G.R. No.

175914 February 10, 2009

RUBY SHELTER BUILDERS AND REALTY DEVELOPMENT CORPORATION, Petitioner,

vs.
HON. PABLO C. FORMARAN III, Presiding Judge of Regional Trial Court Branch 21, Naga City, as Pairing Judge
for Regional Trial Court Branch 22, Formerly Presided By HON. NOVELITA VILLEGAS-LLAGUNO (Retired 01 May
2006), ROMEO Y. TAN, ROBERTO L. OBIEDO and ATTY. TOMAS A. REYES, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1 dated 22 November 2006 of the Court of Appeals in CA-G.R. SP No. 94800. The Court of Appeals, in its
assailed Decision, affirmed the Order2 dated 24 March 2006 of the Regional Trial Court (RTC), Branch 22, of Naga City, in
Civil Case No. RTC-2006-0030, ordering petitioner Ruby Shelter Builders and Realty Development Corporation to pay
additional docket/filing fees, computed based on Section 7(a) of Rule 141 of the Rules of Court, as amended.

The present Petition arose from the following facts:

Petitioner obtained a loan3 in the total amount of ₱95,700,620.00 from respondents Romeo Y. Tan (Tan) and Roberto L.
Obiedo (Obiedo), secured by real estate mortgages over five parcels of land, all located in Triangulo, Naga City, covered
by Transfer Certificates of Title (TCTs) No. 38376,4 No. 29918,5 No. 38374,6 No. 39232,7 and No. 39225,8 issued by the
Registry of Deeds for Naga City, in the name of petitioner. When petitioner was unable to pay the loan when it became
due and demandable, respondents Tan and Obiedo agreed to an extension of the same.

In a Memorandum of Agreement9 dated 17 March 2005, respondents Tan and Obiedo granted petitioner until 31
December 2005 to settle its indebtedness, and condoned the interests, penalties and surcharges accruing thereon from 1
October 2004 to 31 December 2005 which amounted to ₱74,678,647.00. The Memorandum of Agreement required, in
turn, that petitioner execute simultaneously with the said Memorandum, "by way of dacion en pago," Deeds of Absolute
Sale in favor of respondents Tan and Obiedo, covering the same parcels of land subject of the mortgages. The Deeds of
Absolute Sale would be uniformly dated 2 January 2006, and state that petitioner sold to respondents Tan and Obiedo the
parcels of land for the following purchase prices:

TCT No. Purchase Price

38376 ₱ 9,340,000.00
29918 ₱ 28,000,000.00
38374 ₱ 12,000,000.00
39232 ₱ 1,600,000.00
39225 ₱ 1,600,000.00

Petitioner could choose to pay off its indebtedness with individual or all five parcels of land; or it could redeem said
properties by paying respondents Tan and Obiedo the following prices for the same, inclusive of interest and penalties:

TCT No. Redemption Price

38376 ₱ 25,328,939.00
29918 ₱ 35,660,800.00
38374 ₱ 28,477,600.00
39232 ₱ 6,233,381.00
39225 ₱ 6,233,381.00
In the event that petitioner is able to redeem any of the afore-mentioned parcels of land, the Deed of Absolute Sale
covering the said property shall be nullified and have no force and effect; and respondents Tan and Obiedo shall then
return the owner’s duplicate of the corresponding TCT to petitioner and also execute a Deed of Discharge of Mortgage.
However, if petitioner is unable to redeem the parcels of land within the period agreed upon, respondents Tan and Obiedo
could already present the Deeds of Absolute Sale covering the same to the Office of the Register of Deeds for Naga City
so respondents Tan and Obiedo could acquire TCTs to the said properties in their names.

The Memorandum of Agreement further provided that should petitioner contest, judicially or otherwise, any act,
transaction, or event related to or necessarily connected with the said Memorandum and the Deeds of Absolute Sale
involving the five parcels of land, it would pay respondents Tan and Obiedo ₱10,000,000.00 as liquidated damages
inclusive of costs and attorney’s fees. Petitioner would likewise pay respondents Tan and Obiedo the condoned interests,
surcharges and penalties.10 Finally, should a contest arise from the Memorandum of Agreement, Mr. Ruben Sia (Sia),
President of petitioner corporation, personally assumes, jointly and severally with petitioner, the latter’s monetary
obligation to respondent Tan and Obiedo.

Respondent Atty. Tomas A. Reyes (Reyes) was the Notary Public who notarized the Memorandum of Agreement dated
17 March 2005 between respondent Tan and Obiedo, on one hand, and petitioner, on the other.

Pursuant to the Memorandum of Agreement, petitioner, represented by Mr. Sia, executed separate Deeds of Absolute
Sale,11 over the five parcels of land, in favor of respondents Tan and Obiedo. On the blank spaces provided for in the said
Deeds, somebody wrote the 3rd of January 2006 as the date of their execution. The Deeds were again notarized by
respondent Atty. Reyes also on 3 January 2006.

Without payment having been made by petitioner on 31 December 2005, respondents Tan and Obiedo presented the
Deeds of Absolute Sale dated 3 January 2006 before the Register of Deeds of Naga City on 8 March 2006, as a result of
which, they were able to secure TCTs over the five parcels of land in their names.

On 16 March 2006, petitioner filed before the RTC a Complaint12 against respondents Tan, Obiedo, and Atty. Reyes, for
declaration of nullity of deeds of sales and damages, with prayer for the issuance of a writ of preliminary injunction and/or
temporary restraining order (TRO). The Complaint was docketed as Civil Case No. 2006-0030.

On the basis of the facts already recounted above, petitioner raised two causes of action in its Complaint.

As for the first cause of action, petitioner alleged that as early as 27 December 2005, its President already wrote a letter
informing respondents Tan and Obiedo of the intention of petitioner to pay its loan and requesting a meeting to compute
the final amount due. The parties held meetings on 3 and 4 January 2006 but they failed to arrive at a mutually acceptable
computation of the final amount of loan payable. Respondents Tan and Obiedo then refused the request of petitioner for
further dialogues. Unbeknownst to petitioner, despite the ongoing meetings, respondents Tan and Obiedo, in evident bad
faith, already had the pre-executed Deeds of Absolute Sale notarized on 3 January 2006 by respondent Atty. Reyes. Atty.
Reyes, in connivance with respondents Tan and Obiedo, falsely made it appear in the Deeds of Absolute Sale that Mr. Sia
had personally acknowledged/ratified the said Deeds before Atty. Reyes.

Asserting that the Deeds of Absolute Sale over the five parcels of land were executed merely as security for the payment
of its loan to respondents Tan and Obiedo; that the Deeds of Absolute Sale, executed in accordance with the
Memorandum of Agreement, constituted pactum commisorium and as such, were null and void; and that the
acknowledgment in the Deeds of Absolute Sale were falsified, petitioner averred:

13. That by reason of the fraudulent actions by the [herein respondents], [herein petitioner] is prejudiced and is now in
danger of being deprived, physically and legally, of the mortgaged properties without benefit of legal processes such as
the remedy of foreclosure and its attendant procedures, solemnities and remedies available to a mortgagor, while
[petitioner] is desirous and willing to pay its obligation and have the mortgaged properties released. 13

In support of its second cause of action, petitioner narrated in its Complaint that on 18 January 2006, respondents Tan
and Obiedo forcibly took over, with the use of armed men, possession of the five parcels of land subject of the falsified
Deeds of Absolute Sale and fenced the said properties with barbed wire. Beginning 3 March 2006, respondents Tan and
Obiedo started demolishing some of the commercial spaces standing on the parcels of land in question which were being
rented out by petitioner. Respondents Tan and Obiedo were also about to tear down a principal improvement on the
properties consisting of a steel-and-concrete structure housing a motor vehicle terminal operated by petitioner. The
actions of respondents Tan and Obiedo were to the damage and prejudice of petitioner and its tenants/lessees. Petitioner,
alone, claimed to have suffered at least ₱300,000.00 in actual damages by reason of the physical invasion by
respondents Tan and Obiedo and their armed goons of the five parcels of land.

Ultimately, petitioner’s prayer in its Complaint reads:

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that upon the filing of this
complaint, a 72-hour temporary restraining order be forthwith issued ex parte:

(a) Restraining [herein respondents] Tan and Obiedo, their agents, privies or representatives, from committing
act/s tending to alienate the mortgaged properties from the [herein petitioner] pending the resolution of the case,
including but not limited to the acts complained of in paragraph "14", above;

(b) Restraining the Register of Deeds of Naga City from entertaining moves by the [respondents] to have
[petitioner’s] certificates of title to the mortgaged properties cancelled and changed/registered in [respondents]
Tan’s and Obiedo’s names, and/or released to them;

(c) After notice and hearing, that a writ of preliminary injunction be issued imposing the same restraints indicated
in the next preceding two paragraphs of this prayer; and

(d) After trial, judgment be rendered:

1. Making the injunction permanent;

2. Declaring the provision in the Memorandum of Agreement requiring the [petitioner] to execute deed of
sales (sic) in favor of the [respondents Tan and Obiedo] as dacion en pago in the event of non-payment
of the debt as pactum commissorium;

3. Annulling the Deed[s] of Sale for TCT Nos. 29918, 38374, 38376, 39225 and 39232, all dated January
3, 2006, the same being in contravention of law;

4. Ordering the [respondents] jointly and solidarily to pay the [petitioner] actual damages of at least
₱300,000.00; attorney’s fees in the amount of ₱100,000.00 plus P1,000.00 per court attendance of
counsel as appearance fee; litigation expenses in the amount of at least ₱10,000.00 and exemplary
damages in the amount of ₱300,000.00, plus the costs.

[Petitioner] further prays for such other reliefs as may be proper, just and equitable under the premises. 14

Upon filing its Complaint with the RTC on 16 March 2006, petitioner paid the sum of ₱13,644.25 for docket and other legal
fees, as assessed by the Office of the Clerk of Court. The Clerk of Court initially considered Civil Case No. 2006-0030 as
an action incapable of pecuniary estimation and computed the docket and other legal fees due thereon according to
Section 7(b)(1), Rule 141 of the Rules of Court.

Only respondent Tan filed an Answer15 to the Complaint of petitioner. Respondent Tan did admit that meetings were held
with Mr. Sia, as the representative of petitioner, to thresh out Mr. Sia’s charge that the computation by respondents Tan
and Obiedo of the interests, surcharges and penalties accruing on the loan of petitioner was replete with errors and
uncertainties. However, Mr. Sia failed to back up his accusation of errors and uncertainties and to present his own final
computation of the amount due. Disappointed and exasperated, respondents Tan and Obiedo informed Mr. Sia that they
had already asked respondent Atty. Reyes to come over to notarize the Deeds of Absolute Sale. Respondent Atty. Reyes
asked Mr. Sia whether it was his signature appearing above his printed name on the Deeds of Absolute Sale, to which Mr.
Sia replied yes. On 4 January 2006, Mr. Sia still failed to establish his claim of errors and uncertainties in the computation
of the total amount which petitioner must pay respondent Tan and Obiedo. Mr. Sia, instead, sought a nine-month
extension for paying the loan obligation of petitioner and the reduction of the interest rate thereon to only one percent
(1%) per month. Respondents Tan and Obiedo rejected both demands.

Respondent Tan maintained that the Deeds of Absolute Sale were not executed merely as securities for the loan of
petitioner. The Deeds of Absolute Sale over the five parcels of land were the consideration for the payment of the total
indebtedness of petitioner to respondents Tan and Obiedo, and the condonation of the 15-month interest which already
accrued on the loan, while providing petitioner with the golden opportunity to still redeem all or even portions of the
properties covered by said Deeds. Unfortunately, petitioner failed to exercise its right to redeem any of the said properties.
Belying that they forcibly took possession of the five parcels of land, respondent Tan alleged that it was Mr. Sia who, with
the aid of armed men, on board a Sports Utility Vehicle and a truck, rammed into the personnel of respondents Tan and
Obiedo causing melee and disturbance. Moreover, by the execution of the Deeds of Absolute Sale, the properties subject
thereof were, ipso jure, delivered to respondents Tan and Obiedo. The demolition of the existing structures on the
properties was nothing but an exercise of dominion by respondents Tan and Obiedo.

Respondent Tan, thus, sought not just the dismissal of the Complaint of petitioner, but also the grant of his counterclaim.
The prayer in his Answer is faithfully reproduced below:

Wherefore, premises considered, it is most respectfully prayed that, after due hearing, judgment be rendered dismissing
the complaint, and on the counterclaim, [herein petitioner] and Ruben Sia, be ordered to indemnify, jointly and severally
[herein respondents Tan and Obiedo] the amounts of not less than ₱10,000,000.00 as liquidated damages and the further
sum of not less than ₱500,000.00 as attorney’s fees. In the alternative, and should it become necessary, it is hereby
prayed that [petitioner] be ordered to pay herein [respondents Tan and Obiedo] the entire principal loan of
₱95,700,620.00, plus interests, surcharges and penalties computed from March 17, 2005 until the entire sum is fully paid,
including the amount of ₱74,678,647.00 foregone interest covering the period from October 1, 2004 to December 31,
2005 or for a total of fifteen (15) months, plus incidental expenses as may be proved in court, in the event that Annexes
"G" to "L" be nullified. Other relief and remedies as are just and equitable under the premises are hereby prayed for.16

Thereafter, respondent Tan filed before the RTC an Omnibus Motion in which he contended that Civil Case No. 2006-
0030 involved real properties, the docket fees for which should be computed in accordance with Section 7(a), not Section
7(b)(1), of Rule 141 of the Rules of Court, as amended by A.M. No. 04-2-04-SC which took effect on 16 August 2004.
Since petitioner did not pay the appropriate docket fees for Civil Case No. 2006-0030, the RTC did not acquire jurisdiction
over the said case. Hence, respondent Tan asked the RTC to issue an order requiring petitioner to pay the correct and
accurate docket fees pursuant to Section 7(a), Rule 141 of the Rules of Court, as amended; and should petitioner fail to
do so, to deny and dismiss the prayer of petitioner for the annulment of the Deeds of Absolute Sale for having been
executed in contravention of the law or of the Memorandum of Agreement as pactum commisorium.

As required by the RTC, the parties submitted their Position Papers on the matter. On 24 March 2006, the RTC issued an
Order17 granting respondent Tan’s Omnibus Motion. In holding that both petitioner and respondent Tan must pay docket
fees in accordance with Section 7(a), Rule 141 of the Rules of Court, as amended, the RTC reasoned:

It must be noted that under paragraph (b) 2. of the said Section 7, it is provided that QUIETING OF TITLE which is an
action classified as beyond pecuniary estimation "shall be governed by paragraph (a)". Hence, the filing fee in an action
for Declaration of Nullity of Deed which is also classified as beyond pecuniary estimation, must be computed based on the
provision of Section 7(A) herein-above, in part, quoted.

Since [herein respondent], Romeo Tan in his Answer has a counterclaim against the plaintiff, the former must likewise pay
the necessary filling (sic) fees as provided for under Section 7 (A) of Amended Administrative Circular No. 35-2004 issued
by the Supreme Court.18

Consequently, the RTC decreed on the matter of docket/filing fees:

WHEREFORE, premises considered, the [herein petitioner] is hereby ordered to pay additional filing fee and the [herein
respondent], Romeo Tan is also ordered to pay docket and filing fees on his counterclaim, both computed based on
Section 7(a) of the Supreme Court Amended Administrative Circular No. 35-2004 within fifteen (15) days from receipt of
this Order to the Clerk of Court, Regional Trial Court, Naga City and for the latter to compute and to collect the said fees
accordingly.19

Petitioner moved20 for the partial reconsideration of the 24 March 2006 Order of the RTC, arguing that Civil Case No.
2006-0030 was principally for the annulment of the Deeds of Absolute Sale and, as such, incapable of pecuniary
estimation. Petitioner submitted that the RTC erred in applying Section 7(a), Rule 141 of the Rules of Court, as amended,
to petitioner’s first cause of action in its Complaint in Civil Case No. 2006-0030.

In its Order21 dated 29 March 2006, the RTC refused to reconsider its 24 March 2006 Order, based on the following
ratiocination:

Analyzing, the action herein pertains to real property, for as admitted by the [herein petitioner], "the deeds of sale in
question pertain to real property" x x x. The Deeds of Sale subject of the instant case have already been transferred in the
name of the [herein respondents Tan and Obiedo].
Compared with Quieting of Title, the latter action is brought when there is cloud on the title to real property or any interest
therein or to prevent a cloud from being cast upon title to the real property (Art. 476, Civil Code of the Philippines) and the
plaintiff must have legal or equitable title to or interest in the real property which is the subject matter of the action (Art.
447, ibid.), and yet plaintiff in QUIETING OF TITLE is required to pay the fees in accordance with paragraph (a) of Section
7 of the said Amended Administrative Circular No. 35-2004, hence, with more reason that the [petitioner] who no longer
has title to the real properties subject of the instant case must be required to pay the required fees in accordance with
Section 7(a) of the Amended Administrative Circular No. 35-2004 afore-mentioned.

Furthermore, while [petitioner] claims that the action for declaration of nullity of deed of sale and memorandum of
agreement is one incapable of pecuniary estimation, however, as argued by the [respondent Tan], the issue as to how
much filing and docket fees should be paid was never raised as an issue in the case of Russell vs. Vestil, 304 SCRA 738.

xxxx

WHEREFORE, the Motion for Partial Reconsideration is hereby DENIED. 22

In a letter dated 19 April 2006, the RTC Clerk of Court computed, upon the request of counsel for the petitioner, the
additional docket fees petitioner must pay for in Civil Case No. 2006-0030 as directed in the afore-mentioned RTC Orders.
Per the computation of the RTC Clerk of Court, after excluding the amount petitioner previously paid on 16 March 2006,
petitioner must still pay the amount of ₱720,392.60 as docket fees. 23

Petitioner, however, had not yet conceded, and it filed a Petition for Certiorari with the Court of Appeals; the petition was
docketed as CA-G.R. SP No. 94800. According to petitioner, the RTC24 acted with grave abuse of discretion, amounting
to lack or excess of jurisdiction, when it issued its Orders dated 24 March 2006 and 29 March 2006 mandating that the
docket/filing fees for Civil Case No. 2006-0030, an action for annulment of deeds of sale, be assessed under Section 7(a),
Rule 141 of the Rules of Court, as amended. If the Orders would not be revoked, corrected, or rectified, petitioner would
suffer grave injustice and irreparable damage.

On 22 November 2006, the Court of Appeals promulgated its Decision wherein it held that:

Clearly, the petitioner’s complaint involves not only the annulment of the deeds of sale, but also the recovery of the real
properties identified in the said documents. In other words, the objectives of the petitioner in filing the complaint were to
cancel the deeds of sale and ultimately, to recover possession of the same. It is therefore a real action.

Consequently, the additional docket fees that must be paid cannot be assessed in accordance with Section 7(b). As a real
action, Section 7(a) must be applied in the assessment and payment of the proper docket fee.

Resultantly, there is no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the court a quo.
By grave abuse of discretion is meant capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, and mere abuse of discretion is not enough – it must be grave. The abuse must be grave and patent, and it
must be shown that the discretion was exercised arbitrarily and despotically.1avvphi1

Such a situation does not exist in this particular case. The evidence is insufficient to prove that the court a quo acted
despotically in rendering the assailed orders. It acted properly and in accordance with law. Hence, error cannot be
attributed to it.25

Hence, the fallo of the Decision of the appellate court reads:

WHEREFORE, the petition for certiorari is DENIED. The assailed Orders of the court a quo are AFFIRMED. 26

Without seeking reconsideration of the foregoing Decision with the Court of Appeals, petitioner filed its Petition for Review
on Certiorari before this Court, with a lone assignment of error, to wit:

18. The herein petitioner most respectfully submits that the Court of Appeals committed a grave and serious reversible
error in affirming the assailed Orders of the Regional Trial Court which are clearly contrary to the pronouncement of this
Honorable Court in the case of Spouses De Leon v. Court of Appeals, G.R. No. 104796, March 6, 1998, not to mention
the fact that if the said judgment is allowed to stand and not rectified, the same would result in grave injustice and
irreparable damage to herein petitioner in view of the prohibitive amount assessed as a consequence of said Orders. 27
In Manchester Development Corporation v. Court of Appeals,28 the Court explicitly pronounced that "[t]he court acquires
jurisdiction over any case only upon the payment of the prescribed docket fee." Hence, the payment of docket fees is not
only mandatory, but also jurisdictional.

In Sun Insurance Office, Ltd. (SIOL) v. Asuncion,29 the Court laid down guidelines for the implementation of its previous
pronouncement in Manchester under particular circumstances, to wit:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed
docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing
of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee
within a reasonable time but in no case beyond the applicable prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be
considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of
said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period.

3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of
the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if
specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a
lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce
said lien and assess and collect the additional fee.

In the Petition at bar, the RTC found, and the Court of Appeals affirmed, that petitioner did not pay the correct amount of
docket fees for Civil Case No. 2006-0030. According to both the trial and appellate courts, petitioner should pay docket
fees in accordance with Section 7(a), Rule 141 of the Rules of Court, as amended. Consistent with the liberal tenor of Sun
Insurance, the RTC, instead of dismissing outright petitioner’s Complaint in Civil Case No. 2006-0030, granted petitioner
time to pay the additional docket fees. Despite the seeming munificence of the RTC, petitioner refused to pay the
additional docket fees assessed against it, believing that it had already paid the correct amount before, pursuant to
Section 7(b)(1), Rule 141 of the Rules of Court, as amended.

Relevant to the present controversy are the following provisions under Rule 141 of the Rules of Court, as amended by
A.M. No. 04-2-04-SC30 and Supreme Court Amended Administrative Circular No. 35-200431 :

SEC. 7. Clerks of Regional Trial Courts. –

(a) For filing an action or a permissive OR COMPULSORY counterclaim, CROSS-CLAIM, or money claim against an
estate not based on judgment, or for filing a third-party, fourth-party, etc. complaint, or a complaint-in-intervention, if the
total sum claimed, INCLUSIVE OF INTERESTS, PENALTIES, SURCHARGES, DAMAGES OF WHATEVER KIND, AND
ATTORNEY’S FEES, LITIGATIO NEXPENSES AND COSTS and/or in cases involving property, the FAIR MARKET value
of the REAL property in litigation STATED IN THE CURRENT TAX DECLARATION OR CURRENT ZONAL VALUATION
OF THE BUREAU OF INTERNAL REVENUE, WHICHEVER IS HIGHER, OR IF THERE IS NONE, THE STATED VALUE
OF THE PROPERTY IN LITIGATION OR THE VALUE OF THE PERSONAL PROPERTY IN LITIGATION OR THE
VALUE OF THE PERSONAL PROPERTY IN LITIGATION AS ALLEGED BY THE CLAIMANT, is:

[Table of fees omitted.]

If the action involves both a money claim and relief pertaining to property, then THE fees will be charged on both the
amounts claimed and value of property based on the formula prescribed in this paragraph a.

(b) For filing:

1. Actions where the value of the subject matter cannot be estimated

2. Special civil actions, except judicial foreclosure of mortgage, EXPROPRIATION PROCEEDINGS, PARTITION
AND QUIETING OF TITLE which will

3. All other actions not involving property

[Table of fees omitted.]

The docket fees under Section 7(a), Rule 141, in cases involving real property depend on the fair market value of the
same: the higher the value of the real property, the higher the docket fees due. In contrast, Section 7(b)(1), Rule 141
imposes a fixed or flat rate of docket fees on actions incapable of pecuniary estimation.

In order to resolve the issue of whether petitioner paid the correct amount of docket fees, it is necessary to determine the
true nature of its Complaint. The dictum adhered to in this jurisdiction is that the nature of an action is determined by the
allegations in the body of the pleading or Complaint itself, rather than by its title or heading. 32However, the Court finds it
necessary, in ascertaining the true nature of Civil Case No. 2006-0030, to take into account significant facts and
circumstances beyond the Complaint of petitioner, facts and circumstances which petitioner failed to state in its Complaint
but were disclosed in the preliminary proceedings before the court a quo.

Petitioner persistently avers that its Complaint in Civil Case No. 2006-0030 is primarily for the annulment of the Deeds of
Absolute Sale. Based on the allegations and reliefs in the Complaint alone, one would get the impression that the titles to
the subject real properties still rest with petitioner; and that the interest of respondents Tan and Obiedo in the same lies
only in the Deeds of Absolute Sale sought to be annulled.

What petitioner failed to mention in its Complaint was that respondents Tan and Obiedo already had the Memorandum of
Agreement, which clearly provided for the execution of the Deeds of Absolute Sale, registered on the TCTs over the five
parcels of land, then still in the name of petitioner. After respondents Tan and Obiedo had the Deeds of Absolute Sale
notarized on 3 January 2006 and presented the same to Register of Deeds for Naga City on 8 March 2006, they were
already issued TCTs over the real properties in question, in their own names. Respondents Tan and Obiedo have also
acquired possession of the said properties, enabling them, by petitioner’s own admission, to demolish the improvements
thereon.

It is, thus, suspect that petitioner kept mum about the afore-mentioned facts and circumstances when they had already
taken place before it filed its Complaint before the RTC on 16 March 2006. Petitioner never expressed surprise when such
facts and circumstances were established before the RTC, nor moved to amend its Complaint
accordingly.1avvphi1.zw+ Even though the Memorandum of Agreement was supposed to have long been registered on
its TCTs over the five parcels of land, petitioner did not pray for the removal of the same as a cloud on its title. In the same
vein, although petitioner alleged that respondents Tan and Obiedo forcibly took physical possession of the subject real
properties, petitioner did not seek the restoration of such possession to itself. And despite learning that respondents Tan
and Obiedo already secured TCTs over the subject properties in their names, petitioner did not ask for the cancellation of
said titles. The only logical and reasonable explanation is that petitioner is reluctant to bring to the attention of the Court
certain facts and circumstances, keeping its Complaint safely worded, so as to institute only an action for annulment of
Deeds of Absolute Sale. Petitioner deliberately avoided raising issues on the title and possession of the real properties
that may lead the Court to classify its case as a real action.

No matter how fastidiously petitioner attempts to conceal them, the allegations and reliefs it sought in its Complaint in Civil
Case No. 2006-0030 appears to be ultimately a real action, involving as they do the recovery by petitioner of its title to and
possession of the five parcels of land from respondents Tan and Obiedo.

A real action is one in which the plaintiff seeks the recovery of real property; or, as indicated in what is now Section 1,
Rule 4 of the Rules of Court, a real action is an action affecting title to or recovery of possession of real property. 33

Section 7, Rule 141 of the Rules of Court, prior to its amendment by A.M. No. 04-2-04-SC, had a specific paragraph
governing the assessment of the docket fees for real action, to wit:

In a real action, the assessed value of the property, or if there is none, the estimated value thereof shall be alleged by the
claimant and shall be the basis in computing the fees.

It was in accordance with the afore-quoted provision that the Court, in Gochan v. Gochan,34 held that although the caption
of the complaint filed by therein respondents Mercedes Gochan, et al. with the RTC was denominated as one for "specific
performance and damages," the relief sought was the conveyance or transfer of real property, or ultimately, the execution
of deeds of conveyance in their favor of the real properties enumerated in the provisional memorandum of agreement.
Under these circumstances, the case before the RTC was actually a real action, affecting as it did title to or possession of
real property. Consequently, the basis for determining the correct docket fees shall be the assessed value of the property,
or the estimated value thereof as alleged in the complaint. But since Mercedes Gochan failed to allege in their complaint
the value of the real properties, the Court found that the RTC did not acquire jurisdiction over the same for non-payment
of the correct docket fees.
Likewise, in Siapno v. Manalo,35 the Court disregarded the title/denomination of therein plaintiff Manalo’s amended
petition as one for Mandamus with Revocation of Title and Damages; and adjudged the same to be a real action, the filing
fees for which should have been computed based on the assessed value of the subject property or, if there was none, the
estimated value thereof. The Court expounded in Siapno that:

In his amended petition, respondent Manalo prayed that NTA’s sale of the property in dispute to Standford East Realty
Corporation and the title issued to the latter on the basis thereof, be declared null and void. In a very real sense, albeit the
amended petition is styled as one for "Mandamus with Revocation of Title and Damages," it is, at bottom, a suit to recover
from Standford the realty in question and to vest in respondent the ownership and possession thereof. In short, the
amended petition is in reality an action in res or a real action. Our pronouncement in Fortune Motors (Phils.), Inc. vs.
Court of Appeals is instructive. There, we said:

A prayer for annulment or rescission of contract does not operate to efface the true objectives and nature of the action
which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)

An action for the annulment or rescission of a sale of real property is a real action. Its prime objective is to recover said
real property. (Gavieres v. Sanchez, 94 Phil. 760, 1954)

An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a private sale of real
property. (Muñoz v. Llamas, 87 Phil. 737, 1950).

While it is true that petitioner does not directly seek the recovery of title or possession of the property in question, his
action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building
which, under the law, is considered immovable property, the recovery of which is petitioner's primary objective. The
prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the
fundamental and prime objective and nature of the case, which is to recover said real property. It is a real action.

Unfortunately, and evidently to evade payment of the correct amount of filing fee, respondent Manalo never alleged in the
body of his amended petition, much less in the prayer portion thereof, the assessed value of the subject res, or, if there is
none, the estimated value thereof, to serve as basis for the receiving clerk in computing and arriving at the proper amount
of filing fee due thereon, as required under Section 7 of this Court’s en banc resolution of 04 September 1990 (Re:
Proposed Amendments to Rule 141 on Legal Fees).

Even the amended petition, therefore, should have been expunged from the records.

In fine, we rule and so hold that the trial court never acquired jurisdiction over its Civil Case No. Q-95-24791.36

It was in Serrano v. Delica,37 however, that the Court dealt with a complaint that bore the most similarity to the one at bar.
Therein respondent Delica averred that undue influence, coercion, and intimidation were exerted upon him by therein
petitioners Serrano, et al. to effect transfer of his properties. Thus, Delica filed a complaint before the RTC against
Serrano, et al., praying that the special power of attorney, the affidavit, the new titles issued in the names of Serrano, et
al., and the contracts of sale of the disputed properties be cancelled; that Serrano, et al. be ordered to pay Delica, jointly
and severally, actual, moral and exemplary damages in the amount of ₱200,000.00, as well as attorney’s fee of
₱200,000.00 and costs of litigation; that a TRO and a writ of preliminary injunction be issued ordering Serrano, et al. to
immediately restore him to his possession of the parcels of land in question; and that after trial, the writ of injunction be
made permanent. The Court dismissed Delica’s complaint for the following reasons:

A careful examination of respondent’s complaint is that it is a real action. In Paderanga vs. Buissan, we held that "in a real
action, the plaintiff seeks the recovery of real property, or, as stated in Section 2(a), Rule 4 of the Revised Rules of Court,
a real action is one ‘affecting title to real property or for the recovery of possession of, or for partition or condemnation of,
or foreclosure of a mortgage on a real property.’"

Obviously, respondent’s complaint is a real action involving not only the recovery of real properties, but likewise the
cancellation of the titles thereto.

Considering that respondent’s complaint is a real action, the Rule requires that "the assessed value of the property, or if
there is none, the estimated value thereof shall be alleged by the claimant and shall be the basis in computing the fees."
We note, however, that neither the "assessed value" nor the "estimated value" of the questioned parcels of land were
alleged by respondent in both his original and amended complaint. What he stated in his amended complaint is that the
disputed realties have a "BIR zonal valuation" of ₱1,200.00 per square meter. However, the alleged "BIR zonal valuation"
is not the kind of valuation required by the Rule. It is the assessed value of the realty. Having utterly failed to comply with
the requirement of the Rule that he shall allege in his complaint the assessed value of his real properties in controversy,
the correct docket fee cannot be computed. As such, his complaint should not have been accepted by the trial court. We
thus rule that it has not acquired jurisdiction over the present case for failure of herein respondent to pay the required
docket fee. On this ground alone, respondent’s complaint is vulnerable to dismissal.38

Brushing aside the significance of Serrano, petitioner argues that said decision, rendered by the Third Division of the
Court, and not by the Court en banc, cannot modify or reverse the doctrine laid down in Spouses De Leon v. Court of
Appeals.39 Petitioner relies heavily on the declaration of this Court in Spouses De Leon that an action for annulment or
rescission of a contract of sale of real property is incapable of pecuniary estimation.

The Court, however, does not perceive a contradiction between Serrano and the Spouses De Leon. The Court calls
attention to the following statement in Spouses De Leon: "A review of the jurisprudence of this Court indicates that in
determining whether an action is one the subject matter of which is not capable of pecuniary estimation, this Court has
adopted the criterion of first ascertaining the nature of the principal action or remedy sought." Necessarily, the
determination must be done on a case-to-case basis, depending on the facts and circumstances of each. What petitioner
conveniently ignores is that in Spouses De Leon, the action therein that private respondents instituted before the RTC
was "solely for annulment or rescission" of the contract of sale over a real property. 40 There appeared to be no transfer of
title or possession to the adverse party. Their complaint simply prayed for:

1. Ordering the nullification or rescission of the Contract of Conditional Sale (Supplementary Agreement) for
having violated the rights of plaintiffs (private respondents) guaranteed to them under Article 886 of the Civil Code
and/or violation of the terms and conditions of the said contract.

2. Declaring void ab initio the Deed of Absolute Sale for being absolutely simulated; and

3. Ordering defendants (petitioners) to pay plaintiffs (private respondents) attorney's fees in the amount of
₱100,000.00.41

As this Court has previously discussed herein, the nature of Civil Case No. 2006-0030 instituted by petitioner before the
RTC is closer to that of Serrano, rather than of Spouses De Leon, hence, calling for the application of the ruling of the
Court in the former, rather than in the latter.

It is also important to note that, with the amendments introduced by A.M. No. 04-2-04-SC, which became effective on 16
August 2004, the paragraph in Section 7, Rule 141 of the Rules of Court, pertaining specifically to the basis for
computation of docket fees for real actions was deleted. Instead, Section 7(1) of Rule 141, as amended, provides that "in
cases involving real property, the FAIR MARKET value of the REAL property in litigation STATED IN THE CURRENT
TAX DECLARATION OR CURRENT ZONAL VALUATION OF THE BUREAU OF INTERNAL REVENUE, WHICH IS
HIGHER, OR IF THERE IS NONE, THE STATED VALUE OF THE PROPERTY IN LITIGATION x x x" shall be the basis
for the computation of the docket fees. Would such an amendment have an impact on Gochan, Siapno, and Serrano? The
Court rules in the negative.

A real action indisputably involves real property. The docket fees for a real action would still be determined in accordance
with the value of the real property involved therein; the only difference is in what constitutes the acceptable value. In
computing the docket fees for cases involving real properties, the courts, instead of relying on the assessed or estimated
value, would now be using the fair market value of the real properties (as stated in the Tax Declaration or the Zonal
Valuation of the Bureau of Internal Revenue, whichever is higher) or, in the absence thereof, the stated value of the same.

In sum, the Court finds that the true nature of the action instituted by petitioner against respondents is the recovery of title
to and possession of real property. It is a real action necessarily involving real property, the docket fees for which must be
computed in accordance with Section 7(1), Rule 141 of the Rules of Court, as amended. The Court of Appeals, therefore,
did not commit any error in affirming the RTC Orders requiring petitioner to pay additional docket fees for its Complaint in
Civil Case No. 2006-0030.

The Court does not give much credence to the allegation of petitioner that if the judgment of the Court of Appeals is
allowed to stand and not rectified, it would result in grave injustice and irreparable injury to petitioner in view of the
prohibitive amount assessed against it. It is a sweeping assertion which lacks evidentiary support. Undeniably, before the
Court can conclude that the amount of docket fees is indeed prohibitive for a party, it would have to look into the financial
capacity of said party. It baffles this Court that herein petitioner, having the capacity to enter into multi-million transactions,
now stalls at paying ₱720,392.60 additional docket fees so it could champion before the courts its rights over the disputed
real properties. Moreover, even though the Court exempts individuals, as indigent or pauper litigants, from paying docket
fees, it has never extended such an exemption to a corporate entity.

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED. The Decision, dated 22
November 2006, of the Court of Appeals in CA-G.R. SP No. 94800, which affirmed the Orders dated 24 March 2006 and
29 March 2006 of the RTC, Branch 22, of Naga City, in Civil Case No. RTC-2006-0030, ordering petitioner Ruby Shelter
Builders and Realty Development Corporation to pay additional docket/filing fees, computed based on Section 7(a), Rule
141 of the Rules of Court, as amended, is hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.

G.R. No. 187104 August 3, 2010

SAINT LOUIS UNIVERSITY, INC., Petitioner,

vs.
EVANGELINE C. COBARRUBIAS, Respondent.

