1. Rayo vs. Metrobank, 539 SCRA 571 (2007) Meanwhile, on April 3, 2002, petitioner Eduardo L.
, on April 3, 2002, petitioner Eduardo L. Rayo filed a complaint 10 docketed as Civil
[G.R. No. 165142. December 10, 2007.]
EDUARDO L. RAYO, petitioner, vs. METROPOLITAN BANK AND
TRUST COMPANY and BRANCH 223 OF THE REGIONAL TRIAL
COURT OF QUEZON CITY, respondents.
DECISION
QUISUMBING, J p:
Before us is a petition for review assailing the Resolutions dated June 15, 2004 1 and August 23,
2004 2 of the Court of Appeals in CA-G.R. SP No. 83895 for annulment of judgment.
The pertinent facts are undisputed.
Midas Diversified Export Corp. (Midas), thru its president, Mr. Samuel U. Lee, obtained six (6)
loans from private respondent Metropolitan Bank and Trust Company (Metrobank), amounting to
P588,870,000 as evidenced by promissory notes. To secure the payment of an P8,000,000 loan,
Louisville Realty & Development Corporation (Louisville), thru its president, Mr. Samuel U. Lee,
executed in favor of Metrobank, a real estate mortgage over three parcels of land situated at No.
40 Timog Ave., Brgy. Laging Handa, Quezon City, with all the buildings and improvements
thereon. The properties are covered by Transfer Certificates of Title (TCT) Nos. N-163455, N-
166349 and N-166350 issued by the Registry of Deeds of Quezon City.
When the debtor-mortgagor failed to pay, Metrobank extra-judicially foreclosed the real estate
mortgage in accordance with Act No. 3135, 3 as amended. Thereafter, in a public auction,
Metrobank was the highest bidder. A Certificate of Sale 4 dated December 11, 2000 was duly
registered with the Registry of Deeds of Quezon City on December 13, 2000. When Louisville
refused to turn over the real properties, on March 17, 2001, Metrobank filed before the Regional
Trial Court (RTC), Branch 223, Quezon City, an ex parte petition 5 for the issuance of a writ of
possession docketed as LRC Case No. Q-13915(01). After presentation of evidence ex parte, the
RTC granted the petition in an Order 6 dated July 5, 2001, the dispositive portion of which reads
as follows: HTAIcD
WHEREFORE, in consideration of the foregoing premises, the instant
petition is hereby GRANTED. Upon the filing of a bond in the amount of
ONE HUNDRED THOUSAND PESOS ([P]100,000.00), let a Writ of
Possession over the properties covered by Transfer Certificates of Title
Nos. N-163455, N-166349 & N-166350 issue in favor of the petitioner
METROPOLITAN BANK & TRUST COMPANY to be implemented by the
Deputy Sheriff of Branch 223, Regional Trial Court of Quezon City by
placing the petitioner in possession over the parcels of land with all its
improvements.
SO ORDERED. 7
On September 24, 2001, Metrobank posted the required bond. Consequently, a writ of possession
was issued on October 9, 2001. This was partially implemented as to TCT No. N-163455, as
evidenced by the Turn-Over Receipt 8 dated December 13, 2002. The writ over the two remaining
properties, under TCT Nos. N-166349 and N-166350, were subsequently implemented as
evidenced by the Turn-Over Receipt 9 dated December 3, 2003.
Case No. Q02-46514 against Metrobank for Nullification of Real Estate Mortgage Contract(s) and
Extrajudicial Foreclosure Sale, in the RTC, Branch 99, Quezon City.
On May 13, 2004, petitioner Rayo filed with the Court of Appeals a Petition 11 for Annulment of
Judgment on the ground of "absolute lack of due process." Petitioner alleged that his predecessor,
Louisville, was not notified of the proceedings and that Section 7 12 (ex parte motion or petition
for the issuance of a writ of possession) of Act No. 3135 is unconstitutional.
On June 15, 2004, the Court of Appeals denied the petition for lack of merit. The Court of Appeals
ruled that petitioner is neither the registered owner nor the successor-in-interest of the registered
owner; hence, not a real party-in-interest. It also ruled that there is no basis to challenge the
constitutionality of Section 7 of Act No. 3135, as amended as it constitutes a collateral attack
against said provision. Further, petitioner availed of the wrong remedy in filing Civil Case No. Q02-
46514. Petitioner sought reconsideration, but was likewise denied.
Petitioner now comes before us raising the following as primary issue:
WHETHER OR NOT SECTION 7 OF ACT NO. 3135 IS CONTRARY TO
THE DUE PROCESS PROVISION OF THE PHILIPPINE CONSTITUTION
CONSIDERING THAT SUCH SECTION 7 OF THE LAW PROVIDES OR
ALLOWS, ACCORDING TO THIS HONORABLE COURT, FOR AN EX-
PARTE PROCEEDING WHICH IS A "JUDICIAL PROCEEDING
BROUGHT FOR THE BENEFIT OF ONE PARTY ONLY, AND WITHOUT
NOTICE TO, OR CONSENT BY ANY PERSON ADVERSELY
INTERESTED" "OR A PROCEEDING WHEREIN RELIEF IS GRANTED
WITHOUT AN OPPORTUNITY FOR THE PERSON AGAINST WHOM
THE RELIEF IS SOUGHT TO BE HEARD," AS HELD IN THE CASE
OF GOVERNMENT SERVICE INSURANCE SYSTEM VS. COURT OF
APPEALS, 169 SCRA 244 @ 255, JANUARY 20, 1989. 13 CHcETA
He also raises the following as secondary issues:
I.
WHETHER OR NOT THE PETITIONER HAS THE LEGAL PERSONALITY
TO SEEK THE ANNULMENT OF JUDGMENT IN [THE] SUBJECT LRC
CASE NO. Q-13915(01).
II.
WHETHER OR NOT PRIVATE RESPONDENT VIOLATED THE RULE
AGAINST FORUM-SHOPPING WHEN IT DID NOT INFORM THE
HONORABLE BRANCH 223 OF THE REGIONAL TRIAL COURT OF
QUEZON CITY REGARDING THE FILING OF CIVIL CASE NO. Q-02-
46514 FOR NULLIFICATION OF REAL ESTATE MORTGAGE
CONTRACT AND THE EXTRA-JUDICIAL FORECLOSURE SALE OF
THE SAME SUBJECT REAL PROPERTIES AND THE PENDENCY OF
THE SAME BEFORE THE HONORABLE BRANCH 99 OF THE SAME
REGIONAL TRIAL COURT. 14
Stated simply, the issues raised are: (1) Does petitioner have the legal personality in the
annulment of judgment proceedings? (2) Is Section 7 of Act No. 3135, as amended,
unconstitutional? (3) Is respondent guilty of forum-shopping?
Petitioner insists that contrary to the ruling of the Court of Appeals, he has the legal personality to
institute the annulment of judgment case against Metrobank, considering that the March 25, 2002
deed of assignment he entered into with Louisville and Winston Linwy L. Chua makes him a co-
assignee over the subject real properties.
For its part, Metrobank claims that it was not a party to the deed of assignment among Louisville, The Court of Appeals ruled that petitioner's attempt to challenge the constitutionality of Section 7
Chua and petitioner, hence, it has no privity of contract with petitioner Rayo. Moreover, Metrobank of Act No. 3135, as amended, constitutes a collateral attack that is not allowed. We fully agree
points out that the real properties had already been extrajudicially foreclosed when petitioner and with the appellate court's ruling. For reasons of public policy, the constitutionality of a law cannot
his assignors executed the deed of assignment. be attacked collaterally. 28

Under Section 2, 15 Rule 3 of the Rules of Court, every action must be prosecuted or defended in
the name of the real party-in-interest, or one "who stands to be benefited or injured by the judgment
in the suit." 16 A real party-in-interest is one with "a present substantial interest" which means
such interest of a party in the subject matter of the action as will entitle him, under the substantive
law, to recover if the evidence is sufficient, or that he has the legal title to demand. 17 cCTESa
Now, is petitioner Rayo a real party-in-interest? Initially, we recognized herein petitioner as the co-
assignee of the subject real properties as shown in the March 25, 2002 deed of assignment.
However, while petitioner would be injured by the judgment in this suit, we find that petitioner has
no present substantial interest to institute the annulment of judgment proceedings and nullify the
order granting the writ of possession.
First, there was no violation of petitioner's right to constitutional due process. In a long line of
cases, 18 we have consistently ruled that the issuance of a writ of possession in favor of the
purchaser in a foreclosure sale of a mortgaged property under Section 7 of Act No. 3135, as
amended is a ministerial duty of the court. The purchaser of the foreclosed property, upon ex
parte application and the posting of the required bond, has the right to acquire possession of the
foreclosed property during the 12-month redemption period and with more reason, after the
expiration of the redemption period.
With regard to forum-shopping; forum-shopping is the filing of multiple suits involving the same
parties for the same cause of action, either simultaneously or successively, for the purpose of
obtaining a favorable judgment. It exists where the elements of litis pendentia are present or where
a final judgment in one case will amount to res judicata in another. 29 The issuance of the writ of
possession being a ministerial function, and summary in nature, it cannot be said to be a judgment
on the merits. It is only an incident in the transfer of title. Hence, a separate case for annulment of
mortgage and foreclosure sale cannot be barred by litis pendentia or res judicata. 30 Clearly,
insofar as LRC Case No. Q-13915(01) and Civil Case No. Q02-46514 are concerned, Metrobank
is not guilty of forum-shopping.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Resolutions dated June 15,
2004 and August 23, 2004 of the Court of Appeals in CA-G.R. SP No. 83895 are hereby
AFFIRMED. Costs against the petitioner.
SO ORDERED.
||| (Rayo v. Metropolitan Bank and Trust Co., G.R. No. 165142, [December 10, 2007], 564 PHIL
528-540)

An ex parte petition for the issuance of a writ of possession under Section 7 of Act No. 3135 is
not, strictly speaking, a "judicial process" as contemplated in Article 433 19 of the Civil Code. It is
a judicial proceeding for the enforcement of one's right of possession as purchaser in a foreclosure
sale. It is not an ordinary suit filed in court, by which one party "sues another for the enforcement
of a wrong or protection of a right, or the prevention or redress of a wrong." It is a non-litigious
proceeding authorized in an extrajudicial foreclosure of mortgage pursuant to Act No. 3135, as
amended, and is brought for the benefit of one party only, and without notice to, or consent by any
person adversely interested. It is a proceeding where the relief is granted without requiring an
opportunity for the person against whom the relief is sought to be heard. No notice is needed to
be served upon persons interested in the subject property. 20

Second, in the deed of assignment, petitioner also acknowledged that the subject real properties
were already sold at various extrajudicial foreclosure sales and bought by Metrobank. Clearly,
petitioner recognized the prior existing right of Metrobank as the mortgagee-purchaser over the
subject real properties. 21 Actual knowledge of a prior mortgage with Metrobank is equivalent to
notice of registration 22 in accordance with Article 2125 23 of the Civil Code. Conformably with
Articles 1312 24 and 2126 25 of the Civil Code, a real right or lien in favor of Metrobank had
already been established, subsisting over the properties until the discharge of the principal
obligation, whoever the possessor(s) of the land might be. 26 As petitioner is not a party whose
interest is adverse to that of Louisville, there was no bar to the issuance of a writ of possession to
Metrobank. It does not matter that petitioner was not specifically named in the writ of possession
nor notified of such proceedings.

Third, we also note that petitioner availed of the wrong remedy in filing Civil Case No. Q02-46514,
for nullification of real estate mortgage and extrajudicial foreclosure sale, more than six (6) months
after the issuance of the writ of possession considering the mandate of Section 8 27 of Act No.
3135, as amended. Hence, even petitioner's action for annulment of judgment cannot prosper as
it cannot be a substitute for a lost remedy. AaIDHS

Now, petitioner is challenging the constitutionality of Section 7 of Act No. 3135, as amended. He
avers that Section 7 violates the due process clause because, by the mere filing of an ex
parte motion in the proper cadastral court, the purchaser in a foreclosure sale is allowed to obtain
possession of the foreclosed property during the redemption period.
 2. Comm. Domingo vs. Scheer, 421 SCRA 468 (2004)
[G.R. No. 154745. January 29, 2004.]
COMMISSIONER ANDREA D. DOMINGO, BUREAU OF
IMMIGRATION, petitioner, vs. HERBERT MARKUS EMIL
SCHEER, respondent.
DECISION
CALLEJO, SR., J p:
This is a petition for review under Rule 45 of the Rules of Court, as amended, of the Decision 1 of
the Court of Appeals in CA-G.R. SP No. 71094 granting the respondent's petition for certiorari and
prohibition annulling the order of arrest issued by the petitioner, and permanently enjoining her
from deporting the respondent from the Philippines. Through its decision, the CA virtually reversed
the Summary Deportation Order 2 of the Board of Commissioners (BOC) and its Omnibus
Resolution 3 denying the respondent's Urgent Motion for Reconsideration of said Order, and
enjoining the petitioner from deporting the respondent.
The facts as culled from the records are as follows:
Respondent Herbert Markus Emil Scheer, a native of Ochsenfurt, Germany, was a frequent visitor
of the Philippines. On July 18, 1986, his application for permanent resident status was
granted. 4 The Bureau of Immigration and Deportation (BID) issued in favor of the respondent
Alien Certificate of Registration No. B-396907 dated September 16, 1987 5 and Immigration
Certificate of Residence No. 256789 dated February 24, 1988. 6 The Commissioner stated that
the granting of the petition would redound to the benefit of the Filipino people. 7 During his sojourn
in the Philippines, the respondent married widowed Edith delos Reyes 8 with whom he had two
daughters. They had a son, Herbert Scheer, Jr., but he passed away on November 13,
1995. 9 They resided in Puerto Princesa City, Palawan, where the respondent established and
managed the Bavaria Restaurant. On May 21, 1991, he was appointed Confidential Agent by then
NBI Director Alfredo S. Lim. 10
In a Letter dated June 29, 1995, Vice Consul Jutta Hippelein informed the Philippine Ambassador
to Bonn, Germany, that the respondent had police records and financial liabilities in Germany. 11
The Department of Foreign Affairs received from the German Embassy in Manila Note Verbale No.
369/95 dated July 26, 1995, informing it that the respondent was wanted by the German Federal
Police; that a warrant of arrest had been issued against him; and that the respondent will be served
with an official document requesting him to turn over his German passport to the Embassy which
was invalidated on July 2, 1995. 12 The Embassy requested the Department of Foreign Affairs to
inform the competent Philippine authorities of the matter. The BOC thereafter issued a Summary
Deportation Order dated September 27, 1997. The penultimate paragraph of the Order reads:
WHEREFORE, the foregoing considered, the Board Commissioners
hereby orders the following:
1. Cancellation of respondent's permanent residence visa;
2. Respondent's summary deportation and permanent exclusion
from the Philippines; and
3. Inclusion of his name on the Bureau's Blacklist.
PROVIDED, however that said summary deportation should be held in
abeyance in case said alien has a pending final and executory criminal
conviction where the imposed penalty is imprisonment, in which case, he
has to serve first such imposed penalty, and/or has a pending criminal, civil
or administrative action and a Hold Departure Order has been issued or
that his presence in said action is indispensable. In such instances, the
alien should remain in the custody of the Bureau until his turnover to the
proper authorities in case he has to serve imprisonment or in case of
pendency of civil or criminal administrative action, he shall remain in the
custody of the Bureau until such time that his pending cases shall have
been decided, terminated or settled, as the case may be, unless
circumstances demand the immediate implementation of this summary
deportation.
xxx xxx xxx
SO ORDERED. 13
In issuing the said order, the BOC relied on the correspondence from the German Vice Consul on
its speculation that it was unlikely that the German Embassy will issue a new passport to the
respondent; on the warrant of arrest issued by the District Court of Germany against the
respondent for insurance fraud; and on the alleged illegal activities of the respondent in
Palawan. 14 The BOC concluded that the respondent was not only an undocumented but an
undesirable alien as well.
When the respondent was apprised of the deportation order, he forthwith aired his side to then
BID Commissioner Leandro T. Verceles. The Commissioner allowed the respondent to remain in
the Philippines, giving the latter time to secure a clearance and a new passport from the German
Embassy. 15 Then Presidential Assistant Teodorico K. Imperial wrote a Testimonial dated
November 24, 1995, in behalf of the respondent addressed to Commissioner Verceles.
Nonetheless, the respondent, through counsel, filed on December 5, 1995 an Urgent Motion for
Reconsideration of the Summary Deportation Order of the BOC. 16 In his motion, the respondent
alleged, inter alia, that: AcSHCD
1. The elementary rules of due process require notice and opportunity to
be heard before a person can be lawfully deprived of his right (Ute Paterok
vs. Bureau of Customs, 193 SCRA 132). In the instant case, although it is
acknowledged that the Honorable Office may conduct summary
deportation proceedings, respondent was not given notice and opportunity
to be heard before said Summary Deportation Order was issued.
Respondent's right to procedural due process was therefore violated.
Consequently, the Summary Deportation Order is invalid.
2. In issuing, the Summary Deportation Order, this Honorable Office relied
on Note Verbal No. 369/95 issued by the Embassy of the Federal Republic
of Germany, Manila, notifying the Department of Foreign Affairs and this
Honorable Office about the warrant of arrest against respondent for alleged
illegal insurance fraud and illegal activities. However, a close scrutiny of
said note verbal shows that nowhere therein does it state that respondent
was involved in insurance fraud or in any kind of illegal activities in
Germany or anywhere else in the world, such as in Palawan. Therefore,
the main basis of the Summary Deportation Order is incompetent as
evidence against respondent who is, like every Filipino, presumed to be
innocent until his guilt is proven beyond reasonable doubt.
3. The power to deport alien is a police power measure necessary against
undesirable alien whose presence in the country is injurious to the public
good and domestic tranquility of the country (Board of Commissioner
 Commission on Immigration vs. De la Rosa, 197 SCRA 853). It is
respectfully submitted that respondent is not an undesirable alien. He has
stayed in the Philippines for more or less than (10) years. He has married
a Filipina and has three (3) minor children. He has established his business
in Palawan and he has no police record whatsoever. Respondent has
considered the Philippines his second home and he has nowhere else to
go back to in Germany. Under the circumstances and for humanitarian
considerations, respondent is not an undesirable alien whose deportation
is warranted. Likewise, the mere fact that his passport was not renewed by
the German Embassy does not also automatically justify the deportation of
respondent. 17
However, the BOC did not resolve the respondent's motion. The respondent was neither arrested
nor deported.
Meanwhile, on February 15, 1996, the District Court of Straubing rendered a Decision dismissing
the criminal case against the respondent for physical injuries. 18 The German Embassy in Manila,
thereafter, issued a temporary passport to the respondent.
In a Letter dated March 1, 1996, the respondent informed Commissioner Verceles that his
passport had been renewed following the dismissal of the said criminal case. He reiterated his
request for the cancellation of the Summary Deportation Order dated September 27, 1995 and the
restoration of his permanent resident status. 19 Subsequently, on March 12, 1996, the German
Embassy issued to the respondent a regular passport, to expire on March 11, 2006.
The BOC still failed to resolve the respondent's Urgent Motion for Reconsideration. Commissioner
Verceles did not respond to the respondent's March 1, 1996 Letter. The respondent remained in
the Philippines and maintained his business in Palawan. On March 20, 1997, the Department of
Labor and Employment approved his application for Alien Employment Registration Certificate as
manager of the Bavaria Restaurant in Puerto Princesa City.
In the meantime, petitioner Immigration Commissioner Andrea T. Domingo assumed office. She
wrote the German Embassy and inquired if the respondent was wanted by the German police. On
April 12, 2002, the German Embassy replied that the respondent was not so wanted. 20 At about
midnight on June 6, 2002, Marine operatives and BID agents apprehended the respondent in his
residence on orders of the petitioner. He was whisked to the BID Manila Office and there held in
custody while awaiting his deportation. Despite entreaties from the respondent's wife 21 and his
employees, the petitioner refused to release the respondent. 22
Shocked at the sudden turn of events, the respondent promptly communicated with his lawyer.
The latter filed with the BID a motion for bail to secure the respondent's temporary liberty. On June
11, 2002, the respondent's counsel filed with the Court of Appeals a petition for certiorari,
prohibition and mandamus with a prayer for temporary restraining order and writ of preliminary
injunction, to enjoin the petitioner from proceeding with the respondent's deportation. 23 The
respondent (petitioner therein) alleged, inter alia, that his arrest and detention were premature,
unjust, wrongful, illegal and unconstitutional, effected without sufficient cause and without
jurisdiction or with grave abuse of discretion. He asserted that there was no speedy remedy open
to him in the ordinary course of law 24 and that his Urgent Motion for Reconsideration of the
Summary Deportation Order of the BOC had not yet been resolved despite the lapse of more than
six years. The respondent averred that he was a fully documented alien, a permanent resident
and a law-abiding citizen. He, thus, prayed as follows:
PRAYER
WHEREFORE, it is most respectfully prayed of this Honorable Court that:
1. Upon the filing of this Petition, this Honorable Court issue a Temporary
Restraining Order to enjoin respondent Commissioner from enforcing any
order to deport petitioner;
2. After due hearing, a writ of preliminary and mandatory injunction be
correspondingly issued to maintain the status quo pending resolution of the
Petition on the merits.
3. After hearing, judgment be rendered:
a) Directing and mandating respondent Commissioner and the body she
heads to resolve the Motion for Reconsideration filed in 1995, in his favor,
and nullifying or suspending the implementation of any order, oral or
written, she may have issued or issue to deport petitioner; and
b) Making the injunction in petitioner's favor permanent.
Petitioner likewise prays for such other and further relief as may be deemed
just and equitable in the premises, such as directing respondent, if Herbert
Scheer is deported before the matter is heard on notice, to authorize his
return. 25
The BOC ruled that its September 27, 1995 Order had become final and executory after the lapse
of one year, citing our rulings in Sy vs. Vivo, 26 and Lou vs. Vivo. 27 The BOC also held that it
was not competent to reverse the September 27, 1995 Order, citing our ruling in Immigration
Commissioner vs. Fernandez. 28 It declared that the respondent may seek the waiver of his
exclusion via deportation proceedings through the exceptions provided by Commonwealth Act No.
613, 29 Section 29(a)(15), but that his application for the waiver presupposes his prior removal
from the Philippines.
In a parallel development, the respondent procured a letter from the National Bureau of
Investigation (NBI) in Puerto Princesa City certifying that he had no pending criminal
record. 30 The Puerto Princesa City Philippine National Police (PNP) also issued a certification
that the respondent had no pending criminal or derogatory records in the said office. 31
Meanwhile, on June 26, 2002, the Court of Appeals issued a status quo order restraining the
petitioner from deporting the respondent on a bond of P100,000.00. 32 On July 18, 2002, the BOC
issued an Omnibus Resolution dated June 14, 2002, pendente lite denying the respondent's
Urgent Motion for Reconsideration, Motion for Bail/Recognizance, and the Letter dated June 11,
2002. The decretal portion of the resolution reads:
Wherefore, in view of the foregoing circumstances, we deny the prayers of
the Urgent Motion for Reconsideration of 5 December 1995, the Motion for
Bail/Recognizance dated 7 June 2002 and the Letter of 11 June 2002.
Further, we hereby order the following:
1. Subject to the submission of appropriate clearances, the summary
deportation order the respondent Herbert Scheer, German, under BI Office
Memorandum Order No. 34 (series of 1989) and the BOC Summary
Deportation Order of 27 September 1995;
2. Permanent exclusion of Herbert Scheer from the Philippines under C.A.
No. 613, Section 40(a)(15).
3. Inclusion of the name of Herbert Scheer in the Immigration Black List;
and
4. Forfeiture of the bail bond, if any, of Herbert Scheer under C.A. No. 613,
Section 40(a)(15).
xxx xxx xxx
 IT IS SO ORDERED. 33
During the hearing of the respondent's plea for a writ of preliminary mandatory injunction before
the CA on July 22, 2002, the Office of the Solicitor General (OSG) manifested that the State had
no opposition to the respondent's re-entry and stay in the Philippines, provided that he leave the
country first and re-apply for admission and residency status with the assurance that he would be
re-admitted. 34 The respondent's counsel manifested to the appellate court that he had just been
informed by the OSG of the Omnibus Resolution of the BOC dated June 14, 2002.
In her Comment on the Petition, the petitioner (the respondent therein) alleged, inter alia, the
following:
1) that the BOC was an indispensable party to the petition; EaIDAT
2) the petitioner's failure to implead the BOC warranted the denial of the
petition;
3) the allowance by then Immigration Commissioner Leandro Verceles for
the petitioner therein to renew his passport and secure
clearances, even if proved, was not binding on the BOC;
4) the September 27, 1995 Order of the BOC was already executory when
the respondent filed her petition in the CA;
5) the German Embassy's issuance of a new passport did not legalize the
respondent's stay in this country, which became illegal on July
2, 1995 when his passport expired;
6) the respondent therein did not act with abuse of discretion in causing the
arrest and detention of the respondent based on the BOC's
Summary Deportation Order; and
7) the BOC did not act with grave abuse of discretion in issuing its
Summary Deportation Order and Omnibus Resolution and such
order and resolution were not mooted by the German Embassy's
issuance of a new passport in favor of the respondent.
In view of the Omnibus Resolution of the BOC, the respondent (petitioner therein) in his
Memorandum prayed for the nullification of the BOC's Order, as well as its Omnibus Resolution
denying his Urgent Motion for Reconsideration considering that with the issuance of a new
passport, there was no more basis for his deportation, thus:
RELIEF
WHEREFORE, it is most respectfully prayed of this Honorable Court that:
1. Upon the filing of this Memorandum, this Honorable Court forthwith direct
and authorize the immediate release of petitioner, even on undersigned's
recognizance, until further orders from this Honorable Court;
2. The Summary Deportation Order of September 27, 19[9]5, affirmed by
respondent allegedly on June 14, 2002 and made known only yesterday,
be nullified to the extent that it directs the deportation of petitioner, who has
removed the very basis of said Order of not having a valid passport, and
that the Resolution of June 14, 2002 be nullified in toto; and,
3. The Temporary Restraining Order of June 26, 2002 be converted into a
permanent injunction or writ of prohibition.
Petitioner likewise prays for such other and further relief as may be deemed
just and equitable in the premises. 35
Surprisingly, the respondent's counsel received on July 24, 2003 a Letter from the petitioner dated
July 16, 2002 stating that, "the BOC was in the course of reviewing the deportation case against
Mr. Scheer, and that its findings would be given in due time." 36
On August 20, 2002, the Court of Appeals rendered a Decision in favor of the respondent granting
his petition for certiorari and prohibition and permanently enjoining the petitioner from deporting
the respondent. The decretal portion of the Decision reads:
WHEREFORE, premises considered, the petitions for certiorari and
prohibition are hereby GRANTED. Accordingly, any order, oral or written,
issued by respondent Commissioner Domingo against petitioner, in
relation to his deportation, is hereby ANNULLED, and respondent
Commissioner Domingo is hereby permanently enjoined/prohibited from
deporting petitioner, in so far as this case is concerned.
It is likewise ordered that petitioner be released from his
confinement/detention in the Bureau of Immigration UNLESS there is/are
fresh new grounds/cases that will warrant his continued detention.
SO ORDERED. 37
The Court of Appeals ruled that the German Embassy's subsequent issuance of passport to the
respondent before the BOC's issuance of its Omnibus Resolution had mooted the September 27,
1995 Summary Deportation Order, as well as the arrest and detention of the respondent.
According to the court, it made no sense to require the respondent to leave the country and
thereafter re-apply for admission with the BOC. Furthermore, since the grounds cited by the BOC
in its Summary Deportation Order no longer existed, there was no factual and legal basis to
disqualify the respondent from staying in the country.
On the issue of whether the members of the BOC were indispensable parties, the CA ruled as
follows:
a) There are quite a number of cases in relevant jurisprudence wherein
only the Immigration Commissioner was impleaded to decide whether an
alien may stay or be deported, such as in the case of Vivo vs. Arca (19
SCRA 878) and Vivo vs. Cloribel (22 SCRA 159).
b) In the case of Caruncho III vs. COMELEC (315 SCRA 693), it was
pronounced that: "Ordinarily, the nonjoinder of an indispensable party or
the real party interest is not by itself a ground for the dismissal of the
petition. The court before which the petition is filed must first require the
joinder of such party. It is the noncompliance with said order that would be
a ground for the dismissal of the petition."
thus, c) respondent may be estopped for not raising such issue earlier. 38
Aggrieved, the respondent therein, now the petitioner, through the Office of the Solicitor General,
appealed to us for relief. The petitioner contends that the Court of Appeals erred on a question of
law in granting the respondent's petition in CA-G.R. SP No. 71094. 39
In support of his contention, the Solicitor General has submitted the following arguments:
I. THE WRIT OF MANDAMUS DOES NOT LIE AGAINST THE
COMMISSIONER OF THE BUREAU OF IMMIGRATION TO RESOLVE
RESPONDENT'S URGENT MOTION FOR RECONSIDERATION OF THE
SUMMARY DEPORTATION ORDER, CONSIDERING THAT IT IS THE
BOARD OF COMMISSIONERS, AND NOT THE COMMISSIONER
ALONE, WHICH HAS AUTHORITY TO MAKE SAID RESOLUTION.
II. THE WRIT OF CERTIORARI DOES NOT LIE AGAINST THE
COMMISSIONER OF THE BUREAU OF IMMIGRATION, CONSIDERING
 THAT IT IS THE BOARD OF COMMISSIONERS, AND NOT THE
COMMISSIONER ALONE, WHICH ISSUED THE SUMMARY
DEPORTATION ORDER AND THE OMNIBUS RESOLUTION.
III. THE WRIT OF PROHIBITION DOES NOT LIE AGAINST THE
COMMISSIONER OF THE BUREAU OF IMMIGRATION, PROHIBITING
THE IMPLEMENTATION OF THE SUMMARY DEPORTATION ORDER
AND THE OMNIBUS RESOLUTION, CONSIDERING THAT THE BOARD
OF COMMISSIONERS WAS NOT IMPLEADED AS PARTY-
RESPONDENT IN THE PETITION IN CA-G.R. SP NO. 71094.
IV. ASSUMING BUT WITHOUT ADMITTING THAT THE BOARD OF
COMMISSIONERS WAS PROPERLY IMPLEADED AS PARTY-
RESPONDENT IN THE PETITION IN CA-G.R. SP NO. 71094,
NEVERTHELESS, THE SUMMARY DEPORTATION ORDER AND THE
OMNIBUS RESOLUTION WERE NOT ISSUED WITHOUT OR IN
EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION. ATcaID
V. FURTHER ASSUMING BUT WITHOUT ADMITTING THAT THE
BOARD OF COMMISSIONERS WAS PROPERLY IMPLEADED AS
PARTY-RESPONDENT IN THE PETITION IN CA-G.R. SP NO. 71094,
THE COMMISSIONER OF THE BUREAU OF IMMIGRATION DID NOT
ACT WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN IMPLEMENTING THE SUMMARY DEPORTATION
ORDER AND THE OMNIBUS RESOLUTION. 40
Elucidating on his first three arguments, the petitioner maintains that the respondent's petition
for certiorari, prohibition and mandamus before the Court of Appeals should have been dismissed
because he failed to implead the real party-in-interest as mandated by Rule 3, Section 7 of the
Rules of Court, as amended; in this case, the BOC. According to the Solicitor General, this was a
fatal procedural error. The inclusion of the BOC as respondent in the case was necessary in order
that its actions could be directly attacked and for the court to acquire jurisdiction over it. The fact
that Immigration Commissioner Andrea T. Domingo was impleaded as the sole respondent was
not enough, as she is only one of the four Commissioners. Furthermore, the assailed Orders were
issued by the Board, and not by the Immigration Commissioner alone.
The respondent counters that the petitioner is already estopped from raising this issue. He argues
that —
In quite a number of jurisprudence, only the Immigration Commissioner is
impleaded to decide whether an alien may stay here or not. The bottom
line is petitioner, head of the Bureau of Immigration, was more than fully
heard on its institutional position, a Bureau which speaks with a single
voice in this case. She is in estoppel for not raising the issue earlier, either
in a timely Comment or during the oral argument . . . 41
In Caruncho III v. Comelec, it was held that —
[O]rdinarily, the nonjoinder of an indispensable party or real party
in interest is not by itself a ground for the dismissal of the petition.
The court before which the petition is filed must first require the
joinder of such party. It is the noncompliance with said order that
would be a ground for the dismissal of the petition.
But even as the Court of Appeals did not require respondent of such joinder
of parties, the respondent, in fact, begged leave, ad cautelam, in its Reply
Memorandum dated July 31, 2002 to implead the Board which speaks with
a single voice anyway in this case, and therefore, no claim can be made
that a valid point of view has not been heard . . . 42
Moreover, according to the respondent, the petitioner is clearly the BID's chosen instrumentality
for the relevant purpose. What the respondent ultimately questioned are the acts or orders of the
petitioner for the arrest and immediate deportation of the respondent by way of implementing the
BOC's Summary Deportation Order.
By way of reply, the Office of the Solicitor General asserted that the Summary Deportation Order
and Omnibus Resolution were collegial actions of the BOC and not of the petitioner alone.
Although its Chairperson, the petitioner, is merely a member thereof, her decisions and actions
are still subject to the collective will of the majority. 43
The Ruling of the Court
The BOC is an Indispensable Party
We agree with the petitioner's contention that the BOC was an indispensable party to the
respondent's petition for certiorari, prohibition and mandamus in the Court of Appeals. The
respondent was arrested and detained on the basis of the Summary Deportation Order of the
BOC. The petitioner caused the arrest of the respondent in obedience to the said Deportation
Order. The respondent, in his Memorandum, prayed that the CA annul not only the Summary
Deportation Order of the BOC but also the latter's Omnibus Resolution, and, thus, order the
respondent's immediate release. The respondent also prayed that the CA issue a writ
of mandamus for the immediate resolution of his Urgent Motion for Reconsideration. The said
motion had to be resolved by the BOC as the order sought to be resolved and reconsidered was
issued by it and not by the petitioner alone. The powers and duties of the BOC may not be
exercised by the individual members of the Commission. 44
Section 7, Rule 3 of the Rules of Court, as amended, requires indispensable parties to be joined
as plaintiffs or defendants. The joinder of indispensable parties is mandatory. Without the
presence of indispensable parties to the suit, the judgment of the court cannot attain real
finality. 45Strangers to a case are not bound by the judgment rendered by the court. 46 The
absence of an indispensable party renders all subsequent actions of the court null and void. Lack
of authority to act not only of the absent party but also as to those present. 47 The responsibility
of impleading all the indispensable parties rests on the petitioner/plaintiff. 48
However, the non-joinder of indispensable parties is not a ground for the dismissal of an
action. Parties may be added by order of the court on motion of the party or on its own initiative at
any stage of the action and/or such times as are just. 49 If the petitioner/plaintiff refuses to implead
an indispensable party despite the order of the court, the latter may dismiss the complaint/petition
for the petitioner/plaintiffs failure to comply therefor. 50 The remedy is to implead the non-party
claimed to be indispensable. 51 In this case, the CA did not require the respondent (petitioner
therein) to implead the BOC as respondent, but merely relied on the rulings of the Court in Vivo v.
Arca, 52 and Vivo v. Cloribel. 53 The CA's reliance on the said rulings is, however, misplaced.
The acts subject of the petition in the two cases were those of the Immigration Commissioner and
not those of the BOC; hence, the BOC was not a necessary nor even an indispensable party in
the aforecited cases.
The Non-joinder of an Indispensable Party
is not a Ground for the Dismissal of the Petition
The Court may be curing the defect in this case by adding the BOC as party-petitioner. The petition
should not be dismissed because the second action would only be a repetition of the
first. 54 In Salvador, et al., v. Court of Appeals, et al., 55 we held that this Court has full powers,
apart from that power and authority which is inherent, to amend the processes, pleadings,
proceedings and decisions by substituting as party-plaintiff the real party-in-interest. The Court
has the power to avoid delay in the disposition of this case, to order its amendment as to implead
the BOC as party-respondent. Indeed, it may no longer be necessary to do so taking into account
the unique backdrop in this case, involving as it does an issue of public interest. 56 After all, the
Office of the Solicitor General has represented the petitioner in the instant proceedings, as well as
in the appellate court, and maintained the validity of the deportation order and of the BOC's
Omnibus Resolution. It cannot, thus, be claimed by the State that the BOC was not afforded its
day in court, simply because only the petitioner, the Chairperson of the BOC, 57 was the
respondent in the CA, and the petitioner in the instant recourse. In Alonso v. Villamor, 58 we had
the occasion to state:
factual or legal basis for his deportation considering that he was a documented alien and a law-
abiding citizen; the respondent, thus, prayed for a writ of mandamus to compel the petitioner, the
Chairperson of the BOC, to resolve the said motion. The petition before the CA did not involve the
act or power of the President of the Philippines to deport or exclude an alien from the country. This
being so, the petition necessarily did not call for a substitution of the President's discretion on the
matter of the deportation of the respondent with that of the judgment of the CA.

