 40 and 41 together with the improvements thereon, located at Barangay
Kauswagan, City Proper, Iloilo City; herein petitioners are occupying the house standing on the said
parcels of land without any contract of lease nor are they paying any kind of rental and that their
occupation thereof is simply by mere tolerance of Tong; that in a letter dated December 1, 1999, Tong
demanded that respondents vacate the house they are occupying, but despite their receipt of the said
letter they failed and refused to vacate the same; Tong referred his complaint to the Lupon of
Barangay Kauswagan, to no avail
In their Answer with Defenses and Counterclaim, herein petitioners alleged that Tong is not the real
owner of the disputed property, but is only a dummy of a certain alien named Ong Se Fu, who is not
qualified to own the said lot and, as such, Tong's ownership is null and void; petitioners are the true
and lawful owners of the property in question and by reason thereof they need not lease nor pay
rentals to anybody; a case docketed as CA-G.R. CV No. 52676 (RTC Civil Case No. 20181) involving
herein petitioner Pe and respondent is pending before the Court of Appeals (CA) where the ownership
of the subject property is being litigated; respondent should wait for the resolution of the said action
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instead of filing the ejectment case; petitioners also claimed that there was, in fact, no proper
barangay conciliation as Tong was bent on filing the ejectment case before conciliation proceedings
could be validly made.
The MTCC rendered judgment in favor of herein respondent.
Aggrieved by the above-quoted judgment, petitioners appealed the decision of the MTCC with the
RTC of Iloilo City.
In its presently assailed Decision, the RTC of Iloilo City, Branch 24 affirmed in its entirety the
appealed decision of the MTCC.
Hence, the instant petition for review on certiorari.

ISSUE:
Whether or not RTC erred in holding that the law authorizes an attorney-in-fact to execute the
required certificate against forum shopping in behalf of his or her principal. Petitioners argue that
Tong himself, as the principal, and not Ong, should have executed the certificate against forum
shopping.

RULING: The Court is not persuaded.

It is true that the first paragraph of Section 5, Rule 7 of the Rules of Court, requires that the
certification should be signed by the "petitioner or principal party" himself. The rationale behind this is
because only the petitioner himself has actual knowledge of whether or not he has initiated similar
actions or proceedings in different courts or agencies. However, the rationale does not apply where,
as in this case, it is the attorney-in-fact who instituted the action. Such circumstance constitutes
reasonable cause to allow the attorney-in-fact to personally sign the Certificate of Non-Forum
Shopping. Indeed, the settled rule is that the execution of the certification against forum shopping by
the attorney-in-fact is not a violation of the requirement that the parties must personally sign the
same. The attorney-in-fact, who has authority to file, and who actually filed the complaint as the
representative of the plaintiff, is a party to the ejectment suit.14 In fact, Section 1, Rule 70 of the
Rules of Court includes the representative of the owner in an ejectment suit as one of the parties
authorized to institute the proceedings. In the present case, there is no dispute that Ong is
respondent's attorney-in-fact. Hence, the Court finds that there has been substantial compliance with
the rules proscribing forum shopping.
Petitioners also aver that the certificate against forum shopping attached to the complaint in Civil
Case No. 2000(92) falsely stated that there is no other case pending before any other tribunal
involving the same issues as those raised therein, because at the time the said complaint was filed,
Civil Case No. 20181 was, in fact, still pending with the CA (CA-G.R. CV No. 52676), where the very
same issues of ejectment and physical possession were already included.

HEIRS OF MESINA vs. HEIRS OF FIAN

G.R. No. 201816
April 8, 2013

FACTS:
The late spouses Faustino and Genoveva Mesina, during their lifetime, bought from the spouses
Domingo Fian Sr. and Maria Fian 2 lots. 1st lot has an area of 1,632 square meters, while the 2nd
3,730 sq. m. Both are situated in Brgy. Gungab, Poblaciion, Albuera, Leyte. Upon the death of the
spouses Fian, their heirs denied that their parents sold the property to Spouses Mesina. When the
spouses Mesina died, their heirs repeatedly demanded the Heirs of Fian to vacate the lots and to turn
possession over to the former, however, the latter refused. Hence, on August 8, 2005, Norman, as
attorney-in-fact of his siblings Victor, Maria and Lorna, filed an action for quieting of title and damages
before RTC, Branch 14, Leyte against the Heirs of FIan, naming only Theresa Fian Yray as the
representative of the Heirs of Fian. Theresa filed a Motion to Dismiss alleging that the complaint
states no cause of action and gross violation of Sec 1 and 2, Rule 3. Theresa claims that neither the
“Heirs of Mesina” nor the “Heirs of Fian” are juridical persons authorized by law to file an action or to
be defendants. Moreover, Theresa alleged that the failure to individually name all the heirs of the
spouses Fian makes the complaint infirm. Hence, the complaint must be dismissed.
The RTC granted the MTD and held that the comlaint stated no cause of action. It ruled that the
“Heirs of Mesina” and the “Heirs of Fian” are neither natural nor juridical persons as contemplated by
the rules. Said heirs being unnamed could not be real parties in interest. MR was denied.
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On appeal, the CA affirmed the RTC decision ruling that all heirs of spouses Fian are indispensable
parties and should have been impleaded in the complaint. Failing which, the complaint stated no
cause of action. MR denied.

ISSUES:
(1) Is the dismissal correct? (2) Did petitioner substantially comply with verification?

HELD:
(1) No. A complaint states a cause of action if it avers the existence of the three essential elements of
a cause of action, namely: (a) The legal right of the plaintiff; (b) The correlative obligation of the
defendant; and (c) The act or omission of the defendant in violation of said right. The inclusion of
Theresa’s co-heirs does not fall under any of the above elements. The infirmity is, in fact, not a failure
to state a cause of action but a non-joinder of an indispensable party. As such, this is properly a non-
joinder of indispensable party and not a failure of the complaint to state a cause of action. The non-
joinder of indispensable parties is not a ground for the dismissal of an action. At any stage of a judicial
proceeding and/or at such times as are just, parties may be added on the motion of a party or on the
initiative of the tribunal concerned. If the plaintiff refuses to implead an indispensable party despite the
order of the court, that court may dismiss the complaint for the plaintiff’s failure to comply with the
order. The remedy is to implead the non-party claimed to be indispensable. Thus, the dismissal of the
case for failure to state a cause of action is improper. The RTC should have directed petitioner
Norman Mesina to implead all the heirs of Domingo Fian, Sr. as defendants within a reasonable time
from notice with a warning that his failure to do so shall mean dismissal of the complaint.
(2) Yes. Sec. 4. Verification. – Except when otherwise specifically required by law or rule, pleadings
need not be under oath, verified or accompanied by affidavit. A pleading is verified by an affidavit that
the affiant has read the pleading and that the allegations therein are true and correct of his personal
knowledge or based on authentic records.
The alleged defective verification states that:
“I, NORMAN S. MESINA, legal age, married, Filipino, and a resident of Poblacion, Albuera, Leyte,
after having been duly sworn to in accordance with law, hereby depose and say that: x x x x
2. The allegations herein are true and correct to the best of our knowledge;

Both the RTC and the CA found said verification defective, since the phrase "or based on authentic
records," as indicated under the second paragraph of Sec. 4, Rule 7 as afore-quoted, was omitted.
The verification of the complaint does not include the phrase "or based on authentic records" does not
make the verification defective. Notably, the provision used the disjunctive word "or." As such,
"personal knowledge" and "authentic records" need not concur in a verification as they are to be taken
separately.
Also, verification, like in most cases required by the rules of procedure, is a formal requirement, not
jurisdictional. It is mainly intended to secure an assurance that matters which are alleged are done in
good faith or are true and correct and not of mere speculation. Thus, when circumstances so warrant,
as in the case at hand, "the court may simply order the correction of unverified pleadings or act on it
and waive strict compliance with the rules in order that the ends of justice may thereby be served."

RULE 8

Ledda vs. Bank of the Philippine Islands

G.R. No. 200868
November 12, 2012

FACTS:
BPI, through its credit card system, extends credit accommodations to its clientele for the purchase of
goods and availment of various services. As one of BPI’s valued clients, Anita Ledda was issued a
pre-approved BPI credit card. The card with the “Terms and Conditions” was delivered at Ledda’s
house. Ledda used the credit card for various purchases of goods and services and cash
advances.Ledda defaulted in the payment of her credit card obligation despite repeated demands
prompting BPI to file a collection case against her in RTC Makati. The RTC ruled in favor of BPI. In
her appeal in the Court of Appeals, Ledda argued that the document containing the Terms and
Conditions governing the use of the BPI credit card is an actionable document contemplated in
Section 7, Rule 8 of the 1997 Rules of Civil Procedure. This argument was rejected by the CA.
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ISSUE:
Whether or not the document containing the Terms and Conditions is an actionable document.