DECISION

BRION, J.:

We resolve the present petition for review on certiorari1 filed by petitioner Saint Louis University, Inc. (SLU), to challenge
the decision2 and the resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 101708.4

The Factual Background

The facts of the case, gathered from the records, are briefly summarized below.

Respondent Evangeline C. Cobarrubias is an associate professor of the petitioner’s College of Human Sciences. She is
an active member of the Union of Faculty and Employees of Saint Louis University (UFESLU).

The 2001-20065 and 2006-20116 Collective Bargaining Agreements (CBAs) between SLU and UFESLU contain the
following common provision on forced leave:

Section 7.7. For teaching employees in college who fail the yearly evaluation, the following provisions shall apply:

(a) Teaching employees who are retained for three (3) cumulative years in five (5) years shall be on forced leave for one
(1) regular semester during which period all benefits due them shall be suspended. 7

SLU placed Cobarrubias on forced leave for the first semester of School Year (SY) 2007-2008 when she failed the
evaluation for SY 2002-2003, SY 2005-2006, and SY 2006-2007, with the rating of 85, 77, and 72.9 points, respectively,
below the required rating of 87 points.

To reverse the imposed forced leave, Cobarrubias sought recourse from the CBA’s grievance machinery. Despite the
conferences held, the parties still failed to settle their dispute, prompting Cobarrubias to file a case for illegal forced leave
or illegal suspension with the National Conciliation and Mediation Board of the Department of Labor and Employment,
Cordillera Administrative Region, Baguio City. When circulation and mediation again failed, the parties submitted the
issues between them for voluntary arbitration before Voluntary Arbitrator (VA) Daniel T. Fariñas.

Cobarrubias argued that the CA already resolved the forced leave issue in a prior case between the parties, CA-G.R. SP
No. 90596,8 ruling that the forced leave for teachers who fail their evaluation for three (3) times within a five-year period
should be coterminous with the CBA in force during the same five-year period.9

SLU, for its part, countered that the CA decision in CA-G.R. SP No. 90596 cannot be considered in deciding the present
case since it is presently on appeal with this Court (G.R. No. 176717) 10 and, thus, is not yet final. It argued that the forced
leave provision applies irrespective of which CBA is applicable, provided the employee fails her evaluation three (3) times
in five (5) years.11

The Voluntary Arbitrator Decision

On October 26, 2007, VA Daniel T. Fariñas dismissed the case.12 He found that the CA decision in CA-G.R. SP No.
90596 is not yet final because of the pending appeal with this Court. He noted that the CBA clearly authorized SLU to
place its teaching employees on forced leave when they fail in the evaluation for three (3) years within a five-year period,
without a distinction on whether the three years fall within one or two CBA periods. Cobarrubias received the VA’s
decision on November 20, 2007.13

On December 5, 2007, Cobarrubias filed with the CA a petition for review under Rule 43 of the Rules of Court, but failed
to pay the required filing fees and to attach to the petition copies of the material portions of the record.14

Thus, on January 14, 2008, the CA dismissed the petition outright for Cobarrubias’ procedural lapses. 15Cobarrubias
received the CA resolution, dismissing her petition, on January 31, 2008. 16

On February 15, 2008, Cobarrubias filed her motion for reconsideration, arguing that the ground cited is technical. She,
nonetheless, attached to her motion copies of the material portions of the record and the postal money orders for
₱4,230.00. She maintained that the ends of justice and fair play are better served if the case is decided on its merits. 17

On July 30, 2008, the CA reinstated the petition. It found that Cobarrubias substantially complied with the rules by paying
the appeal fee in full and attaching the proper documents in her motion for reconsideration. 18

SLU insisted that the VA decision had already attained finality for Cobarrubias’ failure to pay the docket fees on time.

The CA Decision

The CA brushed aside SLU’s insistence on the finality of the VA decision and annulled it, declaring that the "three (3)
cumulative years in five (5) years" phrase in Section 7.7(a) of the 2006-2011 CBA means within the five-year effectivity of
the CBA. Thus, the CA ordered SLU to pay all the benefits due Cobarrubias for the first semester of SY 2007-2008, when
she was placed on forced leave.19

When the CA denied20 the motion for reconsideration that followed,21 SLU filed the present petition for review on
certiorari.22

The Petition

SLU argues that the CA should not have reinstated the appeal since Cobarrubias failed to pay the docket fees within the
prescribed period, and rendered the VA decision final and executory. Even if Cobarrubias’ procedural lapse is
disregarded, SLU submits that Section 7.7(a) of the 2006-2011 CBA should apply irrespective of the five-year effectivity of
each CBA.23

The Case for Cobarrubias

Cobarrubias insists that the CA settled the appeal fee issue, in its July 30, 2008 resolution, when it found that she had
substantially complied with the rules by subsequently paying the docket fees in full. She submits that the CA’s
interpretation of Section 7.7(a) of the 2006-2011 CBA is more in accord with law and jurisprudence.24

The Issues

The core issues boil down to whether the CA erred in reinstating Cobarrubias’ petition despite her failure to pay the
appeal fee within the reglementary period, and in reversing the VA decision. To state the obvious, the appeal fee is a
threshold issue that renders all other issues unnecessary if SLU’s position on this issue is correct.

The Court’s Ruling

We find the petition meritorious.

Payment of Appellate Court Docket Fees

Appeal is not a natural right but a mere statutory privilege, thus, appeal must be made strictly in accordance with the
provision set by law.25 Rule 43 of the Rules of Court provides that appeals from the judgment of the VA shall be taken to
the CA, by filing a petition for review within fifteen (15) days from the receipt of the notice of judgment.26Furthermore, upon
the filing of the petition, the petitioner shall pay to the CA clerk of court the docketing and other lawful fees;27 non-
compliance with the procedural requirements shall be a sufficient ground for the petition’s dismissal. 28 Thus, payment in
full of docket fees within the prescribed period is not only mandatory, but also jurisdictional. 29 It is an essential
requirement, without which, the decision appealed from would become final and executory as if no appeal has been
filed.30

As early as the 1932 case of Lazaro v. Endencia and Andres, 31 we stressed that the payment of the full amount of the
docket fee is an indispensable step for the perfection of an appeal. In Lee v. Republic,32 we decided that even though half
of the appellate court docket fee was deposited, no appeal was deemed perfected where the other half was tendered after
the period within which payment should have been made. In Aranas v. Endona, 33 we reiterated that the appeal is not
perfected if only a part of the docket fee is deposited within the reglementary period and the remainder is tendered after
the expiration of the period.

The rulings in these cases have been consistently reiterated in subsequent cases: Guevarra v. Court of
Appeals,34Pedrosa v. Spouses Hill,35 Gegare v. Court of Appeals,36 Lazaro v. Court of Appeals,37 Sps. Manalili v. Sps. de
Leon,38 La Salette College v. Pilotin,39 Saint Louis University v. Spouses Cordero,40 M.A. Santander Construction, Inc. v.
Villanueva,41 Far Corporation v. Magdaluyo,42 Meatmasters Int’l. Corp. v. Lelis Integrated Dev’t. Corp.,43Tamayo v.
Tamayo, Jr.,44 Enriquez v. Enriquez,45 KLT Fruits, Inc. v. WSR Fruits, Inc.,46 Tan v. Link,47 Ilusorio v. Ilusorio-Yap,48 and
most recently in Tabigue v. International Copra Export Corporation (INTERCO),49 and continues to be the controlling
doctrine.

In the present case, Cobarrubias filed her petition for review on December 5, 2007, fifteen (15) days from receipt of the
VA decision on November 20, 2007, but paid her docket fees in full only after seventy-two (72) days, when she filed her
motion for reconsideration on February 15, 2008 and attached the postal money orders for ₱4,230.00. Undeniably, the
docket fees were paid late, and without payment of the full docket fees, Cobarrubias’ appeal was not perfected within the
reglementary period.

Exceptions to the Rule on Payment of Appellate Court Docket Fees not applicable

Procedural rules do not exist for the convenience of the litigants; the rules were established primarily to provide order to
and enhance the efficiency of our judicial system.50 While procedural rules are liberally construed, the provisions on
reglementary periods are strictly applied, indispensable as they are to the prevention of needless delays, and are
necessary to the orderly and speedy discharge of judicial business. 51

Viewed in this light, procedural rules are not to be belittled or dismissed simply because their non-observance may have
prejudiced a party's substantive rights; like all rules, they are required to be followed. However, there are recognized
exceptions to their strict observance, such as: (1) most persuasive and weighty reasons; (2) to relieve a litigant from an
injustice not commensurate with his failure to comply with the prescribed procedure; (3) good faith of the defaulting party
by immediately paying within a reasonable time from the time of the default; (4) the existence of special or compelling
circumstances; (5) the merits of the case; (6) a cause not entirely attributable to the fault or negligence of the party
favored by the suspension of the rules; (7) a lack of any showing that the review sought is merely frivolous and dilatory;
(8) the other party will not be unjustly prejudiced thereby; (9) fraud, accident, mistake or excusable negligence without the
appellant's fault; (10) peculiar, legal and equitable circumstances attendant to each case; (11) in the name of substantial
justice and fair play; (12) importance of the issues involved; and (13) exercise of sound discretion by the judge, guided by
all the attendant circumstances.52 Thus, there should be an effort, on the part of the party invoking liberality, to advance a
reasonable or meritorious explanation for his/her failure to comply with the rules.1avvphi1

In Cobarrubias' case, no such explanation has been advanced. Other than insisting that the ends of justice and fair
play are better served if the case is decided on its merits, Cobarrubias offered no excuse for her failure to pay the docket
fees in full when she filed her petition for review. To us, Cobarrubias’ omission is fatal to her cause.

We, thus, find that the CA erred in reinstating Cobarrubias’ petition for review despite the nonpayment of the requisite
docket fees within the reglementary period. The VA decision had lapsed to finality when the docket fees were paid; hence,
the CA had no jurisdiction to entertain the appeal except to order its dismissal.
WHEREFORE, the present petition is GRANTED. The assailed decision and resolution of the Court of Appeals in CA-
G.R. SP No. 101708 are hereby DECLARED VOID and are consequently SET ASIDE. The decision of the voluntary
arbitrator, that the voided Court of Appeals decision and resolution nullified, stands. No pronouncement as to costs.

SO ORDERED.

G.R. No.177425 June 18, 2014

ALONZO GIPA, IMELDA MARO LLANO, JUANITO LUDOVICE, VIRGILIO GOJIT, DEMAR BIT ANGCOR, FELIPE
MONTALBAN AND DAISY M. PLACER,1 Petitioners,
vs.
SOUTHERN LUZON INSTITUTE as represented by its Vice-President For Operations and Corporate Secretary,
RUBEN G. ASUNCION, Respondent.

DECISION

DEL CASTILLO, J.:

Suffice it to say that "[ c ]oncomitant to the liberal interpretation of the rules of procedure should be an effort on the part of
the party invoking liberality to adequately explain his failure to abide by the rules." 2 Those who seek exemption from the
application of the rule have the burden of proving the existence of exceptionally meritorious reasons warranting such
departure.3 Assailed in this Petition for Review on Certiorari is the December 20, 2006 Resolution 4 of the Court of Appeals
(CA) in CA-G.R. CV No. 85215 which dismissed for non-perfection herein petitioners' appeal from the January 5, 2005
Decision' of the Regional Trial Court (RTC), Branch 65, Sorsogon City in Civil Case No. 547-37. Likewise questioned is
the CA Resolution6 dated March 30, 2007 which denied the Motion for Reconsideration thereto.

Factual Antecedents

On February 26, 1996, respondent Southern Luzon Institute (SLI), an educational institution in Bulan, Sorsogon, filed a
Complaint7 for Recovery of Ownership and Possession with Damages against petitioners Alonzo Gipa, Imelda Marollano,
Juanito Ludovice, Demar Bitangcor, Virgilio Gojit, Felipe Montalban and four others namely, Arturo Rogacion, Virgilio
Gracela, Rosemarie Alvarez and Rosita Montalban (Rosita). During trial, defendant Rosita executed a Special Power of
Attorney8 in favor of her sister Daisy M. Placer (Placer) authorizing the latter to represent her in the case and to sign any
and all papers in relation thereto.

SLI alleged that it is the absolute owner of a 7,516-squaremeter parcel of land situated in Brgy. Poblacion, Bulan,
Sorsogon covered by Original Certificate of Title (OCT) No. P-28928. However, petitioners and their co-defendants who
had been informally occupying a portion of the said property refused to vacate the same despite demand. Hence, SLI
sought that they be ordered to immediately vacate the premises, turn over the same to SLI, and pay compensatory
damages, attorney’s fees and cost of suit.

In their Answer with Counterclaim,9 petitioners and their co-defendants asserted that they did not heed SLI’s demand to
vacate as they believed that they have the right to stay on the said property. They relied on their occupation thereof and
that of their predecessors-in-interest which, according to them, dates back to as early as 1950. Impugning SLI’s claims,
petitioners and their co-defendants averred that SLI had not even for a single moment taken possession of the subject
property and was merely able to procure a title over the same thru fraud, bad faith and misrepresentation. By way of
counterclaim, they prayed that they be declared the lawful possessors of the property; that OCT No. P-28928 be declared
null and void; and, that SLI be ordered to pay them moral damages and litigation expenses.

Ruling of the Regional Trial Court

Finding SLI to have proven its ownership of the property by preponderance of evidence, the RTC rendered a Decision10 in
its favor on January 5, 2005. The said court gave weight to SLI’s documentary evidence showing the grant of its
Miscellaneous Sales Application (MSA) over the subject property which became the basis for the issuance of title under
its name, and the testimony of the Supervising Draftsman of the National Housing Authority (NHA) who categorically
stated that the houses occupied by petitioners and their co-defendants were within the property of SLI per NHA’s survey.
It rejected, on the other hand, petitioners and their co-defendants’ claim of title to the property. For one, the fact that SLI
had an existing MSA over the property as far back as 1969 could not have been unknown to them. This is because
several of the petitioners and their codefendants filed Revocable Permit Applications over the same property which were
denied on March 4, 1964, precisely because the areas applied for were already included in SLI’s MSA. For another, the
documentary evidence submitted by them consisted mostly of tax declarations and other documents which were self-
serving and could not be considered as conclusive evidence of ownership. Hence, the RTC ruled:

WHEREFORE, premises considered, judgment is hereby rendered –

a) Declaring plaintiff-SLI as absolute owner of that portion of Lot 4705 containing an area of SEVEN THOUSAND
FIVE HUNDRED SIXTEEN (7,516) SQUARE METERS covered by "Katibayan ng Orihinal na Titulo Blg. P-
28928".

b) Ordering herein defendants to vacate and relinquish the portions of lot 4705 belonging to the SLI that they are
presently occupying illegally and to demolish the residential houses existing thereon at their own expense.

c) To pay attorney’s fee in the amount of Php10,000.00 jointly.

d) And to pay the costs.

SO ORDERED.11

Petitioners and their co-defendants filed a Notice of Appeal12 which was granted by the RTC in its Order13 of January 27,
2005.

Ruling of the Court of Appeals

The CA, however, dismissed the appeal in its Resolution14 of August 26, 2005 since it was not shown that the appellate
court docket fees and other lawful fees were paid.15 Petitioners and their co-defendants promptly filed a Motion for
Reconsideration16 to which they attached a Certification17 from the RTC that they paid the appeal fee in the amount
of₱3,000.00 under Official Receipt No. 18091130 dated January 25, 2005. In view of this, the CA granted the said motion
and consequently reinstated the appeal through a Resolution18 dated November 2, 2005.

Subsequently, however, the CA further required petitioners and their codefendants, through a Minute Resolution 19dated
March 1, 2006,to remit within ten days from notice the amount of ₱30.00 for legal research fund, which apparently was not
included in the ₱3,000.00 appeal fee previously paid by them. Copy of the said resolution was received on March 13,2006
by petitioners’ counsel, Atty. Jose G. Gojar of the Public Attorney’s Office.20

Despite the lapse of nine months from their counsel’s receipt of the said resolution, petitioners and their co-defendants,
however, failed to comply with the CA’s directive. Hence, the said court dismissed the appeal through its Resolution 21 of
December 20, 2006in this wise:

Jurisprudence is replete that the nonpayment of the docket and other lawful fees within the reglementary period as
provided under Section 4 of Rule 41 of the Revised Rules of [C]ourt is a ground for the dismissal of an appeal, as
provided for under Section 1(c)[,] Rule 50 of the same Rule. We quote:

SECTION 1. Grounds for dismissal of appeal. – An appeal may be dismissed by the Court of Appeals, on its own motion
or on that of the appellee, on the following grounds:

xxx xxx xxx

c. Failure of the appellant to pay the docket and other lawful fees as provided in Section 4 of Rule 41; x x x

xxxx

In the instant case, appellants were given sufficient time to complete the payment of the appeal fees. Unfortunately,
appellants still failed to comply with the said directive [despite the fact] that the amount of ₱30.00 involved is very little.
Hence, appellants failed to perfect their appeal for failure to fully pay the appeal fees. They are deemed to have lost
interest over the instant appeal. x x x x

WHEREFORE, premises considered, the instant Appeal is hereby DISMISSED.

SO ORDERED.22

Petitioners and their co-defendants filed a Motion for Reconsideration23 invoking the principle of liberality in the application
of technical rules considering that they have paid the substantial amount of ₱3,000.00 for docket and other legal fees and
fell short only by the meager amount of ₱30.00. Ascompliance, they attached to the said motion a postal money order in
the sum of ₱30.00 payable to the Clerk of Court of the CA.24

The CA, however, was not swayed, hence, the denial of the Motion for Reconsideration in its Resolution 25 of March 30,
2007.

Issue

Petitioners and Placer now file this Petition for Review on Certiorari raising the lone issue of:

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN DISMISSING THE APPEAL FILED BY THE
PETITIONERS FOR FAILURE TO REMIT THE MEAGERAMOUNT OF THIRTY PESOS (₱30.00) AFTER HAVING
ADVANCED A SUBSTANTIAL PORTION OF THE DOCKET FEES.26

It must, however, be noted at the outset that the caption of the present Petition includes Placer as one of the petitioners.
In fact, the other petitioners even authorized her to sign the verification and certification of non-forum shopping in their
behalf.27 A review of the records, however, shows that she was not one of the defendants before the RTC. Her only
participation therein was that she represented her sister Rosita as one of the defendants by virtue of a Special Power of
Attorney which the latter executed in her favor.28 Notably in the present Petition, Placer appears to have been impleaded
in her personal capacity and not as Rosita’s representative. This cannot be done. It bears emphasizing that an appeal on
certiorari, as in this case, is a continuation of the original suit.29 Hence, the parties in the original suit must also be the
parties in such an appeal.30 Placer, therefore, not being a party in the complaint before the RTC has no personality to
continue the same on appeal and cannot be considered as a petitioner. At the most, her only role in this Petition was to
sign the verification and certification of non-forum shopping for and in behalf of petitioners.

The Parties’ Arguments

Initially, petitioners invoke the liberal application of technical rules31 and contend that the fact that only the amount of
₱30.00 was not paid justifies relaxation of the same. Later in their Reply, 32 however, petitioners concede that the payment
of docket fees is not a mere technicality. Nevertheless, they point out that while full payment of docket fees is
indispensable in the perfection of an appeal, the same admits of exceptions.33 Their case falls under one of the
exceptions, that is, in the name of substantial justice and fair play. According to petitioners, the dismissal of their appeal
for failure to pay ₱30.00 runs counter to substantial justice and fair play as the same would deprive them of their right to
justice and render ineffective the amount of ₱3,000.00, which despite being indigents, they undertook to pay. To support
their case, petitioners cited Andrea Camposagrado v. Pablo Camposagrado 34 and Spouses Gutierrez v. Spouses
Valiente35 wherein the Court excused the insufficient payment of docket fees.1âwphi1 Moreover, petitioners raise in the
said Reply, albeit for the first time, the argument that while Republic Act (RA) No. 940636 was still in existent at the time
their appeal was filed before the CA, Section 637 thereof which exempts PAO clients like themselves from the payment of
docket and other fees should be given retroactive application.

For its part, SLI argues that since petitioners’ appeal was not perfected due to insufficient payment of docket and other
legal fees, the January 5, 2005 Decision of the RTC had already become final and executory. Further, the CA correctly
dismissed petitioners’ appeal because aside from the fact that petitioners failed to comply with the CA’s directive to pay
the lacking amount of ₱30.00 for a period of more than nine months from their counsel’s receipt of notice, no plausible
explanation was tendered by them for such failure.

Our Ruling

The Petition fails.

Payment of the full amount of appellate

court docket and lawful fees is
mandatory and jurisdictional;
Relaxation of the rule on payment of
appeal fee is unwarranted in this case.
Section 4, Rule 41 of the Rules of Court provides:

Sec. 4. Appellate court docket and other lawful fees. – Within the period for taking an appeal, the appellant shall pay to
the clerk of court which rendered the judgment or final order appealed from, the full amount of the appellate court docket
and other lawful fees. Proof of payment of said fees shall be transmitted to the appellate court together with the original
record or the record on appeal. (Emphases supplied)

In Gonzales v. Pe,38 the Court’s explanation anent the requirement of full payment of docket and other lawful fees under
the above-quoted provision was iterated, viz:

In Far Corporation v. Magdaluyo, as with other subsequent cases of the same ruling, the Court explained that the
procedural requirement under Section 4 of Rule 41 is not merely directory, as the payment of the docket and other legal
fees within the prescribed period is both mandatory and jurisdictional. It bears stressing that an appeal is not a right, but a
mere statutory privilege. An ordinary appeal from a decision or final order of the RTC to the CA must be made within 15
days from notice. And within this period, the full amount of the appellate court docket and other lawful fees must be paid to
the clerk of the court which rendered the judgment or final order appealed from. The requirement of paying the full amount
of the appellate docket fees within the prescribed period is not a mere technicality of law or procedure. The payment of
docket fees within the prescribed period is mandatory for the perfection of an appeal. Without such payment, the appeal is
not perfected. The appellate court does not acquire jurisdiction over the subject matter of the action and the Decision
sought to be appealed from becomes final and executory. Further, under Section 1 (c), Rule 50, an appeal may be
dismissed by the CA, on its own motion or on that of the appellee, on the ground of the non-payment of the docket and
other lawful fees within the reglementary period as provided under Section 4 of Rule 41. The payment of the full amount of
the docket fee is an indispensable step for the perfection of an appeal. In both original and appellate cases, the court
acquires jurisdiction over the case only upon the payment of the prescribed docket fees.39

Here, petitioners concede that payment of the full amount of docket fees within the prescribed period is not a mere
technicality of law or procedure but a jurisdictional requirement. Nevertheless, they want this Court to relax the application
of the rule on the payment of the appeal fee in the name of substantial justice and equity.

The Court is not persuaded.

The liberality which petitioners pray for has already been granted to them by the CA at the outset. It may be recalled that
while petitioners paid a substantial part of the docket fees, they still failed to pay the full amount thereof since their
payment was short of ₱30.00.Based on the premise that the questioned Decision of the RTC has already become final
and executory due to non-perfection, the CA could have dismissed the appeal outright. But owing to the fact that only the
meager amount of ₱30.00 was lacking and considering that the CA may opt not to proceed with the case until the docket
fees are paid,40 it still required petitioners, even if it was already beyond the reglementary period, to complete their
payment of the appeal fee within 10 days from notice. Clearly, the CA acted conformably with the pronouncement made in
Camposagrado, a case cited by petitioners, that "[a] party’s failure to pay the appellate docket fee within the reglementary
period confers only a discretionary and not a mandatory power to dismiss the proposed appeal. Such discretionary power
should be used in the exercise of the court’s sound judgment in accordance with the tenets of justice and fair play with
great deal of circumspection, considering all attendant circumstances and must be exercised wisely and prudently, never
capriciously, with a view to substantial justice."41

The CA’s leniency over petitioners’ cause did not end there. Although they were given only 10 days to remit the ₱30.00
deficiency, the said court allowed an even longer period of nine months to lapse, apparently in the hope that petitioners’
compliance would be on its way. But as no payment was remitted, it was constrained to finally dismiss the appeal for non-
perfection. Surprisingly, petitioners were again heard of when they filed a Motion for Reconsideration to which they
attached a postal money order of ₱30.00. Nevertheless, they did not offer any plausible explanation either as to why they,
at the start, failed to pay the correct docket fees or why they failed to comply with the CA’s directive for them to remit the
₱30.00-deficiency. Instead, they focused on begging the CA for leniency, arguing that the meager amount of the
deficiency involved justifies relaxation of the rules. What is worse is that even if the CA already took note of the lack of
such explanation in its Resolution denying petitioners’ motion for reconsideration, petitioners, up to now, have not
attempted to tender one in this Petition and instead continue to capitalize on substantial justice, fair play and equity to
secure a reversal of the dismissal of their appeal. The Court cannot, therefore, help but conclude that there is really no
plausible reason behind the said omission.

Suffice it to say that "[c]oncomitant to the liberal interpretation of the rules of procedure should be an effort on the part of
the party invoking liberality to adequately explain his failure to abide by the rules."42 Those who seek exemption from the
application of the rule have the burden of proving the existence of exceptionally meritorious reason warranting such
departure.43 Petitioners’ failure to advance any explanation as to why they failed to pay the correct docket fees or to
complete payment of the same within the period allowed by the CA is thus fatal to their cause. Hence, a departure from
the rule on the payment of the appeal fee is unwarranted. Neither do the cases cited by petitioners help because they are
not in point. Unlike in this case, the CA in Camposagrado no longer required the petitioners therein to complete the
payment of the appeal fee by remitting the ₱5.00 deficiency but just dismissed the appeal outright. Moreover, a justifiable
reason for the insufficient payment was tendered by petitioners in the said case, i.e., that they relied on the assessment
made by the collection officer of the court and honestly believed that the amount collected from them was that which is
mandated by the Rules.1âwphi1

The same thing goes true with Gutierrez. In fact, the pronouncement made in Sun Insurance Office, Ltd. v. Asuncion, 44 as
cited in Gutierrez, even militates against petitioners. It was reiterated therein that the rule that "a court acquires jurisdiction
over any case only upon payment of the prescribed docket fees does not apply where the party does not deliberately
intend to defraud the court in payment of docket fees, and manifests its willingness to abide by the rules by paying
additional docket fees when required by the court."45 As may be recalled, petitioners in this case did not immediately remit
the deficient amount of ₱30.00 when required by the CA and only did so after the lapse of more than nine months when
their appeal was already dismissed.

The Court need not belabor the issue

of the retroactive application of Section 6
of RA 9406.

"The purpose of a reply is to deny or allege facts in denial of new matters alleged by way of defense in the answer," 46 or in
this case, in the comment to the petition. "It is not the office or function of a reply to set up or introduce a new [issue] or to
amend or amplify the [Petition]."47 The issue of whether Section 6 of RA 9406 should be given retroactive application in
order to exempt petitioners from payment of docket fees was therefore improperly introduced in petitioners’ Reply.
Moreover, "[t]he rule in pleadings and practice is that no new issue in a case can be raised in a pleading which by due
diligence could have been raised in previous pleadings."48 Here, petitioners at the outset could have very well raised the
said issue in the Petition since at the time of its filing on June 7, 2007, RA 9406 was already in effect. 49 However, they
failed to do so. Besides, for this Court to take cognizance of the same is to offend the basic rules of fair play, justice and
due process since SLI had no chance to propound its argument in connection thereto. This is because even if it wanted
to, SLI could not anymore do so in its Memorandum as no new issues or arguments may be raised in the said pleading, it
being only the summation of the parties’ previous pleadings.50 For these reasons, the Court sees no need to belabor the
issue of the retroactive application of Section 6 of RA 9406.

All told, the Court finds the CA’s dismissal of the appeal interposed by petitioners in order.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed Resolutions dated December 20, 2006 and
March 30, 2007 of the Court of Appeals in CA-G.R. CV No. 85215 are AFFIRMED.

SO ORDERED.

G.R. No. 193034 July 20, 2015

RODGING REYES, Petitioner,

vs.
PEOPLE OF THE PHILIPPINES and SALUD M. GEGATO, Respondents.

DECISION

PERALTA, J.:

For this Court's resolution is the Petition for Review on Certiorari under Rule 45 of the Rules of Court, dated August 17,
2010, of petitioner Rodging Reyes assailing the Resolution1 dated November 23, 2009 of the Court of Appeals in CA-G.R.
CR No. 00421-MIN.

The facts are the following:

Petitioner, in a complaint filed by private respondent Salud M. Gegato, was charged with Grave Threats before the
Municipal Circuit Trial Court (MCTC) of Bayugan and Sibagat, Bayugan, Agusan del Sur, which reads as follows:
That on or about the 16th day of October 2001, at about 5: 10 o'clock in the afternoon, more or less, in the premises and
vicinity, particularly at Avon Store, situated at Atis Street, Poblacion, in the municipality of Bayugan, province of Agusan
del Sur, Philippines, and within the jurisdiction of this Honorable Court, the above-named Accused, with deliberate intent,
moved by personal resentment and hatred, did then and there willfully, unlawfully and feloniously threatened the life of
Mrs. Salud Gegato, speak and utter by telephone the following threatening words, to wit; "SALUD, UNDANGA ANG IM
ONG PAGSIGI UG TSISMIS SA AKONG ASAWA, KAY MAULAWAN ANG AKONG ASAWA. WARNINGAN TAKA AYAW
PANG HILABOT SA AMONG KINABUHI KAY BASIN PATYON TAKA," meaning (Salud, stop your rumor against my wife
because she will be embarrassed. I'm warning you, don't mind our lives for I might kill you), which acts cast fear and
danger upon the life of the victim Salud Gegato, to the damage and prejudice consisting of actual, moral and
compensatory damages.

CONTRARY TO LAW.

Bayugan, Agusan del Sur, Philippines, October 23, 2001.2

Before arraignment, petitioner filed a Motion to Quash based on the ground of jurisdiction and that the crime is not Grave
Threats under Article 282 of the Revised Penal Code, but Other Light Threats under Article 285, paragraph 2 of the same
Code.

The MCTC, in its Order dated June 3, 2002, denied the motion. Petitioner's motion for reconsideration was also denied by
the same court in an Order dated July 25, 2002.

On September 13, 2002, petitioner filed a Motion to Inhibit the presiding judge on the ground that private respondent is the
Court Interpreter of the same court, but it was denied in the court's Order dated September 16, 2002 based on the Order
of this Court dated July 3, 2002 regarding the same motion for inhibition of the same presiding judge filed earlier by the
petitioner with this Court. Based on that Order of this Court, the basis of the inhibition does not fall within the absolute
disqualification rule under Section 1, Rule 13 7 of the Rules of Court, and neither does it appear to be a just or valid
reason under paragraph 2 thereof. This Court also ordered the presiding judge to set aside the Order of Inhibition and
directed the same presiding judge to hear and decide the case with dispatch applying the Rules on Summary Procedure.3

The MCTC, in a Decision4 dated August 10, 2005, found petitioner guilty beyond reasonable doubt of the crime charged.
The dispositive portion of the Decision reads:

In view of the foregoing, this Court finds the Accused GUILTY beyond reasonable doubt of the crime of GRAVE
THREATS under Paragraph 1 (2) imposing condition, without the offender attaining his purpose, and is hereby sentenced
to suffer imprisonment, considering one (1) mitigating circumstance, the medium period of arresto mayor or a period of
two (2) months and one (1) day to four (4) months.

In addition, he is ordered to pay Private Complainant [the] following civil liabilities.

a. The amount of ONE HUNDRED THOUSAND (₱100,000.00) Pesos as moral damages.

b. the amount of TWENTY THOUSAND (₱20,000.00) Pesos for litigation expenses and for Attorney's Fees as it is
clear from the trials that complainant was assisted by a Private Prosecutor for a fee.

SO ORDERED.

On appeal, the Regional Trial Court, in its Decision5 dated April 2, 2007, denied petitioner's appeal but found petitioner
guilty beyond reasonable doubt of the crime of Other Light Threats under Article 285, par. 2 of the Revised Penal Code,
instead of Grave Threats as originally adjudged by the MCTC. The RTC ruled that:

WHEREFORE, accused is hereby sentenced to suffer imprisonment of 10 days of arresto menor and the moral damages
of ₱100,000.00 be reduced to ₱50,000.00, attorney's fee of ₱20,000.00 stands.

The original decision is hereby modified.

If accused does not file an appeal within the reglementary period, let the entire records be returned back to the Court of
origin for proper disposition thereat.6
Petitioner filed a Motion for Reconsideration, and in its Amended Decision7 dated May 16, 2007, the RTC denied the
motion and modified its original decision reducing the amount of moral damages to ₱10,000.00 and the attorney's fees to
₱10,000.00.

Thus, petitioner filed with the Court of Appeals a Motion for Extension of Time to File a Petition for Review. However,
instead of filing a petition for review within the 15-day period allowed by the CA, petitioner filed a second Motion for
Extension of Time asking for another 15 days within which to file his petition for review. After which, petitioner filed his
petition.

Thereafter, the CA, in its Resolution8 dated August 2, 2007, dismissed the petition. The Resolution partly reads, as
follows:

Petitioner's first Motion for Extension of Time to File Petition for Review asking for fifteen (15) days from June 6, 2007 or
until June 21, 2007 is DENIED for failure to pay the full amount of the docket fees pursuant to Sec. 1, Rule 42 of the Rules
of Court. His second motion for extension is likewise DENIED as no further extension may be granted except for most
compelling reason. The petition subsequently filed is, however, NOTED but DISMISSED on the following grounds:

1. Filed beyond the reglementary period;

2. Failure of petitioner to pay complete docket fees as prescribed by law. It is deficient by P.3,530.00;

3. Failure of petitioner to indicate a complete statement of material dates as required under the Rules. Petitioner
did not mention in the body of the petition when he received the RTC's Order dated May 16, 2007 denying his
Motion for Reconsideration;

4. Failure of petitioner to attach pertinent documents material in the petition. No copy of the May 16, 2007 Order
denying his Motion for Reconsideration was attached to the petition.

On August 14, 2007, petitioner filed a Motion for Reconsideration, but it was denied by the CA in its Resolution dated
October 17, 2008 for failure of the petitioner to furnish copies to the Solicitor General and the private respondent.

Thus, petitioner filed a Second Motion for Reconsideration. The CA, in its Resolution dated November 23, 2009, denied
the said motion, the dispositive portion of which, reads:

ACCORDINGLY, the Court RESOLVES to:

1. DISPENSE with the Offices of the Solicitor General's comment on the petitioner's second Motion for
Reconsideration dated 13 November 2008;

2. GRANT the petitioner's second Motion for Reconsideration dated 13 November 2008, and RECONSIDER and
SET ASIDE the Court's 17 October 2008 Resolution dismissing the petitioner's first Motion for Reconsideration
dated 13 August 2007; and

3. DENY the petitioner's first Motion for Reconsideration dated 13 August 2007; and

4. DISMISS with finality the instant petition for review.

SO ORDERED.9

On December 28, 2009, petitioner filed a third Motion for Reconsideration, but was resolved by the CA on June 24, 2010,
as follows:

The Court RESOLVES to merely NOTE WITHOUT ACTION the petitioner's third Motion for Reconsideration, in view of
Our 23 November 2009 Resolution dismissing this petition with finality. 10

Hence, the present petition.

Petitioner insists that the CA erred in favoring procedural technicalities over his constitutional right to due process.
It must be remembered that petitioner filed three (3) successive Motions for Reconsideration before the CA on August 14,
2007, November 13, 2008, and December 28, 2009.

In its Resolution dated November 23, 2009, the CA granted the petitioner's second Motion for Reconsideration setting
aside its previous Resolution dated October 17, 2008 and dismissing the first Motion for Reconsideration dated August
13, 2007. The CA, in the same Resolution, discussed the other grounds for the dismissal of the petition as contained in its
first Resolution dated August 2, 2007. Thus, the CA not only denied the first Motion for Reconsideration dated August 13,
2007 but also dismissed the Petition for Review filed earlier.