There is nothing sacred about processes or pleadings, their forms or Irrefragably, the CA had jurisdiction over the petition of the respondent. DHACES
contents. Their sole purpose is to facilitate the application of justice to the
rival claims of contending parties. They were created, not to hinder and The BOC Committed a Grave Abuse of Discretion
delay, but to facilitate and promote, the administration of justice. They do Amounting to Lack or Excess of Jurisdiction
not constitute the thing itself, which courts are always striving to secure to in Issuing its Summary Deportation Order
litigants. They are designed as the means best adapted to obtain that thing. and Omnibus Resolution; The Petitioner
In other words, they are a means to an end. When they lose the character Committed a Grave Abuse of Her Discretion
of the one and become the other, the administration of justice is at fault Amounting to Lack or Excess of Jurisdiction
and courts are correspondingly remiss in the performance of their obvious in Causing the Arrest and Detention
duty. of the Private Respondent
On the Solicitor General's fourth and fifth arguments, we are convinced that the BOC committed
The CA had Jurisdiction Over the Petition
a grave abuse of discretion amounting to excess or lack of jurisdiction in issuing its Summary
for Certiorari, Prohibition and Mandamus
Deportation Order and Omnibus Resolution, and that the petitioner committed grave abuse of
We do not agree with the petitioner's contention that the issue before the CA, as to the power of discretion amounting to excess or lack of jurisdiction in causing the arrest and detention of the
the President to determine whether an alien may remain or be deported from the Philippines, is private respondent.
beyond the appellate court's competence to delve into and resolve. The contention of the petitioner
is based on a wrong premise. The settled rule is that the entry or stay of aliens in the Philippines is merely a privilege and a
matter of grace; such privilege is not absolute nor permanent and may be revoked. However,
The settled rule is that the authority to exclude or expel aliens by a power affecting international aliens may be expelled or deported from the Philippines only on grounds and in the manner
relation is vested in the political department of the government, and is to be regulated by treaty or provided for by the Constitution, the Immigration. Act of 1940, as amended, and administrative
by an act of Congress, and to be executed by the executive authority according to the regulations issuances pursuant thereto. In Mejoff v. Director of Prisons, 66we held, thus:
so established, except in so far as the judicial department has been authorized by treaty or by
statute, or is required by the Constitution to intervene. 59The judicial department cannot properly Moreover, by its Constitution (Art. II, Sec. 3) the Philippines "adopts the
express an opinion upon the wisdom or the justice of the measures executed by Congress in the generally accepted principles of international law a part of the law of
exercise of the power conferred on it, 60 by statute or as required by the Constitution. Congress Nation." And in a resolution entitled "Universal Declaration of Human
may, by statute, allow the decision or order of the Immigration Commissioner or the BOC to be Rights" and approved by the General Assembly of the United Nations of
reviewed by the President of the Philippines or by the courts, on the grounds and in the manner which the Philippines is a member, at its plenary meeting on December 10,
prescribed by law. 1948, the right to life and liberty and all other fundamental rights as applied
to all human beings were proclaimed. It was there resolved that "All human
Article VIII, Section 1 of the Constitution has vested judicial power in the Supreme Court and the beings are born free and equal in degree and rights" (Art. 1); that "Everyone
lower courts such as the Court of Appeals, as established by law. Although the courts are without is entitled to all the rights and freedom set forth in this Declaration, without
power to directly decide matters over which full discretionary authority has been delegated to the distinction of any kind, such as race, color, sex, language, religion, political
legislative or executive branch of the government and are not empowered to execute absolutely or other opinion, nationality or social origin, property, birth, or other status"
their own judgment from that of Congress or of the President, 61 the Court may look into and (Art. 2); that "Every one has the right to an effective remedy by the
resolve questions of whether or not such judgment has been made with grave abuse of discretion, competent national tribunals for acts violating the fundamental rights
when the act of the legislative or executive department violates the law or the Constitution. granted him by the Constitution or by law" (Art. 8); that "No one shall be
In Harvy Bridges v. I.F. Wixon, 62 the United States Federal Supreme Court reversed an Order of subjected to arbitrary arrest, detention or exile" (Art. 9); etc.
Deportation made by the Attorney General for insufficiency of evidence and for "improper
admission of evidence." In Nging v. Nagh, 63 the United States Court of Appeals (9th Circuit Court) In this case, the BOC ordered the private respondent's deportation on September 27, 1995 without
held that conclusions of administrative offices on the issues of facts are invulnerable in courts even conducting summary deportation proceedings. The BOC merely relied on the June 29, 1995
unless when they are not rendered by fair-minded men; hence, are arbitrary. In Toon Letter of the German Vice Consul and of the German Embassy's Note Verbale No. 369/95 dated
v. Stump, 64 the Court ruled that courts may supervise the actions of the administrative offices July 26, 1995. It issued the Summary Deportation Order on September 27, 1995 allegedly
authorized to deport aliens and reverse their rulings when there is no evidence to sustain under paragraph 3 of Office Memorandum Order No. 34 dated August 21, 1989 which reads:
them. When acts or omissions of a quasi-judicial agency are involved, a petition for certiorari or
prohibition may be filed in the Court of Appeals as provided by law or by the Rules of Court, as 3. If a foreign embassy cancels the passport of the alien or does not reissue
amended. 65 a valid passport to him, the alien loses the privilege to remain in the country,
under the Immigration Act, Sections 10 and 15 (Schonemann vs. Santiago,
et al., G.R. No. 81461, 30 May 1989). The automatic loss of the privilege
obviates deportation proceedings. In such instance, the Board of
In this case, the respondent alleges that the petitioner acted arbitrarily, contrary to law and with Commissioners may issue summary judgment of deportation which shall
grave abuse of discretion in causing his arrest and detention at a time when his Urgent Motion for be immediately executory.
Reconsideration of the BOC's Summary Deportation Order had yet to be resolved. There was no
However, as gleaned from the Summary Deportation Order, the respondent was ordered deported
not only because his passport had already expired; the BOC speculated that the respondent
committed insurance fraud and illegal activities in the Philippines and would not, thus, be issued
a new passport. This, in turn, caused the BOC to conclude that the respondent was an undesirable
alien. Section 37(c) of Commonwealth Act No. 613, as amended, provides that:
No alien shall be deported without being informed of the specific grounds
for deportation or without being given a hearing under rules of procedure
to be prescribed by the Commissioner of Immigration.
Under paragraphs 4 and 5 of Office Memorandum Order No. 34, an alien cannot be deported
unless he is given a chance to be heard in a full deportation hearing, with the right to adduce
evidence in his behalf, thus:
4. All other cases shall be tried in full deportation hearing, with due
observance of the pertinent provisions of Law Instruction No. 39.
5. In all cases, the right of the alien to be informed of the charges against
him, to be notified of the time and place of hearing, when necessary, to
examine the evidence against him, and to present evidence in his own
behalf, where appropriate, shall be observed.
The respondent was not afforded any hearing at all. The BOC simply concluded that the
respondent committed insurance fraud and illegal activities in Palawan without any evidence. The
respondent was not afforded a chance to refute the charges. He cannot, thus, be arrested and
deported without due process of law as required by the Bill of Rights of the Constitution. In Lao Gi
v. Court of Appeals, 67 we held that:
Although a deportation proceeding does not partake of the nature of a
criminal action, however, considering that it is a harsh and extraordinary
administrative proceeding affecting the freedom and liberty of a person, the
constitutional right of such person to due process should not be denied.
Thus, the provisions of the Rules of Court of the Philippines particularly on
criminal procedure are applicable to deportation proceedings.
It must be noted that the respondent was a permanent resident before his passport expired on
July 2, 1995. In Chew v. Colding, 68 the United States Federal Supreme Court ruled:
It is well established that if an alien is a lawful permanent resident of the
United States and remains physically present there, he is a person within
the protection of the Fifth Amendment. He may not be deprived of his life,
liberty or property without due process of law. Although it later may be
established, as respondents contend, that petitioner can be expelled and
deported, yet before his expulsion, he is entitled to notice of the nature of
the charge and a hearing at least before an executive or administrative
tribunal. Although Congress may prescribe conditions for his expulsion and
deportation, not even Congress may expel him without allowing him a fair
opportunity to be heard.
As Mr. Justice Murphy said in his concurring opinion in Bridges v. Wixon: 69
The Bill of Rights belongs to them as well as to all citizens. It protects them
as long as they reside within the boundaries of our land. It. protects them
in the exercise of the great individual rights necessary to a sound political
and economic democracy.
According to Vattal, 70 an alien who is a permanent resident in a country is a member of the new
society, at least as a permanent inhabitant, and is a kind of citizen of inferior order from the native
citizens; but is, nevertheless, limited and subject to the society, without participating in all its
advantages. Sir Robert Philconse called them "de facto," though not de jure citizens of the country
of their domicile. 71
Such permanent resident 72 may be classified as a "denizen," a kind of middle state between
alien and a natural-born subject and partakes of both. Paraphrasing Justice Brewer in his
dissenting opinion in Fong Yue Ting v. United States, 73 when the right to liberty and residence is
involved, some other protection than the mere discretion of the petitioner or the BOC is required.
We recall the warning of the United States Supreme Court in Boyd v. United States: 74
Illegitimate and unconstitutional practices get their first footing in that way,
namely, by silent approaches and slight deviations from legal modes of
procedure. This can only be obviated by adhering to the rule that
constitutional provisions for the security of person and property should be
liberally construed. A close and literal construction deprives them of half
their efficacy, and leads to a gradual depreciation of the right, as if it
consisted more in sound than in substance. It is the duty of the courts to
be watchful for the constitutional rights of the citizen, and against any
stealthy encroachments thereon. Their motto should be obsta
principiis. EScAID
In sum, the arrest and detention of the respondent and his deportation under the Summary
Deportation Order of the BOC for insurance fraud and illegal activities in Palawan violated his
constitutional and statutory rights to due process.
The Respondent's Arrest and
Detention was Premature,
Unwarranted and Arbitrary
We agree that the Immigration Commissioner is mandated to implement a legal and valid
Summary Deportation Order within a reasonable time. But in this case, the arrest of the respondent
in his house, at near midnight, and his subsequent detention was premature, unwarranted and
arbitrary. Like a thunderbolt in the sky, the BID agents and marines arrested the respondent on
June 6, 2002, on orders of the petitioner based on the September 27, 1995 Summary Deportation
Order. Under the basic rudiments of fair play and due process, the petitioner was required to first
resolve the respondent's Urgent Motion for Reconsideration of the said Order, which was filed
more than six years before or on December 5, 1995.
It may be argued that respondent's filing of an Urgent Motion for Reconsideration did not ipso
facto suspend the efficacy of the BOC's deportation order. However, such an argument cannot be
sustained in this case because of the extant and peculiar factual milieu. It bears stressing that
more than six years had elapsed, from the time the Summary Deportation Order was issued, until
the respondent was finally arrested. Supervening facts and circumstances rendered the
respondent's arrest and detention unjust, unreasonable, barren of factual and legal basis. The
BOC should have set the respondent's motion for hearing to afford him a chance to be heard and
adduce evidence in support thereon. It was bad enough that the BOC issued its Summary
Deportation Order without a hearing; the BOC dealt the respondent a more severe blow when it
refused to resolve his motion for reconsideration before causing his arrest on June 6, 2002.
As aforestated, the BOC ordered the deportation of the respondent after a summary proceeding
without prior notice on the following grounds: (a) the respondent's German passport had expired;
(b) there was a pending criminal case for physical injuries against him in Germany; (c) the
respondent indulged in illegal activities in Palawan; (d) that in all likelihood, the respondent's
passport will not be renewed by the German Embassy as he was wanted for insurance fraud in
Germany; and, (e) he was an undesirable alien. But then, in response to the written query of no
less than the petitioner herself, the German Embassy declared that the respondent was not
wanted by the German police for any crime, including insurance fraud. This could only mean that
the warrant of arrest issued by the German Federal police mentioned in Note Verbale No. 369/95
had been lifted, and that the respondent was not involved in any illegal activities in Germany. The
criminal case against the respondent for physical injuries, which does not involve moral turpitude,
was dismissed by the German District Court. Furthermore, there was no evidence of insurance
fraud against the respondent.
The BOC issued its Summary Deportation Order without affording the respondent the right to be
heard on his motion and adduce evidence thereon. It merely concluded that the respondent was
involved in "illegal activities in Palawan." What made matters worse was that the BOC indulged in
sheer speculation, that the German Embassy is unlikely to issue a new passport to the respondent.
The deportation of aliens should not be based on mere speculation or a mere product of
procrastinations as in this case. As it turned out, the German Embassy re-issued the respondent's
passport; he was issued a temporary passport, and, thereafter, a regular passport, yet to expire
on March 12, 2006. The petitioner cannot feign ignorance of this matter because the respondent
himself, six years before he was arrested, informed then Immigration Commissioner Verceles in a
Letter dated March 1, 1996. The respondent's letter forms part of the records of the BOC. There
is no evidence on record that the respondent committed any illegal activities in Palawan. He was
even designated as special agent of the NBI, and was, in fact, issued clearances by the PNP and
the NBI no less. Despite all the foregoing, the petitioner ordered and caused the arrest and
detention of the respondent.
What is most nettlesome is the apparent antedating of the BOC Omnibus Resolution. The records
show that the petitioner sought to assuage the respondent's concern on the belated resolution of
his pending urgent motion for reconsideration in a Letter to the latter's counsel dated July 18,
2002 in which the petitioner assured the respondent that the BOC will provide him of its action on
the said motion:
Dear Atty. Sagisag,
We respond to your letter of 17 June 2002 by informing you that the case
of Mr. Herbert Scheer is being evaluated by the Board of Commissioners
(BOC). The BOC will provide you of the results of its collegial action in due
time.
Very truly yours,
(Sgd.) ANDREA D.
DOMINGO
Commissioner 75
However, the Omnibus Resolution of the BOC was dated June 14, 2002, although on its face it
was filed with the Records Division of the BID only on July 18, 2002.
The foregoing gave reason for the CA to suspect that the Omnibus Resolution of the BOC was
antedated. 76 The petition of the respondent in the CA must have jolted the petitioner and the
BOC from its stupor because it came out with its Omnibus Resolution on July 18, 2002, which
was, however, dated as early as June 14, 2002. The respondent had to wait in anxiety for the
BOC to quench his quest for justice. The BOC's wanton acts amounted to an abdication of its duty
to act and/or resolve cases/incidents with reasonable dispatch. To recall our ruling in Board of
Commissioners v. De la Rosa, 77 citing Sheor v. Bengson, 78 thus:
This inaction or oversight on the part of the immigration officials has
created an anomalous situation which, for reasons of equity, should be
resolved in favor of the minor herein involved.
The petitioner and the BOC should have taken to heart the following pronouncement
in Commissioner of Immigration v. Fernandez: 79
In the face of the disclosure that Teban Caoili had been all along working
in the Avenue Electrical Supply Co. (Avesco), located at No. 653 Rizal
Avenue, Manila, until his arrest, and the documentary evidence showing
that he had been issued a Philippine Passport; had regularly paid his
Residence Tax Certificates (A & B), and filed Income Tax Returns, a finding
of fact is necessary whether the Commissioner really had intended to notify
Teban Caoili of the exclusion proceedings the Board had conducted in his
absence. While it may be true that the proceedings is purely administrative
in nature, such a circumstance did not excuse the serving of notice. There
are cardinal primary rights which must be respected even in proceedings
of administrative character, the first of which is the right of the party
interested or affected to present his own case and submit evidence in
support thereof. 80
xxx xxx xxx
Since the proceedings affected Caoili's status and liberty, notice should
have been given. And in the light of the actuations of the new Board of
Commissioners, there is a necessity of determining whether the findings of
the Board of Special Inquiry and the old Board of Commissioners are
correct or not. This calls for an examination of the evidence, and, the law
on the matter. 81
Apparently, the BOC did not bother to review its own records in resolving the respondent's Urgent
Motion for Reconsideration. It anchored its Omnibus Resolution only on the following: the
membership of the BOC had changed when it issued its September 27, 1995 Summary
Deportation Order and under Commonwealth Act No. 613, Section 27(b); the BOC is precluded
from reversing a previous order issued by it; 82 and, the September 27, 1995 Order of the BOC
had become final and could no longer be reviewed and reversed by it after the lapse of one
year. 83 However, the rulings cited by the petitioner are not applicable in the instant case, as the
said cases cited involve appeals to the BOC from the decisions of the Board of Special Inquiry
(BSI). In Sy v. Vivo 84 and Lou v. Vivo, 85 we ruled that under Section 27(b) of Commonwealth
Act No. 613, as amended, the Decision of the BOC on appeal from the decision of the BSI
becomes final and executory after one year:
(b) A board of special inquiry shall have authority (1) to determine whether
an alien seeking to enter or land in the Philippines shall be allowed to enter
or land or shall be excluded, and (2) to make its findings and
recommendations in all the cases provided for in section twenty-nine of this
Act wherein the Commissioner of Immigration may admit an alien who is
otherwise inadmissible. For this purpose, the board or any member thereof,
may administer oaths and take evidence and in case of necessity may
issue subpoena and/or subpoena duces tecum. The hearing of all cases
brought before a board of special inquiry shall be conducted under rules of
procedure to be prescribed by the Commissioner of Immigration. The
decision of any two members of the board shall prevail and shall be final
unless reversed on appeal by the Board of Commissioners as hereafter
stated, or in the absence of an appeal, unless reversed by the Board of
Commissioners after a review by it, motu propio, of the entire proceedings
within one year from the promulgation of the decision. EDCcaS
In Commissioner of Immigration v. Fernandez, 86 we held that the BOC composed of new
members is precluded from reversing, motu proprio, the decision of the BOC on appeal from a
BSI decision. But not to be ignored was our ruling that "at any rate, the issue of authority should
be made in accordance with the procedure established by law, with a view to protecting the rights
of individuals." 87
In this case, the Summary Deportation Order was issued by the BOC in the exercise of its authority
under Office Memorandum Order No. 34, and not in the exercise of its appellate jurisdiction of BSI
decisions. There is no law nor rule which provides that a Summary Deportation Order issued by
the BOC in the exercise of its authority becomes final after one year from its issuance, 88 or that
the aggrieved party is barred from filing a motion for a reconsideration of any order or decision of
the BOC. The Rules of Court may be applied in a suppletory manner to deportation passport could not be ruled out. This was exactly what happened: the German Embassy issued a
proceedings 89and under Rule 37, a motion for reconsideration of a decision or final order may new passport to the respondent on March 12, 1996 after the German District Court dismissed the
be filed by the aggrieved party. case for physical injuries. Thus, the respondent was no longer an undocumented alien; nor was
he an undesirable one for that matter.
Neither is there any law nor rule providing that the BOC, composed of new members, cannot
revise a Summary Deportation Order previously issued by a different body of Commissioners. The The petitioner even admits that there is no longer a legal or factual basis to disqualify the
BOC that issued the Summary Deportation Order and the BOC which resolved the respondent's respondent from remaining in the country as a permanent resident. Yet, the OSG insists that he
Urgent Motion for Reconsideration are one and the same government entity, with the same powers has to be deported first so that the BOC's Summary Deportation Order could be implemented.
and duties regardless of its membership. Similarly, an RTC judge who replaces another judge who This contention was rejected by the CA, thus:
presided over a case may review the judgment or order of his predecessor as long as the said
judgment or order has not as yet become final or executory, The act subject of review is not the During the hearing of petitioner's prayer for issuance of a writ of preliminary
act of the judge but the act of the court. injunction before Us, respondent's counsel from the Office of the Solicitor
General had the occasion to manifest in open court that the State has no
opposition to petitioner's stay in the country provided he first leave and re-
enter and re-apply for residency if only to comply with the Summary
The petitioner's contention that it failed to resolve the respondent's motion for reconsideration Deportation Order of 1995. That, to Our mind, seems preposterous, if not
because of the change of administration in the BOC was branded by the CA as flimsy, if not ridiculous. An individual's human rights and rights to freedom, liberty and
bordering on the absurd: self-determination recognize no boundaries in the democratic, free and
civilized world. Such rights follow him wherever he may be. If presently,
Firstly, it was issued three days (June 14, 2002) after petitioner filed this there is no factual or legal impediment to disqualify petitioner in his stay in
instant petition on June 11, 2002 or almost seven years from the time the the country, other than allegedly those relied upon in the Summary
motion for reconsideration was filed; Deportation Order of 1995 (as hereinbefore discussed, had ceased to
exist), requiring petitioner to leave the country and re-enter and re-apply
Secondly, respondent's counsel's excuse that it took such time to resolve
for residency makes little sense or no sense at all, more so, in the case of
it because it was only later that the motion for reconsideration was
petitioner who, for many years past, had lived herein and nurtured a family
discovered because of change of administration, is flimsy, if not bordering
that is Filipino.
on the absurd; 90
Thus, opined, We, therefore, believe and hereby rule, that there is
The Issuance of a New and Regular
presently every reason to enjoin/prohibit the Bureau of Immigration,
Passport to the Respondent
respondent Commissioner Domingo in particular, from presently deporting
Rendered the Summary
petitioner. 93
Deportation Order Moot and
Academic, and the Omnibus We agree with the Court of Appeals. The Summary Deportation Order had been rendered moot
Resolution of the BOC Lacking and academic upon the German Embassy's issuance of a new passport to the respondent. The
in Legal Basis respondent had been in the Philippines as a permanent resident since July 18, 1986, and had
We agree with the petitioner that a foreign embassy's cancellation of the passport it had issued to married a Filipino citizen, with whom he has two children. He is not a burden to the country nor to
its citizens, or its refusal to issue a new one in lieu of a passport that has expired, will result in the the people of Palawan. He put up, and has been managing, the Bavaria Restaurant with about 30
loss of the alien's privilege to stay in this country and his subsequent deportation therefrom. But employees. He has no pending criminal case; nor does he have any derogatory record. The
even the BOC asserted in its Summary Deportation Order that an embassy's issuance of a new respondent was allowed by then Immigration Commissioner Verceles to renew his passport and
passport to any of its citizens may bar the latter's deportation, citing the resolution of this Court was given time to secure a clearance from the German Embassy. The respondent was able to do
in Schonemann v. Commissioner Santiago. 91 so. The case against him for physical injuries was dismissed by the German District Court. Thus,
the inceptual basis for the respondent's deportation had ceased to exist.
Irrefragably, Commissioner Verceles was mandated to cause the arrest of the respondent
preparatory to his deportation from the Philippines. However, there was no fixed period in the The power to deport is a police matter against undesirable aliens, whose presence in the country
Order within which to comply with the same. The Commissioner is not mandated to deport an alien is found to be injurious to the public good. We believe that the deportation of the respondent late
immediately upon receipt of the BOC's deportation order. It is enough that the Commissioner in the day did not achieve the said purpose. The petitioner admitted that there is no longer a factual
complies with the Order within a "reasonable time," which, in Mejoff v. Director of Prisons, 92 we and legal basis to disqualify the respondent from staying in the country. He is not an undesirable
held to connote as follows: alien; nor is his presence in the country injurious to public good. He is even an entrepreneur and
a productive member of society.
The meaning of "reasonable time" depends upon the circumstances,
specially the difficulties of obtaining a passport, the availability of Arrest, detention and deportation orders of aliens should not be enforced blindly and
transportation, the diplomatic arrangements with the governments indiscriminately, without regard to facts and circumstances that will render the same unjust, unfair
concerned and the efforts displayed to send the deportee away; but the or illegal. 94 To direct the respondent to leave the country first before allowing him re-entry is
Court warned that "under established precedents, too long a detention may downright iniquitous. 95 If the respondent does leave the country, he would thereby be accepting
justify the issuance of a writ of habeas corpus. the force and effect of the BOC's Summary Deportation Order with its attendant infirmities. He will
thereby lose his permanent resident status and admit the efficacy of the cancellation of his
In this case, the BOC had yet to act on the respondent's Urgent Motion for Reconsideration. The permanent resident visa. Moreover, his entry into the country will be subject to such conditions as
respondent was also given a chance to secure a clearance and a new passport with the German the petitioner may impose.
Embassy. After all, the possibility that the German Embassy would renew the respondent's
The deportation of an alien is not intended as a punishment or penalty. But in a real sense, it is.
In Bridges v. Wixon, 96 Mr. Justice Murphy declared that the impact of deportation upon the life
of an alien is often as great if not greater than the imposition of a criminal sentence. In dealing
with deportation, there is no justifiable reason for disregarding the democratic and human tenets
of our legal system and descending to the practices of despotism. As Justice Brewer opined
in Fong Yue Ting v. United States, 97 deportation is a punishment because it requires first, an
arrest, a deprivation of liberty and second, a removal from home, from family, from business, from
property. To be forcibly taken away from home, family, business and property and sent across the
ocean to a distant land is punishment; and that oftentimes is most severe and cruel. It would be
putting salt on the respondent's woes occasioned by the BOC's ineptitude. Considering the
peculiar backdrop and the equities in this case, the respondent's deportation and the cancellation
of his permanent resident visa as a precondition to his re-entry into this country is severe and
cruel; it is a form of punishment. aCSEcA

Our ruling in Vivo v. Cloribel, 98 has no application in this case, precisely because the factual
milieu here is entirely different. In that case, the Commissioner of Immigration required the
respondents to leave the country on or before September 12, 1962, because their stay in the
country as approved by the Secretary of Justice had been cancelled. Our ruling in Bing
v. Commission on Immigration, 99 even buttresses the case for the respondent since we ruled
therein that an alien entitled to a permanent stay cannot be deported without being accorded due
notice and hearing.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision of the Court of
Appeals is AFFIRMED.

SO ORDERED.

||| (Domingo v. Scheer, G.R. No. 154745, [January 29, 2004], 466 PHIL 235-284)
 3. Domingo vs. Carague, 456 SCRA 450 (2005)
[G.R. No. 161065. April 15, 2005.]
EUFEMIO C. DOMINGO, CELSO D. GANGAN, PACASIO S. BANARIA,
SOFRONIO B. URSAL, ALBERTO P. CRUZ, MARIA L. MATIB, RACHEL
U. PACPACO, ANGELO G. SANCHEZ, and SHERWIN A. SIP-
AN, petitioners, vs. HON. GUILLERMO N. CARAGUE, in his capacity as
Chairman, Commission on Audit, HON. EMMANUEL M. DALMAN and
HON. RAUL C. FLORES, in their capacities as Commissioners,
Commission on Audit, respondents.
DECISION
SANDOVAL-GUTIERREZ, J p:
Judicial power is the power to hear and decide cases pending between parties who have the right
to sue in courts of law and equity. 1 Corollary to this dictum is the principle of locus standi of a
litigant. He who is directly affected and whose interest is immediate and substantial has the
standing to sue. Thus, a party must show a personal stake in the outcome of the case or an injury
to himself that can be redressed by a favorable decision in order to warrant an invocation of the
court's jurisdiction and justify the exercise of judicial power on his behalf.
Assailed in this petition for certiorari is the legality of Resolution No. 2002-05 of the Commission
on Audit (COA) providing for Organizational Restructuring Plan. The above-named petitioners
basically alleged therein that this Plan is intrinsically void for want of an enabling law authorizing
COA to undertake the same and providing for the necessary standards, conditions, restrictions,
limitations, guidelines, and parameters. Petitioners further alleged that in initiating such
Organizational Restructuring Plan without legal authority, COA committed grave abuse of
discretion amounting to lack or excess of jurisdiction.
At this point, it is pertinent to state that the COA is a quasi-judicial body and that its decision, order
or ruling may be brought to the Supreme Court on certiorari by the aggrieved party. 2
Petitioners Eufemio C. Domingo, Celso C. Gangan, Pascasio S. Banaria are retired Chairmen,
while Sofronio B. Ursal, and Alberto P. Cruz are retired Commissioners of COA. All claim "to
maintain a deep-seated abiding interest in the affairs of COA," 3 especially in its Organizational
Restructuring Plan, as concerned taxpayers.
The other petitioners are incumbent officers or employees of COA. Maria L. Matib and Angelo G.
Sanchez are State Auditor III and State Auditor II, respectively, assigned to the Cordillera
Administrative Region (CAR). Prior to the implementation of the questioned COA Organizational
Restructuring Plan, they were Resident Auditors and later Audit Team Leaders. Petitioner Rachel
U. Pacpaco is a State Auditor III assigned to CAR and a Team Supervisor, while petitioner Sherwin
A. Sipi-an is a State Auditor I also assigned at the CAR. These petitioners claim that they were
unceremoniously divested of their designations/ranks as Unit Head, Team Supervisor, and Team
Leader upon implementation of the COA Organizational Restructuring Plan without just cause and
without due process, in violation of Civil Service Law. Moreover, they were deprived of their
respective Representation and Transportation Allowances (RATA), thus causing them undue
financial prejudice. EHaASD
Petitioners now invoke this Court's judicial power to strike down the COA Organizational
Restructuring Plan for being unconstitutional or illegal.
Initially, for our resolution is the issue of whether petitioners have the legal standing to institute the
instant petition.
Petitioners invoke our ruling in Chavez v. Public Estates Authority, 4 Agan, Jr. v. Philippine
International Air Terminals Co., Inc., 5 and Information Technology Foundation of the Philippines
v. Commission on Elections 6 that where the subject matter of a case is a matter of public concern
and imbued with public interest, then this fact alone gives them legal standing to institute the
instant petition. Petitioners contend that the COA Organizational Restructuring Plan is not just a
mere reorganization but a revamp or overhaul of the COA, with a "spillover effect" upon its audit
performance. This will have an impact upon the rest of the government bodies subject to its audit
supervision, thus, should be treated as a matter of transcendental importance. Consequently,
petitioners' legal standing should be recognized and upheld.
Respondents, through the Office of the Solicitor General (OSG), counter that petitioners have no
legal standing to file the present petition since following our ruling in Kilusang Mayo Uno Labor
Center v. Garcia, Jr., 7 they have not shown "a personal stake in the outcome of the case" or an
actual or potential injury that can be redressed by our favorable decision. Petitioners themselves
admitted that "they do not seek any affirmative relief nor impute any improper or improvident act
against the said respondents" and "are not motivated by any desire to seek affirmative relief from
COA or from respondents that would redound to their personal benefit or gain." It is clear then that
petitioners failed to show any "present substantial interest" in the outcome of this case,
citing Kilosbayan v. Morato. 8 Nor may petitioners claim that as taxpayers, they have legal
standing since nowhere in their petition do they claim that public funds are being spent in violation
of law or that there is a misapplication of the taxpayers' money, as we ruled in Dumlao v.
Comelec. 9
Petitioners' reliance upon our rulings in Chavez, 10 Agan, Jr., 11 and Information Technology
Foundation 12 is flawed.
In Chavez, we ruled that the petitioner has legal standing since he is a taxpayer and his purpose
in filing the petition is to compel the Public Estate Authority (PEA) to perform its constitutional
duties with respect to: (a) the right of the citizens to information on matters of public concern; and
(b) the application of a constitutional provision intended to insure the equitable distribution of
alienable lands of the public domain among Filipino citizens. The thrust of the first is to compel
PEA to disclose publicly information on the sale of Government lands worth billions of pesos, as
mandated by the Constitution and statutory law. The thrust of the second is to prevent PEA from
alienating hundreds of hectares of alienable lands of the public domain, thereby compelling it to
comply with a constitutional duty to the nation. We held that these matters are of transcendental
public importance. 13
In Agan, Jr., we held that petitioners have legal standing as they have a direct and substantial
interest to protect. By the implementation of the PIATCO contracts, they stand to lose their source
of livelihood, a property right zealously protected by the Constitution. Such financial prejudice on
their part is sufficient to confer upon them the requisite locus standi. 14
In Information Technology Foundation, there were two reasons why petitioners' standing was
recognized. First, the nation's political and economic future virtually hangs in the balance, pending
the outcome of the 2004 elections. Accordingly, the award for the automation of the electoral
process was a matter of public concern, imbued with public interest. Second, the individual
petitioners, as taxpayers, asserted a material interest in seeing to it that public funds are properly
used.
Here, petitioners have not shown any direct and personal interest in the COA Organizational
Restructuring Plan. There is no indication that they have sustained or are in imminent danger of
sustaining some direct injury as a result of its implementation. In fact, they admitted that "they do
not seek any affirmative relief nor impute any improper or improvident act against the respondents"
and "are not motivated by any desire to seek affirmative relief from COA or from respondents that
would redound to their personal benefit or gain." Clearly, they do not have any legal standing to
file the instant suit.
We are well aware of the averments of petitioners Matib, Pacpaco, Sanchez, and Sipi-An that they
were demoted and unceremoniously divested of their previous designations as Unit Head, Team
Supervisor, or Team Leader; that they were deprived of their RATA; that they were relegated to
being mere Team Members, entitled to only a reimbursable transportation allowance; and that
they were denied due process.
therein. Accordingly, they are wanting in legal standing to institute the instant petition. Corollarily,
we find no reason to delve into the constitutionality or legality of the COA Organizational
Restructuring Plan.
WHEREFORE, the petition is DISMISSED. No pronouncement as to costs.

Such averments lack merit. Actually, they were not demoted. Under Section 11, Rule VII of the SO ORDERED.
Omnibus Rules Implementing Book V of the Administrative Code of 1987, a demotion is the
movement from one position to another involving the issuance of an appointment with diminution ||| (Domingo v. Carague, G.R. No. 161065, [April 15, 2005], 496 PHIL 341-349)
in duties, responsibilities, status, or rank which may or may not involve reduction in salary. 15 A
demotion by assigning an employee to a lower position in the same service which has a lower rate
of compensation is tantamount to removal, if no cause is shown for it. 16

Here, there have been no new appointments issued to Matib, Pacpaco, Sanchez, and Sipi-An
under the COA Organizational Restructuring Plan. Thus, their contention that they have been
demoted is baseless.

Moreover, the change in their status from COA auditors (receiving monthly RATA) to COA auditors
(receiving only reimbursable RATA) cannot be attributed to the COA Organizational Restructuring
Plan but to the implementation of the Audit Team Approach (ATAP), pursuant to COA Resolution
No. 96-305 dated April 16, 1996.

Under the ATAP, an audit team, not a resident auditor, is deployed to conduct an audit. An audit
team may be composed of two (2) or more members under an Audit Team Leader. Whenever
practicable, an Audit Team Supervisor supervises at least three (3) audit teams. The composition
of an audit team is not permanent. Hence, an Audit Team Member may be designated or assigned
as an Audit Team Leader for one assignment and subsequently as a Team Member in another
engagement. The designation depends upon the position or rank of the one who is designated as
an Audit Team Leader. Thus, a State Auditor III who may have been assigned as an Audit Team
Leader in one engagement may find himself relegated to being an Audit Team Member in another
engagement, if a State Auditor IV or State Auditor V is designated as the Audit Team Leader.

Pursuant to the COA Organizational Restructuring Plan, the COA issued Memorandum No. 2002-
034 17 providing for the guidelines regarding the payment of RATA, thus:

1. All holders of State Auditor IV position shall be entitled to fixed

commutable RATA wherever they are assigned.

2. Henceforth, only State Auditors IV shall be assigned as new Unit Heads

or Team Leaders.

3. State Auditors below State Auditor IV assigned as Unit Heads or Team

Leaders who have been receiving fixed RATA shall continue to
be designated as such and to receive the RATA until relieved of
the designation for incompetence, inefficiency, or misconduct.

All others who collect RATA on reimbursable basis, including those paid
on a daily basis under COA Resolution No. 99-007 dated June 7, 1999, are
likewise entitled thereto.

Matib, Pacpaco, Sanchez, and Sipi-An are not qualified to be Audit Team Leaders or to receive
fixed monthly RATA since none of them holds the rank or position of State Auditor IV. But this
does not mean that they are not entitled to receive reimbursable RATA if they are designated as
Audit Team Leaders. It is clear from the text of the said COA Memorandum that the principle of
non-diminution of benefits has been upheld. SETaHC

Thus, in the implementation of the COA Organizational Restructuring Plan, we fail to see how
petitioners could have sustained personal injury as they have not shown to have a personal stake
 4. Pacana-Contreras vs. Rovila Water Supply, GR No. 168979, Dec 2, 2013
[G.R. No. 168979. December 2, 2013.]
REBECCA PACAÑA-CONTRERAS and ROSALIE
PACAÑA, petitioners, vs. ROVILA WATER SUPPLY, INC., EARL U.
KOKSENG, LILIA TORRES, DALLA P. ROMANILLOS and MARISA
GABUYA, respondents.
DECISION
BRION, J p:
Before the Court is a petition for review on certiorari 1 under Rule 45 of the Rules of Court seeking
the reversal of the decision 2 dated January 27, 2005 and the resolution 3 dated June 6, 2005 of
the Court of Appeals (CA) in CA-G.R. SP No. 71551. The CA set aside the orders dated February
28, 2002 4 and April 1, 2002 5 of the Regional Trial Court (RTC), Branch 8, Cebu City, which
denied the motion to dismiss and the motion for reconsideration, respectively, of respondents
Rovila Water Supply, Inc. (Rovila Inc.), Earl U. Kokseng, Lilia Torres, Dalla P. Romanillos and
Marisa Gabuya.
THE FACTUAL ANTECEDENTS
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. 6 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. 7
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. 8
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. 9 The RTC denied the motion. aCIHcD
On September 26, 2000, Lourdes died 10 and the petitioners amended their complaint, with leave
of court, on October 2, 2000 to reflect this development. 11 They still attached to their amended
complaint the sworn declaration with SPA, but the caption of the amended complaint remained
the same. 12 On October 10, 2000, Luciano also died. 13
The respondents filed their Answer on November 16, 2000. 14 The petitioners' sister, Lagrimas
Pacaña-Gonzales, filed a motion for leave to intervene and her answer-in-intervention was granted
by the trial court. 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. 15
On January 23, 2002, 16 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 RULING
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. 17 The RTC
likewise denied the respondents' motion for reconsideration. 18
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. 19 Furthermore, they seasonably moved for the dismissal of the case 20 and the RTC
never acquired jurisdiction over the persons of the petitioners as heirs of Lourdes and Luciano. 21
THE CA RULING
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; thus,
the complaint should be dismissed 22 pursuant to the Court's ruling in Casimiro v. Roque and
Gonzales. 23
Neither are the petitioners suing as heirs of their deceased parents. Pursuant to
jurisprudence, 24 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. 25 That the motion to dismiss was filed after
the period to file an answer has lapsed is of no moment. The RTC judge entertained it and passed
upon its merit. He was correct in doing so because in the pre-trial order, one of the submitted
issues was whether the case must be dismissed for failure to comply with the requirements of the
Rules of Court. Furthermore, in Dabuco v. Court of Appeals, 26 the Court held that the ground of
lack of cause of action may be raised in a motion to dismiss at anytime. 27
The CA further ruled that, in denying the motion to dismiss, the RTC judge acted contrary to
established rules and jurisprudence which may be questioned via a petition for certiorari. The
phrase "grave abuse of discretion" which was traditionally confined to "capricious and whimsical
exercise of judgment" has been expanded to include any action done "contrary to the Constitution, being merely attorneys-in-fact of their mother; and 2) the petitioners should first be declared as
the law or jurisprudence[.]"28 CAIaHS heirs.

