COMPILATION OF CASES Sometime in 1995, Andrews and another corporation, Palmer Asia, Inc.

MODULE 2, PT. 2 (Palmer), entered into an agreement whereby all the business of
CIVIL PROCEDURE Andrews was going to be handled by Palmer. As explained by Palmer:

PARTIES TO A CIVIL ACTION a change of name was in order to appeal to a bigger and more
sophisticated market. Hence, Palmer Asia was born. Being a family
REAL PARTY IN INTEREST corporation and since the change of name was more of a marketing
strategy, all legal niceties were dispensed with. Andrews x x x thus
ceased to be active in the business.5
GERVE MAGALLANES, Petitioner,
Thus, Andrews remained to be existing, but not operational. It was
vs.
neither dissolved nor liquidated. There was no transfer of assets and
PALMER ASIA, INC., Respondent.
liabilities in the legal sense. Palmer simply took over the business of
Andrews.6
DECISION
According to Magallanes, Andrews demanded payment of the value of
CARPIO, J.:
the checks. Since the demands were unheeded, Magallanes was
charged with several counts of violation of Batas Pambansa Bilang 22
The Case (B.P. 22) under several informations all dated 28 March 1997. The cases
were docketed as Criminal Case Nos. 211340-44 in Branch 62 of the
This is a petition for review that seeks to set aside the Decision1 dated Metropolitan Trial Court of Makati City (MeTC Branch 62). Palmiery was
17 September 2012 of the Court of Appeals (CA) in CA-G.R. SP No. authorized to file suit on behalf of Andrews. 7 Upon being arraigned on
111314 and the Resolution2 dated 14 January 2013 which denied the 13 November 1997, Magallanes pled not guilty.8
Motion for Reconsideration dated 25 September 2012.
On 16 March 1998, Escudero Marasigan Sta. Ana & E.H. Villareal
The Facts (EMSAVILL), the counsel of Andrews, entered its appearance as
counsel for Palmer in Criminal Case Nos. 217336-44 entitled Palmer
Andrews International Product, Inc. (Andrews) is a domestic corporation Asia, Inc. v. Gerve Magallanes, filed before Branch 67 ofthe Metropolitan
that manufactures and sells fire extinguishers. Gerve Magallanes Trial Court of Makati City (MeTC Branch 67). The docket numbers as
(Magallanes) was employed by Andrews as a Sales Agent.3 stated in the Entry of Appearance differ fromthe docket numbers of the
cases filed by Andrews. Also, the Entry of Appearance was filed before
Magallanes negotiated with three (3) prospective buyers of Andrews fire Branch 67 of the MeTC and not Branch 62, where the cases were
extinguishers: Cecile Arboleda, Jose Cruz, and Proceso Jarobilla, who previously filed. Furthermore, there was no mention of the relationship
all issued checks payable to Andrews. These checks, however, between Andrews and Palmer. Lastly, there was no registry receipt or
bounced.4 stamp or signature or any other mark which could indicate that
Magallanes was furnished a copy of the document.9
Angel Palmiery (Palmiery), the President of Andrews, returned the bum
checks to Magallanes. Desirous of obtaining his accrued commissions, On 10 August 2003, Palmiery appeared before the MeTC Branch 62 and
and upon the advice of Palmiery, Magallanes signed Sales Invoices explained that Andrews transferred its assets, and relinquished control
covering the fire extinguishers that were intended to be sold to the of its operations to Palmer. Thus, on 16September 2004, Magallanes
prospective buyers, and he also issued five (5) checks covering the filed an Omnibus Motion to Disqualify Private Prosecutor and to Strike
purchase price of the items: Out Testimony of Angel Palmiery (Omnibus Motion). According to
Magallanes, since the assets and credits of Andrews were transferred
to Palmer, the real party in interest in this case is Palmer and not
Check Date
Bank Date of check Amount Andrews. Therefore, the criminal case should have been instituted by
number deposited
Palmer. Magallanes also asserted that:

Citytrust 000721 28 July 1993 25 January ₱17,740.00 [i]ndeed the private prosecutor was hired by Palmer x x x solely for its
Banking 1994 own account and not by Andrews x x x for otherwise how can the Private
Corp. Prosecutor explain the alleged direct payment of Palmer x x x of its
attorney’s fees in the present case. The problem however is that Palmer
x x x has no right to participate in the present case ‒as the recitals of the
Citytrust 000743 2 September 25 January ₱16,440.00 information refer to Andrews x x x. Hence, the private prosecutor should
Banking 1993 1994 be thereupon disqualified x x x.10
Corp.
Thus, Palmer filed its Opposition to Magallanes’ motion, claiming that:

Prudential 001579 7 7 January ₱49,230.00 3.01.4 As a marketing strategy, Andrews International’s business thus
Bank January1994 1994 operated under the banner of Palmer Asia. Palmer Asia had exactly the
same officers, occupied the same business office, retained all its
employees and agents, had the same customers and sold the same
Prudential 001582 9 18 January ₱19,880.00 products.