However, as keenly pointed out by the OSG in its Comment11 dated January 11, 2011, instead of elevating the present
case before this Court within the period provided under Rule 45 of the Rules of Court, petitioner opted to file a third motion
for reconsideration, which was filed without leave of court and notwithstanding the express declaration of the CA that
petitioner's first Motion for Reconsideration dated August 13, 2007 was denied and the case already dismissed with
finality.12

At the outset, the Court emphasizes that second and subsequent motions for reconsideration are, as a general rule,
prohibited. Section 2, Rule 52 of the Rules of Court provides that "no second motion for reconsideration of a judgment or
final resolution by the same party shall be entertained." The rule rests on the basic tenet of immutability of judgments. "At
some point, a decision becomes final and executory and, consequently, all litigations must come to an end." 13

The general rule, however, against second and subsequent motions for reconsideration admits of settled exceptions. In
Neypes v. Court of Appeals,14 the Court declared:

In setting aside technical infirmities and thereby giving due course to tardy appeals, we have not been oblivious to or
unmindful of the extraordinary situations that merit liberal application of the Rules. In those situations where technicalities
were dispensed with, our decisions were not meant to undermine the force and effectivity of the periods set by law. But
we hasten to add that in those rare cases where procedural rules were not stringently applied, there always existed a
clear need to prevent the commission of a grave injustice. Our judicial system and the courts have always tried to
maintain a healthy balance between the strict enforcement of procedural laws and the guarantee that every litigant be
given the full opportunity for the just and proper disposition of his cause.15

The circumstances surrounding this case do not warrant the relaxation of the rules. Petitioner failed to present compelling
justification or reason to relax the rules of procedure. The CA ruled that, "[t]he petitioner's attribution to inadvertence (as
the cause) of his failure to indicate a complete statement of material dates and to attach pertinent documents material to
the petition is not compelling or reasonable enough for the Court to disregard the mandate in Rule 42, Sec. 3 of the Rules,
x x x."16

It must be noted that the CA has acted favorably upon petitioner's second motion for reconsideration. However, that does
not mean that petitioner is already right in arguing that the reglementary period for the filing of the present petition before
this Court should be reckoned from his receipt of the denial of his third Motion for Reconsideration. As correctly observed
by the OSG, "[t]o condone such a procedurally irregular practice would lead into an absurd situation where petitioner
would, in effect, be rewarded for unilaterally suspending the running of the reglementary period to appeal by filing
prohibited pleadings."17 This is in consonance with this Court's ruling in Securities and Exchange Commission v. PICOP
Resources, Inc.,18 thus: The same issue was the focal point in Obando v. Court of Appeals.19 In Obando, this Court
maintained the prohibitory nature of a second motion for reconsideration and its gnawing implications in the appeal
process. Said the court:

x x x [T]he Rules of Court are explicit that a second motion for reconsideration shall not be allowed. In this case,
petitioners filed not only a second motion for reconsideration, but a third motion for reconsideration as well. Since the
period to appeal began to run from the denial of the first motion for reconsideration, the notice of appeal which petitioners
filed six months after the denial of their first motion for reconsideration was correctly denied for having been filed late.
(Emphasis supplied)

Since the second motion for reconsideration was not allowed, this Court ruled that it did not toll the running of the period
to appeal.1âwphi1 More so, would a third motion for reconsideration.

In Dinglasan v. Court of Appeals,20 this Court explained the reason why it is unwise to reckon the period of finality of
judgment from the denial of the second motion for reconsideration.
To rule that finality of judgment shall be reckoned from the receipt of the resolution or order denying the second motion for
reconsideration would result to an absurd situation whereby courts will be obliged to issue orders or resolutions denying
what is a prohibited motion in the first place, in order that the period for finality of judgments shall run, thereby, prolonging
the disposition of cases. Moreover, such a ruling would allow a party to forestall the running of the period for finality of
judgments by virtue of filing a prohibited pleading; such a situation is not only illogical but also unjust to the winning party.

xxxx

The overt consequence of the introduction of a prohibited pleading was pointed out succinctly by this Court in Land Bank
of the Philippines v. Ascot Holdings and Equities, Inc.:21

It is obvious that a prohibited pleading cannot toll the running of the period to appeal since such pleading cannot be given
any legal effect precisely because of its being prohibited.

Clearly, a second motion for reconsideration does not suspend the running of the period to appeal and neither does it
have any legal effect.22

Hence, the CA did not commit any error when it properly noted without action the petitioner's third motion for
reconsideration for being a prohibited pleading, as well as merely a reiteration of his arguments in his first motion for
reconsideration. Therefore, the said motion for reconsideration is a mere scrap of paper that does not deserve any
consideration and the filing of the same did not toll the running of the prescriptive period for filing a petition based on Rule
45.23

It is significant to emphasize that the CA dismissed the petition due to the following procedural infirmities: (1) it was filed
beyond the reglemetary period; (2) petitioner failed to pay the complete docket fee; (3) the petition failed to indicate a
complete statement of material dates since petitioner did not mention in the body of the petition when he received the
RTC's Order dated May 16, 2007 denying his Motion for Reconsideration; and (4) petitioner failed to attach pertinent
documents material in the petition as no copy of the May 16, 2007 Amended Decision was attached to the petition.

Section 1, Rule 42 of the Rules of Court states the need to pay docket fees, thus:

Section 1. How appeal taken; time for filing. - A party desiring to appeal from a decision of the Regional Trial Court
rendered in the exercise of its appellate jurisdiction may file a verified petition for review with the Court of Appeals, paying
at the same time to the clerk of said court the corresponding docket and other lawful fees, depositing the amount of
₱500.00 for costs, x x x.

The rule is that payment in full of the docket fees within the prescribed period is mandatory. 24 In Manchester v. Court of
Appeals,25 it was held that a court acquires jurisdiction over any case only upon the payment of the prescribed docket fee.
The strict application of this rule was, however, relaxed two (2) years after in the case of Sun Insurance Office, Ltd. v.
Asuncion,26 wherein the Court decreed that where the initiatory pleading is not accompanied by the payment of the docket
fee, the court may allow payment of the fee within a reasonable period of time, but in no case beyond the applicable
prescriptive or reglementary period. This ruling was made on the premise that the plaintiff had demonstrated his
willingness to abide by the rules by paying the additional docket fees required. 27 Thus, in the more recent case of United
Overseas Bank v. Ros,28 the Court explained that where the party does not deliberately intend to defraud the court in
payment of docket fees, and manifests its willingness to abide by the rules by paying additional docket fees when required
by the court, the liberal doctrine enunciated in Sun Insurance Office, Ltd., and not the strict regulations set in Manchester,
will apply.

Admittedly, this rule is not without recognized qualifications. The Court has declared that in appealed cases, failure to pay
the appellate court docket fee within the prescribed period warrants only discretionary as opposed to automatic dismissal
of the appeal and that the court shall exercise its power to dismiss in accordance with the tenets of justice and fair play,
and with great deal of circumspection considering all attendant circumstances. 29

In that connection, the CA, in its discretion, may grant an additional period of fifteen (15) days only within which to file the
petition for review upon proper motion and the payment of the full amount of the docket and other lawful fees and the
deposit for costs before the expiration of the reglemetary period and that no further extension shall be granted except for
the most compelling reason and in no case to exceed fifteen (15) days.30 Therefore, the grant of any extensions for the
filing of the petition is discretionary and subject to the condition that the full amount of the docket and lawful fees are paid
before the expiration of the reglementary period to file the petition. In its Resolution dated November 23, 2009, the CA
clearly explained its denial of petitioner's motion for extension of time to file a petition for review, thus:
Clearly, there are pre-requisites before a motion for extension to file a Rule 42 petition for review could even be granted.
The petitioner must pay the full amount of the docket and other lawful fees and the deposit for costs before the expiration
of the reglementary period. This requirement was not met by the petitioner as the docket fees he had paid are actually
deficient by Three Thousand Five Hundred Thirty Pesos (PJ,530.00). Granting the petitioner's two (2) motions for
extension of time to file petition for review would have been beyond the pale of the limits allowed by the Rules for the
Court in that instance, considering that the petitioner failed to fulfill a requirement. 31

Petitioner now begs this Court for leniency in the interest of justice. While there is a crying need to unclog court dockets,
on the one hand, there is, on the other, a greater demand for resolving genuine disputes fairly and equitably,32 for it is far
better to dispose of a case on the merit which is a primordial end, rather than on a technicality that may result in
injustice.33 However, [i]t is only when persuasive reasons exist that the Rules may be relaxed to spare a litigant of an
injustice not commensurate with his failure to comply with the prescribed procedure.34 In the present case, petitioner failed
to convince this Court of the need to relax the rules and the eventual injustice that he will suffer if his prayer is not granted.

Nevertheless, granting that this Court would decide the merits of this case, the petition would still be denied. In its petition,
the arguments presented by petitioners are factual in nature. The well-entrenched rule is that only errors of law and not of
fact are reviewable by this Court in petitions for review on certiorari under Rule 45 under which this petition is filed. It is not
the Court's function under Rule 45 to review, examine and evaluate or weigh once again the probative value of the
evidence presented.35

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court, dated August 17, 2010, of
petitioner Rodging Reyes is hereby DENIED for lack of merit. Thus, the Resolution dated November 23, 2009 of the Court
of Appeals is hereby AFFIRMED.

SO ORDERED.

G.R. No. 186102

NATIONAL TRANSMISSION CORPORATION, Petitioner,

vs.
HEIRS OF TEODULO EBESA, namely: PORFERIA L. EBESA, EFREN EBESA, DANTE EBESA and CYNTHIA
EBESA, and ATTY. FORTUNATO VELOSO,Respondents .

DECISION

REYES, J.:

This is a petition for review on certiorari1 filed under Rule 45 of the Rules of Court, assailing the Resolution2 dated January
14, 2009 of the Court of Appeals (CA) in CA-G.R. CEB CV No. 01380, which dismissed the appeal on the ground of non-
payment of appeal fees.

The Facts of the Case

The National Transmission Corporation (NTC) is a government-owned and controlled corporation (GOCC) created and
existing by virtue of Republic Act No. 9136, under which it is granted the authority to exercise the power of eminent
domain.3

Early in 2005, NTC filed a case to expropriate the 1,479-square-meter portion of Lot No. 18470, covered by Original
Certificate of Title No. 1852, which has a total area of 6,014 sq m and situated in Quiot, Pardo, Cebu City. It is declared
under the co-ownership of the heirs of Teodulo Ebesa, namely, Porferia Ebesa, Efren Ebesa, Dante Ebesa and Cynthia
Ebesa Ramirez (Heirs of Ebesa), but is occupied by Atty. Fortunato Veloso (Veloso) (respondents), who allegedly
purchased the property, as evidenced by an unregistered Deed of Sale. NTC alleged that the acquisition of an easement
right-of-way over a portion of the subject property is necessary for the construction and maintenance of the 138KV DC/ST
Transmission Line (Tie Line) of the Quiot (Pardo) 100MVA Substation Project in Cebu City, an undertaking that partook of
a public purpose.4

In his Answer, Veloso, acting as his own counsel in collaboration with Atty. Nilo Ahat, conceded that the project was
indeed intended for a public purpose but disputed its necessity and urgency. He alleged that the project will not only affect
a portion of the property but its entirety considering that the construction entails the installation of huge permanent steel
towers and the air space directly above the subject property will be permanently occupied with transmission lines.
Ultimately, the NTC wanted to acquire not only an easement of right-of-way but a site location for its permanent structures
and improvements which seriously affects the marketability of the remainder of the property which was incidentally
classified as residential in character.5

On April 22, 2005, NTC filed an Urgent Motion for the Issuance of a Writ of Possession alleging that it has deposited with
the Land Bank of the Philippines the amount of ₱11,300.00, representing the assessed value of the subject property and
that it has served Notice to Take Possession to interested parties.6

On July 15, 2005, the Regional Trial Court (RTC) of Cebu City, Branch 21, issued an order of expropriation, declaring that
the NTC has a lawful right to take the subject property and use the same for the intended public purpose subject to the
payment of just compensation which shall be based on its value at the time of the filing of the complaint. 7

On July 20, 2005, the NTC filed a compliance informing the RTC that it already complied with the requirement for the
payment of just compensation based on the Bureau of Internal Revenue zonal valuation and prayed for the immediate
issuance of a writ of possession. Thereafter, on July 21, 2005, the RTC issued an order for the issuance of a writ of
possession.8

On August 2, 2005, the RTC issued an order, directing the NTC and Veloso to submit within 10 days from receipt thereof
the name of the individuals respectively nominated by them to be appointed as commissioners tasked to determine the
amount of just compensation for the subject property. Thereafter, in an Order dated August 25, 2005, the RTC appointed
Alfio Robles (Robles), Rodulfo Lafradez, Jr. (Lafradez Jr.) and Wilfredo Muntuerto (Muntuerto) as commissioners. The
Board of Commissioners were directed to include in its report (1) the amount of fair market value of the property sought to
be expropriated, (2) the existence and value of improvements, (3) the existence and value of consequential damages, if
any, on the remainder of the property, and (4) the existence and value of consequential benefits, if any, to be derived by
the owner of the subject property.9

On September 22, 2005, the Board of Commissioners submitted a Commissioner’s Report with Dissenting Opinion. In the
majority opinion penned by Muntuerto and Lafradez Jr., both believed that the applicable fair market value for the year
2005 is ₱6,222.42 per sq m and that the remainder of the property suffered consequential damage equivalent to 70% of
its fair market value. On the other hand, Robles, in his dissent, opined that the applicable fair market value is ₱3,100.00
per sq m and that no consequential damage was suffered. Both the NTC and Veloso submitted their respective
oppositions to the report.10

Ruling of the RTC

On January 9, 2006, the RTC rendered a Decision,11 upholding the majority opinion in the report of the Board of
Commissioners, the dispositive portion of which reads:

WHEREFORE, all the foregoing premises considered, judgment is hereby rendered:

Fixing the just compensation which [the NTC] must pay [Veloso] for the land with an area of 1,479 square meters
described in the complaint in the reasonable amount of ₱35,179,984.88.

Directing [NTC] to pay [Veloso] interest at the legal rate on the amount of just compensation from the time writ of
possession was issued and until the said amount shall have been paid in full. The amount initially paid by [NTC] to
[Veloso] based upon the relevant BIR zonal valuation shall accordingly be deducted the same being part payment of the
just compensation payable.

Directing the [NTC] to either immediately pay [Veloso] the amount of just compensation fixed herein plus the mandated
interest plus the costs and retain the possession taken by it under Section 2, Rule 67 of the 1997 Rules of Civil Procedure
of the land x x x subject of this case, or, immediately return to [Veloso] the possession of the land subject of this case and
await finality of this judgment before paying the just compensation fixed herein, it being clear from Section 10, Rule 67 of
the 1997 Rules of Civil Procedure that [the NTC’s] right to retain the possession of the subject land which it took pursuant
of Section 2, Rule 67 of the 1997 Rules of Civil Procedure, is predicated upon its payment of the just compensation fixed
in this judgment.

Declaring the condemnation or expropriation of the subject land with an area of 1,479 square meters described in the
complaint for the public use or stated in the complaint, that is, to enable the [NTC] to construct and maintain its 138KV
DC/ST Transmission Li[n]e (Tie Line) of the Quiot (Pardo) 100MVA Substation Project, upon payment of the just
compensation fixed above plus the applicable interest.

Declaring that [NTC] shall have the right to transfer the subject property in its name and own the same in perpetuity after it
shall have paid in full the above amount of just compensation and the legal interest provided for.

SO ORDERED.12

On January 24, 2006, the NTC filed a Motion for Reconsideration,13 alleging that the foregoing decision was not supported
by facts and existing laws. The RTC, however, denied the same in its Order dated February 14, 2006. Unyielding, the
NTC appealed with the CA.14

On July 31, 2006, the CA directed the NTC to submit official receipt or proof of payment of the appeal fees within 10 days
from notice.15

On August 18, 2006, the NTC filed a Manifestation, alleging that it cannot comply with the order of the CA as it did not pay
appeal docket fees. It asseverated that the receiving clerk of the RTC did not accept its payment for the appeal fees on
the ground that it is exempted from doing so, being a GOCC.16

On September 14, 2006, the respondents filed a Motion to Dismiss, arguing that the RTC’s Decision dated January 9,
2006 has become final and executory since the payment of docket fees is mandatory and jurisdictional and non-payment
thereof will not toll the running of the appeal period. The respondents further pointed out the NTC’s failure to file the
record on appeal which is required under Section 2, Rule 41 of the 1997 Rules of Civil Procedure.17

The NTC, on September 27, 2006, filed another Manifestation, informing the CA that it already filed on September 18,
2006 a Manifestation with Urgent Ex-Parte Motion with the RTC and settled the payment of appeal fees. The NTC also
submitted the official receipts for the said payment.18

On March 27, 2007, the respondents filed a Motion for Leave to File Supplemental Motion to Dismiss, with the attached
Supplemental Motion to Dismiss, seeking to notify the CA that the RTC denied the NTC’s motion to accept its belated
tender of appeal docket fees and its motion for reconsideration.19

In its Comment to the respondents’ motion, the NTC claimed that it was in good faith and that the failure to pay the appeal
docket fees was attributable to the receiving clerk of the RTC. It also alleged that it had already paid the appeal docket
fees and the belated payment does not preclude the CA from taking cognizance of the appeal. Finally, it claimed that the
notice of appeal was valid and that the record on appeal is not required. 20

Ruling of the CA

On January 14, 2009, the CA issued the assailed Resolution, granting the respondents’ motion to dismiss, the dispositive
portion of which reads:

Accordingly, the Motion to Dismiss and Supplemental Motion to Dismiss filed by [the respondents] are
hereby GRANTED.

SO ORDERED.21

The CA held that the NTC’s counsel should know that as a GOCC, it is not exempted from the payment of docket and
other legal fees. Such knowledge can be presumed from the fact that NTC was required initiatory filing fees when it filed
the expropriation case and was even prepared to defray appeal fees. The CA found it preposterous for the NTC’s counsel
to blindly rely on the receiving clerk’s advice knowing fully well the importance of paying the docket and other legal fees.
The NTC’s counsel was negligent and the reason for his omission can hardly be characterized as excusable. 22

The CA added that even granting that the NTC timely paid the appeal docket fees, its appeal would still not prosper for
non-filing of a record on appeal.23

Unyielding, the NTC, in its present appeal, contends that the failure to pay appeal docket fees does not automatically
cause the dismissal of the appeal, but lies on the discretion of the court. It asseverates that since its failure to pay the
appeal fees was not willful and deliberate, its omission could be excused in the interest of justice and equity. It reiterates
that it was prepared to pay the docket fees if not for the receiving clerk’s advice that the same was not necessary as it is a
GOCC. Even then, it eventually paid the appeal fees, although past the reglementary period.24

In the same manner, the NTC argues that it is erroneous for the CA to require the filing of a record on appeal and deem
the case also dismissible on that ground. It asserts that Section 1, Rule 50 of the Rules of Court confers only a
discretionary power, not a duty, upon the CA to dismiss the appeal based on the failure to file a record on appeal as can
be deduced from the use of the word "may". The CA may thus exercise its discretion to dismiss the appeal or not, taking
into consideration the reason behind the omission. And, in this case, the NTC believes that the record on appeal is no
longer necessary since the first stage of expropriation had already been concluded and no appeal was taken on it. The
order recognizing the power to expropriate had long become final and the only issue left is the amount of just
compensation.25

Ruling of the Court

It has been repeatedly underscored in a long line of jurisprudence that the right to appeal is a mere statutory privilege and
must be exercised only in the manner and in accordance with the provisions of the law. Thus, one who seeks to avail of
the right to appeal must strictly comply with the requirements of the rules, and failure to do so leads to the loss of the right
to appeal.26

Basically, there are three requirements in order to perfect an appeal: (1) the filing of a notice of appeal; (2) the payment of
docket and other legal fees; and (3) in some cases, the filing of a record on appeal, all of which must be done within the
period allowed for filing an appeal. Failure to observe any of these requirements is fatal to one’s appeal.

In the instant case, the NTC bewails the dismissal of its appeal for non-payment of appeal docket fees. Specifically, it
claims that its failure to pay the appeal fees was due to the erroneous advice of the RTC’s receiving clerk. It implores the
liberality of the Court that its omission be deemed as an excusable neglect as it was ready and willing to pay the docket
fees.

In M.A. Santander Construction, Inc. v. Villanueva,27 the Court emphasized, thus:

The mere filing of the Notice of Appeal is not enough, for it must be accompanied by the payment of the correct appellate
docket fees. Payment in full of docket fees within the prescribed period is mandatory. It is an essential requirement
without which the decision appealed from would become final and executory as if no appeal had been filed. Failure to
perfect an appeal within the prescribed period is not a mere technicality but jurisdictional and failure to perfect an appeal
renders the judgment

final and executory.28 (Citations omitted)

Verily, the payment of appeal docket fees is both mandatory and jurisdictional. It is mandatory as it is required in all
appealed cases, otherwise, the Court does not acquire the authority to hear and decide the appeal. The failure to pay or
even the partial payment of the appeal fees does not toll the running of the prescriptive period, hence, will not prevent the
judgment from becoming final and executory. Such was the circumstance in the instant appeal. The NTC failed to pay the
appeal fees without justifiable excuse. That its counsel or his representative was misled by the advice of the receiving
clerk of the RTC is unacceptable as the exercise of ordinary diligence could have avoided such a blunder. It is apparent
from the records that the NTC had ample time to rectify the error or clarify its reservation regarding the propriety of its
supposed exemption from the appeal fees. It received a copy of the RTC Decision dated January 9, 2006 on January 10,
200629 and the Order denying its motion for reconsideration on February 17, 2006 30 and had until March 6, 2006 to file a
notice of appeal and pay the corresponding docket fees.31NTC’s counsel, through his representative, did file a notice of
appeal as early as February 17, 2006 but did not pay the docket fees apparently because of the advice of the receiving
clerk of the RTC, although he was ready and willing to pay the amount at that time. If the NTC came prepared to the trial
court with the necessary voucher to settle the docket fees at the time of filing of the notice of appeal, it understood that it
was not exempted from paying the said fees. This can be further deduced from the fact that the NTC was required to pay
filing fees with the RTC at the commencement of the action.

Further, NTC’s counsel should have been diligent enough to inquire whether the appeal had been properly filed and that
the corresponding fees were accordingly paid knowing fully well the significance of these considerations. Had he only
bothered to do so, he would have known about the non-payment of the filing fees and could have easily consulted with
other lawyers to settle this uncertainty. The NTC, a GOCC, maintains a pool of learned lawyers, who must have had
exposure with expropriation cases. He could have easily confirmed from them the necessity of paying the docket fees and
settled it promptly especially since there are still a number of days left after the notice of appeal was filed.
The implication of the timely payment of docket fees cannot be overemphasized. "The payment of the full amount of the
docket fee is a sine qua non requirement for the perfection of an appeal. The court acquires jurisdiction over the case only
upon the payment of the prescribed docket fees."32

Indeed, there are instances when the Court relaxed the rule and allowed the appeal to run its full course. In La Salette
College v. Pilotin,33 the Court ruled:

Notwithstanding the mandatory nature of the requirement of payment of appellate docket fees, we also recognize that its
strict application is qualified by the following: first, failure to pay those fees within the reglementary period allows only
discretionary, not automatic, dismissal; second, such power should be used by the court in conjunction with its exercise of
sound discretion in accordance with the tenets of justice and fair play, as well as with a great deal of circumspection in
consideration of all attendant circumstances.

In Mactan Cebu International Airport Authority v. Mangubat, the payment of the docket fees was delayed by six (6) days,
but the late payment was accepted, because the party showed willingness to abide by the Rules by immediately paying
those fees. Yambao v. Court of Appeals saw us again relaxing the Rules when we declared therein that "the appellate
court may extend the time for the payment of the docket fees if appellant is able to show that there is a justifiable reason
for x x x the failure to pay the correct amount of docket fees within the prescribed period, like fraud, accident, mistake,
excusable negligence, or a similar supervening casualty, without fault on the part of the appellant." 34 (Citations omitted
and italics in the original)

In the present case, the NTC failed to present any justifiable excuse for its failure to pay the docket fees like in the cases
of Mactan Cebu International Airport Authority v. Mangubat35 and Yambao v. CA.36 In Mactan Cebu International Airport
Authority, the petitioner took the initiative to verify the necessity of paying the docket fees and paid it outright, albeit six
days after the lapse of the period to appeal. Quite the opposite, the NTC in the present case never lifted a finger until it
was required by the CA to present proof of its payment of the docket fees and paid the same only six months after the
period to appeal has prescribed.

The NTC cannot also invoke the ruling of the Court in Yambao as it does not share the same factual milieu as in the
instant case. In Yambao, the petitioner expressed willingness to pay by settling the docket fee of ₱820.00 within the
period of appeal, however, deficient in the amount of ₱20.00 due to the erroneous assessment of the receiving clerk of
the RTC. In the instant case, the NTC did not pay at all and solely attributed the blame on the supposed advice of the
receiving clerk of the RTC about its exemption from the payment of docket fees notwithstanding circumstances that would
have expectedly stirred second thoughts. Its unthinking reliance on the alleged advice of the receiving clerk is utterly
irresponsible and inexcusable.

Apart from failure to pay the docket fees, the NTC likewise failed to file a record on appeal. Apparently, the NTC is of the
impression that the record on appeal is only necessary when what is being appealed is the first phase of the action, that
is, the order of condemnation or expropriation, but not when the appeal concerns the second phase of expropriation or the
judgment on the payment of just compensation.37

In Municipality of Biñan v. Judge Garcia,38 the Court elucidated, thus:

There are two (2) stages in every action of expropriation. The first is concerned with the determination of the authority of
the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in
the suit. It ends with an order, if not of dismissal of the action, "of condemnation declaring that the plaintiff has a lawful
right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the
payment of just compensation to be determined as of the date of the filing of the complaint." x x x.

The second phase of the eminent domain action is concerned with the determination by the Court of "the just
compensation for the property sought to be taken." This is done by the Court with the assistance of not more than three
(3) commissioners. x x x.39 (Citations omitted)

NTC asseverates that the rationale for requiring the record on appeal in cases where several judgments are rendered is to
enable the appellate court to decide the appeal without the original record which should remain with the court a
quo pending disposal of the case with respect to the other defendants or issues. This usually happens in expropriation
cases, when an order of expropriation or condemnation is appealed, while the issue of just compensation is still being
resolved with the trial court.40 It is the contention of the NTC that considering that the first phase of the action had already
been concluded and no appeal was taken, the record on appeal is no longer necessary. There is no longer any issue on
the order of expropriation, the appeal having been made on the just compensation only.
The issue replicates that which had been resolved by the Court in National Power Corporation v. Judge Paderanga.41 In
the said case, the trial court upheld the propriety of the order of condemnation of the property and proceeded to deliberate
on the just compensation due the defendants, notwithstanding the failure of one of the defendants to file answer. The
petitioner, however, appealed the amount of the just compensation awarded by the trial court but dispensed with the filing
of a record on appeal. For this reason, the trial court dismissed the petitioner’s appeal, holding that the latter did not
perfect its appeal due to its failure to file the record on appeal. The CA affirmed the dismissal and this was upheld by this
Court. The Court ruled:

That the defendant Enriquez did not file an answer to the complaint did not foreclose the possibility of an appeal arising
therefrom. For Section 3 of Rule 67 provides:

Sec. 3. Defenses and objections. x x x.

xxxx

A defendant waives all defenses and objections not so alleged but the court, in the interest of justice, may permit
amendments to the answer to be made not later than ten (10) days from the filing thereof. However, at the trial of the
issue of just compensation, whether or not a defendant has previously appeared or answered, he may present
evidence as to the amount of the compensation to be paid for his property, and he may share in the

distribution of the award. x x x.

In other words, once the compensation for Enriquez’ property is placed in issue at the trial, she could, following the third
paragraph of the immediately-quoted Section 3 of Rule 67, participate therein and if she is not in conformity with the trial
courts determination of the compensation, she can appeal therefrom.

Multiple or separate appeals being existent in the present expropriation case, NPC should have filed a record on appeal
within 30 days from receipt of the trial court’s decision. The trial court’s dismissal of its appeal, which was affirmed by the
appellate court, was thus in order.42 (Emphasis, underscoring and italics in the original)

The same ratiocination holds with respect to the instant case. While Veloso’s co-defendants, the Heirs of Ebesa, did not
file any objection to the order of condemnation, they may at any time question the award of just compensation that may be
awarded by the trial court. While there was an allegation that the property had already been sold by the Heirs of Ebesa to
Veloso, the extent of the said unregistered sale was not specified hence it is not unlikely that the former have remaining
interest over the subject property. No proof was likewise presented that the property or portion thereof was already
transferred under Veloso’s sole ownership. As it is, the Heirs of Ebesa are still the declared owners of the property in the
title, hence, the probability that they will file a separate appeal is not remote. It is for this reason that the record on appeal
is being required under the Rules of Court and the NTC's insistence that it is unnecessary and dispensable lacked factual
and legal basis.

Finally, the pronouncement of the Court in Gonzales, et al. v. Pe43 finds relevance in the instant case, thus:

While every litigant must be given the amplest opportunity for the proper and just determination of his cause, free from the
constraints of technicalities, the failure to perfect an appeal within the reglementary period is not a mere technicality. It
raises jurisdictional problem, as it deprives the appellate court of its jurisdiction over the appeal. After a decision is
declared final and executory, vested rights are acquired by the winning party. Just as a losing party has the right to appeal
within the prescribed period, the winning party has the correlative right to enjoy the finality of the decision on the
case.44 (Citation omitted)

WHEREFORE, in view of the foregoing disquisition, the Resolution dated January 14, 2009 of the Court of Appeals in CA-
G.R. CEB CV No. 01380 is AFFIRMED.

SO ORDERED.

G.R. No. 174202 April 7, 2015

DYNAMIC BUILDERS & CONSTRUCTION CO. (PHIL.), INC., Petitioner,

vs.
HON. RICARDO P. PRESBITERO, JR., MAYOR AND HEAD OF PROCURING UNIT OF THE MUNICIPALITY OF
VALLADOLID, NEGROS OCCIDENTAL; BIDS AND A WARDS COMMITTEE, MUNICIPALITY OF VALLADOLID,
NEGROS OCCIDENTAL; AND HENRY L. JORDAN AND/OR HLJ CONSTRUCTION AND ENTERPRISE,Respondents.

DECISION

LEONEN, J.:

Republic Act No. 8975 does not sanction splitting a cause of action in order for a party to avail itself of the ancillary
remedy of a temporary restraining order from this court. Also, this law covers only national government infrastructure
projects. This case involves a local government infrastructure project.

For local government infrastructure projects, Regional Trial Courts may issue provisional injunctive reliefs against
government infrastructure projects only when (1) there are compelling and substantial constitutional violations; (2) there
clearly exists a right in esse; (3) there is a need to prevent grave and irreparable injuries; (4) there is a demonstrable
urgency to the issuance of the injunctive relief; and (5) when there are public interest at stake in restraining or enjoining
the project while the action is pending that far outweighs (a) the inconvenience or costs to the party to whom the project is
awarded and (b) the public benefits that will result from the completion of the project. The time periods for the validity of
temporary restraining orders issued by trial courts should be strictly followed. No preliminary injunction should issue
unless the evidence to support the injunctive relief is clear and convincing.

We are asked by Dynamic Builders & Construction Co. (Phil.), Inc. (Dynamic Builders) through this Petition for prohibition
with application for issuance of a temporary restraining order and/or writ of preliminary injunction 1 that:

1. Upon the filing of this petition, a temporary restraining order and/or writ of preliminary injunction be immediately
issued restraining and enjoining:

(a) the enforcement or execution of the 12 June 2006 Decision and the 30 June 2006 Resolution by the
Hon. Ricardo P. Presbitero, Jr., Mayor of the Municipality of Valladolid and Head of the Procuring Entity in
Protest Case No. BPC-01-06 entitled "Dynamic Builders & Construction Company (Phil.), Inc. v. Bids And
Awards Committee, Municipality of Valladolid, Negros Occidental" by the respondents, or their agents, or
anyone acting in their behalf, or anyone who stands to benefit from such order, in any manner, during the
pendency of the proceedings in Civil Case No. 1459 in order not to render further proceedings in Civil
Case No. 1459 moot and academic and any judgment in the said case ineffectual;

(b) the implementation of the award of the Construction Shoreline Protection Project subject of Protest
Case No. BPC-01-06, during the pendency of Civil Case No. 1459, by the respondents, or their agents, or
anyone acting in their behalf, or anyone who stands to benefit from such implementation, in any manner,
during the pendency of the proceedings in Civil Case No. 1459 in order not to render further proceedings
in Civil Case No. 1459 moot and any judgment in the said case ineffectual; and

2. Thereafter, a writ of prohibition be issued and/or the preliminary injunction be made permanent and continuing,
during the pendency of Civil Case No. 1459 before the Regional Trial Court of Bago City. Other reliefs just and
equitable in the premises are likewise prayed for.2

On December 28, 2005, the Municipality of Valladolid, Negros Occidental, through its Bids and Awards Committee,
published an invitation to bid for the construction of a 1,050-lineal-meter rubble concrete seawall along the municipality’s
shoreline.3 This infrastructure venture is known as the "Construction Shoreline Protection Project." 4

On January 17, 2006, the Bids and Awards Committee conducted a pre-bid conference attended by six (6) prospective
contractors including Dynamic Builders.5

On January 31, 2006, three (3) out of the seven (7) contractors that had secured bidding documents in order to bid
"submitted letters of withdrawal."6 Thus, only the remaining four(4) bidders "were considered during the opening of the
bids."7 The prices offered were the following:8

Mig-wells Const Corp ₱35,561,015.33 Highest Bidder

ADP Const & Supply ₱34,778,496.72 3rd Lowest Bidder
 Dynamic Builders & Const ₱29,750,000.00 Lowest Bidder
HLJ Const & Ent. ₱31,922,420.27 2nd Lowest Bidder

On March 27, 2006, the Bids and Awards Committee issued Resolution No. 6 recommending the award in favor of HLJ
Construction and Enterprise.9

On April 18, 2006, the Municipality of Valladolid received its "NO OBJECTION" letter from World Bank through the
LOGOFIND10 project director, advising the Bids and Awards Committee to proceed with the issuance of the notice of
award, letter of acceptance, signing of contract, and notice to proceed. 11

On April 21, 2006, the Bids and Awards Committee issued Resolution No. 7 affirming the award of contract to HLJ
Construction and Enterprise for the construction of the 1,050-lineal-meter Construction Shoreline Protection Project
amounting to ₱31,922,420.37.12

On April 25, 2006, Bids and Awards Committee Chairperson Celina C. Segunla wrote Engr. Raul F. Balandra of Dynamic
Builders and the other participating losing bidders, ADP Construction and Mig-Wells Construction Corporation, to inform
them of the Bids and Awards Committee’s findings and decision. 13 Dynamic Builders was informed that "its bid proposal
had been found to be ‘not substantially responsive.’" 14 Dynamic Builders received this decision on May 11, 2006.15

Dynamic Builders alleged that on May 5, 2006, it submitted the letter dated April 7, 2006 containing a request for the Bids
and Awards Committee to furnish it with all submitted bid documents and relevant Bids and Awards Committee
resolutions, but this was denied by the letter dated May 5, 2006 invoking confidentiality under Section 2.46 of the
LOGOFIND guidelines.16

On May 15, 2006, the Bids and Awards Committee received the letter from Dynamic Builders seeking reconsideration of
the April 25, 2006 decision declaring Dynamic Builders’ bid as not substantially responsive.17

On May 22, 2006, the Bids and Awards Committee wrote Dynamic Builders denying the request for reconsideration. It
informed Dynamic Builders of the post-evaluation examination results showing Dynamic Builders’ failure in its Financial
Contracting Capability.18

On June 6, 2006, Dynamic Builders lodged a formal protest with the head of the procuring entity, Mayor Ricardo P.
Presbitero, Jr. (Mayor Presbitero), to set aside the Bids and Awards Committee decision declaring Dynamic Builders’ bid
as not substantially responsive.19

Mayor Presbitero dismissed the protest in the Decision20 dated June 12, 2006.

According to Mayor Presbitero’s June 12, 2006 Decision, the bidders underwent preliminary examination and were
"subjected to the criteria of Verification, Eligibility, Bid Security, Completeness of Bid, Substantial Responsiveness, and
Acceptance for Detailed Examination[.]"21 Mig-wells Construction Corporation did not pass the preliminary examination,
while the remaining three that passed were subjected to detailed examination. All three passed and qualified for post-
evaluation examination.22

The June 12, 2006 Decision also stated that during the post-evaluation examination, the three bidders submitted their
financial statements for the last five (5) years and other documents expressly provided in Volume 2 of the Procurement
Guidelines Manual of LOGOFIND World Bank.23 The examination showed that Dynamic Builders had a negative Financial
Contracting Capability of ₱64,579,119.13 due to numerous other contractual commitments or balance of works. 24 HLJ
Construction and Enterprise had a positive Financial Contracting Capability of 30,921,063.86, while ADP Construction had
a positive Financial Contracting Capability of only ₱12,770,893.78.25Section 4.5.e of the Instruction To Bidders requires a
minimum Financial Contracting Capability of ₱13,000,000.00.26

Mayor Presbitero denied Dynamic Builders’ Motion for Reconsideration in the Resolution 27 dated June 30, 2006.

