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EN BANC

G.R. No. L-23145 November 29, 1968

TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased.


RENATO D. TAYAG, ancillary administrator-appellee,
vs. BENGUET CONSOLIDATED, INC., oppositor-appellant.

Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.


Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-appellant.

FERNANDO, J.:

Confronted by an obstinate and adamant refusal of the domiciliary


administrator, the County Trust Company of New York, United
States of America, of the estate of the deceased Idonah Slade
Perkins, who died in New York City on March 27, 1960, to surrender
to the ancillary administrator in the Philippines the stock certificates
owned by her in a Philippine corporation, Benguet Consolidated,
Inc., to satisfy the legitimate claims of local creditors, the lower
court, then presided by the Honorable Arsenio Santos, now retired,
issued on May 18, 1964, an order of this tenor: "After considering
the motion of the ancillary administrator, dated February 11, 1964,
as well as the opposition filed by the Benguet Consolidated, Inc.,
the Court hereby (1) considers as lost for all purposes in connection
with the administration and liquidation of the Philippine estate of
Idonah Slade Perkins the stock certificates covering the 33,002
shares of stock standing in her name in the books of the Benguet
Consolidated, Inc., (2) orders said certificates cancelled, and (3)
directs said corporation to issue new certificates in lieu thereof, the
same to be delivered by said corporation to either the incumbent
ancillary administrator or to the Probate Division of this Court."1chanrobles vi rtua l law lib ra ry

From such an order, an appeal was taken to this Court not by the
domiciliary administrator, the County Trust Company of New York,
but by the Philippine corporation, the Benguet Consolidated, Inc.
The appeal cannot possibly prosper. The challenged order
represents a response and expresses a policy, to paraphrase
Frankfurter, arising out of a specific problem, addressed to the
attainment of specific ends by the use of specific remedies, with full
and ample support from legal doctrines of weight and
significance.
chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

The facts will explain why. As set forth in the brief of appellant
Benguet Consolidated, Inc., Idonah Slade Perkins, who died on
March 27, 1960 in New York City, left among others, two stock
certificates covering 33,002 shares of appellant, the certificates
being in the possession of the County Trust Company of New York,
which as noted, is the domiciliary administrator of the estate of the
deceased.2 Then came this portion of the appellant's brief: "On
August 12, 1960, Prospero Sanidad instituted ancillary
administration proceedings in the Court of First Instance of Manila;
Lazaro A. Marquez was appointed ancillary administrator, and on
January 22, 1963, he was substituted by the appellee Renato D.
Tayag. A dispute arose between the domiciary administrator in New
York and the ancillary administrator in the Philippines as to which of
them was entitled to the possession of the stock certificates in
question. On January 27, 1964, the Court of First Instance of Manila
ordered the domiciliary administrator, County Trust Company, to
"produce and deposit" them with the ancillary administrator or with
the Clerk of Court. The domiciliary administrator did not comply
with the order, and on February 11, 1964, the ancillary
administrator petitioned the court to "issue an order declaring the
certificate or certificates of stocks covering the 33,002 shares issued
in the name of Idonah Slade Perkins by Benguet Consolidated, Inc.,
be declared [or] considered as lost."3 chanro bles vi rt ual law li bra ry

It is to be noted further that appellant Benguet Consolidated, Inc.


admits that "it is immaterial" as far as it is concerned as to "who is
entitled to the possession of the stock certificates in question;
appellant opposed the petition of the ancillary administrator because
the said stock certificates are in existence, they are today in the
possession of the domiciliary administrator, the County Trust
Company, in New York, U.S.A...."4 chanrobles vi rt ual law lib rary

It is its view, therefore, that under the circumstances, the stock


certificates cannot be declared or considered as lost. Moreover, it
would allege that there was a failure to observe certain
requirements of its by-laws before new stock certificates could be
issued. Hence, its appeal. chanrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

As was made clear at the outset of this opinion, the appeal lacks
merit. The challenged order constitutes an emphatic affirmation of
judicial authority sought to be emasculated by the wilful conduct of
the domiciliary administrator in refusing to accord obedience to a
court decree. How, then, can this order be stigmatized as illegal? chan robles v irt ual law li bra ry

As is true of many problems confronting the judiciary, such a


response was called for by the realities of the situation. What
cannot be ignored is that conduct bordering on wilful defiance, if it
had not actually reached it, cannot without undue loss of judicial
prestige, be condoned or tolerated. For the law is not so lacking in
flexibility and resourcefulness as to preclude such a solution, the
more so as deeper reflection would make clear its being buttressed
by indisputable principles and supported by the strongest policy
considerations. chanroblesvi rtualaw lib raryc han robles v i rtual law lib rary

It can truly be said then that the result arrived at upheld and
vindicated the honor of the judiciary no less than that of the
country. Through this challenged order, there is thus dispelled the
atmosphere of contingent frustration brought about by the
persistence of the domiciliary administrator to hold on to the stock
certificates after it had, as admitted, voluntarily submitted itself to
the jurisdiction of the lower court by entering its appearance
through counsel on June 27, 1963, and filing a petition for relief
from a previous order of March 15, 1963. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

Thus did the lower court, in the order now on appeal, impart vitality
and effectiveness to what was decreed. For without it, what it had
been decided would be set at naught and nullified. Unless such a
blatant disregard by the domiciliary administrator, with residence
abroad, of what was previously ordained by a court order could be
thus remedied, it would have entailed, insofar as this matter was
concerned, not a partial but a well-nigh complete paralysis of
judicial authority. chanroblesvi rtualaw lib raryc han robles vi rt ual law li bra ry

1. Appellant Benguet Consolidated, Inc. did not dispute the power of


the appellee ancillary administrator to gain control and possession
of all assets of the decedent within the jurisdiction of the
Philippines. Nor could it. Such a power is inherent in his duty to
settle her estate and satisfy the claims of local creditors.5 As Justice
Tuason speaking for this Court made clear, it is a "general rule
universally recognized" that administration, whether principal or
ancillary, certainly "extends to the assets of a decedent found within
the state or country where it was granted," the corollary being "that
an administrator appointed in one state or country has no power
over property in another state or country."6 chanroble s virtual law l ibra ry

It is to be noted that the scope of the power of the ancillary


administrator was, in an earlier case, set forth by Justice Malcolm.
Thus: "It is often necessary to have more than one administration
of an estate. When a person dies intestate owning property in the
country of his domicile as well as in a foreign country,
administration is had in both countries. That which is granted in the
jurisdiction of decedent's last domicile is termed the principal
administration, while any other administration is termed the
ancillary administration. The reason for the latter is because a grant
of administration does not ex proprio vigore have any effect beyond
the limits of the country in which it is granted. Hence, an
administrator appointed in a foreign state has no authority in the
[Philippines]. The ancillary administration is proper, whenever a
person dies, leaving in a country other than that of his last domicile,
property to be administered in the nature of assets of the deceased
liable for his individual debts or to be distributed among his heirs."7
virtua l law lib rary
chanrobles

It would follow then that the authority of the probate court to


require that ancillary administrator's right to "the stock certificates
covering the 33,002 shares ... standing in her name in the books of
[appellant] Benguet Consolidated, Inc...." be respected is equally
beyond question. For appellant is a Philippine corporation owing full
allegiance and subject to the unrestricted jurisdiction of local courts.
Its shares of stock cannot therefore be considered in any wise as
immune from lawful court orders. chanroblesv irtualawli bra ry chanrobles vi rt ual law li bra ry

Our holding in Wells Fargo Bank and Union v. Collector of Internal


Revenue8 finds application. "In the instant case, the actual situs of
the shares of stock is in the Philippines, the corporation being
domiciled [here]." To the force of the above undeniable proposition,
not even appellant is insensible. It does not dispute it. Nor could it
successfully do so even if it were so minded. chanroblesv irtualawl ibra rycha nrob les vi rtua l law lib rary

2. In the face of such incontrovertible doctrines that argue in a


rather conclusive fashion for the legality of the challenged order,
how does appellant, Benguet Consolidated, Inc. propose to carry the
extremely heavy burden of persuasion of precisely demonstrating
the contrary? It would assign as the basic error allegedly committed
by the lower court its "considering as lost the stock certificates
covering 33,002 shares of Benguet belonging to the deceased
Idonah Slade Perkins, ..."9 More specifically, appellant would stress
that the "lower court could not "consider as lost" the stock
certificates in question when, as a matter of fact, his Honor the trial
Judge knew, and does know, and it is admitted by the appellee, that
the said stock certificates are in existence and are today in the
possession of the domiciliary administrator in New York."10 chanro bles vi rtua l law lib ra ry

There may be an element of fiction in the above view of the lower


court. That certainly does not suffice to call for the reversal of the
appealed order. Since there is a refusal, persistently adhered to by
the domiciliary administrator in New York, to deliver the shares of
stocks of appellant corporation owned by the decedent to the
ancillary administrator in the Philippines, there was nothing
unreasonable or arbitrary in considering them as lost and requiring
the appellant to issue new certificates in lieu thereof. Thereby, the
task incumbent under the law on the ancillary administrator could
be discharged and his responsibility fulfilled.
c hanro blesvi rt ualawlib ra rychan rob les vi rtual law lib rary

Any other view would result in the compliance to a valid judicial


order being made to depend on the uncontrolled discretion of the
party or entity, in this case domiciled abroad, which thus far has
shown the utmost persistence in refusing to yield obedience.
Certainly, appellant would not be heard to contend in all seriousness
that a judicial decree could be treated as a mere scrap of paper, the
court issuing it being powerless to remedy its flagrant disregard.
libra ry
chanroble svirtualawl ibra rycha nrob les vi rtua l law

It may be admitted of course that such alleged loss as found by the


lower court did not correspond exactly with the facts. To be more
blunt, the quality of truth may be lacking in such a conclusion
arrived at. It is to be remembered however, again to borrow from
Frankfurter, "that fictions which the law may rely upon in the
pursuit of legitimate ends have played an important part in its
development."11 chanrobles v irt ual law libra ry

Speaking of the common law in its earlier period, Cardozo could


state fictions "were devices to advance the ends of justice, [even if]
clumsy and at times offensive."12 Some of them have persisted
even to the present, that eminent jurist, noting "the quasi contract,
the adopted child, the constructive trust, all of flourishing vitality, to
attest the empire of "as if" today."13 He likewise noted "a class of
fictions of another order, the fiction which is a working tool of
thought, but which at times hides itself from view till reflection and
analysis have brought it to the light."14 chanrob les vi rtual law lib rary

What cannot be disputed, therefore, is the at times indispensable


role that fictions as such played in the law. There should be then on
the part of the appellant a further refinement in the catholicity of its
condemnation of such judicial technique. If ever an occasion did call
for the employment of a legal fiction to put an end to the anomalous
situation of a valid judicial order being disregarded with apparent
impunity, this is it. What is thus most obvious is that this particular
alleged error does not carry persuasion. chanroble svi rtualaw lib raryc hanrobles vi rt ual law li bra ry

3. Appellant Benguet Consolidated, Inc. would seek to bolster the


above contention by its invoking one of the provisions of its by-laws
which would set forth the procedure to be followed in case of a lost,
stolen or destroyed stock certificate; it would stress that in the
event of a contest or the pendency of an action regarding ownership
of such certificate or certificates of stock allegedly lost, stolen or
destroyed, the issuance of a new certificate or certificates would
await the "final decision by [a] court regarding the ownership
[thereof]."15chanro bles vi rtua l law lib ra ry

Such reliance is misplaced. In the first place, there is no such


occasion to apply such by-law. It is admitted that the foreign
domiciliary administrator did not appeal from the order now in
question. Moreover, there is likewise the express admission of
appellant that as far as it is concerned, "it is immaterial ... who is
entitled to the possession of the stock certificates ..." Even if such
were not the case, it would be a legal absurdity to impart to such a
provision conclusiveness and finality. Assuming that a contrariety
exists between the above by-law and the command of a court
decree, the latter is to be followed. chanro blesvi rtualawlib ra rychan roble s virtual law lib rary

It is understandable, as Cardozo pointed out, that the Constitution


overrides a statute, to which, however, the judiciary must yield
deference, when appropriately invoked and deemed applicable. It
would be most highly unorthodox, however, if a corporate by-law
would be accorded such a high estate in the jural order that a court
must not only take note of it but yield to its alleged controlling
force.chanroble svirtualawl ibra ryc hanro bles vi rt ual law li bra ry

The fear of appellant of a contingent liability with which it could be


saddled unless the appealed order be set aside for its inconsistency
with one of its by-laws does not impress us. Its obedience to a
lawful court order certainly constitutes a valid defense, assuming
that such apprehension of a possible court action against it could
possibly materialize. Thus far, nothing in the circumstances as they
have developed gives substance to such a fear. Gossamer
possibilities of a future prejudice to appellant do not suffice to nullify
the lawful exercise of judicial authority. chanrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

4. What is more the view adopted by appellant Benguet


Consolidated, Inc. is fraught with implications at war with the basic
postulates of corporate theory. chanroblesv irt ualawli bra rycha nrob les vi rtua l law lib rary

We start with the undeniable premise that, "a corporation is an


artificial being created by operation of law...."16 It owes its life to
the state, its birth being purely dependent on its will. As Berle so
aptly stated: "Classically, a corporation was conceived as an
artificial person, owing its existence through creation by a sovereign
power."17 As a matter of fact, the statutory language employed
owes much to Chief Justice Marshall, who in the Dartmouth College
decision defined a corporation precisely as "an artificial being,
invisible, intangible, and existing only in contemplation of law."18 chan robles v irt ual law l ibra ry

The well-known authority Fletcher could summarize the matter


thus: "A corporation is not in fact and in reality a person, but the
law treats it as though it were a person by process of fiction, or by
regarding it as an artificial person distinct and separate from its
individual stockholders.... It owes its existence to law. It is an
artificial person created by law for certain specific purposes, the
extent of whose existence, powers and liberties is fixed by its
charter."19 Dean Pound's terse summary, a juristic person, resulting
from an association of human beings granted legal personality by
the state, puts the matter neatly.20 chanrobles vi rt ual law li bra ry

There is thus a rejection of Gierke's genossenchaft theory, the basic


theme of which to quote from Friedmann, "is the reality of the
group as a social and legal entity, independent of state recognition
and concession."21 A corporation as known to Philippine
jurisprudence is a creature without any existence until it has
received the imprimatur of the state according to law. It is logically
inconceivable therefore that it will have rights and privileges of a
higher priority than that of its creator. More than that, it cannot
legitimately refuse to yield obedience to acts of its state organs,
certainly not excluding the judiciary, whenever called upon to do
so.chanroblesvi rtua lawlib rary chan roble s virtual law lib rary

As a matter of fact, a corporation once it comes into being, following


American law still of persuasive authority in our jurisdiction, comes
more often within the ken of the judiciary than the other two
coordinate branches. It institutes the appropriate court action to
enforce its right. Correlatively, it is not immune from judicial control
in those instances, where a duty under the law as ascertained in an
appropriate legal proceeding is cast upon it. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

To assert that it can choose which court order to follow and which to
disregard is to confer upon it not autonomy which may be conceded
but license which cannot be tolerated. It is to argue that it may,
when so minded, overrule the state, the source of its very
existence; it is to contend that what any of its governmental organs
may lawfully require could be ignored at will. So extravagant a
claim cannot possibly merit approval. chan roble svirtualawl ibra ryc hanro bles vi rtu al law li bra ry

5. One last point. In Viloria v. Administrator of Veterans Affairs,22 it


was shown that in a guardianship proceedings then pending in a
lower court, the United States Veterans Administration filed a
motion for the refund of a certain sum of money paid to the minor
under guardianship, alleging that the lower court had previously
granted its petition to consider the deceased father as not entitled
to guerilla benefits according to a determination arrived at by its
main office in the United States. The motion was denied. In seeking
a reconsideration of such order, the Administrator relied on an
American federal statute making his decisions "final and conclusive
on all questions of law or fact" precluding any other American
official to examine the matter anew, "except a judge or judges of
the United States court."23 Reconsideration was denied, and the
Administrator appealed. chan rob lesvi rtualaw lib raryc han robles v irt ual law li bra ry

In an opinion by Justice J.B.L. Reyes, we sustained the lower court.


Thus: "We are of the opinion that the appeal should be rejected.
The provisions of the U.S. Code, invoked by the appellant, make the
decisions of the U.S. Veterans' Administrator final and conclusive
when made on claims property submitted to him for resolution; but
they are not applicable to the present case, where the Administrator
is not acting as a judge but as a litigant. There is a great difference
between actions against the Administrator (which must be filed
strictly in accordance with the conditions that are imposed by the
Veterans' Act, including the exclusive review by United States
courts), and those actions where the Veterans' Administrator seeks
a remedy from our courts and submits to their jurisdiction by filing
actions therein. Our attention has not been called to any law or
treaty that would make the findings of the Veterans' Administrator,
in actions where he is a party, conclusive on our courts. That, in
effect, would deprive our tribunals of judicial discretion and render
them mere subordinate instrumentalities of the Veterans'
Administrator."chanrobles v irt ual law l ibra ry

It is bad enough as the Viloria decision made patent for our


judiciary to accept as final and conclusive, determinations made by
foreign governmental agencies. It is infinitely worse if through the
absence of any coercive power by our courts over juridical persons
within our jurisdiction, the force and effectivity of their orders could
be made to depend on the whim or caprice of alien entities. It is
difficult to imagine of a situation more offensive to the dignity of the
bench or the honor of the country. chanroblesvi rtualaw lib raryc han robles vi rt ual law li bra ry
Yet that would be the effect, even if unintended, of the proposition
to which appellant Benguet Consolidated seems to be firmly
committed as shown by its failure to accept the validity of the order
complained of; it seeks its reversal. Certainly we must at all pains
see to it that it does not succeed. The deplorable consequences
attendant on appellant prevailing attest to the necessity of negative
response from us. That is what appellant will get. chan roblesv irtualawli bra rycha nrob le s virt ual law li bra ry

That is all then that this case presents. It is obvious why the appeal
cannot succeed. It is always easy to conjure extreme and even
oppressive possibilities. That is not decisive. It does not settle the
issue. What carries weight and conviction is the result arrived at,
the just solution obtained, grounded in the soundest of legal
doctrines and distinguished by its correspondence with what a sense
of realism requires. For through the appealed order, the imperative
requirement of justice according to law is satisfied and national
dignity and honor maintained. chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

WHEREFORE, the appealed order of the Honorable Arsenio Santos,


the Judge of the Court of First Instance, dated May 18, 1964, is
affirmed. With costs against oppositor-appelant Benguet
Consolidated, Inc. chanro blesvi rt ualawlib ra rychan roble s virtual law lib rary

Makalintal, Zaldivar and Capistrano, JJ., concur.


Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez and Castro,
JJ., concur in the result.

Today is Thursday, August 09, 2018

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. L-7922 February 22, 1957


RECREATION AND AMUSEMENT ASSOCIATION OF THE PHILIPPINES, plaintiff-appellant,
vs.
THE CITY OF MANILA, THE MAYOR OF MANILA, THE CITY TREASURER OF MANILA, and THE CHIEF OF PO
MANILA, defendants-appellees.

Leandro H. Fernandez, Jr. for appellant.


City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees.

FELIX, J.:

On March 30, 1954, the Recreation and Amusement Association of the Philippines, Inc., allegedly a non-stock corpor
organized and existing under the laws of the Philippines, whose 35 members are licensed owner and operators in the
Manila, of Five-Ball-Flipper-Action-Pinball machines (also known as slot machines), filed a complaint in the Court of F
Instance of said City praying that a preliminary injunction be issued to restrain the City Mayor and the City Treasurer
enforcing Ordinance No. 3628 passed by the Municipal Board of Manila on March 19, 1954, and approved by the City
the following day, which reads as follows:

ORDINANCE NO. 3628.

AN ORDINANCE AMENDING SECTIONS SEVEN HUNDRED SEVENTY THREE AND SEVEN HUN
SEVENTY FOUR ORDINANCE NUMBERED ONE THOUSAND SIX HUNDRED KNOWN AS "THE R
ORDINANCES OF THE CITY OF MANILA", AS LASTLY AMENDED BY HUNDRED FORTY SEVEN

Be it ordained by the Municipal Board of the City of Manila, that:

SECTION 1. Sections seven hundred seventy-three and seven hundred seventy-four of Ordinance Nu
One thousand six hundred, known as "The Revised Ordinances of the City of Manila, as lastly amend
Ordinance Numbered Three thousand three hundred forty-seven, are hereby amended to read as foll

SEC. 773. Licenses. — No person, entity or corporation shall install or cause to be installed for the us
public for compensation any mechanical contrivance or automatic apparatus which functions through
introduction of money not otherwise prohibited by law of weights and measure and not a gambling de
purposes of amusement or of confronting the weight of persons or things, or printing letters or numbe
displaying features inside the apparatus or reproducing recorded music including other kinds of mach
apparatus without having first obtained a license therefor from the City Treasurer. Such license must
on the apparatus concerned, Provided, that the operation or maintenance of pinball machines, not oth
failing under the category of gambling device, shall not be allowed within a radius of two hundred (200
from any church, hospital, institution of learning public market, plaza, and government buildings.

SEC. 774. Fees. — There shall be paid for every license granted for the installation and use of an app
provided in this chapter, an annual fee of P300 which is payable in advance: Provided, that person-co
weighing or scale machines shall pay only an annual fee of P12, payable in advance.

SEC. 2. This Ordinance shall take effect on its approval.


Enacted, March 19, 1954.
Approved, March 20, 1954.

It is further prayed in the complaint that the City Mayor and the Treasurer be compelled to issue permits and licenses
members of the said corporation upon compliance with the provisions of the ordinance (No. 3347) enforced before th
of Ordinance No. 3628; that after hearing, said ordinance he declared null and void, the writ of preliminary injunction
permanent, and that plaintiff be granted such other relief to which it may be entitled under the law.

Acting upon this complaint, the lower court required plaintiff to file, as it did file, a bond in the amount of P2,000 for th
of a writ of preliminary injunction to restrain the defendant City Officials from enforcing the ordinance in question, and
was actually issued on April 1, 1954. Thereupon, Assistant City Fiscal filed on April 14, 1954, a motion to lift the writ o
preliminary injunction issued as well as a motion to dismiss on the ground that plaintiff has no legal capacity to sue an
complaint states no cause of action. Defendants argue that the complaint does not state that plaintiff is the owner of a
machine to be affected by the ordinance in question; on the contrary, it appears from the complaint that the real partie
are the individual members of said organization whose names are not given. Such being the case, plaintiff associatio
in any way adversely affected by the enforcement of the questioned ordinance, from which it follows that the complai
state a cause of action.

A supplement to the Motion to Dismiss and the Motion to lift the Preliminary Injunction was subsequently filed on Apri
wherein defendants' counsel endeavors to substantiate its previous contention by alleging, among others, that the ord
subject of litigation is a valid legislation and within the power of the Municipal Board to enact; that the power of the Bo
regulate slot machines is embodied in the Revised Charter of the City of Manila (section 18-(1) of Republic Act No. 40
regulation of the operation and maintenance of this kind of machine which they alleged to be inimical to the general w
population especially the school children, is a lawful exercise of the police power of the State (section 18-kk), Republ
409); and that as it a discretionary function of the Mayor to deny or issue permits and licenses, he cannot be compell
mandamus to issue the same.

Upon defendants' motion, the hearing of the motion to dismiss was re-set for April 24, 1954, and on that date the Cou
defendants' counsel a period of 5 days from April 26, 1954, to file an answer to plaintiff's opposition to the motions to
to lift the preliminary injunction, and another 5 days to plaintiff's counsel to reply, if necessary.