HELD:
No. Section 7, Rule 8 states that “Whenever an action or defense is based upon a written instrument
or document, the substance of such instrument or document shall be set forth in the pleading, and the
original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be
a part of the pleading, or said copy may with like effect be set forth in the pleading.”Clearly, the above
provision applies when the action is based on a written instrument or document.In this case, the
complaint is an action for collection of sum of money arising from Ledda’s default in her credit card
obligation with BPI. BPI’s cause of action is primarily based on Ledda’s (1) acceptance of the BPI
credit card, (2) usage of the BPI credit card to purchase goods, avail services and secure cash
advances, and (3) non-payment of the amount due for such credit card transactions, despite
demands. In other words, BPI’s cause of action is not based only on the document containing the
Terms and Conditions. Therefore, the document containing the Terms and Conditions governing the
use of the BPI credit card is not an actionable document contemplated. As such, it is not required by
the Rules to be set forth in and attached to the complaint.BPI sufficiently established a cause of action
against Ledda, who admits having received the BPI credit card, subsequently used the credit card,
and failed to pay her obligation arising from the use of such credit card.

Titan Construction Corporation vs. David

G.R. No. 169548
March 15, 2010
FACTS:
Manuel David, Sr. and Martha David were married in 1957. In 1970, the spouses acquired a lot at
White Plains, Quezon City, which was registered in the name of MARTHA S. DAVID, of legal age,
Filipino, married to Manuel A. David. In 1976, the spouses separated de facto, and no longer
communicated with each other.

Sometime in March 1995, Manuel discovered that Martha had previously sold the property to Titan
Construction Corporation. Thus Manuel filed a Complaint for Annulment of Contract and
Recovenyance against Titan before the RTC of Quezon City. Manuel alleged that the sale executed
by Martha in favor of Titan was without his knowledge and consent, and therefore void.

In its Answer with Counterclaim, Titan claimed that it was a buyer in good faith and for value because
it relied on a Special Power of Attorney signed by Manuel which authorized Martha to dispose of the
property on behalf of the spouses. Titan thus prayed for the dismissal of the complaint. In his
unverified Reply, Manuel claimed that the SPA was spurious, and that the signature purporting to be
his was a forgery; hence, Martha was wholly without authority to sell the property.

RTC and CA ruling: The property, being part of the conjugal property of the spouses could only be
sold upon the consent of both spouses. The Deed of Sale was invalidated because the signature of
Manuel in the SPA was not genuine.

Titan, however, claimed that because Manuel failed to specifically deny the genuineness and due
execution of the SPA in his Reply, he is deemed to have admitted the veracity of said document, in
accordance with Rule 8, Sections 7 and 8, of the Rules of Court.

ISSUE:
Whether or not Manuel validly denied the genuineness and due execution of the SPA

HELD:
YES. It is true that the reply filed by Manuel alleging that the special power of attorney is a forgery
was not made under oath. However, the complaint, which was verified by Manuel under oath, alleged
that the sale of the subject property executed by his wife, Martha, in favor of Titan was without his
knowledge, consent, and approval, express or implied; and that there is nothing on the face of the
deed of sale that would show that he gave his consent thereto.
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Further, Titan did not object to the presentation of Atty. Desiderio Pagui, who testified as an expert
witness, on his Report finding that the signature on the special power of attorney was not affixed by
Manuel based on his analysis of the questioned and standard signatures of the latter, and even cross-
examined said witness. Neither did Titan object to the admission of said Report when it was offered in
evidence by Manuel. Where a party acted in complete disregard of or wholly overlooked Section 8,
Rule 8 and did not object to the introduction and admission of evidence questioning the genuineness
and due execution of a document, he must be deemed to have waived the benefits of said Rule.
Consequently, Titan is deemed to have waived the mantle of protection given [it] by Section 8, Rule 8

RULE 9

REBECCA PACAÑA-CONTRERAS and ROSALIE PACAÑA

vs.
ROVILA WATER SUPPLY, INC., EARL U KOKSENG, LILIA TORRES, DALLA P. ROMANILLOS
and MARISSA GABUYA
G.R. No. 168979 December 2, 2013
FACTS:
Petitioners Rebecca Pacaña-Contreras and Rosalie Pacaña, children of Lourdes Teves Pacaña and
Luciano Pacaña, filed the present case against Rovila Inc., Earl, Lilia, Dalla and Marisa for accounting
and damages.The petitioners claimed that their family has long been known in the community to be
engaged in the water supply business; they operated the "Rovila Water Supply" from their family
residence and were engaged in the distribution of water to customers in Cebu City. The petitioners
alleged that Lilia was a former trusted employee in the family business who hid business records and
burned and ransacked the family files. Lilia also allegedly posted security guards and barred the
members of the Pacaña family from operating their business. She then claimed ownership over the
family business through a corporation named "Rovila Water Supply, Inc." (Rovila Inc.) Upon inquiry
with the Securities and Exchange Commission (SEC), the petitioners claimed that Rovila Inc. was
surreptitiously formed with the respondents as the majority stockholders. The respondents did so by
conspiring with one another and forming the respondent corporation to takeover and illegally usurp
the family business’ registered name.
In forming the respondent corporation, the respondents allegedly used the name of Lourdes as one of
the incorporators and made it appear in the SEC documents that the family business was operated in
a place other than the Pacaña residence. Thereafter, the respondents used the Pacaña family’s
receipts and the deliveries and sales were made to appear as those of the respondent Rovila
Inc.Using this scheme, the respondents fraudulently appropriated the collections and payments.
The petitioners filed the complaint in their own names although Rosalie was authorized by Lourdes
through a sworn declaration and special power of attorney (SPA). The respondents filed a first motion
to dismiss on the ground that the RTC had no jurisdiction over an intra-corporate controversy. The
RTC denied the motion. On September 26, 2000, Lourdes diedand the petitioners amended their
complaint, with leave of court, on October 2, 2000 to reflect this development. They still attached to
their amended complaint the sworn declaration with SPA, but the caption of the amended complaint
remained the same. On October 10, 2000, Luciano also died
At the subsequent pre-trial, the respondents manifested to the RTC that a substitution of the parties
was necessary in light of the deaths of Lourdes and Luciano. They further stated that they would seek
the dismissal of the complaint because the petitioners are not the real parties in interest to prosecute
the case. The pre-trial pushed through as scheduled and the RTC directed the respondents to put into
writing their earlier manifestation. The RTC issued a pre-trial order where one of the issues submitted
was whether the complaint should be dismissed for failure to comply with Section 2, Rule 3 of the
Rules of Court which requires that every action must be prosecuted in the name of the real party in
interest.
On January 23, 2002, the respondents again filed a motion to dismiss on the grounds, among others,
that the petitioners are not the real parties in interest to institute and prosecute the case and that they
have no valid cause of action against the respondents. The RTC denied the respondents’ motion to
dismiss. It ruled that, save for the grounds for dismissal which may be raised at any stage of the
proceedings, a motion to dismiss based on the grounds invoked by the respondents may only be filed
within the time for, but before, the filing of their answer to the amended complaint. Thus, even
granting that the defenses invoked by the respondents are meritorious, their motion was filed out of
time as it was filed only after the conclusion of the pre-trial conference. Furthermore, the rule on
substitution of parties only applies when the parties to the case die, which is not what happened in the
present case.
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The respondents filed a petition for certiorari under Rule 65 of the Rules of Court with the CA,
invoking grave abuse of discretion in the denial of their motion to dismiss. They argued that the
deceased spouses Luciano and Lourdes, not the petitioners, were the real parties in interest. Thus,
the petitioners violated Section 16, Rule 3 of the Rules of Court on the substitution of parties. The CA
granted the petition and ruled that the RTC committed grave abuse of discretion as the petitioners
filed the complaint and the amended complaint as attorneys-in-fact of their parents. As such, they are
not the real parties in interest and cannot bring an action in their own names. Neither are the
petitioners suing as heirs of their deceased parents. Pursuant to jurisprudence, the petitioners should
first be declared as heirs before they can be considered as the real parties in interest. This cannot be
done in the present ordinary civil case but in a special proceeding for that purpose. The CA agreed
with the respondents that they alleged the following issues as affirmative defenses in their answer: 1)
the petitioners are not the real parties in interest; and 2) that they had no legal right to institute the
action in behalf of their parents. Hence this petition.