On September 4, 2006 and pursuant to Article XVII, Section 58 of Republic Act No. 9184, otherwise known as the
Government Procurement Reform Act, Dynamic Builders filed the Petition for Certiorari before the Regional Trial Court of
Bago City, Negros Occidental, assailing Mayor Presbitero’s Decision and Resolution.28
Simultaneously, Dynamic Builders filed this Petition29 dated September 4, 2006 for prohibition with application for
temporary restraining order and/or writ of preliminary injunction before this court. 30 This was received by this court on
September 6, 2006.31

Petitioner Dynamic Builders submits that Article XVII, Section 58 of Republic Act No. 9184 implicitly allowed it to
simultaneously file a Petition for Certiorari before the Regional Trial Court assailing the protest case on the merits, and
another Petition before this court for injunctive remedies.32

Petitioner argues that in Section 58, the "law conferring on the Supreme Court the sole jurisdiction to issue temporary
restraining orders and injunctions relating to Infrastructure Project of Government" refers to Republic Act No. 897533 in
relation to Presidential Decree No. 1818.34 Petitioner then submits that "while R.A. No. 8975 appears to apply only to
national government infrastructure projects . . . the resulting amendment to P.D. No. 1818 (by virtue of Sections 3 and 9 of
R.A. No. 8975) removing any restriction upon the Honorable Supreme Court to issue injunctive relief, would similarly apply
to the infrastructure projects . . . subject of, or covered by, P.D. No. 1818, which would include those infrastructure
projects undertaken for or by local governments."35

Petitioner asserts that J.V. Lagon Construction v. Pangarungan36 clarified that Regional Trial Courts can issue injunctive
relief when it is of "extreme urgency involving a constitutional issue." 37 Nevertheless, petitioner argues that this ruling was
an obiter dictum, and J.V. Lagon involved a national government project. 38 Thus, it only exercised prudence when it took
twin remedial routes.39

The Petition alleges that respondent HLJ Construction and Enterprise already commenced construction and "obtained the
release of the 15% advance . . . for mobilization costs as well as partial payments for the portion . . .
completed."40 Petitioner argues that the issuance of a temporary restraining order and/or preliminary injunction was of
extreme urgency, as it was illegally deprived of its constitutional rights to due process and equal protection of law. 41

The Petition then incorporates by reference its Civil Case No. 1459 Petition’s discussion on the following arguments:

(1) Petitioner was denied due process when the contract was awarded to private respondent HLJ Construction
and Enterprise without first giving the former an opportunity to avail itself of the remedies under R.A. No. 9184[;]

(2) The award of the contract to private respondent HLJ Construction and Enterprise violated Section 57 of R.A.
No. 9184[;]

(3) Contrary to the findings of public respondents, the bid submitted by petitioner was responsive[;] [and]

(4) For having in fact submitted the Lowest Calculated Responsive Bid, petitioner should be awarded the contract
for the Construction of 1,050 Lineal Meter Rubble Concrete Seawall of the Municipality of Valladolid, Negros
Occidental.42

By Resolution dated September 18,2006, this court ordered the parties to "MAINTAIN THE STATUS QUO as of
September 18, 2006 effective immediately until further orders from the Court."43

In their Comment44 on the Petition, public respondents counter that petitioner "grossly violated the rules against splitting a
single cause of action, multiplicity of suits, and forum shopping . . . [and] availed of an improper remedy and disregarded
the rule on ‘hierarchy of courts[.]’"45 The project undertaken by HLJ Construction and Enterprise was almost near
completion, and prohibition "[was] not intended to provide a remedy for acts already executed or
accomplished."46 Petitioner should have asked for injunctive relief in Civil Case No. 1459 filed before the trial court. 47

Public respondents argue that Article XVII, Section 58 of Republic Act No. 9184, Presidential Decree No. 1818, and
Republic Act No. 8975 do not envision simultaneous resort to remedies before the trial court and this court.48 They submit
that Section 58 provides for alternative remedies between an action under Rule 65 before the Regional Trial Court and a
proper action directly before this court.49

Public respondents agree that Republic Act No. 8975 only governs national government projects but disagree insofar as
petitioner’s submission that since Republic Act No. 8975 amended Presidential Decree No. 1818 by removing the
restriction on this court to issue injunctive relief, it now covers local government projects. 50
Respondent HLJ Construction and Enterprise similarly raises the issue of petitioner’s forum shopping. 51 It adds that due
process was not denied, as public respondent notified petitioner of its findings and decision, heard petitioner’s arguments,
and entertained petitioner’s motion for reconsideration. 52 Respondent HLJ Construction and Enterprise stresses that the
Construction Shoreline Protection Project’s delay will only result in grave injustice and irreparable injury affecting the
people of the Municipality of Valladolid, Negros Occidental.53

On December 13, 2006, petitioner filed a verified Petition to Cite Respondents for Contempt, 54 alleging that respondents
did not cease work on the project in disregard of this court’s status quo order. 55 Respondents filed their respective
comments.56

The issues for our resolution are as follows:

First, whether Article XVII, Section 58 of Republic Act No. 9184 contemplates simultaneous filing of a petition for
prohibition seeking injunctive reliefs from this court and a petition for certiorari before the Regional Trial Court;
consequently:

a) Whether petitioner violated the rules against the splitting of a cause of action, multiplicity of suits, and forum
shopping;

b) Whether petitioner violated the doctrine on hierarchy of courts; and

c) Whether petitioner resorted to an improper remedy when it filed a petition for prohibition with this court.

Second, whether Article XVII, Section 58 of Republic Act No. 9184, in relation to Republic Act No. 8975 and Presidential
Decree No. 1818, allows Regional Trial Courts to issue injunctive relief subject to the presence of certain conditions; and

Lastly, whether respondents violated this court’s September 18, 2006 status quo Order in relation to the ongoing
Construction Shoreline Protection Project.

We proceed with the procedural issue of whether petitioner availed itself of the wrong remedy in simultaneously filing (1) a
petition for certiorari before the trial court alleging that public respondent gravely abused its discretion in rendering its
June 12, 2006 Decision and June 30, 2006 Resolution and (2) a petition for prohibition seeking injunctive reliefs from this
court to enjoin the enforcement of public respondent’s June 12, 2006 Decision and June 30, 2006 Resolution during the
pendency of the case before the trial court.

Public respondents submit that a simple reading of the Petition in Civil Case No. 1459 readily reveals that petitioner also
asked the trial court to nullify the same Decision and Resolution on the identical ground of grave abuse of discretion
amounting to lack or excess of jurisdiction.57 Petitioner counters that it was compelled to file the separate petitions
pursuant to, and in view of, Article XVII, Section 58 of Republic Act No. 9184: 58

Sec. 58. Report to Regular Courts; Certiorari. – Court action may be resorted to only after the protests contemplated in
this Article shall have been completed. Cases that are filed in violation of the process specified in this Article shall be
dismissed for lack of jurisdiction. The regional trial court shall have jurisdiction over final decisions of the head of the
procuring entity. Court actions shall be governed by Rule 65 of the 1997 Rules of Civil Procedure.

This provision is without prejudice to any law conferring on the Supreme Court the sole jurisdiction to issue temporary
restraining orders and injunctions relating to Infrastructure Projects of Government. (Emphasis supplied)

Section 58 could not have envisioned a simultaneous resort to this court by one that had already filed an action before the
Regional Trial Court without violating the basic rules on proscription against the splitting of a cause of action, multiplicity of
suits, and forum shopping.

Rule 2, Section 3 of the Rules of Court provides that "[a] party may not institute more than one suit for a single cause of
action." Moreover, Section 4 discusses the splitting of a single cause of action in that "if two or more suits are instituted on
the basis of the same cause of action, the filing of one or a judgment upon the merits in any one is available as a ground
for the dismissal of the others." The splitting of a cause of action "violate[s] the policy against multiplicity of suits, whose
primary objective [is] to avoid unduly burdening the dockets of the courts."59
This Petition seeks to enjoin the execution of public respondent’s Decision and Resolution on the protest — the same
Decision and Resolution sought to be set aside in the Petition before the Regional Trial Court. In essence, petitioner
seeks the same relief through two separate Petitions filed before separate courts. This violates the rule against forum
shopping.

Rule 7, Section 5 of the Rules of Court requires the plaintiff or principal party to certify under oath that he or she has not
commenced any action involving the same issues in any court. This court has discussed this rule against forum shopping:

In essence, forum shopping is the practice of litigants resorting to two different for a for the purpose of obtaining the same
relief, to increase their chances of obtaining a favorable judgment. In determining whether forum shopping exists, it is
important to consider the vexation caused to the courts and the parties-litigants by a person who asks appellate courts
and/or administrative entities to rule on the same related causes and/or to grant the same or substantially the same relief,
in the process creating the possibility of conflicting decisions by the different courts or for a on the same issues. We have
ruled that forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or
causes of action and reliefs prayed for and (3) the identity of the two preceding particulars is such that any judgment
rendered in the other action, will, regardless of which party is successful, amount to res judicata in the action under
consideration.60

Private respondent alleges that petitioner did not even notify the Regional Trial Court of Bago City, Negros Occidental, of
its Petition filed before this court.61

The second paragraph of Article XVII, Section 58 of Republic Act No. 9184 simply means it does not preclude a direct
filing before this court in proper cases.

The Rules of Court provides for original concurrent jurisdiction by the Regional Trial Court, the Court of Appeals, and this
court in entertaining petitions for certiorari, prohibition, or mandamus. 62 However, parties must adhere to the principle of
hierarchy of courts. This was discussed in Dimson (Manila), Inc., et al. v. Local Water Utilities Administration: 63

Clearly, the proper recourse to a court action from decisions of the BAC, such as this one, is to file a certiorari not before
the Supreme Court but before the regional trial court which is vested by R.A. No. 9184 with jurisdiction to entertain the
same. In the recent case of First United Constructors Corporation v. Poro Point Management Corporation, we held that
while indeed the certiorari jurisdiction of the regional trial court is concurrent with this Court’s, that fact alone does not
allow an unrestricted freedom of choice of the court forum. But since this is not an iron-clad rule and the full discretionary
power to take cognizance of and assume jurisdiction over special civil actions for certiorari directly filed with the Court may
actually be exercised by it, it is nevertheless imperative that the Court’s intervention be called for by exceptionally
compelling reasons or be warranted by the nature of the issues involved. In other words, a direct invocation of the
Supreme Court’s original jurisdiction to issue the writ will be allowed only when there are special and important reasons
clearly and specifically set out in the petition.64 (Citations omitted)

The hierarchy of courts must be respected. The doctrine with respect to hierarchy of courts was designed so that this
court will have more time to focus on its constitutional tasks without the need to deal with causes that also fall within the
lower courts’ competence.65 This court acts on petitions for extraordinary writs under Rule 65 "only when absolutely
necessary or when serious and important reasons exist to justify an exception to the policy."66

Consistent with these rules and doctrines, the remedy contemplated by Article XVII, Section 58 of Republic Act No. 9184
is either an action under Rule 65 before the Regional Trial Court or the proper action filed before this court. However,
direct resort to this court can prosper only when the requisites for direct invocation of this court’s original jurisdiction are
present.

II

Prohibition is a preventive remedy. This court has held that injunctive remedies will not lie for acts already accomplished. 67

The acts sought to be enjoined in this case included the implementation of the Construction Shoreline Protection Project
awarded to private respondent HLJ Construction and Enterprise. The project had already commenced and had been
ongoing at the time petitioner filed this case. Moreover, the issue of whether these acts infringed on petitioner’s rights is a
matter interrelated with the issues raised in the Petition before the trial court, emphasizing the existence of the splitting of
a cause of action.
In any case, this court has stressed that extraordinary writs of certiorari, prohibition, and mandamus are "prerogative writs
of equity[.]"68 It is within the court’s sound discretion whether these writs should be granted, and it will need to ensure that
there is a clear right to the relief.69

Prohibition is defined as "an extraordinary remedy available to compel any tribunal, corporation, board, or person
exercising judicial or ministerial functions, to desist from further [proceeding] in an action or matter when the proceedings
in such tribunal, corporation, board or person are without or in excess of jurisdiction or with grave abuse of discretion[.]"70

Grave abuse of discretion will prosper as a ground for prohibition when it is shown that "there was . . . capricious and
whimsical exercise of judgment . . . equivalent to lack of jurisdiction or that the tribunal, corporation, board or person has
exercised its power in an arbitrary or despotic manner by reason of passion or personal hostility." 71

First, public respondent had jurisdiction to rule on the protest since it was then head of the procuring entity. 72

Second, this court need not look into petitioner’s allegation that its Petition before the Regional Trial Court raised grounds
warranting the reversal of public respondent’s Decision. 73 The merits of whether there was grave abuse of discretion by
public respondent were already subject of the Petition before the trial court. Petitioner cannot be allowed to seek the same
relief from this court.

Rule 65 likewise requires that there be "no appeal or any . . . plain, speedy, [or] adequate remedy in the ordinary course of
law."74 Section 3 of Republic Act No. 8975 provides for such a remedy when it gave an exception to the general rule
prohibiting lower courts from issuing provisional injunctive relief against national government projects:

Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory
Injunctions. – No court, except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or
preliminary mandatory injunction against the government, or any of its subdivisions, officials or any person or entity,
whether public or private, acting under the government’s direction, to restrain, prohibit or compel the following acts: . . . .

This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including but not limited to
cases filed by bidders or those claiming to have rights through such bidders involving such contract/project. This
prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that unless a
temporary restraining order is issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an
amount to be fixed by the court, which bond shall accrue in favor of the government if the court should finally decide that
the applicant was not entitled to the relief sought. (Emphasis supplied) When the matter is of "extreme urgency involving a
constitutional issue," even Regional Trial Courts may grant injunctive reliefs as explained in Republic v. Nolasco: 75

Republic Act No. 8975 definitively enjoins all courts, except the Supreme Court, from issuing any temporary restraining
order, preliminary injunction, or preliminary mandatory injunction against the government, or any of its subdivisions,
officials or any person or entity to restrain, prohibit or compel the bidding or awarding of a contract or project of the
national government, precisely the situation that obtains in this case with respect to the Agno River Project. The only
exception would be if the matter is of extreme urgency involving a constitutional issue, such that unless the temporary
restraining order is issued, grave injustice and irreparable injury will arise. 76 (Emphasis supplied, citations omitted)

Considering that petitioner alleges that this matter is "of extreme urgency, involving as it does the . . . constitutional right[s]
to due process and equal protection of the law,"77 it should have prayed for injunctive relief before the trial court where its
Petition for Certiorari via Rule 65 was pending, together with a bond fixed by the court.

Mere allegation or invocation that constitutionally protected rights were violated will not automatically result in the
issuance of injunctive relief. The plaintiff or the petitioner should discharge the burden to show a clear and compelling
breach of a constitutional provision. Violations of constitutional provisions are easily alleged, but trial courts should
scrutinize diligently and deliberately the evidence showing the existence of facts that should support the conclusion that a
constitutional provision is clearly and convincingly breached. In case of doubt, no injunctive relief should issue. In the
proper cases, the aggrieved party may then avail itself of special civil actions and elevate the matter.

This court adheres to the policy behind the prohibition under Republic Act No. 8975 and even issued Administrative
Circular No. 11-2000 entitled Re: Ban on the Issuance of Temporary Restraining Orders or Writs of Preliminary
Prohibitory or Mandatory Injunctions in Cases Involving Government Infrastructure Projects. This circular enjoins lower
court judges to strictly comply with Republic Act No. 8975.
However, the issue here does not involve the propriety of a lower court’s issuance or non-issuance of provisional
injunctive relief, but petitioner’s insistence that only this court can issue such injunctive relief in justifying its simultaneous
Petitions before the Regional Trial Court and this court.

Petitioner hinges its erroneous simultaneous Petitions on its reading of Republic Act No. 8975 in relation to Presidential
Decree No. 1818.

III

Petitioner submits that only this court has the power to issue injunctions to enjoin government infrastructures including
those of local government.78

Petitioner explains that the "laws" referred to in Article XVII, Section 58 of Republic Act No. 9184 refer to Republic Act No.
8975 that prohibits courts, except the Supreme Court, from issuing temporary restraining orders and injunctions against
government infrastructure projects. It adds that Republic Act No. 8975 must be taken in relation to Presidential Decree
No. 1818 prohibiting the issuances by the courts of restraining orders or injunctions involving infrastructure projects. 79 The
full text of Presidential Decree No. 1818 promulgated in 1981 reads: PRESIDENTIAL DECREE NO. 1818

PROHIBITING COURTS FROM ISSUING RESTRAINING ORDERS OR PRELIMINARY INJUNCTIONS IN CASES

INVOLVING INFRASTRUCTURE AND NATURAL RESOURCE DEVELOPMENT PROJECTS OF, AND PUBLIC
UTILITIES OPERATED BY, THE GOVERNMENT.

WHEREAS, Presidential Decree No. 605 prohibits the issuance by the courts of restraining orders or injunctions in cases
involving concessions, licenses, and other permits issued by administrative officials or bodies for the exploitation,
development and utilization of natural resources of the country;

WHEREAS, it is in the public interest to adopt a similar prohibition against the issuance of such restraining orders or
injunctions in other areas of activity equally critical to the economic development effort of the nation, in order not to disrupt
or hamper the pursuit of essential government projects;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by
the Constitution, do hereby decree and order as follows:

Section 1. No court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or
preliminary mandatory injunction in any case, dispute, or controversy involving an infrastructure project, or a mining,
fishery, forest or other natural resource development project of the government, or any public utility operated by the
government, including among others public utilities for the transport of the goods or commodities, stevedoring and arrastre
contracts, to prohibit any person or persons, entity or government official from proceeding with, or continuing the
execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity
necessary for such execution, implementation or operation.

Section 2. This decree shall take effect immediately. (Emphasis supplied)

In 2000, Republic Act No. 8975 was passed. Section 3 of the law provides:

Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory
Injunctions. - No court, except the Supreme Court, shall issue any temporary restraining order, preliminary injunction or
preliminary mandatory injunction against the government or any of its subdivisions, officials or any person or entity,
whether public or private, acting under the government’s direction, to restrain, prohibit or compel the following acts: (a)
Acquisition, clearance and development of the right-of-way and/or site or location of any national government project;

(b) Bidding or awarding of contract/project of the national government as defined under Section 2 hereof;

(c) Commencement, prosecution, execution, implementation, operation of any such contract or project;

(d) Termination or rescission of any such contract/project; and

(e) The undertaking or authorization of any other lawful activity necessary for such contract/project.
This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including but not limited to
cases filed by bidders or those claiming to have rights through such bidders involving such contract/project. This
prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that unless a
temporary restraining order is issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an
amount to be fixed by the court, which bond shall accrue in favor of the government if the court should finally decide that
the applicant was not entitled to the relief sought.

If after due hearing the court finds that the award of the contract is null and void, the court may, if appropriate under the
circumstances, award the contract to the qualified and winning bidder or order a rebidding of the same, without prejudice
to any liability that the guilty party may incur under existing laws. (Emphasis supplied)

Petitioner submits that since the repealing clause of Republic Act No. 8975 has "amended accordingly" Presidential
Decree No. 1818, the prohibition no longer extends to this court. 80 Section 9 reads:

Sec. 9. Repealing Clause. – All laws, decrees, including Presidential Decree Nos. 605, 1818 and Republic Act No. 7160,
as amended, orders, rules and regulations or parts thereof inconsistent

with this Act are hereby repealed or amended accordingly.81

Petitioner argues that even if Republic Act No. 8975 only mentions national government infrastructure projects, Section 9
has accordingly amended Presidential Decree No. 1818, such that the projects covered by this earlier law, like those
undertaken by local governments, are similarly covered by the removal of the prohibition against this court.82

In other words, petitioner contends that based on these laws, only this court can issue injunctive relief against local
government infrastructure projects.1âwphi1 Thus, it was constrained to simultaneously file two separate Petitions before
the Regional Trial Court and this court.

We cannot agree.

There is nothing in Republic Act No. 8975 or in Presidential Decree No. 1818 that allows the simultaneous availment of
legal remedies before the Regional Trial Court and this court. Republic Act No. 8975, even when read with Presidential
Decree No. 1818, does not sanction the splitting of a cause of action in order for a party to avail itself of the ancilliary
remedy of a temporary restraining order from this court.

Petitioner’s reading of Republic Act No. 8975’s repealing clause, such that only this court can issue injunctive relief, fails
to persuade.

This court has set the limit on the prohibition found in Presidential Decree No. 1818 by explaining that lower courts are not
prohibited from enjoining administrative acts when questions of law exist and the acts do not involve administrative
discretion in technical cases:

Although Presidential Decree No. 1818 prohibits any court from issuing injunctions in cases involving infrastructure
projects, the prohibition extends only to the issuance of injunctions or restraining orders against administrative acts in
controversies involving facts or the exercise of discretion in technical cases. On issues clearly outside this dimension and
involving questions of law, this Court declared that courts could not be prevented from exercising their power to restrain or
prohibit administrative acts. In such cases, let the hammer fall and let it fall hard.83

(Emphasis supplied, citations omitted)

We also consider the second paragraph of Republic Act No. 8975, Section 3 on the exception to the prohibition:

This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including but not limited to
cases filed by bidders or those claiming to have rights through such bidders involving such contract/project. This
prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that unless a
temporary restraining order is issued, grave injustice and irreparable injury will arise. The applicant shall file a bond, in an
amount to be fixed by the court, which bond shall accrue in favor of the government if the court should finally decide that
the applicant was not entitled to the relief sought. (Emphasis supplied) In other words, the Regional Trial Court can issue
injunctive relief against government infrastructure projects, even those undertaken by local governments, considering that
the prohibition in Section 3 of Republic Act No. 8957 only mentions national government projects. These courts can issue
injunctive relief when there are compelling constitutional violations — only when the right is clear, there is a need to
prevent grave and irreparable injuries, and the public interest at stake in restraining or enjoining the project while the
action is pending far outweighs the inconvenience or costs to the party to whom the project is awarded.

Republic Act No. 8975 mentions the constitutional provision in that "[t]he use of property bears a social function, and all
economic agents shall contribute to the common good."84

Statute cannot be interpreted as to violate protected rights. Thus, the above conditions safeguard against lower court
issuances of provisional injunctive relief in cases not falling within the exception.

These safeguards are also consistent with the law’s policy for the expeditious implementation of government projects that
ultimately benefit the public:

Section 1. Declaration of Policy. - Article XII, Section 6 of the Constitution states that the use of property bears a social
function, and all economic agents shall contribute to the common good. Towards this end, the State shall ensure the
expeditious and efficient implementation and completion of government infrastructure projects to avoid unnecessary
increase in construction, maintenance and/or repair costs and to immediately enjoy the social and economic benefits
therefrom.85 (Emphasis supplied)

There is no need for this court to labor on petitioner’s arguments regarding violations of due process and equal protection
of the law and the alleged grave injustice and irreparable injury petitioner suffered. The Petition’s incorporation of its
discussion on these arguments, as made in its Petition before the Regional Trial Court docketed as Civil Case No. 1459,
only emphasizes the splitting of a cause of action committed.

In any event, the general rule of prohibition under Republic Act No. 8975 does not preclude lower courts from assuming
jurisdiction when the ultimate relief prayed for is to nullify a national government infrastructure project and its
implementation:

However, it must be clarified that Republic Act No. 8975 does not ordinarily warrant the outright dismissal of any
complaint or petition before the lower courts seeking permanent injunctive relief from the implementation of national
government infrastructure projects. What is expressly prohibited by the statute is the issuance of the provisional reliefs of
temporary restraining orders, preliminary injunctions, and preliminary mandatory injunctions. It does not preclude the
lower courts from assuming jurisdiction over complaints or petitions that seek as ultimate relief the nullification or
implementation of a national government infrastructure project. A statute such as Republic Act No. 8975 cannot diminish
the constitutionally mandated judicial power to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of government. Section 3 of the law
in fact mandates, thus:

If after due hearing the court finds that the award of the contract is null and void, the court may, if appropriate under the
circumstances, award the contract to the qualified and winning bidder or order a rebidding of the same, without prejudice
to any liability that the guilty party may incur under existing laws.

Thus, when a court is called upon to rule on an initiatory pleading assailing any material aspect pertinent to a national
government infrastructure project, the court ordinarily may not dismiss the action based solely on Republic Act No. 8975
but is merely enjoined from granting provisional reliefs. If no other ground obtains to dismiss the action, the court should
decide the case on the merits.86 (Emphasis supplied, citation omitted)

IV

We decide on petitioner’s verified Petition to Cite Respondent for Contempt alleging violation of this court’s September 18,
2006 status quo Order.

In its Comment, private respondent HLJ Construction and Enterprise explains that it has no intention to disobey the
Resolution. Its decision to continue the Construction Shoreline Protection Project was based on the definition of "status
quo," meaning the "present, current, existing state of affairs."87

"The present[,] existing condition on September 18, 2006, was the ongoing construction." 88 Moreover, petitioner’s rights
were not violated as its bid was declared as "not substantially responsive."89 In the absence of a clear legal right, no
injunction can be granted.90 Similarly, public respondent contends in its Comment that the Construction Shoreline
Protection Project commenced as early as May 8, 2006.91 At the time the Petition was filed in September 2006, the
Construction Shoreline Protection Project had been ongoing for four (4) months. 92 Thus, the status quo as of the
September 18, 2006 Resolution was that the project was ongoing.93

This court has explained that status quo should be the one existing at the time of the filing of the case:

The status quo should be that existing at the time of the filing of the case. The status quo usually preserved by a
preliminary injunction is the last actual, peaceable and uncontested status which preceded the actual controversy. The
status quo ante litem is, ineluctably, the state of affairs which is existing at the time of the filing of the case. Indubitably,
the trial court must not make use of its injunctive power to alter such status. 94 (Emphasis supplied, citations omitted)

The ordinary meaning of status quo is "the existing state of affairs[,]"95 while status quo ante refers to "the state of affairs
that existed previously. "96

Relying in good faith on the ordinary meaning of status quo as differentiated from status quo ante, respondents pushed
through with the construction, which had been the existing state of affairs at the time the September 18, 2006 Resolution
was issued.

This is consistent with Republic Act No. 8975's policy that "the State shall ensure the expeditious and efficient
implementation and completion of government infrastructure projects to avoid unnecessary increase in construction,
maintenance and/or repair costs and to immediately enjoy the social and economic benefits therefrom."97 This policy
declaration does not distinguish between national and local government infrastructure projects. Delay in the project will
only mean additional costs for the government and prejudice to the people of the Municipality of Valladolid who will
directly benefit from the Construction Shoreline Protection Project. WHEREFORE, considering the foregoing, the Petition
is DISMISSED for lack of merit. The verified Petition to Cite Respondents for Contempt dated December 11, 2006 is
likewise DISMISSED for lack of merit.

SO ORDERED.

G.R. No. 138497 January 16, 2002

IMELDA RELUCIO, petitioner,

vs.
ANGELINA MEJIA LOPEZ, respondent.

PARDO, J.:

The Case

The case is a petition for review on certiorari1 seeking to set aside the decision2 of the Court of Appeals that denied a
petition for certiorari assailing the trial court's order denying petitioner's motion to dismiss the case against her inclusion
as party defendant therein.

The Facts

The facts, as found by the Court of Appeals, are as follows:

"On September 15, 1993, herein private respondent Angelina Mejia Lopez (plaintiff below) filed a petition for
"APPOINTMENT AS SOLE ADMINISTRATIX OF CONJUGAL PARTNERSHIP OF PROPERTIES,
FORFEITURE, ETC.," against defendant Alberto Lopez and petition Imelda Relucio, docketed as Spec. Proc. M-
3630, in the Regional Trial Court of Makati, Branch 141. In the petition, private-respondent alleged that sometime
in 1968, defendant Lopez, who is legally married to the private respondent, abandoned the latter and their four
legitimate children; that he arrogated unto himself full and exclusive control and administration of the conjugal
properties, spending and using the same for his sole gain and benefit to the total exclusion of the private
respondent and their four children; that defendant Lopez, after abandoning his family, maintained an illicit
relationship and cohabited with herein petitioner since 1976.

"It was further alleged that defendant Lopez and petitioner Relucio, during their period of cohabitation since 1976,
have amassed a fortune consisting mainly of stockholdings in Lopez-owned or controlled corporations, residential,
 agricultural, commercial lots, houses, apartments and buildings, cars and other motor vehicles, bank accounts
and jewelry. These properties, which are in the names of defendant Lopez and petitioner Relucio singly or jointly
or their dummies and proxies, have been acquired principally if not solely through the actual contribution of
money, property and industry of defendant Lopez with minimal, if not nil, actual contribution from petitioner
Relucio.

"In order to avoid defendant Lopez obligations as a father and husband, he excluded the private respondent and
their four children from sharing or benefiting from the conjugal properties and the income or fruits there from. As
such, defendant Lopez either did not place them in his name or otherwise removed, transferred, stashed away or
concealed them from the private-respondent. He placed substantial portions of these conjugal properties in the
name of petitioner Relucio.1âwphi1.nêt

"It was also averred that in the past twenty five years since defendant Lopez abandoned the private-respondent,
he has sold, disposed of, alienated, transferred, assigned, canceled, removed or stashed away properties, assets
and income belonging to the conjugal partnership with the private-respondent and either spent the proceeds
thereof for his sole benefit and that of petitioner Relucio and their two illegitimate children or permanently and
fraudulently placed them beyond the reach of the private-respondent and their four children.

"On December 8, 1993, a Motion to Dismiss the Petition was filed by herein petitioner on the ground that private
respondent has no cause of action against her.

"An Order dated February 10, 1994 was issued by herein respondent Judge denying petitioner Relucio's Motion
to Dismiss on the ground that she is impleaded as a necessary or indispensable party because some of the
subject properties are registered in her name and defendant Lopez, or solely in her name.

"Subsequently thereafter, petitioner Relucio filed a Motion for Reconsideration to the Order of the respondent
Judge dated February 10, 1994 but the same was likewise denied in the Order dated May 31, 1994." 3

On June 21, 1994, petitioner filed with the Court of Appeals a petition for certiorari assailing the trial court's denial of her
motion to dismiss.4

On May 31, 1996, the Court of Appeals promulgated a decision denying the petition. 5 On June 26, 1996, petitioner filed a
motion for reconsideration.6 However, on April 6, 1996, the Court of Appeals denied petitioner's motion for
reconsideration.7

Hence, this appeal.8

The Issues

1. Whether respondent's petition for appointment as sole administratrix of the conjugal property, accounting, etc.
against her husband Alberto J. Lopez established a cause of action against petitioner.

2. Whether petitioner's inclusion as party defendant is essential in the proceedings for a complete adjudication of
the controversy.9

The Court's Ruling

We grant the petition. We resolve the issues in seriatim.

First issue: whether a cause of action exists against petitioner in the proceedings below. "A cause of action is an act or
omission of one party the defendant in violation of the legal right of the other." 10 The elements of a cause of action are:

(1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created;

(2) an obligation on the part of the named defendant to respect or not to violate such right; and
 (3) an act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach
of the obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of
damages.11

A cause of action is sufficient if a valid judgment may be rendered thereon if the alleged facts were admitted or proved. 12

In order to sustain a motion to dismiss for lack of cause of action, the complaint must show that the claim for relief does
not exist, rather than that a claim has been merely defectively stated or is ambiguous, indefinite or uncertain. 13

Hence, to determine the sufficiency of the cause of action alleged in Special Proceedings M-3630, we assays its
allegations.

In Part Two on the "Nature of [the] Complaint," respondent Angelina Mejia Lopez summarized the causes of action
alleged in the complaint below.

The complaint is by an aggrieved wife against her husband.

Nowhere in the allegations does it appear that relief is sought against petitioner. Respondent's causes of action were all
against her husband.

The first cause of action is for judicial appointment of respondent as administratrix of the conjugal partnership or
absolute community property arising from her marriage to Alberto J. Lopez. Petitioner is a complete stranger to this cause
of action. Article 128 of the Family Code refers only to spouses, to wit:

"If a spouse without just cause abandons the other or fails to comply with his or her obligations to the family, the
aggrieved spouse may petition the court for receivership, for judicial separation of property, or for authority to be
the sole administrator of the conjugal partnership property xxx"

The administration of the property of the marriage is entirely between them, to the exclusion of all other persons.
Respondent alleges that Alberto J. Lopez is her husband. Therefore, her first cause of action is against Alberto J. Lopez.
There is no right-duty relation between petitioner and respondent that can possibly support a cause of action. In fact, none
of the three elements of a cause of action exists.

The second cause of action is for an accounting "by respondent husband." 14 The accounting of conjugal partnership arises
from or is an incident of marriage.

Petitioner has nothing to do with the marriage between respondent Alberto J. Lopez. Hence, no cause of action can exist
against petitioner on this ground.

Respondent's alternative cause of action is for forfeiture of Alberto J. Lopez' share in the co-owned property "acquired
during his illicit relationship and cohabitation with [petitioner]"15 and for the "dissolution of the conjugal partnership of gains
between him [Alberto J. Lopez] and the [respondent]."

The third cause of action is essentially for forfeiture of Alberto J. Lopez' share in property co-owned by him and petitioner.
It does not involve the issue of validity of the co-ownership between Alberto J. Lopez and petitioner. The issue is whether
there is basis in law to forfeit Alberto J. Lopez' share, if any there be, in property co-owned by him with petitioner.

Respondent's asserted right to forfeit extends to Alberto J. Lopez' share alone. Failure of Alberto J. Lopez to surrender
such share, assuming the trial court finds in respondent's favor, results in a breach of an obligation to respondent and
gives rise to a cause of action.16 Such cause of action, however, pertains to Alberto J. Lopez, not petitioner.

The respondent also sought support. Support cannot be compelled from a stranger.

The action in Special Proceedings M-3630 is, to use respondent Angelina M. Lopez' own words, one by "an aggrieved
wife against her husband."17 References to petitioner in the common and specific allegations of fact in the complaint are
merely incidental, to set forth facts and circumstances that prove the causes of action alleged against Alberto J. Lopez.

Finally, as to the moral damages, respondent's claim for moral damages is against Alberto J. Lopez, not petitioner.
To sustain a cause of action for moral damages, the complaint must have the character of an action for interference with
marital or family relations under the Civil Code.

A real party in interest is one who stands "to be benefited or injured by the judgment of the suit."18 In this case, petitioner
would not be affected by any judgment in Special Proceedings M-3630.

If petitioner is not a real party in interest, she cannot be an indispensable party. An indispensable party is one without
whom there can be no final determination of an action. 19 Petitioner's participation in Special Proceedings M-36-30 is not
indispensable. Certainly, the trial court can issue a judgment ordering Alberto J. Lopez to make an accounting of his
conjugal partnership with respondent, and give support to respondent and their children, and dissolve Alberto J. Lopez'
conjugal partnership with respondent, and forfeit Alberto J. Lopez' share in property co-owned by him and petitioner. Such
judgment would be perfectly valid and enforceable against Alberto J. Lopez.

Nor can petitioner be a necessary party in Special Proceedings M-3630. A necessary party as one who is not
indispensable but who ought to be joined as party if complete relief is to be accorded those already parties, or for a
complete determination or settlement of the claim subject of the action.20 In the context of her petition in the lower court,
respondent would be accorded complete relief if Alberto J. Lopez were ordered to account for his alleged conjugal
partnership property with respondent, give support to respondent and her children, turn over his share in the co-ownership
with petitioner and dissolve his conjugal partnership or absolute community property with respondent.

The Judgment

WHEREFORE, the Court GRANTS the petition and REVERSES the decision of the Court of Appeals.21 The Court
DISMISSES Special Proceedings M-3630 of the Regional Trial Court, Makati, Branch 141 as against
petitioner.1âwphi1.nêt

No costs.

SO ORDERED.

G.R. No. 141463 August 6, 2002

VICTOR ORQUIOLA and HONORATA ORQUIOLA, petitioners,

vs.
HON. COURT OF APPEALS, HON. VIVENCIO S. BACLIG, Presiding Judge, Regional Trial Court, Branch 77,
Quezon City, THE SHERIFF OF QUEZON CITY and HIS/HER DEPUTIES and PURA KALAW LEDESMA, substituted
by TANDANG SORA DEVELOPMENT CORPORATION, respondents.

QUISUMBING, J.:

This petition for review seeks the reversal of the decision1 of the Court of Appeals dated January 28, 1999 in CA-G.R. SP
No. 47422, which dismissed the petition to prohibit Judge Vivencio Baclig of the Regional Trial Court of Quezon City,
Branch 77, from issuing a writ of demolition against petitioners, and the sheriff and deputy sheriff of the same court from
implementing an alias writ of execution. Also assailed is the resolution 2 of the Court of Appeals dated December 29, 1999
which denied petitioners’ motion for reconsideration.