On May 7, 1954, plaintiff was served with a "Resolucion" dated April 30, 1954, issued by the trial Judge, wherein the
dismissed the complaint and dissolved the injunction issued thereby on the ground that the City Mayor has discretion
issue or refuse the issuance of a license or permit, declaring at the same time that Ordinance No. 3628 is valid and w
power of the Municipal Board to enact. The motion for reconsideration filed by plaintiff having been denied, the case w
to us on appeal and in this instance plaintiff ascribes to the lower Court the commission of the following errors:

1. In motu proprio resolving upon the constitutionality or Ordinance No. 3628 at said stage of the proceeding (before
answer and hearing on the merits), and consequently, in dissolving the writ of preliminary injunction;

2. In finding the Mayor of Manila vested with discretionary powers to grant or refuse to issue municipal licenses and p
that the same cannot be controlled by mandamus; and

3. In finding Ordinance No. 3628 valid and constitutional assuming that it had the power to do so at such stage of the

There is no dispute that the Municipal Board of the City of Manila passed Ordinance No. 3628 limiting the operation a
maintenance of a certain kind of slot machine to areas not within the radius of 200 hundred meters from any church,
institution of learning, public market, plaza and government buildings and that it increased the annual fee from P55 to
payable in advance. It is likewise clear that at the expiration of the period allowed the parties within which to file certa
in connection with defendants' motion to dismiss, the Court issued a "Resolucion" dated April 30, 1954, the dispositiv
which, translated into English, reads as follows:

In view of the foregoing consideration the Court is of the opinion and consequently declares Ordinanc
of the City of Manila valid and that the writ of preliminary injunction issued by this Court shall be disso
costs against plaintiff.
It is to be stated in this connection that defendants did not file in time their answer to plaintiff's opposition to their two
on May 4, 1954, and that is undoubtedly the reason why the Court prepared its Resolution before the lapse of plaintif
reply if necessary" (which was conditioned on defendants' pleading which the latter failed to submit in time), though it
released thereafter, or on May 7, 1956. It is true that the trial Judge, instead of ruling on the motion to dismiss on eith
grounds stated therein, namely, lack of legal capacity to sue and failure to state a cause of action, elected to ignore th
and dismissed the complaint upon its own findings. However, it is to be remembered that it was only the motion to dis
was set for hearing and that section 3, Rule 8 of the Rules of Court provides for the manner in which such kind of mo
resolved:

SEC. 3. Order. — After hearing the Court may deny or grant the motion or allow amendment of plead
defer the hearing and determination of the motion until the trial if the ground alleged therein does not
indubitable.

By arriving at a conclusion upholding the constitutionality of the ordinance and stating the reasons in support of such
the lower court though in effect it passed upon the merits of the case, also assumed the lack of sufficient cause of ac
part of the plaintiff. Moreover, the question relative to the constitutionality of a statute or ordinance is one of law which
need to be supported by evidence.

In the complaint filed with the lower court, plaintiff alleged that it was a non-stock corporation duly organized and exis
accordance with the laws of the Philippines. Subsequent inquires from the Securities and Exchange Commission and
of Commerce disclosed that the Recreation and Amusement Association of the Philippines, Inc., is not registered and
appear in the files of said Offices. Most probably, owners and operators of such pin-ball machines met, put up their s
and thus an association was formed, after which they merely folded their arms and exerted no further effort to effectu
necessary registration that would bestow juridicial personality upon it. The right to be and to act as a corporation is no
or civil right any person; such right as well as the right to enjoy the immunities and privileges resulting from incorpora
constitute a franchise and a corporation, therefore cannot be created except by or under a special authority from the
Tolentino's Commentaries and Jurisprudence on the Commercial Law of the Philippines, p. 734). When there is no le
organization of a corporation, the association of a group of men for business or other endeavors does not absorb the
of the group and merge it into the personality of another separate and independent entity which is not given corporate
mere formation of the group. Such conglomeration of persons is incompetent to act as a corporation, cannot create a
exercise by itself authority in its behalf. (See Fay vs. Noble, 7 Cushing (Mass.) 188.)

Section 1-(c), Rule 8 of the Rules of Court provides for the grounds upon which an action may be dismissed upon mo
defendant and one of them is "that the plaintiff has no legal capacity to sue." The City Fiscal rightly capitalized on this
because as far as the Court was concerned, appellant herein, being an association not organized as a juridicial entity
possess the personality to conduct or maintain an action. The term "lack of legal capacity to sue" means either that th
does not have the necessary qualifications to appear in the case . . . or when he does not have the character or repre
which he claims, as, when he is not a duly appointed executor or administrator of the estate he purports to represent,
plaintiff is not a corporation duly registered in accordance with law. (I Moran's Comments on the Rules of Court, p. 16

It may be argued that under the law plaintiff could be considered as a civil association, but in this case plaintiff-appell
claim to be a civil association but a corporation and as such it has no capacity to sue.

If from the records of the case We shall find, as We do: (1) that plaintiff has no legal capacity to sue; (2) that the comp
no cause of action; and (3) that a proper and adequate interpretation of section 18, paragraph (1) and (kk) of Republi
409, would lead Us to conclude that Ordinance No. 3628 of the City of Manila is valid, would We be justified in annuli
aside the order of the Court dismissing this case, just because it was issued before the filing of defendants' answer a
hearing on the merits but after defendants had submitted their motion to dismiss and argued maintaining the constitu
said ordinance? On the strenght of the foregoing considerations, the answer is obviously in the negative.

Wherefore, the order appealed from is hereby affirmed, with costs against appellant. It is so ordered.
Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion and Endencia, JJ., concur.
Paras, C.J., Bengzon and Padilla, JJ., concur in the result.

Separate Opinions

REYES, J.B.L., J., concurring:

I concur, but it seems to me that the real reason warranting dismissal of the appeal is the fact that plaintiff is not the r
interest (since it does not own the machines in question) and therefore has no cause of action. But I reserve my vote
question of plaintiff's juridicial personality, for the reason that although it has not been duly organized under the Corpo
it may be considered a civil association.

Republic of the Philippines


SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 100866 July 14, 1992

REBECCA BOYER-ROXAS and GUILLERMO ROXAS, petitioners,


vs.
HON. COURT OF APPEALS and HEIRS OF EUGENIA V. ROXAS, INC., respondents.

GUTIERREZ, JR., J.:

This is a petition to review the decision and resolution of the Court of Appeals in CA-G.R. No. 14530
affirming the earlier decision of the Regional Trial Court of Laguna, Branch 37, at Calamba, in the
consolidated RTC Civil Case Nos. 802-84-C and 803-84-C entitled "Heirs of Eugenia V. Roxas, Inc. v.
Rebecca Boyer-Roxas" and Heirs of Eugenia V. Roxas, Inc. v. Guillermo Roxas," the dispositive portion
of which reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered in favor of the plaintiff and
against the defendants, by ordering as it is hereby ordered that:

1) In RTC Civil Case No. 802-84-C: Rebecca Boyer-Roxas and all persons claiming
under her to:

a) Immediately vacate the residential house near the Balugbugan pool located inside the
premises of the Hidden Valley Springs Resort at Limao, Calauan, Laguna;

b) Pay the plaintiff the amount of P300.00 per month from September 10, 1983, for her
occupancy of the residential house until the same is vacated;
c) Remove the unfinished building erected on the land of the plaintiff within ninety (90)
days from receipt of this decision;

d) Pay the plaintiff the amount of P100.00 per month from September 10, 1983, until the
said unfinished building is removed from the land of the plaintiff; and

e) Pay the costs.

2) In RTC Civil Case No. 803-84-C: Guillermo Roxas and all persons claiming under him
to:

a) Immediately vacate the residential house near the tennis court located within the
premises of the Hidden Valley Springs Resort at Limao, Calauan, Laguna;

b) Pay the plaintiff the amount of P300.00 per month from September 10, 1983, for his
occupancy of the said residential house until the same is vacated; and

c) Pay the costs. (Rollo, p. 36)

In two (2) separate complaints for recovery of possession filed with the Regional Trial Court of Laguna
against petitioners Rebecca Boyer-Roxas and Guillermo Roxas respectively, respondent corporation,
Heirs of Eugenia V. Roxas, Inc., prayed for the ejectment of the petitioners from buildings inside the
Hidden Valley Springs Resort located at Limao, Calauan, Laguna allegedly owned by the respondent
corporation.

In the case of petitioner Rebecca Boyer-Roxas (Civil Case No-802-84-C), the respondent corporation
alleged that Rebecca is in possession of two (2) houses, one of which is still under construction, built at
the expense of the respondent corporation; and that her occupancy on the two (2) houses was only upon
the tolerance of the respondent corporation.

In the case of petitioner Guillermo Roxas (Civil Case No. 803-84-C), the respondent corporation alleged
that Guillermo occupies a house which was built at the expense of the former during the time when
Guillermo's father, Eriberto Roxas, was still living and was the general manager of the respondent
corporation; that the house was originally intended as a recreation hall but was converted for the
residential use of Guillermo; and that Guillermo's possession over the house and lot was only upon the
tolerance of the respondent corporation.

In both cases, the respondent corporation alleged that the petitioners never paid rentals for the use of the
buildings and the lots and that they ignored the demand letters for them to vacate the buildings.

In their separate answers, the petitioners traversed the allegations in the complaint by stating that they
are heirs of Eugenia V. Roxas and therefore, co-owners of the Hidden Valley Springs Resort; and as co-
owners of the property, they have the right to stay within its premises.

The cases were consolidated and tried jointly.

At the pre-trial, the parties limited the issues as follows:

1) whether plaintiff is entitled to recover the questioned premises;

2) whether plaintiff is entitled to reasonable rental for occupancy of the premises in


question;
3) whether the defendant is legally authorized to pierce the veil of corporate fiction and
interpose the same as a defense in an accion publiciana;

4) whether the defendants are truly builders in good faith, entitled to occupy the
questioned premises;

5) whether plaintiff is entitled to damages and reasonable compensation for the use of
the questioned premises;

6) whether the defendants are entitled to their counterclaim to recover moral and
exemplary damages as well as attorney's fees in the two cases;

7) whether the presence and occupancy by the defendants on the premises in


questioned (sic) hampers, deters or impairs plaintiff's operation of Hidden Valley Springs
Resort; and

8) whether or not a unilateral and sudden withdrawal of plaintiffs tolerance allowing


defendants' occupancy of the premises in questioned (sic) is unjust enrichment. (Original
Records, 486)

Upon motion of the plaintiff respondent corporation, Presiding Judge Francisco Ma. Guerrero of Branch
34 issued an Order dated April 25, 1986 inhibiting himself from further trying the case. The cases were re-
raffled to Branch 37 presided by Judge Odilon Bautista. Judge Bautista continued the hearing of the
cases.

For failure of the petitioners (defendants below) and their counsel to attend the October 22, 1986 hearing
despite notice, and upon motion of the respondent corporation, the court issued on the same day,
October 22, 1986, an Order considering the cases submitted for decision. At this stage of the
proceedings, the petitioners had not yet presented their evidence while the respondent corporation had
completed the presentation of its evidence.

The evidence of the respondent corporation upon which the lower court based its decision is as follows:

To support the complaints, the plaintiff offered the testimonies of Maria Milagros Roxas
and that of Victoria Roxas Villarta as well as Exhibits "A" to "M-3".

The evidence of the plaintiff established the following: that the plaintiff, Heirs of Eugenia
V Roxas, Incorporated, was incorporated on December 4, 1962 (Exh. "C") with the
primary purpose of engaging in agriculture to develop the properties inherited from
Eugenia V. Roxas and that of y Eufrocino Roxas; that the Articles of Incorporation of the
plaintiff, in 1971, was amended to allow it to engage in the resort business (Exh.
"C-1"); that the incorporators as original members of the board of directors of the plaintiff
were all members of the same family, with Eufrocino Roxas having the biggest share;
that accordingly, the plaintiff put up a resort known as Hidden Valley Springs Resort on a
portion of its land located at Bo. Limao, Calauan, Laguna, and covered by TCT No.
32639 (Exhs. "A" and "A-l"); that improvements were introduced in the resort by the
plaintiff and among them were cottages, houses or buildings, swimming pools, tennis
court, restaurant and open pavilions; that the house near the Balugbugan Pool (Exh. "B-
l") being occupied by Rebecca B. Roxas was originally intended as staff house but later
used as the residence of Eriberto Roxas, deceased husband of the defendant Rebecca
Boyer-Roxas and father of Guillermo Roxas; that this house presently being occupied by
Rebecca B. Roxas was built from corporate funds; that the construction of the unfinished
house (Exh. "B-2") was started by the defendant Rebecca Boyer-Roxas and her husband
Eriberto Roxas; that the third building (Exh. "B-3") presently being occupied by Guillermo
Roxas was originally intended as a recreation hall but later converted as a residential
house; that this house was built also from corporate funds; that the said house occupied
by Guillermo Roxas when it was being built had nipa roofing but was later changed to
galvanized iron sheets; that at the beginning, it had no partition downstairs and the
second floor was an open space; that the conversion from a recreation hall to a
residential house was with the knowledge of Eufrocino Roxas and was not objected to by
any of the Board of Directors of the plaintiff; that most of the materials used in converting
the building into a residential house came from the materials left by Coppola, a film
producer, who filmed the movie "Apocalypse Now"; that Coppola left the materials as part
of his payment for rents of the rooms that he occupied in the resort; that after the said
recreation hall was converted into a residential house, defendant Guillermo Roxas moved
in and occupied the same together with his family sometime in 1977 or 1978; that during
the time Eufrocino Roxas was still alive, Eriberto Roxas was the general manager of the
corporation and there was seldom any board meeting; that Eufrocino Roxas together with
Eriberto Roxas were (sic) the ones who were running the corporation; that during this
time, Eriberto Roxas was the restaurant and wine concessionaire of the resort; that after
the death of Eufrocino Roxas, Eriberto Roxas continued as the general manager until his
death in 1980; that after the death of Eriberto Roxas in 1980, the defendants Rebecca B.
Roxas and Guillermo Roxas, committed acts that impeded the plaintiff's expansion and
normal operation of the resort; that the plaintiff could not even use its own pavilions,
kitchen and other facilities because of the acts of the defendants which led to the filing of
criminal cases in court; that cases were even filed before the Ministry of Tourism, Bureau
of Domestic Trade and the Office of the President by the parties herein; that the
defendants violated the resolution and orders of the Ministry of Tourism dated July 28,
1983, August 3, 1983 and November 26, 1984 (Exhs. "G", "H" and "H-l") which ordered
them or the corporation they represent to desist from and to turn over immediately to the
plaintiff the management and operation of the restaurant and wine outlets of the said
resort (Exh. "G-l"); that the defendants also violated the decision of the Bureau of
Domestic Trade dated October 23, 1983 (Exh. "C"); that on August 27, 1983, because of
the acts of the defendants, the Board of Directors of the plaintiff adopted Resolution No.
83-12 series of 1983 (Exh. "F") authorizing the ejectment of the defendants from the
premises occupied by them; that on September 1, 1983, demand letters were sent to
Rebecca Boyer-Roxas and Guillermo Roxas (Exhs. "D" and "D-1") demanding that they
vacate the respective premises they occupy; and that the dispute between the plaintiff
and the defendants was brought before the barangay level and the same was not settled
(Exhs. "E" and "E-l"). (Original Records, pp. 454-456)

The petitioners appealed the decision to the Court of Appeals. However, as stated earlier, the appellate
court affirmed the lower court's decision. The Petitioners' motion for reconsideration was likewise denied.

Hence, this petition.

In a resolution dated February 5, 1992, we gave due course to the petition.

The petitioners now contend:

I Respondent Court erred when it refused to pierce the veil of corporate fiction over private respondent
and maintain the petitioners in their possession and/or occupancy of the subject premises considering
that petitioners are owners of aliquot part of the properties of private respondent. Besides, private
respondent itself discarded the mantle of corporate fiction by acts and/or omissions of its board of
directors and/or stockholders.

II The respondent Court erred in not holding that petitioners were in fact denied due process or their day
in court brought about by the gross negligence of their former counsel.
III The respondent Court misapplied the law when it ordered petitioner Rebecca Boyer-Roxas to remove
the unfinished building in RTC Case No. 802-84-C, when the trial court opined that she spent her own
funds for the construction thereof. (CA Rollo, pp. 17-18)

Were the petitioners denied due process of law in the lower court?

After the cases were re-raffled to the sala of Presiding Judge Odilon Bautista of Branch 37 the following
events transpired:

On July 3, 1986, the lower court issued an Order setting the hearing of the cases on July 21, 1986.
Petitioner Rebecca V. Roxas received a copy of the Order on July 15, 1986, while petitioner Guillermo
Roxas received his copy on July 18, 1986. Atty. Conrado Manicad, the petitioners' counsel received
another copy of the Order on July 11, 1986. (Original Records, p. 260)

On motion of the respondent corporation's counsel, the lower court issued an Order dated July 15, 1986
cancelling the July 21, 1986 hearing and resetting the hearing to August 11, 1986. (Original records, 262-
263) Three separate copies of the order were sent and received by the petitioners and their counsel.
(Original Records, pp. 268, 269, 271)

A motion to cancel and re-schedule the August 11, 1986 hearing filed by the respondent corporation's
counsel was denied in an Order dated August 8, 1986. Again separate copies of the Order were sent and
received by the petitioners and their counsel. (Original Records, pp. 276-279)

At the hearing held on August 11, 1986, only Atty. Benito P. Fabie, counsel for the respondent
corporation appeared. Neither the petitioners nor their counsel appeared despite notice of hearing. The
lower court then issued an Order on the same date, to wit:

ORDER

When these cases were called for continuation of trial, Atty. Benito P. Fabie appeared
before this Court, however, the defendants and their lawyer despite receipt of the Order
setting the case for hearing today failed to appear. On Motion of Atty. Fabie, further cross
examination of witness Victoria Vallarta is hereby considered as having been waived.

The plaintiff is hereby given twenty (20) days from today within which to submit formal
offer of evidence and defendants are also given ten (10) days from receipt of such formal
offer of evidence to file their objection thereto.

In the meantime, hearing in these cases is set to September 29, 1986 at 10:00 o'clock in
the morning. (Original Records, p. 286)

Copies of the Order were sent and received by the petitioners and their counsel on the following dates —
Rebecca Boyer-Roxas on August 20, 1986, Guillermo Roxas on August 26, 1986, and Atty. Conrado
Manicad on September 19, 1986. (Original Records, pp. 288-290)

On September 1, 1986, the respondent corporation filed its "Formal Offer of Evidence." In an Order dated
September 29, 1986, the lower court issued an Order admitting exhibits "A" to "M-3" submitted by the
respondent corporation in its "Formal Offer of Evidence . . . there being no objection . . ." (Original
Records, p. 418) Copies of this Order were sent and received by the petitioners and their counsel on the
following dates: Rebecca Boyer-Roxas on October 9, 1986; Guillermo Roxas on October 9, 1986 and
Atty. Conrado Manicad on October 4, 1986 (Original Records, pp. 420, 421, 428).
The scheduled hearing on September 29, 1986 did not push through as the petitioners and their counsel
were not present prompting Atty. Benito Fabie, the respondent corporation's counsel to move that the
cases be submitted for decision. The lower court denied the motion and set the cases for hearing on
October 22, 1986. However, in its Order dated September 29, 1986, the court warned that in the event
the petitioners and their counsel failed to appear on the next scheduled hearing, the court shall consider
the cases submitted for decision based on the evidence on record. (Original Records, p. 429, 430 and
431)

Separate copies of this Order were sent and received by the petitioners and their counsel on the following
dates: Rebecca Boyer-Roxas on October 9, 1986, Guillermo Roxas on October 9, 1986; and Atty.
Conrado Manicad on October 1, 1986. (Original Records, pp. 429-430)

Despite notice, the petitioners and their counsel again failed to attend the scheduled October 22, 1986
hearing. Atty. Fabie representing the respondent corporation was present. Hence, in its Order dated
October 22, 1986, on motion of Atty. Fabie and pursuant to the order dated September 29, 1986, the
Court considered the cases submitted for decision. (Original Records, p. 436)

On November 14, 1986, the respondent corporation, filed a "Manifestation", stating that ". . . it is
submitting without further argument its "Opposition to the Motion for Reconsideration" for the
consideration of the Honorable Court in resolving subject incident." (Original Records, p. 442)

On December 16, 1986, the lower court issued an Order, to wit:

ORDER

Considering that the Court up to this date has not received any Motion for
Reconsideration filed by the defendants in the above-entitled cases, the Court cannot act
on the Opposition to Motion for Reconsideration filed by the plaintiff and received by the
Court on November 14, 1986. (Original Records, p. 446)

On January 15, 1987, the lower court rendered the questioned decision in the two (2) cases. (Original
Records, pp. 453-459)

On January 20, 1987, Atty. Conrado Manicad, the petitioners' counsel filed an Ex-Parte Manifestation and
attached thereto, a motion for reconsideration of the October 22, 1986 Order submitting the cases for
decision. He prayed that the Order be set aside and the cases be re-opened for reception of evidence for
the petitioners. He averred that: 1) within the reglementary period he prepared the motion for
reconsideration and among other documents, the draft was sent to his law office thru his messenger; after
signing the final copies, he caused the service of a copy to the respondent corporation's counsel with the
instruction that the copy of the Court be filed; however, there was a miscommunication between his
secretary and messenger in that the secretary mailed the copy for the respondent corporation's counsel
and placed the rest in an envelope for the messenger to file the same in court but the messenger thought
that it was the secretary who would file it; it was only later on when it was discovered that the copy for the
Court has not yet been filed and that such failure to file the motion for reconsideration was due to
excusable neglect and/or accident. The motion for reconsideration contained the following allegations:
that on the date set for hearing (October 22, 1986), he was on his way to Calamba to attend the hearing
but his car suffered transmission breakdown; and that despite efforts to repair said transmission, the car
remained inoperative resulting in his absence at the said hearing. (Original Records, pp. 460-469)

On February 3, 1987, Atty. Manicad filed a motion for reconsideration of the January 15, 1987 decision.
He explained that he had to file the motion because the receiving clerk refused to admit the motion for
reconsideration attached to the ex-parte manifestation because there was no proof of service to the other
party. Included in the motion for reconsideration was a notice of hearing of the motion on February 3,
1987. (Original Records, p. 476-A)
On February 4, 1987, the respondent corporation through its counsel filed a Manifestation and Motion
manifesting that they received the copy of the motion for reconsideration only today (February 4, 1987),
hence they prayed for the postponement of the hearing. (Original Records, pp. 478-479)

On the same day, February 4, 1987, the lower court issued an Order setting the hearing on February 13,
1987 on the ground that it received the motion for reconsideration late. Copies of this Order were sent
separately to the petitioners and their counsel. The records show that Atty. Manicad received his copy on
February 11, 1987. As regards the petitioners, the records reveal that Rebecca Boyer-Roxas did not
receive her copy while as regards Guillermo Roxas, somebody signed for him but did not indicate when
the copy was received. (Original Records, pp. 481-483)

At the scheduled February 13, 1987 hearing, the counsels for the parties were present. However, the
hearing was reset for March 6, 1987 in order to allow the respondent corporation to file its opposition to
the motion for reconsideration. (Order dated February 13, 1987, Original Records, p. 486) Copies of the
Order were sent and received by the petitioners and their counsel on the following dates: Rebecca Boyer-
Roxas on February 23, 1987; Guillermo Roxas on February 23, 1987 and Atty. Manicad on February 19,
1987. (Original Records, pp. 487, 489-490)

The records are not clear as to whether or not the scheduled hearing on March 6, 1987 was held.
Nevertheless, the records reveal that on March 13, 1987, the lower court issued an Order denying the
motion for reconsideration.

The well-settled doctrine is that the client is bound by the mistakes of his lawyer. (Aguila v. Court of First
Instance of Batangas, Branch I, 160 SCRA 352 [1988]; See also Vivero v. Santos, et al., 98 Phil. 500
[1956]; Isaac v. Mendoza, 89 Phil. 279 [1951]; Montes v. Court of First Instance of Tayabas, 48 Phil. 640
[1926]; People v. Manzanilla, 43 Phil. 167 [1922]; United States v. Dungca, 27 Phil. 274 [1914]; and
United States v. Umali, 15 Phil. 33 [1910]) This rule, however, has its exceptions. Thus, in several cases,
we ruled that the party is not bound by the actions of his counsel in case the gross negligence of the
counsel resulted in the client's deprivation of his property without due process of law. In the case
of Legarda v. Court of Appeals (195 SCRA 418 [1991]), we said:

In People's Homesite & Housing Corp. v. Tiongco and Escasa (12 SCRA 471 [1964]),
this Court ruled as follows:

Procedural technicality should not be made a bar to the vindication of a


legitimate grievance. When such technicality deserts from being an aid to
Justice, the courts are justified in excepting from its operation a particular
case. Where there was something fishy and suspicious about the
actuations of the former counsel of petitioners in the case at bar, in that
he did not give any significance at all to the processes of the court, which
has proven prejudicial to the rights of said clients, under a lame and
flimsy explanation that the court's processes just escaped his attention, it
is held that said lawyer deprived his clients of their day in court, thus
entitling said clients to petition for relief from judgment despite the lapse
of the reglementary period for filing said period for filing said petition.