ISSUE:
WON the RTC acted with grave abuse of discretion in denying the respondent’s motion to dismiss
because the petitioners are not the real parties in interest.

RULING:
No, the RTC correctly dismissed the motion of the respondents. The history and development of the
ground "fails to state a cause of action" in the 1940, 1964 and the present 1997 Rules of Court
Preliminarily, a suit that is not brought in the name of the real party in interest is dismissible on the
ground that the complaint "fails to state a cause of action. Pursuant to jurisprudence this is also the
ground invoked when the respondents alleged that the petitioners are not the real parties in interest
because: 1) the petitioners should not have filed the case in their own names, being merely attorneys-
in-fact of their mother; and 2) the petitioners should first be declared as heirs. A review of the 1940,
1964 and the present 1997 Rules of Court shows that the fundamentals of the ground for dismissal
based on "failure to state a cause of action" have drastically changed over time. Notably, in the
present rules, there was a deletion of the ground of "failure to state a cause of action" from the list of
those which may be waived if not invoked either in a motion to dismiss or in the answer. Another
novelty introduced by the present Rules, which was totally absent in its two precedents, is the addition
of the period of time within which a motion to dismiss should be filed as provided under Section 1,
Rule 16. Thus, jurisprudence governed by the 1940 and 1964 Rules of Court to the effect that the
ground for dismissal based on failure to state a cause of action may be raised anytime during the
proceedings, is already inapplicable to cases already governed by the present Rules of Court which
took effect on July 1, 1997. As the rule now stands, the failure to invoke this ground in a motion to
dismiss or in the answer would result in its waiver. According to Oscar M. Herrera, the reason for the
deletion is that failure to state a cause of action may be cured under Section 5, Rule 10 and we quote.
The motion to dismiss in the present case based on failure to state a cause of action was not timely
filed and was thus waived
Applying Rule 16 of the Rules of Court which provides for the grounds for the dismissal of a civil case,
the respondents’ grounds for dismissal fall under Section 1(g) and (j), Rule 16 of the Rules of Court,
particularly, failure to state a cause of action and failure to comply with a condition precedent
(substitution of parties), respectively. Rule 9 of the Rules of Court which states that defenses and
objections not pleaded either in a motion to dismiss or in the answer are deemed waived, except for
the following grounds: 1) the court has no jurisdiction over the subject matter; 2) litis pendencia; 3) res
judicata; and 4) prescription. Therefore, the grounds not falling under these four exceptions may be
considered as waived in the event that they are not timely invoked. As the respondents’ motion to
dismiss was based on the grounds which should be timely invoked, material to the resolution of this
case is the period within which they were raised. Both the RTC and the CA found that the motion to
dismiss was only filed after the filing of the answer and after the pre-trial had been concluded.
Because there was no motion to dismiss before the filing of the answer, the respondents should then
have at least raised these grounds as affirmative defenses in their answer. The RTC’s assailed orders
did not touch on this particular issue but the CA ruled that the respondents did, while the petitioners
insist that the respondents did not. Our examination of the records shows that the CA had no basis in
its finding that the respondents alleged the grounds as affirmative defenses in their answer. The
respondents merely stated in their petition for certiorari that they alleged the subject grounds in their
answer. However, nowhere in the petition did they support this allegation; they did not even attach a
copy of their answer to the petition. It is basic that the respondents had the duty to prove by
substantial evidence their positive assertions. Considering that the petition for certiorari is an original
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and not an appellate action, the CA had no records of the RTC’s proceedings upon which the CA
could refer to in order to validate the respondents’ claim. Clearly, other than the respondents’ bare
allegations, the CA had no basis to rule, without proof, that the respondents alleged the grounds for
dismissal as affirmative defenses in the answer. The respondents, as the parties with the burden of
proving that they timely raised their grounds for dismissal, could have at least attached a copy of their
answer to the petition. This simple task they failed to do. The rules are clear and require no
interpretation. Pursuant to Section 1, Rule 9 of the Rules of Court, a motion to dismiss based on the
grounds invoked by the respondents may be waived if not raised in a motion to dismiss or alleged in
their answer.
Other heirs of the spouses Pacaña to be impleaded in the case. It should be emphasized that insofar
as the petitioners are concerned, the respondents have waived the dismissal of the complaint based
on the ground of failure to state a cause of action because the petitioners are not the real parties in
interest. At this juncture, a distinction between a real party in interest and an indispensable party is in
order. At the inception of the present case, both the spouses Pacaña were not impleaded as parties-
plaintiffs. The Court notes, however, that they are indispensable parties to the case as the alleged
owners of Rovila Water Supply. Without their inclusion as parties, there can be no final determination
of the present case. They possess such an interest in the controversy that a final decree would
necessarily affect their rights, so that the courts cannot proceed without their presence. Their interest
in the subject matter of the suit and in the relief sought is inextricably intertwined with that of the other
parties. Mindful of the differing views of the Court as regards the legal effects of the non-inclusion of
indispensable parties, the Court clarified in Republic of the Philippines v. Sandiganbayan, et al., that
the failure to implead indispensable parties is a curable error and the foreign origin of our present
rules on indispensable parties permitted this corrective measure. Obviously, in the present case, the
deceased Pacañas can no longer be included in the complaint as indispensable parties because of
their death during the pendency of the case. Upon their death, however, their ownership and rights
over their properties were transmitted to their heirs, including herein petitioners, pursuant to Article
774 in relation with Article 777 of the Civil Code. Therefore, to obviate further delay in the proceedings
of the present case and given the Court’s authority to order the inclusion of an indispensable party at
any stage of the proceedings, the heirs of the spouses Pacaña, except the petirioners who are
already parties to the case are Lagrimas Pacaña-Gonzalez who intervened in the case, are hereby
ordered impleaded as parties-plaintiffs. WHEREFORE, the petition is GRANTED.

DIONA VS. BALANGUE, ET AL.

G.R. No. 173559
January 7, 2013

Facts:
On March 21, 1999 respondents obtained a loan of P45K from petitioner payable in 6 months and
secured by Real Estate Mortgage over their 202 sqm property located in Valenzuela and covered by
TCT. When the debt became due, respondents failed to pay despite demand. Thus, petitioner filed
with RTC a complaint on Sept 17, 1999. Respondents were served with summons thru respondent
Sonny Balangue. On October 15, 1999, with the assistance of Atty. Arthur C. Coroza (Atty. Coroza) of
the Public Attorney’s Office, they filed a Motion to Extend Period to Answer but respondents failed to
file any responsive pleadings. Thus, upon motion of the petitioner, the RTC declared them in default
and allowed petitioner to present her evidence ex parte. On October 17, 2000, the RTC granted
petitioner’s Complaint.
Petitioner filed a Motion for Execution alleging that respondents did not interpose a timely appeal
despite receipt by their former counsel of the RTC’s Decision. Before it could be resolved, however,
respondents filed a Motion to Set Aside Judgment claiming that not all of them were duly served with
summons. They had no knowledge of the case because their co-respondent Sonny did not inform
them about it. They prayed that the RTC’s October 17, 2000 Decision be set aside and a new trial be
conducted.
But the RTC ordered the issuance of a Writ of Execution to implement its October 17, 2000 Decision.
However, since the writ could not be satisfied, petitioner moved for the public auction of the
mortgaged property, which the RTC granted. In an auction sale conducted on November 7, 2001,
petitioner was the only bidder in the amount of P420,000.00. Thus, a Certificate of Sale was issued in
her favor and accordingly annotated.
Respondents then filed a Motion to Correct/Amend Judgment and To Set Aside Execution Sale dated
December 17, 2001, claiming that the parties did not agree in writing on any rate of interest and that
petitioner merely sought for a 12% per annum interest in her Complaint. The RTC awarded 5%
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monthly interest (or 60% per annum) from March 2, 1991 until full payment. Their indebtedness
inclusive of the exorbitant interest from March 2, 1991 to May 22, 2001 ballooned from P124,400.00
to P652,000.00.
Displeased with the RTC’s May 7, 2002 Order, petitioner elevated the matter to the CA via a Petition
for Certiorari under Rule 65 of the Rules of Court. On August 5, 2003, the CA rendered a Decision
declaring that the RTC exceeded its jurisdiction in awarding the 5% monthly interest but at the same
time pronouncing that the RTC gravely abused its discretion in subsequently reducing the rate of
interest to 12% per annum. However, the proper remedy is not to amend the judgment but to declare
that portion as a nullity.
Respondents do not contest the existence of their obligation and the principal amount thereof. They
only seek quittance from the 5% monthly interest or 60% per annum imposed by the RTC.
Respondents contend that Section (3)d of Rule 9 of the Rules of Court is clear that when the
defendant is declared in default, the court cannot grant a relief more than what is being prayed for in
the Complaint. A judgment which transgresses said rule, according to the respondents, is void for
having been issued without jurisdiction and for being violative of due process of law.