The facts are as follows:

Pura Kalaw Ledesma was the registered owner of Lot 689, covered by TCT Nos. 111267 and 111266, in Tandang Sora,
Quezon City. This parcel of land was adjacent to certain portions of Lot 707 of the Piedad Estates, namely, Lot 707-A and
707-B, registered in the name of Herminigilda Pedro under TCT Nos. 16951 and 16952, respectively. On October 29,
1964, Herminigilda sold Lot 707-A and 707-B to Mariano Lising who then registered both lots and Lot 707-C in the name
of M.B. Lising Realty and subdivided them into smaller lots.1âwphi1.nêt

Certain portions of the subdivided lots were sold to third persons including herein petitioners, spouses Victor and
Honorata Orquiola, who purchased a portion of Lot 707-A-2, Lot 5, Block 1 of the subdivision plan (LRC), Psd-42965. The
parcel is now #33 Doña Regina St., Regina Village, Tandang Sora, Quezon City. The other portions were registered in the
name of the heirs of Pedro, heirs of Lising, and other third persons.
Sometime in 1969, Pura Kalaw Ledesma filed a complaint, docketed as Civil Case No. Q-12918, with the Regional Trial
Court of Quezon City against Herminigilda Pedro and Mariano Lising for allegedly encroaching upon Lot 689. During the
pendency of the action, Tandang Sora Development Corporation replaced Pura Kalaw Ledesma as plaintiff by virtue of an
assignment of Lot 689 made by Ledesma in favor of said corporation. Trial continued for three decades.

On August 21, 1991, the trial court finally adjudged defendants Pedro and Lising jointly and severally liable for
encroaching on plaintiff’s land and ordered them:

(a) to solidarily pay the plaintiff Tandang Sora Dev. Corp. actual damages in the amount of P20,000 with interest
from date of filing of the complaint;

(b) to remove all construction, including barbed wires and fences, illegally constructed by defendants on plaintiff’s
property at defendants’ expense;

(c) to replace the removed concrete monuments removed by defendants, at their own expense;

(d) to pay attorney’s fees in the amount of FIVE THOUSAND PESOS (P5,000.00) with interest computed from the
date of filing of the complaint;

(e) to relocate the boundaries to conform with the Commissioners’ Report, particularly, Annexes "A" and "B"
thereof, at the expense of the defendants.3

As a result, in February 1998, the Deputy Sheriff of Quezon City directed petitioners, through an alias writ of execution, to
remove the house they constructed on the land they were occupying.

On April 2, 1998, petitioners received a Special Order dated March 30, 1998, from the trial court stating as follows:

Before the Court for resolution is the "Ex-Parte Motion For The Issuance of A Writ of Demolition," filed by plaintiff,
through counsel, praying for the issuance of an Order directing the Deputy Sheriff to cause the removal and/or
demolition of the structures on the plaintiff’s property constructed by defendants and/or the present occupants.
The defendants-heirs of Herminigilda Pedro filed their comment on the said Motion.

Considering that the decision rendered in the instant case had become final and executory, the Court, in its Order
of November 14, 1997, directed the issuance of an alias writ of execution for the enforcement of the said decision.
However, despite the service of the said writ to all the defendants and the present occupants of the subject
property, they failed to comply therewith, as per the Partial Sheriff’s Return, dated February 9, 1998, issued by the
Deputy Sheriff of this branch of the Court. Thus, there is now a need to demolish the structures in order to
implement the said decision.

WHEREFORE, the defendants are hereby directed to remove, at their expense, all constructions, including
barbed wires and fences, which defendants constructed on plaintiff’s property, within fifteen (15) days from notice
of this Order; otherwise, this Court will issue a writ of demolition against them.

SO ORDERED.4

To prohibit Judge Vivencio Baclig of the Regional Trial Court of Quezon City from issuing a writ of demolition and the
Quezon City sheriff from implementing the alias writ of execution, petitioners filed with the Court of Appeals a petition for
prohibition with prayer for a restraining order and preliminary injunction on April 17, 1998. 5 Petitioners alleged that they
bought the subject parcel of land in good faith and for value, hence, they were parties in interest. Since they were not
impleaded in Civil Case No. Q-12918, the writ of demolition issued in connection therewith cannot be enforced against
them because to do so would amount to deprivation of property without due process of law.

The Court of Appeals dismissed the petition on January 28, 1999. It held that as buyers and successors-in-interest of
Mariano Lising, petitioners were considered privies who derived their rights from Lising by virtue of the sale and could be
reached by the execution order in Civil Case No. Q-12918. Thus, for lack of merit, the petition was ordered dismissed.6

Petitioners’ motion for reconsideration was denied. Hence, this petition, where petitioners aver that:

I.
 THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE DECISION IN CIVIL CASE NO. Q-
12918 CAN ALSO BE ENFORCED AGAINST THE PETITIONERS EVEN IF THEY WERE NOT IMPLEADED AS
PARTIES THERETO.

II.

THE HONORABLE COURT OF APPEALS ERRED IN NOT UPHOLDING PETITIONERS’ TITLE DESPITE
THEIR BEING BUILDER IN GOOD FAITH AND INNOCENT PURCHASER AND FOR VALUE.

III.

PETITIONERS ARE ENTITLED TO INJUNCTIVE RELIEF CONSIDERING THAT THEY STAND TO SUFFER
GRAVE AND IRREPARABLE INJURY IF ALIAS WRIT OF EXECUTION AND THE SPECIAL ORDER ISSUED
BY THE COURT A QUO IN CIVIL CASE NO. Q-12918 FOR THE DEMOLITION OF ALL THE STRUCTURES ON
THE DISPUTED PROPERTY WERE ENFORCED AGAINST THE PETITIONERS WHO WERE NOT EVEN
GIVEN THEIR DAY IN COURT.7

For our resolution are the following issues: (1) whether the alias writ of execution may be enforced against petitioners; and
(2) whether petitioners were innocent purchasers for value and builders in good faith.

On the first issue, petitioners claim that the alias writ of execution cannot be enforced against them. They argue that the
appellate court erred when it relied heavily on our ruling in Vda. de Medina vs. Cruz8 in holding that petitioners are
successors-in-interest of Mariano Lising, and as such, they can be reached by the order of execution in Civil Case No. Q-
12918 even though they were not impleaded as parties thereto. Petitioners submit that Medina is not applicable in this
case because the circumstances therein are different from the circumstances in the present case.

In Medina, the property in dispute was registered under Land Registration Act No. 496 in 1916 and Original Certificate of
Title No. 868 was issued in the name of Philippine Realty Corporation (PRC). In 1949, Benedicta Mangahas and
Francisco Ramos occupied and built houses on the lot without the PRC’s consent. In 1959, PRC sold the lot to Remedios
Magbanua. Mangahas and Ramos opposed and instituted Civil Case No. C-120 to annul the sale and to compel PRC to
execute a contract of sale in their favor. The trial court dismissed the complaint and ordered Mangahas and Ramos to
vacate the lot and surrender possession thereof to Magbanua. The judgment became final and executory. When
Magbanua had paid for the land in full, PRC executed a deed of absolute sale in her favor and a new title was
consequently issued in her name. Magbanua then sought the execution of the judgment in Civil Case No. C-120. This was
opposed by petitioner Medina who alleged that she owned the houses and lot subject of the dispute. She said that she
bought the houses from spouses Ricardo and Eufrocinia de Guzman, while she purchased the lot from the heirs of the
late Don Mariano San Pedro y Esteban. The latter held the land by virtue of a Titulo de Composicion Con El Estado Num.
4136, dated April 29, 1894. In opposing the execution, Medina argued that the trial court did not acquire jurisdiction over
her, claiming that she was not a party in Civil Case No. C-120, thus, she could not be considered as "a person claiming
under" Ramos and Mangahas.

When Medina reached this Court, we held that the decision in Civil Case No. C-120, which had long become final and
executory, could be enforced against petitioner even though she was not a party thereto. We found that the houses on the
subject lot were formerly owned by Mangahas and Ramos who sold them to spouses de Guzman, who in turn sold them
to Medina. Under the circumstances, petitioner was privy to the two judgment debtors Mangahas and Ramos, and thus
Medina could be reached by the order of execution and writ of demolition issued against the two. As to the lot under
dispute, we sustained Magbanua’s ownership over it, she being the holder of a Torrens title. We declared that a Torrens
title is generally conclusive evidence of ownership of the land referred to therein, and a strong presumption exists that a
Torrens title was regularly issued and valid. A Torrens title is incontrovertible against any informacion possessoria, or
other title existing prior to the issuance thereof not annotated on the Torrens title. Moreover, persons dealing with property
covered by a Torrens certificate of title are not required to go beyond what appears on its face.

Medina markedly differs from the present case on major points. First, the petitioner in Medina acquired the right over the
houses and lot subject of the dispute after the original action was commenced and became final and executory. In the
present case, petitioners acquired the lot before the commencement of Civil Case No. Q-12918. Second, the right over
the disputed land of the predecessors-in-interest of the petitioner in Medina was based on a title of doubtful authenticity,
allegedly a Titulo de Composicion Con El Estado issued by the Spanish Government in favor of one Don Mariano San
Pedro y Esteban, while the right over the land of the predecessors-in-interest of herein petitioners is based on a fully
recognized Torrens title. Third, petitioners in this case acquired the registered title in their own names, while the petitioner
in Medina merely relied on the title of her predecessor-in-interest and tax declarations to prove her alleged ownership of
the land.

We must stress that where a case like the present one involves a sale of a parcel of land under the Torrens system, the
applicable rule is that a person dealing with the registered property need not go beyond the certificate of title; he can rely
solely on the title and he is charged with notice only of such burdens and claims as are annotated on the title. 9 It is our
view here that the petitioners, spouses Victor and Honorata Orquiola, are fully entitled to the legal protection of their lot by
the Torrens system, unlike the petitioner in the Medina case who merely relied on a mere Titulo de Composicion.

Coming now to the second issue, were petitioners purchasers in good faith and for value? A buyer in good faith is one
who buys the property of another without notice that some other person has a right to or interest in such property. He is a
buyer for value if he pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of
some other person in the property.10 The determination of whether one is a buyer in good faith is a factual issue which
generally is outside the province of this Court to determine in a petition for review. An exception is when the Court of
Appeals failed to take into account certain relevant facts which, if properly considered, would justify a different
conclusion.11 The instant case is covered by this exception to the general rule. As found by the Court of Appeals and not
refuted by private respondent, petitioners purchased the subject land in 1964 from Mariano Lising.12 Civil Case No. Q-
12918 was commenced sometime in 1969. The Court of Appeals overlooked the fact that the purchase of the land took
place prior to the institution of Civil Case No. Q-12918. In other words, the sale to petitioners was made before Pura
Kalaw Ledesma claimed the lot. Petitioners could reasonably rely on Mariano Lising’s Certificate of Title which at the time
of purchase was still free from any third party claim. Hence, considering the circumstances of this case, we conclude that
petitioners acquired the land subject of this dispute in good faith and for value.

The final question now is: could we consider petitioners builders in good faith? We note that this is the first time that
petitioners have raised this issue. As a general rule, this could not be done. Fair play, justice, and due process dictate that
parties should not raise for the first time on appeal issues that they could have raised but never did during trial and even
during proceedings before the Court of Appeals.13 Nevertheless, we deem it proper that this issue be resolved now, to
avoid circuitous litigation and further delay in the disposition of this case. On this score, we find that petitioners are indeed
builders in good faith.

A builder in good faith is one who builds with the belief that the land he is building on is his, and is ignorant of any defect
or flaw in his title.14 As earlier discussed, petitioner spouses acquired the land in question without knowledge of any defect
in the title of Mariano Lising. Shortly afterwards, they built their conjugal home on said land. It was only in 1998, when the
sheriff of Quezon City tried to execute the judgment in Civil Case No. Q-12918, that they had notice of private
respondent’s adverse claim. The institution of Civil Case No. Q-12918 cannot serve as notice of such adverse claim to
petitioners since they were not impleaded therein as parties.

As builders in good faith and innocent purchasers for value, petitioners have rights over the subject property and hence
they are proper parties in interest in any case thereon.15 Consequently, private respondents should have impleaded them
in Civil Case No. Q-12918. Since they failed to do so, petitioners cannot be reached by the decision in said case. No man
shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by any judgment
rendered by the court. In the same manner, a writ of execution can be issued only against a party and not against one
who did not have his day in court. Only real parties in interest in an action are bound by the judgment therein and by writs
of execution and demolition issued pursuant thereto.16 In our view, the spouses Victor and Honorata Orquiola have valid
and meritorious cause to resist the demolition of their house on their own titled lot, which is tantamount to a deprivation of
property without due process of law.1âwphi1.nêt

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated January 28, 1999, and its resolution
dated December 29, 1999, in CA-G.R. SP No. 47422, are REVERSED and SET ASIDE. Respondents are hereby
enjoined from enforcing the decision in Civil Case No. Q-12918 through a writ of execution and order of demolition issued
against petitioners. Costs against private respondent.

SO ORDERED.

G.R. No. 135796 October 3, 2002

CHINA BANKING CORPORATION, petitioner,

vs.
MERCEDES M. OLIVER, respondent.
 RESOLUTION

QUISUMBING, J.:

This petition for review1 seeks the reversal of the decision dated June 1, 1998, of the Court of Appeals in CA-G.R. SP No.
43836, dismissing China Banking Corporation’s petition for certiorari to annul the two orders of the Regional Trial Court of
Muntinlupa City, Branch 276, which earlier denied petitioner’s motion to dismiss and then declared the bank in default in
Civil Case No. 96-219. The appellate court also denied petitioner’s motion for reconsideration in a resolution dated
September 30, 1998.

The facts of this case are culled from the records.

In August 1995, Pangan Lim, Jr. and a certain Mercedes M. Oliver opened a joint account in China Banking Corporation
(hereinafter Chinabank) at EDSA Balintawak Branch. Lim introduced Oliver to the bank’s branch manager as his partner
in the rice and palay trading business. Thereafter, Lim and Oliver applied for a P17 million loan, offering as collateral a
7,782 square meter lot located in Tunasan, Muntinlupa and covered by TCT No. S-50195 in the name of Oliver. The bank
approved the application. On November 17, 1995, Lim and Oliver executed in favor of Chinabank a promissory note for
P16,650,000, as well as a Real Estate Mortgage on the property. The mortgage was duly registered and annotated on the
original title under the custody of the Registry of Deeds of Makati and on the owner’s duplicate copy in the bank’s
possession. The mortgage document showed Mercedes Oliver’s address to be No. 95 Malakas Street, Diliman, Quezon
City. For brevity, she is hereafter referred to as "Oliver One."

On November 18, 1996, respondent claiming that she is Mercedes M. Oliver with postal office address at No. 40 J.P.
Rizal St., San Pedro, Laguna, filed an action for annulment of mortgage and cancellation of title with damages against
Chinabank, Register of Deeds Atty. Mila G. Flores, and Deputy Register of Deeds Atty. Ferdinand P. Ignacio.
Respondent, whom we shall call as "Oliver Two," claimed that she was the registered and lawful owner of the land subject
of the real estate mortgage; that the owner’s duplicate copy of the title had always been in her possession; and that she
did not apply for a loan or surrender her title to Chinabank.2 She prayed that: (1) the owner’s duplicate copy surrendered
to Chinabank as well as the original title with the Registry of Deeds be cancelled; (2) the mortgage be declared null and
void; and (3) the Registry of Deeds be ordered to issue a new and clean title in her name. 3

On January 31, 1997, Chinabank moved to dismiss the case for lack of cause of action and non-joinder of an
indispensable party, the mortgagor.

On March 13, 1997, Judge Norma C. Perello issued an order denying the motion to dismiss, stating that:

A reading of the COMPLAINT which of course is hypothetically admitted, will show that a valid judgment can be rendered
against defendant. Plaintiff having sufficiently averred that defendants negligently failed to ascertain the genuineness or
not (sic) of the title of the land mortgaged to it upon the claim of ownership by the mortgagors. Furthermore, the matters
alleged in the MOTION TO DISMISS are all evidentiary which Defendants may substantiate at the appointed hours. 4

On April 7, 1997, Chinabank filed with the Court of Appeals a petition for certiorari with prayer for the issuance of a writ of
preliminary injunction and/or restraining order to enjoin enforcement of the March 13, 1997 order and further action on the
case. The Court of Appeals directed respondent Oliver Two to file her comment and deferred action on the prayer for the
issuance of the preliminary injunction pending submission of the comment.

On June 30, 1997, respondent Oliver Two moved to declare petitioner Chinabank in default. She pointed out that since
petitioner received the order denying the motion to dismiss on March 21, 1997, it had only until April 7, 1997 to file its
answer to the complaint. However, until the filing of the motion for default, no answer had been filed yet. The trial court
granted the motion and declared petitioner in default in its order dated July 17, 1997, thus:

Acting on the Motion To Declare Defendant Bank in Default, and finding the same to be legally tenable is granted.

Accordingly, the Defendant Bank is declared in default as summons was served on It as early as December 16, 1996, but
until date they have not filed an Answer nor any responsive pleading and instead, It filed a Motion to Dismiss, which was
denied by this Court on March 13, 1997.

The filing of a CERTIORARI to question the Orders by this Court did not toll the period for Defendants to answer the
complaint.
Therefore, the reglementary period for the filing of responsive pleading has long expired.

Let the case be submitted for Decision based on the complaint.

It is SO ORDERED.5

Consequently, petitioner Chinabank filed a supplemental petition on August 11, 1997, seeking annulment of the July 17,
1997 order. It argued that the special civil action for certiorari filed in the Court of Appeals interrupted the proceedings
before the trial court, thereby staying the period for filing the answer.

On June 1, 1998, the Court of Appeals promulgated the assailed decision, finding no grave abuse of discretion committed
by the trial judge in ruling that the Rules of Court provided the manner of impleading parties to a case and in suggesting
that petitioner file an appropriate action to bring the mortgagor within the court’s jurisdiction. The appellate court said that
Rule 6, Section 11 of the Rules of Court allows petitioner to file a third-party complaint against the mortgagor. As to the
judgment by default, the Court of Appeals said that an order denying the motion to dismiss is interlocutory and may not be
questioned through a special civil action for certiorari. The defendant must proceed with the case and raise the issues in
his motion to dismiss when he appeals to a higher court. In this case, petitioner Chinabank should have filed its answer
when it received the March 13, 1997 order denying the motion to dismiss. The special civil action for certiorari with the
Court of Appeals did not interrupt the period to file an answer, there being no temporary restraining order or writ of
preliminary injunction issued.

The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition anchored on the following
grounds:

SEC. 11, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE DOES NOT APPLY WHERE THE PARTY WHO WAS
NOT IMPLEADED IS AN INDISPENSABLE PARTY; INSTEAD, SECTION 7, RULE 3 THEREOF, APPLIES.

II

THE MORTGAGOR MERCEDES M. OLIVER IS AN INDISPENSABLE PARTY UNDER SECTION 7, RULE 3, OF THE
1997 RULES OF CIVIL PROCEDURE, AND MUST THEREFORE INDISPENSABLY BE JOINED AS A PARTY-
DEFENDANT.

III

RESPONDENT’S CAUSE OF ACTION IS ANCHORED ON HER CLAIM AS THE REGISTERED AND LAWFUL OWNER
OF THE PROPERTY IN QUESTION AND THAT HER OWNER’S DUPLICATE COPY OF THE TITLE (ANNEX "A") IS
THE TRUE AND GENUINE TITLE. THUS, THE ACTION BEFORE THE HONORABLE COURT-A-QUO IS A LAND
DISPUTE BETWEEN TWO (2) PERSONS CLAIMING OWNERSHIP.

IV

THE ANNULMENT OF THE MORTGAGE AND THE CANCELLATION OF ANNEXES "B" AND "C" AS PRAYED FOR IN
THE COMPLAINT IN CIVIL CASE NO. 96-219 ARE INEXTRICABLY INTERTWINED WITH THE ISSUE OF
OWNERSHIP. HENCE, THE LATTER MUST FIRST BE RESOLVED TO DETERMINE THE FORMER.

THE OWNER’S DUPLICATE COPY OF THE TITLE OF MORTGAGOR MERCEDES M. OLIVER OWNER’S DUPLICATE
COPY CANNOT, IN HER ABSENCE, BE DECLARED NULL AND VOID. CONSEQUENTLY, INASMUCH AS THE
MORTGAGE IN FAVOR OF PETITIONER IS DEPENDENT UPON THE OWNER’S DUPLICATE COPY OF THE
MORTGAGOR, THE COMPLAINT IN CIVIL CASE NO. 96-219 CAN NOT RESOLVE THE CONTROVERSY WITH
FINALITY.

VI
THE CASE OF CHURCH OF CHRIST VS. VALLESPIN, G.R. NO. 53726, AUGUST 15, 1988, DOES NOT APPLY
INASMUCH AS THE USE OF TERM "INDISPENSABLE PARTY" IN SAID CASE WAS LOOSELY USED AND IN TRUTH
WAS INTENDED TO MEAN "PARTIES-IN-INTEREST" AS CONTEMPLATED BY SECTION 2, RULE 3 OF THE RULES
OF COURT.

VII

THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT SANCTIONED THE TRIAL COURT’S ERROR
IN DECLARING DEFENDANT CBC IN DEFAULT FOR FAILURE TO FILE AN ANSWER, NOTWITHSTANDING THE
SETTLED DOCTRINE THAT WHERE AN INDISPENSABLE PARTY IS NOT IN COURT, THE TRIAL COURT SHOULD
NOT PROCEED BUT INSTEAD SHOULD DISMISS THE CASE.

VIII

THE DISMISSAL/WITHDRAWAL OF THE COMPLAINT AGAINST DEFENDANTS REGISTER AND DEPUTY

REGISTER OF DEEDS NECESSARILY GIVE RISE TO, AND BOLSTERS, THE CONCLUSION THAT THE OWNER’S
DUPLICATE COPY OF TCT NO. S-50195 OF MORTGAGOR MERCEDES M. OLIVER IS THE GENUINE AND
AUTHENTIC COPY.6

For a clearer discussion of the issues in this controversy, we may state them as follows:

1. Is the mortgagor who goes by the name of Mercedes M. Oliver, herein called Oliver One, an indispensable
party in Civil Case No. 96219?

2. Should Section 7 Rule 3 of the 1997 Rules of Civil Procedure 7 apply in this case?

3. Did the Court of Appeals err when it sustained the trial court’s declaration that petitioner was in default?

4. Were the withdrawal and consequent dismissal of the complaint against the Registry of Deeds’ officials
indicative of the authenticity of mortgagor Oliver One’s copy of TCT No. S-50195?

Petitioner Chinabank alleges that there are two owner’s duplicate copies of TCT No. S-50195 involved in this case and
two persons claiming to be the real "MERCEDES MARAVILLA OLIVER." One is the mortgagor, Oliver One. The other is
the respondent, Oliver Two. Respondent’s complaint before the trial court was one for cancellation of the transfer
certificate of title in petitioner’s possession (Annex B). According to petitioner, the issue below is the genuineness of the
titles, which is intertwined with the issue of ownership. This being the case, said the petitioner, the mortgagor Oliver One
must necessarily be impleaded for she is the registered owner under Annex "B." Petitioner argues that mortgagor Oliver
One is in a better position to defend her title. She stands to suffer if it is declared fake. Further, petitioner claims that the
validity and enforceability of the mortgage entirely depends on the validity and authenticity of Annex "B." The mortgage
cannot be declared a nullity without the trial court declaring Annex "B" a nullity. Hence, mortgagor Oliver One’s
participation in the suit is indispensable, according to petitioner. In brief, what petitioner Chinabank is saying is that it was
indispensable for respondent Oliver Two to implead mortgagor Oliver One in the case before the trial court. Failing to do
that, the complaint of herein respondent Oliver Two should have been dismissed.

Petitioner’s contention is far from tenable. An indispensable party is a party in interest, without whom no final
determination can be had of an action.8 It is true that mortgagor Oliver One is a party in interest, for she will be affected by
the outcome of the case. She stands to be benefited in case the mortgage is declared valid, or injured in case her title is
declared fake.9 However, mortgagor Oliver One’s absence from the case does not hamper the trial court in resolving the
dispute between respondent Oliver Two and petitioner. A perusal of Oliver Two’s allegations in the complaint below shows
that it was for annulment of mortgage due to petitioner’s negligence in not determining the actual ownership of the
property, resulting in the mortgage’s annotation on TCT No. S-50195 in the Registry of Deeds’ custody. To support said
allegations, respondent Oliver Two had to prove (1) that she is the real Mercedes M. Oliver referred to in the TCT, and (2)
that she is not the same person using that name who entered into a deed of mortgage with the petitioner. This,
respondent Oliver Two can do in her complaint without necessarily impleading the mortgagor Oliver One. Hence, Oliver
One is not an indispensable party in the case filed by Oliver Two.

In Noceda vs. Court of Appeals, et al., 313 SCRA 504 (1999), we held that a party is not indispensable to the suit if his
interest in the controversy or subject matter is distinct and divisible from the interest of the other parties and will not
necessarily be prejudiced by a judgment which does complete justice to the parties in court. In this case, Chinabank has
interest in the loan which, however, is distinct and divisible from the mortgagor’s interest, which involves the land used as
collateral for the loan.

Further, a declaration of the mortgage’s nullity in this case will not necessarily prejudice mortgagor Oliver One. The bank
still needs to initiate proceedings to go after the mortgagor, who in turn can raise other defenses pertinent to the two of
them. A party is also not indispensable if his presence would merely permit complete relief between him and those
already parties to the action, or will simply avoid multiple litigation, as in the case of Chinabank and mortgagor Oliver
One.10 The latter’s participation in this case will simply enable petitioner Chinabank to make its claim against her in this
case, and hence, avoid the institution of another action. Thus, it was the bank who should have filed a third-party
complaint or other action versus the mortgagor Oliver One.

As to the second issue, since mortgagor Oliver One is not an indispensable party, Section 7, Rule 3 of the 1997 Rules of
Civil Procedure, which requires compulsory joinder of indispensable parties in a case, does not apply. Instead, it is
Section 11, Rule 3, that applies.11 Non-joinder of parties is not a ground for dismissal of an action. Parties may be added
by order of the court, either on its own initiative or on motion of the parties. 12 Hence, the Court of Appeals committed no
error when it found no abuse of discretion on the part of the trial court for denying Chinabank’s motion to dismiss and,
instead, suggested that petitioner file an appropriate action against mortgagor Oliver One. A person who is not a party to
an action may be impleaded by the defendant either on the basis of liability to himself or on the ground of direct liability to
the plaintiff.13

Now, the third issue, did the Court of Appeals err when it sustained the trial court’s ruling that petitioner Chinabank was in
default? As found by the Court of Appeals, petitioner did not file its answer, although it received the March 13, 1997 order
denying the motion to dismiss. Instead, petitioner filed a petition for certiorari under Rule 65 of the Rules of Court. Said
petition, however, does not interrupt the course of the principal case unless a temporary restraining order or writ of
preliminary injunction is issued.14 No such order or writ was issued in this case. Hence, Chinabank as defendant below
was properly declared in default by the trial court, after the 15-day period to file its answer or other responsive pleading
lapsed.

Lastly, were the withdrawal and consequent dismissal of the complaint against officials of the Registry of Deeds
conclusive of the authenticity of mortgagor Oliver One’s copy of TCT No. S-50195? This is a question of fact, which is not
a proper subject for review in this petition. Here, we are limited only to questions of law, 15 as a general rule. Petitioner
failed to show that this case falls under any of the exceptions to this rule. We need not tarry on this issue now.

WHEREFORE, the petition is DENIED for lack of merit. The assailed decision dated June 1, 1998 and the resolution
dated September 30, 1998 of the Court of Appeals in CA-G.R. SP No. 43836 are AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 166302. July 28, 2005

LOTTE PHIL. CO., INC., Petitioners,

vs.
ERLINDA DELA CRUZ, LEONOR MAMAUAG, LOURDES CAUBA, JOSEPHINE DOMANAIS, ARLENE CAGAYAT,
AMELITA YAM, VIVIAN DOMARAIS, MARILYN ANTALAN, CHRISTOPHER RAMIREZ, ARNOLD SAN PEDRO,
MARISSA SAN PEDRO, LORELI JIMENEZ, JEFFREY BUENO, CHRISTOPHER CAGAYAT, GERARD CABILES,
JOAN ENRIQUEZ, JOSEPH DE LA CRUZ, NELLY CLERIGO, DULCE NAVARETTE, ROWENA BELLO, DANIEL
RAMIREZ, AILEEN BAUTISTA and BALTAZAR FERRERA, Respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari1 assails the July 9, 2004 decision2 of the Court of Appeals in CA-G.R. SP No. 72732
and its November 26, 2004 resolution3 denying reconsideration thereof.

The established facts of this case are as follows:

Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a domestic corporation. Petitioners (respondents herein)
are among those who were hired and assigned to the confectionery facility operated by private respondent.
On December 14, 1995 – and yearly thereafter until the year 2000 – 7J Maintenance and Janitorial Services ("7J")
entered into a contract with private respondent to provide manpower for needed maintenance, utility, janitorial and other
services to the latter. In compliance with the terms and conditions of the service contract, and to accommodate the needs
of private respondent for personnel/workers to do and perform "piece works," petitioners, among others, were hired and
assigned to private respondent as repackers or sealers.

However, either in October, 1999 or on February 9, 2000, private respondent dispensed with their services allegedly due
to the expiration/termination of the service contract by respondent with 7J. They were either told "hwag muna kayong
pumasok at tatawagan na lang kung may gawa"; or were asked to wait "pag magrereport sila sa trabaho." Unfortunately,
petitioners were never called back to work again.

Aggrieved, petitioners lodged a labor complaint against both private respondent Lotte and 7J, for illegal dismissal,
regularization, payment of corresponding backwages and related employment benefits, 13th month pay, service incentive
leave, moral and exemplary damages and attorney’s fees based on total judgment award.4

On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr., rendered judgment 5 declaring 7J as employer of
respondents.6 The arbiter also found 7J guilty of illegal dismissal7 and ordered to reinstate respondents,8 pay
P2,374,710.00 as backwages, P713,648.00 as 13th month pay and P117,000.00 as service incentive leave pay. 9

Respondents appealed to the National Labor Relations Commission (NLRC) praying that Lotte be declared as their direct
employer because 7J is merely a labor-only contractor. In its decision10 dated April 24, 2002, the NLRC found no cogent
reason to disturb the findings of the labor arbiter and affirmed its ruling that 7J is the employer of respondents and solely
liable for their claims.

Respondents’ motion for reconsideration was denied by the NLRC in a resolution dated June 18, 2002.

Undaunted, they filed a petition for certiorari in the Court of Appeals11 against the NLRC and Lotte, insisting that their
employer is Lotte and not 7J.

Lotte, however, denied that respondents were its employees. It prayed that the petition be dismissed for failure to implead
7J who is a party interested in sustaining the proceedings in court, pursuant to Section 3, Rule 46 of the Revised Rules of
Civil Procedure.

On July 9, 2004, the Court of Appeals reversed and set aside the rulings of the Labor Arbiter and the NLRC. In its
decision, the Court of Appeals declared Lotte as the real employer of respondents and that 7J who engaged in labor-only
contracting was merely the agent of Lotte. Respondents who performed activities directly related to Lotte’s business were
its regular employees under Art. 280 of the Labor Code. As such, they must be accorded security of tenure and their
services terminated only on "just" and "authorized" causes.

Lotte’s motion for reconsideration was denied, hence this petition, on the following issues:

8. Whether or not petitioner herein had the burden of proof to establish before the proceedings in the Court of Appeals
that 7J Maintenance and Janitorial Service was not a labor-only contractor.

8.1. Whether or not the Petition in CA-G.R. SP No. 72732 is dismissible for failure to comply with Section 3, Rule 46 in
relation to Section 5, Rule 65 of the 1997 Rules of Civil Procedure.12

We first resolve the procedural issue raised by petitioner. Lotte asserts that 7J is an indispensable party and should have
been impleaded in respondents’ petition in the Court of Appeals. It claims that the petition before the Court of Appeals
was dismissible for failure to comply with Section 3,13 Rule 46 in relation to Section 514 of Rule 65 of the Revised Rules of
Civil Procedure.

Petitioner’s contention is tenable.

An indispensable party is a party in interest without whom no final determination can be had of an action, 15 and who shall
be joined either as plaintiffs or defendants.16 The joinder of indispensable parties is mandatory.17 The presence of
indispensable parties is necessary to vest the court with jurisdiction, which is "the authority to hear and determine a
cause, the right to act in a case".18 Thus, without the presence of indispensable parties to a suit or proceeding, judgment
of a court cannot attain real finality.19 The absence of an indispensable party renders all subsequent actions of the court
null and void for want of authority to act, not only as to the absent parties but even as to those present. 20

In the case at bar, 7J is an indispensable party. It is a party in interest because it will be affected by the outcome of the
case. The Labor Arbiter and the NLRC found 7J to be solely liable as the employer of respondents. The Court of Appeals
however rendered Lotte jointly and severally liable with 7J who was not impleaded by holding that the former is the real
employer of respondents. Plainly, its decision directly affected 7J.

In Domingo v. Scheer,21 we held that the non-joinder of indispensable parties is not a ground for the dismissal of an
action22 and the remedy is to implead the non-party claimed to be indispensable.23 Parties may be added by order of the
court on motion of the party or on its own initiative at any stage of the action and/or such times as are just. If the petitioner
refuses to implead an indispensable party despite the order of the court, the latter may dismiss the complaint/petition for
the petitioner/plaintiff’s failure to comply therefor.24

Although 7J was a co-party in the case before the Labor Arbiter and the NLRC, respondents failed to include it in their
petition for certiorari in the Court of Appeals. Hence, the Court of Appeals did not acquire jurisdiction over 7J. No final
ruling on this matter can be had without impleading 7J, whose inclusion is necessary for the effective and complete
resolution of the case and in order to accord all parties with due process and fair play.

In light of the foregoing, the Court sees no need to discuss the second issue raised by petitioner.

WHEREFORE, the July 9, 2004 decision of the Court of Appeals in CA-G.R. SP No. 72732 and the November 26, 2004
resolution, are SET ASIDE. Let the case be REMANDED to the Court of Appeals to include 7J Maintenance and Janitorial
Services as an indispensable party to the case for further proceedings.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

G.R. No. 190823 April 4, 2011

DOMINGO CARABEO, Petitioner,

vs.
SPOUSES NORBERTO and SUSAN DINGCO, Respondents.

DECISION

CARPIO MORALES, J.:

On July 10, 1990, Domingo Carabeo (petitioner) entered into a contract denominated as "Kasunduan sa Bilihan ng
Karapatan sa Lupa"1 (kasunduan) with Spouses Norberto and Susan Dingco (respondents) whereby petitioner agreed to
sell his rights over a 648 square meter parcel of unregistered land situated in Purok III, Tugatog, Orani, Bataan to
respondents for ₱38,000.

Respondents tendered their initial payment of ₱10,000 upon signing of the contract, the remaining balance to be paid on
September 1990.

Respondents were later to claim that when they were about to hand in the balance of the purchase price, petitioner
requested them to keep it first as he was yet to settle an on-going "squabble" over the land.

Nevertheless, respondents gave petitioner small sums of money from time to time which totaled ₱9,100, on petitioner’s
request according to them; due to respondents’ inability to pay the amount of the remaining balance in full, according to
petitioner.

By respondents’ claim, despite the alleged problem over the land, they insisted on petitioner’s acceptance of the
remaining balance of ₱18,900 but petitioner remained firm in his refusal, proffering as reason therefor that he would
register the land first.
Sometime in 1994, respondents learned that the alleged problem over the land had been settled and that petitioner had
caused its registration in his name on December 21, 1993 under Transfer Certificate of Title No. 161806. They thereupon
offered to pay the balance but petitioner declined, drawing them to file a complaint before the Katarungan Pambarangay.
No settlement was reached, however, hence, respondent filed a complaint for specific performance before the Regional
Trial Court (RTC) of Balanga, Bataan.

Petitioner countered in his Answer to the Complaint that the sale was void for lack of object certain, the kasunduan not
having specified the metes and bounds of the land. In any event, petitioner alleged that if the validity of the kasunduan is
upheld, respondents’ failure to comply with their reciprocal obligation to pay the balance of the purchase price would
render the action premature. For, contrary to respondents’ claim, petitioner maintained that they failed to pay the balance
of ₱28,000 on September 1990 to thus constrain him to accept installment payments totaling ₱9,100.