THE PARTIES' ARGUMENTS
The petitioners filed the present petition and argued that, first, in annulling the interlocutory orders,
the CA unjustly allowed the motion to dismiss which did not conform to the rules. 29 Specifically,
the motion was not filed within the time for, but before the filing of, the answer to the amended
complaint, nor were the grounds raised in the answer. Citing Section 1, Rule 9 of the Rules of
Court, the respondents are deemed to have waived these grounds, as correctly held by the
RTC. 30
Second, even if there is non-joinder and misjoinder of parties or that the suit is not brought in the
name of the real party in interest, the remedy is not outright dismissal of the complaint, but its
amendment to include the real parties in interest. 31
Third, the petitioners sued in their own right because they have actual and
substantial interest in the subject matter of the action as heirs or co-owners, pursuant to
Section 2, Rule 3 of the Rules of Court. 32 Their declaration as heirs in a special proceeding
is not necessary, pursuant to the Court's ruling in Marabilles, et al. v. Quito. 33 Finally, the
sworn declaration is evidentiary in nature which remains to be appreciated after the trial is
completed. 34
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. A historical background of this particular ground is in order to preclude any confusion
or misapplication of jurisprudence decided prior to the effectivity of the present Rules of Court.
The 1940 Rules of Court provides under Section 10, Rule 9 that: ADHCSE
Section 10. Waiver of defenses. — Defenses and objections not pleaded
either in a motion to dismiss or in the answer are deemed waived; except
the defense of failure to state a cause of action, which may be alleged in a
later pleading, if one is permitted, or by motion for judgment on the
pleadings, or at the trial on the merits; but in the last instance, the motion
shall be disposed of as provided in section 5 of Rule 17 in the light of any
evidence which may have been received. Whenever it appears that the
court has no jurisdiction over the subject-matter, it shall dismiss the action.
[underscoring supplied]
This provision was essentially reproduced in Section 2, Rule 9 of the 1964 Rules of Court, and we
quote:

The respondents reiterated in their comment that the petitioners are not the real parties in Section 2. Defenses and objections not pleaded deemed waived.
interest. 35 They likewise argued that they moved for the dismissal of the case during the pre-trial — Defenses and objections not pleaded either in a motion to dismiss or in
conference due to the petitioners' procedural lapse in refusing to comply with a condition the answer are deemed waived; except the failure to state a cause of
precedent, which is, to substitute the heirs as plaintiffs. Besides, an administrator of the estates of action which may be alleged in a later pleading, if one is permitted, or by
Luciano and Lourdes has already been appointed. 36 motion for judgment on the pleadings, or at the trial on the merits; but in
the last instance, the motion shall be disposed of as provided in section 5
The respondents also argued that the grounds invoked in their motion to dismiss were timely of Rule 10 in the light of any evidence which may have been received.
raised, pursuant to Section 2, paragraphs g and i, Rule 18 of the Rules of Court. Specifically, the Whenever it appears that the court has no jurisdiction over the subject-
nature and purposes of the pre-trial include, among others, the dismissal of the action, should a matter, it shall dismiss the action. [underscoring supplied]
valid ground therefor be found to exist; and such other matters as may aid in the prompt disposition
of the action. Finally, the special civil action of certiorari was the proper remedy in assailing the Under the present Rules of Court, this provision was reflected in Section 1, Rule 9, and we quote:
order of the RTC. 37
Section 1. Defenses and objections not pleaded. — Defenses and
THE COURT'S RULING objections not pleaded either in a motion to dismiss or in the answer are
deemed waived. However, when it appears from the pleadings or the
We find the petition meritorious.
evidence on record that the court has no jurisdiction over the subject
Petition for certiorari under Rule 65 is a matter, that there is another action pending between the same parties for
proper remedy for a denial of a motion to the same cause, or that the action is barred by a prior judgment or by
dismiss attended by grave abuse of statute of limitations, the court shall dismiss the claim. [underscoring
discretion supplied]

In Barrazona v. RTC, Branch 61, Baguio City, 38 the Court held that while an order denying a Notably, in the present rules, there was a deletion of the ground of "failure to state a cause of
motion to dismiss is interlocutory and non-appealable, certiorari and prohibition are proper action" from the list of those which may be waived if not invoked either in a motion to dismiss or
remedies to address an order of denial made without or in excess of jurisdiction. The writ in the answer.
of certiorari is granted to keep an inferior court within the bounds of its jurisdiction or to prevent it
from committing grave abuse of discretion amounting to lack or excess of jurisdiction. 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
The history and development of the ground under Section 1, Rule 16 and we quote:
"fails to state a cause of action" in the
1940, 1964 and the present 1997 Rules of Section 1. Grounds. — Within the time for but before filing the answer to
Court the complaint or pleading asserting a claim, a motion to dismiss may be
made on any of the following grounds: . . . [underscoring supplied]
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." 39 Pursuant to jurisprudence, 40 this All these considerations point to the legal reality that the new Rules effectively restricted the
is also the ground invoked when the respondents alleged that the petitioners are not the real dismissal of complaints in general, especially when what is being invoked is the ground of "failure
parties in interest because: 1) the petitioners should not have filed the case in their own names, to state a cause of action." 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, 41 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:
Section 5. Amendment to conform to or authorize presentation of
evidence. — When issues not raised by the pleadings are tried with the
express or implied consent of the parties they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment of
the pleadings as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon motion of any party
at any time, even after judgment; but failure to amend does not effect the
result of the trial of these issues. If evidence is objected to at the trial on
the ground that it is not within the issues made by the pleadings, the court
may allow the pleadings to be amended and shall do so with liberality if the
presentation of the merits of the action and the ends of substantial justice
will be subserved thereby. The court may grant a continuance to enable
the amendment to be made.
With this clarification, we now proceed to the substantial issues of the petition.
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.
The first paragraph of Section 1, 42 Rule 16 of the Rules of Court provides for the period within
which to file a motion to dismiss under the grounds enumerated. Specifically, the motion should
be filed within the time for, but before the filing of, the answer to the complaint or pleading asserting
a claim. Equally important to this provision is Section 1, 43 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. In the present petition, the petitioners reiterate that there was a blatant non-observance
of the rules when the respondents did not amend their answer to invoke the grounds for dismissal
which were raised only during the pre-trial and, subsequently, in the subject motion to
dismiss. 44 cAHITS
The divergent findings of the CA and the petitioners' arguments are essentially factual issues.
Time and again, we have held that the jurisdiction of the Court in a petition for review
on certiorari under Rule 45, such as the present case, is limited only to questions of law, save for
certain exceptions. One of these is attendant herein, which is, when the findings are conclusions
without citation of specific evidence on which they are based. 45
In the petition filed with the CA, the respondents made a passing allegation that, as affirmative
defenses in their answer, they raised the issue that the petitioners are not the real parties in
interest. 46 On the other hand, the petitioners consistently argued otherwise in their
opposition 47 to the motion to dismiss, and in their comment 48 and in their memorandum 49 on
the respondents' petition before the CA.
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 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.
That the respondents did not allege in their answer the subject grounds is made more apparent
through their argument, both in their motion to dismiss 50 and in their comment, 51 that it was only
during the pre-trial stage that they verbally manifested and invited the attention of the lower court
on their grounds for dismissal. In order to justify such late invocation, they heavily relied on
Sections 2 (g) and (i), Rule 18 52 of the Rules of Court that the nature and purpose of the pre-trial
include, among others, the propriety of dismissing the action should there be a valid ground
therefor and matters which may aid in the prompt disposition of the action.
The respondents are not correct. 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. On the
other hand, "the pre-trial is primarily intended to make certain that all issues necessary to the
disposition of a case are properly raised. The purpose is to obviate the element of surprise, hence,
the parties are expected to disclose at the pre-trial conference all issues of law and fact which they
intend to raise at the trial, except such as may involve privileged or impeaching matter." 53 The
issues submitted during the pre-trial are thus the issues that would govern the trial proper. The
dismissal of the case based on the grounds invoked by the respondents are specifically covered
by Rule 16 and Rule 9 of the Rules of Court which set a period when they should be raised;
otherwise, they are deemed waived.
The Dabuco ruling is inapplicable in the
present case; the ground for dismissal
"failure to state a cause of action"
distinguished from "lack of cause of action"
To justify the belated filing of the motion to dismiss, the CA reasoned out that the ground for
dismissal of "lack of cause of action" may be raised at any time during the proceedings, pursuant
to Dabuco v. Court of Appeals. 54 This is an erroneous interpretation and application of Dabuco as
will be explained below.
First, in Dabuco, the grounds for dismissal were raised as affirmative defenses in the answer which
is in stark contrast to the present case. Second,in Dabuco, the Court distinguished between the
dismissal of the complaint for "failure to state a cause of action" and "lack of cause of action." The
Court emphasized that in a dismissal of action for lack of cause of action, "questions of fact are
involved, [therefore,] courts hesitate to declare a plaintiff as lacking in cause of action. Such
declaration is postponed until the insufficiency of cause is apparent from a preponderance of
evidence. Usually, this is done only after the parties have been given the opportunity to present
all relevant evidence on such questions of fact." 55 In fact, in Dabuco, the Court held that even
the preliminary hearing on the propriety of lifting the restraining order was declared insufficient for
purposes of dismissing the complaint for lack of cause of action. This is so because the issues of
fact had not yet been adequately ventilated at that preliminary stage. For these reasons, the Court
declared in Dabuco that the dismissal by the trial court of the complaint was premature. AaIDCS
In the case of Macaslang v. Zamora, 56 the Court noted that the incorrect appreciation by both
the RTC and the CA of the distinction between the dismissal of an action, based on "failure to
state a cause of action" and "lack of cause of action," prevented it from properly deciding the case,
and we quote:
Failure to state a cause of action and lack of cause of action are really
different from each other. On the one hand, failure to state a cause of action
refers to the insufficiency of the pleading, and is a ground for dismissal
under Rule 16 of the Rules of Court. On the other hand, lack of cause [of]
action refers to a situation where the evidence does not prove the cause of
action alleged in the pleading. Justice Regalado, a recognized
commentator on remedial law, has explained the distinction:
. . . What is contemplated, therefore, is a failure to state a cause
of action which is provided in Sec. 1(g) of Rule 16. This is a
matter of insufficiency of the pleading. Sec. 5 of Rule 10, which
was also included as the last mode for raising the issue to the
court, refers to the situation where the evidence does not prove a
cause of action. This is, therefore, a matter of insufficiency
of evidence. Failure to state a cause of action is different from
failure to prove a cause of action. The remedy in the first is to
move for dismissal of the pleading, while the remedy in the
second is to demur to the evidence, hence reference to Sec. 5
of Rule 10 has been eliminated in this section. The procedure
would consequently be to require the pleading to state a cause
of action, by timely objection to its deficiency; or, at the trial, to
file a demurrer to evidence, if such motion is warranted. [italics
supplied]
Based on this discussion, the Court cannot uphold the dismissal of the present case based on the
grounds invoked by the respondents which they have waived for failure to invoke them within the
period prescribed by the Rules. The Court cannot also dismiss the case based on "lack of cause
of action" as this would require at least a preponderance of evidence which is yet to be appreciated
by the trial court.
Therefore, the RTC did not commit grave abuse of discretion in issuing the assailed orders denying
the respondents' motion to dismiss and motion for reconsideration. The Court shall not resolve the
merits of the respondents' grounds for dismissal which are considered as waived.
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.
In Carandang v. Heirs of de Guzman, et al., 57the Court clarified these two concepts and held that
"[a] real party in interest is the party who stands to be benefited or injured by the judgment of the
suit, or the party entitled to the avails of the suit. On the other hand, an indispensable party is a
party in interest without whom no final determination can be had of an action, in contrast to
a necessary party, which is one who is not indispensable but who ought to be joined as a party
if complete relief is to be accorded as to those already parties, or for a complete determination or
settlement of the claim subject of the action. . . . If a suit is not brought in the name of or against
the real party in interest, a motion to dismiss may be filed on the ground that the complaint states
no cause of action. However, the dismissal on this ground entails an examination of whether the
parties presently pleaded are interested in the outcome of the litigation, and not whether all
persons interested in such outcome are actually pleaded. The latter query is relevant in
discussions concerning indispensable and necessary parties, but not in discussions
concerning real parties in interest. Both indispensable and necessary parties are considered as
real parties in interest, since both classes of parties stand to be benefited or injured by the
judgment of the suit." TDCaSE
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. 58
Jurisprudence on the procedural consequence of the inclusion or non-inclusion of an
indispensable party is divided in our jurisdiction. Due to the non-inclusion of indispensable parties,
the Court dismissed the case in Lucman v. Malawi, et al.59 and Go v. Distinction Properties
Development Construction, Inc., 60 while in Casals, et al. v. Tayud Golf and Country Club et
al., 61 the Court annulled the judgment which was rendered without the inclusion of the
indispensable parties.
In Arcelona et al. v. Court of Appeals 62 and Bulawan v. Aquende, 63 and Metropolitan Bank &
Trust Company v. Alejo et al. 64 the Court ruled that the burden to implead or order the impleading
of an indispensable party rests on the plaintiff and on the trial court, respectively. Thus, the non-
inclusion of the indispensable parties, despite notice of this infirmity, resulted in the annulment of
these cases.
In Plasabas, et al. v. Court of Appeals, et al., 65 the Court held that the trial court and the CA
committed reversible error when they summarily dismissed the case, after both parties had rested
their cases following a protracted trial, on the sole ground of failure to implead indispensable
parties. Non-joinder of indispensable parties is not a ground for the dismissal of an action. The
remedy is to implead the non-party claimed to be indispensable.
However, in the cases of Quilatan, et al. v. Heirs of Quilatan, et al.66 and Lagunilla, et al. v. Monis,
et al., 67 the Court remanded the case to the RTC for the impleading of indispensable parties. On
the other hand, in Lotte Phil. Co., Inc. v. Dela Cruz, 68 PepsiCo, Inc. v. Emerald
Pizza, 69 and Valdez-Tallorin, v. Heirs of Tarona, et al., 70 the Court directly ordered that the
indispensable parties be impleaded.
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., 71 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. This cited case
held: SHDAEC
Even in those cases where it might reasonably be argued that the failure
of the Government to implead the sequestered corporations as
defendants is indeed a procedural aberration . . ., slight reflection would
nevertheless lead to the conclusion that the defect is not fatal, but one
correctible under applicable adjective rules — e.g., Section 10, Rule 5
of the Rules of Court [specifying the remedy of amendment during trial
to authorize or to conform to the evidence]; Section 1, Rule 20
[governing amendments before trial], in relation to the rule respecting
omission of so-called necessary or indispensable parties, set out in
Section 11, Rule 3 of the Rules of Court. It is relevant in this context to
advert to the old familiar doctrines that the omission to implead such
parties "is a mere technical defect which can be cured at any stage of
the proceedings even after judgment"; and that, particularly in the case
of indispensable parties, since their presence and participation is
 essential to the very life of the action, for without them no judgment may Lagrimas Pacaña-Gonzalez, are ORDERED IMPLEADED as parties-plaintiffs and the RTC is
be rendered, amendments of the complaint in order to implead them directed to proceed with the trial of the case with DISPATCH.
should be freely allowed, even on appeal, in fact even after rendition of
judgment by this Court, where it appears that the complaint otherwise SO ORDERED.
indicates their identity and character as such indispensable parties."
||| (Pacaña-Contreras v. Rovila Water Supply, Inc., G.R. No. 168979, [December 2, 2013], 722
Although there are decided cases wherein the non-joinder of indispensable PHIL 460-484)
parties in fact led to the dismissal of the suit or the annulment of judgment,
such cases do not jibe with the matter at hand. The better view is that non-
joinder is not a ground to dismiss the suit or annul the judgment. The rule
on joinder of indispensable parties is founded on equity. And the spirit of
the law is reflected in Section 11, Rule 3 of the 1997 Rules of Civil
Procedure. It prohibits the dismissal of a suit on the ground of non-joinder
or misjoinder of parties and allows the amendment of the complaint at any
stage of the proceedings, through motion or on order of the court on its
own initiative.

Likewise, jurisprudence on the Federal Rules of Procedure, from which our

Section 7, Rule 3 on indispensable parties was copied, allows the joinder
of indispensable parties even after judgment has been entered if such is
needed to afford the moving party full relief. Mere delay in filing the joinder
motion does not necessarily result in the waiver of the right as long as the
delay is excusable.

In Galicia, et al. v. Vda. De Mindo, et al., 72 the Court ruled that in line with its policy of promoting
a just and inexpensive disposition of a case, it allowed the intervention of the indispensable parties
instead of dismissing the complaint. Furthermore, in Commissioner Domingo v. Scheer, 73 the
Court cited Salvador, et al. v. Court of Appeals, et al.74 and held that the Court has full powers,
apart from that power and authority which are inherent, to amend the processes, pleadings,
proceedings and decisions by substituting as party-plaintiff the real party in interest. The Court
has the power to avoid delay in the disposition of this case, and to order its amendment in order
to implead an indispensable party.

With these discussions as premises, the Court is of the view that the proper remedy in the present
case is to implead the indispensable parties especially when their non-inclusion is merely a
technical defect. To do so would serve proper administration of justice and prevent further delay
and multiplicity of suits. Pursuant to Section 9, Rule 3 of the Rules of Court, parties may be added
by order of the court on motion of the party or on its own initiative at any stage of the action. If the
plaintiff refuses to implead an indispensable party despite the order of the court, then the court
may dismiss the complaint for the plaintiff's failure to comply with a lawful court order. 75 The
operative act that would lead to the dismissal of the case would be the refusal to comply with the
directive of the court for the joinder of an indispensable party to the case. 76

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 77 in relation with Article 777 78 of the Civil
Code.In Orbeta, et al. v. Sendiong, 79 the Court acknowledged that the heirs, whose hereditary
rights are to be affected by the case, are deemed indispensable parties who should have been
impleaded by the trial court.

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 petitioners who are already parties to the case and Lagrimas
Pacaña-Gonzalez who intervened in the case, are hereby ordered impleaded as parties-plaintiffs.