Issue:
Whether or not the CA erred in its judgment.

Ruling:
The petition must fail.
We agree with respondents that the award of 5% monthly interest violated their right to due process
and, hence, the same may be set aside in a Petition for Annulment of Judgment filed under Rule 47 of
the Rules of Court.
Grant of 5% monthly interest is way beyond the 12% per annum interest sought in the Complaint and
smacks of violation of due process.
It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess of what is
being sought by the party. They cannot also grant a relief without first ascertaining the evidence
presented in support thereof. Due process considerations require that judgments must conform to and
be supported by the pleadings and evidence presented in court.
Notably, the Rules is even more strict in safeguarding the right to due process of a defendant who
was declared in default than of a defendant who participated in trial. For instance, amendment to
conform to the evidence presented during trial is allowed the parties under the Rules. But the same is
not feasible when the defendant is declared in default because Section 3(d), Rule 9 of the Rules of
Court comes into play and limits the relief that may be granted by the courts to what has been prayed
for in the Complaint. It provides:
(d) Extent of relief to be awarded. – A judgment rendered against a party in default shall not exceed
the amount or be different in kind from that prayed for nor award unliquidated damages.
The raison d’être in limiting the extent of relief that may be granted is that it cannot be presumed that
the defendant would not file an Answer and allow himself to be declared in default had he known that
the plaintiff will be accorded a relief greater than or different in kind from that sought in the Complaint.
No doubt, the reason behind Section 3(d), Rule 9 of the Rules of Court is to safeguard defendant’s
right to due process against unforeseen and arbitrarily issued judgment. This, to the mind of this
Court, is akin to the very essence of due process. It embodies "the sporting idea of fair play" and
forbids the grant of relief on matters where the defendant was not given the opportunity to be heard
thereon.
In the case at bench, the award of 5% monthly interest rate is not supported both by the allegations in
the pleadings and the evidence on record. The Real Estate Mortgage executed by the parties does
not include any provision on interest. When petitioner filed her Complaint before the RTC, she alleged
that respondents borrowed from her "the sum of FORTY-FIVE THOUSAND PESOS (P45,000.00),
with interest thereon at the rate of 12% per annum" and sought payment thereof. She did not allege or
pray for the disputed 5% monthly interest. Neither did she present evidence nor testified thereon.
Clearly, the RTC’s award of 5% monthly interest or 60% per annum lacks basis and disregards due
process. It violated the due process requirement because respondents were not informed of the
possibility that the RTC may award 5% monthly interest. They were deprived of reasonable
opportunity to refute and present controverting evidence as they were made to believe that the
complainant petitioner was seeking for what she merely stated in her Complaint.

RULE 10
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RAFAEL BAUTISTA and LIGAYA ROSEL

vs.
MAYA-MAYA COTTAGES, INC.
G.R. No. 148361 November 29, 2005
FACTS:
Spouses Rafael and Ligaya Bautista, petitioners herein, are the registered owners of a 3,856-square
meter lot located at Natipuan, Nasugbu, Batangas, as evidenced by Original Certificate of Title (OCT)
No. P-1436 issued in their names on January 15, 1989 by the Register of Deeds, same province. On
May 13, 1996, Maya-Maya Cottages, Inc. (MMCI), respondent, filed with the Regional Trial Court
(RTC) of Nasugbu, Batangas a complaint for cancellation of petitioners’ title and damages, with
application for a preliminary injunction, docketed as Civil Case No. 371. Respondent alleged inter alia
that "without any color of right and through dubious means," petitioners were able to obtain OCT No.
P-1436 in their names. On May 29, 1996, petitioners filed a motion to dismiss the complaint on the
ground that it does not state a cause of action. They averred that respondent is a private corporation,
hence, disqualified under the Constitution from acquiring public alienable lands except by lease.
Respondent cannot thus be considered a real party in interest. In its Order dated August 30, 1996, the
trial court granted the motion to dismiss, holding that since the property is an alienable public land,
respondent is not qualified to acquire it except by lease. Thus, it has no cause of action. Respondent
then filed a motion for reconsideration with motion for leave to file an amended complaint for quieting
of title. Respondent alleged that the technical description in petitioners’ title does not cover the
disputed lot. Thereupon, petitioners filed their opposition, contending that the amended complaint
does not also state a cause of action and if admitted, respondent’s theory of the case is substantially
modified. On November 18, 1996, the trial court issued an Order denying petitioners’ motion to
dismiss, thus, reversing its Order of August 30, 1996 dismissing the complaint in Civil Case No. 371.
Petitioners then filed with the Court of Appeals a special civil action for certiorari and prohibition. They
alleged that the amended complaint does not cure the defect in the original complaint which does not
state a cause of action. Clearly, in admitting respondent’s amended complaint, the trial court
committed grave abuse of discretion amounting to lack or excess of jurisdiction. On November 24,
2000, the Court of Appeals rendered a Decision dismissing the petition for certiorari and prohibition.
Petitioners filed a motion for reconsideration but was denied by the Appellate Court in its Resolution
of May 30, 2001. Hence this petition.

ISSUE:
WON the Court of Appeals erred in holding that the trial court did not commit grave abuse of
discretion amounting to lack or excess of jurisdiction in admitting respondent’s amended complaint.