After the case was submitted for decision or on January 31, 2001,2 petitioner passed away. The records do not show that
petitioner’s counsel informed Branch 1 of the Bataan RTC, where the complaint was lodged, of his death and that proper
substitution was effected in accordance with Section 16, Rule 3, Rules of Court.3

By Decision of February 25, 2001,4 the trial court ruled in favor of respondents, disposing as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering:

1. The defendant to sell his right over 648 square meters of land pursuant to the contract dated July 10, 1990 by
executing a Deed of Sale thereof after the payment of P18,900 by the plaintiffs;

2. The defendant to pay the costs of the suit.

SO ORDERED.5

Petitioner’s counsel filed a Notice of Appeal on March 20, 2001.

By the herein challenged Decision dated July 20, 2009, 6 the Court of Appeals affirmed that of the trial court.

Petitioner’s motion for reconsideration having been denied by Resolution of January 8, 2010, the present petition for
review was filed by Antonio Carabeo, petitioner’s son,7 faulting the appellate court:

(A)

… in holding that the element of a contract, i.e., an object certain is present in this case.

(B)

… in considering it unfair to expect respondents who are not lawyers to make judicial consignation after herein
petitioner allegedly refused to accept payment of the balance of the purchase price.

(C)

… in upholding the validity of the contract, "Kasunduan sa Bilihan ng Karapatan sa Lupa," despite the lack of
spousal consent, (underscoring supplied)

and proffering that

(D)

[t]he death of herein petitioner causes the dismissal of the action filed by respondents; respondents’ cause of
action being an action in personam. (underscoring supplied)

The petition fails.

The pertinent portion of the kasunduan reads:8

xxxx

Na ako ay may isang partial na lupa na matatagpuan sa Purok 111, Tugatog, Orani Bataan, na may sukat na 27 x 24
metro kuwadrado, ang nasabing lupa ay may sakop na dalawang punong santol at isang punong mangga, kaya’t ako ay
nakipagkasundo sa mag-asawang Norby Dingco at Susan Dingco na ipagbili sa kanila ang karapatan ng nasabing lupa
sa halagang ₱38,000.00.

x x x x (underscoring supplied)

That the kasunduan did not specify the technical boundaries of the property did not render the sale a nullity. The
requirement that a sale must have for its object a determinate thing is satisfied as long as, at the time the contract is
entered into, the object of the sale is capable of being made determinate without the necessity of a new or further
agreement between the parties.9 As the above-quoted portion of the kasunduan shows, there is no doubt that the object
of the sale is determinate.

Clutching at straws, petitioner proffers lack of spousal consent. This was raised only on appeal, hence, will not be
considered, in the present case, in the interest of fair play, justice and due process.10

Respecting the argument that petitioner’s death rendered respondents’ complaint against him dismissible, Bonilla v.
Barcena11 enlightens:

The question as to whether an action survives or not depends on the nature of the action and the damage sued for. In the
causes of action which survive, the wrong complained [of] affects primarily and principally property and property rights, the
injuries to the person being merely incidental, while in the causes of action which do not survive, the injury complained of
is to the person, the property and rights of property affected being incidental. (emphasis and underscoring supplied)

In the present case, respondents are pursuing a property right arising from the kasunduan, whereas petitioner is invoking
nullity of the kasunduan to protect his proprietary interest. Assuming arguendo, however, that the kasunduan is deemed
void, there is a corollary obligation of petitioner to return the money paid by respondents, and since the action involves
property rights,12 it survives.1avvphi1

It bears noting that trial on the merits was already concluded before petitioner died. Since the trial court was not informed
of petitioner’s death, it may not be faulted for proceeding to render judgment without ordering his substitution. Its judgment
is thus valid and binding upon petitioner’s legal representatives or successors-in-interest, insofar as his interest in the
property subject of the action is concerned.13

In another vein, the death of a client immediately divests the counsel of authority. 14 Thus, in filing a Notice of Appeal,
petitioner’s counsel of record had no personality to act on behalf of the already deceased client who, it bears reiteration,
had not been substituted as a party after his death. The trial court’s decision had thereby become final and executory, no
appeal having been perfected.

WHEREFORE, the petition is DENIED.

SO ORDERED.

G.R. No. 152272 March 5, 2012

JUANA COMPLEX I HOMEOWNERS ASSOCIATION, INC., ANDRES C. BAUTISTA, BRIGIDO DIMACULANGAN,

DOLORES P. PRADO, IMELDA DE LA CRUZ, EDITHA C. DY, FLORENCIA M. MERCADO, LEOVINO C. DATARIO,
AIDA A. ABAYON, NAPOLEON M. DIMAANO, ROSITA G. ESTIGOY and NELSON A. LOYOLA, Petitioners,
vs.
FIL-ESTATE LAND, INC., FIL ESTATE ECOCENTRUM CORPORATION, LA PAZ HOUSING AND DEVELOPMENT
CORPORATION, WARBIRD SECURITY AGENCY, ENRIQUE RIVILLA, MICHAEL E. JETHMAL and MICHAEL
ALUNAN, Respondents.

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

G. R. No. 152397
FIL-ESTATE LAND, INC., FIL ESTATE ECOCENTRUM CORPORATION, LA PAZ HOUSING AND DEVELOPMENT
CORPORATION, WARBIRD SECURITY AGENCY, ENRIQUE RIVILLA, MICHAEL E. JETHMAL and MICHAEL
ALUNAN, Petitioners,
vs.
JUANA COMPLEX I HOMEOWNERS ASSOCIATION, INC., ANDRES C. BAUTISTA, BRIGIDO DIMACULANGAN,
DOLORES P. PRADO, IMELDA DE LA CRUZ, EDITHA C. DY, FLORENCIA M. MERCADO, LEOVINO C. DATARIO,
AIDA A. ABAYON, NAPOLEON M. DIMAANO, ROSITA G. ESTIGOY and NELSON A. LOYOLA, Respondents.

DECISION

MENDOZA, J.:

Before the Court are two (2) consolidated petitions assailing the July 31, 2001 Decision 1 and February 21, 2002
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 60543, which annulled and set aside the March 3, 1999
Order3 of the Regional Trial Court, Branch 25, Biñan, Laguna (RTC), granting the application for the issuance of a writ of
preliminary injunction, and upheld the June 16, 2000 Omnibus Order 4 denying the motion to dismiss.

The Facts:

On January 20, 1999, Juana Complex I Homeowners Association, Inc. (JCHA), together with individual residents of Juana
Complex I and other neighboring subdivisions (collectively referred as JCHA, et. al.), instituted a complaint5for damages,
in its own behalf and as a class suit representing the regular commuters and motorists of Juana Complex I and
neighboring subdivisions who were deprived of the use of La Paz Road, against Fil-Estate Land, Inc. (Fil-Estate), Fil-
estate Ecocentrum Corporation (FEEC), La Paz Housing & Development Corporation (La Paz), and Warbird Security
Agency and their respective officers (collectively referred as Fil-Estate, et al.).

The complaint alleged that JCHA, et al. were regular commuters and motorists who constantly travelled towards the
direction of Manila and Calamba; that they used the entry and exit toll gates of South Luzon Expressway (SLEX) by
passing through right-of-way public road known as La Paz Road; that they had been using La Paz Road for more than ten
(10) years; that in August 1998, Fil-estate excavated, broke and deliberately ruined La Paz Road that led to SLEX so
JCHA, et al. would not be able to pass through the said road; that La Paz Road was restored by the residents to make it
passable but Fil-estate excavated the road again; that JCHA reported the matter to the Municipal Government and the
Office of the Municipal Engineer but the latter failed to repair the road to make it passable and safe to motorists and
pedestrians; that the act of Fil-estate in excavating La Paz Road caused damage, prejudice, inconvenience, annoyance,
and loss of precious hours to them, to the commuters and motorists because traffic was re-routed to narrow streets that
caused terrible traffic congestion and hazard; and that its permanent closure would not only prejudice their right to free
and unhampered use of the property but would also cause great damage and irreparable injury.

Accordingly, JCHA, et al. also prayed for the immediate issuance of a Temporary Restraining Order (TRO) or a writ of
preliminary injunction (WPI) to enjoin Fil-Estate, et al. from stopping and intimidating them in their use of La Paz Road.

On February 10, 1999, a TRO was issued ordering Fil-Estate, et al, for a period of twenty (20) days, to stop preventing,
coercing, intimidating or harassing the commuters and motorists from using the La Paz Road. 6

Subsequently, the RTC conducted several hearings to determine the propriety of the issuance of a WPI.

On February 26, 1999, Fil-Estate, et al. filed a motion to dismiss7 arguing that the complaint failed to state a cause of
action and that it was improperly filed as a class suit. On March 5, 1999, JCHA, et al. filed their comment 8 on the motion to
dismiss to which respondents filed a reply.9

On March 3, 1999, the RTC issued an Order 10 granting the WPI and required JCHA, et al. to post a bond.

On March 19, 1999, Fil-Estate, et al. filed a motion for reconsideration11 arguing, among others, that JCHA, et al. failed to
satisfy the requirements for the issuance of a WPI. On March 23, 1999, JCHA, et al. filed their opposition to the motion. 12

The RTC then issued its June 16, 2000 Omnibus Order, denying both the motion to dismiss and the motion for
reconsideration filed by Fil-Estate, et al.
Not satisfied, Fil-Estate, et al. filed a petition for certiorari and prohibition before the CA to annul (1) the Order dated
March 3, 1999 and (2) the Omnibus Order dated June 16, 2000. They contended that the complaint failed to state a cause
of action and that it was improperly filed as a class suit. With regard to the issuance of the WPI, the defendants averred
that JCHA, et al. failed to show that they had a clear and unmistakable right to the use of La Paz Road; and further
claimed that La Paz Road was a torrens registered private road and there was neither a voluntary nor legal easement
constituted over it.13

On July 31, 2001, the CA rendered the decision partially granting the petition, the dispositive portion of which reads:

WHEREFORE, the petition is hereby partially GRANTED. The Order dated March 3, 1999 granting the writ of preliminary
injunction is hereby ANNULLED and SET ASIDE but the portion of the Omnibus Order dated June 16, 2000 denying the
motion to dismiss is upheld.

SO ORDERED.14

The CA ruled that the complaint sufficiently stated a cause of action when JCHA, et al. alleged in their complaint that they
had been using La Paz Road for more than ten (10) years and that their right was violated when Fil-Estate closed and
excavated the road. It sustained the RTC ruling that the complaint was properly filed as a class suit as it was shown that
the case was of common interest and that the individuals sought to be represented were so numerous that it was
impractical to include all of them as parties. The CA, however, annulled the WPI for failure of JCHA, et al. to prove their
clear and present right over La Paz Road. The CA ordered the remand of the case to the RTC for a full-blown trial on the
merits.

Hence, these petitions for review.

In G.R. No. 152272, JCHA, et al. come to this Court, raising the following issues:

(A)

THE HONORABLE COURT OF APPEALS, IN HOLDING THAT A FULL-BLOWN TRIAL ON THE MERITS IS REQUIRED
TO DETERMINE THE NATURE OF THE LA PAZ ROAD, HAD DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION.

(B)

THE HONORABLE COURT OF APPEALS, IN HOLDING THAT THE PETITIONERS FAILED TO SATISFY THE
REQUIREMENTS FOR THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION, HAD DECIDED NOT IN
ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT.15

In G.R. No. 152397, on the other hand, Fil-Estate, et al. anchor their petition on the following issues:

I.

The Court of Appeals’ declaration that respondents’ Complaint states a cause of action is contrary to existing law
and jurisprudence.

II.

The Court of Appeals’ pronouncement that respondents’ complaint was properly filed as a class suit is contrary to
existing law and jurisprudence.

III.

The Court of Appeals’ conclusion that full blown trial on the merits is required to determine the nature of the La
Paz Road is contrary to existing laws and jurisprudence.16

JCHA, et al. concur with the CA that the complaint sufficiently stated a cause of action. They, however, disagree with the
CA’s pronouncement that a full-blown trial on the merits was necessary. They claim that during the hearing on the
application of the writ of injunction, they had sufficiently proven that La Paz Road was a public road and that commuters
and motorists of their neighboring villages had used this road as their means of access to the San Agustin Church,
Colegio De San Agustin and to SLEX in going to Metro Manila and to Southern Tagalog particularly during the rush hours
when traffic at Carmona Entry/Exit and Susana Heights Entry/Exit was at its worst.

JCHA, et al. argue that La Paz Road has attained the status and character of a public road or burdened by an apparent
easement of public right of way. They point out that La Paz Road is the widest road in the neighborhood used by motorists
in going to Halang Road and in entering the SLEX-Halang toll gate and that there is no other road as wide as La Paz
Road existing in the vicinity. For residents of San Pedro, Laguna, the shortest, convenient and safe route towards SLEX
Halang is along Rosario Avenue joining La Paz Road.

Finally, JCHA, et al. argue that the CA erred when it voided the WPI because the public nature of La Paz Road had been
sufficiently proven and, as residents of San Pedro and Biñan, Laguna, their right to use La Paz Road is undeniable.

In their Memorandum,17 Fil-Estate, et al. explain that La Paz Road is included in the parcels of land covered by Transfer
Certificates of Title (TCT) Nos. T-120008, T-90321 and T-90607, all registered in the name of La Paz. The purpose of
constructing La Paz Road was to provide a passageway for La Paz to its intended projects to the south, one of which was
the Juana Complex I. When Juana Complex I was completed, La Paz donated the open spaces, drainage, canal, and
lighting facilities inside the Juana Complex I to the Municipality of Biñan. The streets within the subdivisions were then
converted to public roads and were opened for use of the general public. The La Paz Road, not being part of the Juana
Complex I, was excluded from the donation. Subsequently, La Paz became a shareholder of FEEC, a consortium formed
to develop several real properties in Biñan, Laguna, known as Ecocentrum Project. In exchange for shares of stock, La
Paz contributed some of its real properties to the Municipality of Biñan, including the properties constituting La Paz Road,
to form part of the Ecocentrum Project.

Fil-Estate, et al. agree with the CA that the annulment of the WPI was proper since JCHA, et al. failed to prove that they
have a clear right over La Paz Road. Fil-Estate, et al. assert that JCHA, et al. failed to prove the existence of a right of
way or a right to pass over La Paz Road and that the closure of the said road constituted an injury to such right. According
to them, La Paz Road is a torrens registered private road and there is neither a voluntary nor legal easement constituted
over it. They claim that La Paz Road is a private property registered under the name of La Paz and the beneficial
ownership thereof was transferred to FEEC when La Paz joined the consortium for the Ecocentrum Project.

Fil-Estate, et al., however, insist that the complaint did not sufficiently contain the ultimate facts to show a cause of action.
They aver the bare allegation that one is entitled to something is an allegation of a conclusion which adds nothing to the
pleading.

They likewise argue that the complaint was improperly filed as a class suit for it failed to show that JCHA, et al. and the
commuters and motorists they are representing have a well-defined community of interest over La Paz Road. They claim
that the excavation of La Paz Road would not necessarily give rise to a common right or cause of action for JCHA, et al.
against them since each of them has a separate and distinct purpose and each may be affected differently than the
others.

The Court’s Ruling

The issues for the Court’s resolution are: (1) whether or not the complaint states a cause of action; (2) whether the
complaint has been properly filed as a class suit; and (2) whether or not a WPI is warranted.

Section 2, Rule 2 of the Rules of Court defines a cause of action as an act or omission by which a party violates the right
of another. A complaint states a cause of action when it contains three (3) essential elements of a cause of action,
namely:

(1) the legal right of the plaintiff,

(2) the correlative obligation of the defendant, and

(3) the act or omission of the defendant in violation of said legal right. 18

The question of whether the complaint states a cause of action is determined by its averments regarding the acts
committed by the defendant.19 Thus, it must contain a concise statement of the ultimate or essential facts constituting the
plaintiff’s cause of action.20 To be taken into account are only the material allegations in the complaint; extraneous facts
and circumstances or other matters aliunde are not considered.21

The test of sufficiency of facts alleged in the complaint as constituting a cause of action is whether or not admitting the
facts alleged, the court could render a valid verdict in accordance with the prayer of said complaint. 22 Stated differently, if
the allegations in the complaint furnish sufficient basis by which the complaint can be maintained, the same should not be
dismissed regardless of the defense that may be asserted by the defendant. 23

In the present case, the Court finds the allegations in the complaint sufficient to establish a cause of action. First,JCHA, et
al.’s averments in the complaint show a demandable right over La Paz Road. These are: (1) their right to use the road on
the basis of their allegation that they had been using the road for more than 10 years; and (2) an easement of a right of
way has been constituted over the said roads. There is no other road as wide as La Paz Road existing in the vicinity and it
is the shortest, convenient and safe route towards SLEX Halang that the commuters and motorists may use. Second,
there is an alleged violation of such right committed by Fil-Estate, et al. when they excavated the road and prevented the
commuters and motorists from using the same. Third, JCHA, et al. consequently suffered injury and that a valid judgment
could have been rendered in accordance with the relief sought therein.

With respect to the issue that the case was improperly instituted as a class suit, the Court finds the opposition without
merit.

Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:

Sec. 12. Class suit. – When the subject matter of the controversy is one of common or general interest to many persons
so numerous that it is impracticable to join all as parties, a number of them which the court finds to be sufficiently
numerous and representative as to fully protect the interests of all concerned may sue or defend for the benefit of all. Any
party in interest shall have the right to intervene to protect his individual interest.

The necessary elements for the maintenance of a class suit are: 1) the subject matter of controversy is one of common or
general interest to many persons; 2) the parties affected are so numerous that it is impracticable to bring them all to court;
and 3) the parties bringing the class suit are sufficiently numerous or representative of the class and can fully protect the
interests of all concerned.24

In this case, the suit is clearly one that benefits all commuters and motorists who use La Paz Road. As succinctly stated
by the CA:

The subject matter of the instant case, i.e., the closure and excavation of the La Paz Road, is initially shown to be of
common or general interest to many persons. The records reveal that numerous individuals have filed manifestations with
the lower court, conveying their intention to join private respondents in the suit and claiming that they are similarly situated
with private respondents for they were also prejudiced by the acts of petitioners in closing and excavating the La Paz
Road. Moreover, the individuals sought to be represented by private respondents in the suit are so numerous that it is
impracticable to join them all as parties and be named individually as plaintiffs in the complaint. These individuals claim to
be residents of various barangays in Biñan, Laguna and other barangays in San Pedro, Laguna.

Anent the issue on the propriety of the WPI, Section 3, Rule 58 of the Rules of Court lays down the rules for the issuance
thereof. Thus:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining
the commission or continuance of the acts complained of, or in the performance of an act or acts, either for a
limited period or perpetually;

(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation
would probably work injustice to the applicant; or

(c) That a party, court, or agency or a person is doing, threatening, or attempting to do, or is procuring or suffering
to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action
or proceeding, and tending to render the judgment ineffectual.

A writ of preliminary injunction is available to prevent a threatened or continuous irremediable injury to parties before their
claims can be thoroughly studied and adjudicated.25 The requisites for its issuance are: (1) the existence of a clear and
unmistakable right that must be protected; and (2) an urgent and paramount necessity for the writ to prevent serious
damage.26 For the writ to issue, the right sought to be protected must be a present right, a legal right which must be shown
to be clear and positive.27 This means that the persons applying for the writ must show that they have an ostensible right
to the final relief prayed for in their complaint.28

In the case at bench, JCHA, et al. failed to establish a prima facie proof of violation of their right to justify the issuance of a
WPI. Their right to the use of La Paz Road is disputable since they have no clear legal right therein. As correctly ruled by
the CA:

Here, contrary to the ruling of respondent Judge, private respondents failed to prove as yet that they have a clear and
unmistakable right over the La Paz Road – which was sought to be protected by the injunctive writ. They merely anchor
their purported right over the La Paz Road on the bare allegation that they have been using the same as public road right-
of-way for more than ten years. A mere allegation does not meet the standard of proof that would warrant the issuance of
the injunctive writ. Failure to establish the existence of a clear right which should be judicially protected through the writ of
injunction is a sufficient ground for denying the injunction.

Consequently, the case should be further heard by the RTC so that the parties can fully prove their respective positions
on the issues.1âwphi1

Due process considerations dictate that the assailed injunctive writ is not a judgment on the merits but merely an order for
the grant of a provisional and ancillary remedy to preserve the status quo until the merits of the case can be heard. The
hearing on the application for issuance of a writ of preliminary injunction is separate and distinct from the trial on the
merits of the main case. 29 The evidence submitted during the hearing of the incident is not conclusive or complete for only
a "sampling" is needed to give the trial court an idea of the justification for the preliminary injunction pending the decision
of the case on the merits.30 There are vital facts that have yet to be presented during the trial which may not be obtained
or presented during the hearing on the application for the injunctive writ.31 Moreover, the quantum of evidence required for
one is different from that for the other.32

WHEREFORE, the petitions are DENIED. Accordingly, the July 31, 2001 Decision and February 21, 2002 Resolution of
the Court of Appeals in CA-G.R. SP No. 60543 are AFFIRMED.

SO ORDERED.

G.R. No. 153788 November 27, 2009

ROGER V. NAVARRO, Petitioner,

vs.
HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN T. GO, doing
business under the name KARGO ENTERPRISES, Respondents.

DECISION

BRION, J.:

This is a petition for review on certiorari1 that seeks to set aside the Court of Appeals (CA) Decision2 dated October 16,
2001 and Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26, 20004 and
March 7, 20015 orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner
Roger V. Navarro’s (Navarro) motion to dismiss.

BACKGROUND FACTS

On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first
complaint)6 and 98-598 (second complaint),7 before the RTC for replevin and/or sum of money with damages against
Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor
vehicles in Navarro’s possession.

The first complaint stated:

 1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro
City and doing business under the trade name KARGO ENTERPRISES, an entity duly registered and existing
under and by virtue of the laws of the Republic of the Philippines, which has its business address at Bulua,
Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores
Street, Nazareth, Cagayan de Oro City, where he may be served with summons and other processes of the
Honorable Court; that defendant "JOHN DOE" whose real name and address are at present unknown to plaintiff
is hereby joined as party defendant as he may be the person in whose possession and custody the personal
property subject matter of this suit may be found if the same is not in the possession of defendant ROGER
NAVARRO;

2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles, including
hauling trucks and other heavy equipment;

3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8, 1997,
the said defendant leased [from] plaintiff a certain motor vehicle which is more particularly described as follows –

Make/Type FUSO WITH MOUNTED CRANE

Serial No. FK416K-51680

Motor No. 6D15-338735
Plate No. GHK-378

as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and between KARGO
ENTERPRISES, then represented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER
NAVARRO xxx; that in accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO
PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks each in the amount of
SIXTY-SIX THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS (₱66,333.33) which were supposedly in
payment of the agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF COMMUNICATIONS –
CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively dated January 8, 1998 and February 8,
1998, were presented for payment and/or credit, the same were dishonored and/or returned by the drawee bank for the
common reason that the current deposit account against which the said checks were issued did not have sufficient funds
to cover the amounts thereof; that the total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-TWO
THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (₱132,666.66) therefore represents the principal liability of
defendant ROGER NAVARRO unto plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH
RIGHT TO PURCHASE; that demands, written and oral, were made of defendant ROGER NAVARRO to pay the amount
of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (₱132,666.66), or to return
the subject motor vehicle as also provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said
demands were, and still are, in vain to the great damage and injury of herein plaintiff; xxx

4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law, or
seized under an execution or an attachment as against herein plaintiff;

xxx

8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the above-
described motor vehicle from defendants unto plaintiff pending the final determination of this case on the merits and, for
that purpose, there is attached hereto an affidavit duly executed and bond double the value of the personal property
subject matter hereof to answer for damages and costs which defendants may suffer in the event that the order for
replevin prayed for may be found out to having not been properly issued.

The second complaint contained essentially the same allegations as the first complaint, except that the Lease Agreement
with Option to Purchase involved is dated October 1, 1997 and the motor vehicle leased is described as follows:

Make/Type FUSO WITH MOUNTED CRANE

Serial No. FK416K-510528
Motor No. 6D14-423403

The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount of ₱100,000.00,
to Karen Go in payment of the agreed rentals; however, the third check was dishonored when presented for payment. 8
On October 12, 19989 and October 14, 1998,10 the RTC issued writs of replevin for both cases; as a result, the Sheriff
seized the two vehicles and delivered them to the possession of Karen Go.

In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since
Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the lease agreements) – the
actionable documents on which the complaints were based.

On Navarro’s motion, both cases were duly consolidated on December 13, 1999.

In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of action.

In response to the motion for reconsideration Karen Go filed dated May 26, 2000, 11 the RTC issued another order dated
July 26, 2000 setting aside the order of dismissal. Acting on the presumption that Glenn Go’s leasing business is a
conjugal property, the RTC held that Karen Go had sufficient interest in his leasing business to file the action against
Navarro. However, the RTC held that Karen Go should have included her husband, Glenn Go, in the complaint based on
Section 4, Rule 3 of the Rules of Court (Rules).12 Thus, the lower court ordered Karen Go to file a motion for the inclusion
of Glenn Go as co-plaintiff.1avvphi1

When the RTC denied Navarro’s motion for reconsideration on March 7, 2001, Navarro filed a petition for certiorari with
the CA, essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of
the case and directed Karen Go to amend her complaints by including her husband Glenn Go as co-plaintiff. According to
Navarro, a complaint which failed to state a cause of action could not be converted into one with a cause of action by
mere amendment or supplemental pleading.

On October 16, 2001, the CA denied Navarro’s petition and affirmed the RTC’s order. 13 The CA also denied Navarro’s
motion for reconsideration in its resolution of May 29, 2002,14 leading to the filing of the present petition.

THE PETITION

Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the
requisite juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was Karen Go
who filed the complaints and not Glenn Go, she was not a real party-in-interest and the complaints failed to state a cause
of action.

Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-plaintiff,
instead of dismissing the complaint outright because a complaint which does not state a cause of action cannot be
converted into one with a cause of action by a mere amendment or a supplemental pleading. In effect, the lower court
created a cause of action for Karen Go when there was none at the time she filed the complaints.

Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the
complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed that
the leased vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner of
Kargo Enterprises, the vehicles subject of the complaint are her paraphernal properties and the RTC gravely erred when it
ordered the inclusion of Glenn Go as a co-plaintiff.

Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to amend
her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules.

Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were
premature because no prior demand was made on him to comply with the provisions of the lease agreements before the
complaints for replevin were filed.

Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were
illegally seized from his possession and should be returned to him immediately.

Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the subject of
the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of Kargo
Enterprises and Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover, Karen
Go maintains that Navarro’s insistence that Kargo Enterprises is Karen Go’s paraphernal property is without basis. Based
on the law and jurisprudence on the matter, all property acquired during the marriage is presumed to be conjugal property.
Finally, Karen Go insists that her complaints sufficiently established a cause of action against Navarro. Thus, when the
RTC ordered her to include her husband as co-plaintiff, this was merely to comply with the rule that spouses should sue
jointly, and was not meant to cure the complaints’ lack of cause of action.

THE COURT’S RULING

We find the petition devoid of merit.

Karen Go is the real party-in-interest

The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real
party-in-interest, i.e., 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.15

Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he
still insists that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts were in
Kargo Enterprises’ name, this was merely a trade name without a juridical personality, so the actual parties to the lease
agreements were Navarro and Glenn Go, to the exclusion of Karen Go.

As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of Glenn
Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was none.

We do not find Navarro’s arguments persuasive.

The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name
appears in the title of the Complaint where the plaintiff was identified as "KAREN T. GO doing business under the name
KARGO ENTERPRISES," and this identification was repeated in the first paragraph of the Complaint. Paragraph 2
defined the business KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant
"leased from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the Complaint specifies and
attaches as its integral part the Lease Agreement that underlies the transaction between the plaintiff and the defendant.
Again, the name KARGO ENTERPRISES entered the picture as this Lease Agreement provides:

This agreement, made and entered into by and between:

GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the LESSOR-SELLER;
representing KARGO ENTERPRISES as its Manager,

xxx

thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by the
express terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises and
the latter is clearly the real party to the lease agreements.

As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a
juridical person, as defined by Article 44 of the Civil Code:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality
begins as soon as they have been constituted according to law;

(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each shareholder, partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises cannot be a party to a civil action. This legal reality
leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo Enterprises?

We faced a similar question in Juasing Hardware v. Mendoza,17 where we said:

Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely recognizes the
existence of a sole proprietorship as a form of business organization conducted for profit by a single individual, and
requires the proprietor or owner thereof to secure licenses and permits, register the business name, and pay taxes to the
national government. It does not vest juridical or legal personality upon the sole proprietorship nor empower it to file or
defend an action in court.

Thus, the complaint in the court below should have been filed in the name of the owner of Juasing Hardware. The
allegation in the body of the complaint would show that the suit is brought by such person as proprietor or owner of the
business conducted under the name and style Juasing Hardware. The descriptive words "doing business as Juasing
Hardware" may be added to the title of the case, as is customarily done. 18 [Emphasis supplied.]

This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:

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.

As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a
judgment in this case. Thus, contrary to Navarro’s contention, Karen Go is the real party-in-interest, and it is legally
incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease
Agreement that her husband signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease
Agreement in his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, as
this is a matter for the trial court to consider in a trial on the merits.

Glenn Go’s Role in the Case

We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go, 19 who described herself in
the Complaints to be "a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing
business under the trade name KARGO ENTERPRISES."20 That Glenn Go and Karen Go are married to each other is a
fact never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of a
married woman, a fact material to the side issue of whether Kargo Enterprises and its properties are paraphernal or
conjugal properties. To restate the parties’ positions, Navarro alleges that Kargo Enterprises is Karen Go’s paraphernal
property, emphasizing the fact that the business is registered solely in Karen Go’s name. On the other hand, Karen Go
contends that while the business is registered in her name, it is in fact part of their conjugal property.

The registration of the trade name in the name of one person – a woman – does not necessarily lead to the conclusion
that the trade name as a property is hers alone, particularly when the woman is married. By law, all property acquired
during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or
both spouses, is presumed to be conjugal unless the contrary is proved.21 Our examination of the records of the case
does not show any proof that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all, only the
bare allegation of Navarro to this effect exists in the records of the case. As we emphasized in Castro v. Miat:22

Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the marriage is presumed to be
conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife." This article does not
require proof that the property was acquired with funds of the partnership. The presumption applies even when the
manner in which the property was acquired does not appear. 23 [Emphasis supplied.]

Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is
conjugal or paraphernal property, we hold that it is conjugal property.

Article 124 of the Family Code, on the administration of the conjugal property, provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses
jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for
proper remedy, which must be availed of within five years from the date of the contract implementing such decision.

xxx

This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal
property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before performing an
act of administration or any act that does not dispose of or encumber their conjugal property.

Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of partnership in
all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements.
In other words, the property relations of the husband and wife shall be governed primarily by Chapter 4 on Conjugal
Partnership of Gains of the Family Code and, suppletorily, by the spouses’ marriage settlement and by the rules on
partnership under the Civil Code. In the absence of any evidence of a marriage settlement between the spouses Go, we
look at the Civil Code provision on partnership for guidance.

A rule on partnership applicable to the spouses’ circumstances is Article 1811 of the Civil Code, which states:

Art. 1811. A partner is a co-owner with the other partners of specific partnership property.

The incidents of this co-ownership are such that:

(1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right with
his partners to possess specific partnership property for partnership purposes; xxx

Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered
under this name; hence, both have an equal right to seek possession of these properties. Applying Article 484 of the Civil
Code, which states that "in default of contracts, or special provisions, co-ownership shall be governed by the provisions of
this Title," we find further support in Article 487 of the Civil Code that allows any of the co-owners to bring an action in
ejectment with respect to the co-owned property.

While ejectment is normally associated with actions involving real property, we find that this rule can be applied to the
circumstances of the present case, following our ruling in Carandang v. Heirs of De Guzman. 24 In this case, one spouse
filed an action for the recovery of credit, a personal property considered conjugal property, without including the other
spouse in the action. In resolving the issue of whether the other spouse was required to be included as a co-plaintiff in the
action for the recovery of the credit, we said:

Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses Carandang,
seems to be either an indispensable or a necessary party. If she is an indispensable party, dismissal would be proper. If
she is merely a necessary party, dismissal is not warranted, whether or not there was an order for her inclusion in the
complaint pursuant to Section 9, Rule 3.

Article 108 of the Family Code provides:

Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict
with what is expressly determined in this Chapter or by the spouses in their marriage settlements.

This provision is practically the same as the Civil Code provision it superseded:

Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict
with what is expressly determined in this Chapter.

In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with the other partners of specific
partnership property." Taken with the presumption of the conjugal nature of the funds used to finance the four checks
used to pay for petitioners’ stock subscriptions, and with the presumption that the credits themselves are part of conjugal
funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the recovery
thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-ownership, co-owners
may bring actions for the recovery of co-owned property without the necessity of joining all the other co-owners as co-
plaintiffs because the suit is presumed to have been filed for the benefit of his co-owners. In the latter case and in that
of De Guia v. Court of Appeals, we also held that Article 487 of the Civil Code, which provides that any of the co-owners
may bring an action for ejectment, covers all kinds of action for the recovery of possession.

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the
Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery of co-
owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-
owned property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even
necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is
presumed to have been filed for the benefit of all co-owners.25 [Emphasis supplied.]

Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo
Enterprises-leased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code,
supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they do not
dispose of or encumber the property in question without the other spouse’s consent.

On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the
leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the Rules,
which states:

Section 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided by law.

Non-joinder of indispensable parties not ground to dismiss action

Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases26 that the
misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated in
Macababbad v. Masirag:27

Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the
dismissal of an action, thus:

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for dismissal of an
action. 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. Any claim against a misjoined party may be severed and proceeded with
separately.

In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable party
at any stage of the action. The court, either motu proprio or upon the motion of a party, may order the inclusion of the
indispensable party or give the plaintiff opportunity to amend his complaint in order to include indispensable parties. If the
plaintiff to whom the order to include the indispensable party is directed refuses to comply with the order of the court, the
complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only upon unjustified failure or
refusal to obey the order to include or to amend is the action dismissed.

In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is fully in
order.

Demand not required prior

to filing of replevin action

In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a replevin
action to an unlawful detainer.

For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2, Rule 60
of the Rules, which states:

Sec. 2. Affidavit and bond.

The applicant must show by his own affidavit or that of some other person who personally knows the facts:

(a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the
possession thereof;

(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof
according to the best of his knowledge, information, and belief;

(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized
under a writ of execution or preliminary attachment, or otherwise placed under custodia legis, or if so seized, that
it is exempt from such seizure or custody; and

(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the
affidavit aforementioned, for the return of the property to the adverse party if such return be adjudged, and for the
payment to the adverse party of such sum as he may recover from the applicant in the action.

We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the property
before he can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action for a writ of
replevin.

More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already
admitted in his Answers that he had received the letters that Karen Go sent him, demanding that he either pay his unpaid
obligations or return the leased motor vehicles. Navarro’s position that a demand is necessary and has not been made is
therefore totally unmeritorious.

WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs against petitioner Roger V.
Navarro.

SO ORDERED.

G.R. No. 191667 April 17, 2013

LAND BANK OF THE PHILIPPINES, Petitioner,

vs.
EDUARDO M. CACAYURAN, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this Petition for Review on Certiorari1 is the March 26, 2010 Decision2 of the Court of Appeals (CA) in CA-G.R.
CV. No. 89732 which affirmed with modification the April 10, 2007 Decision 3 of the Regional Trial Court (RTC) of Agoo, La
Union, Branch 31, declaring inter alia the nullity of the loan agreements entered into by petitioner Land Bank of the
Philippines (Land Bank) and the Municipality of Agoo, La Union (Municipality).

The Facts

From 2005 to 2006, the Municipality’s Sangguniang Bayan (SB) passed certain resolutions to implement a multi-phased
plan (Redevelopment Plan) to redevelop the Agoo Public Plaza (Agoo Plaza) where the Imelda Garden and Jose Rizal
Monument were situated.