Bank January1994 1994
xxxx
Prudential 001585 15 January 17 January 45,440.00
3.01.6 Seen another way, Palmer Asiacan be seen as in effect, for
Bank 1994 1994 P
purposes of this litigation, an agent of Andrews International. x x x [A]n
agency can be constituted in any form, even by sheer implication derived
from the conduct of the parties.11
Total ₱148,800.20
In its Joint Order dated 8 March 2005, the MeTC Branch 62 denied the
motion filed by Magallanes for lack of merit.12 It also acquitted
Magallanes, but held him civilly liable. The dispositive portion of the Joint
However, Magallanes’ checks were dishonored upon presentment to the Decision13 dated 10 December 2008 reads:
bank.
1
WHEREFORE, foregoing considered, the accused GERVE
MAGALLANES is ACQUITTED of the offense charged for lack of proof
beyond reasonable doubt in Criminal Cases No. 211340, 211341,
211341, 211342, 211343 and 211344. He is ordered to pay the private
complainant, the corresponding face value of the checks subject of the
Criminal Cases No. 211340, 211341, 211342, 211343 and 211344, by
way of civil liability, with 12% interest per annum counted from June
10, 1994, until the amount shall have been paid; attorney’s fees at 10%
of the total face value of the subject checks; and to pay the costs.
In case of execution of civil liability, the Clerk of Court is directed to
determine and enforce collection of any unpaid docket or other lawful
fees in accordance with Rule 111, Sec. 1-b in relation to Rule 141.
SO ORDERED.14
Magallanes filed a Partial Appeal before Branch 61 of the Regional
Trial Court of Makati (RTC Branch 61). According to Magallanes, the
checks were not issued for valuable consideration since the Sales
Invoices, as well as the transactions reflectedin the invoices were
simulated and fictitious. He also claimed that as a Sales Agent, he is
not liable for the bum checks issued by the prospective buyers of
Andrews.15 Andrews, as the private complainant mentioned in the Joint
Decision of MeTC Branch 62, did not file any appeal.
When the parties were required by the RTC Branch 61 to submit their
respective memoranda, the memorandum for the complainant was filed
by Palmer, and not Andrews. The memorandum was prepared by
EMSAVILL16 and received by Magallanes on 9 March 2009.17
The RTC Branch 61, in its Decision18 dated 25 May 2009, held that
Magallanes was not civilly liable for the value of the checks because "the
x x x complaining juridical entity has not fully established the existence
of a debt by Mr. Magallanes in its favor."19 Thus, Palmer filed a motion
for reconsideration on 15 June 2009,20 which was denied by the RTC in
its Resolution dated 14 October 2009.21 Andrews did not file a motion for
reconsideration.
Thus, Palmer filed a petition for review under Rule 42 of the Rules of
Civil Procedure before the CA. It alleged that the RTC erred in reversing
the decision of the MeTC Branch 62 and absolving Magallanes from civil
liability. Andrews did not file a petition for review with the CA.
Magallanes then filed his Comments to Petition for Review (ad
cautelam) with Motion to Dismiss Due to Finality of Judgment, wherein
he alleged that:
The Decision of the Regional Trial Court of Makati City dated 25 May
2003 has already attained finality there being no appeal interposed by
Andrews International Products, Inc.
Petitioner Palmer Asia, Inc. is not, can not and has never been a party
plaintiff litigant in the civil aspect of Criminal Case Nos. 211340, 211341,
211342, 211343, 21134[4] before the Metropolitan Trial Court of Makati,
Branch 62 for alleged violation of Batas [Pambansa] Bilang 22 and in
the appealed Criminal Cases 09-031 to 035 [before the] Regional Trial
Court of Makati City, Branch 61.22
The Ruling of the CA
The CA ruled against Magallanes. It held that Magallanes issued the
checks for a consideration because he derived pecuniary benefit from it
(collection of accrued commissions). According to the court a quo:
The Supreme Court [has] held that upon issuance of a check, in the
absence of evidence to the contrary, it is presumed that the same was
issued for valuable consideration which may consist either in some right,
interest, profit or benefit accruing to the party who makes the contract,
or some forbearance, detriment, loss or some responsibility, to act, or
labor, or service given, suffered or undertaken by the other side. Under
the Negotiable Instruments Law, it is presumed that every party to an
instrument acquires the same for a consideration or for value. In the
instant case, respondent failed to present convincing evidence to
overthrow the presumption and prove that the checks were indeed
issued without valuable consideration. In fact, respondent categorically
admitted that he issued the subject bum checks in order for him to collect
his pending commissions with petitioner.23
Aggrieved, Magallanes then filed the instant petition before this Court.