WHEREFORE, the petition is GRANTED. The decision dated January 27, 2005 and the resolution
dated June 6, 2005 of the Court of Appeals in CA-G.R. SP No. 71551 are REVERSED and SET
ASIDE. The heirs of the spouses Luciano and Lourdes Pacaña, except herein petitioners and
 5. Juana Complex Homeowners, et. al. vs. Fil-Estate Land, GR No. 152272,
March 5, 2012
[G.R. No. 152272. March 5, 2012.]
JUANA COMPLEX I HOMEOWNERS ASSOCIATION, INC., ANDRES C.
BAUTISTA, BRIGIDO DIMACULANGAN, DOLORES P. PRADO,
IMELDA DE LA CRUZ, EDITHA C. DY, FLORENCIA M. MERCADO,
LEOVINO C. DATARIO, AIDA A. ABAYON, NAPOLEON M. DIMAANO,
ROSITA G. ESTIGOY and NELSON A. LOYOLA, petitioners, vs. FIL-
ESTATE LAND, INC., FIL ESTATE ECOCENTRUM CORPORATION, LA
PAZ HOUSING AND DEVELOPMENT CORPORATION, WARBIRD
SECURITY AGENCY, ENRIQUE RIVILLA, MICHAEL E. JETHMAL and
MICHAEL ALUNAN, respondents.
[G.R. No. 152397. March 5, 2012.]
FIL-ESTATE LAND, INC., FIL ESTATE ECOCENTRUM
CORPORATION, LA PAZ HOUSING AND DEVELOPMENT
CORPORATION, WARBIRD SECURITY AGENCY, ENRIQUE RIVILLA,
MICHAEL E. JETHMAL and MICHAEL ALUNAN, petitioners, vs. JUANA
COMPLEX I HOMEOWNERS ASSOCIATION, INC., ANDRES C.
BAUTISTA, BRIGIDO DIMACULANGAN, DOLORES P. PRADO,
IMELDA DE LA CRUZ, EDITHA C. DY, FLORENCIA M. MERCADO,
LEOVINO C. DATARIO, AIDA A. ABAYON, NAPOLEON M. DIMAANO,
ROSITA G. ESTIGOY and NELSON A. LOYOLA, respondents.
DECISION
MENDOZA, J p:
Before the Court are two (2) consolidated petitions assailing the July 31, 2001 Decision 1 and
February 21, 2002 Resolution 2 of the Court of Appeals (CA) in CA-G.R. SP No. 60543, which
annulled and set aside the March 3, 1999 Order 3 of the Regional Trial Court, Branch 25, Biñan,
Laguna (RTC), granting the application for the issuance of a writ of preliminary injunction, and
upheld the June 16, 2000 Omnibus Order 4 denying the motion to dismiss.
The Facts:
On January 20, 1999, Juana Complex I Homeowners Association, Inc. (JCHA), together with
individual residents of Juana Complex I and other neighboring subdivisions (collectively referred
as JCHA, et al.), instituted a complaint 5 for damages, in its own behalf and as a class suit
representing the regular commuters and motorists of Juana Complex I and neighboring
subdivisions who were deprived of the use of La Paz Road, against Fil-Estate Land, Inc. (Fil-
Estate), Fil-estate Ecocentrum Corporation (FEEC), La Paz Housing & Development
Corporation (La Paz), and Warbird Security Agency and their respective officers (collectively
referred as Fil-Estate, et al.). DEcTCa
The complaint alleged that JCHA, et al., were regular commuters and motorists who constantly
travelled towards the direction of Manila and Calamba; that they used the entry and exit toll gates
of South Luzon Expressway (SLEX) by passing through right-of-way public road known as La Paz
Road; that they had been using La Paz Road for more than ten (10) years; that in August 1998,
Fil-estate excavated, broke and deliberately ruined La Paz Road that led to SLEX so JCHA, et al.,
would not be able to pass through the said road; that La Paz Road was restored by the residents
to make it passable but Fil-estate excavated the road again; that JCHA reported the matter to the
Municipal Government and the Office of the Municipal Engineer but the latter failed to repair the
road to make it passable and safe to motorists and pedestrians; that the act of Fil-estate in
excavating La Paz Road caused damage, prejudice, inconvenience, annoyance, and loss of
precious hours to them, to the commuters and motorists because traffic was re-routed to narrow
streets that caused terrible traffic congestion and hazard; and that its permanent closure would
not only prejudice their right to free and unhampered use of the property but would also cause
great damage and irreparable injury.
Accordingly, JCHA, et al., also prayed for the immediate issuance of a Temporary Restraining
Order (TRO) or a writ of preliminary injunction (WPI) to enjoin Fil-Estate, et al., from stopping and
intimidating them in their use of La Paz Road.
On February 10, 1999, a TRO was issued ordering Fil-Estate, et al., for a period of twenty (20)
days, to stop preventing, coercing, intimidating or harassing the commuters and motorists from
using the La Paz Road. 6
Subsequently, the RTC conducted several hearings to determine the propriety of the issuance of
a WPI.
On February 26, 1999, Fil-Estate, et al., filed a motion to dismiss 7 arguing that the complaint
failed to state a cause of action and that it was improperly filed as a class suit. On March 5, 1999,
JCHA, et al., filed their comment 8 on the motion to dismiss to which respondents filed a reply. 9
On March 3, 1999, the RTC issued an Order 10 granting the WPI and required JCHA, et al., to
post a bond.
On March 19, 1999, Fil-Estate, et al., filed a motion for reconsideration 11 arguing, among others,
that JCHA, et al., failed to satisfy the requirements for the issuance of a WPI. On March 23, 1999,
JCHA, et al., filed their opposition to the motion. 12 aDcEIH
The RTC then issued its June 16, 2000 Omnibus Order, denying both the motion to dismiss and
the motion for reconsideration filed by Fil-Estate, et al.
Not satisfied, Fil-Estate, et al., filed a petition for certiorari and prohibition before the CA to annul
(1) the Order dated March 3, 1999 and (2) the Omnibus Order dated June 16, 2000. They
contended that the complaint failed to state a cause of action and that it was improperly filed as a
class suit. With regard to the issuance of the WPI, the defendants averred that JCHA, et al., failed
to show that they had a clear and unmistakable right to the use of La Paz Road; and further
claimed that La Paz Road was a torrens registered private road and there was neither a voluntary
nor legal easement constituted over it. 13
On July 31, 2001, the CA rendered the decision partially granting the petition, the dispositive
portion of which reads:
WHEREFORE, the petition is hereby partially GRANTED. The Order dated
March 3, 1999 granting the writ of preliminary injunction is hereby
ANNULLED and SET ASIDE but the portion of the Omnibus Order dated
June 16, 2000 denying the motion to dismiss is upheld.
SO ORDERED. 14
The CA ruled that the complaint sufficiently stated a cause of action when JCHA, et al., alleged in
their complaint that they had been using La Paz Road for more than ten (10) years and that their
right was violated when Fil-Estate closed and excavated the road. It sustained the RTC ruling that
the complaint was properly filed as a class suit as it was shown that the case was of common
interest and that the individuals sought to be represented were so numerous that it was impractical
to include all of them as parties. The CA, however, annulled the WPI for failure of JCHA, et al., to
prove their clear and present right over La Paz Road. The CA ordered the remand of the case to
the RTC for a full-blown trial on the merits.
Hence, these petitions for review.
In G.R. No. 152272, JCHA, et al., come to this Court, raising the following issues:
(A)
THE HONORABLE COURT OF APPEALS, IN HOLDING THAT A FULL-
BLOWN TRIAL ON THE MERITS IS REQUIRED TO DETERMINE THE
NATURE OF THE LA PAZ ROAD, HAD DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS
TO CALL FOR AN EXERCISE OF THE POWER OF
SUPERVISION. aHATDI
(B)
THE HONORABLE COURT OF APPEALS, IN HOLDING THAT THE
PETITIONERS FAILED TO SATISFY THE REQUIREMENTS FOR THE
ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION, HAD
DECIDED NOT IN ACCORD WITH LAW AND WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT. 15
In G.R. No. 152397, on the other hand, Fil-Estate, et al., anchor their petition on the following
issues:
I.
The Court of Appeals' declaration that respondents' Complaint states
a cause of action is contrary to existing law and jurisprudence.
II.
The Court of Appeals' pronouncement that respondents' complaint
was properly filed as a class suit is contrary to existing law and
jurisprudence.
III.
The Court of Appeals' conclusion that full blown trial on the merits is
required to determine the nature of the La Paz Road is contrary to
existing laws and jurisprudence. 16 THacES
JCHA, et al., concur with the CA that the complaint sufficiently stated a cause of action. They,
however, disagree with the CA's pronouncement that a full-blown trial on the merits was
necessary. They claim that during the hearing on the application of the writ of injunction, they had
sufficiently proven that La Paz Road was a public road and that commuters and motorists of their
neighboring villages had used this road as their means of access to the San Agustin Church,
Colegio De San Agustin and to SLEX in going to Metro Manila and to Southern Tagalog particularly
during the rush hours when traffic at Carmona Entry/Exit and Susana Heights Entry/Exit was at its
worst.
JCHA, et al., argue that La Paz Road has attained the status and character of a public road or
burdened by an apparent easement of public right of way. They point out that La Paz Road is the
widest road in the neighborhood used by motorists in going to Halang Road and in entering the
SLEX-Halang toll gate and that there is no other road as wide as La Paz Road existing in the
vicinity. For residents of San Pedro, Laguna, the shortest, convenient and safe route towards
SLEX Halang is along Rosario Avenue joining La Paz Road.
Finally, JCHA, et al., argue that the CA erred when it voided the WPI because the public nature of
La Paz Road had been sufficiently proven and, as residents of San Pedro and Biñan, Laguna,
their right to use La Paz Road is undeniable.
In their Memorandum, 17 Fil-Estate, et al., explain that La Paz Road is included in the parcels of
land covered by Transfer Certificates of Title (TCT)Nos. T-120008, T-90321 and T-90607, all
registered in the name of La Paz. The purpose of constructing La Paz Road was to provide a
passageway for La Paz to its intended projects to the south, one of which was the Juana Complex
I. When Juana Complex I was completed, La Paz donated the open spaces, drainage, canal, and
lighting facilities inside the Juana Complex I to the Municipality of Biñan. The streets within the
subdivisions were then converted to public roads and were opened for use of the general public.
The La Paz Road, not being part of the Juana Complex I, was excluded from the donation.
Subsequently, La Paz became a shareholder of FEEC, a consortium formed to develop several
real properties in Biñan, Laguna, known as Ecocentrum Project. In exchange for shares of stock,
La Paz contributed some of its real properties to the Municipality of Biñan, including the properties
constituting La Paz Road, to form part of the Ecocentrum Project.
Fil-Estate, et al., agree with the CA that the annulment of the WPI was proper since JCHA, et al.,
failed to prove that they have a clear right over La Paz Road. Fil-Estate, et al., assert that JCHA,
et al., failed to prove the existence of a right of way or a right to pass over La Paz Road and that
the closure of the said road constituted an injury to such right. According to them, La Paz Road is
a torrens registered private road and there is neither a voluntary nor legal easement constituted
over it. They claim that La Paz Road is a private property registered under the name of La Paz
and the beneficial ownership thereof was transferred to FEEC when La Paz joined the consortium
for the Ecocentrum Project.
Fil-Estate, et al., however, insist that the complaint did not sufficiently contain the ultimate facts to
show a cause of action. They aver the bare allegation that one is entitled to something is an
allegation of a conclusion which adds nothing to the pleading.
They likewise argue that the complaint was improperly filed as a class suit for it failed to show that
JCHA, et al., and the commuters and motorists they are representing have a well-defined
community of interest over La Paz Road. They claim that the excavation of La Paz Road would
not necessarily give rise to a common right or cause of action for JCHA, et al., against them since
each of them has a separate and distinct purpose and each may be affected differently than the
others. SHcDAI
The Court's Ruling
The issues for the Court's resolution are: (1) whether or not the complaint states a cause of action;
(2) whether the complaint has been properly filed as a class suit; and (2) whether or not a WPI is
warranted.
Section 2, Rule 2 of the Rules of Court defines a cause of action as an act or omission by which
a party violates the right of another. A complaint states a cause of action when it contains three
(3) essential elements of a cause of action, namely:
(1) the legal right of the plaintiff,
(2) the correlative obligation of the defendant, and
(3) the act or omission of the defendant in violation of said legal right. 18
The question of whether the complaint states a cause of action is determined by its averments
regarding the acts committed by the defendant. 19Thus, it must contain a concise statement of
the ultimate or essential facts constituting the plaintiff's cause of action. 20 To be taken into
account are only the material allegations in the complaint; extraneous facts and circumstances or
other matters aliunde are not considered. 21
The test of sufficiency of facts alleged in the complaint as constituting a cause of action is whether
or not admitting the facts alleged, the court could render a valid verdict in accordance with the
prayer of said complaint. 22 Stated differently, if the allegations in the complaint furnish sufficient
basis by which the complaint can be maintained, the same should not be dismissed regardless of
the defense that may be asserted by the defendant. 23
In the present case, the Court finds the allegations in the complaint sufficient to establish a cause
of action. First, JCHA, et al.'s averments in the complaint show a demandable right over La Paz
Road. These are: (1) their right to use the road on the basis of their allegation that they had been
using the road for more than 10 years; and (2) an easement of a right of way has been constituted
over the said roads. There is no other road as wide as La Paz Road existing in the vicinity and it
is the shortest, convenient and safe route towards SLEX Halang that the commuters and motorists
may use. Second, there is an alleged violation of such right committed by Fil-Estate, et al., when
they excavated the road and prevented the commuters and motorists from using the
same. Third, JCHA, et al., consequently suffered injury and that a valid judgment could have been
rendered in accordance with the relief sought therein.
With respect to the issue that the case was improperly instituted as a class suit, the Court finds
the opposition without merit. TEDaAc
Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:
Sec. 12. Class suit. — When the subject matter of the controversy is one
of common or general interest to many persons so numerous that it is
impracticable to join all as parties, a number of them which the court finds
to be sufficiently numerous and representative as to fully protect the
interests of all concerned may sue or defend for the benefit of all. Any party
in interest shall have the right to intervene to protect his individual interest.
The necessary elements for the maintenance of a class suit are: 1) the subject matter of
controversy is one of common or general interest to many persons; 2) the parties affected are so
numerous that it is impracticable to bring them all to court; and 3) the parties bringing the class
suit are sufficiently numerous or representative of the class and can fully protect the interests of
all concerned. 24
In this case, the suit is clearly one that benefits all commuters and motorists who use La Paz Road.
As succinctly stated by the CA:
The subject matter of the instant case, i.e., the closure and excavation of
the La Paz Road, is initially shown to be of common or general interest to
many persons. The records reveal that numerous individuals have filed
manifestations with the lower court, conveying their intention to join private
respondents in the suit and claiming that they are similarly situated with
private respondents for they were also prejudiced by the acts of petitioners
in closing and excavating the La Paz Road. Moreover, the individuals
sought to be represented by private respondents in the suit are so
numerous that it is impracticable to join them all as parties and be named
individually as plaintiffs in the complaint. These individuals claim to be
residents of various barangays in Biñan, Laguna and other barangays in
San Pedro, Laguna.
Anent the issue on the propriety of the WPI, Section 3, Rule 58 of the Rules of Court lays down
the rules for the issuance thereof. Thus:
(a) That the applicant is entitled to the relief demanded, and the whole or
part of such relief consists in restraining the commission or continuance of
the acts complained of, or in the performance of an act or acts, either for a
limited period or perpetually;
(b) That the commission, continuance or non-performance of the act or acts
complained of during the litigation would probably work injustice to the
applicant; or
(c) That a party, court, or agency or a person is doing, threatening, or
attempting to do, or is procuring or suffering to be done, some act or acts
probably in violation of the rights of the applicant respecting the subject of
the action or proceeding, and tending to render the judgment ineffectual.
A writ of preliminary injunction is available to prevent a threatened or continuous irremediable
injury to parties before their claims can be thoroughly studied and adjudicated. 25 The requisites
for its issuance are: (1) the existence of a clear and unmistakable right that must be protected;
and (2) an urgent and paramount necessity for the writ to prevent serious damage. 26 For the writ
to issue, the right sought to be protected must be a present right, a legal right which must be
shown to be clear and positive. 27 This means that the persons applying for the writ must show
that they have an ostensible right to the final relief prayed for in their complaint. 28 cEAHSC
In the case at bench, JCHA, et al., failed to establish a prima facie proof of violation of their right
to justify the issuance of a WPI. Their right to the use of La Paz Road is disputable since they
have no clear legal right therein. As correctly ruled by the CA:
Here, contrary to the ruling of respondent Judge, private respondents failed
to prove as yet that they have a clear and unmistakable right over the La
Paz Road — which was sought to be protected by the injunctive writ. They
merely anchor their purported right over the La Paz Road on the bare
allegation that they have been using the same as public road right-of-way
for more than ten years. A mere allegation does not meet the standard of
proof that would warrant the issuance of the injunctive writ. Failure to
establish the existence of a clear right which should be judicially protected
through the writ of injunction is a sufficient ground for denying the
injunction.
Consequently, the case should be further heard by the RTC so that the parties can fully prove
their respective positions on the issues.
Due process considerations dictate that the assailed injunctive writ is not a judgment on the merits
but merely an order for the grant of a provisional and ancillary remedy to preserve the status
quo until the merits of the case can be heard. The hearing on the application for issuance of a writ
of preliminary injunction is separate and distinct from the trial on the merits of the main
case. 29 The evidence submitted during the hearing of the incident is not conclusive or complete
for only a "sampling" is needed to give the trial court an idea of the justification for the preliminary
injunction pending the decision of the case on the merits. 30 There are vital facts that have yet to
be presented during the trial which may not be obtained or presented during the hearing on the
application for the injunctive writ. 31 Moreover, the quantum of evidence required for one is
different from that for the other. 32
WHEREFORE, the petitions are DENIED. Accordingly, the July 31, 2001 Decision and February
21, 2002 Resolution of the Court of Appeals in CA-G.R. SP No. 60543 are AFFIRMED. AcDaEH
SO ORDERED.
||| (Juana Complex I Homeowners Association, Inc. v. Fil-Estate Land, Inc., G.R. No. 152272,
152397, [March 5, 2012], 683 PHIL 415-430)
 6. Mathay vs. Consolidated Bank, 58 SCRA 559 (1974)
[G.R. No. L-23136. August 26, 1974.]
ISMAEL MATHAY, JOSEFINA MATHAY, DIOGRACIAS T. REYES and
S. ADOR DIONISIO, plaintiffs-appellants, vs. THE CONSOLIDATED
BANK AND TRUST COMPANY, JOSE MARINO OLONDRIZ,
WILFREDO C. TECSON, SIMON R. PATERNO, FERMIN Z. CARAM, JR.,
ANTONIO P. MADRIGAL, JOSE P. MADRIGAL, CLAUDIO
TEEHANKEE, and ALFONSO JUAN OLONDRIZ, defendants-
appellees.CIPRIANO AZADA, MARIA CRISTINA OLONDRIZ
PERTIERRA jointly with her husband ARTURO PERTIERRA, and
MARIA DEL PUY OLONDRIZ DE STEVENS, movants-intervenors-
appellants.
Deogracias T . Reyes & Associates for appellants.
Tañada, Teehankee & Carreon for appellees.
Paterno Pedreña for appellee Fermin Z. Caram, Jr.
DECISION
ZALDIVAR, J p:
In this appeal, appellants-plaintiffs and movants-intervenors, seek the reversal of the order dated
March 21, 1964 of the Court of First Instance of Manila dismissing the complaint together with all
other pending incidents in Civil Case No. 55810. cdt
The complaint in this case, filed on December 24, 1963 as a class suit, under Section 12, Rule 3,
of the Rules of Court, contained six causes of action. Under the first cause of action, plaintiffs-
appellants alleged that they were, on or before March 28, 1962, stockholders in the Consolidated
Mines, Inc. (hereinafter referred to as CMI), a corporation duly organized and existing under
Philippine laws; that the stockholders of the CMI, including the plaintiffs-appellants, passed, at a
regular stockholders' meeting, a Resolution providing: (a) that the Consolidated Bank & Trust Co.
(hereinafter referred to as Bank) he organized with an authorized capital of P20,000,000.00; (b)
that the organization be undertaken by a Board of Organizers composed of the President and
Members of the Board of Directors of the CMI; (c) that all stockholders of the CMI, who were legally
qualified to become stockholders, would be entitled to subscribe to the capital stock of the
proposed Bank "at par value to the same extent and in the same amount as said stockholders'
respective shareholdings in the CMI," as shown in its stock books on a date to be fixed by the
Board of Directors [which date was subsequently fixed as January 15, 1963], provided that the
right to subscribe should be exercised within thirty days from the date so fixed, and "that if such
right to subscription be not so exercised then the stockholders concerned shall be deemed to have
thereby waived and released ipso-facto their right to such subscription in favor of the Interim Board
of Organizers of the Defendant Bank or their assignees;" and (d) that the Board of Directors of the
CMI be authorized to declare a "special dividend" in an amount it would fix, which the subscribing
stockholders might authorize to be paid directly to the treasurer of the proposed Bank in payment
of the subscriptions; that the President and members of the Board of Directors of the CMI, who
are the individuals-defendants-appellees in the instant case, constituted themselves as the Interim
Board of Organizers; that said Board sent out, on or about November 20, 1962, to the CMI
stockholders, including the plaintiffs-appellants, circular letters with "Pre-Incorporation Agreement
to Subscribe" forms that provided that the payment of the subscription should be made in cash
from time to time or by the application of the special dividend declared by the CMI, and that the
subscription must be made within the period from December 4, 1962 to January 15, 1963,
"otherwise such subscription right shall be deemed to have been thereby ipso facto waived and
released in favor of the Board of Organizers of the Defendant Bank and their assignees"; that the
plaintiffs-appellants accomplished and filed their respective "Pre-Incorporation Agreement to
Subscribe" and paid in full their subscriptions; that plaintiffs-appellants and the other CMI
subscribing stockholders in whose behalf the action was brought also subscribed to a very
substantial amount of shares; that on June 25, 1963, the Board of Organizers caused the
execution of the Articles or Incorporation of the proposed Bank indicating an original subscription
of 50,000 shares worth P5,000,000 subscribed and paid only by six of the individuals-defendants-
appellees, namely, Antonio P. Madrigal, Jose P. Madrigal, Simon R. Paterno, Fermin Z. Caram,
Jr., Claudio Teehankee, and Wilfredo C. Tecson, thereby excluding the plaintiffs-appellants and
the other CMI subscribing stockholders who had already subscribed; that the execution of said
Articles of Incorporation was "in violation of law and in breach of trust and contractual agreement
as a means to gain control of Defendant Bank by Defendant Individuals and persons or entities
chosen by them and for their personal profit or gain in disregard of the rights of Plaintiffs and other
CMI Subscribing Stockholders;" that the paid-in capital stock was raised, as required by the
Monetary Board, to P8,000,000.00, and individuals — defendants-appellees caused to be issued
from the unissued shares 30,000 shares amounting to P3,000,000.00, all of which were again
subscribed and paid for entirely by individuals-defendants-appellees or entities chosen by them
"to the exclusion of Plaintiffs and other CMI subscribing stockholders" "in violation of law and
breach of trust and of the contractual agreement embodied in the contractual agreement of March
28, 1962"; that the Articles were filed with the Securities and Exchange Commission which issued
the Certificate of Incorporation on June 25, 1963; that as of the date of the Complaint, the plaintiffs-
appellants and other CMI subscribing stockholders had been denied, through the unlawful acts
and manipulation of the defendant Bank and Individuals-defendants-appellees, the right to
subscribe at par value, in proportion to their equities established under their respective "Pre-
Incorporation Agreements to Subscribe" to the capital stock, i.e., (a) to the original issue of 50,000
shares and/or (b) to the additional issue of 30,000 shares, and/or (c) in that portion of said original
or additional issue which was unsubscribed; that the individuals-defendants-appellees and the
persons chosen by them had unlawfully acquired stockholdings in the defendant-appellee Bank in
excess of what they were lawfully entitled and held such shares "in trust" for the plaintiffs-
appellants and the other CMI stockholders; that it would have been vain and futile to resort to
intracorporate remedies under the facts and circumstances alleged above. As relief on the first
cause of action, plaintiffs-appellants prayed that the subscriptions and shareholdings acquired by
the individuals-defendants-appellees and the persons chosen by them, to the extent that plaintiffs-
appellants and the other CMI stockholders had been deprived of their right to subscribe, be
annulled and transferred to plaintiffs-appellants and other CMI subscribing stockholders.
Besides reproducing all the above allegations in the other causes of action, plaintiffs-appellants
further alleged under the second cause of action that on or about August 28, 1963, defendants-
appellees Antonio P. Madrigal, Jose P. Madrigal; Fermin Z. Caram, Jr., and Wilfredo C. Tecson
"falsely certified to the calling of a special stockholders' meeting allegedly pursuant to due notice
and call of Defendant Bank" although plaintiffs-appellants and other CMI stockholders were not
notified thereof, and amended the Articles of Incorporation increasing the number of Directors from
6 to 7, and had the illegally created position of Director filled up by defendant-appellee Alfonso
Juan Olondriz, who was not competent or qualified to hold such position. In the third cause of
action, plaintiffs-appellants claimed actual damages in an amount equivalent to the difference
between the par value of the shares they were entitled, but failed, to acquire and the higher market
value of the same shares. In the fourth cause of action, plaintiffs-appellants claimed moral
damages; in the fifth, exemplary damages; and in the sixth, attorney's fees.
In his manifestation to the court on January 4, 1964, Francisco Sevilla, who was one of the original
plaintiffs, withdrew. On January 15, 1964 Cipriano Azada, Maria Cristina Olondriz Pertierra, Maria
del Puy Olondriz de Stevens (who later withdrew as intervenors-appellants) and Carmen Sievert
de Amoyo, filed a motion to intervene, and to join the plaintiffs-appellants on record, to which
motion defendants-appellees, except Fermin Z. Caram, Jr., filed, on January 17, 1964 their
opposition. prLL
On February 7, 1964 defendants-appellees, except Fermin Z. Caram, Jr., filed a motion to dismiss
on the grounds that (a) plaintiffs-appellants had no legal standing or capacity to institute the
alleged class suit; (b) that the complaint did not state a sufficient and valid cause of action; and
(c) that plaintiffs-appellants' complaint against the increase of the number of directors did not
likewise state a cause of action. Plaintiffs-appellants filed their opposition thereto on February 21,
1964.
On March 4, 1964 appellants, plaintiffs and intervenors, filed a verified petition for a writ of
preliminary injunction to enjoin defendants-appellees from considering or ratifying by resolution,
at the meeting of the stockholders of defendant-appellee Bank to be held the following day, the
unlawful apportionment of the shares of the defendant-appellee Bank and the illegal amendment
to its Articles of Incorporation increasing the number of Directors. The Court, after hearing, granted
the writ, but subsequently set it aside upon the appellees' filing a counterbond.
Some subscribers to the capital stock of the Bank like Concepcion Zuluaga, et al., and Carlos
Moran Sison, et al., filed separate manifestations that they were opposing and disauthorizing the
suit of plaintiffs-appellants.
On March 7, 1964 defendants-appellees, except Fermin Z. Caram, Jr., filed a supplemental ground
for their motion to dismiss, to wit, that the stockholders, except Fermin Z. Caram, Jr., who
abstained, had unanimously, at their regular annual meeting held on March 5, 1964, ratified and
confirmed all the actuations of the organizers-directors in the incorporation, organization and
establishment of the Bank.
In its order, dated March 21, 1964, the trial court granted the motion to dismiss, holding, among
other things, that the class suit could not be maintained because of the absence of a showing in
the complaint that the plaintiffs-appellants were sufficiently numerous and representative, and that
the complaint failed to state a cause of action. From said order, appellants, plaintiffs and
intervenors, interposed this appeal to this Court on questions of law and fact, contending that the
lower court erred as follows:
I. In holding that plaintiffs-appellants could not maintain the present class
suit because of the absence of a showing in the complaint that
they were sufficiently numerous and representative;
II. In holding that the instant action could not be maintained as a class suit
because plaintiffs-appellants did not have a common legal
interest in the subject matter of the suit;
III. In dismissing the present class suit on the ground that it did not meet
the requirements of Rule 3, section 12 of the Rules of Court;
IV. In holding that the complaint was fatally defective in that it failed to state
with particularity that plaintiffs-appellants had resorted to, and
exhausted, intra-corporate remedies;
V. In resolving defendants-appellees' motion on the basis of facts not
alleged in the complaint;
VI. In holding that plaintiffs-appellants' complaint stated no valid cause of
action against defendants-appellees;
VII. In not holding that a trust relationship existed between the Interim
Board of Organizers of defendant-appellee Bank and the CMI
subscribing stockholders and in not holding that the waiver was
in favor of the Board of Trustees for the CMI subscribing
stockholders;
VIII. In holding that the failure of plaintiffs-appellants to allege that they had
paid or had offered to pay for the shares allegedly pertaining to
them constituted another ground for dismissal;
IX. In holding that the allegations under the second cause of action stated
no valid cause of action due to a fatal omission to allege that
plaintiffs-appellants were stockholders of record at the time of
the holding of the special stockholders' meeting;
X. In holding that plaintiffs-appellants' complaint stated no cause of action
against defendant-appellee Bank; and
XI. In considering the resolution of ratification and confirmation and in
holding that the resolution rendered the issues in this case
moot. cd
The assigned error revolve around two questions, namely: (1) whether the instant action could be
maintained as a class suit, and (2) whether the complaint stated a cause of action. These issues
alone will be discussed.
1. Appellants contended in the first three assigned errors that the trial court erred in holding that
the present suit could not be maintained as a class suit, and in support thereof argued that the
propriety of a class suit should be determined by the common interest in the subject matter of the
controversy; that in the instant case there existed such common interest which consisted not only
in the recovery of the shares of which the appellants were unlawfully deprived, but also in divesting
the individuals-defendants-appellees and the persons or entities chosen by them of control of the
appellee Bank; 1 that the complaint showed that besides the four plaintiffs-appellants of record,
and the four movant-intervenors-appellants there were in the appellee Bank many other
stockholders who, though similarly situated as the appellants, did not formally include themselves
as parties on record in view of the representative character of the suit; that the test, in order to
determine the legal standing of a party to institute a class suit, was not one of number, but whether
or not the interest of said party was representative of the persons in whose behalf the class suit
was instituted; that granting arguendo, that the plaintiffs-appellants were not sufficiently numerous
and representative, the court should not have dismissed the action, for insufficiency of number in
a class suit was not a ground for a motion to dismiss, and the court should have treated the suit
as an action under Rule 3, section 6, of the Rules of Court which permits a joinder of parties.
Defendants-appellees, on the contrary, stressed that the instant suit was instituted as a class suit
and the plaintiffs-appellants did not sue in their individual capacities for the protection of their
individual interests; that the plaintiffs-appellants of record could not be considered numerous and
representative, as said plaintiffs-appellants were only four out of 1,500 stockholders, and owned
only 8 shares out of the 80,000 shares of stock of the appellee Bank; that even if to the four
plaintiffs-appellants were added the four movants-intervenors-appellants the situation would be
the same as two of the intervenors, to wit, Ma. Cristina Olondriz Pertierra and Ma. del Puy Olondriz
de Stevens, could not sue as they did not have their husbands' consent; that it was necessary that
in a class suit the complaint itself should allege facts showing that the plaintiffs were sufficiently
numerous and representative, and this did not obtain in the instant case, as the complaint did not
even allege how many other CMI stockholders were "similarly situated"; that the withdrawal of one
plaintiff, Francisco Sevilla, the subsequent disclaimers of any interest in the suit made in two
separate pleadings by other CMI stockholders and the disauthorization of their being represented
by plaintiffs-appellants by the 986 (out of 1,663) stockholders who attended the annual meeting of
bank stockholders on March 5, 1964, completely negated plaintiffs-appellants' pretension that they
were sufficiently numerous and representative or that there were many other stockholders similarly
situated whom the plaintiffs-appellants allegedly represented; that plaintiffs-appellants did not
have that common or general interest required by the Rules of Court in the subject matter of the
suit. 2
In their Reply Brief, appellants insisted that non-compliance with Section 12, Rule 3, not being one
enumerated in Rules 16 and 17, was not a ground for dismissal; that the requirements for a class
had been complied with; that the required common interest existed even if the interests were
several for there was a common question of law or fact and a common relief was sought; that the
common or general interest could be in the object of the action, in the result of the proceedings,
or in the question involved in the action, as long as there was a common right based on the same
essential facts; that plaintiffs-appellants adequately represented the aggrieved group of bank
stockholders, inasmuch as appellants interests were not antagonistic to those of the latter, and
appellants were in the same position as the group in whose behalf the complaint was filed.
The governing statutory provision for the maintenance of a class suit is Section 12 of Rule 3 of the
Rules of Court, which reads as follows.
"SECTION 12. Class suit. — When the subject matter of the controversy is
one of common or general interest to many persons, and the parties are so
numerous that it is impracticable to bring them all before the court, one or
more may sue or defend for the benefit of all. But in such case the court
shall make sure that the parties actually before it are sufficiently numerous
and representative so that all interests concerned are fully protected. Any
party in interest shall have a right to intervene in protection of his individual
interest."
The necessary elements for the maintenance of a class suit are accordingly: (1) that the subject
matter of the controversy be one of common or general interest to many persons, and (2) that
such persons be so numerous as to make it impracticable to bring them all to the court. An action
does not become a class suit merely because it is designated as such in the pleadings. Whether
the suit is or is not a class suit depends upon the attending facts, and the complaint, or other
pleading initiating the class action should allege the existence of the necessary facts, to wit, the
existence of a subject matter of common interest, and the existence of a class and the number of
persons in the alleged class, 3 in order that the court might be enabled to determine whether the
members of the class are so numerous as to make it impracticable to bring them all before the
court, to contrast the number appearing on the record with the number in the class and to
determine whether claimants on record adequately represent the class and the subject matter of
general or common interest. 4
The complaint in the instant case explicitly declared that the plaintiffs-appellants instituted the
"present class suit under Section 12, Rule 3, of the Rules of Court in behalf of CMI subscribing
stockholders" 5 but did not state the number of said CMI subscribing stockholders so that the trial
court could not infer, much less make sure as explicitly required by the statutory provision, that
the parties actually before it were sufficiently numerous and representative in order that all
interests concerned might be fully protected, and that it was impracticable to bring such a large
number of parties before the court.
The statute also requires, as a prerequisite to a class suit, that the subject-matter of the
controversy be of common or general interest to numerous persons. Although it has been
remarked that the "innocent 'common or general interest' requirement is not very helpful in
determining whether or not the suit is proper", 6 the decided cases in our jurisdiction have more
incisively certified the matter when there is such common or general interest in the subject matter
of the controversy. By the phrase "subject matter of the action" is meant "the physical facts, the
things real or personal, the money, lands, chattels, and the like, in relation to which the suit is
prosecuted, and not the delict or wrong committed by the defendant." 7
This Court has ruled that a class suit did not lie in an action for recovery of real property where
separate portions of the same parcel were occupied and claimed individually by different parties
to the exclusion of each other, such that the different parties had determinable, though undivided
interests, in the property in question. 8 It has likewise held that a class suit would not lie against
319 defendants individually occupying different portions of a big parcel of land, where each
defendant had an interest only in the particular portion he was occupying, which portion was
completely different from the other portions individually occupied by other defendants, for the
applicable Section 118 of the Code of Civil Procedure relates to a common and general interest
in single specific things and not to distinct ones. 9 In an action for the recovery of amounts that
represented surcharges allegedly collected by the city from some 30,000 customers of four movie
houses, it was held that a class suit did not lie, as no one plaintiff had any right to, or any share in
the amounts individually claimed by the others, as each of them was entitled, if at all, only to the
return of what he had personally paid. 10
The interest, subject matter of the class suits in the above-cited cases, is analogous to the interest
claimed by appellants in the instant case. The interest that appellants, plaintiffs and intervenors,
and the CMI stockholders had in the subject matter of this suit — the portion of stocks offering of
the Bank left unsubscribed by CMI stockholders who failed to exercise their right to subscribe on
or before January 15, 1963 — was several, not common or general in the sense required by the
statute. Each one of the appellants and the CMI stockholders had determinable interest; each one
had a right, if any, only to his respective portion of the stocks. No one of them had any right to, or
any interest in, the stock to which another was entitled. Anent this point, the trial court correctly
remarked:
"It appears to be the theory of the plaintiffs borne out by the prayer, that
each subscribing CMI stockholder is entitled to further subscribe to a
certain proportion, depending upon his stockholding in the CMI, of the P8
million capital stock of the defendant bank open to subscription (out of the
P20 million authorized capital stock) as well as the unsubscribed portion of
the P8 million stock offering which were left unsubscribed by those CMI
stockholders who for one reason or another had failed to exercise their
subscription rights on or before January 15, 1963. Under the plaintiffs'
theory therefore, each subscribing CMI stockholder was entitled to
subscribe to a definite number of shares both in the original offering of P8
million and in that part thereof not subscribed on or before the deadline
mentioned, so that one subscribing CMI stockholder may be entitled to
subscribe to one share, another to 3 shares and a third to 11 shares, and
so on, depending upon the amount and extent of CMI stockholding. But
except for the fact that a question of law — the proper interpretation of the
waiver provisions of the CMI stockholders' resolution of March 28, 1962 —
is common to all, each CMI subscribing stock holder has a legal interest in,
and a claim to, only his respective proportion of shares in the defendant
bank, and none with regard to any of the shares to which another
stockholder is entitled. Thus, plaintiff Ismael Mathay has no legal interest
in, or claim to, any share claimed by any or all of his co-plaintiffs from the
defendant individuals. Hence, no CMI subscribing stockholder or, for that
matter, not any number of CMI stockholders can maintain a class suit in
behalf of others, . . ." 11
Even if it be assumed, for the sake of argument, that the appellants and the CMI stockholders
suffered wrongs that had been committed by similar means and even pursuant to a single plan of
the Interim Board of Organizers of the Bank, the wrong suffered by each of them would constitute
a wrong separate from those suffered by the other stockholders, and those wrongs alone would
not create that common or general interest in the subject matter of the controversy as would entitle
any one of them to bring a class suit on behalf of the others. Anent this point it has been said that:
"Separate wrongs to separate persons, although committed by similar
means and even pursuant to a single plan, do not alone create a 'common'
or 'general' interest in those who are wronged so as to entitle them to
maintain a representative action." 12
Appellants, however, insisted, citing American authorities, 13 that a class suit might be brought
even if the interests of plaintiffs-appellants might be several as long as there was a common
question of law or fact affecting them and a common relief was sought. We have no conflict with
the authorities cited; those were rulings under the Federal Rules of Civil Procedure, pursuant to
Rule 23 of which, there were three types of class suits, namely: the true, the hybrid, and the
spurious, and these three had only one feature in common, that is, in each the persons constituting
the class must be so numerous as to make it impracticable to bring them all before the court. The
authorities cited by plaintiffs-appellants refer to the spurious class action (Rule 23 (a) (3) which
involves a right sought to be enforced, which is several, and there is a common question of law or
fact affecting the several rights and a common relief is sought. 14 The spurious class action is
merely a permissive joinder device; between the members of the class there is no jural
relationship, and the right or liability of each is distinct, the class being formed solely by the
presence of a common question of law or fact. 15 This permissive joinder is provided in Section 6
of Rule 3, of our Rules of Court. Such joinder is not and cannot be regarded as a class suit, which
this action purported and was intended to be as per averment of the complaint.
It may be granted that the claims of all the appellants involved the same question of law. But this
alone, as said above, did not constitute the common interest over the subject matter indispensable
in a class suit. The right to purchase or subscribe to the shares of the proposed Bank, claimed by
appellants herein, is analogous to the right of preemption that stockholders have when their
corporation increases its capital. The right of preemption, it has been said, is personal to each
stockholder, 16 and while a stockholder may maintain a suit to compel the issuance of his
proportionate share of stock, it has been ruled, nevertheless, that he may not maintain a
representative action on behalf of other stockholders who are similarly situated. 17 By analogy,
the right of each of the appellants to subscribe to the waived stocks was personal, and no one of
them could maintain on behalf of others similarly situated a representative suit.
Straining to make it appear that appellants and the CMI subscribing stockholders had a common
or general interest in the subject matter of the suit, appellants stressed in their brief that one of the
reliefs sought in the instant action was "to divest defendant individuals and the persons or entities
chosen by them of control of the defendant bank." 18 This relief allegedly sought by appellants did
not, however, appear either in the text or in the prayer of the complaint. prLL
Appellants, furthermore, insisted that insufficiency of number in a class suit was not a ground for
dismissal of one action. This Court has, however, said that where it appeared that no sufficient
representative parties had been joined, the dismissal by the trial court of the action, despite the
contention by plaintiffs that it was a class suit, was correct. 19 Moreover, insofar as the instant
case is concerned, even if it be granted for the sake of argument, that the suit could not be
dismissed on that ground, it could have been dismissed, nevertheless, on the ground of lack of
cause of action which will be presently discussed.
2. Appellants supported their assigned error that the court erred in holding that the complaint
stated no valid cause of action, by claiming that paragraph 15 together with the other allegations
of the complaint to the effect that defendants-appellees had unlawfully acquired stockholdings in
the capital stock of defendant-appellee Bank in excess of what they were lawfully entitled to, in
violation of law and in breach of trust and the contractual agreement, constituted a valid and
sufficient cause of action; 20 and that only the allegations in the complaint should have been
considered by the trial court in determining whether the complaint stated a cause of action or not.
Defendants-appellees, on the contrary, maintained that the allegations of the complaint should not
be the only ones to be considered in determining whether there is a cause of action; that even if
the ultimate facts alleged in the first cause of action of the complaint be the only ones considered,
the complaint would still fail to state a valid cause of action on the following grounds: first, there
was no allegation regarding appellants' qualification to subscribe to the capital stock of the
appellee Bank, for under the CMI stockholders' resolution of March 28, 1962, only those qualified
under the law were entitled to subscribe, and under the regulations of the Monetary Board, only
natural-born Filipino citizens could be stockholders of a banking corporation organized under the
laws of the Philippines, and nowhere did the complaint allege that plaintiffs-appellants were natural
born Filipino citizens. 21 Second, appellants' averment in paragraph 8 that they "subscribed," and
their averment in paragraph 15 that they were "denied the right to subscribe . . . to the capital stock
of the defendant Bank", were inconsistent, and hence neutralized each other, thereby leaving in
shambles the first cause of action. Third, there was no allegation that appellants had not yet
received or had not been issued the corresponding certificates of stock covering the shares they
had subscribed and paid for. Fourth, the allegations failed to show the existence of the supposed
trust; and fifth, the complaint failed to allege that plaintiffs-appellants had paid or offered to pay for
the shares allegedly pertaining to them. 22
Let us premise the legal principles governing the motion to dismiss on the ground of lack of cause
of action. cdasia
Section 1, Rule 16 of the Rules of Court, providing in part that:
Within the time for pleading a motion to dismiss may be made on any of
the following grounds:. . .
"(g) That the complaint states no cause of action. . . ."
explicitly requires that the sufficiency of the complaint must be tested exclusively on the basis
of the complaint itself and no other should be considered when the ground for motion to
dismiss is that the complaint states no cause of action. Pursuant thereto this Court has ruled
that:
"As a rule the sufficiency of the complaint, when challenged in a motion to
dismiss, must be determined exclusively on the basis of the facts alleged
therein." 23
It has been likewise held that a motion to dismiss based on lack of cause of action hypothetically
admits the truth of the allegations of fact made in the complaint. 24 It is to be noted that only the
facts well pleaded in the complaint, and likewise, any inferences fairly deducible therefrom, are
deemed admitted by a motion to dismiss. Neither allegations of conclusions 25 nor allegations of
facts the falsity of which the court may take judicial notice are deemed admitted. 26 The question,
therefore, submitted to the Court in a motion to dismiss based on lack of cause of action is not
whether the facts alleged in the complaint are true, for these are hypothetically admitted, but
whether the facts alleged are sufficient to constitute a cause of action such that the court may
render a valid judgment upon the facts alleged therein.
A cause of action is an act or omission of one party in violation of the legal right of the other. Its
essential elements are, namely: (1) the existence of a legal right in the plaintiff, (2) a correlative
legal duty in the defendant, and (3) an act or omission of the defendant in violation of plaintiff's
right with consequential injury or damage to the plaintiff for which he may maintain an action for
the recovery of damages or other appropriate relief. 27On the other hand, Section 3 of Rule 6 of
the Rules of Court provides that the complaint must state the ultimate facts constituting the
plaintiff's cause of action. Hence, where the complaint states ultimate facts that constitute the three
essential elements of a cause of action, the complaint states a cause of action; 28 otherwise, the
complaint must succumb to a motion to dismiss on that ground.
The legal principles having been premised, let us now analyze and discuss appellant's various
causes of action.
Appellants' first cause of action, pursuant to what has been premised above, should have
consisted of: (1) the right of appellants as well as of the other CMI stockholders to subscribe, in
proportion to their equities established under their respective "Pre-Incorporation Agreements to
Subscribe", to that portion of the capital stock which was unsubscribed because of failure of the
CMI stockholders to exercise their right to subscribe thereto; (2) the legal duty of the appellees to
have said portion of the capital stock to be subscribed by appellants and other CMI stockholders;
and (3) the violation or breach of said right of appellants and other CMI stockholders by the
appellees.
Did the complaint state the important and substantial facts directly forming the basis of the primary
right claimed by plaintiffs? Before proceeding to elucidate this question, it should be noted that a
bare allegation that one is entitled to something is an allegation of a conclusion. Such allegation
adds nothing to the pleading, it being necessary to plead specifically the facts upon which such
conclusion is founded. 29 The complaint alleged that appellants were stockholders of the CMI;
that as such stockholders, they were entitled, by virtue of the resolution of March 28, 1962, to
subscribe to the capital stock of the proposed Consolidated Bank and Trust Co., at par value to
the same extent and in the same amount as said stockholders' respective shareholdings in the
CMI as shown in the latter's stock book as of January 15, 1963, the right to subscribe to be
exercised until January 15, 1963, provided said stockholders of the CMI were qualified under the
law to become stockholders of the proposed Bank; 30 that appellants accomplished and filed their
respective "Pre-Incorporation Agreements to Subscribe" and fully paid the subscription. 31
These alleged specific facts did not even show that appellants were entitled to subscribe to the
capital stock of the proposed Bank, for said right depended on a condition precedent, which was,
that they were qualified under the law to become stockholders of the Bank, and there was no direct
averment in the complaint of the facts that qualified them to become stockholders of the Bank.
The allegation of the fact that they subscribed to the stock did not, by necessary implication, show
that they were possessed of the necessary qualifications to become stockholders of the proposed
Bank.
Assuming arguendo that appellants were qualified to become stockholders of the Bank, they could
subscribe, pursuant to the explicit terms of the resolution of March 28, 1962, "to the same extent
and in the same amount as said stockholders' respective shareholdings in the CMI" as of January
15, 1963. 32 This was the measure of the right they could claim to subscribe to waived stocks.
Appellants did not even aver that the stocks waived to the subscription of which they claimed the
right to subscribe, were comprised in "the extent and amount" of their respective shareholdings in
the CMI. It is not surprising that they did not make such an averment for they did not even allege
the amount of shares of stock to which they claimed they were entitled to subscribe. The failure of
the complaint to plead specifically the above facts rendered it impossible for the court to conclude
by natural reasoning that the appellants and other CMI stockholders had a right to subscribe to
the waived shares of stock, and made any allegation to that effect a conclusion of the pleader, not
an ultimate fact, in accordance with the test suggested by the California Supreme Court, to wit:
"If from the facts in evidence, the result can be reached by that process of
natural reasoning adopted in the investigation of truth, it becomes an
ultimate fact, to be found as such. If, on the other hand, resort must be had
to the artificial processes of the law, in order to reach a final determination,
the result is a conclusion of law." 33
Let us now pass to the second and third elements that would have constituted the first cause of
action. Did the complaint allege as ultimate facts the legal duty of defendants-appellees to have a
portion of the capital stock subscribed to by appellants? Did the complaint allege as ultimate facts
that defendants-appellees had violated appellants' right?
Even if it be assumed arguendo that defendants-appellees had the duty to have the waived stocks
subscribed to by the CMI stockholders, this duty was not owed to all the CMI stockholders, but
only to such CMI stockholders as were qualified to become stockholders of the proposed Bank.
Inasmuch as it has been shown that the complaint did not contain ultimate facts to show that
plaintiffs-appellants were qualified to become stockholders of the Bank, it follows that the
complaint did not show that defendants-appellees were under duty to have plaintiffs-appellants
subscribe to the stocks of the proposed Bank. It inevitably follows also that the complaint did not
contain ultimate facts to show that the right of the plaintiffs-appellants to subscribe to the shares
of the proposed Bank had been violated by defendants-appellees. How could a non-existent right
be violated?
Let us continue the discussion further. The complaint alleged that by virtue of the resolution of
March 28, 1962, the President and Members of the Board of Directors of the CMI would be
constituted as a Board of Organizers to undertake and carry out the organization of the
Bank; 34 that the Board of Organizers was constituted and proceeded with the establishment of
the Bank; 35 that the persons composing the Board of Organizers were the individuals-
defendants-appellees; 36 that the Board of Organizers sent our circular letters with "Pre-
Incorporation Agreement to Subscribe" forms 37 which specified, among others, "such
subscription right shall be deemed ipso facto waived and released in favor of the Board of
Organizers of the defendant Bank and their assignees"; 38 that in the Articles of Incorporation
prepared by the Board of Organizers, the individuals-defendants-appellees alone appeared to
have subscribed to the 50,000 shares; 39 and that individuals-defendants-appellees again
subscribed to all the additional 30,000 shares. 40 From these facts, appellants concluded that they
were denied their right to subscribe in proportion to their equities; 41that the individuals-
defendants-appellees unlawfully acquired stockholdings far in excess of what they were lawfully
entitled in violation of law and in breach of trust and of contractual agreement; 42 and that,
because of matters already alleged, the individuals-defendants-appellees "hold their shares in the
defendant bank in trust for plaintiffs." 43
The allegation in the complaint that the individuals-defendants-appellees held their shares "in
trust" for plaintiffs-appellants without averment of the facts from which the court could conclude
the existence of the alleged trust, was not deemed admitted by the motion to dismiss for that was
a conclusion of law. Express averments "that a party was the beneficial owner of certain property;
. . . that property or money was received or held in trust, or for the use of another; that particular
funds were trust funds; that a particular transaction created an irrevocable trust; that a person held
property as constructive trustee; that on the transfer of certain property a trust resulted" have been
considered as mere conclusions of law. 44 The facts alleged in the complaint did not, by logical
reasoning, necessarily lead to the conclusion that defendants-appellees were trustees in favor of
appellants of the shares of stock waived by the CMI stockholders who failed to exercise their right
to subscribe. In this connection, it has been likewise said that:
"The general rule is that an allegation of duty in terms unaccompanied by
a statement of the facts showing the existence of the duty, is a mere
conclusion of law, unless there is a relation set forth from which the law
raises the duty." 45
In like manner, the allegation that individuals-defendants-appellees held said shares in trust was
no more than an interpretation by appellants of the effect of the waiver clause of the Resolution
and as such it was again a mere conclusion of law. It has been said that:
"The following are also conclusions of law: . . . an allegation characterizing
an instrument or purporting to interpret it and state its effects, . . ." 46
"Allegations in petition in the nature of conclusions about the meaning of
contract, inconsistent with stated terms of the contract, cannot be
considered." 47
The allegation that the defendants-appellees acquired stockholdings far in excess of what they
were lawfully entitled, in violation of law and in breach of trust and of contractual agreement, is
also mere conclusion of law.
Of course, the allegation that there was a violation of trust duty was plainly a conclusion of law,
for "a mere allegation that it was the duty of a party to do this or that, or that he was guilty of a
breach of duty, is a statement of a conclusion, not of fact." 48
"An averment . . . that an act was 'unlawful' or 'wrongful' is a mere legal
conclusion or opinion of the pleader." 49
Moreover, plaintiffs-appellants did not state in the complaint the amount of subscription the
individual defendants-appellees were entitled to; hence there was no basis for the court to
determine what amount subscribed to by them was excessive.
From what has been said, it is clear that the ultimate facts stated under the first cause of action
are not sufficient to constitute a cause of action.
The further allegations in the second cause of action that the calling of a special meeting was
"falsely certified", that the seventh position of Director was "illegally created" and that defendant
Alfonso Juan Olondriz was "not competent or qualified" to be a director are mere conclusions of
law, the same not being necessarily inferable from the ultimate facts stated in the first and second
causes of action. It has been held in this connection that:

"An averment that . . . an act was 'unlawful' or 'wrongful' is a mere legal

conclusion or opinion of the pleader. The same is true of allegations that
an instrument was 'illegally' certified or . . . that an act was 'arbitrarily' done
. . ." 50

"A pleader states a mere conclusion when he makes any of the following
allegations: that a party was incapacitated to enter into a contract or convey
property . . ." 51

The third, fourth, fifth and sixth causes of action depended on the first cause of action, which, as
has been shown, did not state ultimate facts sufficient to constitute a cause of action. It stands to
reason, therefore, that said causes of action would also be fatally defective. pred

It having been shown that the complaint failed to state ultimate facts to constitute a cause of action,
it becomes unnecessary to discuss the other assignments of errors.

WHEREFORE, the instant appeal is dismissed, and the order dated March 21, 1964 of the Court
of First Instance of Manila dismissing the complaint in Civil Case No. 55810 is affirmed, with costs
in this instance against appellants.