To finance phase 1 of the said plan, the SB initially passed Resolution No. 68-20054 on April 19, 2005, authorizing then
Mayor Eufranio Eriguel (Mayor Eriguel) to obtain a loan from Land Bank and incidental thereto, mortgage a 2,323.75
square meter lot situated at the southeastern portion of the Agoo Plaza (Plaza Lot) as collateral. To serve as additional
security, it further authorized the assignment of a portion of its internal revenue allotment (IRA) and the monthly income
from the proposed project in favor of Land Bank.5 The foregoing terms were confirmed, approved and ratified on October
4, 2005 through Resolution No. 139-2005.6 Consequently, on November 21, 2005, Land Bank extended a ₱4,000,000.00
loan in favor of the Municipality (First Loan),7 the proceeds of which were used to construct ten (10) kiosks at the northern
and southern portions of the Imelda Garden. After completion, these kiosks were rented out.8

On March 7, 2006, the SB passed Resolution No. 58-2006,9 approving the construction of a commercial center on the
Plaza Lot as part of phase II of the Redevelopment Plan. To finance the project, Mayor Eriguel was again authorized to
obtain a loan from Land Bank, posting as well the same securities as that of the First Loan. All previous representations
and warranties of Mayor Eriguel related to the negotiation and obtention of the new loan 10were ratified on September 5,
2006 through Resolution No. 128-2006.11 In consequence, Land Bank granted a second loan in favor of the Municipality
on October 20, 2006 in the principal amount of ₱28,000,000.00 (Second Loan). 12

Unlike phase 1 of the Redevelopment Plan, the construction of the commercial center at the Agoo Plaza was vehemently
objected to by some residents of the Municipality. Led by respondent Eduardo Cacayuran (Cacayuran), these residents
claimed that the conversion of the Agoo Plaza into a commercial center, as funded by the proceeds from the First and
Second Loans (Subject Loans), were "highly irregular, violative of the law, and detrimental to public interests, and will
result to wanton desecration of the said historical and public park."13 The foregoing was embodied in a
Manifesto,14 launched through a signature campaign conducted by the residents and Cacayuran.

In addition, Cacayuran wrote a letter15 dated December 8, 2006 addressed to Mayor Eriguel, Vice Mayor Antonio Eslao
(Vice Mayor Eslao), and the members of the SB namely, Violeta Laroya-Balbin, Jaime Boado, Jr., Rogelio De Vera,
James Dy, Crisogono Colubong, Ricardo Fronda, Josephus Komiya, Erwina Eriguel, Felizardo Villanueva, and Gerard
Mamuyac (Implicated Officers), expressing the growing public clamor against the conversion of the Agoo Plaza into a
commercial center. He then requested the foregoing officers to furnish him certified copies of various documents related
to the aforementioned conversion including, among others, the resolutions approving the Redevelopment Plan as well as
the loan agreements for the sake of public information and transparency.

Unable to get any response, Cacayuran, invoking his right as a taxpayer, filed a Complaint16 against the Implicated
Officers and Land Bank, assailing, among others, the validity of the Subject Loans on the ground that the Plaza Lot used
as collateral thereof is property of public dominion and therefore, beyond the commerce of man. 17

Upon denial of the Motion to Dismiss dated December 27, 2006,18 the Implicated Officers and Land Bank filed their
respective Answers.

For its part, Land Bank claimed that it is not privy to the Implicated Officers’ acts of destroying the Agoo Plaza. It further
asserted that Cacayuran did not have a cause of action against it since he was not privy to any of the Subject Loans. 19

During the pendency of the proceedings, the construction of the commercial center was completed and the said structure
later became known as the Agoo’s People Center (APC).

On May 8, 2007, the SB passed Municipal Ordinance No. 02-2007,20 declaring the area where the APC stood as
patrimonial property of the Municipality.

The Ruling of the RTC

In its Decision dated April 10, 2007,21 the RTC ruled in favor of Cacayuran, declaring the nullity of the Subject Loans. 22 It
found that the resolutions approving the said loans were passed in a highly irregular manner and thus, ultra vires; as such,
the Municipality is not bound by the same.23 Moreover, it found that the Plaza Lot is proscribed from collateralization given
its nature as property for public use.24

Aggrieved, Land Bank filed its Notice of Appeal on April 23, 2007.25 On the other hand, the Implicated Officers’ appeal
was deemed abandoned and dismissed for their failure to file an appellants’ brief despite due notice. 26 In this regard, only
Land Bank’s appeal was given due course by the CA.

Ruling of the CA

In its Decision dated March 26, 2010,27 the CA affirmed with modification the RTC’s ruling, excluding Vice Mayor Eslao
from any personal liability arising from the Subject Loans. 28
It held, among others, that: (1) Cacayuran had locus standi to file his complaint, considering that (a) he was born, raised
and a bona fide resident of the Municipality; and (b) the issue at hand involved public interest of transcendental
importance;29 (2) Resolution Nos. 68-2005, 139-2005, 58-2006, 128-2006 and all other related resolutions (Subject
Resolutions) were invalidly passed due to the SB’s non-compliance with certain sections of Republic Act No. 7160,
otherwise known as the "Local Government Code of 1991" (LGC); (3) the Plaza Lot, which served as collateral for the
Subject Loans, is property of public dominion and thus, cannot be appropriated either by the State or by private
persons;30 and (4) the Subject Loans are ultra vires because they were transacted without proper authority and their
collateralization constituted improper disbursement of public funds.

Dissatisfied, Land Bank filed the instant petition.

Issues Before the Court

The following issues have been raised for the Court’s resolution: (1) whether Cacayuran has standing to sue; (2) whether
the Subject Resolutions were validly passed; and (3) whether the Subject Loans are ultra vires.

The Court’s Ruling

The petition lacks merit.

A. Cacayuran’s standing to sue

Land Bank claims that Cacayuran did not have any standing to contest the construction of the APC as it was funded
through the proceeds coming from the Subject Loans and not from public funds. Besides, Cacayuran was not even a
party to any of the Subject Loans and is thus, precluded from questioning the same.

The argument is untenable.

It is hornbook principle that a taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or
that public money is being deflected to any improper purpose, or that there is wastage of public funds through the
enforcement of an invalid or unconstitutional law. A person suing as a taxpayer, however, must show that the act
complained of directly involves the illegal disbursement of public funds derived from taxation. In other words, for a
taxpayer’s suit to prosper, two requisites must be met namely, (1) public funds derived from taxation are disbursed by a
political subdivision or instrumentality and in doing so, a law is violated or some irregularity is committed; and (2) the
petitioner is directly affected by the alleged act.31

Records reveal that the foregoing requisites are present in the instant case.

First, although the construction of the APC would be primarily sourced from the proceeds of the Subject Loans, which
Land Bank insists are not taxpayer’s money, there is no denying that public funds derived from taxation are bound to be
expended as the Municipality assigned a portion of its IRA as a security for the foregoing loans. Needless to state, the
Municipality’s IRA, which serves as the local government unit’s just share in the national taxes,32 is in the nature of public
funds derived from taxation. The Court believes, however, that although these funds may be posted as a security, its
collateralization should only be deemed effective during the incumbency of the public officers who approved the same,
else those who succeed them be effectively deprived of its use.

In any event, it is observed that the proceeds from the Subject Loans had already been converted into public funds by the
Municipality’s receipt thereof. Funds coming from private sources become impressed with the characteristics of public
funds when they are under official custody.33

Accordingly, the first requisite has been clearly met.

Second, as a resident-taxpayer of the Municipality, Cacayuran is directly affected by the conversion of the Agoo Plaza
which was funded by the proceeds of the Subject Loans. It is well-settled that public plazas are properties for public
use34 and therefore, belongs to the public dominion.35 As such, it can be used by anybody and no one can exercise over it
the rights of a private owner.36 In this light, Cacayuran had a direct interest in ensuring that the Agoo Plaza would not be
exploited for commercial purposes through the APC’s construction. Moreover, Cacayuran need not be privy to the Subject
Loans in order to proffer his objections thereto. In Mamba v. Lara, it has been held that a taxpayer need not be a party to
the contract to challenge its validity; as long as taxes are involved, people have a right to question contracts entered into
by the government.37

Therefore, as the above-stated requisites obtain in this case, Cacayuran has standing to file the instant suit.

B. Validity of the Subject Resolutions

Land Bank avers that the Subject Resolutions provided ample authority for Mayor Eriguel to contract the Subject Loans. It
posits that Section 444(b)(1)(vi) of the LGC merely requires that the municipal mayor be authorized by the SB concerned
and that such authorization need not be embodied in an ordinance.38

A careful perusal of Section 444(b)(1)(vi) of the LGC shows that while the authorization of the municipal mayor need not
be in the form of an ordinance, the obligation which the said local executive is authorized to enter into must be made
pursuant to a law or ordinance, viz:

Sec. 444. The Chief Executive: Powers, Duties, Functions and Compensation. -

xxxx

(b) For efficient, effective and economical governance the purpose of which is the general welfare of the municipality and
its inhabitants pursuant to Section 16 of this Code, the municipal mayor shall:

xxxx

(vi) Upon authorization by the sangguniang bayan, represent the municipality in all its business transactions and sign on
its behalf all bonds, contracts, and obligations, and such other documents made pursuant to law or ordinance; (Emphasis
and underscoring supplied)

In the present case, while Mayor Eriguel’s authorization to contract the Subject Loans was not contained – as it need not
be contained – in the form of an ordinance, the said loans and even the Redevelopment Plan itself were not approved
pursuant to any law or ordinance but through mere resolutions. The distinction between ordinances and resolutions is
well-perceived. While ordinances are laws and possess a general and permanent character, resolutions are merely
declarations of the sentiment or opinion of a lawmaking body on a specific matter and are temporary in nature.39 As
opposed to ordinances, "no rights can be conferred by and be inferred from a resolution." 40 In this accord, it cannot be
denied that the SB violated Section 444(b)(1)(vi) of the LGC altogether.

Noticeably, the passage of the Subject Resolutions was also tainted with other irregularities, such as (1) the SB’s failure to
submit the Subject Resolutions to the Sangguniang Panlalawigan of La Union for its review contrary to Section 56 of the
LGC;41 and (2) the lack of publication and posting in contravention of Section 59 of the LGC. 42

In fine, Land Bank cannot rely on the Subject Resolutions as basis to validate the Subject Loans.

C. Ultra vires nature of the Subject

Loans

Neither can Land Bank claim that the Subject Loans do not constitute ultra vires acts of the officers who approved the
same.

Generally, an ultra vires act is one committed outside the object for which a corporation is created as defined by the law of
its organization and therefore beyond the powers conferred upon it by law. 43 There are two (2) types of ultra vires acts. As
held in Middletown Policemen's Benevolent Association v. Township of Middletown: 44

There is a distinction between an act utterly beyond the jurisdiction of a municipal corporation and the irregular exercise of
a basic power under the legislative grant in matters not in themselves jurisdictional. The former are ultra vires in the
primary sense and void; the latter, ultra vires only in a secondary sense which does not preclude ratification or the
application of the doctrine of estoppel in the interest of equity and essential justice. (Emphasis and underscoring supplied)
In other words, an act which is outside of the municipality’s jurisdiction is considered as a void ultra vires act, while an act
attended only by an irregularity but remains within the municipality’s power is considered as an ultra vires act subject to
ratification and/or validation. To the former belongs municipal contracts which (a) are entered into beyond the express,
implied or inherent powers of the local government unit; and (b) do not comply with the substantive requirements of law
e.g., when expenditure of public funds is to be made, there must be an actual appropriation and certificate of availability of
funds; while to the latter belongs those which (a) are entered into by the improper department, board, officer of agent; and
(b)do not comply with the formal requirements of a written contract e.g., the Statute of Frauds.45

Applying these principles to the case at bar, it is clear that the Subject Loans belong to the first class of ultra vires acts
deemed as void.

Records disclose that the said loans were executed by the Municipality for the purpose of funding the conversion of the
Agoo Plaza into a commercial center pursuant to the Redevelopment Plan. However, the conversion of the said plaza is
beyond the Municipality’s jurisdiction considering the property’s nature as one for public use and thereby, forming part of
the public dominion. Accordingly, it cannot be the object of appropriation either by the State or by private persons. 46 Nor
can it be the subject of lease or any other contractual undertaking.47 In Villanueva v. Castañeda, Jr.,48 citing Espiritu v.
Municipal Council of Pozorrubio,49 the Court pronounced that:

x x x Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in
general. They are outside the commerce of man and cannot be disposed of or even leased by the municipality to private
parties.1âwphi1

In this relation, Article 1409(1) of the Civil Code provides that a contract whose purpose is contrary to law, morals, good
customs, public order or public policy is considered void50 and as such, creates no rights or obligations or any juridical
relations.51 Consequently, given the unlawful purpose behind the Subject Loans which is to fund the commercialization of
the Agoo Plaza pursuant to the Redevelopment Plan, they are considered as ultra vires in the primary sense thus,
rendering them void and in effect, non-binding on the Municipality.

At this juncture, it is equally observed that the land on which the Agoo Plaza is situated cannot be converted into
patrimonial property – as the SB tried to when it passed Municipal Ordinance No. 02-200752 – absent any express grant
by the national government.53 As public land used for public use, the foregoing lot rightfully belongs to and is subject to
the administration and control of the Republic of the Philippines. 54 Hence, without the said grant, the Municipality has no
right to claim it as patrimonial property.

Nevertheless, while the Subject Loans cannot bind the Municipality for being ultra vires, the officers who authorized the
passage of the Subject Resolutions are personally liable. Case law states that public officials can be held personally
accountable for acts claimed to have been performed in connection with official duties where they have acted ultra
vires,55 as in this case.

WHEREFORE, the petition is DENIED. Accordingly, the March 26, 2010 Decision of the Court of Appeals in CA-G.R. CV.
No. 89732 is hereby AFFIRMED.

SO ORDERED.

G.R. No. 196750

MA. ELENA R. DIVINAGRACIA, as Administratrix of the ESTATE OF THE LATE SANTIAGO C.

DIVINAGRACIA, Petitioner,
vs.
CORONACION PARILLA, CELESTIAL NOBLEZA, CECILIA LELINA, CELEDONIO NOBLEZA, MAUDE
NOBLEZA, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated March 26, 2009 and the Resolution3 dated April 6,
2011 of the Court of Appeals (CA) in CA-G.R. CV. No. 80167, which set aside the Decision4 dated November 29, 2002
and the Order5 dated April 4, 2003 of the Regional Trial Court of Iloilo City, Branch 31 (RTC) in Civil Case No. 19003 and,
consequently, dismissed Santiago C. Divinagracia's (Santiago) complaint for judicial partition.

The Facts

Conrado Nobleza, Sr. (Conrado, Sr.) owned a 313-square meter parcel of land located at Cor. Fuentes-Delgado Streets,
Iloilo City denominated as Lot 133-B-1-A and covered by Transfer Certificate of Title (TCT) No. T- 12255 (subject
land).6 During his lifetime, he contracted two marriages: (a) the first was with Lolita Palermo with whom he had two (2)
children, namely, Cresencio and Conrado, Jr.; and (b) the second was with Eusela Niangar with whom he had seven (7)
children, namely, Mateo, Sr., Coronacion, Cecilia, Celestial, Celedonio, Ceruleo, 7 and Cebeleo, Sr. Conrado, Sr. also
begot three (3) illegitimate children, namely, Eduardo, Rogelio, and Ricardo. 8 Mateo, Sr. pre-deceased Conrado, Sr. and
was survived by his children Felcon, Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and Gaylord. Cebeleo, Sr. also pre-
deceased his father and was survived by his wife, Maude, and children Cebeleo, Jr. and Neobel.9

According to Santiago, upon Conrado, Sr.’s death, Cresencio, Conrado, Jr., Felcon (in representation of his father, Mateo,
Sr., and his siblings), Coronacion, Celestial, Cecilia, Rogelio, Eduardo, and Ricardo sold their respective interests over the
subject land to Santiago for a consideration of 447,695.66, as embodied in a Deed of Extrajudicial Settlement or
Adjudication with Deed of Sale10 dated November 22, 1989 (subject document),11 which was, however, not signed by the
other heirs who did not sell their respective shares, namely, Ceruleo, Celedonio, and Maude (in representation of his
husband, Cebeleo, Sr., and their children).12 On December 22, 1989, the same parties executed a Supplemental
Contract13 whereby the vendors-heirs and Santiago agreed that out of the aforesaid consideration, only 109,807.93 will be
paid up front, and that Santiago will only pay the remaining balance of 337,887.73 upon the partition of the subject
land.14 However, Santiago was not able to have TCT No. T-12255 cancelled and the subject document registered
because of Ceruleo, Celedonio, and Maude’s refusal to surrender the said title. This fact, coupled with Ceruleo,
Celedonio, and Maude’s failure to partition the subject land, prompted Santiago to file a Complaint 15 dated January 3,
1990 for judicial partition and for receivership.16

For their part, Ceruleo, Celedonio, and Maude maintained that Santiago had no legal right to file an action for judicial
partition nor compel them to surrender TCT No. T-12255 because, inter alia: (a) Santiago did not pay the full purchase
price of the shares sold to him; and (b) the subject land is a conjugal asset of Conrado Sr. and Eusela Niangar and, thus,
only their legitimate issues may validly inherit the same.17

The RTC Ruling

In a Decision18 dated November 29, 2002, the RTC ordered, among others, the partition of the subject land between
Santiago on the one hand, and Ceruleo, Celedonio, Maude, and the heirs of Mateo, Sr. (i.e., Felcon, et al.) on the other
hand and, consequently, the cancellation of TCT No. T- 12255 and the issuance of a new owner’s duplicate certificate in
favor of Santiago and the group of Ceruleo, Celedonio, Maude, and the heirs of Mateo, Sr. 19 The RTC found that through
the subject document, Santiago became a co-owner of the subject land and, as such, has the right to demand the partition
of the same. However, the RTC held that Santiago did not validly acquire Mateo, Sr.’s share over the subject land,
considering that Felcon admitted the lack of authority to bind his siblings with regard to Mateo, Sr.’s share thereon. 20

On reconsideration21 of Ceruleo and herein respondents Celedonio, Maude, Celestial, Coronacion, and Cecilia
(respondents), the RTC issued an Order22 dated April 4, 2003 further ordering Santiago to comply with the provisions of
the Supplemental Contract dated December 22, 1989 by paying the amount of 337,887.73 upon the partition of the
subject land.

Dissatisfied, respondents appealed23 to the CA. Records are bereft of any showing that the other heirs made similar
appeals thereto.

The CA Ruling

In a Decision24 dated March 26, 2009, the CA set aside the RTC Rulings and, consequently, dismissed Santiago’s
complaint for judicial partition.25 It held that Felcon’s siblings, as well as Maude’s children, are indispensable parties to the
judicial partition of the subject land and, thus, their non-inclusion as defendants in Santiago’s complaint would necessarily
result in its dismissal.26

Aggrieved, the heirs of Santiago27 moved for reconsideration28 which was, however, denied in a Resolution29 dated April
6, 2011, hence, this petition instituted by herein petitioner, Ma. Elena R. Divinagracia, as administratrix of Santiago’s
estate.
The Issues Before the Court

The issues for the Court’s resolution are whether or not the CA correctly: (a) ruled that Felcon’s siblings and Cebeleo, Sr.
and Maude’s children are indispensable parties to Santiago’s complaint for judicial partition; and (b) dismissed Santiago’s
complaint for his failure to implead said omitted heirs.

The Court’s Ruling

The petition is partly meritorious.

An indispensable party is one whose interest will be affected by the court’s action in the litigation, and without whom no
final determination of the case can be had. The party’s interest in the subject matter of the suit and in the relief sought are
so inextricably intertwined with the other parties’ that his legal presence as a party to the proceeding is an absolute
necessity. In his absence, there cannot be a resolution of the dispute of the parties before the court which is effective,
complete, or equitable.30 Thus, the absence of an indispensable party renders all subsequent actions of the court null and
void, for want of authority to act, not only as to the absent parties but even as to those present. 31

With regard to actions for partition, Section 1, Rule 69 of the Rules of Court requires that all persons interested in the
property shall be joined as defendants, viz.:

SEC. 1. Complaint in action for partition of real estate. – A person having the right to compel the partition of real estate
may do so as provided in this Rule, setting forth in his complaint the nature and extent of his title and an adequate
description of the real estate of which partition is demanded and joining as defendants all other persons interested in the
property. (Emphasis and underscoring supplied)

Thus, all the co-heirs and persons having an interest in the property are indispensable parties; as such, an action for
partition will not lie without the joinder of the said parties.32

In the instant case, records reveal that Conrado, Sr. has the following heirs, legitimate and illegitimate, who are entitled to
a pro-indiviso share in the subject land, namely: Conrado, Jr., Cresencio, Mateo, Sr., Coronacion, Cecilia, Celestial,
Celedonio, Ceruleo, Cebeleo, Sr., Eduardo, Rogelio, and Ricardo. However, both Mateo, Sr. and Cebeleo, Sr. pre-
deceased Conrado, Sr. and, thus, pursuant to the rules on representation under the Civil Code, 33 their respective interests
shall be represented by their children, namely: (a) for Mateo, Sr.: Felcon, Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and
Gaylord; and (b) for Cebeleo, Sr.: Cebeleo, Jr. and Neobel.34

The aforementioned heirs – whether in their own capacity or in representation of their direct ascendant – have vested
rights over the subject land and, as such, should be impleaded as indispensable parties in an action for partition thereof.
However, a reading of Santiago’s complaint shows that as regards Mateo, Sr.’s interest, only Felcon was impleaded,
excluding therefrom his siblings and co-representatives. Similarly, with regard to Cebeleo, Sr.’s interest over the subject
land, the complaint impleaded his wife, Maude, when pursuant to Article 972 35 of the Civil Code, the proper
representatives to his interest should have been his children, Cebeleo, Jr. and Neobel. Verily, Santiago’s omission of the
aforesaid heirs renders his complaint for partition defective.

Santiago’s contention that he had already bought the interests of the majority of the heirs and, thus, they should no longer
be regarded as indispensable parties deserves no merit. As correctly noted by the CA, in actions for partition, the court
cannot properly issue an order to divide the property, unless it first makes a determination as to the existence of co-
ownership. The court must initially settle the issue of ownership, which is the first stage in an action for
partition.36 Indubitably, therefore, until and unless this issue of co-ownership is definitely and finally resolved, it would be
premature to effect a partition of the disputed properties.37

In this case, while it is conceded that Santiago bought the interests of majority of the heirs of Conrado, Sr. as evidenced
by the subject document, as a vendee, he merely steps into the shoes of the vendors-heirs. Since his interest over the
subject land is merely derived from that of the vendors- heirs, the latter should first be determined as co-owners thereof,
thus necessitating the joinder of all those who have vested interests in such land, i.e., the aforesaid heirs of Conrado, Sr.,
in Santiago’s complaint.

In fine, the absence of the aforementioned indispensable parties in the instant complaint for judicial partition renders all
subsequent actions of the RTC null and void for want of authority to act, not only as to the absent parties, but even as to
those present.38 Therefore, the CA correctly set aside the November 29, 2002 Decision and the April 4, 2003 Order of the
RTC.
However, the CA erred in ordering the dismissal of the complaint on account of Santiago’s failure to implead all the
indispensable parties in his complaint.1âwphi1 In Heirs of Mesina v. Heirs of Fian, Sr.,39 the Court definitively explained
that in instances of non-joinder of indispensable parties, the proper remedy is to implead them and not to dismiss the
case, to wit:

The non-joinder of indispensable parties is not a ground for the dismissal of an action. At any stage of a judicial
proceeding and/or at such times as are just, parties may be added on the motion of a party or on the initiative of the
tribunal concerned. If the plaintiff refuses to implead an indispensable party despite the order of the court, that court may
dismiss the complaint for the plaintiff’s failure to comply with the order.

The remedy is to implead the non-party claimed to be indispensable. x x x40 (Underscoring supplied; emphases in the
original)

In view of the foregoing, the correct course of action in the instant case is to order its remand to the RTC for the inclusion
of those indispensable parties who were not impleaded and for the disposition of the case on the merits. 41

WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the Decision dated March 26, 2009 and the Resolution
dated April 6, 2011 of the Court of Appeals in CA-G.R. CV. No. 80167, setting aside the Decision dated November 29,
2002 and the Order dated April 4, 2003 of the Regional Trial Court of Iloilo City, Branch 31 in Civil Case No. 19003, are
hereby AFFIRMED with MODIFICATION REMANDING the instant case to the court a quo, which is hereby DIRECTED to
implead all indispensable parties and, thereafter, PROCEED with the resolution of the case on the merits WITH
DISPATCH.

SO ORDERED.

G.R. No. 166920 February 19, 2007

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and JENS PETER HENRICHSEN, Petitioners,
vs.
KLAUS K. SCHONFELD, Respondent.

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the Decision 1 of the Court
of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision reversed the Resolution of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 029319-01, which, in turn, affirmed the Decision of the Labor Arbiter in NLRC
NCR Case No. 30-12-04787-00 dismissing the complaint of respondent Klaus K. Schonfeld.

The antecedent facts are as follows:

Respondent is a Canadian citizen and was a resident of New Westminster, British Columbia, Canada. He had been a
consultant in the field of environmental engineering and water supply and sanitation. Pacicon Philippines, Inc. (PPI) is a
corporation duly established and incorporated in accordance with the laws of the Philippines. The primary purpose of PPI
was to engage in the business of providing specialty and technical services both in and out of the Philippines. 2 It is a
subsidiary of Pacific Consultants International of Japan (PCIJ). The president of PPI, Jens Peter Henrichsen, who was
also the director of PCIJ, was based in Tokyo, Japan. Henrichsen commuted from Japan to Manila and vice versa, as well
as in other countries where PCIJ had business.

In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the Philippines. In October 1997,
respondent was employed by PCIJ, through Henrichsen, as Sector Manager of PPI in its Water and Sanitation
Department. However, PCIJ assigned him as PPI sector manager in the Philippines. His salary was to be paid partly by
PPI and PCIJ.

On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada, requesting him to accept
the same and affix his conformity thereto. Respondent made some revisions in the letter of employment and signed the
contract.3 He then sent a copy to Henrichsen. The letter of employment reads:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Tokyo 7

January 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of Employment constitutes the agreement under which
you will be engaged by our Company on the terms and conditions defined hereunder. In case of any discrepancies or
contradictions between this Letter of Employment and the General Conditions of Employment, this Letter of Employment
will prevail.

You will, from the date of commencement, be ["seconded"] to our subsidiary Pacicon Philippines, Inc. in Manila,
hereinafter referred as Pacicon. Pacicon will provide you with a separate contract, which will define that part of the present
terms and conditions for which Pacicon is responsible. In case of any discrepancies or contradictions between the present
Letter of Employment and the contract with Pacicon Philippines, Inc. or in the case that Pacicon should not live up to its
obligations, this Letter of Employment will prevail.

1. Project Country: The Philippines with possible short-term assignments in other countries.

2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

4. Position: Sector Manager, Water and Sanitation.

5. Commencement: 1st October 1997.

6. Remuneration: US$7,000.00 per month. The amount will be paid partly as a local salary (US$2,100.00 per
month) by Pacicon and partly as an offshore salary (US$4,900.00) by PCI to bank accounts to be nominated by
you.

A performance related component corresponding to 17.6% of the total annual remuneration, subject to
satisfactory performance against agreed tasks and targets, paid offshore.

7. Accommodation: The company will provide partly furnished accommodation to a rent including association
fees, taxes and VAT not exceeding the Pesos equivalent of US$2,900.00 per month.

8. Transportation: Included for in the remuneration.

9. Leave Travels: You are entitled to two leave travels per year.

10. Shipment of Personal

Effects: The maximum allowance is US$4,000.00.

11. Mobilization

Travel: Mobilization travel will be from New Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.

Yours sincerely,
Pacific Consultants International
Jens Peter Henrichsen

Above terms and conditions accepted

Date: 2 March 1998

(Sgd.)
Klaus Schonfeld

as annotated and initialed4

Section 21 of the General Conditions of Employment appended to the letter of employment reads:

21 Arbitration

Any question of interpretation, understanding or fulfillment of the conditions of employment, as well as any question
arising between the Employee and the Company which is in consequence of or connected with his employment with the
Company and which can not be settled amicably, is to be finally settled, binding to both parties through written
submissions, by the Court of Arbitration in London.5

Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was accorded the status of a
resident alien.

As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor Code, PPI applied for an
Alien Employment Permit (Permit) for respondent before the Department of Labor and Employment (DOLE). It appended
respondent’s contract of employment to the application.1awphi1.net

On February 26, 1999, the DOLE granted the application and issued the Permit to respondent. It reads:

Republic of the Philippines

Department of Labor & Employment
National Capital Region

ALIEN EMPLOYMENT PERMIT

ISSUED TO: SCHONFELD, KLAUS KURT

DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian

POSITION: VP – WATER & SANITATION

EMPLOYER: PACICON PHILIPPINES, INC.

ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave., Makati City

PERMIT

ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:

VALID UNTIL: January 7, 2000 (Sgd.)

APPROVED: BIENVENIDO S. LAGUESMA

By: MAXIMO B. ANITO

REGIONAL DIRECTOR
(Emphasis supplied)6

Respondent received his compensation from PPI for the following periods: February to June 1998, November to
December 1998, and January to August 1999. He was also reimbursed by PPI for the expenses he incurred in connection
with his work as sector manager. He reported for work in Manila except for occasional assignments abroad, and received
instructions from Henrichsen.7

On May 5, 1999, respondent received a letter from Henrichsen informing him that his employment had been terminated
effective August 4, 1999 for the reason that PCIJ and PPI had not been successful in the water and sanitation sector in
the Philippines.8 However, on July 24, 1999, Henrichsen, by electronic mail,9 requested respondent to stay put in his job
after August 5, 1999, until such time that he would be able to report on certain projects and discuss all the opportunities
he had developed.10 Respondent continued his work with PPI until the end of business hours on October 1, 1999.

Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare from Manila to Canada, and
cost of shipment of goods to Canada. PPI partially settled some of his claims (US$5,635.99), but refused to pay the rest.

On December 5, 2000, respondent filed a Complaint11 for Illegal Dismissal against petitioners PPI and Henrichsen with
the Labor Arbiter. It was docketed as NLRC-NCR Case No. 30-12-04787-00.

In his Complaint, respondent alleged that he was illegally dismissed; PPI had not notified the DOLE of its decision to close
one of its departments, which resulted in his dismissal; and they failed to notify him that his employment was terminated
after August 4, 1999. Respondent also claimed for separation pay and other unpaid benefits. He alleged that the company
acted in bad faith and disregarded his rights. He prayed for the following reliefs:

1. Judgment be rendered in his favor ordering the respondents to reinstate complainant to his former position
without loss of seniority and other privileges and benefits, and to pay his full backwages from the time
compensation was with held (sic) from him up to the time of his actual reinstatement. In the alternative, if
reinstatement is no longer feasible, respondents must pay the complainant full backwages, and separation pay
equivalent to one month pay for every year of service, or in the amount of US$16,400.00 as separation pay;

2. Judgment be rendered ordering the respondents to pay the outstanding monetary obligation to complainant in
the amount of US$10,131.76 representing the balance of unpaid salaries, leave pay, cost of his air travel and
shipment of goods from Manila to Canada; and

3. Judgment be rendered ordering the respondent company to pay the complainant damages in the amount of no
less than US $10,000.00 and to pay 10% of the total monetary award as attorney’s fees, and costs.

Other reliefs just and equitable under the premises are, likewise, prayed for.12 1awphi1.net

Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter had no jurisdiction over
the subject matter; and (2) venue was improperly laid. It averred that respondent was a Canadian citizen, a transient
expatriate who had left the Philippines. He was employed and dismissed by PCIJ, a foreign corporation with principal
office in Tokyo, Japan. Since respondent’s cause of action was based on his letter of employment executed in Tokyo,
Japan dated January 7, 1998, under the principle of lex loci contractus, the complaint should have been filed in Tokyo,
Japan. Petitioners claimed that respondent did not offer any justification for filing his complaint against PPI before the
NLRC in the Philippines. Moreover, under Section 12 of the General Conditions of Employment appended to the letter of
employment dated January 7, 1998, complainant and PCIJ had agreed that any employment-related dispute should be
brought before the London Court of Arbitration. Since even the Supreme Court had already ruled that such an agreement
on venue is valid, Philippine courts have no jurisdiction.13

Respondent opposed the Motion, contending that he was employed by PPI to work in the Philippines under contract
separate from his January 7, 1998 contract of employment with PCIJ. He insisted that his employer was PPI, a Philippine-
registered corporation; it is inconsequential that PPI is a wholly-owned subsidiary of PCIJ because the two corporations
have separate and distinct personalities; and he received orders and instructions from Henrichsen who was the president
of PPI. He further insisted that the principles of forum non conveniens and lex loci contractus do not apply, and that
although he is a Canadian citizen, Philippine Labor Laws apply in this case.

Respondent adduced in evidence the following contract of employment dated January 9, 1998 which he had entered into
with Henrichsen:
Mr. Klaus K. Schonfeld

II-365 Ginger Drive

New Westminster, B.C.
Canada V3L 5L5

Manila 9 January, 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of Employment constitutes the agreement, under which
you will be engaged by Pacicon Philippines, Inc. on the terms and conditions defined hereunder.

1. Project Country: The Philippines with possible assignments in other countries.

2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

4. Position: Sector Manager – Water and Sanitation Sector.

5. Commencement: 1 January, 1998.

6. Remuneration: US$3,100.00 per month payable to a bank account to be nominated by you.

7. Accommodation: The company will provide partly furnished accommodation to a rent including association
fees, taxes and VAT not exceeding the Pesos equivalent of US$2300.00 per month.

8. Transportation: Included for in the remuneration.

9. Shipment of Personal The maximum allowance is US$2500.00 in Effects: connection with initial shipment of
personal effects from Canada.

10. Mobilization Travel: Mobilization travel will be from New Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.

Yours sincerely,

Pacicon Philippines, Inc.

Jens Peter Henrichsen
President14

According to respondent, the material allegations of the complaint, not petitioners’ defenses, determine which quasi-
judicial body has jurisdiction. Section 21 of the Arbitration Clause in the General Conditions of Employment does not
provide for an exclusive venue where the complaint against PPI for violation of the Philippine Labor Laws may be filed.
Respondent pointed out that PPI had adopted two inconsistent positions: it was first alleged that he should have filed his
complaint in Tokyo, Japan; and it later insisted that the complaint should have been filed in the London Court of
Arbitration.15

In their reply, petitioners claimed that respondent’s employer was PCIJ, which had exercised supervision and control over
him, and not PPI. Respondent was dismissed by PPI via a letter of Henrichsen under the letterhead of PCIJ in
Japan.16 The letter of employment dated January 9, 1998 which respondent relies upon did not bear his (respondent’s)
signature nor that of Henrichsen.
On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners’ Motion to Dismiss. The dispositive portion
reads:

WHEREFORE, finding merit in respondents’ Motion to Dismiss, the same is hereby granted. The instant complaint filed by
the complainant is dismissed for lack of merit.

SO ORDERED.17

The Labor Arbiter found, among others, that the January 7, 1998 contract of employment between respondent and PCIJ
was controlling; the Philippines was only the "duty station" where Schonfeld was required to work under the General
Conditions of Employment. PCIJ remained respondent’s employer despite his having been sent to the Philippines. Since
the parties had agreed that any differences regarding employer-employee relationship should be submitted to the
jurisdiction of the court of arbitration in London, this agreement is controlling.

On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latter’s decision in toto.18

Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the following arguments:

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED
ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE LABOR
ARBITER’S DECISION CONSIDERING THAT:

A. PETITIONER’S TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS INTERNATIONAL OF JAPAN BUT

RESPONDENT COMPANY, AND THEREFORE, THE LABOR ARBITER HAS JURISDICTION OVER THE INSTANT
CASE; AND

B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION BRANCH OF THE NLRC AND NOT
THE COURT OF ARBITRATION IN LONDON.

II

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED
ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE DISMISSAL OF
THE COMPLAINT CONSIDERING THAT PETITIONER’S TERMINATION FROM EMPLOYMENT IS ILLEGAL:

A. THE CLOSURE OF RESPONDENT COMPANY’S WATER AND SANITATION SECTOR WAS NOT BONA
FIDE.

B. ASSUMING ARGUENDO THAT THE CLOSURE OF RESPONDENT COMPANY’S WATER AND

SANITATION SECTOR WAS JUSTIFIABLE, PETITIONER’S DISMISSAL WAS INEFFECTUAL AS THE
DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE) AND PETITIONER WAS NOT NOTIFIED THIRTY (30)
DAYS BEFORE THE ALLEGED CLOSURE.19

Respondent averred that the absence or existence of a written contract of employment is not decisive of whether he is an
employee of PPI. He maintained that PPI, through its president Henrichsen, directed his work/duties as Sector Manager of
PPI; proof of this was his letter-proposal to the Development Bank of the Philippines for PPI to provide consultancy
services for the Construction Supervision of the Water Supply and Sanitation component of the World Bank-Assisted LGU
Urban Water and Sanitation Project.20 He emphasized that as gleaned from Alien Employment Permit (AEP) No. M-
029908-5017 issued to him by DOLE on February 26, 1999, he is an employee of PPI. It was PPI president Henrichsen
who terminated his employment; PPI also paid his salary and reimbursed his expenses related to transactions abroad.
That PPI is a wholly-owned subsidiary of PCIJ is of no moment because the two corporations have separate and distinct
personalities.