RULING:
No, the CA correctly upheld the ruling of the RTC. Under Section 2, Rule 10 of the 1997 Rules of Civil
Procedure, as amended, provides: SEC. 2. Amendments as a matter of right. – A party may amend
his pleading once as a matter of right at any time before a responsive pleading is served or, in the
case of a reply, at any time within ten (10) days after it is served." The above provision clearly shows
that before the filing of any responsive pleading, a party has the absolute right to amend his pleading,
regardless of whether a new cause of action or change in theory is introduced. It is settled that a
motion to dismiss is not the responsive pleading contemplated by the Rule.3 Records show that
petitioners had not yet filed a responsive pleading to the original complaint in Civil Case No. 371.
What they filed was a motion to dismiss. It follows that respondent, as a plaintiff, may file an amended
complaint even after the original complaint was ordered dismissed, provided that the order of
dismissal is not yet final, as in this case. Verily, the Court of Appeals correctly held that in issuing the
assailed Order admitting the amended complaint, the trial court did not gravely abuse its discretion.
Hence, neither certiorari nor prohibition would lie. As to petitioners’ contention that respondent
corporation is barred from acquiring the subject lot, suffice it to say that this is a matter of defense
which can only be properly determined during the full-blown trial of the instant case.
Philippine Export and Foreign Loan Guarantee Corporation vs. Philippine Infrastructures, Inc,
419 SCRA 6, G.R. No. 120384;
January 13, 2004
FACTS:
Petitioner filed a complaint for collection of sum of money before the Regional Trial Court against
herein respondents Philippine Infrastructures, Inc. (PII), Philippine British Assurance Co., Inc. (PBAC),
The Solid Guaranty, Inc. (Solid), B.F. Homes, Inc. (BF Homes), Pilar Development Corporation (PDC)
and Tomas B. Aguirre (Aguirre). The complaint alleges that: petitioner issued five separate Letters of
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Guarantee in favor of the Philippine National Bank (PNB) as security for various credit
accommodations extended by PNB to respondent PII; respondents PII, BF Homes, PDC and Aguirre
executed a Deed of Undertaking binding themselves, jointly and severally, to pay or reimburse
petitioner upon demand such amount of money or to repair the damages, losses or penalties which
petitioner may pay or suffer on account of its guarantees; as security for prompt payment by
respondent PII, the latter submitted to petitioner, surety and performance bonds issued by
respondents PBAC and Solid; on April 24, 1985, the PNB called on the guarantees of petitioner, and
so, the latter demanded from respondent PII the immediate settlement of P20,959, 529.36,
representing the aggregate amount of the guarantees of petitioner called by PNB and the further sum
of P351,517.57 representing various fees and charges; PII refused to settle said obligations; petitioner
likewise demanded payment from respondents Solid and PBAC but they also refused to pay
petitioner; and because of the unjustified refusal of respondents to comply with their respective
obligations, petitioner was constrained to secure the services of counsel and incur expenses for the
purpose of prosecuting its valid claims against the respondents. It is prayed in the complaint that
judgment be rendered ordering respondents PII, BF Homes, PDC and Aguirre to pay petitioner the
amount of P21,311,046.93 plus interest and penalty charges thereon, ordering respondents Solid and
PBAC to pay P5,758,000.00 and P9,596,000.00, respectively, under their surety and/or performance
bonds and ordering respondents to pay petitioner the sums of P2,000,000.00 as attorney’s fees and
expenses of litigation and P50,000.00 as exemplary damages.
Respondent BF Homes filed a Motion to Dismiss on the ground that it is undergoing rehabilitation
receivership and pursuant to P.D. 902-A, the trial court has no jurisdiction to try the case. Respondent
PII also filed a Motion to Dismiss on the ground that the complaint states no cause of action since it
does not allege that petitioner has suffered any damage, loss or penalty because of the guarantees
petitioner had extended for and on behalf of respondent PII. The other respondents filed their
respective responsive pleadings.
Judge Roberto M. Lagman issued an Order suspending the case only as against respondent BF
Homes and denying respondent PII’s motion to dismiss. Thereafter, hearing on the merits ensued.
Petitioner presented Rosauro Termulo, the treasury department manager of petitioner, who testified
that the amount of P19,035,256.57 was paid on July 28, 1990 by petitioner to the PNB; and, Exhibit
"LL," a debit memo issued by the PNB. Consequently, petitioner filed a Motion to Amend Complaint to
Conform to Evidence pursuant to Section 5, Rule 10 of the Revised Rules of Court, seeking to amend
Paragraph 17 and the pertinent portion of the prayer in the complaint, to read as follows:
17. Because of the unjustified refusal of the defendants to comply with their respective obligations, the
plaintiffas guarantor has been constrained to pay the Philippine National Bank thru the account of the
National Treasury the amount of Nineteen Million Thirty-five Thousand Two Hundred Fifty-six and
57/100 (P19,035,256.57) on July 28, 1990 representing payment of principal loan of P12,790,094.83
and interest ofP6,245,111.54 due March 16, 1987 on the Philippine Infrastructure, Inc./Philguaranty
loan under the PNB Expanded Loan Collection Program; and which amount was deducted from the
equity share of the National Government in Philguarantee. In view of defendants unwarranted failure
and refusal to settle their respective accountabilities plaintiff was likewise constrained to secure the
services of counsel and incur expenses in the process of prosecuting its just and valid claims against
the defendants; accordingly, the defendants should be held liable, jointly and severally, to pay the
plaintiff attorney’s fees and expenses of litigation in the amount ofP2,000,000.00 or about ten (10%)
percent of the guaranteed obligations.
PRAYER
(a) Ordering defendant PII, BF Homes, PILAR and AGUIRRE to pay plaintiff, jointly and severally, the
amount of P19,035,256.57 plus P351,517.57 extension guarantee fees and amendment fees, plus
interests and penalty charges thereon;

Acting on the motion to amend, the trial court, at that time presided by Judge Joselito J. Dela Rosa,
issued the assailed Order dated December 7, 1992, dismissing the case without prejudice on the
ground of failure of the complaint to state a cause of action.
A petition for review on certiorari was filed by petitioner against the Regional Trial Court with this
Court. On June 23, 1993, the Court issued a Resolution resolving to REFER the case to the Court of
Appeals, for disposition considering that under Batas Pambansa Blg. 129, the Court of Appeals now
exercises exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or
awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or
commissions,
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The Court of Appeals promulgated the assailed Decision, dismissing the petition. On May 19, 1995,
the appellate court denied petitioner’s motion for reconsideration. Hence, petitioner filed the present
petition for review on certiorari.

ISSUE:
Whether the Court of Appeals erred in affirming the lower court’s order dismissing the complaint on
the ground that petitioner failed to state a cause of action for not alleging loss or actual payment made
by it to PNB under its guarantees.

HELD:
It should be stressed that amendment was sought after petitioner had already presented evidence,
more specifically, the testimony of petitioner’s Treasury Department Manager and a debit memo from
the PNB (Exhibit "LL") proving that petitioner had paid the PNB in the amount of P19,035,256.57
pursuant to the guarantees it accorded to respondent PII.
It is settled that even if the complaint be defective, but the parties go to trial thereon, and the plaintiff,
without objection, introduces sufficient evidence to constitute the particular cause of action which it
intended to allege in the original complaint, and the defendant voluntarily produces witnesses to meet
the cause of action thus established, an issue is joined as fully and as effectively as if it had been
previously joined by the most perfect pleadings. Likewise, when issues not raised by the pleadings
are tried by express or implied consent of the parties, they shall be treated in all respects as if they
had been raised in the pleadings.
Evidently, herein respondents’ failure to object to the evidence at the time it is presented in court is
fatal to their cause inasmuch as whatever perceived defect the complaint had was cured by the
introduction of petitioner’s evidence proving actual loss sustained by petitioner due to payment made
by it to PNB.
Thus, the contention of respondents that the amendment would introduce a subsequently acquired
cause of action as there was none at the time the original complaint was filed, is untenable.
Furthermore, petitioner’s cause of action against respondents stemmed from the obligation of
respondents PII, BF Homes, PDC and Aguirre under their Deed of Undertaking that was secured by
the surety and performance bonds issued by respondents PBAC and Solid. It is a condition of this
instrument that failure of the OBLIGOR and CO-OBLIGORS to comply with this undertaking and to
make good the performance of the other obligations herein undertaken and/or promised, shall be
sufficient cause for the OBLIGEE to consider such failure as an event of default which shall give to
the OBLIGEE the right to take such action against the OBLIGOR and/or CO-OBLIGORS for the
protection of the OBLIGEE’s interests.
In the present petition, petitioner had become liable to pay the amounts covered by said guarantees
when, as the original complaint alleges, the PNB called upon said guarantees. Respondents’
obligation under the Deed of Undertaking to keep petitioner free and harmless from any damage or
liability then became operative as soon as the liability of petitioner arose and there was no need for
petitioner to first sustain actual loss before it could have a cause of action against respondents. The
mere inclusion in petitioner’s original complaint of the allegation that the PNB had already called on
the guarantees of petitioner is sufficient to constitute a cause of action against respondents. Clearly
therefore, the original complaint, by itself, stated a valid cause of action.
Verily, it was patently erroneous on the part of the trial court not to have allowed the amendments as
to make the complaint conform to petitioner’s evidence that was presented without any objection from
respondents. The trial court likewise patently acted with grave abuse of discretion or in excess of its
jurisdiction amounting to lack of jurisdiction when, acting on a mere motion to amend the complaint, it
erroneously dismissed the complaint on the ground of failure to state a cause of action. Consequently,
the Court of Appeals committed a reversible error in sustaining the trial court.

SWAGMAN HOTELS vs. CA

FACTS:
Sometime in 1996 and 1997, Swagman Hotels and Travel, Inc., through Atty. Infante and ] Hegerty,
its president and vice-president, obtained from Christian loans evidenced by three promissory notes
dated 7 August 1996, 14 March 1997, and 14 July 1997. Each of the promissory notes is in the
amount of US$50,000 payable after three years from its date with an interest of 15% per annum
payable every three months.
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In 1998, Christian informed the Swagman Hotels that he was terminating the loans and demanded
from the latter payment in the total amount of US$150,000 plus unpaid interests. In 1999, Christian
filed with the RTC of Baguio a complaint for a sum ofmoney and damages against the petitioner
corporation, Hegerty, and Atty. Infante alleging that petitioner obtained loans from him, total amount of
US$150,000 after three years, with an interest of 15% per annum payable quarterly or every three
months. However, starting January 1998 until December 1998, they paid him only an interest of 6%
per annum. Thus, Christian prayed that the trial court order them to pay him jointly and solidarily the
total amount, the unpaid interests, moral damages; attorney’s fees; and the cost of the suit. The
petitioners filed an Answer raising as defenses lack of cause of action and novation of the principal
obligations. The petitioner and its co-defendants then prayed that the complaint be dismissed and that
hristian be ordered to pay moral damages; exemplary damages; and attorney’s fees. RTC declared
the first two promissory notes dated 7 August 1996 and 14 March 1997 as already due and
demandable and that the interest on the loans had been reduced by the parties from 15% to 6% per
annum. It then ordered the petitioner corporation to pay Christian the amount of $100,000
representing the principal obligation covered by the promissory notes dated 7 August 1996 and 14
March 1997, “plus interest of 6% per month thereon until fully paid, with all interest payments already
paid by the defendant to the plaintiff to be deducted therefrom.”