It is so ordered.

||| (Mathay v. Consolidated Bank and Trust Co., G.R. No. L-23136, [August 26, 1974], 157 PHIL
551-578)
 7. Newsweek vs. IAC, 142 SCRA 171 (1986)
[G.R. No. L-63559. May 30, 1986.]
NEWSWEEK, INC., petitioner, vs. THE INTERMEDIATE APPELLATE
COURT, and NATIONAL FEDERATION OF SUGARCANE PLANTERS
INC., BINALBAGAN-ISABELA PLANTERS ASSOCIATION, INC.,
ASOCIACION DE AGRICULTORES DE LA CARLOTA, LA
CASTELLANA y PONTEVEDRA, INC., DONEDCO PLANTERS
ASSOCIATION INC., ARMANDO GUSTILO, ENRIQUE ROJAS,
ALFREDO MONTELIBANO, JR., PABLO SOLA, JOSE MONTALVO,
VICENTE GUSTILO, JOSEPH MARANON, ROBERTO CUENCA, JOSE
SICANGCO, FLORENCIO ALONSO, MIGUEL GATUSLAO, PEDRO
YULO, MARINO RUBIN and BENJAMIN BAUTISTA, respondents.
San Juan, Africa, Gonzales & San Agustin Law Offices for private respondents.
SYLLABUS
1. REMEDIAL LAW; CRIMINAL PROCEDURE; LIBEL; VICTIM MUST BE IDENTIFIABLE. — In
the case of Corpus vs. Cuaderno, Sr. (16 SCRA 807) this Court ruled that "in order to maintain a
libel suit, it is essential that the victim be identifiable (People vs. Monton, L-16772, November 30,
1962), although it is not necessary that he be named (19 A.L.R. 116)." In an earlier case, this
Court declared that ". . . defamatory matter which does not reveal the identity of the person whom
the imputation is case, affords no ground of action unless it be shown that the readers of the libel
could have identified the personality of the individual defamed." (Kunkle vs. Cablenews-American
and Lyons, 42 Phil. 760). This principle has been recognized to be of vital importance, especially
where a group or class of persons, as in the case at bar, claim to have been defamed, for it is
evident that the larger the collectivity , the more difficult it is for the individual member to prove
that the defamatory remarks apply to him. (Cf. 70 ALR 2d. 1384).
2. ID.; ID.; ID.; DEFAMATORY REMARKS DIRECTED AT A CLASS OR GROUP OF PERSONS
MUST BE SO SWEEPING OR ALL-EMBRACING AS TO APPLY TO EVERY INDIVIDUAL IN
THAT GROUP OR CLASS. — In the case of Uy Tioco vs. Yang Shu Wen, 32 Phil. 624, this Court
held as follows: "Defamatory remarks directed at a class or group of persons in general language
only, are not actionable by individuals composing the class or group unless the statements are
sweeping; and it is very probable that even then no action would lie where the body is composed
of so large a number of persons that common sense would tell those to whom the publication was
made that there was room for persons connected with the body to pursue an upright and law
abiding course and that it would be unreasonable and absurd to condemn all because of the
actions of a part." It is evident from the above ruling that where the defamation is alleged to have
been directed at a group or class, it is essential that the statement must be so sweeping or all-
embracing as to apply to every individual in that group or class, or sufficiently specific so that each
individual in the class or group can prove that the defamatory statement specifically pointed to
him, so that he can bring the action separately, if need be.
3. ID.; ID.; ID.; CLASS SUIT; NOT A CASE OF; PLAINTIFFS DO NOT HAVE A COMMON
INTEREST IN THE SUBJECT MATTER OF CONTROVERSY. — We note that private
respondents filed a "class suit" in representation of all the 8,500 sugarcane planters of Negros
Occidental. Petitioner disagrees and argues that the absence of any actionable basis in the
complaint cannot be cured by the filing of a class suit on behalf of the aforesaid sugar planters.
We find petitioner's contention meritorious. The case at bar is not a class suit. It is not a case
where one or more may sue for the benefit of all (Mathay vs. Consolidated Band and Trust
Company, 58 SCRA 559) or where the representation of class interest affected by the judgment
or decree is indispensable to make each member of the class an actual party (Borlaza vs. Polistico,
47 Phil. 348). We have here a case where each of the plaintiff has a separate and distinct
reputation in the community. They do not have a common or general interest in the subject matter
of the controversy.
4. CONSTITUTIONAL LAW; BILL OF RIGHTS; FREEDOM OF SPEECH AND PRESS; REPORT
REFERRING TO AN OFFICIAL ACT PERFORMED BY AN ELECTIVE PUBLIC OFFICIAL,
WITHIN THE REALMS OF THE PRIVILEGE. — The disputed portion of the article which refers
to plaintiff Sola and which was claimed to be libelous never singled out plaintiff Sola as a sugar
planter. The news report merely stated that the victim had been arrested by members of a special
police unit brought into the area by Pablo Sola, the mayor of Kabankalan. Hence, the report,
referring as it does not an official act performed by an elective public official, is within the realm of
privilege and protected by the constitutional guarantees of free speech and press. The article
further stated that Sola and the commander of the special police unit were arrested. The Court
takes judicial notice of this fact. (People vs. Sola, 103 SCRA 393).
5. REMEDIAL LAW; CIVIL PROCEDURE; APPEALS; AN ORDER DENYING A MOTION TO
DISMISS, MERELY INTERLOCUTORY AND CANNOT BE THE SUBJECT OF AN APPEAL. —
As a general rule, an order denying a motion to dismiss is merely interlocutory and cannot be
subject of appeal until final judgment or order is rendered. (Sec. 2 of Rule 41). The ordinary
procedure to be followed in such a case is to file an answer, go to trial and if the decision is
adverse, reiterate the issue on appeal from the final judgment. The same rule applies to an order
denying a motion to quash, except that instead of filing an answer a plea is entered and no appeal
lies from a judgment of acquittal.
6. ID.; ID.; ID.; ID.; EXCEPTIONS. — This general rule is subject to certain exceptions. If the court,
in denying the motion to dismiss or motion to quash, acts without or in excess of jurisdiction or
with grave abuse of discretion, then certiorari or prohibition lies. The reason is that it would be
unfair to require the defendant or accused to undergo the ordeal and expense of a trial if the court
has no jurisdiction over the subject matter or offense, or is not the court of proper venue, or if the
denial of the motion to dismiss or motion to quash is made with grave abuse of discretion or a
whimsical and capricious exercise of judgment. In such cases, the ordinary remedy of appeal
cannot be plain and adequate.
DECISION
FERIA, J p:
Petitioner, Newsweek, Inc., a foreign corporation licensed to do business in the Philippines, in this
special action for certiorari, prohibition with preliminary injunction, seeks to annul the decision of
the Intermediate Appellate Court dated December 17, 1982 sustaining the Order of the then Court
of First Instance of Bacolod City which denied petitioner's Motion to Dismiss the complaint for libel
filed by private respondents (Civil Case No. 15812), and the Resolution dated March 10, 1983
which denied its Motion for Reconsideration.
It appears that on March 5, 1981, private respondents, incorporated associations of sugarcane
planters in Negros Occidental claiming to have 8,500 members and several individual sugar
planters, filed Civil Case No. 15812 in their own behalf and/or as a class suit in behalf of all
sugarcane planters in the province of Negros Occidental, against petitioner and two of petitioners'
non-resident correspondents/reporters Fred Bruning and Barry Came. The complaint alleged that
petitioner and the other defendants committed libel against them by the publication of the article
"An Island of Fear" in the February 23, 1981 issue of petitioner's weekly news
magazine Newsweek. The article supposedly portrayed the island province of Negros Occidental
as a place dominated by big landowners or sugarcane planters who not only exploited the
impoverished and underpaid sugarcane workers/laborers, but also brutalized and killed them with
impunity. Complainants therein alleged that said article, taken as a whole, showed a deliberate
and malicious use of falsehood, slanted presentation and/or misrepresentation of facts intended
to put them (sugarcane planters) in bad light, expose them to public ridicule, discredit and
humiliation here in the Philippines and abroad, and make them objects of hatred, contempt and
hostility of their agricultural workers and of the public in general. They prayed that defendants be
ordered to pay them P1M as actual and compensatory damages, and such amounts for moral,
exemplary and corrective damages as the court may determine, plus expenses of litigation,
attorney's fees and costs of suit. A photo copy of the article was attached to the complaint.
On November 5, 1981, petitioner filed a motion to dismiss on the grounds that (1) the printed article
sued upon is not actionable in fact and in law; and (2) the complaint is bereft of allegations that
state, much less support a cause of action. It pointed out the non-libelous nature of the article and,
consequently, the failure of the complaint to state a cause of action. Private respondents filed an
Opposition to the motion to dismiss and petitioner filed a reply.
On March 17, 1982, the trial court denied the motion to dismiss, stating that the grounds on which
the motion to dismiss are predicated are not indubitable as the complaint on its face states a valid
cause of action; and the question as to whether the printed article sued upon its actionable or not
is a matter of evidence. Petitioner's motion for reconsideration was denied on May 28, 1982.
On June 18, 1982, petitioner filed a petition for certiorari with respondent Court (CA-G.R. No.
14406) seeking the annulment of the aforecited trial court's Orders for having been issued with
such a grave abuse of discretion as amounting to lack of jurisdiction and praying for the dismissal
of the complaint for failure to state a cause of action.
As earlier stated, respondent Court affirmed the trial court's Orders in a Decision dated December
17, 1982 and ordered the case to be tried on the merits on the grounds that — (1) the complaint
contains allegations of fact which called for the presentation of evidence; and (2) certiorari under
Rule 65 cannot be made to substitute for an appeal where an appeal would lie at a proper time.
Subsequently, on March 10, 1983, the respondent Court denied petitioner's Motion for
Reconsideration of the aforesaid decision, hence this petition.
The proper remedy which petitioner should have taken from the decision of respondent Court is
an appeal by certiorari under Rule 45 of the Rules of Court and not the special civil action of
certiorari and prohibition under Rule 45 of said Rules. However, since the petition was filed on
time within fifteen days from notice of the Resolution denying the motion for reconsideration, we
shall treat the same as a petition for review on certiorari.
The two (2) issues raised in the petition are: (1) whether or not the private respondents' complaint
failed to state a cause of action; and (2) whether or not the petition for certiorari and prohibition is
proper to question the denial of a motion to dismiss for failure to state a cause of action.
First, petitioner argues that private respondents' complaint failed to state a cause of action
because the complaint made no allegation that anything contained in the article complained of
regarding sugarcane planters referred specifically to any one of the private respondents; that libel
can be committed only against individual reputation; and that in cases where libel is claimed to
have been directed at a group, there is actionable defamation only if the libel can be said to reach
beyond the mere collectivity to do damage to a specific, individual group member's reputation.
We agree with petitioner.
In the case of Corpus vs. Cuaderno, Sr. (16 SCRA 807) this Court ruled that "in order to maintain
a libel suit, it is essential that the victim be identifiable (People vs. Monton, L-16772, November
30, 1962), although it is not necessary that he be named (19 A.L.R. 116)." In an earlier case, this
Court declared that ". . . defamatory matter which does not reveal the identity of the person upon
whom the imputation is cast, affords no ground of action unless it be shown that the readers of the
libel could have identified the personality of the individual defamed." (Kunkle vs. Cablenews —
American and Lyons, 42 Phil. 760).
This principle has been recognized to be of vital importance, especially where a group or class of
persons, as in the case at bar, claim to have been defamed, for it is evident that the larger the
collectivity, the more difficult it is for the individual member to prove that the defamatory remarks
apply to him. (Cf. 70 ALR 2d. 1384).
In the case of Uy Tioco vs. Yang Shu Wen, 32 Phil. 624, this Court held as follows:
"Defamatory remarks directed at a class or group of persons in general
language only, are not actionable by individuals composing the class or
group unless the statements are sweeping; and it is very probable that
even then no action would he where the body is composed of so large a
number of persons that common sense would tell those to whom the
publication was made that there was room for persons connected with the
body to pursue an upright and law abiding course and that it would be
unreasonable and absurd to condemn all because of the actions of a part."
(supra, p. 628).
It is evident from the above ruling that where the defamation is alleged to have been directed at a
group or class, it is essential that the statement must be so sweeping or all-embracing as to apply
to every individual in that group or class, or sufficiently specific so that each individual in the class
or group can prove that the defamatory statement specifically pointed to him, so that he can bring
the action separately, if need be.
We note that private respondents filed a "class suit" in representation of all the 8,500 sugarcane
planters of Negros Occidental. Petitioner disagrees and argues that the absence of any actionable
basis in the complaint cannot be cured by the filing of a class suit on behalf of the aforesaid sugar
planters.
We find petitioner's contention meritorious.
The case at bar is not a class suit. It is not a case where one or more may sue for the benefit of
all (Mathay vs. Consolidated Bank and Trust Company, 58 SCRA 559) or where the representation
of class interest affected by the judgment or decree is indispensable to make each member of the
class an actual party (Borlaza vs. Polistico, 47 Phil. 348). We have here a case where each of the
plaintiffs has a separate and distinct reputation in the community. They do not have a common or
general interest in the subject matter of the controversy.
The disputed portion of the article which refers to plaintiff Sola and which was claimed to be
libelous never singled out plaintiff Sola as a sugar planter. The news report merely stated that the
victim had been arrested by members of a special police unit brought into the area by Pablo Sola,
the mayor of Kabankalan. Hence, the report, referring as it does to an official act performed by an
elective public official, is within the realm of privilege and protected by the constitutional
guarantees of free speech and press.
The article further stated that Sola and the commander of the special police unit were arrested.
The Court takes judicial notice of this fact. (People vs. Sola, 103 SCRA 393.).
The second issue to be resolved here is whether or not the special civil action of certiorari or
prohibition is available to petitioner whose motion to dismiss the complaint and subsequent motion
for reconsideration were denied.
As a general rule, an order denying a motion to dismiss is merely interlocutory and cannot be
subject of appeal until final judgment or order is rendered. (Sec. 2 of Rule 41). The ordinary
procedure to be followed in such a case is to file an answer, go to trial and if the decision is
adverse, reiterate the issue on appeal from the final judgment. The same rule applies to an order
denying a motion to quash, except that instead of filing an answer a plea is entered and no appeal
lies from a judgment of acquittal.
This general rule is subject to certain exceptions. If the court, in denying the motion to dismiss or WHEREFORE, the decision of the Intermediate Appellate Court is reversed and the complaint in
motion to quash, acts without or in excess of jurisdiction or with grave abuse of discretion, then Civil Case No. 15812 of the Court of First Instance of Negros Occidental is dismissed, without
certiorari or prohibition lies. The reason is that it would be unfair to require the defendant or pronouncement as to costs.
accused to undergo the ordeal and expense of a trial if the court has no jurisdiction over the subject
matter or offense, or is not the court of proper venue, or if the denial of the motion to dismiss or
motion to quash is made with grave abuse of discretion or a whimsical and capricious exercise of
judgment. In such cases, the ordinary remedy of appeal cannot be plain and adequate. The SO ORDERED.
following are a few examples of the exceptions to the general rule.
||| (Newsweek, Inc. v. Intermediate Appellate Court, G.R. No. L-63559, [May 30, 1986], 226 PHIL
In De Jesus vs. Garcia (19 SCRA 554), upon the denial of a motion to dismiss based on lack of 99-108)
jurisdiction over the subject matter, this Court granted the petition for certiorari and prohibition
against the City Court of Manila and directed the respondent court to dismiss the case.

In Lopez vs. City Judge (18 SCRA 616), upon the denial of a motion to quash based on lack of
jurisdiction over the offense, this Court granted the petition for prohibition and enjoined the
respondent court from further proceeding in the case.

In Enriquez vs. Macadaeg (84 Phil. 674), upon the denial of a motion to dismiss based on improper
venue, this Court granted the petition for prohibition and enjoined the respondent judge from taking
cognizance of the case except to dismiss the same.

In Manalo vs. Mariano (69 SCRA 80), upon the denial of a motion to dismiss based on bar by prior
judgment, this Court granted the petition for certiorari and directed the respondent judge to dismiss
the case.

In Yuviengco vs. Dacuycuy (105 SCRA 668), upon the denial of a motion to dismiss based on the
Statute of Frauds, this Court granted the petition for certiorari and dismissed the amended
complaint.

In Tacas vs. Cariaso (72 SCRA 527), this Court granted the petition for certiorari after the motion
to quash based on double jeopardy was denied by respondent judge and ordered him to desist
from further action in the criminal case except to dismiss the same.

In People vs. Ramos (83 SCRA 11), the order denying the motion to quash based on prescription
was set aside on certiorari and the criminal case was dismissed by this Court.

Respondent Court correctly stated the general rule and its exceptions. However, it ruled that none
of the exceptions is present in the case at bar and that the case appears complex and complicated,
necessitating a full-blown trial to get to the bottom of the controversy.

Petitioner's motion to dismiss is based on the ground that the complaint states no cause of action
against it by pointing out the non-libelous nature of the article sued upon. There is no need of a
trial in view of the conclusion of this Court that the article in question is not libelous. The specific
allegation in the complaint, to the effect that the article attributed to the sugarcane planters the
deaths and brutalization of sugarcane workers, is not borne out by a perusal of the actual text.

The complaint contains a recital of the favorable working conditions of the agricultural workers in
the sugar industry and the various foundations and programs supported by planters' associations
for the benefit of their workers. Undoubtedly, the statements in the article in question are sweeping
and exaggerated; but, paraphrasing the ruling in the Uy Tioco case above quoted, it would be
unreasonable and absurd to condemn the majority of the sugarcane planters, who have at heart
the welfare of their workers, because of the actions of a part. Nonetheless, articles such as the
one in question may also serve to prick the consciences of those who have but are not doing
anything or enough for those who do not have.

On the other hand, petitioner would do well to heed the admonition of the President to media that
they should check the sources of their information to ensure the publication of the truth. Freedom
of the press, like all freedoms, should be exercised with responsibility.
 8. Oposa vs. Factoran, 224 SCRA 792 (1993)
[G.R. No. 101083. July 30, 1993.]
JUAN ANTONIO, ANNA ROSARIO and JOSE ALFONSO, all surnamed
OPOSA, minors, and represented by their parents ANTONIO and
RIZALINA OPOSA, ROBERT A NICOLE SADIUA, minor, represented
by her parents CALVIN and ROBERTA SADIUA, CARLO, AMANDA
SALUD and PATRISHA, all surnamed FLORES, minors and
represented by their parents ENRICO and NIDA FLORES, GIANINA
DITA R. FORTUN, minor, represented by her parents SIGFRID and
DOLORES FORTUN, GEORGE II and MA. CONCEPCION, all surnamed
MISA, minors and represented by their parents GEORGE and MYRA
MISA, BENJAMIN ALAN V. PASIGAN, minor, represented by his
parents ANTONIO and ALICE PESIGAN, JOVIE MARIE ALFARO,
minor, represented by her parents JOSE and MARIA VIOLETA
ALFARO, MARIA CONCEPCION T. CASTRO, minor, represented by
her parents FREDENIL and JANE CASTRO, JOHANNA
DESAMPARADO, minor, represented by her parents JOSE and
ANGELA DESAMPARADO, CARLO JOAQUIN T. NARVASA, minor,
represented by his parents GREGORIO II and CRISTINE CHARITY
NARVASA, MA. MARGARITA, JESUS IGNACIO, MA. ANGELA and
MARIE GABRIELLE, all surnamed SAENZ, minors, represented by
their parents ROBERTO and AURORA SAENZ, KRISTINE, MARY
ELLEN, MAY, GOLDA MARTHE and DAVID IAN, all surnamed KING,
minors, represented by their parents MARIO and HAYDEE KING,
DAVID, FRANCISCO and THERESE VICTORIA, all surnamed
ENDRIGA, minors, represented by their parents BALTAZAR and
TERESITA ENDRIGA, JOSE MA. and REGINA MA., all surnamed
ABAYA, minors, represented by their parents ANTONIO and MARICA
ABAYA, MARILIN, MARIO, JR. and MARIETTE, all surnamed
CARDAMA, minors, represented by their parents MARIO and LINA
CARDAMA, CLARISSA, ANN MARIE, NAGEL and IMEE LYN, all
surnamed OPOSA, minors and represented by their parents
RICARDO and MARISSA OPOSA, PHILIP JOSEPH, STEPHEN JOHN
and ISAIAH JAMES, all surnamed QUIPIT, minors, represented by
their parents JOSE MAX and VILMI QUIPIT, BUGHAW CIELO,
CRISANTO, ANNA, DANIEL and FRANCISCO, all surnamed BIBAL,
minors, represented by their parents FRANCISCO, JR. and
MILAGROS BIBAL, and THE PHILIPPINE ECOLOGICAL NETWORK,
INC., petitioners, vs. THE HONORABLE FULGENCIO S. FACTORAN,
JR., in his capacity as the Secretary of the Department of
Environment and Natural Resources, and THE HONORABLE
ERIBERTO U. ROSARIO, Presiding Judge of the RTC, Makati, Branch
66, respondents.
Oposa Law Office for petitioners.
The Solicitor General for respondents.
SYLLABUS
1. CONSTITUTIONAL LAW; DECLARATION OF PRINCIPLES AND STATE POLICIES; RIGHT
TO A BALANCED AND HEALTHFUL ECOLOGY, CONSTRUED. — The complaint focuses on
one specific fundamental legal right — the right to a balanced and healthful ecology which, for the
first time in our nation's constitutional history, is solemnly incorporated in the fundamental law.
Section 16, Article II of the 1987 Constitution explicitly provides: "SEC. 16. The State shall protect
and advance the right of the people to a balanced and healthful ecology in accord with the rhythm
and harmony of nature." This right unites with the right to health which is provided for in the
preceding section of the same article: "SEC. 15. The State shall protect and promote the right to
health of the people and instill health consciousness among them." While the right to a balanced
and healthful ecology is to be found under the Declaration of Principles and State Policies and not
under the Bill of Rights, it does not follow that it is less important than any of the civil and political
rights enumerated in the latter. Such a right belongs to a different category of rights altogether for
it concerns nothing less than self-preservation and self-perpetuation — aptly and fittingly stressed
by the petitioners — the advancement of which may even be said to predate all governments and
constitutions. As a matter of fact, these basic rights need not even be written in the Constitution for
they are assumed to exist from the inception of humankind. If they are now explicitly mentioned in
the fundamental charter, it is because of the well-founded fear of its framers that unless the rights
to a balanced and healthful ecology and to health are mandated as state policies by the
Constitution itself, thereby highlighting their continuing importance and imposing upon the state a
solemn obligation to preserve the first and protect and advance the second, the day would not be
too far when all else would be lost not only for the present generation, but also for those to come
— generations which stand to inherit nothing but parched earth incapable of sustaining life. The
right to a balanced and healthful ecology carries with it the correlative duty to refrain from impairing
the environment.
2. ID.; ID.; TIMBER LICENSES; NATURE THEREOF; NON-IMPAIRMENT CLAUSE MAY NOT
BE INVOKED; CASE AT BAR. — all licenses may thus be revoked or rescinded by executive
action. It is not a contract, property or a property right protected by the due process clause of the
Constitution. In Tan vs. Director of Forestry, (125 SCRA 302, 325 [1983]) This Court held: ". . . A
timber license is an instrument by which the State regulates the utilization and disposition of forest
resources to the end that public welfare is promoted. A timber license is not a contract within the
purview of the due process clause; it is only a license or privilege, which can be validly withdrawn
whenever dictated by public interest or public welfare as in this case. 'A license is merely a permit
or privilege to do what otherwise would be unlawful, and is not a contract between the authority,
federal, state, or municipal, granting it and the person to whom it is granted; neither is it property
or a property right, nor does it create a vested right; nor is it taxation' (37 C.J. 168). Thus, this
Court held that the granting of license does not create irrevocable rights, neither is it property or
property rights (People vs. Ong Tin, 54 O.G. 7576) . . ." We reiterated this pronouncement in Felipe
Ysmael, Jr. & Co., Inc. vs. Deputy Executive Secretary: (190 SCRA 673 684 [1990]) ". . . Timber
licenses, permits and license agreements are the principal instruments by which the State
regulates the utilization and disposition of forest resources to the end that public welfare is
promoted. And it can hardly be gainsaid that they merely evidence a privilege granted by the State
to qualified entities, and do not vest in the latter a permanent or irrevocable right to the particular
concession area and the forest products therein. They may be validly amended, modified,
replaced or rescinded by the Chief Executive when national interests so require. Thus, they are
not deemed contracts within the purview of the due process of law clause [See Sections 3(ee) and
20 of Pres. Decree No. 705, as amended. Also, Tan v. Director of Forestry,G.R. No. L-24548,
October 27, 1983, 125 SCRA 302]." Since timber licenses are not contracts, the non-impairment
clause, which reads: "SEC. 10. No law impairing the obligation of contracts shall be passed." In
the second place, even if it is to be assumed that the same are contracts, the instant case does
not involve a law or even an executive issuance declaring the cancellation or modification of
existing timber licenses. Hence, the non-impairment clause cannot as yet be invoked.
Nevertheless, granting further that a law has actually been passed mandating cancellations or
modifications, the same cannot still be stigmatized as a violation of the non-impairment clause.
This is because by its very nature and purpose, such a law could have only been passed in the
exercise of the police power of the state for the purpose of advancing the right of the people to a
balanced and healthful ecology, promoting their health and enhancing the general welfare. In Abe
vs. Foster Wheeler Corp., (110 Phil. 198, 203 [1960]) this Court stated: "The freedom of contract,
under our system of government, is not meant to be absolute. The same is understood to be
subject to reasonable legislative regulation aimed at the promotion of public health, moral, safety
and welfare. In other words, the constitutional guaranty of non-impairment of obligations of
contract is limited by the exercise of the police power of the State, in the interest of public health,
safety, moral and general welfare." The reason for this is emphatically set forth in Nebia vs. New
York, (291 U.S. 502, 523, 78 L. ed. 940 947-949) quoted in Philippine American Life Insurance
Co. vs. Auditor General, (22 SCRA 135, 146-147 [1968]) to wit: "'Under our form of government
the use of property and the making of contracts are normally matters of private and not of public
concern. The general rule is that both shall be free of governmental interference. But neither
property rights nor contract rights are absolute; for government cannot exist if the citizen may at
will use his property to the detriment of his fellows, or exercise his freedom of contract to work
them harm. Equally fundamental with the private right is that of the public to regulate it in the
common interest.'" In court, the non-impairment clause must yield to the police power of the state.
(Ongsiako vs. Gamboa, 86 Phil. 50 [1950]; Abe vs. Foster Wheeler Corp., supra; Phil. American
Life Insurance Co. vs. Auditor General, supra; Alalyan vs. NLRC, 24 scra 172 [1968]; Victoriano
vs. Elizalde Rope Workers Union, 59 SCRA 54 [1974]; Kabiling vs. National Housing Authority,
156 SCRA 623 [1987]).
3. ID.; JUDICIAL REVIEW; NO LONGER IMPAIRED BY THE POLITICAL QUESTION
DOCTRINE; RATIONALE. — It must, nonetheless, be emphasized that the political question
doctrine is no longer the insurmountable obstacle to the exercise of judicial power or the
impenetrable shield that protects executive and legislative actions from judicial inquiry or review.
The second paragraph of section 1, Article VIII of the Constitution states that: "Judicial power
includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government." Commenting on this provision in his book, Philippine Political
Law, Mr. Justice Isagani A. Cruz, a distinguished member of this Court, says: "The first part of the
authority represents the traditional concept of judicial power, involving the settlement of conflicting
rights as conferred by law. The second part of the authority represents a broadening of judicial
power to enable the courts of justice to review what was before forbidden territory, to wit, the
discretion of the political departments of the government. As worded, the new provision vests in
the judiciary, and particularly the Supreme Court, the power to rule upon even the wisdom of the
decisions of the executive and the legislature and to declare their acts invalid for lack or excess of
jurisdiction because tainted with grave abuse of discretion. The catch, of course, is the meaning
of 'grave abuse of discretion,' which is a very elastic phrase that can expand or contract according
to the disposition of the judiciary." In Daza vs. Singson, (180 SCRA 496, 501-502 [1989]. See also
Coseteng vs. Mitra, 187 SCRA 377 [1990]; Gonzales vs. Macaraig, 191 SCRA 844 [1991];
Bengzon vs. Senate Blue Ribbon Committee, 203 SCRA 767 [1991]) Mr. Justice Cruz, now
speaking for this Court, noted: "In the case now before us, the jurisdictional objection becomes
even less tenable and decisive. The reason is that, even if we were to assume that the issue
presented before us was political in nature, we would still not be precluded from resolving it under
the expanded jurisdiction conferred upon us that now covers, in proper cases, even the political
question. Article VII, Section 1, of the Constitution clearly provides: . . ."
4. REMEDIAL LAW; PLEADINGS; CAUSE OF ACTION, DEFINED; CASE AT BAR. — the right
of the petitioners (and all those they represent) to a balanced and healthful ecology is as clear as
the DENR's duty — under its mandate and by virtue of its powers and functions under E.O. No.
192 and the Administrative Code of 1987 — to protect and advance the said right. A denial or
violation of that right by the other who has the correlative duty or obligation to respect or protect
the same gives rise to a cause of action. Petitioners maintain that the granting of the TLAs, which
they claim was done with grave abuse of discretion, violated their right to a balanced and healthful
ecology; hence, the full protection thereof requires that no further TLAs should be renewed or
granted. A cause of action is defined as: ". . . an act or omission of one party in violation of the
legal right or rights of the other; and its essential elements are legal right of the plaintiff, correlative
obligation of the defendant, and act or omission of the defendant in violation of said legal right."
(Marao Sugar Central Co. vs. Barrios, 79 Phil. 666 [1947]; Community Investment and Finance
Corp. vs.Garcia, 88 Phil. 215 [1951]; Remitere vs. vda. de Yulo, 16 SCRA 251 [1966]; Caseñas
vs. Rosales, 19 SCRA 462 [1967]; Virata vs. Sandiganbayan, 202 SCRA 680 [1991];
Madrona vs. Rosal, 204 SCRA 1 [1991].
5. ID.; ID.; MOTION TO DISMISS; LACK OF CAUSE OF ACTION, AS A GROUND; RULE; CASE
AT BAR. — It is settled in this jurisdiction that in a motion to dismiss based on the ground that the
complaint fails to state a cause of action, the question submitted to the court for resolution involves
the sufficiency of the facts alleged in the complaint itself. No other matter should be considered;
furthermore, the truth or falsity of the said allegations is beside the point for the truth thereof is
deemed hypothetically admitted. The only issue to be resolved in such a case is: admitting such
alleged facts to be true, may the court render a valid judgment in accordance with the prayer in
the complaint? In Militante vs. Edrosolano, this Court laid down the rule that the judiciary should
"exercise the utmost care and circumspection in passing upon a motion to dismiss on the ground
of the absence thereof [cause of action] lest, by its failure to manifest a correct appreciation of the
facts alleged and deemed hypothetically admitted, what the law grants or recognizes is effectively
nullified. If that happens, there is a blot on the legal order. The law itself stands in disrepute." After
a careful examination of the petitioners' complaint, We find the statements under the introductory
affirmative allegations, as well as the specific averments under the subheading CAUSE OF
ACTION, to be adequate enough to show, prima facie, the claimed violation of their rights. On the
basis thereof, they may thus be granted, wholly or partly, the reliefs prayed for.
FELICIANO, J., concurring:
1. REMEDIAL LAW; ACTIONS; LOCUS STANDI, CONSTRUED; CASE AT BAR. — The Court
explicitly states that petitioners have the locus standinecessary to sustain the bringing and
maintenance of this suit (Decision, pp. 11-12). Locus standi is not a function of petitioners' claim
that their suit is properly regarded as a class suit. I understand locus standi to refer to the legal
interest which a plaintiff must have in the subject matter of the suit. Because of the very broadness
of the concept of "class" here involved — membership in this "class" appears to
embrace everyone living in the country whether now or in the future — it appears to me that
everyone who may be expected to benefit from the course of action petitioners seek to require
public respondents to take, is vested with the necessary locus standi. The Court may be seen
therefore to be recognizing a beneficiaries' right of action in the field of environmental protection,
as against both the public administrative agency directly concerned and the private persons or
entities operating in the field or sector of activity involved. Whether such a beneficiaries' right of
action may be found under any and all circumstances, or whether some failure to act, in the first
instance, on the part of the governmental agency concerned must be shown ("prior exhaustion of
administrative remedies"), is not discussed in the decision and presumably is left for future
determination in an appropriate case.
2. CONSTITUTIONAL LAW; DECLARATION OF PRINCIPLES AND STATE POLICIES; RIGHT
TO "A BALANCE AND HEALTHFUL ECOLOGY"; INTERPRETATION. — The Court has also
declared that the complaint has alleged and focused upon "one specific fundamental legal right —
the right to a balanced and healthful ecology" (Decision, p. 14). There is no question that "the right
to a balanced and healthful ecology" is "fundamental" and that, accordingly, it has been
"constitutionalized." But although it is fundamental in character, I suggest, with very great respect,
that it cannot be characterized as "specific," without doing excessive violence to language. It is in
fact very difficult to fashion language more comprehensive in scope and generalized in character
than a right to "a balanced and healthful ecology." The list of particular claims which can be
subsumed under this rubric appears to be entirely open-ended: prevention and control of emission
of toxic fumes and smoke from factories and motor vehicles; of discharge of oil, chemical effluents,
garbage and raw sewage into rivers, inland and coastal waters by vessels, oil rigs, factories, mines
and whole communities; of dumping of organic and inorganic wastes on open land, streets and
thoroughfares; failure to rehabilitate land after strip-mining or open-pit mining; kaingin or slash-
and-burn farming; destruction of fisheries, coral reefs and other living sea resources through the
use of dynamite or cyanide and other chemicals; contamination of ground water resources; loss
of certain species of fauna and flora; and so on. The other statements pointed out by the Court:
Section 3, Executive Order No. 192 dated 10 June 1987; Section 1, Title XIV, Book IV of the 1987
Administrative Code; and P.D. No. 1151, dated 6 June 1977 — all appear to be formulations
of policy, as general and abstract as the constitutional statements of basic policy in Article II,
Sections 16 ("the right — to a balanced and healthful ecology") and 15 ("the right to health"). As a
matter of logic, by finding petitioners' cause of action as anchored on a legal right comprised in
the constitutional statements above noted, the Court is in effect saying that Section 15 (and
Section 16) of Article II of the Constitution are self-executing and judicially enforceable even in
their present form. The implications of this doctrine will have to be explored in future cases; those
implications are too large and far-reaching in nature even to be hinted at here.
3. ID.; RIGHT TO HEALTH; SHOULD SPECIFICALLY EXIST IN OUR CORPUS OF LAW. —
Justice Feliciano suggestion is simply that petitioners must, before the trial court, show a more
specific legal right — a right cast in language of a significantly lower order of generality than Article
II (15) of the Constitution — that is or may be violated by the actions, or failures to act, imputed to
the public respondent by petitioners so that the trial court can validly render judgment granting all
or part of the relief prayed for. To my mind, the Court should be understood as simply saying that
such a more specific legal right or rights may well exist in our corpus of law, considering the general
policy principles found in the Constitution and the existence of the Philippine Environment Code,
and that the trial court should have given petitioners an effective opportunity so to demonstrate,
instead of aborting the proceedings on a motion to dismiss.
4. REMEDIAL LAW; CIVIL PROCEDURE; CAUSE OF ACTION; LEGAL RIGHTS, AS
ESSENTIAL COMPONENTS; STANDARDS. — the legal right which is an essential component
of a cause of action be a specific, operable legal right, rather than a constitutional or
statutory policy, for at least two (2) reasons. One is that unless the legal right claimed to have
been violated or disregarded is given specification in operational terms, defendants may well be
unable to defend themselves intelligently and effectively; in other words, there are due process
dimensions to this matter. The second is a broader-gauge consideration — where a specific
violation of law or applicable regulation is not alleged or proved, petitioners can be expected to fall
back on the expanded conception of judicial power in the second paragraph of Section 1 of Article
VIII of the Constitution which reads: "Section 1 . . . Judicial power includes the duty of the courts
of justice to settle actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality
of the Government." When substantive standards as general as "the right to a balanced and
healthy ecology" and "the right to health" are combined with remedial standards as broad ranging
as "a grave abuse of discretion amounting to lack or excess of jurisdiction," the result will be, it is
respectfully submitted, to propel courts into the uncharted ocean of social and economic policy
making. At least in respect of the vast area of environmental protection and management, our
courts have no claim to special technical competence and experience and professional
qualifications. Where no specific, operable norms and standards are shown to exist, then the policy
making departments — the legislative and executive departments — must be given a real and
effective opportunity to fashion and promulgate those norms and standards, and to implement
them before the courts should intervene.
DECISION
DAVIDE, JR., J p:
In a broader sense, this petition bears upon the right of Filipinos to a balanced and healthful
ecology which the petitioners dramatically associate with the twin concepts of "inter-generational
responsibility" and "inter-generational justice." Specifically, it touches on the issue of whether the
said petitioners have a cause of action to "prevent the misappropriation or impairment" of
Philippine rainforests and "arrest the unabated hemorrhage of the country's vital life-support
systems and continued rape of Mother Earth."
The controversy has its genesis in Civil Case No. 90-777 which was filed before Branch 66
(Makati, Metro Manila) of the Regional Trial Court (RTC), National Capital Judicial Region. The
principal plaintiffs therein, now the principal petitioners, are all minors duly represented and joined
by their respective parents. Impleaded as an additional plaintiff is the Philippine Ecological
Network, Inc. (PENI), a domestic, non-stock and non-profit corporation organized for the purpose
of, inter alia, engaging in concerted action geared for the protection of our environment and natural
resources. The original defendant was the Honorable Fulgencio S. Factoran, Jr., then Secretary
of the Department of Environment and Natural Resources (DENR). His substitution in this petition
by the new Secretary, the Honorable Angel C. Alcala, was subsequently ordered upon proper
motion by the petitioners. 1 The complaint 2 was instituted as a taxpayers' class suit 3 and alleges
that the plaintiffs "are all citizens of the Republic of the Philippines, taxpayers, and entitled to the
full benefit, use and enjoyment of the natural resource treasure that is the country's virgin tropical
rainforests." The same was filed for themselves and others who are equally concerned about the
preservation of said resource but are "so numerous that it is impracticable to bring them all before
the Court." The minors further asseverate that they "represent their generation as well as
generations yet unborn." 4 Consequently, it is prayed for that judgment be rendered:
". . . ordering defendant, his agents, representatives and other persons
acting in his behalf to —
(1) Cancel all existing timber license agreements in the country;
(2) Cease and desist from receiving, accepting, processing, renewing or
approving new timber license agreements."
and granting the plaintiffs ". . . such other reliefs just and equitable under the premises." 5
The complaint starts off with the general averments that the Philippine archipelago of 7,100 islands
has a land area of thirty million (30,000,000) hectares and is endowed with rich, lush and verdant
rainforests in which varied, rare and unique species of flora and fauna may be found; these
rainforests contain a genetic, biological and chemical pool which is irreplaceable; they are also the
habitat of indigenous Philippine cultures which have existed, endured and flourished since time
immemorial; scientific evidence reveals that in order to maintain a balanced and healthful ecology,
the country's land area should be utilized on the basis of a ratio of fifty-four per cent (54%) for
forest cover and forty-six per cent (46%) for agricultural, residential, industrial, commercial and
other uses; the distortion and disturbance of this balance as a consequence of deforestation have
resulted in a host of environmental tragedies, such as (a) water shortages resulting from the drying
up of the water table, otherwise known as the "aquifer," as well as of rivers, brooks and streams,
(b) salinization of the water table as a result of the intrusion therein of salt water, incontrovertible
examples of which may be found in the island of Cebu and the Municipality of Bacoor, Cavite, (c)
massive erosion and the consequential loss of soil fertility and agricultural productivity, with the
volume of soil eroded estimated at one billion (1,000,000,000) cubic meters per annum —
approximately the size of the entire island of Catanduanes, (d) the endangering and extinction of
the country's unique, rare and varied flora and fauna, (e) the disturbance and dislocation of cultural
communities, including the disappearance of the Filipino's indigenous cultures, (f) the siltation of
rivers and seabeds and consequential destruction of corals and other aquatic life leading to a
critical reduction in marine resource productivity, (g) recurrent spells of drought as is presently
experienced by the entire country, (h) increasing velocity of typhoon winds which result from the
absence of windbreakers, (i) the flooding of lowlands and agricultural plains arising from the
absence of the absorbent mechanism of forests, (j) the siltation and shortening of the lifespan of
multi-billion peso dams constructed and operated for the purpose of supplying water for domestic
uses, irrigation and the generation of electric power, and (k) the reduction of the earth's capacity
to process carbon dioxide gases which has led to perplexing and catastrophic climatic changes
such as the phenomenon of global warming, otherwise known as the "greenhouse effect."
Plaintiffs further assert that the adverse and detrimental consequences of continued deforestation
are so capable of unquestionable demonstration that the same may be submitted as a matter of
judicial notice. This notwithstanding, they expressed their intention to present expert witnesses as
well as documentary, photographic and film evidence in the course of the trial.
As their cause of action, they specifically allege that:
"CAUSE OF ACTION
7. Plaintiffs replead by reference the foregoing allegations.
8. Twenty-five (25) years ago, the Philippines had some sixteen (16) million
hectares of rainforests constituting roughly 53% of the country's land mass.
9. Satellite images taken in 1987 reveal that there remained no more than
1.2 million hectares of said rainforests or four per cent (4.0%) of the
country's land area.
10. More recent surveys reveal that a mere 850,000 hectares of virgin old-
growth rainforests are left, barely 2.8% of the entire land mass of the
Philippine archipelago and about 3.0 million hectares of immature and
uneconomical secondary growth forests.
11. Public records reveal that defendant's predecessors have granted
timber license agreements ('TLA's') to various corporations to cut the
aggregate area of 3.89 million hectares for commercial logging purposes.
A copy of the TLA holders and the corresponding areas covered is hereto
attached as Annex 'A'.
12. At the present rate of deforestation, i.e. about 200,000 hectares per
annum or 25 hectares per hour — nighttime, Saturdays, Sundays and
holidays included — the Philippines will be bereft of forest resources after
the end of this ensuing decade, if not earlier.
13. The adverse effects, disastrous consequences, serious injury and
irreparable damage of this continued trend of deforestation to the plaintiff
minors' generation and to generations yet unborn are evident and
incontrovertible. As a matter of fact, the environmental damages
enumerated in paragraph 6 hereof are already being felt, experienced and
suffered by the generation of plaintiff adults.
14. The continued allowance by defendant of TLA holders to cut and
deforest the remaining forest stands will work great damage and
irreparable injury to plaintiffs — especially plaintiff minors and their
successors — who may never see, use, benefit from and enjoy this rare
and unique natural resource treasure.
This act of defendant constitutes a misappropriation and/or impairment of
the natural resource property he holds in trust for the benefit of plaintiff
minors and succeeding generations.
15. Plaintiffs have a clear and constitutional right to a balanced and
healthful ecology and are entitled to protection by the State in its capacity
as the parens patriae.
16. Plaintiffs have exhausted all administrative remedies with the
defendant's office. On March 2, 1990, plaintiffs served upon defendant a
final demand to cancel all logging permits in the country.
A copy of the plaintiffs' letter dated March 1, 1990 is hereto attached as
Annex 'B'.
17. Defendant, however, fails and refuses to cancel the existing TLA's, to
the continuing serious damage and extreme prejudice of plaintiffs.
18. The continued failure and refusal by defendant to cancel the TLA's is
an act violative of the rights of plaintiffs, especially plaintiff minors who may
be left with a country that is desertified (sic), bare, barren and devoid of the
wonderful flora, fauna and indigenous cultures which the Philippines has
been abundantly blessed with.
19. Defendant's refusal to cancel the aforementioned TLA's is manifestly
contrary to the public policy enunciated in the Philippine Environmental
Policy which, in pertinent part, states that it is the policy of the State —
'(a) to create, develop, maintain and improve
conditions under which man and nature can thrive in productive
and enjoyable harmony with each other;
'(b) to fulfill the social, economic and other
requirements of present and future generations of Filipinos and;
'(c) to ensure the attainment of an environmental
quality that is conducive to a life of dignity and well-being'. (P.D.
1151, 6 June 1977).
20. Furthermore, defendant's continued refusal to cancel the
aforementioned TLA's is contradictory to the Constitutional policy of the
State to —
a. effect 'a more equitable distribution of opportunities,
income and wealth' and 'make full and efficient use of natural
resources (sic).' (Section 1, Article XII of the Constitution);
b. 'protect the nation's marine wealth.' (Section 2, ibid);
c. 'conserve and promote the nation's cultural heritage
and resources (sic).' (Section 14, Article XIV, id.);
d. 'protect and advance the right of the people to a
balanced and healthful ecology in accord with the rhythm and
harmony of nature.' (Section 16, Article II, id.)
21. Finally, defendant's act is contrary to the highest law of humankind —
the natural law — and violative of plaintiffs' right to self-preservation and
perpetuation.
22. There is no other plain, speedy and adequate remedy in law other than
the instant action to arrest the unabated hemorrhage of the country's vital
life-support systems and continued rape of Mother Earth." 6
On 22 June 1990, the original defendant, Secretary Factoran, Jr., filed a Motion to Dismiss the
complaint based on two (2) grounds, namely: (1) the plaintiffs have no cause of action against him
and (2) the issue raised by the plaintiffs is a political question which properly pertains to the
legislative or executive branches of Government. In their 12 July 1990 Opposition to the Motion,
the petitioners maintain that (1) the complaint shows a clear and unmistakable cause of action, (2)
the motion is dilatory and (3) the action presents a justiciable question as it involves the
defendant's abuse of discretion.
On 18 July 1991, respondent Judge issued an order granting the aforementioned motion to
dismiss. 7 In the said order, not only was the defendant's claim — that the complaint states no
cause of action against him and that it raises a political question — sustained, the respondent
Judge further ruled that the granting of the reliefs prayed for would result in the impairment of
contracts which is prohibited by the fundamental law of the land.
Plaintiffs thus filed the instant special civil action for certiorari under Rule 65 of the Revised Rules
of Court and ask this Court to rescind and set aside the dismissal order on the ground that the
respondent Judge gravely abused his discretion in dismissing the action. Again, the parents of the
plaintiffs-minors not only represent their children, but have also joined the latter in this case. 8
On 14 May 1992, We resolved to give due course to the petition and required the parties to submit
their respective Memoranda after the Office of the Solicitor General (OSG) filed a Comment in
behalf of the respondents and the petitioners filed a reply thereto.
Petitioners contend that the complaint clearly and unmistakably states a cause of action as it
contains sufficient allegations concerning their right to a sound environment based on Articles 19,
20 and 21 of the Civil Code (Human Relations), Section 4 of Executive Order (E.O.) No.
192 creating the DENR, Section 3 of Presidential Decree (P.D.) No. 1151 (Philippine
Environmental Policy), Section 16, Article II of the 1987 Constitution recognizing the right of the
people to a balanced and healthful ecology, the concept of generational genocide in Criminal Law
and the concept of man's inalienable right to self-preservation and self-perpetuation embodied in
natural law. Petitioners likewise rely on the respondent's correlative obligation, per Section 4
of E.O. No. 192, the safeguard the people's right to a healthful environment.
It is further claimed that the issue of the respondent Secretary's alleged grave abuse of discretion
in granting Timber License Agreements (TLAs) to cover more areas for logging than what is
available involves a judicial question.
Anent the invocation by the respondent Judge of the Constitution's non-impairment clause,
petitioners maintain that the same does not apply in this case because TLAs are not contracts.
They likewise submit that even if TLAs may be considered protected by the said clause, it is well
settled that they may still be revoked by the State when public interest so requires.
On the other hand, the respondents aver that the petitioners failed to allege in their complaint a
specific legal right violated by the respondent Secretary for which any relief is provided by law.
They see nothing in the complaint but vague and nebulous allegations concerning an
"environmental right" which supposedly entitles the petitioners to the "protection by the state in its
capacity as parens patriae." Such allegations, according to them, do not reveal a valid cause of
action. They then reiterate the theory that the question of whether logging should be permitted in
the country is a political question which should be properly addressed to the executive or
legislative branches of Government. They therefore assert that the petitioners' recourse is not to
file an action in court, but to lobby before Congress for the passage of a bill that would ban logging
totally.
As to the matter of the cancellation of the TLAs, respondents submit that the same cannot be done
by the State without due process of law. Once issued, a TLA remains effective for a certain period
of time — usually for twenty-five (25) years. During its effectivity, the same can neither be revised
nor cancelled unless the holder has been found, after due notice and hearing, to have violated the
terms of the agreement or other forestry laws and regulations. Petitioners' proposition to have all
the TLAs indiscriminately cancelled without the requisite hearing would be violative of the
requirements of due process.
Before going any further, We must first focus on some procedural matters. Petitioners instituted
Civil Case No. 90-777 as a class suit. The original defendant and the present respondents did not
take issue with this matter. Nevertheless, We hereby rule that the said civil case is indeed a class
suit. The subject matter of the complaint is of common and general interest not just to several, but
to all citizens of the Philippines. Consequently, since the parties are so numerous, it becomes
impracticable, if not totally impossible, to bring all of them before the court. We likewise declare
that the plaintiffs therein are numerous and representative enough to ensure the full protection of
all concerned interests. Hence, all the requisites for the filing of a valid class suit under Section
12, Rule 3 of the Revised Rules of Court are present both in the said civil case and in the instant
petition, the latter being but an incident to the former.
This case, however, has a special and novel element. Petitioners minors assert that they represent
their generation as well as generations yet unborn. We find no difficulty in ruling that they can, for
themselves, for others of their generation and for the succeeding generations, file a class suit.
Their personality to sue in behalf of the succeeding generations can only be based on the concept
of intergenerational responsibility insofar as the right to a balanced and healthful ecology is
concerned. Such a right, as hereinafter expounded, considers the "rhythm and harmony of nature."
Nature means the created world in its entirety. 9 Such rhythm and harmony indispensably
include, inter alia, the judicious disposition, utilization, management, renewal and conservation of
the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other natural
resources to the end that their exploration, development and utilization be equitably accessible to
the present as well as future generations. 10 Needless to say, every generation has a
responsibility to the next to preserve that rhythm and harmony for the full enjoyment of a balanced
and healthful ecology. Put a little differently, the minors' assertion of their right to a sound
environment constitutes, at the same time, the performance of their obligation to ensure the
protection of that right for the generations to come.
The locus standi of the petitioners having thus been addressed, We shall now proceed to the
merits of the petition.
After a careful perusal of the complaint in question and a meticulous consideration and evaluation
of the issues raised and arguments adduced by the parties, We do not hesitate to find for the
petitioners and rule against the respondent Judge's challenged order for having been issued with
grave abuse of discretion amounting to lack of jurisdiction. The pertinent portions of the said order
read as follows:
xxx xxx xxx
"After a careful and circumspect evaluation of the Complaint, the Court
cannot help but agree with the defendant. For although we believe that
plaintiffs have but the noblest of all intentions, it (sic) fell short of alleging,
with sufficient definiteness, a specific legal right they are seeking to enforce
and protect, or a specific legal wrong they are seeking to prevent and
redress (Sec. 1, Rule 2, RRC). Furthermore, the Court notes that the
Complaint is replete with vague assumptions and vague conclusions based
on unverified data. In fine, plaintiffs fail to state a cause of action in its
Complaint against the herein defendant.
Furthermore, the Court firmly believes that the matter before it, being
impressed with political color and involving a matter of public policy, may
not be taken cognizance of by this Court without doing violence to the
sacred principle of 'Separation of Powers' of the three (3) co-equal
branches of the Government.
The Court is likewise of the impression that it cannot, no matter how we
stretch our jurisdiction, grant the reliefs prayed for by the plaintiffs, i.e., to
cancel all existing timber license agreements in the country and to cease
and desist from receiving, accepting, processing renewing or approving
new timber license agreements. For to do otherwise would amount to
'impairment of contracts' abhored (sic) by the fundamental law." 11
We do not agree with the trial court's conclusion that the plaintiffs failed to allege with sufficient
definiteness a specific legal right involved or a specific legal wrong committed, and that the
complaint is replete with vague assumptions and conclusions based on unverified data. A reading
of the complaint itself belies these conclusions.
The complaint focuses on one specific fundamental legal right — the right to a balanced and
healthful ecology which, for the first time in our nation's constitutional history, is solemnly
incorporated in the fundamental law. Section 16, Article II of the 1987 Constitution explicitly
provides:
"SEC. 16. The State shall protect and advance the right of the people to a
balanced and healthful ecology in accord with the rhythm and harmony of
nature."
This right unites with the right to health which is provided for in the preceding section of the
same article:
"SEC. 15. The State shall protect and promote the right to health of the
people and instill health consciousness among them."
While the right to a balanced and healthful ecology is to be found under the Declaration of
Principles and State Policies and not under the Bill of Rights, it does not follow that it is less
important than any of the civil and political rights enumerated in the latter. Such a right belongs to
a different category of rights altogether for it concerns nothing less than self-preservation and self-
perpetuation — aptly and fittingly stressed by the petitioners — the advancement of which may
even be said to predate all governments and constitutions. As a matter of fact, these basic rights
need not even be written in the Constitution for they are assumed to exist from the inception of
humankind. If they are now explicitly mentioned in the fundamental charter, it is because of the
well-founded fear of its framers that unless the rights to a balanced and healthful ecology and to
health are mandated as state policies by the Constitution itself, thereby highlighting their
continuing importance and imposing upon the state a solemn obligation to preserve the first and
protect and advance the second, the day would not be too far when all else would be lost not only
for the present generation, but also for those to come — generations which stand to inherit nothing
but parched earth incapable of sustaining life.
The right to a balanced and healthful ecology carries with it the correlative duty to refrain from
impairing the environment. During the debates on this right in one of the plenary sessions of the
1986 Constitutional Commission, the following exchange transpired between Commissioner
Wilfrido Villacorta and Commissioner Adolfo Azcuna who sponsored the section in question:
"MR. VILLACORTA:
Does this section mandate the State to provide sanctions against all forms
of pollution — air, water and noise pollution?
MR. AZCUNA:
Yes, Madam President. The right to healthful (sic) environment necessarily
carries with it the correlative duty of not impairing the same and,
therefore, sanctions may be provided for impairment of
environmental balance." 12
The said right implies, among many other things, the judicious management and conservation of
the country's forests. Without such forests, the ecological or environmental balance would be
irreversibly disrupted.
Conformably with the enunciated right to a balanced and healthful ecology and the right to health,
as well as the other related provisions of the Constitution concerning the conservation,
development and utilization of the country's natural resources, 13 then President Corazon C.
Aquino promulgated on 10 June 1987 E.O. No. 192, 14 Section 4 of which expressly mandates
that the Department of Environment and Natural Resources "shall be the primary government
agency responsible for the conservation, management, development and proper use of the
country's environment and natural resources, specifically forest and grazing lands, mineral
resources, including those in reservation and watershed areas, and lands of the public domain, as
well as the licensing and regulation of all natural resources as may be provided for by law in order
to ensure equitable sharing of the benefits derived therefrom for the welfare of the present and
future generations of Filipinos." Section 3 thereof makes the following statement of policy:
"SEC. 3. Declaration of Policy. — It is hereby declared the policy of the
State to ensure the sustainable use, development, management, renewal,
and conservation of the country's forest, mineral, land, off-shore areas and
other natural resources, including the protection and enhancement of the
quality of the environment, and equitable access of the different segments
of the population to the development and use of the country's natural
resources, not only for the present generation but for future generations as
well. It is also the policy of the state to recognize and apply a true value
system including social and environmental cost implications relative to their
utilization; development and conservation of our natural resources."
This policy declaration is substantially re-stated in Title XIV, Book IV of the Administrative Code
of 1987, 15 specifically in Section 1 thereof which reads:
"SEC. 1. Declaration of Policy. — (1) The State shall ensure, for the benefit
of the Filipino people, the full exploration and development as well as the
judicious disposition, utilization, management, renewal and conservation
of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore
areas and other natural resources, consistent with the necessity of
maintaining a sound ecological balance and protecting and enhancing the
quality of the environment and the objective of making the exploration,
development and utilization of such natural resources equitably accessible
to the different segments of the present as well as future generations.
(2) The State shall likewise recognize and apply a true value system that
takes into account social and environmental cost implications relative to
the utilization, development and conservation of our natural resources."
The above provision stresses "the necessity of maintaining a sound ecological balance and
protecting and enhancing the quality of the environment." Section 2 of the same Title, on the other
hand, specifically speaks of the mandate of the DENR; however, it makes particular reference to
the fact of the agency's being subject to law and higher authority. Said section provides:
"SEC. 2. Mandate. — (1) The Department of Environment and Natural
Resources shall be primarily responsible for the implementation of the
foregoing policy.
(2) It shall, subject to law and higher authority, be in charge of carrying out
the State's constitutional mandate to control and supervise the exploration,
development, utilization, and conservation of the country's natural
resources."
Both E.O. No. 192 and the Administrative Code of 1987 have set the objectives which will serve
as the bases for policy formulation, and have defined the powers and functions of the DENR.
It may, however, be recalled that even before the ratification of the 1987 Constitution, specific
statutes already paid special attention to the "environmental right" of the present and future
generations. On 6 June 1977, P.D. No. 1151 (Philippine Environmental Policy) and P.D. No. 1152
(Philippine Environment Code) were issued. The former "declared a continuing policy of the State
(a) to create, develop, maintain and improve conditions under which man and nature can thrive in
productive and enjoyable harmony with each other, (b) to fulfill the social, economic and other
requirements of present and future generations of Filipinos, and (c) to insure the attainment of an
environmental quality that is conducive to a life of dignity and well-being." 16 As its goal, it speaks
of the "responsibilities of each generation as trustee and guardian of the environment for
succeeding generations." 17 The latter statute, on the other hand, gave flesh to the said policy.
Thus, the right of the petitioners (and all those they represent) to a balanced and healthful ecology
is as clear as the DENR's duty — under its mandate and by virtue of its powers and functions
under E.O. No. 192 and the Administrative Code of 1987 — to protect and advance the said right.
A denial or violation of that right by the other who has the correlative duty or obligation to respect
or protect the same gives rise to a cause of action. Petitioners maintain that the granting of the
TLAs, which they claim was done with grave abuse of discretion, violated their right to a balanced
and healthful ecology; hence, the full protection thereof requires that no further TLAs should be
renewed or granted.
A cause of action is defined as:
". . . an act or omission of one party in violation of the legal right or rights
of the other; and its essential elements are legal right of the plaintiff,
correlative obligation of the defendant, and act or omission of the defendant
in violation of said legal right." 18
It is settled in this jurisdiction that in a motion to dismiss based on the ground that the complaint
fails to state a cause of action, 19 the question submitted to the court for resolution involves the
sufficiency of the facts alleged in the complaint itself. No other matter should be considered;
furthermore, the truth or falsity of the said allegations is beside the point for the truth thereof is
deemed hypothetically admitted. The only issue to be resolved in such a case is: admitting such
alleged facts to be true, may the court render a valid judgment in accordance with the prayer in
the complaint? 20 In Militante vs. Edrosolano, 21 this Court laid down the rule that the judiciary
should "exercise the utmost care and circumspection in passing upon a motion to dismiss on the
ground of the absence thereof [cause of action] lest, by its failure to manifest a correct appreciation
of the facts alleged and deemed hypothetically admitted, what the law grants or recognizes is
effectively nullified. If that happens, there is a blot on the legal order. The law itself stands in
disrepute."
After a careful examination of the petitioners' complaint, We find the statements under the
introductory affirmative allegations, as well as the specific averments under the subheading
CAUSE OF ACTION, to be adequate enough to show, prima facie, the claimed violation of their
rights. On the basis thereof, they may thus be granted, wholly or partly, the reliefs prayed for. It
bears stressing, however, that insofar as the cancellation of the TLAs is concerned, there is the
need to implead, as party defendants, the grantees thereof for they are indispensable parties.
The foregoing considered, Civil Case No. 90-777 cannot be said to raise a political question. Policy
formulation or determination by the executive or legislative branches of Government is not
squarely put in issue. What is principally involved is the enforcement of a right vis-a-vis policies
already formulated and expressed in legislation. It must, nonetheless, be emphasized that the
political question doctrine is no longer the insurmountable obstacle to the exercise of judicial power
or the impenetrable shield that protects executive and legislative actions from judicial inquiry or
review. The second paragraph of section 1, Article VIII of the Constitution states that:
"Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part
of any branch or instrumentality of the Government."
Commenting on this provision in his book, Philippine Political Law, 22 Mr. Justice Isagani A. Cruz,
a distinguished member of this Court, says:
"The first part of the authority represents the traditional concept of judicial
power, involving the settlement of conflicting rights as conferred by law.
The second part of the authority represents a broadening of judicial power
to enable the courts of justice to review what was before forbidden territory,
to wit, the discretion of the political departments of the government.
As worded, the new provision vests in the judiciary, and particularly the
Supreme Court, the power to rule upon even the wisdom of the decisions
of the executive and the legislature and to declare their acts invalid for lack
or excess of jurisdiction because tainted with grave abuse of discretion.
The catch, of course, is the meaning of 'grave abuse of discretion,' which
is a very elastic phrase that can expand or contract according to the
disposition of the judiciary."
In Daza vs. Singson, 23 Mr. Justice Cruz, now speaking for this Court, noted:
"In the case now before us, the jurisdictional objection becomes even less
tenable and decisive. The reason is that, even if we were to assume that
the issue presented before us was political in nature, we would still not be
precluded from resolving it under the expanded jurisdiction conferred upon
us that now covers, in proper cases, even the political question. Article VII,
Section 1, of the Constitution clearly provides: . . ."
The last ground invoked by the trial court in dismissing the complaint is the non-impairment of
contracts clause found in the Constitution. The court a quo declared that:
"The Court is likewise of the impression that it cannot, no matter how we
stretch our jurisdiction, grant the reliefs prayed for by the plaintiffs, i.e., to
cancel all existing timber license agreements in the country and to cease
and desist from receiving, accepting, processing, renewing or approving
new timber license agreements. For to do otherwise would amount to
'impairment of contracts' abhored (sic) by the fundamental law." 24
We are not persuaded at all; on the contrary, We are amazed, if not shocked, by such a sweeping
pronouncement. In the first place, the respondent Secretary did not, for obvious reasons, even
invoke in his motion to dismiss the non-impairment clause. If he had done so, he would have acted
with utmost infidelity to the Government by providing undue and unwarranted benefits and
advantages to the timber license holders because he would have forever bound the Government
to strictly respect the said licenses according to their terms and conditions regardless of changes
in policy and the demands of public interest and welfare. He was aware that as correctly pointed
out by the petitioners, into every timber license must be read Section 20 of the Forestry Reform
Code (P.D. No. 705) which provides:
". . . Provided, That when the national interest so requires, the President
may amend, modify, replace or rescind any contract, concession, permit,
licenses or any other form of privilege granted herein . . ."
Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not
a contract, property or a property right protected by the due process clause of the
Constitution. In Tan vs. Director of Forestry, 25 this Court held:
". . . A timber license is an instrument by which the State regulates the
utilization and disposition of forest resources to the end that public welfare
is promoted. A timber license is not a contract within the purview of the due
process clause; it is only a license or privilege, which can be validly
withdrawn whenever dictated by public interest or public welfare as in this
case.
'A license is merely a permit or privilege to do what otherwise would be
unlawful, and is not a contract between the authority, federal, state, or
municipal, granting it and the person to whom it is granted; neither is it
property or a property right, nor does it create a vested right; nor is it
taxation' (37 C.J. 168). Thus, this Court held that the granting of license
 does not create irrevocable rights, neither is it property or property rights WHEREFORE, being impressed with merit, the instant Petition is hereby GRANTED, and the
(People vs. Ong Tin, 54 O.G. 7576) . . ." challenged Order of respondent Judge of 18 July 1991 dismissing Civil Case No. 90-777 is hereby
set aside. The petitioners may therefore amend their complaint to implead as defendants the
We reiterated this pronouncement in Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive holders or grantees of the questioned timber license agreements.
Secretary: 26
No pronouncement as to costs.
". . . Timber licenses, permits and license agreements are the principal
instruments by which the State regulates the utilization and disposition of SO ORDERED.
forest resources to the end that public welfare is promoted. And it can
hardly be gainsaid that they merely evidence a privilege granted by the ||| (Oposa v. Factoran, Jr., G.R. No. 101083, [July 30, 1993])
State to qualified entities, and do not vest in the latter a permanent or
irrevocable right to the particular concession area and the forest products
therein. They may be validly amended, modified, replaced or rescinded by
the Chief Executive when national interests so require. Thus, they are not
deemed contracts within the purview of the due process of law clause
[See Sections 3(ee) and 20 of Pres. Decree No. 705, as
amended. Also, Tan v. Director of Forestry,G.R. No. L-24548, October 27,
1983, 125 SCRA 302]."