In Escudero v. Judge Dulay (158 SCRA 69 [1988]), this Court, in holding that the
counsel's blunder in procedure is an exception to the rule that the client is bound by the
mistakes of counsel, made the following disquisition:

Petitioners contend, through their new counsel, that the judgment


rendered against them by the respondent court was null and void,
because they were therein deprived of their day in court and divested of
their property without due process of law, through the gross ignorance,
mistake and negligence of their previous counsel. They acknowledge
that, while as a rule, clients are bound by the mistake of their counsel,
the rule should not be applied automatically to their case, as their trial
counsel's blunder in procedure and gross ignorance of existing
jurisprudence changed their cause of action and violated their substantial
rights.

We are impressed with petitioner's contentions.

xxx xxx xxx

While this Court is cognizant of the rule that, generally, a client will suffer
consequences of the negligence, mistake or lack of competence of his
counsel, in the interest of Justice and equity, exceptions may be made to
such rule, in accordance with the facts and circumstances of each case.
Adherence to the general rule would, in the instant case, result in the
outright deprivation of their property through a technicality.

In its questioned decision dated November 19, 1989 the Court of Appeals found, in no
uncertain terms, the negligence of the then counsel for petitioners when he failed to file
the proper motion to dismiss or to draw a compromise agreement if it was true that they
agreed on a settlement of the case; or in simply filing an answer; and that after having
been furnished a copy of the decision by the court he failed to appeal therefrom or to file
a petition for relief from the order declaring petitioners in default. In all these instances
the appellate court found said counsel negligent but his acts were held to bind his client,
petitioners herein, nevertheless.

The Court disagrees and finds that the negligence of counsel in this case appears to be
so gross and inexcusable. This was compounded by the fact, that after petitioner gave
said counsel another chance to make up for his omissions by asking him to file a petition
for annulment of the judgment in the appellate court, again counsel abandoned the case
of petitioner in that after he received a copy of the adverse judgment of the appellate
court, he did not do anything to save the situation or inform his client of the judgment. He
allowed the judgment to lapse and become final. Such reckless and gross negligence
should not be allowed to bind the petitioner. Petitioner was thereby effectively deprived of
her day in court. (at pp. 426-427)

The herein petitioners, however, are not similarly situated as the parties mentioned in the abovecited
cases. We cannot rule that they, too, were victims of the gross negligence of their counsel.

The petitioners are to be blamed for the October 22, 1986 order issued by the lower court submitting the
cases for decision. They received notices of the scheduled hearings and yet they did not do anything.
More specifically, the parties received notice of the Order dated September 29, 1986 with
the warning that if they fail to attend the October 22, 1986 hearing, the cases would be submitted for
decision based on the evidence on record. Earlier, at the scheduled hearing on September 29, 1986, the
counsel for the respondent corporation moved that the cases be submitted for decision for failure of the
petitioners and their counsel to attend despite notice. The lower court denied the motion and gave the
petitioners and their counsel another chance by rescheduling the October 22, 1986 hearing.

Indeed, the petitioners knew all along that their counsel was not attending the scheduled hearings. They
did not take steps to change their counsel or make him attend to their cases until it was too late. On the
contrary, they continued to retain the services of Atty. Manicad knowing fully well his lapses vis-a-vis their
cases. They, therefore, cannot raise the alleged gross negligence of their counsel resulting in their denial
of due process to warrant the reversal of the lower court's decision. In a similar case, Aguila v. Court of
First Instance of Batangas, Branch 1 (supra), we ruled:

In the instant case, the petitioner should have noticed the succession of errors committed
by his counsel and taken appropriate steps for his replacement before it was altogether
too late. He did not. On the contrary, he continued to retain his counsel through the series
of proceedings that all resulted in the rejection of his cause, obviously through such
counsel's "ineptitude" and, let it be added, the clients' forbearance. The petitioner's
reverses should have cautioned him that his lawyer was mishandling his case and moved
him to seek the help of other counsel, which he did in the end but rather tardily.

Now petitioner wants us to nullify all of the antecedent proceedings and recognize his
earlier claims to the disputed property on the justification that his counsel was grossly
inept. Such a reason is hardly plausible as the petitioner's new counsel should know.
Otherwise, all a defeated party would have to do to salvage his case is claim neglect or
mistake on the part of his counsel as a ground for reversing the adverse judgment. There
would be no end to litigation if these were allowed as every shortcoming of counsel could
be the subject of challenge by his client through another counsel who, if he is also found
wanting, would likewise be disowned by the same client through another counsel, and so
on ad infinitum. This would render court proceedings indefinite, tentative and subject to
reopening at any time by the mere subterfuge of replacing counsel. (at pp. 357-358)

We now discuss the merits of the cases.

In the first assignment of error, the petitioners maintain that their possession of the questioned properties
must be respected in view of their ownership of an aliquot portion of all the properties of the respondent
corporation being stockholders thereof. They propose that the veil of corporate fiction be pierced,
considering the circumstances under which the respondent corporation was formed.

Originally, the questioned properties belonged to Eugenia V. Roxas. After her death, the heirs of Eugenia
V. Roxas, among them the petitioners herein, decided to form a corporation — Heirs of Eugenia V.
Roxas, Incorporated (private respondent herein) with the inherited properties as capital of the corporation.
The corporation was incorporated on December 4, 1962 with the primary purpose of engaging in
agriculture to develop the inherited properties. The Articles of Incorporation of the respondent corporation
were amended in 1971 to allow it to engage in the resort business. Accordingly, the corporation put up a
resort known as Hidden Valley Springs Resort where the questioned properties are located.

These facts, however, do not justify the position taken by the petitioners.

The respondent is a bona fide corporation. As such, it has a juridical personality of its own separate from
the members composing it. (Western Agro Industrial Corporation v. Court of Appeals, 188 SCRA 709
[1990]; Tan Boon Bee & Co., Inc. v. Jarencio, 163 SCRA 205 [1988]; Yutivo Sons Hardware Company v.
Court of Tax Appeals, 1 SCRA 160 [1961]; Emilio Cano Enterprises, Inc. v. Court of Industrial Relations,
13 SCRA 290 [1965]) There is no dispute that title over the questioned land where the Hidden Valley
Springs Resort is located is registered in the name of the corporation. The records also show that the
staff house being occupied by petitioner Rebecca Boyer-Roxas and the recreation hall which was later on
converted into a residential house occupied by petitioner Guillermo Roxas are owned by the respondent
corporation. Regarding properties owned by a corporation, we stated in the case of Stockholders of F.
Guanzon and Sons, Inc. v. Register of Deeds of Manila, (6 SCRA 373 [1962]):

xxx xxx xxx

. . . Properties registered in the name of the corporation are owned by it as an entity


separate and distinct from its members. While shares of stock constitute personal
property, they do not represent property of the corporation. The corporation has property
of its own which consists chiefly of real estate (Nelson v. Owen, 113 Ala., 372, 21 So. 75;
Morrow v. Gould,145 Iowa 1, 123 N.W. 743). A share of stock only typifies an aliquot part
of the corporation's property, or the right to share in its proceeds to that extent when
distributed according to law and equity (Hall & Faley v. Alabama Terminal, 173 Ala., 398,
56 So. 235), but its holder is not the owner of any part of the capital of the corporation
(Bradley v. Bauder, 36 Ohio St., 28). Nor is he entitled to the possession of any definite
portion of its property or assets (Gottfried V. Miller, 104 U.S., 521; Jones v. Davis, 35
Ohio St., 474). The stockholder is not a co-owner or tenant in common of the corporate
property (Harton v. Johnston, 166 Ala., 317, 51 So. 992). (at pp. 375-376)

The petitioners point out that their occupancy of the staff house which was later used as the residence of
Eriberto Roxas, husband of petitioner Rebecca Boyer-Roxas and the recreation hall which was converted
into a residential house were with the blessings of Eufrocino Roxas, the deceased husband of Eugenia V.
Roxas, who was the majority and controlling stockholder of the corporation. In his lifetime, Eufrocino
Roxas together with Eriberto Roxas, the husband of petitioner Rebecca Boyer-Roxas, and the father of
petitioner Guillermo Roxas managed the corporation. The Board of Directors did not object to such an
arrangement. The petitioners argue that . . . the authority thus given by Eufrocino Roxas for the
conversion of the recreation hall into a residential house can no longer be questioned by the stockholders
of the private respondent and/or its board of directors for they impliedly but no leas explicitly delegated
such authority to said Eufrocino Roxas. (Rollo, p. 12)

Again, we must emphasize that the respondent corporation has a distinct personality separate from its
members. The corporation transacts its business only through its officers or agents. (Western Agro
Industrial Corporation v. Court of Appeals, supra). Whatever authority these officers or agents may have
is derived from the board of directors or other governing body unless conferred by the charter of the
corporation. An officer's power as an agent of the corporation must be sought from the statute, charter,
the by-laws or in a delegation of authority to such officer, from the acts of the board of directors, formally
expressed or implied from a habit or custom of doing business. (Vicente v. Geraldez, 52 SCRA 210
[1973])

In the present case, the record shows that Eufrocino V. Roxas who then controlled the management of
the corporation, being the majority stockholder, consented to the petitioners' stay within the questioned
properties. Specifically, Eufrocino Roxas gave his consent to the conversion of the recreation hall to a
residential house, now occupied by petitioner Guillermo Roxas. The Board of Directors did not object to
the actions of Eufrocino Roxas. The petitioners were allowed to stay within the questioned properties until
August 27, 1983, when the Board of Directors approved a Resolution ejecting the petitioners, to wit:

R E S O L U T I O N No. 83-12

RESOLVED, That Rebecca B. Roxas and Guillermo Roxas, and all persons claiming
under them, be ejected from their occupancy of the Hidden Valley Springs compound on
which their houses have been constructed and/or are being constructed only on tolerance
of the Corporation and without any contract therefor, in order to give way to the
Corporation's expansion and improvement program and obviate prejudice to the
operation of the Hidden Valley Springs Resort by their continued interference.

RESOLVED, Further that the services of Atty. Benito P. Fabie be engaged and that he be
authorized as he is hereby authorized to effect the ejectment, including the filing of the
corresponding suits, if necessary to do so. (Original Records, p. 327)

We find nothing irregular in the adoption of the Resolution by the Board of Directors. The petitioners' stay
within the questioned properties was merely by tolerance of the respondent corporation in deference to
the wishes of Eufrocino Roxas, who during his lifetime, controlled and managed the corporation.
Eufrocino Roxas' actions could not have bound the corporation forever. The petitioners have not cited any
provision of the corporation by-laws or any resolution or act of the Board of Directors which authorized
Eufrocino Roxas to allow them to stay within the company premises forever. We rule that in the absence
of any existing contract between the petitioners and the respondent corporation, the corporation may
elect to eject the petitioners at any time it wishes for the benefit and interest of the respondent
corporation.

The petitioners' suggestion that the veil of the corporate fiction should be pierced is untenable. The
separate personality of the corporation may be disregarded only when the corporation is used "as a cloak
or cover for fraud or illegality, or to work injustice, or where necessary to achieve equity or when
necessary for the protection of the creditors." (Sulong Bayan, Inc. v. Araneta, Inc., 72 SCRA 347 [1976]
cited in Tan Boon Bee & Co., Inc., v. Jarencio, supra and Western Agro Industrial Corporation v. Court of
Appeals, supra) The circumstances in the present cases do not fall under any of the enumerated
categories.

In the third assignment of error, the petitioners insist that as regards the unfinished building, Rebecca
Boyer-Roxas is a builder in good faith.

The construction of the unfinished building started when Eriberto Roxas, husband of Rebecca Boyer-
Roxas, was still alive and was the general manager of the respondent corporation. The couple used their
own funds to finance the construction of the building. The Board of Directors of the corporation, however,
did not object to the construction. They allowed the construction to continue despite the fact that it was
within the property of the corporation. Under these circumstances, we agree with the petitioners that the
provision of Article 453 of the Civil Code should have been applied by the lower courts.

Article 453 of the Civil Code provides:

If there was bad faith, not only on the part of the person who built, planted or sown on the
land of another but also on the part of the owner of such land, the rights of one and the
other shall be the same as though both had acted in good faith.

In such a case, the provisions of Article 448 of the Civil Code govern the relationship between petitioner
Rebecca-Boyer-Roxas and the respondent corporation, to wit:

Art. 448 — The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting
after payment of the indemnity provided for in articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the buildings or
trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.

WHEREFORE, the present petition is partly GRANTED. The questioned decision of the Court of Appeals
affirming the decision of the Regional Trial Court of Laguna, Branch 37, in RTC Civil Case No. 802-84-C
is MODIFIED in that subparagraphs (c) and (d) of Paragraph 1 of the dispositive portion of the decision
are deleted. In their stead, the petitioner Rebecca Boyer-Roxas and the respondent corporation are
ordered to follow the provisions of Article 448 of the Civil Code as regards the questioned unfinished
building in RTC Civil Case No. 802-84-C. The questioned decision is affirmed in all other respects.

SO ORDERED.

Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.


Republic of the Philippines
SUPREME COURT
Baguio City

THIRD DIVISION

G.R. No. 161838 April 7, 2010

REPUBLIC OF THE PHILIPPINES, represented by DANTE QUINDOZA, in his capacity as Zone


Administrator of the Bataan Economic Zone, Petitioner,
vs.
COALBRINE INTERNATIONAL PHILIPPINES, INC. and SHEILA F. NERI, Respondents.

DECISION

PERALTA, J.:

Assailed in this petition for review on certiorari filed by petitioner is the Decision1 dated January 21,
2004 of the Court of Appeals in CA-G.R. SP No 74667, which affirmed the Order2 dated September
24, 2002 of the Regional Trial Court (RTC) of Balanga, Bataan, in Civil Case No. 548-ML, denying
petitioner's Motion to Dismiss.

The Export Processing Zone Authority (EPZA), predecessor of the Philippine Economic Zone
Authority (PEZA), is the owner of the Bataan Hilltop Hotel and Country Club, located at the Bataan
Export Processing Zone, Mariveles, Bataan. Dante M. Quindoza is the Zone Administrator of the
Bataan Economic Zone.

On August 4, 1994, EPZA, now PEZA, and respondent Coalbrine International Philippines, Inc.
entered into a contract in which the latter would rehabilitate and lease the Bataan Hilltop Hotel, Golf
Course and Clubhouse for twenty-five (25) years, which commenced on January 1, 1994, and
renewable for another twenty-five (25) years at the option of respondent Coalbrine. Respondent
Sheila F. Neri was the Managing Director of the hotel.

On July 11, 1996, the PEZA Board passed Resolution No. 96-231 rescinding the contract to
rehabilitate and lease, on the ground of respondent Coalbrine's repeated violations and non-
performance of its obligations as provided in the contract. Subsequently, PEZA sent respondent
Coalbrine a notice to vacate the premises and to pay its outstanding obligations to it.

On April 3, 1998, respondent Coalbrine filed with the RTC of Manila a Complaint for specific
performance with prayer for the issuance of a temporary restraining order (TRO) and/or writ of
preliminary injunction with damages against PEZA and/or Bataan Economic Zone wherein
respondent Coalbrine sought to declare that PEZA had no valid cause to rescind the contract to
rehabilitate and lease; and to enjoin PEZA from taking over the hotel and country club and from
disconnecting the water and electric services to the hotel. The complaint is pending with Branch 17
of the RTC of Manila.

On April 24, 2002, respondents Coalbrine and Neri filed with the RTC of Balanga, Bataan, a
Complaint for damages with prayer for the issuance of a TRO and/or writ of preliminary
prohibitory/mandatory injunction against Zone Administrator Quindoza, docketed as Civil Case No.
548-ML. Respondent alleged that: in October 2001, Quindoza started to harass the hotel's
operations by causing the excavation of the entire width of a cross-section of the only road leading to
the hotel for the supposed project of putting up a one length steel pipe; that such project had been
stopped, which, consequently, paralyzed the hotel's operations; respondent Neri undertook the
construction of a temporary narrow access ramp in order that the hotel guests and their vehicles
could pass through the wide excavations; Quindoza had also placed a big "ROAD CLOSED" sign
near the hotel, which effectively blocked all access to and from the hotel and created an impression
that the hotel had been closed; in the last week of March 2002, Quindoza cut the pipelines that
supplied water to the hotel to the great inconvenience of respondents and the hotel guests, and,
subsequently, the pipelines were reconnected. Respondents prayed for the payment of damages, for
the issuance of a TRO and a writ of preliminary injunction to enjoin Quindoza from cutting or
disconnecting the reconnected water pipelines to the hotel and from committing further acts of
harassment; and to cause the construction of a reasonable access road at Quindoza's expense.

Administrator Quindoza, through the Solicitor General, filed a Motion to Dismiss3 on the following
grounds:

1. The Honorable Court has no jurisdiction over the instant case;

2. The Honorable Court is an improper venue for the instant case;

3. Plaintiff (respondent Coalbrine) is guilty of forum shopping;

4. With respect to plaintiff (respondent) Neri, the complaint states no cause of action against
defendant;

5. The complaint is fatally defective for being unauthorized.

On September 24, 2002, the RTC issued an Order4 denying petitioner's motion to dismiss.

Administrator Quindoza filed a Motion for Reconsideration, which the RTC denied in its Order5 dated
December 9, 2002.

On January 2, 2003, petitioner Republic of the Philippines, represented by Dante Quindoza, in his
capacity as Zone Administrator of the Bataan Economic Zone, filed with the CA a petition
for certiorari under Rule 65 seeking to annul the RTC Orders, reiterating the grounds raised by
Administrator Quindoza in the RTC.

On January 21, 2004, the CA issued its assailed Decision denying petitioner's petition
for certiorari for lack of merit.

Hence, petitioner is now before us in a petition for review on certiorari raising the lone issue of
respondent Neri's lack of proof of authority to file the complaint in the RTC of Balanga, Bataan,
which was docketed as Civil Case No. 548-ML. 1avvphi1

In their Comment, respondents argue that the Republic of the Philippines was not a party to the civil
case subject of this petition, hence, it has no personality to file the instant petition for review; that the
RTC Order denying the motion to dismiss the complaint was a mere interlocutory order, thus, the
same is not appealable and not a proper subject of a petition for certiorari unless it was shown that
there was a grave abuse of discretion in its issuance; that petitioner had already filed an answer to
the complaint incorporating the grounds stated in their motion to dismiss; and that respondents had
already presented their evidence by way of an opposition to the motion to dismiss and in support of
their application for the issuance of a writ of preliminary mandatory injunction.
In its Reply, petitioner argues that it has the personality to file this petition, since Administrator
Quindoza is being sued for damages for certain acts he performed in an official capacity; that the
denial of petitioner's motion to dismiss was tainted with grave abuse of discretion, which justified the
filing of a petition for certiorari with the CA. The parties filed their respective memoranda as required
under the Resolution dated January 26, 2005.

In its Memorandum, petitioner raises the following arguments, to wit:

THE COMPLAINT IS FATALLY DEFECTIVE FOR BEING UNAUTHORIZED.

PETITIONER REPUBLIC OF THE PHILIPPINES IS THE REAL PARTY-IN-INTEREST IN THE


CASE AT BAR.

RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION IN DENYING


PETITIONER'S MOTION TO DISMISS, NECESSITATING THE FILING OF A PETITION FOR
CERTIORARI UNDER RULE 65 BEFORE THE HONORABLE COURT OF APPEALS.6

Petitioner claims that respondent Neri's signature in the verification and certification against non-
forum shopping attached to the complaint filed by respondents in the RTC was defective, since there
was no proof of her authority to institute the complaint on behalf of the corporation; and that
respondent Neri is not a real party-in-interest.

We agree.

The verification and certification against non-forum shopping reads:

xxxx

That I am the Managing Director of Bataan Hilltop Hotel and one of the plaintiffs in this case.7

Notably, respondent Neri signed the verification/certification as one of the plaintiffs. However, we
find that respondent Neri is not a real party-in- interest. Section 2, Rule 3 of the Rules of Civil
Procedure provides:

SEC. 2. Parties-in interest. – A real party-in-interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be prosecuted or defended in the name of the
real party-in-interest.

And "interest," within the meaning of the rule, means material interest, an interest in issue and to be
affected by the decree, as distinguished from mere interest in the question involved, or a mere
incidental interest.8 Cases construing the real party-in-interest provision can be more easily
understood if it is borne in mind that the true meaning of real party-in-interest may be summarized as
follows: An action shall be prosecuted in the name of the party who, by the substantive law, has the
right sought to be enforced.9

The RTC based its conclusion that respondent Neri had a cause of action against petitioner on the
allegations in the complaint. The CA, however, did not rule on the matter despite the fact that it was
raised in petitioner's petition for certiorari filed before it and merely said that there was no necessity
to discuss such issue after deciding the other grounds raised in the petition.
We find the RTC in error. A reading of the allegations in the complaint shows that the acts
complained of and said to have been committed by petitioner against respondents have solely
affected the hotel's operations where respondent Neri was the hotel's Managing Director and whose
interest in the suit was incidental. Thus, we find that respondent Neri has no cause of action against
petitioner. Consequently, the plaintiff in this case would only be respondent Coalbrine.

A corporation has no power, except those expressly conferred on it by the Corporation Code and
those that are implied or incidental to its existence. In turn, a corporation exercises said powers
through its board of directors and/or its duly authorized officers and agents.10 Thus, it has been
observed that the power of a corporation to sue and be sued in any court is lodged with the board of
directors that exercises its corporate powers. In turn, physical acts of the corporation, like the signing
of documents, can be performed only by natural persons duly authorized for the purpose by
corporate by-laws or by a specific act of the board of directors.11

In this case, respondent Coalbrine is a corporation. However, when respondent Neri filed the
complaint in the RTC, there was no proof that she was authorized to sign the verification and the
certification against non-forum shopping.

The Court has consistently held that the requirement regarding verification of a pleading is formal,
not jurisdictional. Such requirement is simply a condition affecting the form of the pleading, non-
compliance with which does not necessarily render the pleading fatally defective.12 Verification is
simply intended to secure an assurance that the allegations in the pleading are true and correct, and
not the product of the imagination or a matter of speculation, and that the pleading is filed in good
faith. The court may order the correction of the pleading if verification is lacking or act on the
pleading although it is not verified, if the attending circumstances are such that strict compliance with
the rules may be dispensed with in order that the ends of justice may thereby be served.13

On the other hand, the lack of certification against non-forum shopping is generally not curable by
mere amendment of the complaint, but shall be a cause for the dismissal of the case without
prejudice.14 The same rule applies to certifications against non-forum shopping signed by a person
on behalf of a corporation which are unaccompanied by proof that said signatory is authorized to file
the complaint on behalf of the corporation.15

In Philippine Airlines, Inc. v. Flight Attendants and Stewards Association of the Philippines
(FASAP),16 we ruled that only individuals vested with authority by a valid board resolution may sign
the certificate of non-forum shopping on behalf of a corporation. We also required that proof of such
authority must be attached. Failure to provide a certificate of non-forum shopping is sufficient ground
to dismiss the petition. Likewise, the petition is subject to dismissal if a certification was submitted
unaccompanied by proof of signatory's authority.

While there were instances where we have allowed the filing of a certificate against non-forum
shopping by someone on behalf of a corporation without the accompanying proof of authority at the
time of its filing, we did so on the basis of a special circumstance or compelling reason. Moreover,
there was a subsequent compliance by the submission of the proof of authority attesting to the fact
that the person who signed the certification was duly authorized.

In China Banking Corporation v. Mondragon International Philippines, Inc.,17 the CA dismissed the
petition filed by China Bank, since the latter failed to show that its bank manager who signed the
certification against non-forum shopping was authorized to do so. We reversed the CA and said that
the case be decided on the merits despite the failure to attach the required proof of authority, since
the board resolution which was subsequently attached recognized the pre-existing status of the bank
manager as an authorized signatory.
In Abaya Investments Corporation v. Merit Philippines,18 where the complaint before the Metropolitan
Trial Court of Manila was instituted by petitioner's Chairman and President, Ofelia Abaya, who
signed the verification and certification against non-forum shopping without proof of authority to sign
for the corporation, we also relaxed the rule. We did so taking into consideration the merits of the
case and to avoid a re-litigation of the issues and further delay the administration of justice, since the
case had already been decided by the lower courts on the merits. Moreover, Abaya's authority to
sign the certification was ratified by the Board.