RTC held that when the instant case was filed on February 2, 1999, none of the promissory notes was
due and demandable. As of this date however, the first and the second promissory notes have
already matured. Hence, payment is already due. It held that under Section 5 of Rule 10 of the 1997
Rules of Civil Procedure, a complaint which states no cause of action may be cured by evidence
presented without objection. Thus, even if the plaintiff had no cause of action at the time he filed the
instant complaint, as defendants’ obligation are not yet dueand demandable then, he may
nevertheless recover on the first two promissory notes in view of the introduction of evidence showing
that the obligations covered by the two promissory notes are now due and demandable.

Court of Appeals denied petitioner’s appeal and affirmed in toto the decision of the RTC, holding that
in the case at bench, while it is true that appellant Swagman raised in its Answer the issue of
prematurity inthe filing of the complaint, appellant Swagman nonetheless failed to object to appellee
Christian’s presentation of evidence to the effect thatthe promissory notes have become due and
demandable. The afore-quoted rule allows a complaint which states no cause of action to be cured
either by evidence presented without objection or, in the event ofan objection sustained by the court,
by an amendment of the complaintwith leave of court. A motion for consideration filed by petitioner
was likewise denied. Hence this petition.

ISSUE:
Does Section 5, Rule 10 allows a complaint that does not statea cause of action to be cured by
evidence presented without objectionduring the trial? NO.

HELD:
Such interpretation of Section 5, Rule 10 of the 1997 Rules of Civil Procedure is
erroneous.Amendments of pleadings are allowed under Rule 10 of the 1997 Rulesof Civil Procedure
in order that the actual merits of a case may be determined in the most expeditious and inexpensive
manner without regard to technicalities, and that all other matters included in the case may be
determined in a single proceeding, thereby avoiding multiplicityof suits. Section 5 thereof applies to
situations wherein evidence not within the issues raised in the pleadings is presented by the parties
during the trial, and to conform to such evidence the pleadings are subsequently amended on motion
of a party. Thus, a complaint which fails to state a cause of action may be cured by evidence
presented during the trial.

However, the curing effect under Section 5 is applicable only if a causeof action in fact exists at the
time the complaint is filed, but the complaint is defective for failure to allege the essential facts. It thus
follows that a complaint whose cause of action has not yet accrued cannot be cured or remedied by
an amended or supplemental pleading lleging the existence or accrual of a cause of action while the
case is pending. Such an action is prematurely brought and is, therefore, a groundless suit, which
should be dismissed by the court upon proper motion seasonably filed by the defendant.

Unless the plaintiff has a valid and subsisting cause of action at the time his action is commenced, the
defect cannot be cured or remedied by the acquisition or accrual of one while the action is pending,
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and a supplemental complaint or an amendment setting up such after-accrued cause of action is not
permissible. Contrary to the holding of the trial court and the Court of Appeals, the defect of lack of
cause of action at the commencement of this suit cannot be cured by the accrual of a cause of action
during the pendency of this case arising from the alleged maturity of two of the promissory notes.

Vlason Enterprises Corp. vs. CA

310 SCRA 26
6 July 1999

FACTS:

Poro Point Shipping Services was then acting as local agent of Omega Sea Transport Company of
Panama and Honduras (Omega) when it requested permission for its vessel M/V Star Ace,
experiencing engine trouble, to unload its cargo and have it stored in the Philippine Ports Authority
(PPA) compound in San Fernando, La Union, while waiting for transhipment to Hong Kong. It was
approved by the Bureau of Customs. However, customs personnel still boarded the vessel when it
docked on the suspicion that it was the hijacked M/V Silver Med owned by Med Line Philippines and
that its cargoes were smuggled into the country. The vessel and its cargoes were then seized. A
notice of hearing was served on its consignee, Singkong Trading Co. of Hong Kong, and its shipper,
Dusit International Co. Ltd. of Thailand.

While the seizure proceedings were on going, three typhoons struck La Union, and the vessel ran
aground and was abandoned. A salvage agreement was entered into with Duraproof Services to
secure and repair the vessel.

The warrant of seizure was lifted upon finding that there was no fraud. However, the Customs
Commissioner declined to issue a clearance and even forfeited the vessel and its cargoes. A decision
was decreed for the forfeiture and sale of its cargoes in favor of the government.

Seeking to enforce its preferred salvor’s lien, Duraproof filed a Petition for Certiorari, Prohibition, and
Mandamus before the RTC of Manila assailing the actions of the Bureau of Customs. PPA, Silverio
Mangaoang, and Med Line Phil. were named as respondents. Subsequently, Duraproof amended its
petition to include, among others, Vlason Enterprises. It was alleged that some employees of Vlason
Enterprises surreptiously stole parts of the vessel.

Summons for the amended petition were served to the respondents and their counsels.

The cases against some respondents were dismissed due to litis pendencia and lack of jurisdiction.
For the second time, Duraproof, with leave of court, amended its petition with supplemental petition.

The RTC ruled in favor of Duraproof. Vlason Enterprises filed, by special appearance, a Motion for
Reconsideration, on the grounds that it was allegedly not impleaded as a defendant, served summons
or declared in default.

ISSUES:
1. Is there a valid service of summons?

2. Should new summons be served to Vlason Enterprises for the amended petition and the second
amended petition with supplemental petition?

HELD:

1. NO. The sheriffs return shows that Angliongto who was president of Vlason Enterprises, through
his secretary Betty Bebero, was served summons. The service is defective for two reasons: (1)
Bebero was an employee of Vlasons Shipping, Inc., which was an entity separate and distinct from
petitioner Vlason Enterprises Corporation; and (2) the return pertained to the service of summons for
the amended Pptition, not for the second amended Petition with supplemental petition, the latter
pleading having superseded the former.
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2. YES. Although t is well-settled that an amended pleading supersedes the original one, which is
thus deemed withdrawn and no longer considered part of the record, it does not follow ipso fact that
the service of a new summons for amended petitions or complaints is required. Where the defendants
have already appeared before the trial court by virtue of a summons on the original complaint, the
amended complaint may be served upon them without need of another summons, even if new causes
of action are alleged. After it is acquired, a courts jurisdiction continues until the case is finally
terminated. Conversely, when defendants have not yet appeared in court and no summons has been
validly served, new summons for the amended complaint must be served on them. It is not the
change of cause of action that gives rise to the need to serve another summons for the amended
complaint, but rather the acquisition of jurisdiction over the persons of the defendants. If the trial court
has not yet acquired jurisdiction over them, a new service of summons for the amended complaint is
required.

In this case, the trial court obviously labored under the erroneous impression that petitioner had
already been placed under its jurisdiction since it had been served summons through the secretary of
its president. Thus, it dispensed with the service on petitioner of new summons for the subsequent
amendments of the petition. In the first issue, it was already ruled that the first service of summons on
petitioner was invalid. Therefore, the trial court never acquired jurisdiction, and the said court should
have required a new service of summons for the amended Petitions.

ASSET PRIVATIZATION TRUST, petitioner, vs. COURT OF APPEALS, HON. JESUS F.

GUERRERO, Judge of the Regional Trial Court of Makati, Branch 148, STA. INES MELALE
FOREST PRODUCTS CORPORATION, RODOLFO M. CUENCA and MANUEL I. TINIO,
respondents.

Q: May the proscription against multiplicity of suits be properly invoked to allow the filing of a
supplemental complaint involving basically the same parties as those in the original complaint but with
a cause of action arising from a transaction distinct from that sued upon in the original complaint?
A: No. A supplemental pleading is meant to supply deficiencies in aid of the original pleading and not
to dispense with or substitute the latter. It is not like an amended pleading which is a substitute for the
original one. It does not supersede the original, but assumes that the original pleading is to stand. The
issues joined under the original pleading remain as issues to be tried in the action.