The CA found the petition meritorious. Applying the four-fold test21 of determining an employer-employee relationship, the
CA declared that respondent was an employee of PPI. On the issue of venue, the appellate court declared that, even
under the January 7, 1998 contract of employment, the parties were not precluded from bringing a case related thereto in
other venues. While there was, indeed, an agreement that issues between the parties were to be resolved in the London
Court of Arbitration, the venue is not exclusive, since there is no stipulation that the complaint cannot be filed in any other
forum other than in the Philippines.

On November 25, 2004, the CA rendered its decision granting the petition, the decretal portion of which reads:

WHEREFORE, the petition is GRANTED in that the assailed Resolutions of the NLRC are hereby REVERSED and SET
ASIDE. Let this case be REMANDED to the Labor Arbiter a quo for disposition of the case on the merits.

SO ORDERED.22

A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which the appellate court denied
for lack of merit.23

In the present recourse, PPI and Henrichsen, as petitioners, raise the following issues:

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT RELATIONSHIP EXISTED
BETWEEN PETITIONERS AND RESPONDENT DESPITE THE UNDISPUTED FACT THAT RESPONDENT, A
FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT
CONTRACT ABROAD, AND WAS MERELY "SECONDED" TO PETITIONERS SINCE HIS WORK ASSIGNMENT WAS
IN MANILA.

II

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR ARBITER A QUO HAS JURISDICTION
OVER RESPONDENT’S CLAIM DESPITE THE UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL,
WAS HIRED ABROAD BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND
HAD AGREED THAT ANY DISPUTE BETWEEN THEM "SHALL BE FINALLY SETTLED BY THE COURT OF
ARBITRATION IN LONDON."24

Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC. Petitioners aver that the findings of
the Labor Arbiter, as affirmed by the NLRC, are conclusive on the CA. They maintain that it is not within the province of
the appellate court in a petition for certiorari to review the facts and evidence on record since there was no conflict in the
factual findings and conclusions of the lower tribunals. Petitioners assert that such findings and conclusions, having been
made by agencies with expertise on the subject matter, should be deemed binding and conclusive. They contend that it
was the PCIJ which employed respondent as an employee; it merely seconded him to petitioner PPI in the Philippines,
and assigned him to work in Manila as Sector Manager. Petitioner PPI, being a wholly-owned subsidiary of PCIJ, was
never the employer of respondent.

Petitioners assert that the January 9, 1998 letter of employment which respondent presented to prove his employment
with petitioner PPI is of doubtful authenticity since it was unsigned by the purported parties. They insist that PCIJ paid
respondent’s salaries and only coursed the same through petitioner PPI. PPI, being its subsidiary, had supervision and
control over respondent’s work, and had the responsibilities of monitoring the "daily administration" of respondent.
Respondent cannot rely on the pay slips, expenses claim forms, and reimbursement memoranda to prove that he was an
employee of petitioner PPI because these documents are of doubtful authenticity.

Petitioners further contend that, although Henrichsen was both a director of PCIJ and president of PPI, it was he who
signed the termination letter of respondent upon instructions of PCIJ. This is buttressed by the fact that PCIJ’s letterhead
was used to inform him that his employment was terminated. Petitioners further assert that all work instructions came from
PCIJ and that petitioner PPI only served as a "conduit." Respondent’s Alien Employment Permit stating that petitioner PPI
was his employer is but a necessary consequence of his being "seconded" thereto. It is not sufficient proof that petitioner
PPI is respondent’s employer. The entry was only made to comply with the DOLE requirements.

There being no evidence that petitioner PPI is the employer of respondent, the Labor Arbiter has no jurisdiction over
respondent’s complaint.
Petitioners aver that since respondent is a Canadian citizen, the CA erred in ignoring their claim that the principlesof
forum non conveniens and lex loci contractus are applicable. They also point out that the principal office, officers and staff
of PCIJ are stationed in Tokyo, Japan; and the contract of employment of respondent was executed in Tokyo, Japan.

Moreover, under Section 21 of the General Conditions for Employment incorporated in respondent’s January 7, 1998
letter of employment, the dispute between respondent and PCIJ should be settled by the court of arbitration of London.
Petitioners claim that the words used therein are sufficient to show the exclusive and restrictive nature of the stipulation on
venue.

Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and employers, while the Labor Code
of the Philippines applies only to Filipino employers and Philippine-based employers and their employees, not to PCIJ. In
fine, the jurisdictions of the NLRC and Labor Arbiter do not extend to foreign workers who executed employment
agreements with foreign employers abroad, although "seconded" to the Philippines. 25

In his Comment,26 respondent maintains that petitioners raised factual issues in their petition which are proscribed under
Section 1, Rule 45 of the Rules of Court. The finding of the CA that he had been an employee of petitioner PPI and not of
PCIJ is buttressed by his documentary evidence which both the Labor Arbiter and the NLRC ignored; they erroneously
opted to dismiss his complaint on the basis of the letter of employment and Section 21 of the General Conditions of
Employment. In contrast, the CA took into account the evidence on record and applied case law correctly.

The petition is denied for lack of merit.

It must be stressed that in resolving a petition for certiorari, the CA is not proscribed from reviewing the evidence on
record. Under Section 9 of Batas Pambansa Blg. 129, as amended by R.A. No. 7902, the CA is empowered to pass upon
the evidence, if and when necessary, to resolve factual issues.27 If it appears that the Labor Arbiter and the NLRC
misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had been properly
appreciated, the factual findings of such tribunals cannot be given great respect and finality. 28

Inexplicably, the Labor Arbiter and the NLRC ignored the documentary evidence which respondent appended to his
pleadings showing that he was an employee of petitioner PPI; they merely focused on the January 7, 1998 letter of
employment and Section 21 of the General Conditions of Employment.

Petitioner PPI applied for the issuance of an AEP to respondent before the DOLE. In said application, PPI averred that
respondent is its employee. To show that this was the case, PPI appended a copy of respondent’s employment contract.
The DOLE then granted the application of PPI and issued the permit.

It bears stressing that under the Omnibus Rules Implementing the Labor Code, one of the requirements for the issuance
of an employment permit is the employment contract. Section 5, Rule XIV (Employment of Aliens) of the Omnibus Rules
provides:

SECTION 1. Coverage. – This rule shall apply to all aliens employed or seeking employment in the Philippines and the
present or prospective employers.

SECTION 2. Submission of list. – All employers employing foreign nationals, whether resident or non-resident, shall
submit a list of nationals to the Bureau indicating their names, citizenship, foreign and local address, nature of
employment and status of stay in the Philippines.

SECTION 3. Registration of resident aliens. – All employed resident aliens shall register with the Bureau under such
guidelines as may be issued by it.

SECTION 4. Employment permit required for entry. – No alien seeking employment, whether as a resident or non-
resident, may enter the Philippines without first securing an employment permit from the Ministry. If an alien enters the
country under a non-working visa and wishes to be employed thereafter, he may only be allowed to be employed upon
presentation of a duly approved employment permit.

SECTION 5. Requirements for employment permit applicants. – The application for an employment permit shall be
accompanied by the following:
 (a) Curriculum vitae duly signed by the applicant indicating his educational background, his work experience and
other data showing that he possesses technical skills in his trade or profession.

(b) Contract of employment between the employer and the principal which shall embody the following, among
others:

1. That the non-resident alien worker shall comply with all applicable laws and rules and regulations of the
Philippines;

2. That the non-resident alien worker and the employer shall bind themselves to train at least two (2)
Filipino understudies for a period to be determined by the Minister; and

3. That he shall not engage in any gainful employment other than that for which he was issued a permit.

(c) A designation by the employer of at least two (2) understudies for every alien worker. Such understudies must
be the most ranking regular employees in the section or department for which the expatriates are being hired to
insure the actual transfer of technology.

Under Section 6 of the Rule, the DOLE may issue an alien employment permit based only on the following:

(a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;

(b) Report of the Bureau Director as to the availability or non-availability of any person in the Philippines who is
competent and willing to do the job for which the services of the applicant are desired;

(c) His assessment as to whether or not the employment of the applicant will redound to the national interest;

(d) Admissibility of the alien as certified by the Commission on Immigration and Deportation;

(e) The recommendation of the Board of Investments or other appropriate government agencies if the applicant
will be employed in preferred areas of investments or in accordance with the imperative of economic
development.

Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise, petitioner PPI would not
have filed an application for a Permit with the DOLE. Petitioners are thus estopped from alleging that the PCIJ, not
petitioner PPI, had been the employer of respondent all along.

We agree with the conclusion of the CA that there was an employer-employee relationship between petitioner PPI and
respondent using the four-fold test. Jurisprudence is firmly settled that whenever the existence of an employment
relationship is in dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s
conduct. It is the so-called "control test" which constitutes the most important index of the existence of the employer-
employee relationship–that is, whether the employer controls or has reserved the right to control the employee not only as
to the result of the work to be done but also as to the means and methods by which the same is to be accomplished.
Stated otherwise, an employer-employee relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the means to be used in reaching such end.29 We
quote with approval the following ruling of the CA:

[T]here is, indeed, substantial evidence on record which would erase any doubt that the respondent company is the true
employer of petitioner. In the case at bar, the power to control and supervise petitioner’s work performance devolved upon
the respondent company. Likewise, the power to terminate the employment relationship was exercised by the President of
the respondent company. It is not the letterhead used by the company in the termination letter which controls, but the
person who exercised the power to terminate the employee. It is also inconsequential if the second letter of employment
executed in the Philippines was not signed by the petitioner. An employer-employee relationship may indeed exist even in
the absence of a written contract, so long as the four elements mentioned in the Mafinco case are all present. 30

The settled rule on stipulations regarding venue, as held by this Court in the vintage case of Philippine Banking
Corporation v. Tensuan,31 is that while they are considered valid and enforceable, venue stipulations in a contract do not,
as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules of Court in the absence of qualifying or
restrictive words. They should be considered merely as an agreement or additional forum, not as limiting venue to the
specified place. They are not exclusive but, rather permissive. If the intention of the parties were to restrict venue, there
must be accompanying language clearly and categorically expressing their purpose and design that actions between them
be litigated only at the place named by them.32

In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no other court save —,"
"particularly," "nowhere else but/except —," or words of equal import were stated in the contract.33 It cannot be said that
the court of arbitration in London is an exclusive venue to bring forth any complaint arising out of the employment
contract.

Petitioners contend that respondent should have filed his Complaint in his place of permanent residence, or where the
PCIJ holds its principal office, at the place where the contract of employment was signed, in London as stated in their
contract. By enumerating possible venues where respondent could have filed his complaint, however, petitioners
themselves admitted that the provision on venue in the employment contract is indeed merely permissive.

Petitioners’ insistence on the application of the principle of forum non conveniens must be rejected. The bare fact that
respondent is a Canadian citizen and was a repatriate does not warrant the application of the principle for the following
reasons:

First. The Labor Code of the Philippines does not include forum non conveniens as a ground for the dismissal of
the complaint.34

Second. The propriety of dismissing a case based on this principle requires a factual determination; hence, it is
properly considered as defense.35

Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals, 36 this Court held that:

x x x [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the following
requisites are met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2) that the
Philippine Court is in a position to make an intelligent decision as to the law and the facts; and, (3) that the Philippine
Court has or is likely to have power to enforce its decision. x x x

Admittedly, all the foregoing requisites are present in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 76563 is AFFIRMED.
This case is REMANDED to the Labor Arbiter for disposition of the case on the merits. Cost against petitioners.

SO ORDERED.

G.R. No. 161417 February 8, 2007

MA. TERESA CHAVES BIACO, Petitioner,

vs.
PHILIPPINE COUNTRYSIDE RURAL BANK, Respondent.

DECISION

TINGA, J.:

Petitioner, Ma. Teresa Chaves Biaco, seeks a review of the Decision1 of the Court of Appeals in CA-G.R. No. 67489 dated
August 27, 2003, which denied her petition for annulment of judgment, and the Resolution 2 dated December 15, 2003
which denied her motion for reconsideration.

The facts as succinctly stated by the Court of Appeals are as follows:

Ernesto Biaco is the husband of petitioner Ma. Teresa Chaves Biaco. While employed in the Philippine Countryside Rural
Bank (PCRB) as branch manager, Ernesto obtained several loans from the respondent bank as evidenced by the
following promissory notes:
 Feb. 17, 1998 ₱ 65,000.00

Mar. 18, 1998 30,000.00

May 6, 1998 60,000.00

May 20, 1998 350,000.00

July 30, 1998 155,000.00

Sept. 8, 1998 40,000.00

Sept. 8, 1998 120,000.00

As security for the payment of the said loans, Ernesto executed a real estate mortgage in favor of the bank covering the
parcel of land described in Original Certificate of Title (OCT) No. P-14423. The real estate mortgages bore the signatures
of the spouses Biaco.

When Ernesto failed to settle the above-mentioned loans on its due date, respondent bank through counsel sent him a
written demand on September 28, 1999. The amount due as of September 30, 1999 had already reached ONE MILLION
EIGHTY THOUSAND SIX HUNDRED SEVENTY SIX AND FIFTY CENTAVOS (₱1,080,676.50).

The written demand, however, proved futile.

On February 22, 2000, respondent bank filed a complaint for foreclosure of mortgage against the spouses Ernesto and
Teresa Biaco before the RTC of Misamis Oriental. Summons was served to the spouses Biaco through Ernesto at his
office (Export and Industry Bank) located at Jofelmor Bldg., Mortola Street, Cagayan de Oro City.

Ernesto received the summons but for unknown reasons, he failed to file an answer. Hence, the spouses Biaco were
declared in default upon motion of the respondent bank. The respondent bank was allowed to present its evidence ex
parte before the Branch Clerk of Court who was then appointed by the court as Commissioner.

Arturo Toring, the branch manager of the respondent bank, testified that the spouses Biaco had been obtaining loans from
the bank since 1996 to 1998. The loans for the years 1996-1997 had already been paid by the spouses Biaco, leaving
behind a balance of ₱1,260,304.33 representing the 1998 loans. The amount being claimed is inclusive of interests,
penalties and service charges as agreed upon by the parties. The appraisal value of the land subject of the mortgage is
only ₱150,000.00 as reported by the Assessor’s Office.

Based on the report of the Commissioner, the respondent judge ordered as follows:

WHEREFORE, judgment is hereby rendered ordering defendants spouses ERNESTO R. BIACO and MA. THERESA
[CHAVES] BIACO to pay plaintiff bank within a period of not less than ninety (90) days nor more than one hundred (100)
days from receipt of this decision the loan of ONE MILLION TWO HUNDRED SIXTY THOUSAND THREE HUNDRED
FOUR PESOS and THIRTY THREE CENTAVOS (₱1,260,304.33) plus litigation expenses in the amount of SEVEN
THOUSAND SIX HUNDRED FORTY PESOS (₱7,640.00) and attorney’s fees in the amount of TWO HUNDRED FIFTY
TWO THOUSAND THIRTY PESOS and FORTY THREE CENTAVOS (₱252,030.43) and cost of this suit.

In case of non-payment within the period, the Sheriff of this Court is ordered to sell at public auction the mortgaged Lot, a
parcel of registered land (Lot 35802, Cad. 237 {Lot No. 12388-B, Csd-10-002342-D}), located at Gasi, Laguindingan,
Misamis Oriental and covered by TCT No. P-14423 to satisfy the mortgage debt, and the surplus if there be any should be
delivered to the defendants spouses ERNESTO and MA. THERESA [CHAVES] BIACO. In the event however[,] that the
proceeds of the auction sale of the mortgage[d] property is not enough to pay the outstanding obligation, the defendants
are ordered to pay any deficiency of the judgment as their personal liability.

SO ORDERED.

On July 12, 2000, the sheriff personally served the above-mentioned judgment to Ernesto Biaco at his office at Export and
Industry Bank. The spouses Biaco did not appeal from the adverse decision of the trial court. On October 13, 2000, the
respondent bank filed an ex parte motion for execution to direct the sheriff to sell the mortgaged lot at public auction. The
respondent bank alleged that the order of the court requiring the spouses Biaco to pay within a period of 90 days had
passed, thus making it necessary to sell the mortgaged lot at public auction, as previously mentioned in the order of the
court. The motion for execution was granted by the trial court per Order dated October 20, 2000.

On October 31, 2000, the sheriff served a copy of the writ of execution to the spouses Biaco at their residence in #92 9th
Street, Nazareth, Cagayan de Oro City. The writ of execution was personally received by Ernesto. By virtue of the writ of
execution issued by the trial court, the mortgaged property was sold at public auction in favor of the respondent bank in
the amount of ONE HUNDRED FIFTY THOUSAND PESOS (₱150,000.00).

The amount of the property sold at public auction being insufficient to cover the full amount of the obligation, the
respondent bank filed an "ex parte motion for judgment" praying for the issuance of a writ of execution against the other
properties of the spouses Biaco for the full settlement of the remaining obligation. Granting the motion, the court ordered
that a writ of execution be issued against the spouses Biaco to enforce and satisfy the judgment of the court for the
balance of ONE MILLION THREE HUNDRED SIXTY NINE THOUSAND NINE HUNDRED SEVENTY FOUR PESOS
AND SEVENTY CENTAVOS (₱1,369,974.70).

The sheriff executed two (2) notices of levy against properties registered under the name of petitioner Ma. Teresa Chaves
Biaco. However, the notices of levy were denied registration because Ma. Teresa had already sold the two (2) properties
to her daughters on April 11, 2001.3

Petitioner sought the annulment of the Regional Trial Court decision contending that extrinsic fraud prevented her from
participating in the judicial foreclosure proceedings. According to her, she came to know about the judgment in the case
only after the lapse of more than six (6) months after its finality. She claimed that extrinsic fraud was perpetrated against
her because the bank failed to verify the authenticity of her signature on the real estate mortgage and did not inquire into
the reason for the absence of her signature on the promissory notes. She moreover asserted that the trial court failed to
acquire jurisdiction because summons were served on her through her husband without any explanation as to why
personal service could not be made.

The Court of Appeals considered the two circumstances that kept petitioner in the dark about the judicial foreclosure
proceedings: (1) the failure of the sheriff to personally serve summons on petitioner; and (2) petitioner’s husband’s
concealment of his knowledge of the foreclosure proceedings. On the validity of the service of summons, the appellate
court ruled that judicial foreclosure proceedings are actions quasi in rem. As such, jurisdiction over the person of the
defendant is not essential as long as the court acquires jurisdiction over the res. Noting that the spouses Biaco were not
opposing parties in the case, the Court of Appeals further ruled that the fraud committed by one against the other cannot
be considered extrinsic fraud.

Her motion for reconsideration having been denied, petitioner filed the instant Petition for Review, 4 asserting that even if
the action is quasi in rem, personal service of summons is essential in order to afford her due process. The substituted
service made by the sheriff at her husband’s office cannot be deemed proper service absent any explanation that efforts
had been made to personally serve summons upon her but that such efforts failed. Petitioner contends that extrinsic fraud
was perpetrated not so much by her husband, who did not inform her of the judicial foreclosure proceedings, but by the
sheriff who allegedly connived with her husband to just leave a copy of the summons intended for her at the latter’s office.

Petitioner further argues that the deficiency judgment is a personal judgment which should be deemed void for lack of
jurisdiction over her person.

Respondent PCRB filed its Comment,5 essentially reiterating the appellate court’s ruling. Respondent avers that service of
summons upon the defendant is not necessary in actions quasi in rem it being sufficient that the court acquire jurisdiction
over the res. As regards the alleged conspiracy between petitioner’s husband and the sheriff, respondent counters that
this is a new argument which cannot be raised for the first time in the instant petition.

We required the parties to file their respective memoranda in the Resolution 6 dated August 18, 2004. Accordingly,
petitioner filed her Memorandum 7 dated October 10, 2004, while respondent filed its Memorandum for Respondent8dated
September 9, 2004.

Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases as where there is no
available or other adequate remedy. Jurisprudence and Sec. 2, Rule 47 of the 1997 Rules of Civil Procedure (Rules of
Court) provide that judgments may be annulled only on grounds of extrinsic fraud and lack of jurisdiction or denial of due
process.9
Petitioner asserts that extrinsic fraud consisted in her husband’s concealment of the loans which he obtained from
respondent PCRB; the filing of the complaint for judicial foreclosure of mortgage; service of summons; rendition of
judgment by default; and all other proceedings which took place until the writ of garnishment was served. 10

Extrinsic fraud exists when there is a fraudulent act committed by the prevailing party outside of the trial of the case,
whereby the defeated party was prevented from presenting fully his side of the case by fraud or deception practiced on
him by the prevailing party.11 Extrinsic fraud is present where the unsuccessful party had been prevented from exhibiting
fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from court, a false promise
of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of
the plaintiff; or where an attorney fraudulently or without authority assumes to represent a party and connives at his
defeat; or where the attorney regularly employed corruptly sells out his client’s interest to the other side. The overriding
consideration is that the fraudulent scheme of the prevailing litigant prevented a party from having his day in court.12

With these considerations, the appellate court acted well in ruling that there was no fraud perpetrated by respondent bank
upon petitioner, noting that the spouses Biaco were co-defendants in the case and shared the same interest. Whatever
fact or circumstance concealed by the husband from the wife cannot be attributed to respondent bank.

Moreover, petitioner’s allegation that her signature on the promissory notes was forged does not evince extrinsic fraud. It
is well-settled that the use of forged instruments during trial is not extrinsic fraud because such evidence does not
preclude the participation of any party in the proceedings.13

The question of whether the trial court has jurisdiction depends on the nature of the action, i.e., whether the action is in
personam, in rem, or quasi in rem. The rules on service of summons under Rule 14 of the Rules of Court likewise apply
according to the nature of the action.

An action in personam is an action against a person on the basis of his personal liability. An action in rem is an action
against the thing itself instead of against the person. An action quasi in rem is one wherein an individual is named as
defendant and the purpose of the proceeding is to subject his interest therein to the obligation or lien burdening the
property.14

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and decide
the case. In a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to
confer jurisdiction on the court provided that the court acquires jurisdiction over the res. Jurisdiction over the res is
acquired either (1) by the seizure of the property under legal process, whereby it is brought into actual custody of the law;
or (2) as a result of the institution of legal proceedings, in which the power of the court is recognized and made effective. 15

Nonetheless, summons must be served upon the defendant not for the purpose of vesting the court with jurisdiction but
merely for satisfying the due process requirements.16

A resident defendant who does not voluntarily appear in court, such as petitioner in this case, must be personally served
with summons as provided under Sec. 6, Rule 14 of the Rules of Court. If she cannot be personally served with summons
within a reasonable time, substituted service may be effected (1) by leaving copies of the summons at the defendant’s
residence with some person of suitable age and discretion then residing therein, or (2) by leaving the copies at
defendant’s office or regular place of business with some competent person in charge thereof in accordance with Sec. 7,
Rule 14 of the Rules of Court.

In this case, the judicial foreclosure proceeding instituted by respondent PCRB undoubtedly vested the trial court with
jurisdiction over the res. A judicial foreclosure proceeding is an action quasi in rem. As such, jurisdiction over the person
of petitioner is not required, it being sufficient that the trial court is vested with jurisdiction over the subject matter.

There is a dimension to this case though that needs to be delved into. Petitioner avers that she was not personally served
summons. Instead, summons was served to her through her husband at his office without any explanation as to why the
particular surrogate service was resorted to. The Sheriff’s Return of Service dated March 21, 2000 states:

xxxx

That on March 16, 2000, the undersigned served the copies of Summons, complaint and its annexes to the defendants
Sps. Ernesto R. & Ma. Teresa Ch. Biaco thru Ernesto R. Biaco[,] defendant of the above-entitled case at his office
EXPORT & INDUSTRY BANK, Jofelmore Bldg.[,] Mortola St., Cagayan de Oro City and he acknowledged receipt thereof
as evidenced with his signature appearing on the original copy of the Summons. 17 [Emphasis supplied]
Without ruling on petitioner’s allegation that her husband and the sheriff connived to prevent summons from being served
upon her personally, we can see that petitioner was denied due process and was not able to participate in the judicial
foreclosure proceedings as a consequence. The violation of petitioner’s constitutional right to due process arising from
want of valid service of summons on her warrants the annulment of the judgment of the trial court.

There is more, the trial court granted respondent PCRB’s ex-parte motion for deficiency judgment and ordered the
issuance of a writ of execution against the spouses Biaco to satisfy the remaining balance of the award. In short, the trial
court went beyond its jurisdiction over the res and rendered a personal judgment against the spouses Biaco. This cannot
be countenanced.1awphil.net

In Sahagun v. Court of Appeals,18 suit was brought against a non-resident defendant, Abelardo Sahagun, and a writ of
attachment was issued and subsequently levied on a house and lot registered in his name. Claiming ownership of the
house, his wife, Carmelita Sahagun, filed a motion to intervene. For failure of plaintiff to serve summons extraterritorially
upon Abelardo, the complaint was dismissed without prejudice.

Subsequently, plaintiff filed a motion for leave to serve summons by publication upon Abelardo. The trial court granted the
motion. Plaintiff later filed an amended complaint against Abelardo, this time impleading Carmelita and Rallye as
additional defendants. Summons was served on Abelardo through publication in the Manila Evening Post. Abelardo failed
to file an answer and was declared in default. Carmelita went on certiorari to the Court of Appeals assailing as grave
abuse of discretion the declaration of default of Abelardo. The Court of Appeals dismissed the petition and denied
reconsideration.

In her petition with this Court, Carmelita raised the issue of whether the trial court acquired jurisdiction over her husband,
a non-resident defendant, by the publication of summons in a newspaper of general circulation in the Philippines. The
Court sustained the correctness of extrajudicial service of summons by publication in such newspaper.

The Court explained, citing El Banco Español-Filipino v. Palanca,19 that foreclosure and attachment proceedings are both
actions quasi in rem. As such, jurisdiction over the person of the (non-resident) defendant is not essential. Service of
summons on a non-resident defendant who is not found in the country is required, not for purposes of physically acquiring
jurisdiction over his person but simply in pursuance of the requirements of fair play, so that he may be informed of the
pendency of the action against him and the possibility that property belonging to him or in which he has an interest may
be subjected to a judgment in favor of a resident, and that he may thereby be accorded an opportunity to defend in the
action, should he be so minded.

Significantly, the Court went on to rule, citing De Midgely v. Ferandos, et. al.20 and Perkins v. Dizon, et al.21 that in a
proceeding in rem or quasi in rem, the only relief that may be granted by the court against a defendant over whose person
it has not acquired jurisdiction either by valid service of summons or by voluntary submission to its jurisdiction, is limited to
the res.

Similarly, in this case, while the trial court acquired jurisdiction over the res, its jurisdiction is limited to a rendition of
judgment on the res. It cannot extend its jurisdiction beyond the res and issue a judgment enforcing petitioner’s personal
liability. In doing so without first having acquired jurisdiction over the person of petitioner, as it did, the trial court violated
her constitutional right to due process, warranting the annulment of the judgment rendered in the case.

WHEREFORE, the instant petition is GRANTED. The Decision dated August 27, 2003 and the Resolution dated
December 15, 2003 of the Court of Appeals in CA-G.R. SP No. 67489 are SET ASIDE. The Judgment dated July 11,
2000 and Order dated February 9, 2001 of the Regional Trial Court of Cagayan de Oro City, Branch 20, are likewise SET
ASIDE.

SO ORDERED.

G.R. No. 175796 July 22, 2015

BPI FAMILY SAVINGS BANK INC., Petitioner,

vs.
SPOUSES BENEDICTO & TERESITA YUJUICO, Respondents,

DECISION
BERSAMIN, J.:

An action to recover the deficiency after extrajudicial foreclosure of a real property mortgage is a personal action because
it does not affect title to or possession of real property, or any interest therein.

The Case

This appeal is taken by the petitioner to overturn the decision promulgated on March 31, 2006, 1 whereby the Court of
Appeals (CA) set aside the orders issued by the Regional Trial Court, Branch 60, in Makati City (Makati RTC) on October
17, 2003 2 and February 1, 2005 3 dismissing

their action against the respondents to recover the deficiency after the extrajudicial foreclosure of their mortgage (Civil
Case No.03-450) on the ground of improper venue.

Antecedents

On August 22, 1996, the City of Manila filed a complaint against the respondents for the expropriation of five parcels of
land located in Tondo, Manila and registered in the name of respondent Teresita Yujuico. Two of the parcels of land,
covered by Transfer Certificate of Title (TCT) No. 261331 and TCT No. 261332, were previously mortgaged to Citytrust
Banking Corporation, the petitioner's predecessor-in-interest, under a First Real Estate Mortgage Contract.4On June 30,
2000, the Regional Trial Court in Manila (Manila RTC) rendered its judgment declaring the five parcels of land
expropriated for public use. The judgment became final and executory on January 28, 2001 and was entered in the book
of entries of judgment on March 23, 2001.5 The petitioner subsequently filed a Motion to Intervene in Execution with
Partial Opposition to Defendant's Request to Release, but the RTC denied the motion for having been "filed out of time."
Hence, the petitioner decided to extrajudicially foreclose the mortgage constituted on the two parcels of land subject of the
respondents' loan. After holding the public auction, the sheriff awarded the two lots to the petitioner as the highest bidder
at ₱10, 000, 000.00. 6

Claiming a deficiency amounting to Pl8, 522155.42, the pet1t1oner sued the respondents to recover such deficiency in the
Makati RTC (Civil Case No. 03-450).1âwphi1 The respondents moved to dismiss the complaint on several grounds,
namely: that the suit was barred by res judicata; that the complaint stated no cause of action; and that the plaintiffs claim
had been waived, abandoned, or extinguished. 7

In its order issued on October 17, 2003, the Makati RTC denied the respondents' motion to dismiss, ruling that there was
no res judicata; that the complaint stated a sufficient cause of action to recover the deficiency; and that there was nothing
to support the claim that the obligation had been abandoned or extinguished apart from the respondents' contention that
the properties had been subjected to expropriation by the City of Manila. 8

On November 4, 2003, the respondents moved for reconsideration, reiterating their grounds earlier made in their motion
to dismiss. 9

In turn, the petitioner adopted its comment/opposition to the motion to dismiss. 10

The respondents then filed their reply, 11 in which they raised for the first time their objection on the ground of improper
venue. They contended that the action for the recovery of the deficiency, being a supplementary action of the extrajudicial
foreclosure proceedings, was a real action that should have been brought in the Manila RTC because Manila was the
place where the properties were located.12

On February 1, 2005, the Makati RTC denied the respondents' motion for reconsideration for its lack of merit; and held on
the issue of improper venue that:

It would be improper for this Court to dismiss the plaintiffs complaint on the ground of improper venue, assuming that the
venue is indeed improperly laid, since the said ground was not raised in the defendant's Motion to Dismiss. On this point,
it was held in the case of Malig, et al. vs. Bush, L 22761, May 31, 1969 that "an action cannot be dismissed on a ground
not alleged in the motion therefore even if said ground, e.g., prescription, is provided in Rule 16. 13

Decision of the CA
Not satisfied, the respondents assailed the orders dated October 1 7, 2003 and February 1, 2005 by petition for
certiorari.14 They submitted for consideration by the CA the following issues, namely:

x x x (WHETHER OR NOT) RESPONDENT TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ISSUED ITS ASSAILED ORDERS CONSIDERING
THAT:

A THE COMPLAINT A QUO IS BARRED BY RES JUDICATA.

B. THE COMPLAINT STATED NO CAUSE OF ACTION.

C. PRIVATE RESPONDENT'S CLAIM HAS BEEN WAIVED, ABANDONED OR OTHERWISE EXTINGUISHED.

D. VENUE WAS IMPROPERLY LAID. 15

On March 31, 2006, the CA granted the petition for certiorari of the respondents on the basis of the fourth issue, opining:

xxxx

Thus, a suit for recovery of the deficiency after the foreclosure of a mortgage is in the nature of a mortgage action
because its purpose is precisely to enforce the mortgage contract; it is upon a written contract and upon an obligation of
the mortgage-debtor to pay the deficiency which is created by law. As such, the venue of an action for recovery of
deficiency must necessarily be the same venue as that of the extrajudicial foreclosure of mortgage.

xxxx

In this regard, We take note that the parcels of land subject of the mortgage contract are located in Tondo, Manila, under
Transfer Certificates of Title Nos. 216331 and 216332. On the other hand, the extrajudicial foreclosure of the real estate
mortgage took place at the R TC of Manila on January 28, 2003. Thus, the suit for judgment on the deficiency filed by
respondent BPI against petitioners Yujuico, being an action emanating from the foreclosure of the real estate mortgage
contract between them, must necessarily be filed also at the RTC of Manila, not at the RTC of Makati.

x x x x 16

The CA denied the respondents' Motion for Partial Reconsideration and the petitioner's Partial Motion for Reconsideration
on December 7, 2006.17

Issues

Hence, this appeal by the petitioner, to assail the CA's dismissal of Civil Case No. 03-450 on the ground of improper
venue upon the following grounds,18 namely:

I.

WHETHER OR NOT THE HONORA.BLE COURT OF APPEALS' DENIAL OF THE PETITIONER'S PARTIAL MOTION
FOR RECONSIDERATION ON THE GROUND OF IMPROPER VENUE AS A RESULT DISMISSED THE COMPLAINT
FOR SUM OF MONEY IS CONTRARY TO LAW.

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS['] ACT OF APPRECIATING THE ADDITIONAL
GROUND OF IMPROPER VENUE, ONLY RAISED IN THE MOTION FOR RECONSIDERATION FILED IN THE LOWER
COURT AFTER IT DENIED RESPONDENTS' MOTION TO DISMISS, IS CONTRARY TO LAW AND
JURISPRUDENCE.19

Ruling of the Court

We grant the petition for review on certiorari.

It is basic that the venue of an action depends on whether it is a real or a personal action. The determinants of whether an
action is of a real or a personal nature have been fixed by the Rules of Court and relevant jurisprudence. According to
Section 1, Rule 4 of the Rules of Court, a real action is one that affects title to or possession of real property, or an interest
therein. Thus, an action for partition or condemnation of, or foreclosure of mortgage on, real property is a real
action. 20 The real action is to be commenced and tried in the proper court having jurisdiction over the area wherein the
real property involved, or a portion thereof, is situated, which explains why the action is also referred to as a local action.
In contrast, the Rules of Court declares all other actions as personal actions. 21 such actions may include those brought
for the recovery of personal property, or for the enforcement of some contract or recovery of damages for its breach, or for
the recovery of damages for the commission of an injury to the person or property. 22 The venue of a personal action is the
place where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants
resides, or in the case of a non-resident defendant where he may be found, at the election of the plaintiff, 23 for which
reason the action is considered a transitory one.

Based on the distinctions between real and personal actions, an action to recover the deficiency after the extrajudicial
foreclosure of the real property mortgage is a personal action, for it does not affect title to or possession of real property,
or any interest therein.

It is true that the Court has said in Caltex Philippines, Inc. v. Intermediate Appellate Court 24 that "a suit for the recovery of
the deficiency after the foreclosure of a mortgage is in the nature of a mortgage action because its purpose is precisely to
enforce the mortgage contract." However, the CA erred in holding, upon the authority of Caltex Philippines, Inc., that the
venue of Civil Case No. 03 450 must necessarily be Manila, the same venue as that of the extrajudicial foreclosure of
mortgage. An examination of Caltex Philippines, Inc. reveals that the Court was thereby only interpreting the prescriptive
period within which to bring the suit for the recovery of the deficiency after the foreclosure of the mortgage, and was not at
all ruling therein on the venue of such suit or on the nature of such suit being either a real or a personal action.

Given the foregoing, the petitioner correctly brought Civil Case No.03-450 in the Makati RTC because Makati was the
place where the main office of the petitioner was located.1avvphi1

Moreover, the Makati RTC observed, and the observation is correct in our view, that it would be improper to dismiss Civil
Case No. 03-450 on the ground of improper venue, assuming that the venue had been improperly laid, considering that
the respondents had not raised such ground in their Motion to Dismiss. As earlier indicated, they came to raise the
objection of improper venue for the first time only in their reply to the petitioner's comment on their Motion for
Reconsideration. They did so belatedly.

We underscore that in civil proceedings, venue is procedural, not jurisdictional, and may be waived by the defendant if not
seasonably raised either in a motion to dismiss or in the answer. 25 Section 1, Rule 9 of the Rules of Court thus expressly
stipulates that defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. As
it relates to the place of trial, indeed, venue is meant to provide convenience to the parties, rather than to restrict their
access to the courts.26 In other words, unless the defendant seasonably objects, any action may be tried by a court
despite its being the improper venue.

WHEREFORE, we GRANT the petition for review on certiorari; REVERSE and SET ASIDE the decision promulgated by
the Court of Appeals on March 31, 2006; REINSTATE the orders dated October 17, 2003 and February 1, 2005 of the
Regional Trial Court, Branch 60, in Makati City; and ORDER the respondents to pay the costs of suit.

SO ORDERED.