In the present case, the RTC, in denying petitioner's motion to dismiss the complaint when the latter
raised respondent Neri's lack of authority to sign the certification, found that respondent Neri testified
that she was the Managing Director of the Bataan Hilltop Hotel which was being leased by
respondent Coalbrine, and that she was authorized by the Corporate Secretary to file the case.
Notably, while the matter of lack of authority was raised by petitioner in its petition for certiorari filed
with the CA, it chose not to tackle the issue after disposing of the other issues raised therein.

We cannot agree with the RTC's reasoning and find the certification signed by respondent Neri to be
defective. The authority of respondent Neri to file the complaint in the RTC had not been proven.
First, the certification against non-forum shopping did not even contain a statement that she was
authorized by the corporate secretary to file the case on behalf of Coalbrine as she claimed. More
importantly, while she testified that she was authorized by the corporate secretary, there was no
showing that there was a valid board resolution authorizing the corporate secretary to file the action,
and to authorize respondent Neri to file the action. In fact, such proof of authority had not been
submitted even belatedly to show subsequent compliance. Thus, there was no reason for the
relaxation of the rule.

As to respondents' claim that petitioner Republic of the Philippines was not a party to the civil case
subject of this petition since Administrator Quindoza was the sole defendant therein and, thus, has
no personality to file this petition, their claim is not persuasive.

Notably, Administrator Quindoza was sued for damages for certain acts that he allegedly committed
while he was the Zone Administrator of the Bataan Export Processing Zone. Therefore, the
complaint is in the nature of suit against the State, and the Republic has the personality to file the
petition.

Anent respondents' claim that the RTC Order denying a motion to dismiss is a mere interlocutory
order, thus, not appealable and may not be a subject of a petition for certiorari filed by the petitioner
before the CA, the same is also not meritorious.

While indeed, the general rule is that the denial of a motion to dismiss cannot be questioned in a
special civil action for certiorari, which is not intended to correct every controversial interlocutory
ruling,19 and that the appropriate recourse is to file an answer and to interpose as defenses the
objections raised in the motion, to proceed to trial, and, in case of an adverse

decision, to elevate the entire case by appeal in due course,20 this rule is not absolute.

Even when appeal is available and is the proper remedy, the Supreme Court has allowed a writ of
certiorari (1) where the appeal does not constitute a speedy and adequate remedy; (2) where the
orders were also issued either in excess of or without jurisdiction or with grave abuse of discretion;
(3) for certain special considerations, as public welfare or public policy; (4) where in criminal actions,
the court rejects rebuttal evidence for the prosecution as, in case of acquittal, there could be no
remedy; (5) where the order is a patent nullity; and (6) where the decision in the certiorari case will
avoid future litigations. 21
In this case, we find that the RTC committed grave abuse of discretion amounting to lack of
jurisdiction when it failed to consider the lack of proof of authority of respondent Neri to file the action
on behalf of the corporation as we have discussed above.

WHEREFORE, the petition for review is GRANTED. The Decision dated January 21, 2004 of the
Court of Appeals in CA-G.R. SP No 74667 is REVERSED and SET ASIDE. The Complaint in Civil
Case No. 548-ML pending in the Regional Trial Court, Branch 4, Balanga, Bataan, is
ordered DISMISSED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 82797 February 27, 1991

GOOD EARTH EMPORIUM INC., and LIM KA PING, petitioners,


vs.
HONORABLE COURT OF APPEALS and ROCES-REYES REALTY INC., respondents.

A.E. Dacanay for petitioners.


Antonio Quintos Law Office for private respondent.

PARAS, J.:

This is a petition for review on certiorari of the December 29, 1987 decision * of the Court of Appeals
in CA-G.R. No. 11960 entitled "ROCES-REYES REALTY, INC. vs. HONORABLE JUDGE
REGIONAL TRIAL COURT OF MANILA, BRANCH 44, GOOD EARTH EMPORIUM, INC. and LIM
KA PING" reversing the decision of respondent Judge ** of the Regional Trial Court of Manila,
Branch 44 in Civil Case No. 85-30484, which reversed the resolution of the Metropolitan Trial Court
Of Manila, Branch 28 in Civil Case No. 09639, *** denying herein petitioners' motion to quash the alias writ of execution
issued against them.

As gathered from the records, the antecedent facts of this case, are as follows:

A Lease Contract, dated October 16, 1981, was entered into by and between ROCES-REYES
REALTY, INC., as lessor, and GOOD EARTH EMPORIUM, INC., as lessee, for a term of three years
beginning November 1, 1981 and ending October 31, 1984 at a monthly rental of P65,000.00 (Rollo,
p. 32; Annex "C" of Petition). The building which was the subject of the contract of lease is a five-
storey building located at the corner of Rizal Avenue and Bustos Street in Sta. Cruz, Manila.
From March 1983, up to the time the complaint was filed, the lessee had defaulted in the payment of
rentals, as a consequence of which, private respondent ROCES-REYES REALTY, INC., (hereinafter
designated as ROCES for brevity) filed on October 14, 1984, an ejectment case (Unlawful Detainer)
against herein petitioners, GOOD EARTH EMPORIUM, INC. and LIM KA PING, hereinafter
designated as GEE, (Rollo, p. 21; Annex "B" of the Petition). After the latter had tendered their
responsive pleading, the lower court (MTC, Manila) on motion of Roces rendered judgment on the
pleadings dated April 17, 1984, the dispositive portion of which states:

Judgment is hereby rendered ordering defendants (herein petitioners) and all persons
claiming title under him to vacate the premises and surrender the same to the plaintiffs
(herein respondents); ordering the defendants to pay the plaintiffs the rental of P65,000.00 a
month beginning March 1983 up to the time defendants actually vacate the premises and
deliver possession to the plaintiff; to pay attorney's fees in the amount of P5,000.00 and to
pay the costs of this suit. (Rollo, p. 111; Memorandum of Respondents)

On May 16, 1984, Roces filed a motion for execution which was opposed by GEE on May 28, 1984
simultaneous with the latter's filing of a Notice of Appeal (Rollo, p. 112, Ibid.). On June 13, 1984, the
trial court resolved such motion ruling:

After considering the motion for the issuance of a writ of execution filed by counsel for the
plaintiff (herein respondents) and the opposition filed in relation thereto and finding that the
defendant failed to file the necessary supersedeas bond, this court resolved to grant the
same for being meritorious. (Rollo, p. 112)

On June 14, 1984, a writ of execution was issued by the lower court. Meanwhile, the appeal was
assigned to the Regional Trial Court (Manila) Branch XLVI. However, on August 15, 1984, GEE thru
counsel filed with the Regional Trial Court of Manila, a motion to withdraw appeal citing as reason
that they are satisfied with the decision of the Metropolitan Trial Court of Manila, Branch XXVIII,
which said court granted in its Order of August 27, 1984 and the records were remanded to the trial
court (Rollo, p. 32; CA Decision). Upon an ex-parte Motion of ROCES, the trial court issued
an Alias Writ of Execution dated February 25, 1985 (Rollo, p. 104; Annex "D" of Petitioner's
Memorandum), which was implemented on February 27, 1985. GEE thru counsel filed a motion to
quash the writ of execution and notice of levy and an urgent Ex-parte Supplemental Motion for the
issuance of a restraining order, on March 7, and 20, 1985, respectively. On March 21, 1985, the
lower court issued a restraining order to the sheriff to hold the execution of the judgment pending
hearing on the motion to quash the writ of execution (Rollo, p. 22; RTC Decision). While said motion
was pending resolution, GEE filed a Petition for Relief from judgment before another court, Regional
Trial Court of Manila, Branch IX, which petition was docketed as Civil Case No. 80-30019, but the
petition was dismissed and the injunctive writ issued in connection therewith set aside. Both parties
appealed to the Court of Appeals; GEE on the order of dismissal and Roces on denial of his motion
for indemnity, both docketed as CA-G.R. No. 15873-CV. Going back to the original case, the
Metropolitan Trial Court after hearing and disposing some other incidents, promulgated the
questioned Resolution, dated April 8, 1985, the dispositive portion of which reads as follows:

Premises considered, the motion to quash the writ is hereby denied for lack of merit.

The restraining orders issued on March 11 and 23, 1985 are hereby recalled, lifted and set
aside. (Rollo, p. 20, MTC Decision)

GEE appealed and by coincidence. was raffled to the same Court, RTC Branch IX. Roces moved to
dismiss the appeal but the Court denied the motion. On certiorari, the Court of Appeals dismissed
Roces' petition and remanded the case to the RTC. Meantime, Branch IX became vacant and the
case was re-raffled to Branch XLIV.

On April 6, 1987, the Regional Trial Court of Manila, finding that the amount of P1 million evidenced
by Exhibit "I" and another P1 million evidenced by the pacto de retro sale instrument (Exhibit "2")
were in full satisfaction of the judgment obligation, reversed the decision of the Municipal Trial Court,
the dispositive portion of which reads:

Premises considered, judgment is hereby rendered reversing the Resolution appealed from
quashing the writ of execution and ordering the cancellation of the notice of levy and
declaring the judgment debt as having been fully paid and/or Liquidated. (Rollo, p. 29).

On further appeal, the Court of Appeals reversed the decision of the Regional Trial Court and
reinstated the Resolution of the Metropolitan Trial Court of Manila, the dispositive portion of which is
as follows:

WHEREFORE, the judgment appealed from is hereby REVERSED and the Resolution dated
April 8, 1985, of the Metropolitan Trial Court of Manila Branch XXXIII is hereby
REINSTATED. No pronouncement as to costs. (Rollo, p. 40).

GEE's Motion for Reconsideration of April 5, 1988 was denied (Rollo, p. 43). Hence, this petition.

The main issue in this case is whether or not there was full satisfaction of the judgment debt in favor
of respondent corporation which would justify the quashing of the Writ of Execution.

A careful study of the common exhibits (Exhibits 1/A and 2/B) shows that nowhere in any of said
exhibits was there any writing alluding to or referring to any settlement between the parties of
petitioners' judgment obligation (Rollo, pp. 45-48).

Moreover, there is no indication in the receipt, Exhibit "1", that it was in payment, full or partial, of the
judgment obligation. Likewise, there is no indication in the pacto de retro sale which was drawn in
favor of Jesus Marcos Roces and Marcos V. Roces and not the respondent corporation, that the
obligation embodied therein had something to do with petitioners' judgment obligation with
respondent corporation.

Finding that the common exhibit, Exhibit 1/A had been signed by persons other than judgment
creditors (Roces-Reyes Realty, Inc.) coupled with the fact that said exhibit was not even alleged by
GEE and Lim Ka Ping in their original motion to quash the alias writ of execution (Rollo, p. 37) but
produced only during the hearing (Ibid.) which production resulted in petitioners having to
claim belatedly that there was an "overpayment" of about half a million pesos (Rollo, pp. 25-27) and
remarking on the utter absence of any writing in Exhibits "1/A" and "2/B" to indicate payment of the
judgment debt, respondent Appellate Court correctly concluded that there was in fact no payment of
the judgment debt. As aptly observed by the said court:

What immediately catches one's attention is the total absence of any writing alluding to or
referring to any settlement between the parties of private respondents' (petitioners') judgment
obligation. In moving for the dismissal of the appeal Lim Ka Ping who was then assisted by
counsel simply stated that defendants (herein petitioners) are satisfied with the decision of
the Metropolitan Trial Court (Records of CA, p. 54).
Notably, in private respondents' (petitioners') Motion to Quash the Writ of Execution and
Notice of Levy dated March 7, 1985, there is absolutely no reference to the alleged payment
of one million pesos as evidenced by Exhibit 1 dated September 20, 1984. As pointed out by
petitioner (respondent corporation) this was brought out by Linda Panutat, Manager of Good
Earth only in the course of the latter's testimony. (Rollo, p. 37)

Article 1240 of the Civil Code of the Philippines provides that:

Payment shall be made to the person in whose favor the obligation has been constituted, or
his successor in interest, or any person authorized to receive it.

In the case at bar, the supposed payments were not made to Roces-Reyes Realty, Inc. or to its
successor in interest nor is there positive evidence that the payment was made to a person
authorized to receive it. No such proof was submitted but merely inferred by the Regional Trial Court
(Rollo, p. 25) from Marcos Roces having signed the Lease Contract as President which was
witnessed by Jesus Marcos Roces. The latter, however, was no longer President or even an officer
of Roces-Reyes Realty, Inc. at the time he received the money (Exhibit "1") and signed the sale
with pacto de retro (Exhibit "2"). He, in fact, denied being in possession of authority to receive
payment for the respondent corporation nor does the receipt show that he signed in the same
capacity as he did in the Lease Contract at a time when he was President for respondent corporation
(Rollo, p. 20, MTC decision).

On the other hand, Jesus Marcos Roces testified that the amount of P1 million evidenced by the
receipt (Exhibit "1") is the payment for a loan extended by him and Marcos Roces in favor of Lim Ka
Ping. The assertion is home by the receipt itself whereby they acknowledged payment of the loan in
their names and in no other capacity.

A corporation has a personality distinct and separate from its individual stockholders or members.
Being an officer or stockholder of a corporation does not make one's property also of the
corporation, and vice-versa, for they are separate entities (Traders Royal Bank v. CA-G.R. No.
78412, September 26, 1989; Cruz v. Dalisay, 152 SCRA 482). Shareowners are in no legal sense
the owners of corporate property (or credits) which is owned by the corporation as a distinct legal
person (Concepcion Magsaysay-Labrador v. CA-G.R. No. 58168, December 19, 1989). As a
consequence of the separate juridical personality of a corporation, the corporate debt or credit is not
the debt or credit of the stockholder, nor is the stockholder's debt or credit that of the corporation
(Prof. Jose Nolledo's "The Corporation Code of the Philippines, p. 5, 1988 Edition, citing Professor
Ballantine).

The absence of a note to evidence the loan is explained by Jesus Marcos Roces who testified that
the IOU was subsequently delivered to private respondents (Rollo, pp. 97-98). Contrary to the
Regional Trial Court's premise that it was incumbent upon respondent corporation to prove that the
amount was delivered to the Roces brothers in the payment of the loan in the latter's favor, the
delivery of the amount to and the receipt thereof by the Roces brothers in their names raises the
presumption that the said amount was due to them. There is a disputable presumption that money
1âwphi 1

paid by one to the other was due to the latter (Sec. 5(f) Rule 131, Rules of Court). It is for GEE and
Lim Ka Ping to prove otherwise. In other words, it is for the latter to prove that the payments made
were for the satisfaction of their judgment debt and not vice versa.

The fact that at the time payment was made to the two Roces brothers, GEE was also indebted to
respondent corporation for a larger amount, is not supportive of the Regional Trial Court's
conclusions that the payment was in favor of the latter, especially in the case at bar where the
amount was not receipted for by respondent corporation and there is absolutely no indication in the
receipt from which it can be reasonably inferred, that said payment was in satisfaction of the
judgment debt. Likewise, no such inference can be made from the execution of the pacto de
retro sale which was not made in favor of respondent corporation but in favor of the two Roces
brothers in their individual capacities without any reference to the judgment obligation in favor of
respondent corporation.

In addition, the totality of the amount covered by the receipt (Exhibit "1/A") and that of the sale
with pacto de retro(Exhibit "2/B") all in the sum of P2 million, far exceeds petitioners' judgment
obligation in favor of respondent corporation in the sum of P1,560,000.00 by P440,000.00, which
militates against the claim of petitioner that the aforesaid amount (P2M) was in full payment of the
judgment obligation.

Petitioners' explanation that the excess is interest and advance rentals for an extension of the lease
contract (Rollo, pp. 25-28) is belied by the absence of any interest awarded in the case and of any
agreement as to the extension of the lease nor was there any such pretense in the Motion to Quash
the Alias Writ of Execution.

Petitioners' averments that the respondent court had gravely abused its discretion in arriving at the
assailed factual findings as contrary to the evidence and applicable decisions of this Honorable
Court are therefore, patently unfounded. Respondent court was correct in stating that it "cannot go
beyond what appears in the documents submitted by petitioners themselves (Exhibits "1" and "2") in
the absence of clear and convincing evidence" that would support its claim that the judgment
obligation has indeed been fully satisfied which would warrant the quashal of the Alias Writ of
Execution.

It has been an established rule that when the existence of a debt is fully established by the evidence
(which has been done in this case), the burden of proving that it has been extinguished by payment
devolves upon the debtor who offers such a defense to the claim of the plaintiff creditor (herein
respondent corporation) (Chua Chienco v. Vargas, 11 Phil. 219; Ramos v. Ledesma, 12 Phil. 656;
Pinon v. De Osorio, 30 Phil. 365). For indeed, it is well-entrenched in Our jurisprudence that each
party in a case must prove his own affirmative allegations by the degree of evidence required by law
(Stronghold Insurance Co. v. CA, G.R. No. 83376, May 29,1989; Tai Tong Chuache & Co. v.
Insurance Commission, 158 SCRA 366).

The appellate court cannot, therefore, be said to have gravely abused its discretion in finding lack of
convincing and reliable evidence to establish payment of the judgment obligation as claimed by
petitioner. The burden of evidence resting on the petitioners to establish the facts upon which their
action is premised has not been satisfactorily discharged and therefore, they have to bear the
consequences.

PREMISES CONSIDERED, the petition is hereby DENIED and the Decision of the Respondent
court is hereby AFFIRMED, reinstating the April 8, 1985 Resolution of the Metropolitan Trial Court of
Manila.

SO ORDERED.

Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.


Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

Adm. Matter No. R-181-P July 31, 1987

ADELIO C. CRUZ, complainant,


vs.
QUITERIO L. DALISAY, Deputy Sheriff, RTC, Manila, respondents.

RESOLUTION

FERNAN, J.:

In a sworn complaint dated July 23, 1984, Adelio C. Cruz charged Quiterio L. Dalisay, Senior Deputy
Sheriff of Manila, with "malfeasance in office, corrupt practices and serious irregularities" allegedly
committed as follows:

1. Respondent sheriff attached and/or levied the money belonging to complainant Cruz when he was
not himself the judgment debtor in the final judgment of NLRC NCR Case No. 8-12389-91 sought to
be enforced but rather the company known as "Qualitrans Limousine Service, Inc.," a duly registered
corporation; and,

2. Respondent likewise caused the service of the alias writ of execution upon complainant who is a
resident of Pasay City, despite knowledge that his territorial jurisdiction covers Manila only and does
not extend to Pasay City.

In his Comments, respondent Dalisay explained that when he garnished complainant's cash deposit
at the Philtrust bank, he was merely performing a ministerial duty. While it is true that said writ was
addressed to Qualitrans Limousine Service, Inc., yet it is also a fact that complainant had executed
an affidavit before the Pasay City assistant fiscal stating that he is the owner/president of said
corporation and, because of that declaration, the counsel for the plaintiff in the labor case advised
him to serve notice of garnishment on the Philtrust bank.

On November 12, 1984, this case was referred to the Executive Judge of the Regional Trial Court of
Manila for investigation, report and recommendation.

Prior to the termination of the proceedings, however, complainant executed an affidavit of desistance
stating that he is no longer interested in prosecuting the case against respondent Dalisay and that it
was just a "misunderstanding" between them. Upon respondent's motion, the Executive Judge
issued an order dated May 29, 1986 recommending the dismissal of the case.

It has been held that the desistance of complainant does not preclude the taking of disciplinary
action against respondent. Neither does it dissuade the Court from imposing the appropriate
corrective sanction. One who holds a public position, especially an office directly connected with the
administration of justice and the execution of judgments, must at all times be free from the
appearance of impropriety.1
We hold that respondent's actuation in enforcing a judgment against complainant who is not the
judgment debtor in the case calls for disciplinary action. Considering the ministerial nature of his duty
in enforcing writs of execution, what is incumbent upon him is to ensure that only that portion of a
decision ordained or decreed in the dispositive part should be the subject of execution.2 No more, no
less. That the title of the case specifically names complainant as one of the respondents is of no
moment as execution must conform to that directed in the dispositive portion and not in the title of
the case.

The tenor of the NLRC judgment and the implementing writ is clear enough. It directed Qualitrans
Limousine Service, Inc. to reinstate the discharged employees and pay them full backwages.
Respondent, however, chose to "pierce the veil of corporate entity" usurping a power belonging to
the court and assumed improvidently that since the complainant is the owner/president of Qualitrans
Limousine Service, Inc., they are one and the same. It is a well-settled doctrine both in law and in
equity that as a legal entity, a corporation has a personality distinct and separate from its individual
stockholders or members. The mere fact that one is president of a corporation does not render the
property he owns or possesses the property of the corporation, since the president, as individual,
and the corporation are separate entities.3

Anent the charge that respondent exceeded his territorial jurisdiction, suffice it to say that the writ of
execution sought to be implemented was dated July 9, 1984, or prior to the issuance of
Administrative Circular No. 12 which restrains a sheriff from enforcing a court writ outside his
territorial jurisdiction without first notifying in writing and seeking the assistance of the sheriff of the
place where execution shall take place.

ACCORDINGLY, we find Respondent Deputy Sheriff Quiterio L. Dalisay NEGLIGENT in the


enforcement of the writ of execution in NLRC Case-No. 8-12389-91, and a fine equivalent to three
[3] months salary is hereby imposed with a stern warning that the commission of the same or similar
offense in the future will merit a heavier penalty. Let a copy of this Resolution be filed in the personal
record of the respondent.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

SECOND DIVISION

SEVENTH DAY ADVENTIST G.R. No. 150416


CONFERENCE CHURCH OF
SOUTHERN PHILIPPINES, INC.,
and/or represented by MANASSEH
C. ARRANGUEZ, BRIGIDO P.
GULAY, FRANCISCO M. LUCENARA,
DIONICES O. TIPGOS, LORESTO
C. MURILLON, ISRAEL C. NINAL,
GEORGE G. SOMOSOT, JESSIE
T. ORBISO, LORETO PAEL and
JOEL BACUBAS,
Petitioners, Present:

PUNO, J., Chairperson,


SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ.

NORTHEASTERN MINDANAO
MISSION OF SEVENTH DAY
ADVENTIST, INC., and/or
represented by JOSUE A. LAYON,
WENDELL M. SERRANO, FLORANTE
P. TY and JETHRO CALAHAT
and/or SEVENTH DAY ADVENTIST
CHURCH [OF] NORTHEASTERN
MINDANAO MISSION,*
Respondents. Promulgated:
July 21, 2006

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

DECISION

CORONA, J.:

This petition for review on certiorari assails the Court of Appeals (CA)
decision[1] and resolution[2] in CA-G.R. CV No. 41966 affirming, with
modification, the decision of the Regional Trial Court (RTC)
of Bayugan, Agusan del Sur, Branch 7 in Civil Case No. 63.

This case involves a 1,069 sq. m. lot covered by Transfer Certificate


of Title (TCT) No. 4468 in Bayugan, Agusan del Sur originally owned
by Felix Cosio and his wife, Felisa Cuysona.
On April 21, 1959, the spouses Cosio donated the land to the
South Philippine Union Mission of Seventh Day Adventist Church
of Bayugan Esperanza, Agusan (SPUM-SDA Bayugan).[3] Part of the
deed of donation read:

KNOW ALL MEN BY THESE PRESENTS:

That we Felix Cosio[,] 49 years of age[,] and Felisa Cuysona[,]


40 years of age, [h]usband and wife, both are citizen[s] of the
Philippines, and resident[s] with post office address in the Barrio
of Bayugan, Municipality of Esperanza, Province of Agusan,
Philippines, do hereby grant, convey and forever quit claim by way
of Donation or gift unto the South Philippine [Union] Mission of
Seventh Day Adventist Church of Bayugan, Esperanza, Agusan,
all the rights, title, interest, claim and demand both at law and as
well in possession as in expectancy of in and to all the place of land
and portion situated in the Barrio of Bayugan, Municipality of
Esperanza, Province of Agusan, Philippines, more particularly and
bounded as follows, to wit:

1. a parcel of land for Church Site purposes only.


2. situated [in Barrio Bayugan, Esperanza].
3. Area: 30 meters wide and 30 meters length or 900 square
meters.
4. Lot No. 822-Pls-225. Homestead Application No. V-
36704, Title No. P-285.
5. Bounded Areas
North by National High Way; East by Bricio Gerona; South
by Serapio Abijaron and West by Feliz Cosio xxx. [4]

The donation was allegedly accepted by one Liberato Rayos, an elder


of the Seventh Day Adventist Church, on behalf of the donee.