Since timber licenses are not contracts, the non-impairment clause, which reads:

"SEC. 10. No law impairing the obligation of contracts shall be passed." 27

cannot be invoked.
In the second place, even if it is to be assumed that the same are contracts, the instant case does
not involve a law or even an executive issuance declaring the cancellation or modification of
existing timber licenses. Hence, the non-impairment clause cannot as yet be invoked.
Nevertheless, granting further that a law has actually been passed mandating cancellations or
modifications, the same cannot still be stigmatized as a violation of the non-impairment clause.
This is because by its very nature and purpose, such a law could have only been passed in the
exercise of the police power of the state for the purpose of advancing the right of the people to a
balanced and healthful ecology, promoting their health and enhancing the general welfare. In Abe
vs. Foster Wheeler Corp., 28 this Court stated:

"The freedom of contract, under our system of government, is not meant to

be absolute. The same is understood to be subject to reasonable legislative
regulation aimed at the promotion of public health, moral, safety and
welfare. In other words, the constitutional guaranty of non-impairment of
obligations of contract is limited by the exercise of the police power of the
State, in the interest of public health, safety, moral and general welfare."

The reason for this is emphatically set forth in Nebia vs. New York, 29 quoted in Philippine
American Life Insurance Co. vs. Auditor General, 30 to wit:

" 'Under our form of government the use of property and the making of
contracts are normally matters of private and not of public concern. The
general rule is that both shall be free of governmental interference. But
neither property rights nor contract rights are absolute; for government
cannot exist if the citizen may at will use his property to the detriment of his
fellows, or exercise his freedom of contract to work them harm. Equally
fundamental with the private right is that of the public to regulate it in the
common interest.' "

In court, the non-impairment clause must yield to the police power of the state. 31