FACTS
The Development Bank of the Philippines (DBP), not the Asset Privatization Trust (APT), was the
original petitioner in this case.
APT was first impleaded as a party-respondent in the Resolution of August 14, 1989 on account of
the fact that Sta. Ines Melale Forest Products Corporation (SIM) "has been taken over" by the APT.
DBP, in its reply to the manifestation and comment of APT, asserted that the transfer of SIM’s rights
and interests to the APT cannot be a valid ground for the dismissal of the petition because the said
transfer was effected pendente lite.
The case could prosper only if the Court would direct "APT, as transferee (of SIM’s interests), to be
substituted in the action or joined with petitioner" in accordance with Sec. 20, Rule 3 of the Rules of
Court.
Thus, pursuant to the said rule, in the Resolution of March 26, 1990, the Court ordered that the DBP
"be substituted" as party-petitioner in this case by APT.
The petition originated from a transaction between the DBP and Galleon Shipping Corporation
sometime in 1979. Galleon obtained several "foreign loan guarantee accommodations" from DBP in
the total amount of US$87.233 Million for the acquisition of five (5) brand-new vessels and to finance
twenty percent (20%) of the acquisition cost of two (2) second-hand vessels.
To secure payment thereof, Galleon mortgaged the vessels to DBP. Named joint and solidary debtors
with Galleon in such transaction were SIM, Rodolfo M. Cuenca and Manuel I. Tinio. Due to Galleons
default in the payment of its obligations, DBP had to "make good its guarantees to Galleons foreign
creditors." In June 1984, DBP foreclosed the mortgage but the proceeds of the auction sales
conducted after the extrajudicial foreclosure of the mortgage on the vessels, yielded a deficiency in
the amount of P2,700,960,412.60.[5]
Apparently in anticipation of DBPs claim for the said deficiency, private respondents SIM, Cuenca and
Tinio lodged a complaint against DBP, National Development Corporation (NDC) and Galleon (which
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had become the National Galleon Shipping Corporation ([NGSC]) before Branch 148 of the Regional
Trial Court of Makati, alleging that:
• under Letter of Instruction No. 1155, dated July 21, 1981, the then President of the Philippines
directed NDC to take over the ownership and operation of Galleon. In compliance with such directive,
on August 10, 1981 Galleon, represented Cuenca, entered into a Memorandum of Agreement with
NDC whereby the latter acquired 100% of Galleons equity.
• However, without paying a single centavo in accordance with the "share purchase agreement," NDC
took over absolute ownership of Galleon but mismanaged its operations and placed obstacles to the
formal signing of the "share purchase agreement".
• It is alleged that it was during the management of NDC that Galleon incurred the aforesaid
indebtedness with the accommodation of DBP.
• Prayers in the complaint:
• Issuance of a TRO directing DBP “to cease and desist from filing or pursuing any action or claim for
efficiency judgment or enforcing further claim of any nature against SIM, Cuenca and Tinio until the
rights of the parties shall have been declared under LOI 1155, the MoA and other supporting
documents
• That the injunction to be granted be made permanent
• That SIM, Cuenca and Tinio be declared as “no longer liable to DBP under the Deed of Undertaking,
pledge, mortgages and other accessory contracts between the parties
• That the contracts be declared as having been extinguished and the plaintiffs released from any and
all responsibilities therefor
• That the NDC be declared the absolute owner of Galleon "even without the execution of a share
purchase agreement and responsible for any and all obligations of said Galleon and the plaintiffs, if
any prior to the transfer of ownership, management and control of NDC
• That NDC and Galleon be made to pay them their "advances" on behalf of Galleon in the total
amount of P15.15 million plus $2.3 million, the price of their equity in Galleon and damages

DBP’s answer to the complaint:

• The liability of SIM, Cuenca and Tinio for Galleon’s obligation was not extinguished because LOI
1155, which was not implemented, was in fact revoked by LOI 1195 dated February 19, 1982.
• Galleon’s ownership was not transferred to NDC because Galleon and NDC did not proceed with
the formality of entering into the "share purchase agreement" which was supposed to effect the
conveyance as stipulated in the Memorandum of Agreement.
• DBP was enforcing its claim against the plaintiffs upon a deed of undertaking they had signed and
not upon the deed of mortgage.
• By way of counterclaim, the DBP reiterated its deficiency claim against the plaintiffs in the amount of
P2,700,960,412.60.
On May 15, 1985, the trial court issued a writ of preliminary injunction ordering the DBP and its co-
defendants to "refrain from pursuing any other deficiency claims or any other claim of any nature,
whether judicial or extra-judicial, arising out of, bred by or incident to the transactions covered by the
complaint except as counterclaims in this proceedings."[8]
Meanwhile, the DBP granted SIM, Cuenca and Tinio foreign loan guarantee accommodations in the
total amount of P238,526,225.68, as of August 31, 1985. The transactions were secured by a
mortgage over certain parcels of land owned by SIM in Magallanes, Agusan del Sur.[9] The mortgage
contract authorized DBP to take actual possession of the mortgaged property upon breach of any of
the conditions therein stipulated.[10] Thus, when the mortgagor failed to pay their amortizations on
time, the DBP took the initial step to foreclose the mortgage by taking possession of the mortgaged
plant site in Magallanes, Agusan del Sur. It posted forty-five (45) security guards with instructions to
prevent the taking out therefrom of property or equipment without DBPs approval.[11]
SIM took DBPs action as a "retaliatory move."[12] It sought to supplement the original complaint in
Civil Case No. 10378 by filing a "Motion to Admit Supplemental Complaint."[13] It alleged that DBPs
taking possession of the said plant was a "new development" between the parties and in violation of
the writ of preliminary injunction issued and therefore, warranted the admission of the supplemental
complaint pursuant to Section 6, Rule 10 of the Rules of Court. Missdaa
The supplemental complaint dated June 13, 1985 sought a declaration that "the defendant DBP is not
entitled to foreclose the mortgage" and that DBPs act of posting its security guards in the Agusan del
Sur plant is null and void and unlawful. The same pleading, the first sentence of which stated that it
was filed by SIM only, alleged that the presence of DBPs security men at the manufacturing and
logging plant site caused SIMs creditors, suppliers and workers to panic. SIM also claimed that the
foreclosure of mortgage would "paralyze" its "business operation" thereby rendering jobless 2,300
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employees. It then, prayed that judgment be rendered "making the injunction permanent" and that
petitioner be adjudged liable to SIM for damages.[14]
Immediately, or on June 14, 1985, to be precise, the trial court issued an order directing DBP and all
persons acting under it "to refrain from interfering with the possession, operation, management and
administration" of SIMs plant at Agusan del Norte, "as well as its other mortgaged properties, until
plaintiffs motion could be heard on June 21, 1985." In the same order the court directed DBP to file its
comment on or opposition to plaintiffs motion to admit supplemental complaint.[15]
The DBP opposed the admission of the supplemental complaint; alleging primarily "that the subject
matter of the supplemental complaint is not a proper subject to be heard in the instant case."[16]
Explaining that it "merely exercised its power as attorney-in fact" under the mortgage contract, the
DBP argued that the supplemental complaint "introduces another cause of action into this case". It
added that the cause of action in the original complaint could not be joined with that alleged in the
supplemental complaint "pursuant to the provisions of Sec. 5 of Rule 2 of the Rules of Court."[17]
On August 20, 1985, the trial court issued an Order admitting the supplemental complaint.
The DBP questioned the said Order before the Court of Appeals via a petition for certiorari dated
November 19, 1985.[19]
On February 18, 1987, the Court of Appeals declared the assailed Order as null and void, dismissed
the supplemental complaint and lifted the preliminary injunction issued by RTC. According to it, RTC
gravely abused its discretion in issuing subject Order for two reasons:
First, the admission of the supplemental complaint violated the rule on venue, specifically Sec. 2 (a),
Rule 4 of the Rules of Court.
The supplemental complaint was filed when DBP had already initiated foreclosure proceedings and
therefore while the supplemental complaint appeared to be a personal action, in reality it was a real
action seeking "a ruling on the legality of (DBP’s) foreclosure action." Citing Lizares v. Caluag, CA
held that venue was improperly laid.
Second, a supplemental complaint should strengthen or reinforce the cause of action or defense in
the original complaint for it is meant to "supply deficiencies in aid of one original pleading, not to
entirely substitute the latter."
The supplemental complaint has a subject matter "distinct and different from each other." The cause
of action in the original complaint arose from the mortgage contract executed by Galleon while that in
the supplemental complaint arose from the mortgage contract "executed by principal obligors (firm)."
However, upon motion for reconsideration, the Court of Appeals reversed its aforesaid Decision.
Undaunted, DBP has come to SC via the instant petition for review on certiorari where petitioner DBP
(now the APT) contends that CA erred in admitting the supplemental complaint, it being violative of
the:
(a) rule on venue of real action (Rule 4, Sec 2-A)
(b) Rule on joinder of causes of action (Rule 2, Sec 5)
(c) Rule on Matters subject of supplemental pleadings (Rule 10, Sec 6)

ISSUE:
May the proscription against multiplicity of suits be properly invoked to allow the filing of a
supplemental complaint involving basically the same parties as those in the original complaint but with
a cause of action arising from a transaction distinct from that sued upon in the original complaint?