Twenty-one years later, however, on February 28, 1980, the


same parcel of land was sold by the spouses Cosio to the Seventh
Day Adventist Church of Northeastern Mindanao Mission (SDA-
NEMM).[5] TCT No. 4468 was thereafter issued in the name of SDA-
NEMM.[6]
Claiming to be the alleged donees successors-in-interest, petitioners
asserted ownership over the property. This was opposed by
respondents who argued that at the time of the donation, SPUM-
SDA Bayugan could not legally be a donee
because, not having been incorporated yet, it had no juridical
personality. Neither were petitioners members of the local church
then, hence, the donation could not have been made particularly to
them.

On September 28, 1987, petitioners filed a case, docketed as Civil


Case No. 63 (a suit for cancellation of title, quieting of ownership and
possession, declaratory relief and reconveyance with prayer for
preliminary injunction and damages), in the RTC
of Bayugan,Agusan del Sur. After trial, the trial court rendered a
decision[7] on November 20, 1992 upholding the sale in favor of
respondents.
On appeal, the CA affirmed the RTC decision but deleted the
award of moral damages and attorneys fees.[8] Petitioners motion for
reconsideration was likewise denied. Thus, this petition.
The issue in this petition is simple: should SDA-
NEMMs ownership of the lot covered by TCT No. 4468 be
upheld?[9] We answer in the affirmative.
The controversy between petitioners and respondents involves
two supposed transfers of the lot previously owned by the
spouses Cosio: (1) a donation to petitioners alleged predecessors-in-
interest in 1959 and (2) a sale to respondents in 1980.
Donation is undeniably one of the modes of acquiring ownership
of real property. Likewise, ownership of a property may be transferred
by tradition as a consequence of a sale.

Petitioners contend that the appellate court should not have


ruled on the validity of the donation since it was not among the issues
raised on appeal. This is not correct because an appeal generally
opens the entire case for review.
We agree with the appellate court that the alleged donation to
petitioners was void.
Donation is an act of liberality whereby a person disposes
gratuitously of a thing or right in favor of another person who accepts
it. The donation could not have been made in favor of an entity yet
inexistent at the time it was made. Nor could it have been accepted
as there was yet no one to accept it.

The deed of donation was not in favor of any informal group of


SDA members but a supposed SPUM-SDA Bayugan (the local
church) which, at the time, had neither juridical personality nor
capacity to accept such gift.

Declaring themselves a de facto corporation, petitioners allege


that they should benefit from the donation.
But there are stringent requirements before one can qualify as
a de facto corporation:

(a) the existence of a valid law under which it may be


incorporated;
(b) an attempt in good faith to incorporate; and
(c) assumption of corporate powers.[10]
While there existed the old Corporation Law (Act 1459),[11] a law
under which SPUM-SDA Bayugan could have been organized, there
is no proof that there was an attempt to incorporate at that time.

The filing of articles of incorporation and the issuance of the


certificate of incorporation are essential for the existence of a de
facto corporation.[12] We have held that an organization not registered
with the Securities and Exchange Commission (SEC) cannot be
considered a corporation in any concept, not even as a corporation de
facto.[13] Petitioners themselves admitted that at the time of the
donation, they were not registered with the SEC, nor did they even
attempt to organize[14] to comply with legal requirements.
Corporate existence begins only from the moment a certificate
of incorporation is issued. No such certificate was ever issued to
petitioners or their supposed predecessor-in-interest at the time of
the donation. Petitioners obviously could not have claimed
succession to an entity that never came to exist. Neither could the
principle of separate juridical personality apply since there was never
any corporation[15] to speak of. And, as already stated, some of the
representatives of petitioner Seventh Day Adventist Conference
Church of Southern Philippines, Inc. were not even members of the
local church then, thus, they could not even claim that the donation
was particularly for them.[16]

The de facto doctrine thus effects a compromise between two


conflicting public interest[s]the one opposed to an unauthorized
assumption of corporate privileges; the other in favor of doing
justice to the parties and of establishing a general assurance of
security in business dealing with corporations.[17]

Generally, the doctrine exists to protect the public dealing


with supposed corporate entities, not to favor the defective or non-
existent corporation.[18]
In view of the foregoing, petitioners arguments anchored on
their supposed de facto status hold no water. We are convinced that
there was no donation to petitioners or their supposed predecessor-
in-interest.
On the other hand, there is sufficient basis to affirm the title of
SDA-NEMM. The factual findings of the trial court in this regard were
not convincingly disputed. This Court is not a trier of facts. Only
questions of law are the proper subject of a petition for review on
certiorari.[19]

Sustaining the validity of respondents title as well as their right


of ownership over the property, the trial court stated:

[W]hen Felix Cosio was shown the Absolute Deed of Sale during
the hearing xxx he acknowledged that the same was his xxx but
that it was not his intention to sell the controverted property
because he had previously donated the same lot to the South
Philippine Union Mission of SDA Church of Bayugan-
Esperanza. Cosio avouched that had it been his intendment to sell,
he would not have disposed of it for a mere P2,000.00 in two
installments but for P50,000.00 or P60,000.00. According to him,
the P2,000.00 was not a consideration of the sale but only a form
of help extended.
A thorough analysis and perusal, nonetheless, of the Deed of
Absolute Sale disclosed that it has the essential requisites of
contracts pursuant to xxx Article 1318 of the Civil Code, except
that the consideration of P2,000.00 is somewhat insufficient for a
[1,069-square meter] land. Would then this inadequacy of the
consideration render the contract invalid?

Article 1355 of the Civil Code provides:

Except in cases specified by law, lesion or


inadequacy of cause shall not invalidate a
contract, unless there has been fraud,
mistake or undue influence.

No evidence [of fraud, mistake or undue influence] was


adduced by [petitioners].

xxx

Well-entrenched is the rule that a Certificate of Title is generally


a conclusive evidence of [ownership] of the land. There is that
strong and solid presumption that titles were legally issued and that
they are valid. It is irrevocable and indefeasible and the duty of the
Court is to see to it that the title is maintained and respected unless
challenged in a direct proceeding. xxx The title shall be received as
evidence in all the Courts and shall be conclusive as to all matters
contained therein.

[This action was instituted almost seven years after the certificate
of title in respondents name was issued in 1980.][20]

According to Art. 1477 of the Civil Code, the ownership of the


thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof. On this, the noted author
Arturo Tolentino had this to say:

The execution of [a] public instrument xxx transfers the


ownership from the vendor to the vendee who may thereafter
exercise the rights of an owner over the same[21]
Here, transfer of ownership from the spouses Cosio to SDA-
NEMM was made upon constructive delivery of the property on
February 28, 1980 when the sale was made through a public
instrument.[22] TCT No. 4468 was thereafter issued and it remains in
the name of SDA-NEMM.

WHEREFORE, the petition is hereby DENIED.


Costs against petitioners.

[G.R. No. 141735. June 8, 2005]

SAPPARI K. SAWADJAAN, petitioner, vs. THE HONORABLE COURT


OF APPEALS, THE CIVIL SERVICE COMMISSION and AL-
AMANAH INVESTMENT BANK OF THE
PHILIPPINES, respondents.

DECISION
CHICO-NAZARIO, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court of the
Decision of the Court of Appeals of 30 March 1999 affirming Resolutions No.
[1]

94-4483 and No. 95-2754 of the Civil Service Commission (CSC) dated 11
August 1994 and 11 April 1995, respectively, which in turn affirmed Resolution
No. 2309 of the Board of Directors of the Al-Amanah Islamic Investment Bank
of the Philippines (AIIBP) dated 13 December 1993, finding petitioner guilty of
Dishonesty in the Performance of Official Duties and/or Conduct Prejudicial to
the Best Interest of the Service and dismissing him from the service, and its
Resolution of 15 December 1999 dismissing petitioners Motion for
[2]

Reconsideration.
The records show that petitioner Sappari K. Sawadjaan was among the first
employees of the Philippine Amanah Bank (PAB) when it was created by virtue
of Presidential Decree No. 264 on 02 August 1973. He rose through the ranks,
working his way up from his initial designation as security guard, to settling
clerk, bookkeeper, credit investigator, project analyst, appraiser/ inspector, and
eventually, loans analyst.[3]

In February 1988, while still designated as appraiser/investigator,


Sawadjaan was assigned to inspect the properties offered as collaterals by
Compressed Air Machineries and Equipment Corporation (CAMEC) for a credit
line of Five Million Pesos (P5,000,000.00). The properties consisted of two
parcels of land covered by Transfer Certificates of Title (TCTs) No. N-130671
and No. C-52576. On the basis of his Inspection and Appraisal Report, the [4]

PAB granted the loan application. When the loan matured on 17 May 1989,
CAMEC requested an extension of 180 days, but was granted only 120 days to
repay the loan. [5]

In the meantime, Sawadjaan was promoted to Loans Analyst I on 01 July


1989. [6]

In January 1990, Congress passed Republic Act 6848 creating the AIIBP
and repealing P.D. No. 264 (which created the PAB). All assets, liabilities and
capital accounts of the PAB were transferred to the AIIBP, and the existing
[7]

personnel of the PAB were to continue to discharge their functions unless


discharged. In the ensuing reorganization, Sawadjaan was among the
[8]

personnel retained by the AIIBP.


When CAMEC failed to pay despite the given extension, the bank, now
referred to as the AIIBP, discovered that TCT No. N-130671 was spurious, the
property described therein non-existent, and that the property covered by TCT
No. C-52576 had a prior existing mortgage in favor of one Divina Pablico.
On 08 June 1993, the Board of Directors of the AIIBP created an
Investigating Committee to look into the CAMEC transaction, which had cost
the bank Six Million Pesos (P6,000,000.00) in losses. The subsequent events,
[9]

as found and decided upon by the Court of Appeals, are as follows:


[10]

On 18 June 1993, petitioner received a memorandum from Islamic Bank [AIIBP]


Chairman Roberto F. De Ocampo charging him with Dishonesty in the Performance
of Official Duties and/or Conduct Prejudicial to the Best Interest of the Service and
preventively suspending him.

In his memorandum dated 8 September 1993, petitioner informed the Investigating


Committee that he could not submit himself to the jurisdiction of the Committee
because of its alleged partiality. For his failure to appear before the hearing set on 17
September 1993, after the hearing of 13 September 1993 was postponed due to the
Manifestation of even date filed by petitioner, the Investigating Committee declared
petitioner in default and the prosecution was allowed to present its evidence ex parte.

On 08 December 1993, the Investigating Committee rendered a decision, the pertinent


portions of which reads as follows:
In view of respondent SAWADJAANS abject failure to perform his duties and
assigned tasks as appraiser/inspector, which resulted to the prejudice and substantial
damage to the Bank, respondent should be held liable therefore. At this juncture,
however, the Investigating Committee is of the considered opinion that he could not
be held liable for the administrative offense of dishonesty considering the fact that no
evidence was adduced to show that he profited or benefited from being remiss in the
performance of his duties. The record is bereft of any evidence which would show
that he received any amount in consideration for his non-performance of his official
duties.

This notwithstanding, respondent cannot escape liability. As adverted to earlier, his


failure to perform his official duties resulted to the prejudice and substantial damage
to the Islamic Bank for which he should be held liable for the administrative offense
of CONDUCT PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE.

Premises considered, the Investigating Committee recommends that respondent


SAPPARI SAWADJAAN be meted the penalty of SIX (6) MONTHS and ONE (1)
DAY SUSPENSION from office in accordance with the Civil Service Commissions
Memorandum Circular No. 30, Series of 1989.

On 13 December 1993, the Board of Directors of the Islamic Bank [AIIBP] adopted
Resolution No. 2309 finding petitioner guilty of Dishonesty in the Performance of
Official Duties and/or Conduct Prejudicial to the Best Interest of the Service and
imposing the penalty of Dismissal from the Service.

On reconsideration, the Board of Directors of the Islamic Bank [AIIBP] adopted the
Resolution No. 2332 on 20 February 1994 reducing the penalty imposed on petitioner
from dismissal to suspension for a period of six (6) months and one (1) day.

On 29 March 1994, petitioner filed a notice of appeal to the Merit System Protection
Board (MSPB).

On 11 August 1994, the CSC adopted Resolution No. 94-4483 dismissing the appeal
for lack of merit and affirming Resolution No. 2309 dated 13 December 1993 of the
Board of Directors of Islamic Bank.

On 11 April 1995, the CSC adopted Resolution No. 95-2574 denying petitioners
Motion for Reconsideration.

On 16 June 1995, the instant petition was filed with the Honorable Supreme Court on
the following assignment of errors:
I. Public respondent Al-Amanah Islamic Investment Bank of the Philippines has
committed a grave abuse of discretion amounting to excess or lack of jurisdiction
when it initiated and conducted administrative investigation without a validly
promulgated rules of procedure in the adjudication of administrative cases at the
Islamic Bank.

II. Public respondent Civil Service Commission has committed a grave abuse of
discretion amounting to lack of jurisdiction when it prematurely and falsely assumed
jurisdiction of the case not appealed to it, but to the Merit System Protection Board.

III. Both the Islamic Bank and the Civil Service Commission erred in finding
petitioner Sawadjaan of having deliberately reporting false information and therefore
guilty of Dishonesty and Conduct Prejudicial to the Best Interest of the Service and
penalized with dismissal from the service.

On 04 July 1995, the Honorable Supreme Court En Banc referred this petition to this
Honorable Court pursuant to Revised Administrative Circular No. 1-95, which took
effect on 01 June 1995.

We do not find merit [in] the petition.

Anent the first assignment of error, a reading of the records would reveal that
petitioner raises for the first time the alleged failure of the Islamic Bank [AIIBP] to
promulgate rules of procedure governing the adjudication and disposition of
administrative cases involving its personnel. It is a rule that issues not properly
brought and ventilated below may not be raised for the first time on appeal, save in
exceptional circumstances (Casolita, Sr. v. Court of Appeals, 275 SCRA 257) none of
which, however, obtain in this case. Granting arguendo that the issue is of such
exceptional character that the Court may take cognizance of the same, still, it must
fail. Section 26 of Republic Act No. 6848 (1990) provides:

Section 26. Powers of the Board. The Board of Directors shall have the broadest
powers to manage the Islamic Bank, x x x The Board shall adopt policy guidelines
necessary to carry out effectively the provisions of this Charter as well as internal
rules and regulations necessary for the conduct of its Islamic banking business and all
matters related to personnel organization, office functions and salary administration.
(Italics ours)

On the other hand, Item No. 2 of Executive Order No. 26 (1992) entitled Prescribing
Procedure and Sanctions to Ensure Speedy Disposition of Administrative Cases
directs, all administrative agencies to adopt and include in their respective Rules of
Procedure provisions designed to abbreviate administrative proceedings.
The above two (2) provisions relied upon by petitioner does not require the Islamic
Bank [AIIBP] to promulgate rules of procedure before administrative discipline may
be imposed upon its employees. The internal rules of procedures ordained to be
adopted by the Board refers to that necessary for the conduct of its Islamic banking
business and all matters related to personnel organization, office functions and salary
administration. On the contrary, Section 26 of RA 6848 gives the Board of Directors
of the Islamic Bank the broadest powers to manage the Islamic Bank. This grant of
broad powers would be an idle ceremony if it would be powerless to discipline its
employees.

The second assignment of error must likewise fail. The issue is raised for the first
time via this petition for certiorari. Petitioner submitted himself to the jurisdiction of
the CSC. Although he could have raised the alleged lack of jurisdiction in his Motion
for Reconsideration of Resolution No. 94-4483 of the CSC, he did not do so. By filing
the Motion for Reconsideration, he is estopped from denying the CSCs jurisdiction
over him, as it is settled rule that a party who asks for an affirmative relief cannot later
on impugn the action of the tribunal as without jurisdiction after an adverse result was
meted to him. Although jurisdiction over the subject matter of a case may be objected
to at any stage of the proceedings even on appeal, this particular rule, however, means
that jurisdictional issues in a case can be raised only during the proceedings in said
case and during the appeal of said case (Aragon v. Court of Appeals, 270 SCRA 603).
The case at bar is a petition [for] certiorari and not an appeal.

But even on the merits the argument must falter. Item No. 1 of CSC Resolution No.
93-2387 dated 29 June 1993, provides:

Decisions in administrative cases involving officials and employees of the civil


service appealable to the Commission pursuant to Section 47 of Book V of the Code
(i.e., Administrative Code of 1987) including personnel actions such as contested
appointments shall now be appealed directly to the Commission and not to the MSPB.

In Rubenecia v. Civil Service Commission, 244 SCRA 640, 651, it was categorically
held:

. . . The functions of the MSPB relating to the determination of administrative


disciplinary cases were, in other words, re-allocated to the Commission itself.

Be that as it may, (i)t is hornbook doctrine that in order `(t)o ascertain whether a court
(in this case, administrative agency) has jurisdiction or not, the provisions of the law
should be inquired into. Furthermore, `the jurisdiction of the court must appear clearly
from the statute law or it will not be held to exist.(Azarcon v. Sandiganbayan, 268
SCRA 747, 757) From the provision of law abovecited, the Civil Service Commission
clearly has jurisdiction over the Administrative Case against petitioner.

Anent the third assignment of error, we likewise do not find merit in petitioners
proposition that he should not be liable, as in the first place, he was not qualified to
perform the functions of appraiser/investigator because he lacked the necessary
training and expertise, and therefore, should not have been found dishonest by the
Board of Directors of Islamic Bank [AIIBP] and the CSC. Petitioner himself admits
that the position of appraiser/inspector is one of the most serious [and] sensitive job in
the banking operations. He should have been aware that accepting such a designation,
he is obliged to perform the task at hand by the exercise of more than ordinary
prudence. As appraiser/investigator, he is expected, among others, to check the
authenticity of the documents presented by the borrower by comparing them with the
originals on file with the proper government office. He should have made it sure that
the technical descriptions in the location plan on file with the Bureau of Lands of
Marikina, jibe with that indicated in the TCT of the collateral offered by CAMEC, and
that the mortgage in favor of the Islamic Bank was duly annotated at the back of the
copy of the TCT kept by the Register of Deeds of Marikina. This, petitioner failed to
do, for which he must be held liable. That he did not profit from his false report is of
no moment. Neither the fact that it was not deliberate or willful, detracts from the
nature of the act as dishonest. What is apparent is he stated something to be a fact,
when he really was not sure that it was so.

WHEREFORE, above premises considered, the instant Petition is DISMISSED, and


the assailed Resolutions of the Civil Service Commission are hereby AFFIRMED.

On 24 March 1999, Sawadjaans counsel notified the court a quo of his


change of address, but apparently neglected to notify his client of this fact.
[11]

Thus, on 23 July 1999, Sawadjaan, by himself, filed a Motion for New Trial in [12]

the Court of Appeals based on the following grounds: fraud, accident, mistake
or excusable negligence and newly discovered evidence. He claimed that he
had recently discovered that at the time his employment was terminated, the
AIIBP had not yet adopted its corporate by-laws. He attached a Certification by [13]

the Securities and Exchange Commission (SEC) that it was only on 27 May
1992 that the AIIBP submitted its draft by-laws to the SEC, and that its
registration was being held in abeyance pending certain corrections being made
thereon. Sawadjaan argued that since the AIIBP failed to file its by-laws within
60 days from the passage of Rep. Act No. 6848, as required by Sec. 51 of the
said law, the bank and its stockholders had already forfeited its franchise or
charter, including its license to exist and operate as a corporation, and thus
[14]

no longer have the legal standing and personality to initiate an administrative


case.
Sawadjaans counsel subsequently adopted his motion, but requested that
it be treated as a motion for reconsideration. This motion was denied by the
[15]

court a quo in its Resolution of 15 December 1999. [16]

Still disheartened, Sawadjaan filed the present petition for certiorari under
Rule 65 of the Rules of Court challenging the above Decision and Resolution
of the Court of Appeals on the ground that the court a quo erred: i) in ignoring
the facts and evidences that the alleged Islamic Bank has no valid by-laws; ii)
in ignoring the facts and evidences that the Islamic Bank lost its juridical
personality as a corporation on 16 April 1990; iii) in ignoring the facts and
evidences that the alleged Islamic Bank and its alleged Board of Directors have
no jurisdiction to act in the manner they did in the absence of a valid by-laws;
iv) in not correcting the acts of the Civil Service Commission who erroneously
rendered the assailed Resolutions No. 94-4483 and No. 95-2754 as a result of
fraud, falsification and/or misrepresentations committed by Farouk A. Carpizo
and his group, including Roberto F. de Ocampo; v) in affirming an
unconscionably harsh and/or excessive penalty; and vi) in failing to consider
newly discovered evidence and reverse its decision accordingly.
Subsequently, petitioner Sawadjaan filed an Ex-parte Urgent Motion for
Additional Extension of Time to File a Reply (to the Comments of Respondent
Al-Amanah Investment Bank of the Philippines), Reply (to Respondents
[17]

Consolidated Comment,) and Reply (to the Alleged Comments of Respondent


[18]

Al-Amanah Islamic Bank of the Philippines). On 13 October 2000, he informed


[19]

this Court that he had terminated his lawyers services, and, by himself,
prepared and filed the following: 1) Motion for New Trial; 2) Motion to Declare
[20]

Respondents in Default and/or Having Waived their Rights to Interpose


Objection to Petitioners Motion for New Trial; 3) Ex-Parte Urgent Motions to
[21]

Punish Attorneys Amado D. Valdez, Elpidio J. Vega, Alda G. Reyes, Dominador


R. Isidoro, Jr., and Odilon A. Diaz for Being in Contempt of Court & to Inhibit
them from Appearing in this Case Until they Can Present Valid Evidence of
Legal Authority; 4) Opposition/Reply (to Respondent AIIBPs Alleged
[22]

Comment); 5) Ex-Parte Urgent Motion to Punish Atty. Reynaldo A. Pineda for


[23]

Contempt of Court and the Issuance of a Commitment Order/Warrant for His


Arrest; 6) Reply/Opposition (To the Formal Notice of Withdrawal of
[24]

Undersigned Counsel as Legal Counsel for the Respondent Islamic Bank with
Opposition to Petitioners Motion to Punish Undersigned Counsel for Contempt
of Court for the Issuance of a Warrant of Arrest); 7) Memorandum for [25]

Petitioner; 8) Opposition to SolGens Motion for Clarification with Motion for


[26]

Default and/or Waiver of Respondents to File their Memorandum; 9) Motion [27]

for Contempt of Court and Inhibition/Disqualification with Opposition to OGCCs


Motion for Extension of Time to File Memorandum; 10) Motion for [28]
Enforcement (In Defense of the Rule of Law); 11) Motion and Opposition
[29]

(Motion to Punish OGCCs Attorneys Amado D. Valdez, Efren B. Gonzales, Alda


G. Reyes, Odilon A. Diaz and Dominador R. Isidoro, Jr., for Contempt of Court
and the Issuance of a Warrant for their Arrest; and Opposition to their Alleged
Manifestation and Motion Dated February 5, 2002); 12) Motion for [30]

Reconsideration of Item (a) of Resolution dated 5 February 2002 with


Supplemental Motion for Contempt of Court; 13) Motion for Reconsideration
[31]

of Portion of Resolution Dated 12 March 2002; 14) Ex-Parte Urgent Motion for
[32]

Extension of Time to File Reply Memorandum (To: CSC and AIIBPs


Memorandum); 15) Reply Memorandum (To: CSCs Memorandum) With Ex-
[33]

Parte Urgent Motion for Additional Extension of time to File Reply Memorandum
(To: AIIBPs Memorandum); and 16) Reply Memorandum (To: OGCCs
[34]

Memorandum for Respondent AIIBP). [35]

Petitioners efforts are unavailing, and we deny his petition for its procedural
and substantive flaws.
The general rule is that the remedy to obtain reversal or modification of the
judgment on the merits is appeal. This is true even if the error, or one of the
errors, ascribed to the court rendering the judgment is its lack of jurisdiction
over the subject matter, or the exercise of power in excess thereof, or grave
abuse of discretion in the findings of fact or of law set out in the decision. [36]