Finally, it is difficult to imagine, as the trial court did, how the non-impairment clause could apply
with respect to the prayer to enjoin the respondent Secretary from receiving, accepting,
processing, renewing or approving new timber licenses for, save in cases of renewal, no contract
would have as of yet existed in the other instances. Moreover, with respect to renewal, the holder
is not entitled to it as a matter of right.
 9. Heirs of Bertuldo Hinog vs. Melicor, 455 SCRA 460 (2005)
[G.R. No. 140954. April 12, 2005.]
HEIRS OF BERTULDO 1 HINOG: Bertuldo Hinog II, Bertuldo Hinog III,
Bertuldo Hinog, Jr., Jocelyn Hinog, Bertuldo Hinog IV, Bertuldo Hinog V,
Edgardo Hinog, Milagros H. Pabatao, Lilian H. King, Victoria H. Engracia,
Terisita C. Hinog, Paz H. Besana, Roberto C. Hinog, Vicente C. Hinog,
Roel C. Hinog, Marilyn C. Hinog, Bebot C. Hinog, Lordes C. Hinog, Pablo
Chiong, Arlene Lansang (All represented by Bertuldo Hinog
III), petitioners, vs. HON. ACHILLES MELICOR, in his capacity as
Presiding Judge, RTC, Branch 4, 7th Judicial Region, Tagbilaran City,
Bohol, and CUSTODIO BALANE, RUFO BALANE, HONORIO BALANE,
and TOMAS BALANE, respondents.
DECISION
AUSTRIA-MARTINEZ, J p:
Before us is a petition for certiorari and prohibition under Rule 65 of the Rules of Court which
assails the Orders dated March 22, 1999, August 13, 1999 and October 15, 1999 of the Regional
Trial Court, Branch 4, of Tagbilaran City, Bohol in Civil Case No. 4923.
The factual background of the case is as follows:
On May 21, 1991, private respondents Custodio, Rufo, Tomas and Honorio, all surnamed Balane,
filed a complaint for "Recovery of Ownership and Possession, Removal of Construction and
Damages" against Bertuldo Hinog (Bertuldo for brevity). They alleged that: they own a 1,399-
square meter parcel of land situated in Malayo Norte, Cortes, Bohol, designated as Lot No. 1714;
sometime in March 1980, they allowed Bertuldo to use a portion of the said property for a period
of ten years and construct thereon a small house of light materials at a nominal annual rental of
P100.00 only, considering the close relations of the parties; after the expiration of the ten-year
period, they demanded the return of the occupied portion and removal of the house constructed
thereon but Bertuldo refused and instead claimed ownership of the entire property.
Accordingly, private respondents sought to oust Bertuldo from the premises of the subject property
and restore upon themselves the ownership and possession thereof, as well as the payment of
moral and exemplary damages, attorney's fees and litigation expenses "in amounts justified by
the evidence." 2
On July 2, 1991, Bertuldo filed his Answer. He alleged ownership of the disputed property by virtue
of a Deed of Absolute Sale dated July 2, 1980, executed by one Tomas Pahac with the knowledge
and conformity of private respondents. 3
After the pre-trial, trial on the merits ensued. On November 18, 1997, private respondents rested
their case. Thereupon, Bertuldo started his direct examination. However, on June 24, 1998,
Bertuldo died without completing his evidence. ITaCEc
On August 4, 1998, Atty. Sulpicio A. Tinampay withdrew as counsel for Bertuldo as his services
were terminated by petitioner Bertuldo Hinog III. Atty. Veronico G. Petalcorin then entered his
appearance as new counsel for Bertuldo. 4
On September 22, 1998, Atty. Petalcorin filed a motion to expunge the complaint from the record
and nullify all court proceedings on the ground that private respondents failed to specify in the
complaint the amount of damages claimed so as to pay the correct docket fees; and that
under Manchester Development Corporation vs. Court of Appeals, 5 non-payment of the correct
docket fee is jurisdictional. 6
In an amended motion, filed on October 2, 1998, Atty. Petalcorin further alleged that the private
respondents failed to pay the correct docket fee since the main subject matter of the case cannot
be estimated as it is for recovery of ownership, possession and removal of construction. 7
Private respondents opposed the motion to expunge on the following grounds: (a) said motion
was filed more than seven years from the institution of the case; (b) Atty. Petalcorin has not
complied with Section 16, Rule 3 of the Rules of Court which provides that the death of the original
defendant requires a substitution of parties before a lawyer can have legal personality to represent
a litigant and the motion to expunge does not mention of any specific party whom he is
representing; (c) collectible fees due the court can be charged as lien on the judgment; and (d)
considering the lapse of time, the motion is merely a dilatory scheme employed by petitioners. 8
In their Rejoinder, petitioners manifested that the lapse of time does not vest the court with
jurisdiction over the case due to failure to pay the correct docket fees. As to the contention that
deficiency in payment of docket fees can be made as a lien on the judgment, petitioners argued
that the payment of filing fees cannot be made dependent on the result of the action taken. 9
On January 21, 1999, the trial court, while ordering the complaint to be expunged from the records
and the nullification of all court proceedings taken for failure to pay the correct docket fees,
nonetheless, held:
The Court can acquire jurisdiction over this case only upon the payment of
the exact prescribed docket/filing fees for the main cause of action, plus
additional docket fee for the amount of damages being prayed for in the
complaint, which amount should be specified so that the same can be
considered in assessing the amount of the filing fees. Upon the complete
payment of such fees, the Court may take appropriate action in the light of
the ruling in the case of Manchester Development Corporation vs. Court of
Appeals, supra. 10
Accordingly, on January 28, 1999, upon payment of deficiency docket fee, private respondents
filed a manifestation with prayer to reinstate the case. 11 Petitioners opposed the
reinstatement 12 but on March 22, 1999, the trial court issued the first assailed Order reinstating
the case. 13
On May 24, 1999, petitioners, upon prior leave of court, 14 filed their supplemental pleading,
appending therein a Deed of Sale dated November 15, 1982. 15 Following the submission of
private respondents' opposition thereto, 16 the trial court, in its Order dated July 7, 1999, denied
the supplemental pleading on the ground that the Deed of Absolute Sale is a new matter which
was never mentioned in the original answer dated July 2, 1991, prepared by Bertuldo's original
counsel and which Bertuldo verified; and that such new document is deemed waived in the light
of Section 1, Rule 9 17 of the Rules of Court. The trial court also noted that no formal substitution
of the parties was made because of the failure of defendant's counsel to give the names and
addresses of the legal representatives of Bertuldo, so much so that the supposed heirs of Bertuldo
are not specified in any pleading in the case. 18
On July 14, 1999, petitioners manifested that the trial court having expunged the complaint and
nullified all court proceedings, there is no valid case and the complaint should not be admitted for
failure to pay the correct docket fees; that there should be no case to be reinstated and no case
to proceed as there is no complaint filed. 19
After the submission of private respondents' opposition 20 and petitioners' rejoinder, 21 the trial
court issued the second assailed Order on August 13, 1999, essentially denying petitioners'
manifestation/rejoinder. The trial court held that the issues raised in such manifestation/rejoinder
are practically the same as those raised in the amended motion to expunge which had already
been passed upon in the Order dated January 21, 1999. Moreover, the trial court observed that
the Order dated March 22, 1999 which reinstated the case was not objected to by petitioners within
the reglementary period or even thereafter via a motion for reconsideration despite receipt thereof
on March 26, 1999. 22
On August 25, 1999, petitioners filed a motion for reconsideration 23 but the same was denied by
the trial court in its third assailed Order dated October 15, 1999. The trial court held that
the Manchester rule was relaxed in Sun Insurance Office, Ltd. vs. Asuncion. 24 Noting that there
has been no substitution of parties following the death of Bertuldo, the trial court directed Atty.
Petalcorin to comply with the provisions of Section 16, Rule 3 of the Rules of Court. The trial court
also reiterated that the Order dated March 22, 1999 reinstating the case was not assailed by
petitioners within the reglementary period, despite receipt thereof on March 26, 1999. 25
On November 19, 1999, Atty. Petalcorin complied with the directive of the trial court to submit the
names and addresses of the heirs of Bertuldo. 26
On November 24, 1999, petitioners filed before us the present petition for certiorari and
prohibition. 27 They allege that the public respondent committed grave abuse of discretion in
allowing the case to be reinstated after private respondents paid the docket fee deficiency since
the trial court had earlier expunged the complaint from the record and nullified all proceedings of
the case and such ruling was not contested by the private respondents. Moreover, they argue that
the public respondent committed grave abuse of discretion in allowing the case to be filed and
denying the manifestation with motion to dismiss, despite the defect in the complaint which prayed
for damages without specifying the amounts, in violation of SC Circular No. 7, dated March 24,
1988.
In their Comment, private respondents aver that no grave abuse of discretion was committed by
the trial court in reinstating the complaint upon the payment of deficiency docket fees because
petitioners did not object thereto within the reglementary period. Besides, Atty. Petalcorin
possessed no legal personality to appear as counsel for the heirs of Bertuldo until he complies
with Section 16, Rule 3 of the Rules of Court. 28
At the outset, we note the procedural error committed by petitioners in directly filing the instant
petition before this Court for it violates the established policy of strict observance of the judicial
hierarchy of courts.
Although the Supreme Court, Court of Appeals and the Regional Trial Courts have concurrent
jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction, such concurrence does not give the petitioner unrestricted freedom of choice of court
forum. 29 As we stated in People vs. Cuaresma: 30
This Court's original jurisdiction to issue writs of certiorari is not exclusive.
It is shared by this Court with Regional Trial Courts and with the Court of
Appeals. This concurrence of jurisdiction is not, however, to be taken as
according to parties seeking any of the writs an absolute, unrestrained
freedom of choice of the court to which application therefor will be directed.
There is after all a hierarchy of courts. That hierarchy is determinative of
the venue of appeals, and also serves as a general determinant of the
appropriate forum for petitions for the extraordinary writs. A becoming
regard for that judicial hierarchy most certainly indicates that petitions for
the issuance of extraordinary writs against first level ("inferior") courts
should be filed with the Regional Trial Court, and those against the latter,
with the Court of Appeals. A direct invocation of the Supreme Court's
original jurisdiction to issue these writs should be allowed only when there
are special and important reasons therefor, clearly and specifically set out
in the petition. This is [an] established policy. It is a policy necessary to
prevent inordinate demands upon the Court's time and attention which are
better devoted to those matters within its exclusive jurisdiction, and to
prevent further over-crowding of the Court's docket. 31
The rationale for this rule is two-fold: (a) it would be an imposition upon the precious time of
this Court; and (b) it would cause an inevitable and resultant delay, intended or otherwise, in
the adjudication of cases, which in some instances had to be remanded or referred to the
lower court as the proper forum under the rules of procedure, or as better equipped to resolve
the issues because this Court is not a trier of facts. 32
Thus, this Court will not entertain direct resort to it unless the redress desired cannot be obtained
in the appropriate courts, and exceptional and compelling circumstances, such as cases of
national interest and of serious implications, justify the availment of the extraordinary remedy of
writ of certiorari, calling for the exercise of its primary jurisdiction. Exceptional and compelling
circumstances were held present in the following cases: (a) Chavez vs. Romulo 33 on citizens'
right to bear arms; (b) Government of the United States of America vs. Purganan 34 on bail in
extradition proceedings; (c) Commission on Elections vs. Quijano-Padilla 35 on government
contract involving modernization and computerization of voters' registration list; (d) Buklod ng
Kawaning EIIB vs. Zamora 36 on status and existence of a public office; and (e) Fortich vs.
Corona 37 on the so-called "Win-Win Resolution" of the Office of the President which modified the
approval of the conversion to agro-industrial area. IEAacT
In this case, no special and important reason or exceptional and compelling circumstance
analogous to any of the above cases has been adduced by the petitioners so as to justify direct
recourse to this Court. The present petition should have been initially filed in the Court of Appeals
in strict observance of the doctrine on the hierarchy of courts. Failure to do so is sufficient cause
for the dismissal of the petition at bar.
In any event, even if the Court disregards such procedural flaw, the petitioners' contentions on the
substantive aspect of the case fail to invite judgment in their favor.
The unavailability of the writ of certiorari and prohibition in this case is borne out of the fact that
petitioners principally assail the Order dated March 22, 1999 which they never sought
reconsideration of, in due time, despite receipt thereof on March 26, 1999. Instead, petitioners
went through the motion of filing a supplemental pleading and only when the latter was denied, or
after more than three months have passed, did they raise the issue that the complaint should not
have been reinstated in the first place because the trial court had no jurisdiction to do so, having
already ruled that the complaint shall be expunged.
After recognizing the jurisdiction of the trial court by seeking affirmative relief in their motion to
serve supplemental pleading upon private respondents, petitioners are effectively barred by
estoppel from challenging the trial court's jurisdiction. 38 If a party invokes the jurisdiction of a
court, he cannot thereafter challenge the court's jurisdiction in the same case. 39 To rule otherwise
would amount to speculating on the fortune of litigation, which is against the policy of the Court. 40
Nevertheless, there is a need to correct the erroneous impression of the trial court as well as the
private respondents that petitioners are barred from assailing the Order dated March 22, 1999
which reinstated the case because it was not objected to within the reglementary period or even
thereafter via a motion for reconsideration despite receipt thereof on March 26, 1999.
It must be clarified that the said order is but a resolution on an incidental matter which does not
touch on the merits of the case or put an end to the proceedings. 41 It is an interlocutory order
since there leaves something else to be done by the trial court with respect to the merits of the
case. 42 As such, it is not subject to a reglementary period. Reglementary period refers to the
period set by the rules for appeal or further review of a final judgment or order, i.e., one that ends
the litigation in the trial court.
Moreover, the remedy against an interlocutory order is generally not to resort forthwith to certiorari,
but to continue with the case in due course and, when an unfavorable verdict is handed down, to
take an appeal in the manner authorized by law. 43 Only when the court issued such order without
or in excess of jurisdiction or with grave abuse of discretion and when the assailed interlocutory
order is patently erroneous and the remedy of appeal would not afford adequate and expeditious
relief will certiorari be considered an appropriate remedy to assail an interlocutory order. 44 Such
special circumstances are absolutely wanting in the present case.
Time and again, the Court has held that the Manchester rule has been modified in Sun Insurance
Office, Ltd. (SIOL) vs. Asuncion 45 which defined the following guidelines involving the payment
of docket fees:
1. It is not simply the filing of the complaint or appropriate initiatory
pleading, but the payment of the prescribed docket fee, that vests a trial
court with jurisdiction over the subject-matter or nature of the action. Where
the filing of the initiatory pleading is not accompanied by payment of the
docket fee, the court may allow payment of the fees within a reasonable
time but in no case beyond the applicable prescriptive or reglementary
period.
2. The same rule applies to permissive counterclaims, third-party claims
and similar pleadings, which shall not be considered filed until and unless
the filing fee prescribed therefor is paid. The court may also allow payment
of said fee within a reasonable time but also in no case beyond its
applicable prescriptive or reglementary period.
3. 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.
Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its
non-payment at the time of filing does not automatically cause the dismissal of the case, as long
as the fee is paid within the applicable prescriptive or reglementary period, more so when the party
involved demonstrates a willingness to abide by the rules prescribing such payment. 46 Thus,
when insufficient filing fees were initially paid by the plaintiffs and there was no intention to defraud
the government, the Manchester rule does not apply. 47
Under the peculiar circumstances of this case, the reinstatement of the complaint was just and
proper considering that the cause of action of private respondents, being a real action, prescribes
in thirty years, 48 and private respondents did not really intend to evade the payment of the
prescribed docket fee but simply contend that they could not be faulted for inadequate assessment
because the clerk of court made no notice of demand or reassessment. 49 They were in good
faith and simply relied on the assessment of the clerk of court. cDTCIA
Furthermore, the fact that private respondents prayed for payment of damages "in amounts
justified by the evidence" does not call for the dismissal of the complaint for violation of SC Circular
No. 7, dated March 24, 1988 which required that all complaints must specify the amount of
damages sought not only in the body of the pleadings but also in the prayer in order to be accepted
and admitted for filing. Sun Insuranceeffectively modified SC Circular No. 7 by providing that filing
fees for damages and awards that cannot be estimated constitute liens on the awards finally
granted by the trial court. 50
Thus, while the docket fees were based only on the real property valuation, the trial court acquired
jurisdiction over the action, and judgment awards which were left for determination by the court or
as may be proven during trial would still be subject to additional filing fees which shall constitute
a lien on the judgment. It would then be the responsibility of the Clerk of Court of the trial court or
his duly authorized deputy to enforce said lien and assess and collect the additional fees. 51
It is worth noting that when Bertuldo filed his Answer on July 2, 1991, he did not raise the issue of
lack of jurisdiction for non-payment of correct docket fees. Instead, he based his defense on a
claim of ownership and participated in the proceedings before the trial court. It was only in
September 22, 1998 or more than seven years after filing the answer, and under the auspices of
a new counsel, that the issue of jurisdiction was raised for the first time in the motion to expunge
by Bertuldo's heirs.
After Bertuldo vigorously participated in all stages of the case before the trial court and even
invoked the trial court's authority in order to ask for affirmative relief, petitioners, considering that
they merely stepped into the shoes of their predecessor, are effectively barred by estoppel from
challenging the trial court's jurisdiction. Although the issue of jurisdiction may be raised at any
stage of the proceedings as the same is conferred by law, it is nonetheless settled that a party
may be barred from raising it on ground of laches or estoppel. 52
Moreover, no formal substitution of the parties was effected within thirty days from date of death
of Bertuldo, as required by Section 16, Rule 3 53 of the Rules of Court. Needless to stress, the
purpose behind the rule on substitution is the protection of the right of every party to due process.
It is to ensure that the deceased party would continue to be properly represented in the suit through
the duly appointed legal representative of his estate. 54 Non-compliance with the rule on
substitution would render the proceedings and judgment of the trial court infirm because the court
acquires no jurisdiction over the persons of the legal representatives or of the heirs on whom the
trial and the judgment would be binding. 55 Thus, proper substitution of heirs must be effected for
the trial court to acquire jurisdiction over their persons and to obviate any future claim by any heir
that he was not apprised of the litigation against Bertuldo or that he did not authorize Atty.
Petalcorin to represent him.
The list of names and addresses of the heirs was submitted sixteen months after the death of
Bertuldo and only when the trial court directed Atty. Petalcorin to comply with the provisions of
Section 16, Rule 3 of the Rules of Court. Strictly speaking therefore, before said compliance, Atty.
Petalcorin had no standing in the court a quo when he filed his pleadings. Be that as it may, the
matter has been duly corrected by the Order of the trial court dated October 15, 1999.
To be sure, certiorari under Rule 65 56 is a remedy narrow in scope and inflexible in character. It
is not a general utility tool in the legal workshop. 57It offers only a limited form of review. Its
principal function is to keep an inferior tribunal within its jurisdiction. 58 It can be invoked only for
an error of jurisdiction, that is, one where the act complained of was issued by the court, officer or
a quasi-judicial body without or in excess of jurisdiction, or with grave abuse of discretion which is
tantamount to lack or in excess of jurisdiction, 59 not to be used for any other purpose, 60 such
as to cure errors in proceedings or to correct erroneous conclusions of law or fact. 61 A contrary
rule would lead to confusion, and seriously hamper the administration of justice.
Petitioners utterly failed to show that the trial court gravely abused its discretion in issuing the
assailed resolutions. On the contrary, it acted prudently, in accordance with law and jurisprudence.
WHEREFORE, the instant petition for certiorari is DISMISSED for lack of merit. acHTIC
No costs.
||| (Heirs of Hinog v. Melicor, G.R. No. 140954, [April 12, 2005], 495 PHIL 422-440)
 10. De la Cruz vs. Joaquin, 464 SCRA 576 (2005)
[G.R. No. 162788. July 28, 2005.]
Spouses JULITA DE LA CRUZ and FELIPE DE LA
CRUZ, petitioners, vs. PEDRO JOAQUIN, respondent.
George Erwin M. Garcia for petitioners.
Nicolas P. Lapena, Jr. for respondent.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; PARTIES TO CIVIL ACTIONS; WHEN A PARTY TO
A PENDING ACTION DIES AND THE CLAIM IS NOT EXTINGUISHED, SUBSTITUTION OF THE
DECEASED IS REQUIRED; PURPOSE. — When a party to a pending action dies and the claim
is not extinguished, the Rules of Court require a substitution of the deceased. The procedure is
specifically governed by Section 16 of Rule 3, . . . . The rule on the substitution of parties was
crafted to protect every party's right to due process. The estate of the deceased party will continue
to be properly represented in the suit through the duly appointed legal representative. Moreover,
no adjudication can be made against the successor of the deceased if the fundamental right to a
day in court is denied.
2. ID.; ID.; ID.; ID.; A FORMAL SUBSTITUTION BY HEIRS IS NOT NECESSARY WHEN THEY
THEMSELVES VOLUNTARILY APPEAR, PARTICIPATE IN THE CASE, AND PRESENT
EVIDENCE IN DEFENSE OF THE DECEASED. — The Court has nullified not only trial
proceedings conducted without the appearance of the legal representatives of the deceased, but
also the resulting judgments. In those instances, the courts acquired no jurisdiction over the
persons of the legal representatives or the heirs upon whom no judgment was binding. This
general rule notwithstanding, a formal substitution by heirs is not necessary when they themselves
voluntarily appear, participate in the case, and present evidence in defense of the deceased.
These actions negate any claim that the right to due process was violated.
3. ID.; ID.; ID.; ID.; RULE ON SUBSTITUTION BY HEIRS IS NOT A MATTER OF JURISDICTION
BUT A REQUIREMENT OF DUE PROCESS. — Strictly speaking, the rule on the substitution by
heirs is not a matter of jurisdiction, but a requirement of due process. Thus, when due process is
not violated, as when the right of the representative or heir is recognized and protected,
noncompliance or belated formal compliance with the Rules cannot affect the validity of a
promulgated decision. Mere failure to substitute for a deceased plaintiff is not a sufficient ground
to nullify a trial court's decision. The alleging party must prove that there was an undeniable
violation of due process.
4. ID.; ID.; ACTIONS; FORUM SHOPPING; DEFINED. — Forum shopping is the institution of two
or more actions or proceedings involving the same parties for the same cause of action, either
simultaneously or successively, on the supposition that one or the other court would make a
favorable disposition. Forum shopping may be resorted to by a party against whom an adverse
judgment or order has been issued in one forum, in an attempt to seek a favorable opinion in
another, other than by an appeal or a special civil action for certiorari.
5. ID.; ID.; ID.; ID.; WILLFUL AND DELIBERATE VIOLATION OF THE RULE ON FORUM
SHOPPING IS A GROUND FOR THE SUMMARY DISMISSAL OF CASE AND CONSTITUTES
DIRECT CONTEMPT OF COURT. — Forum shopping trifles with the courts, abuses their
processes, degrades the administration of justice, and congests court dockets. Willful and
deliberate violation of the rule against it is a ground for the summary dismissal of the case; it may
also constitute direct contempt of court.
6. ID.; ID.; ID.; ID.; TEST TO DETERMINE ITS EXISTENCE. — The test for determining the
existence of forum shopping is whether the elements of litis pendentia are present, or whether a
final judgment in one case amounts to res judicata in another.
7. ID.; ID.; JUDGMENTS; RES JUDICATA; BARS A SUBSEQUENT SUIT INVOLVING THE
SAME PARTIES, SUBJECT MATTER, AND CAUSE OF ACTION. — Under res judicata, a final
judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of
the parties or their privies, in all later suits and on all points and matters determined in the previous
suit. The term literally means a "matter adjudged, judicially acted upon, or settled by judgment."
The principle bars a subsequent suit involving the same parties, subject matter, and cause of
action. Public policy requires that controversies must be settled with finality at a given point in time.
8. ID.; ID.; ID.; ID.; ELEMENTS OF RES JUDICATA. — The elements of res judicata are as
follows: (1) the former judgment or order must be final; (2) it must have been rendered on the
merits of the controversy; (3) the court that rendered it must have had jurisdiction over the subject
matter and the parties; and (4) there must have been — between the first and the second actions
— an identity of parties, subject matter and cause of action.
DECISION
PANGANIBAN, J p:
The Rules require the legal representatives of a dead litigant to be substituted as parties to a
litigation. This requirement is necessitated by due process. Thus, when the rights of the legal
representatives of a decedent are actually recognized and protected, noncompliance or belated
formal compliance with the Rules cannot affect the validity of the promulgated decision. After all,
due process had thereby been satisfied.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the August 26,
2003 Decision 2 and the March 9, 2004 Resolution 3of the Court of Appeals (CA) in CA-GR CV
No. 34702. The challenged Decision disposed as follows:
"WHEREFORE, the foregoing considered, the appeal is DISMISSED and
the assailed decision accordingly AFFIRMED in toto. No costs." 4
On the other hand, the trial court's affirmed Decision disposed as follows:
"WHEREFORE, judgment is hereby rendered:
"a) declaring the Deed of Absolute Sale (Exh. 'D') and
'Kasunduan' (Exhibit B), to be a sale with right of
repurchase;
"b) ordering the plaintiff to pay the defendants the sum of
P9,000.00 by way of repurchasing the land in
question;
 "c) ordering the defendants to execute a deed of reconveyance
of said land in favor of the plaintiff after the latter has
paid them the amount of P9,000.00 to repurchase the
land in question;
"d) ordering the defendants to yield possession of the subject
land to the plaintiff after the latter has paid them the
amount of P9,000.00 to repurchase the property from
them; and
"e) ordering the defendants to pay the plaintiff the amount of
P10,000.00 as actual and compensatory damages;
the amount of P5,000[.00] as exemplary damages; the
amount of P5,000.00 as expenses of litigation and the
amount of P5,000.00 by way of attorney's fees." 5
The Facts
The case originated from a Complaint for the recovery of possession and ownership, the
cancellation of title, and damages, filed by Pedro Joaquin against petitioners in the Regional Trial
Court of Baloc, Sto. Domingo, Nueva Ecija. 6 Respondent alleged that he had obtained a loan
from them in the amount of P9,000 on June 29, 1974, payable after five (5) years; that is, on June
29, 1979. To secure the payment of the obligation, he supposedly executed a Deed of Sale in
favor of petitioners. The Deed was for a parcel of land in Pinagpanaan, Talavera, Nueva Ecija,
covered by TCT No. T-111802. The parties also executed another document entitled
"Kasunduan." 7
Respondent claimed that the Kasunduan showed the Deed of Sale to be actually an equitable
mortgage. 8 Spouses De la Cruz contended that this document was merely an accommodation to
allow the repurchase of the property until June 29, 1979, a right that he failed to exercise. 9
On April 23, 1990, the RTC issued a Decision in his favor. The trial court declared that the parties
had entered into a sale with a right of repurchase. 10 It further held that respondent had made a
valid tender of payment on two separate occasions to exercise his right of
repurchase. 11 Accordingly, petitioners were required to reconvey the property upon his
payment. 12
Ruling of the Court of Appeals
Sustaining the trial court, the CA noted that petitioners had given respondent the right to
repurchase the property within five (5) years from the date of the sale or until June 29, 1979.
Accordingly, the parties executed the Kasunduan to express the terms and conditions of their
actual agreement. 13The appellate court also found no reason to overturn the finding that
respondent had validly exercised his right to repurchase the land. 14
In the March 9, 2004 Resolution, the CA denied reconsideration and ordered a substitution by
legal representatives, in view of respondent's death on December 24, 1988. 15
Hence, this Petition. 16
The Issues
Petitioners assign the following errors for our consideration:
"I. Public Respondent Twelfth Division of the Honorable Court of Appeals
seriously erred in dismissing the appeal and affirming in toto the Decision
of the trial court in Civil Case No. SD-838; CHDAEc
"II. Public Respondent Twelfth Division of the Honorable Court of Appeals
likewise erred in denying [petitioners'] Motion for Reconsideration given the
facts and the law therein presented." 17
Succinctly, the issues are whether the trial court lost jurisdiction over the case upon the death of
Pedro Joaquin, and whether respondent was guilty of forum shopping. 18
The Court's Ruling
The Petition has no merit.
First Issue:
Jurisdiction
Petitioners assert that the RTC's Decision was invalid for lack of jurisdiction. 19 They claim that
respondent died during the pendency of the case. There being no substitution by the heirs, the
trial court allegedly lacked jurisdiction over the litigation. 20
Rule on Substitution
When a party to a pending action dies and the claim is not extinguished, 21 the Rules of Court
require a substitution of the deceased. The procedure is specifically governed by Section 16 of
Rule 3, which reads thus:
"Section 16. Death of a party; duty of counsel. — Whenever a party to a
pending action dies, and the claim is not thereby extinguished, it shall be
the duty of his counsel to inform the court within thirty (30) days after such
death of the fact thereof, and to give the name and address of his legal
representative or representatives. Failure of counsel to comply with this
duty shall be a ground for disciplinary action.
"The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or
administrator and the court may appoint a guardian ad litem for the minor
heirs.
"The court shall forthwith order said legal representative or representatives
to appear and be substituted within a period of thirty (30) days from notice.
"If no legal representative is named by the counsel for the deceased party,
or if the one so named shall fail to appear within the specified period, the
court may order the opposing party, within a specified time, to procure the
appointment of an executor or administrator for the estate of the deceased,
and the latter shall immediately appear for and on behalf of the deceased.
The court charges in procuring such appointment, if defrayed by the
opposing party, may be recovered as costs."
The rule on the substitution of parties was crafted to protect every party's right to due
process. 22 The estate of the deceased party will continue to be properly represented in the suit
through the duly appointed legal representative. 23 Moreover, no adjudication can be made
against the successor of the deceased if the fundamental right to a day in court is denied. 24
HcTDSA
The Court has nullified not only trial proceedings conducted without the appearance of the legal
representatives of the deceased, but also the resulting judgments. 25 In those instances, the
courts acquired no jurisdiction over the persons of the legal representatives or the heirs upon
whom no judgment was binding. 26
This general rule notwithstanding, a formal substitution by heirs is not necessary when they
themselves voluntarily appear, participate in the case, and present evidence in defense of the
deceased. 27 These actions negate any claim that the right to due process was violated.
The Court is not unaware of Chittick v. Court of Appeals, 28 in which the failure of the heirs to
substitute for the original plaintiff upon her death led to the nullification of the trial court's Decision.
The latter had sought to recover support in arrears and her share in the conjugal partnership. The
children who allegedly substituted for her refused to continue the case against their father and
vehemently objected to their inclusion as parties. 29Moreover, because he died during the
pendency of the case, they were bound to substitute for the defendant also. The substitution Forum shopping trifles with the courts, abuses their processes, degrades the administration of
effectively merged the persons of the plaintiff and the defendant and thus extinguished the justice, and congests court dockets. 39 Willful and deliberate violation of the rule against it is a
obligation being sued upon. 30 ground for the summary dismissal of the case; it may also constitute direct contempt of court. 40

Clearly, the present case is not similar, much less identical, to the factual milieu of Chittick.
Strictly speaking, the rule on the substitution by heirs is not a matter of jurisdiction, but a
requirement of due process. Thus, when due process is not violated, as when the right of the
representative or heir is recognized and protected, noncompliance or belated formal compliance
with the Rules cannot affect the validity of a promulgated decision. 31 Mere failure to substitute
for a deceased plaintiff is not a sufficient ground to nullify a trial court's decision. The alleging party
must prove that there was an undeniable violation of due process. TECIaH
Substitution in
the Instant Case
The records of the present case contain a "Motion for Substitution of Party Plaintiff" dated February
15, 2002, filed before the CA. The prayer states as follows:
"WHEREFORE, it is respectfully prayed that the Heirs of the deceased
plaintiff-appellee as represented by his daughter Lourdes dela Cruz be
substituted as party-plaintiff for the said Pedro Joaquin.
"It is further prayed that henceforth the undersigned counsel 32 for the heirs
of Pedro Joaquin be furnished with copies of notices, orders, resolutions
and other pleadings at its address below."
Evidently, the heirs of Pedro Joaquin voluntary appeared and participated in the case. We stress
that the appellate court had ordered 33 his legal representatives to appear and substitute for him.
The substitution even on appeal had been ordered correctly. In all proceedings, the legal
representatives must appear to protect the interests of the deceased. 34 After the rendition of
judgment, further proceedings may be held, such as a motion for reconsideration or a new trial,
an appeal, or an execution. 35
The test for determining the existence of forum shopping is whether the elements of litis
pendentia are present, or whether a final judgment in one case amounts to res judicata in
another. 41 We note, however, petitioners' claim that the subject matter of the present case has
already been litigated and decided. Therefore, the applicable doctrine is res judicata. 42
Applicability of Res Judicata
Under res judicata, a final judgment or decree on the merits by a court of competent jurisdiction is
conclusive of the rights of the parties or their privies, in all later suits and on all points and matters
determined in the previous suit. 43 The term literally means a "matter adjudged, judicially acted
upon, or settled by judgment." 44 The principle bars a subsequent suit involving the same parties,
subject matter, and cause of action. Public policy requires that controversies must be settled with
finality at a given point in time. IDcHCS
The elements of res judicata are as follows: (1) the former judgment or order must be final; (2) it
must have been rendered on the merits of the controversy; (3) the court that rendered it must have
had jurisdiction over the subject matter and the parties; and (4) there must have been — between
the first and the second actions — an identity of parties, subject matter and cause of action. 45
Failure to Support Allegation
The onus of proving allegations rests upon the party raising them. 46 As to the matter of forum
shopping and res judicata, petitioners have failed to provide this Court with relevant and clear
specifications that would show the presence of an identity of parties, subject matter, and cause of
action between the present and the earlier suits. They have also failed to show whether the other
case was decided on the merits. Instead, they have made only bare assertions involving its
existence without reference to its facts. In other words, they have alleged conclusions of law
without stating any factual or legal basis. Mere mention of other civil cases without showing the
identity of rights asserted and reliefs sought is not enough basis to claim that respondent is guilty
of forum shopping, or that res judicata exists. 47

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED.
Considering the foregoing circumstances, the Motion for Substitution may be deemed to have Costs against petitioners. ASETHC
been granted; and the heirs, to have substituted for the deceased, Pedro Joaquin. There being no
violation of due process, the issue of substitution cannot be upheld as a ground to nullify the trial SO ORDERED.
court's Decision.
||| (Spouses De la Cruz v. Joaquin, G.R. No. 162788, [July 28, 2005], 502 PHIL 803-815)
Second Issue:
Forum Shopping
Petitioners also claim that respondents were guilty of forum shopping, a fact that should have
compelled the trial court to dismiss the Complaint. 36They claim that prior to the commencement
of the present suit on July 7, 1981, respondent had filed a civil case against petitioners on June
25, 1979. Docketed as Civil Case No. SD-742 for the recovery of possession and for damages, it
was allegedly dismissed by the Court of First Instance of Nueva Ecija for lack of interest to
prosecute.