RULING
NO.
The petition is impressed with merit.
At the time the supplemental complaint was filed in Civil Case No. 10387, the pertinent provision of
Rule 10 of the Rules of Court provided:
"Sec. 6. Matters subject of supplemental pleadings. - Upon motion of a party the court may, upon
reasonable notice and upon such terms as are just, permit him to serve a supplemental pleading
setting forth transactions, occurrences or events which have happened since the date of the pleading
sought to be supplemented. If the court deems it advisable that the adverse party should plead
thereto, it shall so order, specifying the time therefor."[24]
Under the aforecited rule, a supplemental pleading is meant to supply deficiencies in aid of the
original pleading and not to dispense with or substitute the latter.[25] It is not like an amended
pleading which is a substitute for the original one. It does not supersede the original, but assumes that
the original pleading is to stand. The issues joined under the original pleading remain as issues to be
tried in the action.[26]
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In Leobrera v. Court of Appeals[27] the Court ruled that when the cause of action stated in the
supplemental complaint is different from the cause of action mentioned in the original complaint, the
court should not admit the supplemental complaint. In that case, the Bank of the Philippine Islands
(BPI) granted Carlos Leobrera an P800,000.00 credit facility that was secured by two (2) real estate
mortgages. The credit facility was later converted into "a revolving promissory note line" the last of
which was renewed on March 21, 1986 through two (2) ninety-day promissory notes. Upon maturity of
the notes, Leobrera and BPI negotiated for renewal thereof but they failed to agree. Consequently,
BPI demanded full payment of the 90-day loans. Because Leobrera failed to pay the loans, BPI
prepared to foreclose the mortgages. However, before BPI could institute the foreclosure
proceedings, Leobrera filed a complaint for damages with a prayer for the issuance of a writ of
preliminary injunction to enjoin BPI from foreclosing the mortgages. The trial court issued the writ
applied for. Sclaw
It appeared, however, that apart from the P800,000.00 credit facility, BPI also granted Leobrera a
three-year term loan of P500,000.00 secured by a real estate mortgage. After Leobrera had defaulted
in his amortization payments, BPI called the entire loan due and demandable. Leobrera failed to pay
but before BPI could foreclose the mortgage, Leobrera filed with the trial court a "Motion to File
Supplemental Complaint" with the supplemental complaint attached thereto. The trial court granted
Leobreras motion but the Court of Appeals nullified that order of the trial court. Leobrera thus filed a
petition for review on certiorari with this Court which, in due course, denied Leobreras petition; this
Court ratiocinating:
"As to the supplemental complaint, what likewise militates against its admission is the fact that the
matters involved therein are entirely different from the causes of action mentioned in the original
complaint.
A supplemental complaint should, as the name implies, supply only deficiencies in aid of an original
complaint [British Traders Insurance Company v. Commissioner of Internal Revenue, G.R. No. L-
20501, April 30, 1965, 13 SCRA 728]. It should contain only causes of action relevant and material to
the plaintiffs right and which help or aid the plaintiffs right or defense [De la Rama Steamship Co., Inc.
v. National Development Company, G.R. No. L-15659, November 30, 1962, 6 SCRA 775]. The
supplemental complaint must be based on matters arising subsequent to the original complaint
related to the claim or defense presented therein, and founded on the same cause of action. It cannot
be used to try a new matter or a new cause of action [See Randolph v. Missouri-Kansas-Texas R.
Co., D.C. Mo. 1948, 78 F. Supp. 727, Berssenbrugge v. Luce Mfg. Co., D.C. Mo. 1939, 30 F. Supp.
101.]
While petitioner would persuade this Court that the causes of action are interrelated, the record
reveals otherwise. The record shows that petitioners main cause of action in the original complaint
filed in Civil Case No. 15644 concerned BPIs threat to foreclose two real estate mortgages securing
the two 90-day promissory notes executed by petitioner in 1986. Petitioner alleges that this
threatened foreclosure violated the terms of the 1980 amicable settlement between BPI and
petitioner.
The supplemental complaint on the other hand alleged facts of harassment committed by BPI in
unreasonably opting to declare petitioner in default and in demanding full liquidation of the 1985
three-year term loan. This three-year term loan, as previously mentioned, was entirely distinct and
separate from the two promissory notes. It was independent of the 1980 amicable settlement between
petitioner and BPI which gave rise to the credit facility subject of the original complaint. Although there
is identity in the remedies asked for in the original and supplemental complaints, i.e., injunction,
petitioners subsequent cause of action giving rise to the claim for damages in the supplemental
complaint is unrelated to the amicable settlement which brought about the grant of the credit facilities,
the breach of which settlement is alleged to be the basis of the original complaint. Petitioner himself in
his supplemental complaint admits this. xxx.
xxx xxx xxx
The two causes of action being entirely different, the latter one could not be successfully pleaded by
supplemental complaint."[28]
The facts of the Leobrera cases are not very different from those in the case under scrutiny. However,
private respondent SIM attempts to impress upon the Court that the facts alleged in the original
complaint are connected with those in the supplemental complaint because the DBPs act of initiating
foreclosure proceedings as regards the mortgaged plant in Agusan del Sur was in violation of the May
15, 1985 writ of preliminary injunction. Nevertheless, a closer look at the facts reveals that the original
complaint was based on a cause of action that is entirely different from that stated in the supplemental
complaint which arose out of a different set of facts. Sclex
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A cause of action is the fact or combination of facts which affords a party a right to judicial
interference in his behalf. It is the reason why the litigation has come about; it is the act or omission of
defendant resulting in the violation of someones right. Its existence is determined upon consideration
of the statements or allegations in the complaint.[29]
In the original complaint in Civil Case No. 10387, what private respondents sought to prevent by their
prayer for an injunction was the DBPs intention to go after private respondents for the deficiency of
P2,700,960,412.60 resulting from the foreclosure of the mortgages in June 1984 of seven (7) vessels
of Galleon. On the other hand, the cause of action stated in the supplemental complaint was the
DBPs initial act of posing security guards in SIMs Agusan del Norte plant preparatory to the
foreclosure of the mortgage of the same plant, allegedly in contravention of the writ of preliminary
injunction issued by the trial court in Civil Case No. 10387. The supplemental complaint, however,
states a fact that is entirely distinct from those in the original complaint. It alleges that the DBPs taking
over the Agusan del Sur plant of SIM could not have been in pursuance of any agreement between
SIM and the DBP because the mortgaged dated November 8, 1984 that was entered into between
those parties "does not provide extrajudicial and forcible taking over of the mortgaged properties by
defendant DBP."[30] Although the thrust of the allegations in the supplemental complaint was to
create a connection or relation between it and the original complaint, the same allegations reveal the
fact that its filing was impelled by the imminence of the foreclosure of the November 8, 1984
mortgage, that is different from and outside of the subject matter of the original complaint.
Furthermore, if the supplemental complaint "assumes the original pleading to stand," then there was
no point in naming only the SIM as the plaintiff in the supplemental complaint. That fact only proves
that the other plaintiffs in the original complaint, namely, Cuenca and Tinio, have no cause of action
against the DBP in the supplemental complaint as it is in reality based on an entirely different subject
matter.
Granting that SIMs purpose in filing the supplemental complaint was to effect a joinder of causes of
action to avoid multiplicity of suits, it must fail just the same. The Rules of Court provide that causes of
action may be joined provided that they arise out of the same contract, transaction or relation between
the parties or are for demands for money or are of the same nature and character.
In this case, hardly do the original and supplemental complaints meet the required test of "unity in the
problem presented" and "a common question of law and fact involved" as regards jurisdiction, venue
and joinder of parties. The ultimate problem in the original complaint as far as private respondents are
concerned is how to prevent the DBP from pursuing the amount of deficiency after an extrajudicial
foreclosure sale of the mortgaged vessels. In the supplemental complaint, what private respondent
SIM seeks to preempt is the foreclosure of the mortgage of its Agusan del Sur plant.