The records show that petitioners counsel received the Resolution of the
Court of Appeals denying his motion for reconsideration on 27 December 1999.
The fifteen day reglamentary period to appeal under Rule 45 of the Rules of
Court therefore lapsed on 11 January 2000. On 23 February 2000, over a month
after receipt of the resolution denying his motion for reconsideration, the
petitioner filed his petition for certiorari under Rule 65.
It is settled that a special civil action for certiorari will not lie as a substitute
for the lost remedy of appeal, and though there are instances where the
[37] [38]

extraordinary remedy of certiorari may be resorted to despite the availability of


an appeal, we find no special reasons for making out an exception in this case.
[39]

Even if we were to overlook this fact in the broader interests of justice and
treat this as a special civil action for certiorari under Rule 65, the petition would
[40]

nevertheless be dismissed for failure of the petitioner to show grave abuse of


discretion. Petitioners recurrent argument, tenuous at its very best, is premised
on the fact that since respondent AIIBP failed to file its by-laws within the
designated 60 days from the effectivity of Rep. Act No. 6848, all proceedings
initiated by AIIBP and all actions resulting therefrom are a patent nullity. Or, in
his words, the AIIBP and its officers and Board of Directors,
. . . [H]ave no legal authority nor jurisdiction to manage much less operate the Islamic
Bank, file administrative charges and investigate petitioner in the manner they did and
allegedly passed Board Resolution No. 2309 on December 13, 1993 which is null and
void for lack of an (sic) authorized and valid by-laws. The CIVIL SERVICE
COMMISSION was therefore affirming, erroneously, a null and void Resolution No.
2309 dated December 13, 1993 of the Board of Directors of Al-Amanah Islamic
Investment Bank of the Philippines in CSC Resolution No. 94-4483 dated August 11,
1994. A motion for reconsideration thereof was denied by the CSC in its Resolution
No. 95-2754 dated April 11, 1995. Both acts/resolutions of the CSC are erroneous,
resulting from fraud, falsifications and misrepresentations of the alleged Chairman
and CEO Roberto F. de Ocampo and the alleged Director Farouk A. Carpizo and his
group at the alleged Islamic Bank.[41]

Nowhere in petitioners voluminous pleadings is there a showing that the


court a quo committed grave abuse of discretion amounting to lack or excess
of jurisdiction reversible by a petition for certiorari. Petitioner already raised the
question of AIIBPs corporate existence and lack of jurisdiction in his Motion for
New Trial/Motion for Reconsideration of 27 May 1997 and was denied by the
Court of Appeals. Despite the volume of pleadings he has submitted thus far,
he has added nothing substantial to his arguments.
The AIIBP was created by Rep. Act No. 6848. It has a main office where it
conducts business, has shareholders, corporate officers, a board of directors,
assets, and personnel. It is, in fact, here represented by the Office of the
Government Corporate Counsel, the principal law office of government-owned
corporations, one of which is respondent bank. At the very least, by its failure
[42]

to submit its by-laws on time, the AIIBP may be considered a de


facto corporation whose right to exercise corporate powers may not be
[43]

inquired into collaterally in any private suit to which such corporations may be
a party.[44]

Moreover, a corporation which has failed to file its by-laws within the
prescribed period does not ipso facto lose its powers as such. The SEC Rules
on Suspension/Revocation of the Certificate of Registration of
Corporations, details the procedures and remedies that may be availed of
[45]

before an order of revocation can be issued. There is no showing that such a


procedure has been initiated in this case.
In any case, petitioners argument is irrelevant because this case is not a
corporate controversy, but a labor dispute; and it is an employers basic right to
freely select or discharge its employees, if only as a measure of self-protection
against acts inimical to its interest. Regardless of whether AIIBP is a
[46]

corporation, a partnership, a sole proprietorship, or a sari-sari store, it is an


undisputed fact that AIIBP is the petitioners employer. AIIBP chose to retain his
services during its reorganization, controlled the means and methods by which
his work was to be performed, paid his wages, and, eventually, terminated his
services.[47]

And though he has had ample opportunity to do so, the petitioner has not
alleged that he is anything other than an employee of AIIBP. He has neither
claimed, nor shown, that he is a stockholder or an officer of the corporation.
Having accepted employment from AIIBP, and rendered his services to the said
bank, received his salary, and accepted the promotion given him, it is now too
late in the day for petitioner to question its existence and its power to terminate
his services. One who assumes an obligation to an ostensible corporation as
such, cannot resist performance thereof on the ground that there was in fact no
corporation. [48]

Even if we were to consider the facts behind petitioner Sawadjaans


dismissal from service, we would be hard pressed to find error in the decision
of the AIIBP.
As appraiser/investigator, the petitioner was expected to conduct an ocular
inspection of the properties offered by CAMEC as collaterals and check the
copies of the certificates of title against those on file with the Registry of Deeds.
Not only did he fail to conduct these routine checks, but he also deliberately
misrepresented in his appraisal report that after reviewing the documents and
conducting a site inspection, he found the CAMEC loan application to be in
order. Despite the number of pleadings he has filed, he has failed to offer an
alternative explanation for his actions.
When he was informed of the charges against him and directed to appear
and present his side on the matter, the petitioner sent instead a memorandum
questioning the fairness and impartiality of the members of the investigating
committee and refusing to recognize their jurisdiction over him. Nevertheless,
the investigating committee rescheduled the hearing to give the petitioner
another chance, but he still refused to appear before it.
Thereafter, witnesses were presented, and a decision was rendered finding
him guilty of dishonesty and dismissing him from service. He sought a
reconsideration of this decision and the same committee whose impartiality he
questioned reduced their recommended penalty to suspension for six months
and one day. The board of directors, however, opted to dismiss him from
service.
On appeal to the CSC, the Commission found that Sawadjaans failure to
perform his official duties greatly prejudiced the AIIBP, for which he should be
held accountable. It held that:

. . . (I)t is crystal clear that respondent SAPPARI SAWADJAAN was remiss in the
performance of his duties as appraiser/inspector. Had respondent performed his duties
as appraiser/inspector, he could have easily noticed that the property located at
Balintawak, Caloocan City covered by TCT No. C-52576 and which is one of the
properties offered as collateral by CAMEC is encumbered to Divina Pablico. Had
respondent reflected such fact in his appraisal/inspection report on said property the
ISLAMIC BANK would not have approved CAMECs loan of P500,000.00 in 1987
and CAMECs P5 Million loan in 1988, respondent knowing fully well the Banks
policy of not accepting encumbered properties as collateral.

Respondent SAWADJAANs reprehensible act is further aggravated when he failed to


check and verify from the Registry of Deeds of Marikina the authenticity of the
property located at Mayamot, Antipolo, Rizal covered by TCT No. N-130671 and
which is one of the properties offered as collateral by CAMEC for its P5 Million loan
in 1988. If he only visited and verified with the Register of Deeds of Marikina the
authenticity of TCT No. N-130671 he could have easily discovered that TCT No. N-
130671 is fake and the property described therein non-existent.

...

This notwithstanding, respondent cannot escape liability. As adverted to earlier, his


failure to perform his official duties resulted to the prejudice and substantial damage
to the ISLAMIC BANK for which he should be held liable for the administrative
offense of CONDUCT PREJUDICIAL TO THE BEST INTEREST OF THE
SERVICE. [49]

From the foregoing, we find that the CSC and the court a quo committed no
grave abuse of discretion when they sustained Sawadjaans dismissal from
service. Grave abuse of discretion implies such capricious and whimsical
exercise of judgment as equivalent to lack of jurisdiction, or, in other words,
where the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility, and it must be so patent and gross as to amount
to an evasion of positive duty or to a virtual refusal to perform the duty enjoined
or to act at all in contemplation of law. The records show that the respondents
[50]

did none of these; they acted in accordance with the law.


WHEREFORE, the petition is DISMISSED. The Decision of the Court of
Appeals of 30 March 1999 affirming Resolutions No. 94-4483 and No. 95-2754
of the Civil Service Commission, and its Resolution of 15 December 1999 are
hereby AFFIRMED. Costs against the petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 84197 July 28, 1989

PIONEER INSURANCE & SURETY CORPORATION, petitioner,


vs.
THE HON. COURT OF APPEALS, BORDER MACHINERY & HEAVY EQUIPMENT, INC.,
(BORMAHECO), CONSTANCIO M. MAGLANA and JACOB S. LIM, respondents.

G.R. No. 84157 July 28, 1989

JACOB S. LIM, petitioner,


vs.
COURT OF APPEALS, PIONEER INSURANCE AND SURETY CORPORATION, BORDER
MACHINERY and HEAVY EQUIPMENT CO., INC,, FRANCISCO and MODESTO CERVANTES
and CONSTANCIO MAGLANA, respondents.

Eriberto D. Ignacio for Pioneer Insurance & Surety Corporation.

Sycip, Salazar, Hernandez & Gatmaitan for Jacob S. Lim.

Renato J. Robles for BORMAHECO, Inc. and Cervanteses.

Leonardo B. Lucena for Constancio Maglana.

GUTIERREZ, JR., J.:

The subject matter of these consolidated petitions is the decision of the Court of Appeals in CA-G.R.
CV No. 66195 which modified the decision of the then Court of First Instance of Manila in Civil Case
No. 66135. The plaintiffs complaint (petitioner in G.R. No. 84197) against all defendants
(respondents in G.R. No. 84197) was dismissed but in all other respects the trial court's decision
was affirmed.

The dispositive portion of the trial court's decision reads as follows:

WHEREFORE, judgment is rendered against defendant Jacob S. Lim requiring Lim


to pay plaintiff the amount of P311,056.02, with interest at the rate of 12% per annum
compounded monthly; plus 15% of the amount awarded to plaintiff as attorney's fees
from July 2,1966, until full payment is made; plus P70,000.00 moral and exemplary
damages.

It is found in the records that the cross party plaintiffs incurred additional
miscellaneous expenses aside from Pl51,000.00,,making a total of P184,878.74.
Defendant Jacob S. Lim is further required to pay cross party plaintiff, Bormaheco,
the Cervanteses one-half and Maglana the other half, the amount of Pl84,878.74 with
interest from the filing of the cross-complaints until the amount is fully paid; plus
moral and exemplary damages in the amount of P184,878.84 with interest from the
filing of the cross-complaints until the amount is fully paid; plus moral and exemplary
damages in the amount of P50,000.00 for each of the two Cervanteses.

Furthermore, he is required to pay P20,000.00 to Bormaheco and the Cervanteses,


and another P20,000.00 to Constancio B. Maglana as attorney's fees.

xxx xxx xxx

WHEREFORE, in view of all above, the complaint of plaintiff Pioneer against


defendants Bormaheco, the Cervanteses and Constancio B. Maglana, is dismissed.
Instead, plaintiff is required to indemnify the defendants Bormaheco and the
Cervanteses the amount of P20,000.00 as attorney's fees and the amount of
P4,379.21, per year from 1966 with legal rate of interest up to the time it is paid.

Furthermore, the plaintiff is required to pay Constancio B. Maglana the amount of


P20,000.00 as attorney's fees and costs.

No moral or exemplary damages is awarded against plaintiff for this action was filed
in good faith. The fact that the properties of the Bormaheco and the Cervanteses
were attached and that they were required to file a counterbond in order to dissolve
the attachment, is not an act of bad faith. When a man tries to protect his rights, he
should not be saddled with moral or exemplary damages. Furthermore, the rights
exercised were provided for in the Rules of Court, and it was the court that ordered it,
in the exercise of its discretion.

No damage is decided against Malayan Insurance Company, Inc., the third-party


defendant, for it only secured the attachment prayed for by the plaintiff Pioneer. If an
insurance company would be liable for damages in performing an act which is clearly
within its power and which is the reason for its being, then nobody would engage in
the insurance business. No further claim or counter-claim for or against anybody is
declared by this Court. (Rollo - G.R. No. 24197, pp. 15-16)

In 1965, Jacob S. Lim (petitioner in G.R. No. 84157) was engaged in the airline business as owner-
operator of Southern Air Lines (SAL) a single proprietorship.

On May 17, 1965, at Tokyo, Japan, Japan Domestic Airlines (JDA) and Lim entered into and
executed a sales contract (Exhibit A) for the sale and purchase of two (2) DC-3A Type aircrafts and
one (1) set of necessary spare parts for the total agreed price of US $109,000.00 to be paid in
installments. One DC-3 Aircraft with Registry No. PIC-718, arrived in Manila on June 7,1965 while
the other aircraft, arrived in Manila on July 18,1965.
On May 22, 1965, Pioneer Insurance and Surety Corporation (Pioneer, petitioner in G.R. No. 84197)
as surety executed and issued its Surety Bond No. 6639 (Exhibit C) in favor of JDA, in behalf of its
principal, Lim, for the balance price of the aircrafts and spare parts.

It appears that Border Machinery and Heavy Equipment Company, Inc. (Bormaheco), Francisco and
Modesto Cervantes (Cervanteses) and Constancio Maglana (respondents in both petitions)
contributed some funds used in the purchase of the above aircrafts and spare parts. The funds were
supposed to be their contributions to a new corporation proposed by Lim to expand his airline
business. They executed two (2) separate indemnity agreements (Exhibits D-1 and D-2) in favor of
Pioneer, one signed by Maglana and the other jointly signed by Lim for SAL, Bormaheco and the
Cervanteses. The indemnity agreements stipulated that the indemnitors principally agree and bind
themselves jointly and severally to indemnify and hold and save harmless Pioneer from and against
any/all damages, losses, costs, damages, taxes, penalties, charges and expenses of whatever kind
and nature which Pioneer may incur in consequence of having become surety upon the bond/note
and to pay, reimburse and make good to Pioneer, its successors and assigns, all sums and amounts
of money which it or its representatives should or may pay or cause to be paid or become liable to
pay on them of whatever kind and nature.

On June 10, 1965, Lim doing business under the name and style of SAL executed in favor of
Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former. It
was stipulated therein that Lim transfer and convey to the surety the two aircrafts. The deed (Exhibit
D) was duly registered with the Office of the Register of Deeds of the City of Manila and with the
Civil Aeronautics Administration pursuant to the Chattel Mortgage Law and the Civil Aeronautics Law
(Republic Act No. 776), respectively.

Lim defaulted on his subsequent installment payments prompting JDA to request payments from the
surety. Pioneer paid a total sum of P298,626.12.

Pioneer then filed a petition for the extrajudicial foreclosure of the said chattel mortgage before the
Sheriff of Davao City. The Cervanteses and Maglana, however, filed a third party claim alleging that
they are co-owners of the aircrafts,

On July 19, 1966, Pioneer filed an action for judicial foreclosure with an application for a writ of
preliminary attachment against Lim and respondents, the Cervanteses, Bormaheco and Maglana.

In their Answers, Maglana, Bormaheco and the Cervanteses filed cross-claims against Lim alleging
that they were not privies to the contracts signed by Lim and, by way of counterclaim, sought for
damages for being exposed to litigation and for recovery of the sums of money they advanced to Lim
for the purchase of the aircrafts in question.

After trial on the merits, a decision was rendered holding Lim liable to pay Pioneer but dismissed
Pioneer's complaint against all other defendants.

As stated earlier, the appellate court modified the trial court's decision in that the plaintiffs complaint
against all the defendants was dismissed. In all other respects the trial court's decision was affirmed.

We first resolve G.R. No. 84197.

Petitioner Pioneer Insurance and Surety Corporation avers that:


RESPONDENT COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT
DISMISSED THE APPEAL OF PETITIONER ON THE SOLE GROUND THAT
PETITIONER HAD ALREADY COLLECTED THE PROCEEDS OF THE
REINSURANCE ON ITS BOND IN FAVOR OF THE JDA AND THAT IT CANNOT
REPRESENT A REINSURER TO RECOVER THE AMOUNT FROM HEREIN
PRIVATE RESPONDENTS AS DEFENDANTS IN THE TRIAL COURT. (Rollo - G.
R. No. 84197, p. 10)

The petitioner questions the following findings of the appellate court:

We find no merit in plaintiffs appeal. It is undisputed that plaintiff Pioneer had


reinsured its risk of liability under the surety bond in favor of JDA and subsequently
collected the proceeds of such reinsurance in the sum of P295,000.00. Defendants'
alleged obligation to Pioneer amounts to P295,000.00, hence, plaintiffs instant action
for the recovery of the amount of P298,666.28 from defendants will no longer
prosper. Plaintiff Pioneer is not the real party in interest to institute the instant action
as it does not stand to be benefited or injured by the judgment.

Plaintiff Pioneer's contention that it is representing the reinsurer to recover the


amount from defendants, hence, it instituted the action is utterly devoid of merit.
Plaintiff did not even present any evidence that it is the attorney-in-fact of the
reinsurance company, authorized to institute an action for and in behalf of the latter.
To qualify a person to be a real party in interest in whose name an action must be
prosecuted, he must appear to be the present real owner of the right sought to be
enforced (Moran, Vol. I, Comments on the Rules of Court, 1979 ed., p. 155). It has
been held that the real party in interest is the party who would be benefited or injured
by the judgment or the party entitled to the avails of the suit (Salonga v. Warner
Barnes & Co., Ltd., 88 Phil. 125, 131). By real party in interest is meant a present
substantial interest as distinguished from a mere expectancy or a future, contingent,
subordinate or consequential interest (Garcia v. David, 67 Phil. 27; Oglleaby v.
Springfield Marine Bank, 52 N.E. 2d 1600, 385 III, 414; Flowers v. Germans, 1 NW
2d 424; Weber v. City of Cheye, 97 P. 2d 667, 669, quoting 47 C.V. 35).

Based on the foregoing premises, plaintiff Pioneer cannot be considered as the real
party in interest as it has already been paid by the reinsurer the sum of P295,000.00
— the bulk of defendants' alleged obligation to Pioneer.

In addition to the said proceeds of the reinsurance received by plaintiff Pioneer from
its reinsurer, the former was able to foreclose extra-judicially one of the subject
airplanes and its spare engine, realizing the total amount of P37,050.00 from the sale
of the mortgaged chattels. Adding the sum of P37,050.00, to the proceeds of the
reinsurance amounting to P295,000.00, it is patent that plaintiff has been overpaid in
the amount of P33,383.72 considering that the total amount it had paid to JDA totals
to only P298,666.28. To allow plaintiff Pioneer to recover from defendants the
amount in excess of P298,666.28 would be tantamount to unjust enrichment as it has
already been paid by the reinsurance company of the amount plaintiff has paid to
JDA as surety of defendant Lim vis-a-vis defendant Lim's liability to JDA. Well settled
is the rule that no person should unjustly enrich himself at the expense of another
(Article 22, New Civil Code). (Rollo-84197, pp. 24-25).

The petitioner contends that-(1) it is at a loss where respondent court based its finding that petitioner
was paid by its reinsurer in the aforesaid amount, as this matter has never been raised by any of the
parties herein both in their answers in the court below and in their respective briefs with respondent
court; (Rollo, p. 11) (2) even assuming hypothetically that it was paid by its reinsurer, still none of the
respondents had any interest in the matter since the reinsurance is strictly between the petitioner
and the re-insurer pursuant to section 91 of the Insurance Code; (3) pursuant to the indemnity
agreements, the petitioner is entitled to recover from respondents Bormaheco and Maglana; and (4)
the principle of unjust enrichment is not applicable considering that whatever amount he would
recover from the co-indemnitor will be paid to the reinsurer.

The records belie the petitioner's contention that the issue on the reinsurance money was never
raised by the parties.

A cursory reading of the trial court's lengthy decision shows that two of the issues threshed out were:

xxx xxx xxx

1. Has Pioneer a cause of action against defendants with respect to so much of its
obligations to JDA as has been paid with reinsurance money?

2. If the answer to the preceding question is in the negative, has Pioneer still any
claim against defendants, considering the amount it has realized from the sale of the
mortgaged properties? (Record on Appeal, p. 359, Annex B of G.R. No. 84157).

In resolving these issues, the trial court made the following findings:

It appearing that Pioneer reinsured its risk of liability under the surety bond it had
executed in favor of JDA, collected the proceeds of such reinsurance in the sum of
P295,000, and paid with the said amount the bulk of its alleged liability to JDA under
the said surety bond, it is plain that on this score it no longer has any right to collect
to the extent of the said amount.

On the question of why it is Pioneer, instead of the reinsurance (sic), that is suing
defendants for the amount paid to it by the reinsurers, notwithstanding that the cause
of action pertains to the latter, Pioneer says: The reinsurers opted instead that the
Pioneer Insurance & Surety Corporation shall pursue alone the case.. . . . Pioneer
Insurance & Surety Corporation is representing the reinsurers to recover the amount.'
In other words, insofar as the amount paid to it by the reinsurers Pioneer is suing
defendants as their attorney-in-fact.

But in the first place, there is not the slightest indication in the complaint that Pioneer
is suing as attorney-in- fact of the reinsurers for any amount. Lastly, and most
important of all, Pioneer has no right to institute and maintain in its own name an
action for the benefit of the reinsurers. It is well-settled that an action brought by an
attorney-in-fact in his own name instead of that of the principal will not prosper, and
this is so even where the name of the principal is disclosed in the complaint.

Section 2 of Rule 3 of the Old Rules of Court provides that 'Every


action must be prosecuted in the name of the real party in interest.'
This provision is mandatory. The real party in interest is the party who
would be benefitted or injured by the judgment or is the party entitled
to the avails of the suit.
This Court has held in various cases that an attorney-in-fact is not a
real party in interest, that there is no law permitting an action to be
brought by an attorney-in-fact. Arroyo v. Granada and Gentero, 18
Phil. Rep. 484; Luchauco v. Limjuco and Gonzalo, 19 Phil. Rep. 12;
Filipinos Industrial Corporation v. San Diego G.R. No. L- 22347,1968,
23 SCRA 706, 710-714.

The total amount paid by Pioneer to JDA is P299,666.29. Since Pioneer has
collected P295,000.00 from the reinsurers, the uninsured portion of what it paid to
JDA is the difference between the two amounts, or P3,666.28. This is the amount for
which Pioneer may sue defendants, assuming that the indemnity agreement is still
valid and effective. But since the amount realized from the sale of the mortgaged
chattels are P35,000.00 for one of the airplanes and P2,050.00 for a spare engine, or
a total of P37,050.00, Pioneer is still overpaid by P33,383.72. Therefore, Pioneer has
no more claim against defendants. (Record on Appeal, pp. 360-363).

The payment to the petitioner made by the reinsurers was not disputed in the appellate court.
Considering this admitted payment, the only issue that cropped up was the effect of payment made
by the reinsurers to the petitioner. Therefore, the petitioner's argument that the respondents had no
interest in the reinsurance contract as this is strictly between the petitioner as insured and the
reinsuring company pursuant to Section 91 (should be Section 98) of the Insurance Code has no
basis.

In general a reinsurer, on payment of a loss acquires the same rights by subrogation


as are acquired in similar cases where the original insurer pays a loss (Universal Ins.
Co. v. Old Time Molasses Co. C.C.A. La., 46 F 2nd 925).

The rules of practice in actions on original insurance policies are in general


applicable to actions or contracts of reinsurance. (Delaware, Ins. Co. v. Pennsylvania
Fire Ins. Co., 55 S.E. 330,126 GA. 380, 7 Ann. Con. 1134).

Hence the applicable law is Article 2207 of the new Civil Code, to wit:

Art. 2207. If the plaintiffs property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the rights of
the insured against the wrongdoer or the person who has violated the contract. If the
amount paid by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person causing
the loss or injury.

Interpreting the aforesaid provision, we ruled in the case of Phil. Air Lines, Inc. v. Heald Lumber Co.
(101 Phil. 1031 [1957]) which we subsequently applied in Manila Mahogany Manufacturing
Corporation v. Court of Appeals (154 SCRA 650 [1987]):

Note that if a property is insured and the owner receives the indemnity from the
insurer, it is provided in said article that the insurer is deemed subrogated to the
rights of the insured against the wrongdoer and if the amount paid by the insurer
does not fully cover the loss, then the aggrieved party is the one entitled to recover
the deficiency. Evidently, under this legal provision, the real party in interest with
regard to the portion of the indemnity paid is the insurer and not the insured.
(Emphasis supplied).
It is clear from the records that Pioneer sued in its own name and not as an attorney-in-fact of the
reinsurer.

Accordingly, the appellate court did not commit a reversible error in dismissing the petitioner's
complaint as against the respondents for the reason that the petitioner was not the real party in
interest in the complaint and, therefore, has no cause of action against the respondents.

Nevertheless, the petitioner argues that the appeal as regards the counter indemnitors should not
have been dismissed on the premise that the evidence on record shows that it is entitled to recover
from the counter indemnitors. It does not, however, cite any grounds except its allegation that
respondent "Maglanas defense and evidence are certainly incredible" (p. 12, Rollo) to back up its
contention.