Forum Shopping Defined

Forum shopping is the institution of two or more actions or proceedings involving the same parties
for the same cause of action, either simultaneously or successively, on the supposition that one
or the other court would make a favorable disposition. 37 Forum shopping may be resorted to by
a party against whom an adverse judgment or order has been issued in one forum, in an attempt
to seek a favorable opinion in another, other than by an appeal or a special civil action
for certiorari. 38
 11. Spouses Algura vs. City of Naga, 506 SCRA 81
[G.R. No. 150135. October 30, 2006.]
SPOUSES ANTONIO F. ALGURA and LORENCITA S.J.
ALGURA, petitioners, vs. THE LOCAL GOVERNMENT UNIT OF THE
CITY OF NAGA, ATTY. MANUEL TEOXON, ENGR. LEON PALMIANO,
NATHAN SERGIO and BENJAMIN NAVARRO, SR., respondents.
DECISION
VELASCO, JR., J p:
Anyone who has ever struggled with poverty
knows how extremely expensive it is to be poor.
–– James Baldwin
The Constitution affords litigants — moneyed or poor — equal access to the courts; moreover, it
specifically provides that poverty shall not bar any person from having access to the
courts. 1 Accordingly, laws and rules must be formulated, interpreted, and implemented pursuant
to the intent and spirit of this constitutional provision. As such, filing fees, though one of the
essential elements in court procedures, should not be an obstacle to poor litigants' opportunity to
seek redress for their grievances before the courts.
The Case
This Petition for Review on Certiorari seeks the annulment of the September 11, 2001 Order of
the Regional Trial Court (RTC) of Naga City, Branch 27, in Civil Case No. 99-4403
entitled Spouses Antonio F. Algura and Lorencita S.J. Algura v. The Local Government Unit of the
City of Naga, et al., dismissing the case for failure of petitioners Algura spouses to pay the required
filing fees. 2 Since the instant petition involves only a question of law based on facts established
from the pleadings and documents submitted by the parties, 3 the Court gives due course to the
instant petition sanctioned under Section 2(c) of Rule 41 on Appeal from the RTCs, and governed
by Rule 45 of the 1997 Rules of Civil Procedure.
The Facts
On September 1, 1999, spouses Antonio F. Algura and Lorencita S.J. Algura filed a Verified
Complaint dated August 30, 1999 4 for damages against the Naga City Government and its
officers, arising from the alleged illegal demolition of their residence and boarding house and for
payment of lost income derived from fees paid by their boarders amounting to PhP 7,000.00
monthly.
Simultaneously, petitioners filed an Ex-Parte Motion to Litigate as Indigent Litigants, 5 to which
petitioner Antonio Algura's Pay Slip No. 2457360 (Annex "A" of motion) was appended, showing
a gross monthly income of Ten Thousand Four Hundred Seventy Four Pesos (PhP 10,474.00)
and a net pay of Three Thousand Six Hundred Sixteen Pesos and Ninety Nine Centavos (PhP
3,616.99) for [the month of] July 1999. 6 Also attached as Annex "B" to the motion was a July 14,
1999 Certification 7 issued by the Office of the City Assessor of Naga City, which stated that
petitioners had no property declared in their name for taxation purposes.
Finding that petitioners' motion to litigate as indigent litigants was meritorious, Executive Judge
Jose T. Atienza of the Naga City RTC, in the September 1, 1999 Order, 8 granted petitioners' plea
for exemption from filing fees.
Meanwhile, as a result of respondent Naga City Government's demolition of a portion of
petitioners' house, the Alguras allegedly lost a monthly income of PhP 7,000.00 from their
boarders' rentals. With the loss of the rentals, the meager income from Lorencita Algura's sari-
sari store and Antonio Algura's small take home pay became insufficient for the expenses of the
Algura spouses and their six (6) children for their basic needs including food, bills, clothes, and
schooling, among others.
On October 13, 1999, respondents filed an Answer with Counterclaim dated October 10,
1999, 9 arguing that the defenses of the petitioners in the complaint had no cause of action, the
spouses' boarding house blocked the road right of way, and said structure was a nuisance per se.
Praying that the counterclaim of defendants (respondents) be dismissed, petitioners then filed
their Reply with Ex-Parte Request for a Pre-Trial Setting 10 before the Naga City RTC on October
19, 1999. On February 3, 2000, a pre-trial was held wherein respondents asked for five (5) days
within which to file a Motion to Disqualify Petitioners as Indigent Litigants.
On March 13, 2000, respondents filed a Motion to Disqualify the Plaintiffs for Non-Payment of
Filing Fees dated March 10, 2000. 11 They asserted that in addition to the more than PhP 3,000.00
net income of petitioner Antonio Algura, who is a member of the Philippine National Police, spouse
Lorencita Algura also had a mini-store and a computer shop on the ground floor of their residence
along Bayawas St., Sta. Cruz, Naga City. Also, respondents claimed that petitioners' second floor
was used as their residence and as a boarding house, from which they earned more than PhP
3,000.00 a month. In addition, it was claimed that petitioners derived additional income from their
computer shop patronized by students and from several boarders who paid rentals to them.
Hence, respondents concluded that petitioners were not indigent litigants.
On March 28, 2000, petitioners subsequently interposed their Opposition to the Motion 12 to
respondents' motion to disqualify them for non-payment of filing fees.
On April 14, 2000, the Naga City RTC issued an Order disqualifying petitioners as indigent litigants
on the ground that they failed to substantiate their claim for exemption from payment of legal fees
and to comply with the third paragraph of Rule 141, Section 18 of the Revised Rules of Court —
directing them to pay the requisite filing fees. 13
On April 28, 2000, petitioners filed a Motion for Reconsideration of the April 14, 2000 Order. On
May 8, 2000, respondents then filed their Comment/Objections to petitioner's Motion for
Reconsideration.
On May 5, 2000, the trial court issued an Order 14 giving petitioners the opportunity to comply
with the requisites laid down in Section 18, Rule 141, for them to qualify as indigent litigants.
On May 13, 2000, petitioners submitted their Compliance 15 attaching the affidavits of petitioner
Lorencita Algura 16 and Erlinda Bangate, 17 to comply with the requirements of then Rule 141,
Section 18 of the Rules of Court and in support of their claim to be declared as indigent litigants.
In her May 13, 2000 Affidavit, petitioner Lorencita Algura claimed that the demolition of their small
dwelling deprived her of a monthly income amounting to PhP 7,000.00. She, her husband, and
their six (6) minor children had to rely mainly on her husband's salary as a policeman which
provided them a monthly amount of PhP 3,500.00, more or less. Also, they did not own any real
property as certified by the assessor's office of Naga City. More so, according to her, the meager
net income from her small sari-sari store and the rentals of some boarders, plus the salary of her
husband, were not enough to pay the family's basic necessities.
To buttress their position as qualified indigent litigants, petitioners also submitted the affidavit of
Erlinda Bangate, who attested under oath, that she personally knew spouses Antonio Algura and
Lorencita Algura, who were her neighbors; that they derived substantial income from their
boarders; that they lost said income from their boarders' rentals when the Local Government Unit
of the City of Naga, through its officers, demolished part of their house because from that time,
only a few boarders could be accommodated; that the income from the small store, the boarders,
and the meager salary of Antonio Algura were insufficient for their basic necessities like food and
clothing, considering that the Algura spouses had six (6) children; and that she knew that
petitioners did not own any real property.
Thereafter, Naga City RTC Acting Presiding Judge Andres B. Barsaga, Jr. issued his July 17,
2000 18 Order denying the petitioners' Motion for Reconsideration.
Judge Barsaga ratiocinated that the pay slip of Antonio F. Algura showed that the "GROSS
INCOME or TOTAL EARNINGS of plaintiff Algura [was] P10,474.00 which amount [was] over and
above the amount mentioned in the first paragraph of Rule 141, Section 18 for pauper litigants
residing outside Metro Manila." 19 Said rule provides that the gross income of the litigant should
not exceed PhP 3,000.00 a month and shall not own real estate with an assessed value of PhP
50,000.00. The trial court found that, in Lorencita S.J. Algura's May 13, 2000 Affidavit, nowhere
was it stated that she and her immediate family did not earn a gross income of PhP 3,000.00.
The Issue
Unconvinced of the said ruling, the Alguras instituted the instant petition raising a solitary issue for
the consideration of the Court: whether petitioners should be considered as indigent litigants who
qualify for exemption from paying filing fees.
The Ruling of the Court
The petition is meritorious.
A review of the history of the Rules of Court on suits in forma pauperis (pauper litigant) is
necessary before the Court rules on the issue of the Algura spouses' claim to exemption from
paying filing fees.
When the Rules of Court took effect on January 1, 1964, the rule on pauper litigants was found in
Rule 3, Section 22 which provided that:
Section 22. Pauper litigant. — Any court may authorize a litigant to
prosecute his action or defense as a pauper upon a proper showing that
he has no means to that effect by affidavits, certificate of the corresponding
provincial, city or municipal treasurer, or otherwise. Such authority[,] once
given[,] shall include an exemption from payment of legal fees and from
filing appeal bond, printed record and printed brief. The legal fees shall be
a lien to any judgment rendered in the case [favorable] to the pauper,
unless the court otherwise provides.
From the same Rules of Court, Rule 141 on Legal Fees, on the other hand, did not contain any
provision on pauper litigants.
On July 19, 1984, the Court, in Administrative Matter No. 83-6-389-0 (formerly G.R. No. 64274),
approved the recommendation of the Committee on the Revision of Rates and Charges of Court
Fees, through its Chairman, then Justice Felix V. Makasiar, to revise the fees in Rule 141 of the
Rules of Court to generate funds to effectively cover administrative costs for services rendered by
the courts. 20 A provision on pauper litigants was inserted which reads:
Section 16. Pauper-litigants exempt from payment of court fees. —
Pauper-litigants include wage earners whose gross income do not exceed
P2,000.00 a month or P24,000.00 a year for those residing in Metro Manila,
and P1,500.00 a month or P18,000.00 a year for those residing outside
Metro Manila, or those who do not own real property with an assessed
value of not more than P24,000.00, or not more than P18,000.00 as the
case may be.
Such exemption shall include exemption from payment of fees for filing
appeal bond, printed record and printed brief.
The legal fees shall be a lien on the monetary or property judgment
rendered in favor of the pauper-litigant.
To be entitled to the exemption herein provided, the pauper-litigant shall
execute an affidavit that he does not earn the gross income
abovementioned, nor own any real property with the assessed value afore-
mentioned [sic], supported by a certification to that effect by the provincial,
city or town assessor or treasurer.
When the Rules of Court on Civil Procedure were amended by the 1997 Rules of Civil Procedure
(inclusive of Rules 1 to 71) in Supreme Court Resolution in Bar Matter No. 803 dated April 8, 1997,
which became effective on July 1, 1997, Rule 3, Section 22 of the Revised Rules of Court was
superseded by Rule 3, Section 21 of said 1997 Rules of Civil Procedure, as follows:
Section 21. Indigent party. — A party may be authorized to litigate his
action, claim or defense as an indigent if the court, upon an ex
parteapplication and hearing, is satisfied that the party is one who has no
money or property sufficient and available for food, shelter and basic
necessities for himself and his family.
Such authority shall include an exemption from payment of docket and
other lawful fees, and of transcripts of stenographic notes which the court
may order to be furnished him. The amount of the docket and other lawful
fees which the indigent was exempted from paying shall be a lien on any
judgment rendered in the case favorable to the indigent, unless the court
otherwise provides.
Any adverse party may contest the grant of such authority at any time
before judgment is rendered by the trial court. If the court should determine
after hearing that the party declared as an indigent is in fact a person with
sufficient income or property, the proper docket and other lawful fees shall
be assessed and collected by the clerk of court. If payment is not made
within the time fixed by the court, execution shall issue for the payment
thereof, without prejudice to such other sanctions as the court may impose.
At the time the Rules on Civil Procedure were amended by the Court in Bar Matter No. 803,
however, there was no amendment made on Rule 141, Section 16 on pauper litigants.
On March 1, 2000, Rule 141 on Legal Fees was amended by the Court in A.M. No. 00-2-01-SC,
whereby certain fees were increased or adjusted. In this Resolution, the Court amended Section
16 of Rule 141, making it Section 18, which now reads:
Section 18. Pauper-litigants exempt from payment of legal fees. — Pauper
litigants (a) whose gross income and that of their immediate family do not
exceed four thousand (P4,000.00) pesos a month if residing in Metro
Manila, and three thousand (P3,000.00) pesos a month if residing outside
Metro Manila, and (b) who do not own real property with an assessed value
of more than fifty thousand (P50,000.00) pesos shall be exempt from the
payment of legal fees.
The legal fees shall be a lien on any judgment rendered in the case
favorably to the pauper litigant, unless the court otherwise provides.
 To be entitled to the exemption herein provided, the litigant shall execute
an affidavit that he and his immediate family do not earn the gross income
abovementioned, nor do they own any real property with the assessed
value aforementioned, supported by an affidavit of a disinterested person
attesting to the truth of the litigant's affidavit.
Any falsity in the affidavit of a litigant or disinterested person shall be
sufficient cause to strike out the pleading of that party, without prejudice to
whatever criminal liability may have been incurred.
It can be readily seen that the rule on pauper litigants was inserted in Rule 141 without revoking
or amending Section 21 of Rule 3, which provides for the exemption of pauper litigants from
payment of filing fees. Thus, on March 1, 2000, there were two existing rules on pauper
litigants; namely, Rule 3, Section 21 and Rule 141, Section 18.
On August 16, 2004, Section 18 of Rule 141 was further amended in Administrative Matter No.
04-2-04-SC, which became effective on the same date. It then became Section 19 of Rule 141, to
wit:
SEC. 19. Indigent litigants exempt from payment of legal fees. —
INDIGENT LITIGANTS (A) WHOSE GROSS INCOME AND THAT OF
THEIR IMMEDIATE FAMILY DO NOT EXCEED AN AMOUNT DOUBLE
THE MONTHLY MINIMUM WAGE OF AN EMPLOYEE AND (B) WHO DO
NOT OWN REAL PROPERTY WITH A FAIR MARKET VALUE AS
STATED IN THE CURRENT TAX DECLARATION OF MORE THAN
THREE HUNDRED THOUSAND (P300,000.00) PESOS SHALL BE
EXEMPT FROM PAYMENT OF LEGAL FEES.
The legal fees shall be a lien on any judgment rendered in the case
favorable to the indigent litigant unless the court otherwise provides.
To be entitled to the exemption herein provided, the litigant shall
execute an affidavit that he and his immediate family do not earn a
gross income abovementioned, and they do not own any real
property with the fair value aforementioned, supported by an affidavit
of a disinterested person attesting to the truth of the litigant's
affidavit. The current tax declaration, if any, shall be attached to the
litigant's affidavit.
Any falsity in the affidavit of litigant or disinterested person shall be
sufficient cause to dismiss the complaint or action or to strike out the
pleading of that party, without prejudice to whatever criminal liability may
have been incurred. (Emphasis supplied.)
Amendments to Rule 141 (including the amendment to Rule 141, Section 18) were made to
implement RA 9227 which brought about new increases in filing fees. Specifically, in the August
16, 2004 amendment, the ceiling for the gross income of litigants applying for exemption and that
of their immediate family was increased from PhP 4,000.00 a month in Metro Manila and PhP
3,000.00 a month outside Metro Manila, to double the monthly minimum wage of an employee;
and the maximum value of the property owned by the applicant was increased from an assessed
value of PhP 50,000.00 to a maximum market value of PhP 300,000.00, to be able to
accommodate more indigent litigants and promote easier access to justice by the poor and the
marginalized in the wake of these new increases in filing fees.
Even if there was an amendment to Rule 141 on August 16, 2004, there was still no amendment
or recall of Rule 3, Section 21 on indigent litigants.
With this historical backdrop, let us now move on to the sole issue — whether petitioners are
exempt from the payment of filing fees.
It is undisputed that the Complaint (Civil Case No. 99-4403) was filed on September 1, 1999.
However, the Naga City RTC, in its April 14, 2000 and July 17, 2000 Orders, incorrectly applied
Rule 141, Section 18 on Legal Fees when the applicable rules at that time were Rule 3, Section
21 on Indigent Party which took effect on July 1, 1997 and Rule 141, Section 16 on Pauper
Litigants which became effective on July 19, 1984 up to February 28, 2000.
The old Section 16, Rule 141 requires applicants to file an ex-parte motion to litigate as a pauper
litigant by submitting an affidavit that they do not have a gross income of PhP 2,000.00 a month
or PhP 24,000.00 a year for those residing in Metro Manila and PhP 1,500.00 a month or PhP
18,000.00 a year for those residing outside Metro Manila or those who do not own real property
with an assessed value of not more than PhP 24,000.00 or not more than PhP 18,000.00 as the
case may be. Thus, there are two requirements: a) income requirement — the applicants should
not have a gross monthly income of more than PhP 1,500.00, and b) property requirement –– they
should not own property with an assessed value of not more than PhP 18,000.00.
In the case at bar, petitioners Alguras submitted the Affidavits of petitioner Lorencita Algura and
neighbor Erlinda Bangate, the pay slip of petitioner Antonio F. Algura showing a gross monthly
income of PhP 10,474.00, 21 and a Certification of the Naga City assessor stating that petitioners
do not have property declared in their names for taxation. 22 Undoubtedly, petitioners do not own
real property as shown by the Certification of the Naga City assessor and so the property
requirement is met. However with respect to the income requirement, it is clear that the gross
monthly income of PhP 10,474.00 of petitioner Antonio F. Algura and the PhP 3,000.00 income of
Lorencita Algura when combined, were above the PhP 1,500.00 monthly income threshold
prescribed by then Rule 141, Section 16 and therefore, the income requirement was not satisfied.
The trial court was therefore correct in disqualifying petitioners Alguras as indigent litigants
although the court should have applied Rule 141, Section 16 which was in effect at the time of the
filing of the application on September 1, 1999. Even if Rule 141, Section 18 (which superseded
Rule 141, Section 16 on March 1, 2000) were applied, still the application could not have been
granted as the combined PhP 13,474.00 income of petitioners was beyond the PhP 3,000.00
monthly income threshold.
Unrelenting, petitioners however argue in their Motion for Reconsideration of the April 14, 2000
Order disqualifying them as indigent litigants 23 that the rules have been relaxed by relying on
Rule 3, Section 21 of the 1997 Rules of Civil procedure which authorizes parties to litigate their
action as indigents if the court is satisfied that the party is "one who has no money or property
sufficient and available for food, shelter and basic necessities for himself and his family." The trial
court did not give credence to this view of petitioners and simply applied Rule 141 but ignored
Rule 3, Section 21 on Indigent Party.
The position of petitioners on the need to use Rule 3, Section 21 on their application to litigate as
indigent litigants brings to the fore the issue on whether a trial court has to apply both Rule 141,
Section 16 and Rule 3, Section 21 on such applications or should the court apply only Rule 141,
Section 16 and discard Rule 3, Section 21 as having been superseded by Rule 141, Section 16
on Legal Fees.
The Court rules that Rule 3, Section 21 and Rule 141, Section 16 (later amended as Rule 141,
Section 18 on March 1, 2000 and subsequently amended by Rule 141, Section 19 on August 16,
2003, which is now the present rule) are still valid and enforceable rules on indigent litigants.
For one, the history of the two seemingly conflicting rules readily reveals that it was not the intent
of the Court to consider the old Section 22 of Rule 3, which took effect on January 1, 1994 to have
been amended and superseded by Rule 141, Section 16, which took effect on July 19, 1984
through A.M. No. 83-6-389-0. If that is the case, then the Supreme Court, upon the
recommendation of the Committee on the Revision on Rules, could have already deleted Section
22 from Rule 3 when it amended Rules 1 to 71 and approved the 1997 Rules of Civil Procedure,
which took effect on July 1, 1997. The fact that Section 22 which became Rule 3, Section 21 on
indigent litigant was retained in the rules of procedure, even elaborating on the meaning of an
indigent party, and was also strengthened by the addition of a third paragraph on the right to
contest the grant of authority to litigate only goes to show that there was no intent at all to consider
said rule as expunged from the 1997 Rules of Civil Procedure.
Furthermore, Rule 141 on indigent litigants was amended twice: first on March 1, 2000 and
the second on August 16, 2004; and yet, despite these two amendments, there was no attempt
to delete Section 21 from said Rule 3. This clearly evinces the desire of the Court to maintain the
two (2) rules on indigent litigants to cover applications to litigate as an indigent litigant.
It may be argued that Rule 3, Section 21 has been impliedly repealed by the recent 2000 and 2004
amendments to Rule 141 on legal fees. This position is bereft of merit. Implied repeals are frowned
upon unless the intent of the framers of the rules is unequivocal. It has been consistently ruled
that:
(r)epeals by implication are not favored, and will not be decreed, unless it
is manifest that the legislature so intended. As laws are presumed to be
passed with deliberation and with full knowledge of all existing ones on the
subject, it is but reasonable to conclude that in passing a statute[,] it was
not intended to interfere with or abrogate any former law relating to same
matter, unless the repugnancy between the two is not only irreconcilable,
but also clear and convincing, and flowing necessarily from the language
used, unless the later act fully embraces the subject matter of the earlier,
or unless the reason for the earlier act is beyond peradventure removed.
Hence, every effort must be used to make all acts stand and if, by any
reasonable construction they can be reconciled, the later act will not
operate as a repeal of the earlier. 24(Emphasis supplied).
Instead of declaring that Rule 3, Section 21 has been superseded and impliedly amended by
Section 18 and later Section 19 of Rule 141, the Court finds that the two rules can and should be
harmonized.
The Court opts to reconcile Rule 3, Section 21 and Rule 141, Section 19 because it is a settled
principle that when conflicts are seen between two provisions, all efforts must be made to
harmonize them. Hence, "every statute [or rule] must be so construed and harmonized with other
statutes [or rules] as to form a uniform system of jurisprudence." 25
In Manila Jockey Club, Inc. v. Court of Appeals, this Court enunciated that in the interpretation of
seemingly conflicting laws, efforts must be made to first harmonize them. This Court thus ruled:
Consequently, every statute should be construed in such a way that will
harmonize it with existing laws. This principle is expressed in the legal
maxim 'interpretare et concordare leges legibus est optimus interpretandi,'
that is, to interpret and to do it in such a way as to harmonize laws with
laws is the best method of interpretation. 26
In the light of the foregoing considerations, therefore, the two (2) rules can stand together and are
compatible with each other. When an application to litigate as an indigent litigant is filed, the court
shall scrutinize the affidavits and supporting documents submitted by the applicant to determine if
the applicant complies with the income and property standards prescribed in the present Section
19 of Rule 141 — that is, the applicant's gross income and that of the applicant's immediate family
do not exceed an amount double the monthly minimum wage of an employee; and the applicant
does not own real property with a fair market value of more than Three Hundred Thousand Pesos
(PhP 300,000.00). If the trial court finds that the applicant meets the income and property
requirements, the authority to litigate as indigent litigant is automatically granted and the grant is
a matter of right.
However, if the trial court finds that one or both requirements have not been met, then it would set
a hearing to enable the applicant to prove that the applicant has "no money or property sufficient
and available for food, shelter and basic necessities for himself and his family." In that hearing,
the adverse party may adduce countervailing evidence to disprove the evidence presented by the
applicant; after which the trial court will rule on the application depending on the evidence
adduced. In addition, Section 21 of Rule 3 also provides that the adverse party may later still
contest the grant of such authority at any time before judgment is rendered by the trial court,
possibly based on newly discovered evidence not obtained at the time the application was heard.
If the court determines after hearing, that the party declared as an indigent is in fact a person with
sufficient income or property, the proper docket and other lawful fees shall be assessed and
collected by the clerk of court. If payment is not made within the time fixed by the court, execution
shall issue or the payment of prescribed fees shall be made, without prejudice to such other
sanctions as the court may impose.
The Court concedes that Rule 141, Section 19 provides specific standards while Rule 3, Section
21 does not clearly draw the limits of the entitlement to the exemption. Knowing that the litigants
may abuse the grant of authority, the trial court must use sound discretion and scrutinize evidence
strictly in granting exemptions, aware that the applicant has not hurdled the precise standards
under Rule 141. The trial court must also guard against abuse and misuse of the privilege to litigate
as an indigent litigant to prevent the filing of exorbitant claims which would otherwise be regulated
by a legal fee requirement.
Thus, the trial court should have applied Rule 3, Section 21 to the application of the Alguras after
their affidavits and supporting documents showed that petitioners did not satisfy the twin
requirements on gross monthly income and ownership of real property under Rule 141. Instead of
disqualifying the Alguras as indigent litigants, the trial court should have called a hearing as
required by Rule 3, Section 21 to enable the petitioners to adduce evidence to show that they
didn't have property and money sufficient and available for food, shelter, and basic necessities for
them and their family. 27 In that hearing, the respondents would have had the right to also present
evidence to refute the allegations and evidence in support of the application of the petitioners to
litigate as indigent litigants. Since this Court is not a trier of facts, it will have to remand the case
to the trial court to determine whether petitioners can be considered as indigent litigants using the
standards set in Rule 3, Section 21.
Recapitulating the rules on indigent litigants, therefore, if the applicant for exemption meets the
salary and property requirements under Section 19 of Rule 141, then the grant of the application
is mandatory. On the other hand, when the application does not satisfy one or both requirements,
then the application should not be denied outright; instead, the court should apply the "indigency
test" under Section 21 of Rule 3 and use its sound discretion in determining the merits of the
prayer for exemption.
Access to justice by the impoverished is held sacrosanct under Article III, Section 11 of the 1987
Constitution. The Action Program for Judicial Reforms (APJR) itself, initiated by former Chief
Justice Hilario G. Davide, Jr., placed prime importance on 'easy access to justice by the poor' as
one of its six major components. Likewise, the judicial philosophy of Liberty and Prosperity of Chief
Justice Artemio V. Panganiban makes it imperative that the courts shall not only safeguard but
also enhance the rights of individuals — which are considered sacred under the 1987 Constitution.
Without doubt, one of the most precious rights which must be shielded and secured is the
unhampered access to the justice system by the poor, the underprivileged, and the marginalized.
WHEREFORE, the petition is GRANTED and the April 14, 2000 Order granting the disqualification
of petitioners, the July 17, 2000 Order denying petitioners' Motion for Reconsideration, and the
September 11, 2001 Order dismissing the case in Civil Case No. RTC-99-4403 before the Naga
City RTC, Branch 27 are ANNULLED and SET ASIDE. Furthermore, the Naga City RTC is ordered
to set the "Ex-Parte Motion to Litigate as Indigent Litigants" for hearing and apply Rule 3, Section
21 of the 1997 Rules of Civil Procedure to determine whether petitioners can qualify as indigent
litigants.
No costs.
SO ORDERED.
||| (Spouses Algura v. Local Government Unit of the City of Naga, G.R. No. 150135, [October 30,
2006], 536 PHIL 819-838)
 12. White vs. City of Manila, 576 SCRA 416, January 20, 2009
[G.R. No. 122846. January 20, 2009.]
WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA.
MESA TOURIST & DEVELOPMENT CORPORATION, petitioners, vs.
CITY OF MANILA, represented by MAYOR ALFREDO S.
LIM, respondent.
DECISION
TINGA, J p:
With another city ordinance of Manila also principally involving the tourist district
as subject, the Court is confronted anew with the incessant clash between government power
and individual liberty in tandem with the archetypal tension between law and
morality. CcaASE
In City of Manila v. Laguio, Jr., 1 the Court affirmed the nullification of a city
ordinance barring the operation of motels and inns, among other establishments, within the
Ermita-Malate area. The petition at bar assails a similarly-motivated city ordinance that
prohibits those same establishments from offering short-time admission, as well as pro-rated
or "wash up" rates for such abbreviated stays. Our earlier decision tested the city ordinance
against our sacred constitutional rights to liberty, due process and equal protection of law.
The same parameters apply to the present petition.
This Petition 2 under Rule 45 of the Revised Rules on Civil Procedure, which seeks
the reversal of the Decision 3 in C.A.-G.R. S.P. No. 33316 of the Court of Appeals, challenges
the validity of Manila City Ordinance No. 7774 entitled, "An Ordinance Prohibiting Short-Time
Admission, Short-Time Admission Rates, and Wash-Up Rate Schemes in Hotels, Motels,
Inns, Lodging Houses, Pension Houses, and Similar Establishments in the City of Manila"
(the Ordinance).
I.
The facts are as follows:
On December 3, 1992, City Mayor Alfredo S. Lim (Mayor Lim) signed into law the
Ordinance. 4 The Ordinance is reproduced in full, hereunder:
SEC. 1. Declaration of Policy. — It is hereby the declared policy of the City
Government to protect the best interest, health and welfare, and the
morality of its constituents in general and the youth in particular.
SEC. 2. Title. — This ordinance shall be known as "An Ordinance"
prohibiting short time admission in hotels, motels, lodging houses, pension
houses and similar establishments in the City of Manila.
SEC. 3. Pursuant to the above policy, short-time admission and
rate [sic], wash-up rate or other similarly concocted terms, are hereby
prohibited in hotels, motels, inns, lodging houses, pension houses and
similar establishments in the City of Manila. aDECHI
SEC. 4. Definition of Term[s]. — Short-time admission shall mean
admittance and charging of room rate for less than twelve (12) hours at any
given time or the renting out of rooms more than twice a day or any other
term that may be concocted by owners or managers of said establishments
but would mean the same or would bear the same meaning.
SEC. 5. Penalty Clause. — Any person or corporation who shall violate any
provision of this ordinance shall upon conviction thereof be punished by a
fine of Five Thousand (P5,000.00) Pesos or imprisonment for a period of
not exceeding one (1) year or both such fine and imprisonment at the
discretion of the court; Provided, That in case of [a] juridical person, the
president, the manager, or the persons in charge of the operation thereof
shall be liable: Provided, further, That in case of subsequent conviction for
the same offense, the business license of the guilty party shall
automatically be cancelled.
SEC. 6. Repealing Clause. — Any or all provisions of City ordinances not
consistent with or contrary to this measure or any portion hereof are hereby
deemed repealed.
SEC. 7. Effectivity. — This ordinance shall take effect immediately upon
approval.
Enacted by the city Council of Manila at its regular session today,
November 10, 1992.
Approved by His Honor, the Mayor on December 3, 1992.
On December 15, 1992, the Malate Tourist and Development Corporation (MTDC)
filed a complaint for declaratory relief with prayer for a writ of preliminary injunction and/or
temporary restraining order (TRO) 5 with the Regional Trial Court (RTC) of Manila, Branch 9
impleading as defendant, herein respondent City of Manila (the City) represented by Mayor
Lim. 6 MTDC prayed that the Ordinance, insofar as it includes motels and inns as among its
prohibited establishments, be declared invalid and unconstitutional. MTDC claimed that as
owner and operator of the Victoria Court in Malate, Manila it was authorized by Presidential
Decree (P.D.) No. 259 to admit customers on a short time basis as well as to charge
customers wash up rates for stays of only three hours. DACTSa
On December 21, 1992, petitioners White Light Corporation (WLC), Titanium
Corporation (TC) and Sta. Mesa Tourist and Development Corporation (STDC) filed a motion
to intervene and to admit attached complaint-in-intervention 7 on the ground that the
Ordinance directly affects their business interests as operators of drive-in hotels and motels
in Manila. 8 The three companies are components of the Anito Group of Companies which
owns and operates several hotels and motels in Metro Manila. 9
On December 23, 1992, the RTC granted the motion to intervene. 10 The RTC
also notified the Solicitor General of the proceedings pursuant to then Rule 64, Section 4 of
the Rules of Court. On the same date, MTDC moved to withdraw as plaintiff. 11 ADTCaI
On December 28, 1992, the RTC granted MTDC's motion to withdraw. 12 The RTC
issued a TRO on January 14, 1993, directing the City to cease and desist from enforcing the
Ordinance. 13 The City filed an Answer dated January 22, 1993 alleging that the Ordinance
is a legitimate exercise of police power. 14
On February 8, 1993, the RTC issued a writ of preliminary injunction ordering the
city to desist from the enforcement of the Ordinance. 15 A month later, on March 8, 1993,
the Solicitor General filed his Comment arguing that the Ordinance is constitutional.
During the pre-trial conference, the WLC, TC and STDC agreed to submit the case
for decision without trial as the case involved a purely legal question. 16 On October 20,
1993, the RTC rendered a decision declaring the Ordinance null and void. The dispositive
portion of the decision reads:
 WHEREFORE, in view of all the foregoing, [O]rdinance No. 7774 of the
City of Manila is hereby declared null and void.
Accordingly, the preliminary injunction heretofor issued is hereby made
permanent.
SO ORDERED. 17
The RTC noted that the ordinance "strikes at the personal liberty of the individual
guaranteed and jealously guarded by the Constitution." 18 Reference was made to the
provisions of the Constitution encouraging private enterprises and the incentive to needed
investment, as well as the right to operate economic enterprises. Finally, from the observation
that the illicit relationships the Ordinance sought to dissuade could nonetheless be
consummated by simply paying for a 12-hour stay, the RTC likened the law to the ordinance
annulled in Ynot v. Intermediate Appellate Court, 19 where the legitimate purpose of
preventing indiscriminate slaughter of carabaos was sought to be effected through an inter-
province ban on the transport of carabaos and carabeef. ITSCED
The City later filed a petition for review on certiorari with the Supreme Court. 20 The
petition was docketed as G.R. No. 112471. However in a resolution dated January 26, 1994,
the Court treated the petition as a petition for certiorari and referred the petition to the Court
of Appeals. 21
Before the Court of Appeals, the City asserted that the Ordinance is a valid
exercise of police power pursuant to Section 458 (4) (iv) of the Local Government Code which
confers on cities, among other local government units, the power:
[To] regulate the establishment, operation and maintenance of cafes,
restaurants, beerhouses, hotels, motels, inns, pension houses, lodging
houses and other similar establishments, including tourist guides and
transports. 22
The Ordinance, it is argued, is also a valid exercise of the power of the City under
Article III, Section 18 (kk) of the Revised Manila Charter, thus:
"to enact all ordinances it may deem necessary and proper for the
sanitation and safety, the furtherance of the prosperity and the promotion
of the morality, peace, good order, comfort, convenience and general
welfare of the city and its inhabitants, and such others as be necessary to
carry into effect and discharge the powers and duties conferred by this
Chapter; and to fix penalties for the violation of ordinances which shall not
exceed two hundred pesos fine or six months imprisonment, or both such
fine and imprisonment for a single offense. 23
Petitioners argued that the Ordinance is unconstitutional and void since it violates
the right to privacy and the freedom of movement; it is an invalid exercise of police power;
and it is an unreasonable and oppressive interference in their business. acIHDA
The Court of Appeals reversed the decision of the RTC and affirmed the
constitutionality of the Ordinance. 24 First, it held that the Ordinance did not violate the right
to privacy or the freedom of movement, as it only penalizes the owners or operators of
establishments that admit individuals for short time stays. Second, the virtually limitless reach
of police power is only constrained by having a lawful object obtained through a lawful
method. The lawful objective of the Ordinance is satisfied since it aims to curb immoral
activities. There is a lawful method since the establishments are still allowed to operate.
Third, the adverse effect on the establishments is justified by the well-being of its constituents
in general. Finally, as held in Ermita-Malate Motel Operators Association v. City Mayor of
Manila, liberty is regulated by law.
TC, WLC and STDC come to this Court via petition for review on certiorari. 25 In
their petition and Memorandum, petitioners in essence repeat the assertions they made
before the Court of Appeals. They contend that the assailed Ordinance is an invalid exercise
of police power.
II.
We must address the threshold issue of petitioners' standing. Petitioners allege
that as owners of establishments offering "wash-up" rates, their business is being unlawfully
interfered with by the Ordinance. However, petitioners also allege that the equal protection
rights of their clients are also being interfered with. Thus, the crux of the matter is whether or
not these establishments have the requisite standing to plead for protection of their patrons'
equal protection rights. aTcSID
Standing or locus standi is the ability of a party to demonstrate to the court sufficient
connection to and harm from the law or action challenged to support that party's participation
in the case. More importantly, the doctrine of standing is built on the principle of separation
of powers, 26 sparing as it does unnecessary interference or invalidation by the judicial
branch of the actions rendered by its co-equal branches of government.
The requirement of standing is a core component of the judicial system derived
directly from the Constitution. 27 The constitutional component of standing doctrine
incorporates concepts which concededly are not susceptible of precise definition. 28 In this
jurisdiction, the extancy of "a direct and personal interest" presents the most obvious cause,
as well as the standard test for a petitioner's standing. 29 In a similar vein, the United States
Supreme Court reviewed and elaborated on the meaning of the three constitutional standing
requirements of injury, causation, and redressability in Allen v. Wright. 30
Nonetheless, the general rules on standing admit of several exceptions such as
the overbreadth doctrine, taxpayer suits, third party standing and, especially in the
Philippines, the doctrine of transcendental importance. 31
For this particular set of facts, the concept of third party standing as an exception
and the overbreadth doctrine are appropriate. In Powers v. Ohio, 32 the United States
Supreme Court wrote that: "We have recognized the right of litigants to bring actions on
behalf of third parties, provided three important criteria are satisfied: the litigant must have
suffered an 'injury-in-fact', thus giving him or her a "sufficiently concrete interest" in the
outcome of the issue in dispute; the litigant must have a close relation to the third party; and
there must exist some hindrance to the third party's ability to protect his or her own
interests". 33 Herein, it is clear that the business interests of the petitioners are likewise
injured by the Ordinance. They rely on the patronage of their customers for their continued
viability which appears to be threatened by the enforcement of the Ordinance. The relative
silence in constitutional litigation of such special interest groups in our nation such as the
American Civil Liberties Union in the United States may also be construed as a hindrance for
customers to bring suit. 34
American jurisprudence is replete with examples where parties-in-interest were
allowed standing to advocate or invoke the fundamental due process or equal protection
claims of other persons or classes of persons injured by state action. In Griswold v.
Connecticut, 35 the United States Supreme Court held that physicians had standing to
challenge a reproductive health statute that would penalize them as accessories as well as
to plead the constitutional protections available to their patients. The Court held that:
"The rights of husband and wife, pressed here, are likely to be diluted or
adversely affected unless those rights are considered in a suit involving
those who have this kind of confidential relation to them." 36
An even more analogous example may be found in Craig v. Boren, 37 wherein the
United States Supreme Court held that a licensed beverage vendor has standing to raise the
equal protection claim of a male customer challenging a statutory scheme prohibiting the sale
of beer to males under the age of 21 and to females under the age of 18. The United States
High Court explained that the vendors had standing "by acting as advocates of the rights of
third parties who seek access to their market or function". 38 HacADE
 Assuming arguendo that petitioners do not have a relationship with their patrons
for the former to assert the rights of the latter, the overbreadth doctrine comes into play. In
overbreadth analysis, challengers to government action are in effect permitted to raise the
rights of third parties. Generally applied to statutes infringing on the freedom of speech, the
overbreadth doctrine applies when a statute needlessly restrains even constitutionally
guaranteed rights. 39 In this case, the petitioners claim that the Ordinance makes a sweeping
intrusion into the right to liberty of their clients. We can see that based on the allegations in
the petition, the Ordinance suffers from overbreadth.
We thus recognize that the petitioners have a right to assert the constitutional rights
of their clients to patronize their establishments for a "wash-rate" time frame.
III.
To students of jurisprudence, the facts of this case will recall to mind not only the
recent City of Manila ruling, but our 1967 decision inErmita-Malate Hotel and Motel
Operations Association, Inc. v. Hon. City Mayor of Manila. 40 Ermita-Malate concerned the
City ordinance requiring patrons to fill up a prescribed form stating personal information such
as name, gender, nationality, age, address and occupation before they could be admitted to
a motel, hotel or lodging house. This earlier ordinance was precisely enacted to minimize
certain practices deemed harmful to public morals. A purpose similar to the annulled
ordinance in City of Manila which sought a blanket ban on motels, inns and similar
establishments in the Ermita-Malate area. However, the constitutionality of the ordinance
in Ermita-Malate was sustained by the Court.
The common thread that runs through those decisions and the case at bar goes
beyond the singularity of the localities covered under the respective ordinances. All three
ordinances were enacted with a view of regulating public morals including particular illicit
activity in transient lodging establishments. This could be described as the middle case,
wherein there is no wholesale ban on motels and hotels but the services offered by these
establishments have been severely restricted. At its core, this is another case about the
extent to which the State can intrude into and regulate the lives of its citizens. ESDHCa
The test of a valid ordinance is well established. A long line of decisions
including City of Manila has held that for an ordinance to be valid, it must not only be within
the corporate powers of the local government unit to enact and pass according to the
procedure prescribed by law, it must also conform to the following substantive requirements:
(1) must not contravene the Constitution or any statute; (2) must not be unfair or oppressive;
(3) must not be partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must
be general and consistent with public policy; and (6) must not be unreasonable. 41
The Ordinance prohibits two specific and distinct business practices, namely wash
rate admissions and renting out a room more than twice a day. The ban is evidently sought
to be rooted in the police power as conferred on local government units by the Local
Government Code through such implements as the general welfare clause.
A.
Police power, while incapable of an exact definition, has been purposely veiled in
general terms to underscore its comprehensiveness to meet all exigencies and provide
enough room for an efficient and flexible response as the conditions warrant. 42 Police power
is based upon the concept of necessity of the State and its corresponding right to protect
itself and its people. 43 Police power has been used as justification for numerous and varied
actions by the State. These range from the regulation of dance halls, 44 movie
theaters, 45 gas stations 46 and cockpits. 47The awesome scope of police power is best
demonstrated by the fact that in its hundred or so years of presence in our nation's legal
system, its use has rarely been denied.
The apparent goal of the Ordinance is to minimize if not eliminate the use of the
covered establishments for illicit sex, prostitution, drug use and alike. These goals, by
themselves, are unimpeachable and certainly fall within the ambit of the police power of the
State. Yet the desirability of these ends do not sanctify any and all means for their
achievement. Those means must align with the Constitution, and our emerging sophisticated
analysis of its guarantees to the people. The Bill of Rights stands as a rebuke to the seductive
theory of Macchiavelli, and, sometimes even, the political majorities animated by his
cynicism. ETDHaC
Even as we design the precedents that establish the framework for analysis of due
process or equal protection questions, the courts are naturally inhibited by a due deference
to the co-equal branches of government as they exercise their political functions. But when
we are compelled to nullify executive or legislative actions, yet another form of caution
emerges. If the Court were animated by the same passing fancies or turbulent emotions that
motivate many political decisions, judicial integrity is compromised by any perception that the
judiciary is merely the third political branch of government. We derive our respect and good
standing in the annals of history by acting as judicious and neutral arbiters of the rule of law,
and there is no surer way to that end than through the development of rigorous and
sophisticated legal standards through which the courts analyze the most fundamental and
far-reaching constitutional questions of the day.
B.
The primary constitutional question that confronts us is one of due process, as
guaranteed under Section 1, Article III of the Constitution. Due process evades a precise
definition. 48 The purpose of the guaranty is to prevent arbitrary governmental encroachment
against the life, liberty and property of individuals. The due process guaranty serves as a
protection against arbitrary regulation or seizure. Even corporations and partnerships are
protected by the guaranty insofar as their property is concerned. cAaTED
The due process guaranty has traditionally been interpreted as imposing two
related but distinct restrictions on government, "procedural due process" and "substantive
due process". Procedural due process refers to the procedures that the government must
follow before it deprives a person of life, liberty, or property. 49 Procedural due process
concerns itself with government action adhering to the established process when it makes
an intrusion into the private sphere. Examples range from the form of notice given to the level
of formality of a hearing.
If due process were confined solely to its procedural aspects, there would arise
absurd situation of arbitrary government action, provided the proper formalities are followed.
Substantive due process completes the protection envisioned by the due process clause. It
inquires whether the government has sufficient justification for depriving a person of life,
liberty, or property. 50
The question of substantive due process, moreso than most other fields of law,
has reflected dynamism in progressive legal thought tied with the expanded acceptance of
fundamental freedoms. Police power, traditionally awesome as it may be, is now confronted
with a more rigorous level of analysis before it can be upheld. The vitality though of
constitutional due process has not been predicated on the frequency with which it has been
utilized to achieve a liberal result for, after all, the libertarian ends should sometimes yield to
the prerogatives of the State. Instead, the due process clause has acquired potency because
of the sophisticated methodology that has emerged to determine the proper metes and
bounds for its application.
C.
The general test of the validity of an ordinance on substantive due process grounds
is best tested when assessed with the evolved footnote 4 test laid down by the U.S. Supreme
Court in U.S. v. Carolene Products. 51 Footnote 4 of the Carolene Products case
acknowledged that the judiciary would defer to the legislature unless there is a discrimination
against a "discrete and insular" minority or infringement of a "fundamental
right". 52 Consequently, two standards of judicial review were established: strict scrutiny for
laws dealing with freedom of the mind or restricting the political process, and the rational
basis standard of review for economic legislation. aITECA
A third standard, denominated as heightened or immediate scrutiny, was later
adopted by the U.S. Supreme Court for evaluating classifications based on gender 53 and
legitimacy. 54 Immediate scrutiny was adopted by the U.S. Supreme Court in Craig, 55 after
the Court declined to do so in Reed v. Reed. 56 While the test may have first been articulated
in equal protection analysis, it has in the United States since been applied in all substantive
due process cases as well.
We ourselves have often applied the rational basis test mainly in analysis of equal
protection challenges. 57 Using the rational basis examination, laws or ordinances are upheld
if they rationally further a legitimate governmental interest. 58 Under intermediate review,
governmental interest is extensively examined and the availability of less restrictive
measures is considered. 59 Applying strict scrutiny, the focus is on the presence of
compelling, rather than substantial, governmental interest and on the absence of less
restrictive means for achieving that interest.
In terms of judicial review of statutes or ordinances, strict scrutiny refers to the
standard for determining the quality and the amount of governmental interest brought to
justify the regulation of fundamental freedoms. 60 Strict scrutiny is used today to test the
validity of laws dealing with the regulation of speech, gender, or race as well as other
fundamental rights as expansion from its earlier applications to equal protection. 61 The
United States Supreme Court has expanded the scope of strict scrutiny to protect
fundamental rights such as suffrage, 62judicial access 63 and interstate travel. 64
If we were to take the myopic view that an Ordinance should be analyzed strictly
as to its effect only on the petitioners at bar, then it would seem that the only restraint imposed
by the law which we are capacitated to act upon is the injury to property sustained by the
petitioners, an injury that would warrant the application of the most deferential standard —
the rational basis test. Yet as earlier stated, we recognize the capacity of the petitioners to
invoke as well the constitutional rights of their patrons — those persons who would be
deprived of availing short time access or wash-up rates to the lodging establishments in
question. HEaCcD
Viewed cynically, one might say that the infringed rights of these customers are
trivial since they seem shorn of political consequence. Concededly, these are not the sort of
cherished rights that, when proscribed, would impel the people to tear up their cedulas. Still,
the Bill of Rights does not shelter gravitas alone. Indeed, it is those "trivial" yet fundamental
freedoms — which the people reflexively exercise any day without the impairing awareness
of their constitutional consequence — that accurately reflect the degree of liberty enjoyed by
the people. Liberty, as integrally incorporated as a fundamental right in the Constitution, is
not a Ten Commandments-style enumeration of what may or what may not be done; but
rather an atmosphere of freedom where the people do not feel labored under a Big Brother
presence as they interact with each other, their society and nature, in a manner innately
understood by them as inherent, without doing harm or injury to others.
D.
The rights at stake herein fall within the same fundamental rights to liberty which
we upheld in City of Manila v. Hon. Laguio, Jr. We expounded on that most primordial of
rights, thus:
Liberty as guaranteed by the Constitution was defined by Justice Malcolm
to include "the right to exist and the right to be free from arbitrary restraint
or servitude. The term cannot be dwarfed into mere freedom from physical
restraint of the person of the citizen, but is deemed to embrace the right of
man to enjoy the faculties with which he has been endowed by his Creator,
subject only to such restraint as are necessary for the common welfare."
[ 65 ] In accordance with this case, the rights of the citizen to be free to use
his faculties in all lawful ways; to live and work where he will; to earn his
livelihood by any lawful calling; and to pursue any avocation are all deemed
embraced in the concept of liberty. [ 66 ]
The U.S. Supreme Court in the case of Roth v. Board of Regents, sought
to clarify the meaning of "liberty". It said:
While the Court has not attempted to define with exactness the
liberty . . . guaranteed [by the Fifth and Fourteenth
Amendments], the term denotes not merely freedom from bodily
restraint but also the right of the individual to contract, to engage
in any of the common occupations of life, to acquire useful
knowledge, to marry, establish a home and bring up children, to
worship God according to the dictates of his own conscience,
and generally to enjoy those privileges long recognized . . . as
essential to the orderly pursuit of happiness by free men. In a
Constitution for a free people, there can be no doubt that the
meaning of "liberty" must be broad indeed. 67[Citations
omitted] DHSaCA
It cannot be denied that the primary animus behind the ordinance is the curtailment
of sexual behavior. The City asserts before this Court that the subject establishments "have
gained notoriety as venue of 'prostitution, adultery and fornications' in Manila since they
provide the necessary atmosphere for clandestine entry, presence and exit and thus became
the 'ideal haven for prostitutes and thrill-seekers'". 68 Whether or not this depiction of a mise-
en-scene of vice is accurate, it cannot be denied that legitimate sexual behavior among
consenting married or consenting single adults which is constitutionally protected 69 will be
curtailed as well, as it was in the City of Manila case. Our holding therein retains significance
for our purposes:
The concept of liberty compels respect for the individual whose claim to
privacy and interference demands respect. As the case of Morfe v.
Mutuc, borrowing the words of Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to unity.
His separateness, his isolation, are indefeasible; indeed, they
are so fundamental that they are the basis on which his civic
obligations are built. He cannot abandon the consequences of
his isolation, which are, broadly speaking, that his experience is
private, and the will built out of that experience personal to
himself. If he surrenders his will to others, he surrenders himself.
If his will is set by the will of others, he ceases to be a master of
himself. I cannot believe that a man no longer a master of himself
is in any real sense free.
Indeed, the right to privacy as a constitutional right was recognized
in Morfe, the invasion of which should be justified by a compelling state
interest. Morfe accorded recognition to the right to privacy independently
of its identification with liberty; in itself it is fully deserving of constitutional
protection. Governmental powers should stop short of certain intrusions
into the personal life of the citizen. 70 SDIaHE
We cannot discount other legitimate activities which the Ordinance would proscribe
or impair. There are very legitimate uses for a wash rate or renting the room out for more
than twice a day. Entire families are known to choose to pass the time in a motel or hotel
whilst the power is momentarily out in their homes. In transit passengers who wish to wash
up and rest between trips have a legitimate purpose for abbreviated stays in motels or hotels.
Indeed any person or groups of persons in need of comfortable private spaces for a span of
a few hours with purposes other than having sex or using illegal drugs can legitimately look
to staying in a motel or hotel as a convenient alternative.
 equates wash rates and renting out a room more than twice a day with immorality without
accommodating innocuous intentions.
E.
The promotion of public welfare and a sense of morality among citizens deserves
That the Ordinance prevents the lawful uses of a wash rate depriving patrons of a the full endorsement of the judiciary provided that such measures do not trample rights this
product and the petitioners of lucrative business ties in with another constitutional requisite Court is sworn to protect. 77 The notion that the promotion of public morality is a function of
for the legitimacy of the Ordinance as a police power measure. It must appear that the the State is as old as Aristotle. 78 The advancement of moral relativism as a school of
interests of the public generally, as distinguished from those of a particular class, require an philosophy does not de-legitimize the role of morality in law, even if it may foster wider debate
interference with private rights and the means must be reasonably necessary for the on which particular behavior to penalize. It is conceivable that a society with relatively little
accomplishment of the purpose and not unduly oppressive of private rights. 71 It must also shared morality among its citizens could be functional so long as the pursuit of sharply variant
be evident that no other alternative for the accomplishment of the purpose less intrusive of moral perspectives yields an adequate accommodation of different interests. 79
private rights can work. More importantly, a reasonable relation must exist between the
purposes of the measure and the means employed for its accomplishment, for even under To be candid about it, the oft-quoted American maxim that "you cannot legislate
the guise of protecting the public interest, personal rights and those pertaining to private morality" is ultimately illegitimate as a matter of law, since as explained by Calabresi, that
property will not be permitted to be arbitrarily invaded. 72 phrase is more accurately interpreted as meaning that efforts to legislate morality will fail if
they are widely at variance with public attitudes about right and wrong. 80 Our penal laws,
Lacking a concurrence of these requisites, the police measure shall be struck down for one, are founded on age-old moral traditions, and as long as there are widely accepted
as an arbitrary intrusion into private rights. As held inMorfe v. Mutuc, the exercise of police distinctions between right and wrong, they will remain so oriented. EcHIDT
power is subject to judicial review when life, liberty or property is affected. 73 However, this
is not in any way meant to take it away from the vastness of State police power whose Yet the continuing progression of the human story has seen not only the
exercise enjoys the presumption of validity. 74 acceptance of the right-wrong distinction, but also the advent of fundamental liberties as the
key to the enjoyment of life to the fullest. Our democracy is distinguished from non-free
Similar to the Comelec resolution requiring newspapers to donate advertising societies not with any more extensive elaboration on our part of what is moral and immoral,
space to candidates, this Ordinance is a blunt and heavy instrument. 75 The Ordinance but from our recognition that the individual liberty to make the choices in our lives is innate,
makes no distinction between places frequented by patrons engaged in illicit activities and and protected by the State. Independent and fair-minded judges themselves are under a
patrons engaged in legitimate actions. Thus it prevents legitimate use of places where illicit moral duty to uphold the Constitution as the embodiment of the rule of law, by reason of their
activities are rare or even unheard of. A plain reading of section 3 of the Ordinance shows it expression of consent to do so when they take the oath of office, and because they are
makes no classification of places of lodging, thus deems them all susceptible to illicit entrusted by the people to uphold the law. 81
patronage and subjects them without exception to the unjustified prohibition.
Even as the implementation of moral norms remains an indispensable complement
The Court has professed its deep sentiment and tenderness of the Ermita-Malate to governance, that prerogative is hardly absolute, especially in the face of the norms of due
area, its longtime home, 76 and it is skeptical of those who wish to depict our capital city — process of liberty. And while the tension may often be left to the courts to relieve, it is possible
the Pearl of the Orient — as a modern-day Sodom or Gomorrah for the Third World set. for the government to avoid the constitutional conflict by employing more judicious, less
Those still steeped in Nick Joaquin-dreams of the grandeur of Old Manila will have to accept drastic means to promote morality.
that Manila like all evolving big cities, will have its problems. Urban decay is a fact of mega
cities such as Manila, and vice is a common problem confronted by the modern metropolis WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals is
wherever in the world. The solution to such perceived decay is not to prevent legitimate REVERSED, and the Decision of the Regional Trial Court of Manila, Branch 9, is
businesses from offering a legitimate product. Rather, cities revive themselves by offering REINSTATED. Ordinance No. 7774 is hereby declared UNCONSTITUTIONAL. No
incentives for new businesses to sprout up thus attracting the dynamism of individuals that pronouncement as to costs.
would bring a new grandeur to Manila. IDCcEa
SO ORDERED.
The behavior which the Ordinance seeks to curtail is in fact already prohibited and
||| (White Light Corp. v. City of Manila, G.R. No. 122846, [January 20, 2009], 596 PHIL 444-472)
could in fact be diminished simply by applying existing laws. Less intrusive measures such
as curbing the proliferation of prostitutes and drug dealers through active police work would
be more effective in easing the situation. So would the strict enforcement of existing laws and
regulations penalizing prostitution and drug use. These measures would have minimal
intrusion on the businesses of the petitioners and other legitimate merchants. Further, it is
apparent that the Ordinance can easily be circumvented by merely paying the whole day rate
without any hindrance to those engaged in illicit activities. Moreover, drug dealers and
prostitutes can in fact collect "wash rates" from their clientele by charging their customers a
portion of the rent for motel rooms and even apartments.
IV.
We reiterate that individual rights may be adversely affected only to the extent that
may fairly be required by the legitimate demands of public interest or public welfare. The
State is a leviathan that must be restrained from needlessly intruding into the lives of its
citizens. However wellintentioned the Ordinance may be, it is in effect an arbitrary and
whimsical intrusion into the rights of the establishments as well as their patrons. The
Ordinance needlessly restrains the operation of the businesses of the petitioners as well as
restricting the rights of their patrons without sufficient justification. The Ordinance rashly