On the other hand, we find the trial court's findings on the matter replete with evidence to
substantiate its finding that the counter-indemnitors are not liable to the petitioner. The trial court
stated:

Apart from the foregoing proposition, the indemnity agreement ceased to be valid
and effective after the execution of the chattel mortgage.

Testimonies of defendants Francisco Cervantes and Modesto Cervantes.

Pioneer Insurance, knowing the value of the aircrafts and the spare parts involved,
agreed to issue the bond provided that the same would be mortgaged to it, but this
was not possible because the planes were still in Japan and could not be mortgaged
here in the Philippines. As soon as the aircrafts were brought to the Philippines, they
would be mortgaged to Pioneer Insurance to cover the bond, and this indemnity
agreement would be cancelled.

The following is averred under oath by Pioneer in the original complaint:

The various conflicting claims over the mortgaged properties have


impaired and rendered insufficient the security under the chattel
mortgage and there is thus no other sufficient security for the claim
sought to be enforced by this action.

This is judicial admission and aside from the chattel mortgage there is no other
security for the claim sought to be enforced by this action, which necessarily means
that the indemnity agreement had ceased to have any force and effect at the time
this action was instituted. Sec 2, Rule 129, Revised Rules of Court.

Prescinding from the foregoing, Pioneer, having foreclosed the chattel mortgage on
the planes and spare parts, no longer has any further action against the defendants
as indemnitors to recover any unpaid balance of the price. The indemnity agreement
was ipso jure extinguished upon the foreclosure of the chattel mortgage. These
defendants, as indemnitors, would be entitled to be subrogated to the right of Pioneer
should they make payments to the latter. Articles 2067 and 2080 of the New Civil
Code of the Philippines.

Independently of the preceding proposition Pioneer's election of the remedy of


foreclosure precludes any further action to recover any unpaid balance of the price.
SAL or Lim, having failed to pay the second to the eight and last installments to JDA
and Pioneer as surety having made of the payments to JDA, the alternative remedies
open to Pioneer were as provided in Article 1484 of the New Civil Code, known as
the Recto Law.

Pioneer exercised the remedy of foreclosure of the chattel mortgage both by


extrajudicial foreclosure and the instant suit. Such being the case, as provided by the
aforementioned provisions, Pioneer shall have no further action against the
purchaser to recover any unpaid balance and any agreement to the contrary is void.'
Cruz, et al. v. Filipinas Investment & Finance Corp. No. L- 24772, May 27,1968, 23
SCRA 791, 795-6.

The operation of the foregoing provision cannot be escaped from through the
contention that Pioneer is not the vendor but JDA. The reason is that Pioneer is
actually exercising the rights of JDA as vendor, having subrogated it in such rights.
Nor may the application of the provision be validly opposed on the ground that these
defendants and defendant Maglana are not the vendee but indemnitors. Pascual, et
al. v. Universal Motors Corporation, G.R. No. L- 27862, Nov. 20,1974, 61 SCRA 124.

The restructuring of the obligations of SAL or Lim, thru the change of their maturity
dates discharged these defendants from any liability as alleged indemnitors. The
change of the maturity dates of the obligations of Lim, or SAL extinguish the original
obligations thru novations thus discharging the indemnitors.

The principal hereof shall be paid in eight equal successive three


months interval installments, the first of which shall be due and
payable 25 August 1965, the remainder of which ... shall be due and
payable on the 26th day x x x of each succeeding three months and
the last of which shall be due and payable 26th May 1967.

However, at the trial of this case, Pioneer produced a memorandum executed by


SAL or Lim and JDA, modifying the maturity dates of the obligations, as follows:

The principal hereof shall be paid in eight equal successive three


month interval installments the first of which shall be due and payable
4 September 1965, the remainder of which ... shall be due and
payable on the 4th day ... of each succeeding months and the last of
which shall be due and payable 4th June 1967.

Not only that, Pioneer also produced eight purported promissory notes bearing
maturity dates different from that fixed in the aforesaid memorandum; the due date of
the first installment appears as October 15, 1965, and those of the rest of the
installments, the 15th of each succeeding three months, that of the last installment
being July 15, 1967.

These restructuring of the obligations with regard to their maturity dates, effected
twice, were done without the knowledge, much less, would have it believed that
these defendants Maglana (sic). Pioneer's official Numeriano Carbonel would have it
believed that these defendants and defendant Maglana knew of and consented to
the modification of the obligations. But if that were so, there would have been the
corresponding documents in the form of a written notice to as well as written
conformity of these defendants, and there are no such document. The consequence
of this was the extinguishment of the obligations and of the surety bond secured by
the indemnity agreement which was thereby also extinguished. Applicable by
analogy are the rulings of the Supreme Court in the case of Kabankalan Sugar Co. v.
Pacheco, 55 Phil. 553, 563, and the case of Asiatic Petroleum Co. v. Hizon David, 45
Phil. 532, 538.

Art. 2079. An extension granted to the debtor by the creditor without


the consent of the guarantor extinguishes the guaranty The mere
failure on the part of the creditor to demand payment after the debt
has become due does not of itself constitute any extension time
referred to herein, (New Civil Code).'

Manresa, 4th ed., Vol. 12, pp. 316-317, Vol. VI, pp. 562-563, M.F. Stevenson & Co.,
Ltd., v. Climacom et al. (C.A.) 36 O.G. 1571.

Pioneer's liability as surety to JDA had already prescribed when Pioneer paid the
same. Consequently, Pioneer has no more cause of action to recover from these
defendants, as supposed indemnitors, what it has paid to JDA. By virtue of an
express stipulation in the surety bond, the failure of JDA to present its claim to
Pioneer within ten days from default of Lim or SAL on every installment, released
Pioneer from liability from the claim.

Therefore, Pioneer is not entitled to exact reimbursement from these defendants thru
the indemnity.

Art. 1318. Payment by a solidary debtor shall not entitle him to


reimbursement from his co-debtors if such payment is made after the
obligation has prescribed or became illegal.

These defendants are entitled to recover damages and attorney's fees from Pioneer
and its surety by reason of the filing of the instant case against them and the
attachment and garnishment of their properties. The instant action is clearly
unfounded insofar as plaintiff drags these defendants and defendant Maglana.'
(Record on Appeal, pp. 363-369, Rollo of G.R. No. 84157).

We find no cogent reason to reverse or modify these findings.

Hence, it is our conclusion that the petition in G.R. No. 84197 is not meritorious.

We now discuss the merits of G.R. No. 84157.

Petitioner Jacob S. Lim poses the following issues:

l. What legal rules govern the relationship among co-investors whose agreement was
to do business through the corporate vehicle but who failed to incorporate the entity
in which they had chosen to invest? How are the losses to be treated in situations
where their contributions to the intended 'corporation' were invested not through the
corporate form? This Petition presents these fundamental questions which we
believe were resolved erroneously by the Court of Appeals ('CA'). (Rollo, p. 6).
These questions are premised on the petitioner's theory that as a result of the failure of respondents
Bormaheco, Spouses Cervantes, Constancio Maglana and petitioner Lim to incorporate, a de
facto partnership among them was created, and that as a consequence of such relationship all must
share in the losses and/or gains of the venture in proportion to their contribution. The petitioner,
therefore, questions the appellate court's findings ordering him to reimburse certain amounts given
by the respondents to the petitioner as their contributions to the intended corporation, to wit:

However, defendant Lim should be held liable to pay his co-defendants' cross-claims
in the total amount of P184,878.74 as correctly found by the trial court, with interest
from the filing of the cross-complaints until the amount is fully paid. Defendant Lim
should pay one-half of the said amount to Bormaheco and the Cervanteses and the
other one-half to defendant Maglana. It is established in the records that defendant
Lim had duly received the amount of Pl51,000.00 from defendants Bormaheco and
Maglana representing the latter's participation in the ownership of the subject
airplanes and spare parts (Exhibit 58). In addition, the cross-party plaintiffs incurred
additional expenses, hence, the total sum of P 184,878.74.

We first state the principles.

While it has been held that as between themselves the rights of the stockholders in a
defectively incorporated association should be governed by the supposed charter
and the laws of the state relating thereto and not by the rules governing partners
(Cannon v. Brush Electric Co., 54 A. 121, 96 Md. 446, 94 Am. S.R. 584), it is
ordinarily held that persons who attempt, but fail, to form a corporation and who carry
on business under the corporate name occupy the position of partners inter se
(Lynch v. Perryman, 119 P. 229, 29 Okl. 615, Ann. Cas. 1913A 1065). Thus, where
persons associate themselves together under articles to purchase property to carry
on a business, and their organization is so defective as to come short of creating a
corporation within the statute, they become in legal effect partners inter se, and their
rights as members of the company to the property acquired by the company will be
recognized (Smith v. Schoodoc Pond Packing Co., 84 A. 268,109 Me. 555; Whipple
v. Parker, 29 Mich. 369). So, where certain persons associated themselves as a
corporation for the development of land for irrigation purposes, and each conveyed
land to the corporation, and two of them contracted to pay a third the difference in the
proportionate value of the land conveyed by him, and no stock was ever issued in the
corporation, it was treated as a trustee for the associates in an action between them
for an accounting, and its capital stock was treated as partnership assets, sold, and
the proceeds distributed among them in proportion to the value of the property
contributed by each (Shorb v. Beaudry, 56 Cal. 446). However, such a relation does
not necessarily exist, for ordinarily persons cannot be made to assume the relation of
partners, as between themselves, when their purpose is that no partnership shall
exist (London Assur. Corp. v. Drennen, Minn., 6 S.Ct. 442, 116 U.S. 461, 472, 29
L.Ed. 688), and it should be implied only when necessary to do justice between the
parties; thus, one who takes no part except to subscribe for stock in a proposed
corporation which is never legally formed does not become a partner with other
subscribers who engage in business under the name of the pretended corporation,
so as to be liable as such in an action for settlement of the alleged partnership and
contribution (Ward v. Brigham, 127 Mass. 24). A partnership relation between certain
stockholders and other stockholders, who were also directors, will not be implied in
the absence of an agreement, so as to make the former liable to contribute for
payment of debts illegally contracted by the latter (Heald v. Owen, 44 N.W. 210, 79
Iowa 23). (Corpus Juris Secundum, Vol. 68, p. 464). (Italics supplied).
In the instant case, it is to be noted that the petitioner was declared non-suited for his failure to
appear during the pretrial despite notification. In his answer, the petitioner denied having received
any amount from respondents Bormaheco, the Cervanteses and Maglana. The trial court and the
appellate court, however, found through Exhibit 58, that the petitioner received the amount of
P151,000.00 representing the participation of Bormaheco and Atty. Constancio B. Maglana in the
ownership of the subject airplanes and spare parts. The record shows that defendant Maglana gave
P75,000.00 to petitioner Jacob Lim thru the Cervanteses.

It is therefore clear that the petitioner never had the intention to form a corporation with the
respondents despite his representations to them. This gives credence to the cross-claims of the
respondents to the effect that they were induced and lured by the petitioner to make contributions to
a proposed corporation which was never formed because the petitioner reneged on their agreement.
Maglana alleged in his cross-claim:

... that sometime in early 1965, Jacob Lim proposed to Francisco Cervantes and
Maglana to expand his airline business. Lim was to procure two DC-3's from Japan
and secure the necessary certificates of public convenience and necessity as well as
the required permits for the operation thereof. Maglana sometime in May 1965, gave
Cervantes his share of P75,000.00 for delivery to Lim which Cervantes did and Lim
acknowledged receipt thereof. Cervantes, likewise, delivered his share of the
undertaking. Lim in an undertaking sometime on or about August 9,1965, promised
to incorporate his airline in accordance with their agreement and proceeded to
acquire the planes on his own account. Since then up to the filing of this answer, Lim
has refused, failed and still refuses to set up the corporation or return the money of
Maglana. (Record on Appeal, pp. 337-338).

while respondents Bormaheco and the Cervanteses alleged in their answer, counterclaim, cross-
claim and third party complaint:

Sometime in April 1965, defendant Lim lured and induced the answering defendants
to purchase two airplanes and spare parts from Japan which the latter considered as
their lawful contribution and participation in the proposed corporation to be known as
SAL. Arrangements and negotiations were undertaken by defendant Lim. Down
payments were advanced by defendants Bormaheco and the Cervanteses and
Constancio Maglana (Exh. E- 1). Contrary to the agreement among the defendants,
defendant Lim in connivance with the plaintiff, signed and executed the alleged
chattel mortgage and surety bond agreement in his personal capacity as the alleged
proprietor of the SAL. The answering defendants learned for the first time of this
trickery and misrepresentation of the other, Jacob Lim, when the herein plaintiff
chattel mortgage (sic) allegedly executed by defendant Lim, thereby forcing them to
file an adverse claim in the form of third party claim. Notwithstanding repeated oral
demands made by defendants Bormaheco and Cervanteses, to defendant Lim, to
surrender the possession of the two planes and their accessories and or return the
amount advanced by the former amounting to an aggregate sum of P 178,997.14 as
evidenced by a statement of accounts, the latter ignored, omitted and refused to
comply with them. (Record on Appeal, pp. 341-342).

Applying therefore the principles of law earlier cited to the facts of the case, necessarily, no de facto
partnership was created among the parties which would entitle the petitioner to a reimbursement of
the supposed losses of the proposed corporation. The record shows that the petitioner was acting on
his own and not in behalf of his other would-be incorporators in transacting the sale of the airplanes
and spare parts.
WHEREFORE, the instant petitions are DISMISSED. The questioned decision of the Court of
Appeals is AFFIRMED.

SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 156759 June 5, 2013

ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS ALBANO, LILY REYES, JANET
BAY, JESUS R. GALANG, AND RANDY HAGOS, Petitioners,
vs.
FRANCISCO R. CO, JR., Respondent.

DECISION

BERSAMIN, J.:

To warrant the substituted service of the summons and copy of the complaint, the serving officer
must first attempt to effect the same upon the defendant in person. Only after the attempt at
personal service has become futile or impossible within a reasonable time may the officer resort to
substituted service.

The Case

Petitioners – defendants in a suit for libel brought by respondent – appeal the decision promulgated
on March 8, 20021 and the resolution promulgated on January 13, 2003,2 whereby the Court of
Appeals (CA) respectively dismissed their petition for certiorari, prohibition and mandamus and
denied their motion for reconsideration. Thereby, the CA upheld the order the Regional Trial Court
(RTC), Branch 51, in Manila had issued on March 12, 2001 denying their motion to dismiss because
the substituted service of the summons and copies of the complaint on each of them had been valid
and effective.3

Antecedents

On July 3, 2000, respondent, a retired police officer assigned at the Western Police District in
Manila, sued Abante Tonite, a daily tabloid of general circulation; its Publisher Allen A. Macasaet; its
Managing Director Nicolas V. Quijano; its Circulation Manager Isaias Albano; its Editors Janet Bay,
Jesus R. Galang and Randy Hagos; and its Columnist/Reporter Lily Reyes (petitioners), claiming
damages because of an allegedly libelous article petitioners published in the June 6, 2000 issue of
Abante Tonite. The suit, docketed as Civil Case No. 00-97907, was raffled to Branch 51 of the RTC,
which in due course issued summons to be served on each defendant, including Abante Tonite, at
their business address at Monica Publishing Corporation, 301-305 3rd Floor, BF Condominium
Building, Solana Street corner A. Soriano Street, Intramuros, Manila.4

In the morning of September 18, 2000, RTC Sheriff Raul Medina proceeded to the stated address to
effect the personal service of the summons on the defendants. But his efforts to personally serve
each defendant in the address were futile because the defendants were then out of the office and
unavailable. He returned in the afternoon of that day to make a second attempt at serving the
summons, but he was informed that petitioners were still out of the office. He decided to resort to
substituted service of the summons, and explained why in his sheriff’s return dated September 22,
2005,5 to wit:

SHERIFF’S RETURN

This is to certify that on September 18, 2000, I caused the service of summons together with copies
of complaint and its annexes attached thereto, upon the following:

1. Defendant Allen A. Macasaet, President/Publisher of defendant AbanteTonite, at Monica


Publishing Corporation, Rooms 301-305 3rd Floor, BF Condominium Building, Solana corner
A. Soriano Streets, Intramuros, Manila, thru his secretary Lu-Ann Quijano, a person of
sufficient age and discretion working therein, who signed to acknowledge receipt thereof.
That effort (sic) to serve the said summons personally upon said defendant were made, but
the same were ineffectual and unavailing on the ground that per information of Ms. Quijano
said defendant is always out and not available, thus, substituted service was applied;

2. Defendant Nicolas V. Quijano, at the same address, thru his wife Lu-Ann Quijano, who
signed to acknowledge receipt thereof. That effort (sic) to serve the said summons
personally upon said defendant were made, but the same were ineffectual and unavailing on
the ground that per information of (sic) his wife said defendant is always out and not
available, thus, substituted service was applied;

3. Defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos and Lily Reyes, at
the same address, thru Rene Esleta, Editorial Assistant of defendant AbanteTonite, a person
of sufficient age and discretion working therein who signed to acknowledge receipt thereof.
That effort (sic) to serve the said summons personally upon said defendants were made, but
the same were ineffectual and unavailing on the ground that per information of (sic) Mr.
Esleta said defendants is (sic) always roving outside and gathering news, thus, substituted
service was applied.

Original copy of summons is therefore, respectfully returned duly served.

Manila, September 22, 2000.

On October 3, 2000, petitioners moved for the dismissal of the complaint through counsel’s special
appearance in their behalf, alleging lack of jurisdiction over their persons because of the invalid and
ineffectual substituted service of summons. They contended that the sheriff had made no prior
attempt to serve the summons personally on each of them in accordance with Section 6 and Section
7, Rule 14 of the Rules of Court. They further moved to drop Abante Tonite as a defendant by virtue
of its being neither a natural nor a juridical person that could be impleaded as a party in a civil action.

At the hearing of petitioners’ motion to dismiss, Medina testified that he had gone to the office
address of petitioners in the morning of September 18, 2000 to personally serve the summons on
each defendant; that petitioners were out of the office at the time; that he had returned in the
afternoon of the same day to again attempt to serve on each defendant personally but his attempt
had still proved futile because all of petitioners were still out of the office; that some competent
persons working in petitioners’ office had informed him that Macasaet and Quijano were always out
and unavailable, and that Albano, Bay, Galang, Hagos and Reyes were always out roving to gather
news; and that he had then resorted to substituted service upon realizing the impossibility of his
finding petitioners in person within a reasonable time.

On March 12, 2001, the RTC denied the motion to dismiss, and directed petitioners to file their
answers to the complaint within the remaining period allowed by the Rules of Court,6 relevantly
stating:

Records show that the summonses were served upon Allen A. Macasaet, President/Publisher of
defendant AbanteTonite, through LuAnn Quijano; upon defendants Isaias Albano, Janet Bay, Jesus
R. Galang, Randy Hagos and Lily Reyes, through Rene Esleta, Editorial Assistant of defendant
Abante Tonite (p. 12, records). It is apparent in the Sheriff’s Return that on several occasions, efforts
to served (sic) the summons personally upon all the defendants were ineffectual as they were
always out and unavailable, so the Sheriff served the summons by substituted service.

Considering that summonses cannot be served within a reasonable time to the persons of all the
defendants, hence substituted service of summonses was validly applied. Secretary of the President
who is duly authorized to receive such document, the wife of the defendant and the Editorial
Assistant of the defendant, were considered competent persons with sufficient discretion to realize
the importance of the legal papers served upon them and to relay the same to the defendants
named therein (Sec. 7, Rule 14, 1997 Rules of Civil Procedure).

WHEREFORE, in view of the foregoing, the Motion to Dismiss is hereby DENIED for lack of merit..

Accordingly, defendants are directed to file their Answers to the complaint within the period still open
to them, pursuant to the rules.

SO ORDERED.

Petitioners filed a motion for reconsideration, asserting that the sheriff had immediately resorted to
substituted service of the summons upon being informed that they were not around to personally
receive the summons, and that Abante Tonite, being neither a natural nor a juridical person, could
not be made a party in the action.

On June 29, 2001, the RTC denied petitioners’ motion for reconsideration.7 It stated in respect of the
service of summons, as follows:

The allegations of the defendants that the Sheriff immediately resorted to substituted service of
summons upon them when he was informed that they were not around to personally receive the
same is untenable. During the hearing of the herein motion, Sheriff Raul Medina of this Branch of the
Court testified that on September 18, 2000 in the morning, he went to the office address of the
defendants to personally serve summons upon them but they were out. So he went back to serve
said summons upon the defendants in the afternoon of the same day, but then again he was
informed that the defendants were out and unavailable, and that they were always out because they
were roving around to gather news. Because of that information and because of the nature of the
work of the defendants that they are always on field, so the sheriff resorted to substituted service of
summons. There was substantial compliance with the rules, considering the difficulty to serve the
summons personally to them because of the nature of their job which compels them to be always out
and unavailable. Additional matters regarding the service of summons upon defendants were
sufficiently discussed in the Order of this Court dated March 12, 2001.

Regarding the impleading of Abante Tonite as defendant, the RTC held, viz:
"Abante Tonite" is a daily tabloid of general circulation. People all over the country could buy a copy
of "Abante Tonite" and read it, hence, it is for public consumption. The persons who organized said
publication obviously derived profit from it. The information written on the said newspaper will affect
the person, natural as well as juridical, who was stated or implicated in the news. All of these facts
imply that "Abante Tonite" falls within the provision of Art. 44 (2 or 3), New Civil Code. Assuming
arguendo that "Abante Tonite" is not registered with the Securities and Exchange Commission, it is
deemed a corporation by estoppels considering that it possesses attributes of a juridical person,
otherwise it cannot be held liable for damages and injuries it may inflict to other persons.

Undaunted, petitioners brought a petition for certiorari, prohibition, mandamusin the CA to nullify the
orders of the RTC dated March 12, 2001 and June 29, 2001.

Ruling of the CA

On March 8, 2002, the CA promulgated its questioned decision,8 dismissing the petition for certiorari,
prohibition, mandamus, to wit:

We find petitioners’ argument without merit. The rule is that certiorari will prosper only if there is a
showing of grave abuse of discretion or an act without or in excess of jurisdiction committed by the
respondent Judge. A judicious reading of the questioned orders of respondent Judge would show
that the same were not issued in a capricious or whimsical exercise of judgment. There are factual
bases and legal justification for the assailed orders. From the Return, the sheriff certified that "effort
to serve the summons personally xxx were made, but the same were ineffectual and unavailing xxx.

and upholding the trial court’s finding that there was a substantial compliance with the rules that
allowed the substituted service.

Furthermore, the CA ruled:

Anent the issue raised by petitioners that "Abante Tonite is neither a natural or juridical person who
may be a party in a civil case," and therefore the case against it must be dismissed and/or dropped,
is untenable.

The respondent Judge, in denying petitioners’ motion for reconsideration, held that:

xxxx

Abante Tonite’s newspapers are circulated nationwide, showing ostensibly its being a corporate
entity, thus the doctrine of corporation by estoppel may appropriately apply.

An unincorporated association, which represents itself to be a corporation, will be estopped from


denying its corporate capacity in a suit against it by a third person who relies in good faith on such
representation.

There being no grave abuse of discretion committed by the respondent Judge in the exercise of his
jurisdiction, the relief of prohibition is also unavailable.

WHEREFORE, the instant petition is DENIED. The assailed Orders of respondent Judge are
AFFIRMED.

SO ORDERED.9
On January 13, 2003, the CA denied petitioners’ motion for reconsideration.10

Issues

Petitioners hereby submit that:

1. THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING THAT THE


TRIAL COURT ACQUIRED JURISDICTION OVER HEREIN PETITIONERS.

2. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR BY SUSTAINING THE


INCLUSION OF ABANTE TONITE AS PARTY IN THE INSTANT CASE.11

Ruling

The petition for review lacks merit.

Jurisdiction over the person, or jurisdiction in personam –the power of the court to render a personal
judgment or to subject the parties in a particular action to the judgment and other rulings rendered in
the action – is an element of due process that is essential in all actions, civil as well as criminal,
except in actions in rem or quasi in rem. Jurisdiction over the defendantin an action in rem or quasi
in rem is not required, and the court acquires jurisdiction over an actionas long as it acquires
jurisdiction over the resthat is thesubject matter of the action. The purpose of summons in such
action is not the acquisition of jurisdiction over the defendant but mainly to satisfy the constitutional
requirement of due process.12

The distinctions that need to be perceived between an action in personam, on the one hand, and an
action inrem or quasi in rem, on the other hand, are aptly delineated in Domagas v. Jensen,13 thusly:

The settled rule is that the aim and object of an action determine its character. Whether a
proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its nature and
purpose, and by these only. A proceeding in personam is a proceeding to enforce personal rights
and obligations brought against the person and is based on the jurisdiction of the person, although it
may involve his right to, or the exercise of ownership of, specific property, or seek to compel him to
control or dispose of it in accordance with the mandate of the court. The purpose of a proceeding in
personam is to impose, through the judgment of a court, some responsibility or liability directly upon
the person of the defendant. Of this character are suits to compel a defendant to specifically perform
some act or actions to fasten a pecuniary liability on him. An action in personam is said to be one
which has for its object a judgment against the person, as distinguished from a judgment against the
property to determine its state. It has been held that an action in personam is a proceeding to
enforce personal rights or obligations; such action is brought against the person. As far as suits for
injunctive relief are concerned, it is well-settled that it is an injunctive act in personam. In Combs v.
Combs, the appellate court held that proceedings to enforce personal rights and obligations and in
which personal judgments are rendered adjusting the rights and obligations between the affected
parties is in personam. Actions for recovery of real property are in personam.

On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the
property of such persons to the discharge of the claims assailed. In an action quasi in rem, an
individual is named as defendant and the purpose of the proceeding is to subject his interests
therein to the obligation or loan burdening the property. Actions quasi in rem deal with the status,
ownership or liability of a particular property but which are intended to operate on these questions
only as between the particular parties to the proceedings and not to ascertain or cut off the rights or
interests of all possible claimants. The judgments therein are binding only upon the parties who
joined in the action.

As a rule, Philippine courts cannot try any case against a defendant who does not reside and is not
found in the Philippines because of the impossibility of acquiring jurisdiction over his person unless
he voluntarily appears in court; but when the case is an action in rem or quasi in rem enumerated in
Section 15, Rule 14 of the Rules of Court, Philippine courts have jurisdiction to hear and decide the
case because they have jurisdiction over the res, and jurisdiction over the person of the non-resident
defendant is not essential. In the latter instance, extraterritorial service of summons can be made
upon the defendant, and such extraterritorial service of summons is not for the purpose of vesting
the court with jurisdiction, but for the purpose of complying with the requirements of fair play or due
process, so that the defendant will be informed of the pendency of the action against him and the
possibility that property in the Philippines belonging to him or in which he has an interest may be
subjected to a judgment in favor of the plaintiff, and he can thereby take steps to protect his interest
if he is so minded. On the other hand, when the defendant in an action in personam does not reside
and is not found in the Philippines, our courts cannot try the case against him because of the
impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court.14

As the initiating party, the plaintiff in a civil action voluntarily submits himself to the jurisdiction of the
court by the act of filing the initiatory pleading. As to the defendant, the court acquires jurisdiction
over his person either by the proper service of the summons, or by a voluntary appearance in the
action.15

Upon the filing of the complaint and the payment of the requisite legal fees, the clerk of court
forthwith issues the corresponding summons to the defendant.16 The summons is directed to the
defendant and signed by the clerk of court under seal. It contains the name of the court and the
names of the parties to the action; a direction that the defendant answers within the time fixed by the
Rules of Court; and a notice that unless the defendant so answers, the plaintiff will take judgment by
default and may be granted the relief applied for.17 To be attached to the original copy of the
summons and all copies thereof is a copy of the complaint (and its attachments, if any) and the
order, if any, for the appointment of a guardian ad litem.18

The significance of the proper service of the summons on the defendant in an action in personam
cannot be overemphasized. The service of the summons fulfills two fundamental objectives, namely:
(a) to vest in the court jurisdiction over the person of the defendant; and (b) to afford to the
defendant the opportunity to be heard on the claim brought against him.19 As to the former, when
jurisdiction in personam is not acquired in a civil action through the proper service of the summons
or upon a valid waiver of such proper service, the ensuing trial and judgment are void.20 If the
defendant knowingly does an act inconsistent with the right to object to the lack of personal
jurisdiction as to him, like voluntarily appearing in the action, he is deemed to have submitted himself
to the jurisdiction of the court.21 As to the latter, the essence of due process lies in the reasonable
opportunity to be heard and to submit any evidence the defendant may have in support of his
defense. With the proper service of the summons being intended to afford to him the opportunity to
be heard on the claim against him, he may also waive the process.21 In other words, compliance with
the rules regarding the service of the summons is as much an issue of due process as it is of
jurisdiction.23

Under the Rules of Court, the service of the summons should firstly be effected on the defendant
himself whenever practicable. Such personal service consists either in handing a copy of the
summons to the defendant in person, or, if the defendant refuses to receive and sign for it, in
tendering it to him.24 The rule on personal service is to be rigidly enforced in order to ensure the
realization of the two fundamental objectives earlier mentioned. If, for justifiable reasons, the
defendant cannot be served in person within a reasonable time, the service of the summons may
then be effected either (a) by leaving a copy of the summons at his residence with some person of
suitable age and discretion then residing therein, or (b) by leaving the copy at his office or regular
place of business with some competent person in charge thereof.25 The latter mode of service is
known as substituted service because the service of the summons on the defendant is made
through his substitute.

It is no longer debatable that the statutory requirements of substituted service must be followed
strictly, faithfully and fully, and any substituted service other than that authorized by statute is
considered ineffective.26 This is because substituted service, being in derogation of the usual method
of service, is extraordinary in character and may be used only as prescribed and in the
circumstances authorized by statute.27 Only when the defendant cannot be served personally within
a reasonable time may substituted service be resorted to. Hence, the impossibility of prompt
personal service should be shown by stating the efforts made to find the defendant himself and the
fact that such efforts failed, which statement should be found in the proof of service or sheriff’s
return.28 Nonetheless, the requisite showing of the impossibility of prompt personal service as basis
for resorting to substituted service may be waived by the defendant either expressly or impliedly.29

There is no question that Sheriff Medina twice attempted to serve the summons upon each of
petitioners in person at their office address, the first in the morning of September 18, 2000 and the
second in the afternoon of the same date. Each attempt failed because Macasaet and Quijano were
"always out and not available" and the other petitioners were "always roving outside and gathering
news." After Medina learned from those present in the office address on his second attempt that
there was no likelihood of any of petitioners going to the office during the business hours of that or
any other day, he concluded that further attempts to serve them in person within a reasonable time
would be futile. The circumstances fully warranted his conclusion. He was not expected or required
as the serving officer to effect personal service by all means and at all times, considering that he
was expressly authorized to resort to substituted service should he be unable to effect the personal
service within a reasonable time. In that regard, what was a reasonable time was dependent on the
circumstances obtaining. While we are strict in insisting on personal service on the defendant, we do
not cling to such strictness should the circumstances already justify substituted service instead. It is
the spirit of the procedural rules, not their letter, that governs.30

In reality, petitioners’ insistence on personal service by the serving officer was demonstrably
superfluous. They had actually received the summonses served through their substitutes, as borne
out by their filing of several pleadings in the RTC, including an answer with compulsory counterclaim
ad cautelam and a pre-trial brief ad cautelam. They had also availed themselves of the modes of
discovery available under the Rules of Court. Such acts evinced their voluntary appearance in the
action.

Nor can we sustain petitioners’ contention that Abante Tonite could not be sued as a defendant due
to its not being either a natural or a juridical person. In rejecting their contention, the CA categorized
Abante Tonite as a corporation by estoppel as the result of its having represented itself to the
reading public as a corporation despite its not being incorporated. Thereby, the CA concluded that
the RTC did not gravely abuse its discretion in holding that the non-incorporation of Abante Tonite
with the Securities and Exchange Commission was of no consequence, for, otherwise, whoever of
the public who would suffer any damage from the publication of articles in the pages of its tabloids
would be left without recourse. We cannot disagree with the CA, considering that the editorial box of
the daily tabloid disclosed that basis, nothing in the box indicated that Monica Publishing Corporation
had owned Abante Tonite.
WHEREFORE, the Court AFFIRMS the decision promulgated on March 8, 2002; and ORDERS
petitioners to pay the costs of suit.

SO ORDERED.

RIDGEWOOD ESTATE, INC. G.R. No. 166751


(Erroneously sued as Camella
Homes), Present:
Petitioner,
PUNO, J., Chairman,
SANDOVAL-GUTIERREZ,
CORONA,
- versus - AZCUNA, and
GARCIA, JJ.

Promulgated:
EXPEDITO BELAOS,
Respondent. June 8, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

PUNO, J.:

This is a petition for review of the decision of the Court of Appeals dated July 28,
2004 and its resolution dated January 19, 2005 in CA-G.R. SP No. 77836. The Court
of Appeals affirmed the order of the Regional Trial Court of Manila in Civil Case
No. 02-103764 denying the motion to dismiss filed by herein petitioner Ridgewood
Estate, Inc.

Petitioner is a subdivision developer that sells properties under the trade


name Camella Homes. Respondent Expedito Belaos entered into a contract to sell
with petitioner for the purchase of a house and lot at Tierra Nevada,
Gen. Trias, Cavite. Pursuant thereto, respondent issued several postdated checks in
favor of petitioner as amortization for the property. Petitioner, however, failed to
construct the house. Thus, respondent, in a letter dated April 16, 2000, rescinded the
contract to sell and demanded the return of the amounts he had paid to petitioner, as
well as the postdated checks. Petitioner remitted to respondent the sum
of P299,908.00, equivalent to the down payment and six monthly amortizations
previously paid by respondent, but it nonetheless continued to encash the other
postdated checks, to the prejudice of respondent.

Respondent filed before the Regional Trial Court of Manila a complaint for damages
against Camella Homes for encashing the postdated checks despite repeated
demands to return them and refrain from encashing them in view of the recission of
the contract to sell.

Petitioner filed a motion to dismiss. It argued that Camella Homes is not a real party-
in-interest and the complaint states no cause of action as the contract to sell was
entered into by and between Expedito L. Belaos and Ridgewood Estate, Inc. It
further argued that the complaint was defective since Camella Homes is not a natural
or juridical person, hence, it is not an entity authorized by law to be a party to a civil
suit.

The trial court denied the motion to dismiss. It applied the doctrine on corporation
by estoppel under Section 21 of the Corporation Code which states:
Section 21. Corporation by estoppel.All persons who assume to act as a
corporation knowing it to be without authority to do so shall be liable as
general partners for all debts, liabilities and damages incurred or arising
as a result thereof: Provided, however, That when any such ostensible
corporation is sued on any transaction entered by it as a corporation or on
any tort committed by it as such, it shall not be allowed to use as a defense
its lack of corporate personality.

One who assumes an obligation to an ostensible corporation as such,


cannot resist performance thereof on the ground that there was in fact no
corporation.

Petitioner filed a petition for certiorari before the Court of Appeals. In


addition to its contention that Camella Homes was not a real party-in-interest,
petitioner also raised the argument that the trial court had no jurisdiction over the
suit, as the subject matter of the complaint was within the exclusive jurisdiction of
the Housing and Land Use Regulatory Board (HLURB).

In its decision dated July 28, 2004, the Court of Appeals dismissed the
petition. It held:
Private respondents complaint contains allegations that Ridgewood
Estates (sic) deliberately and intentionally encashed the postdated checks
despite knowledge of the contracts recission. Respondent prayed for the
award of actual, moral and exemplary damages due to his humiliation and
loss of credibility with the banking community and among his colleagues
caused by petitioners alleged malicious acts.

Respondent Belaos is not claiming refund or any other claim from


a subdivision developer. He does not demand for specific performance of
contractual and statutory obligations of delivering the property to him. In
the cases that reached the Supreme Court, the ruling has consistently been
that the NHA or the HLURB has jurisdiction over complaints arising from
contracts between the subdivision developer and the lot buyer or those
aimed at compelling the subdivision developer to comply with its
contractual and statutory obligations to make the subdivision a better place
to live in. It has already been admitted by both parties that the contract has
already been rescinded and that Ridgewood returned
the downpayment [sic] and some of the postdated checks. Hence, the
Court a quo has jurisdiction over the action for damages.[1]

Petitioner filed a motion for reconsideration which was denied by the Court
of Appeals in its resolution dated January 19, 2005.

Petitioner raises the following arguments in the case at bar:


1. That the honorable court failed to consider that the lower court acted
with grave abuse of discretion when the latter assumed jurisdiction
over a matter which the law already vests with the Housing and Land
Use Regulatory Board.

2. That a perusal of the order of the lower court reveals that it committed
grave abuse of discretion when it anchored itself on an erroneous
finding that Camella Homes allegedly is a corporation by estoppel.
3. That the Honorable Court of Appeals failed to consider that the lower
court committed grave abuse of discretion when it failed to consider
that the complaint filed by private respondent has no cause of action
for failure to implead the real party in interest.

4. That the Honorable Court of Appeals failed to consider that the lower
court committed grave abuse of discretion when it
ordered Camella Homes, which has no legal capacity to be sued[,] to
submit an answer.[2]

We affirm the decision of the Court of Appeals.

First, the trial court correctly assumed jurisdiction over the complaint filed by
respondent against petitioner.

Section 1 of Presidential Decree No. 1344 provides for the jurisdiction of


HLURB (then National Housing Authority), thus:
Sec. 1. In the exercise of its function to regulate the real estate trade
and business and in addition to its powers provided for in Presidential
Decree No. 957, the National Housing Authority shall have exclusive
jurisdiction to hear and decide the cases of the following nature:

a. Unsound real estate business practices;

b. Claims involving refund and any other claims filed by


subdivision lot or condominium unit buyer against the project owner,
developer, dealer, broker or salesman; and

c. Cases involving specific performance of contractual and


statutory obligations filed by buyers of subdivision lot or condominium
unit against the owner, developer, dealer, broker or salesman.

The Court held in Roxas v. Court of Appeals[3] that the mere relationship
between the parties, i.e., that of being subdivision owner/developer and subdivision
lot buyer, does not automatically vest jurisdiction in the HLURB. For an action to
fall within the exclusive jurisdiction of the HLURB, the decisive element is the
nature of the action as enumerated in Section 1 of P.D. No. 1344. The HLURB has
jurisdiction over complaints aimed at compelling the subdivision developer to
comply with its contractual and statutory obligations.

The complaint filed by respondent against petitioner was one for damages. It
prayed for the payment of moral, actual and exemplary damages by reason of
petitioners malicious encashment of the checks even after the rescission of the
contract to sell between them. Respondent claimed that because of petitioners
malicious and fraudulent acts, he suffered humiliation and embarrassment in several
banks, causing him to lose his credibility and good standing among his
colleagues.[4] Such action falls within the jurisdiction of regular courts, not the
HLURB.

Second, we observe that respondents complaint was actually directed against


herein petitioner, Ridgewood Estate, Inc., although it named Camella Homes as
respondent therein. The complaint itself referred to Ridgewood Estate, Inc. as the
authorized representative of Camella Homes. Petitioner cannot use the lack of
juridical personality by Camella Homes as reason to evade its liability, if any, to
petitioner. Petitioner admittedly uses the name Camella Homes as its business
name. Hence, to the buyers, Camella Homes and Ridgewood Estate, Inc. are one and
the same. A reading of the complaint would show that respondent was essentially
suing petitioner, it being the seller of the house and lot he intended to purchase. We
agree with the Court of Appeals ruling that the remedy in this case is not the
dismissal of the case but the joinder of the proper party.[5] The appellate court
correctly explained:
Dismissal of the complaint is not the remedy since the Court a
quo properly acquired jurisdiction [over] the action for damages. In its
pleadings before the trial court, defendant Camella Homes alleges that it
is not a juridical entity, not the real party in interest and pointed to
Ridgewood Estates [sic], Inc. as the party liable to Belaos. In its petition
before [u]s, Ridgewood Estates [sic], Inc. erroneously sued
as Camella Homes presented itself as one of the developers
of Camella Homes, specifically that of Tierra Nevada Subdivision of
which respondent Belaos is a buyer, then it claims to be the real party in
interest in the controversy by admitting it entered into a Contract to Sell
with Belaos, [then] tries to exculpate Camella Homes by alleging that the
latter is not a juridical entity and alleges that it is the HLURB which has
jurisdiction over the controversy.
The Regional Trial Court did not commit grave abuse of discretion
in denying the motion to dismiss and ordering defendant Camella Homes
to file an answer.Assuming arguendo that petitioner Ridgewood is a
separate entity from Camella Homes, defendant Camella Homes
may implead the former. Private respondent Belaos may file a motion to
amend his complaint so as to implead the real party in interest. Parties
may be dropped or added by order of the court on motion of any party or
on its own initiative at any stage of the action and on such terms as are
just. (Sec. 11, Rule 3 of the 1997 Rules of Civil Procedure)[6]

We, therefore, find that the trial court did not err in denying petitioners motion
to dismiss.

IN VIEW WHEREOF, the petition is DENIED.

SO ORDERED.

[G.R. No. 125221. June 19, 1997]

REYNALDO M. LOZANO, petitioner, vs. HON. ELIEZER R. DE LOS


SANTOS, Presiding Judge, RTC, Br. 58, Angeles City; and
ANTONIO ANDA, respondents.

DECISION
PUNO, J.:

This petition for certiorari seeks to annul and set aside the decision of the Regional
Trial Court, Branch 58, Angeles City which ordered the Municipal Circuit Trial Court,
Mabalacat and Magalang, Pampanga to dismiss Civil Case No. 1214 for lack of
jurisdiction.
The facts are undisputed. On December 19, 1995, petitioner Reynaldo M. Lozano
filed Civil Case No. 1214 for damages against respondent Antonio Anda before
theMunicipal Circuit Trial Court (MCTC), Mabalacat and Magalang, Pampanga. Petitioner
alleged that he was the president of the Kapatirang Mabalacat-Angeles Jeepney Drivers'
Association, Inc. (KAMAJDA) while respondent Anda was the president of the Samahang
Angeles-Mabalacat Jeepney Operators' and Drivers' Association, Inc. (SAMAJODA); in
August 1995, upon the request of the Sangguniang Bayan of Mabalacat, Pampanga,
petitioner and private respondent agreed to consolidate their respective associations and
form the Unified Mabalacat-Angeles Jeepney Operators' and Drivers' Association, Inc.
(UMAJODA); petitioner and private respondent also agreed to elect one set of officers
who shall be given the sole authority to collect the daily dues from the members of the
consolidated association; elections were held on October 29, 1995 and both petitioner
and private respondent ran for president; petitioner won; private respondent protested
and, alleging fraud, refused to recognize the results of the election; private
respondent also refused to abide by their agreement and continued collecting the dues
from the members of his association despite several demands to desist. Petitioner was
thus constrained to file the complaint to restrain private respondent from collecting the
dues and to order him to pay damages in the amount of P25,000.00 and attorney's fees
of P500.00.[1]
Private respondent moved to dismiss the complaint for lack of jurisdiction, claiming
that jurisdiction was lodged with the Securities and Exchange Commission (SEC).The
MCTC denied the motion on February 9, 1996.[2] It denied reconsideration on March 8,
1996.[3]
Private respondent filed a petition for certiorari before the Regional Trial Court,
Branch 58, Angeles City.[4] The trial court found the dispute to be intracorporate, hence,
subject to the jurisdiction of the SEC, and ordered the MCTC to dismiss Civil Case No.
1214 accordingly.[5] It denied reconsideration on May 31, 1996.[6]
Hence this petition. Petitioner claims that:

"THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION


AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND SERIOUS
ERROR OF LAW IN CONCLUDING THAT THE SECURITIES AND
EXCHANGE COMMISSION HAS JURISDICTION OVER A CASE OF
DAMAGES BETWEEN HEADS/PRESIDENTS OF TWO (2) ASSOCIATIONS
WHO INTENDED TO CONSOLIDATE/MERGE THEIR ASSOCIATIONS BUT
NOT YET [SIC] APPROVED AND REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION." [7]

The jurisdiction of the Securities and Exchange Commission (SEC) is set forth in
Section 5 of Presidential Decree No. 902-A. Section 5 reads as follows:

"Section 5. x x x [T]he Securities and Exchange Commission [has] original and


exclusive jurisdiction to hear and decide cases involving:

(a) Devices or schemes employed by or any acts of the board of directors, business
associates, its officers or partners, amounting to fraud and misrepresentation which
may be detrimental to the interest of the public and/or of the stockholders, partners,
members of associations or organizations registered with the Commission.
(b) Controversies arising out of intracorporate or partnership relations, between and
among stockholders, members or associates; between any or all of them and the
corporation, partnership or association of which they are stockholders, members, or
associates, respectively; and between such corporation, partnership or association and
the state insofar as it concerns their individual franchise or right to exist as such entity.

(c) Controversies in the election or appointment of directors, trustees, officers or


managers of such corporations, partnerships or associations.

(d) Petitions of corporations, partnerships or associations to be declared in the state of


suspension of payments in cases where the corporation, partnership or association
possesses sufficient property to cover all its debts but foresees the impossibility of
meeting them when they respect very fall due or in cases where the corporation,
partnership or association has no sufficient assets to cover its liabilities, but is under
the management of a Rehabilitation Receiver or Management Committee created
pursuant to this Decree."

The grant of jurisdiction to the SEC must be viewed in the light of its nature and function
under the law.[8] This jurisdiction is determined by a concurrence of two elements: (1) the
status or relationship of the parties; and (2) the nature of the question that is the subject
of their controversy.[9]
The first element requires that the controversy must arise out of intracorporate or
partnership relations between and among stockholders, members, or associates;between
any or all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such corporation,
partnership or association and the State in so far as it concerns their individual
franchises.[10] The second element requires that the dispute among the parties be
intrinsically connected with the regulation of the corporation, partnership or association or
deal with the internal affairs of the corporation, partnership or association.[11]After all, the
principal function of the SEC is the supervision and control of corporations, partnerships
and associations with the end in view that investments in these entities may be
encouraged and protected, and their activities pursued for the promotion of economic
development.[12]
There is no intracorporate nor partnership relation between petitioner and private
respondent. The controversy between them arose out of their plan to consolidate their
respective jeepney drivers' and operators' associations into a single common
association. This unified association was, however, still a proposal. It had not been
approved by the SEC, neither had its officers and members submitted their articles of
consolidation in accordance with Sections 78 and 79 of the Corporation
Code.Consolidation becomes effective not upon mere agreement of the members but
only upon issuance of the certificate of consolidation by the SEC.[13] When the SEC, upon
processing and examining the articles of consolidation, is satisfied that the consolidation
of the corporations is not inconsistent with the provisions of the Corporation Code and
existing laws, it issues a certificate of consolidation which makes the reorganization
official.[14] The new consolidated corporation comes into existence and the constituent
corporations dissolve and cease to exist.[15]
The KAMAJDA and SAMAJODA to which petitioner and private respondent
belong are duly registered with the SEC, but these associations are two separate
entities.The dispute between petitioner and private respondent is not within the
KAMAJDA nor the SAMAJODA. It is between members of separate and distinct
associations.Petitioner and private respondent have no intracorporate relation much less
do they have an intracorporate dispute. The SEC therefore has no jurisdiction over the
complaint.
The doctrine of corporation by estoppel[16] advanced by private respondent cannot
override jurisdictional requirements. Jurisdiction is fixed by law and is not subject to the
agreement of the parties.[17] It cannot be acquired through or waived, enlarged or
diminished by, any act or omission of the parties, neither can it be conferred by the
acquiescence of the court.[18]
Corporation by estoppel is founded on principles of equity and is designed to prevent
injustice and unfairness.[19] It applies when persons assume to form a corporation and
exercise corporate functions and enter into business relations with third persons. Where
there is no third person involved and the conflict arises only among those assuming the
form of a corporation, who therefore know that it has not been registered, there is no
corporation by estoppel.[20]
IN VIEW WHEREOF, the petition is granted and the decision dated April 18, 1996
and the order dated May 31, 1996 of the Regional Trial Court, Branch 58, Angeles City
are set aside. The Municipal Circuit Trial Court of Mabalacat and Magalang, Pampanga
is ordered to proceed with dispatch in resolving Civil Case No. 1214. No costs.
SO ORDERED.
Regalado, (Chairman), Romero, Mendoza, and Torres, Jr., JJ., concur.