Issues
The petition alleges that the CA erred in not dismissing Palmer’s petition
for review under Rule 42 based on lack of jurisdiction and finality of
judgment of the RTC’s Joint Decision24 and in ruling that Magallanes
failed to rebut the presumption of consideration in the issuance of the
checks.25 The Ruling of this Court
We grant the petition. The RTC Decision absolving Magallanes from civil
liability has attained finality, since no appeal was interposed by the
private complainant, Andrews. While Palmer filed a petition for review
before the CA, it is not the real party in interest; it was never a party to
the proceedings at the trial court.
Under our procedural rules, "a case is dismissible for lack of personality
to sue upon proof that the plaintiff is not the real party-in interest, hence
grounded on failure to state a cause of action."26 In the instant case,
Magallanes filed a motion to dismiss in accordance with the Rules of
Court, wherein he claimed that:
x x x the obvious and only real party in interest in the filing and
prosecution of the civil aspect impliedly instituted with x x x the filing of
the foregoing Criminal Cases for B.P. 22 is Andrews International
Products, Inc.
The alleged bounced checks issued by x x x Magallanes were issued
payable in the name of Andrews International Products, Inc. The
[n]arration of [facts] in the several Informations for violation of B.P. 22
filed against Magallanes solely mentioned the name of Andrews
International Products, Inc.27
The real party in this case is Andrews, not Palmer. Section 2 of Rule 3
of the Rules of Court provides: Sec. 2.Parties in interest.– A real party in
interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.
In Goco v. Court of Appeals,28 we explained that:
This provision has two requirements: 1) to institute an action, the plaintiff
must be the real party in interest; and 2) the action must be prosecuted
in the name of the real party in interest. Interest within the meaning of
the Rules of Court means material interest or an interest in issue to be
affected by the decree or judgment of the case, as distinguished from
mere curiosity about the question involved. One having no material
interest to protect cannot invoke the jurisdiction of the court as the
plaintiff in an action.
Parties who are not the real parties in interest may be included in a suit
in accordance with the provisions of Section 3 of Rule 3 of the Rules of
Court:
Sec. 3. Representatives as parties. Where the action is allowed to be
prosecuted or defended by a representative or someone acting in a
fiduciary capacity, the beneficiary shall be included in the title of the case
and shall be deemed to be the real party in interest. A representative
may be a trustee of an express trust, a guardian, an executor or
administrator, or a party authorized by law or these Rules. An agent
acting in his own name and for the benefit of an undisclosed principal
may sue or be sued without joining the principal except when the
contract involves things belonging to the principal.
The CA erred in stating that Palmer and Andrews are the same
entity.29 These are two separate and distinct entities claiming civil liability
against Magallanes. Andrews was the payee of the bum checks, and the
former employer of Magallanes. It filed the complaint for B.P. 22 before
MeTC Branch 62. Thus when the MeTC Branch 62 ordered Magallanes
to "pay the private complainant the corresponding face value of the
checks x x x",30 it was referring to Andrews, not Palmer.
2
Palmer, on the other hand, was first mentioned in an Entry of
Appearance filed by its counsel EMSAVILL (also the counsel of
Andrews) before MeTC Branch 67 in connection with Palmer Asia, Inc.
v. Gerve Magallanes. Palmer also filed the Memorandum required by
the RTC.
Although Andrews relinquished control of its business to Palmer, it was
never dissolved and thus remained existing. This was stated in Palmer’s
Comment and Opposition.31 Quoting the Order dated 8 March 2005 of
the MeTC Branch 62 denying Magallanes’ Omnibus Motion, Palmer
explained that:
Under the Corporation Code, specifically Sections 117, 118 120 and
121, a corporation can only be dissolved in two ways, voluntary and
involuntary. In the case of Andrews International, no document was
presented that majority of its Board of Directors passed a [r]esolution
terminating its corporate life. No complaint was also filed with the
Securities and Exchange Commission to involuntarily terminate the
same, thus, for all intents and purposes, it is still existing although not
operational.32 (Emphasis in the original)
Given the foregoing facts, it is clear that the real party in interest here is
Andrews. Following the Rules of Court, the action should be in the name
of Andrews. As previously mentioned, Andrews instituted the action
before the MeTC Branch 62 but it was Palmer which filed a petition for
review before the CA. In fact, the case at the CA was entitled Palmer
Asia, Inc. v. Gerve Magallanes.
In NM Rothschild & Sons (Australia) Limited v. Lepanto Consolidated
Mining Company,33 NM Rothschild changed its name to Investec
Australia Limited, in accordance with Australian law, pending resolution
of its petition before this Court. Thus, when we required the parties to
file memoranda, NM Rothschild referred to itself as Investec Australia
Limited (formerly "NM Rothschild & Sons [Australia] Limited"). Lepanto
sought the dismissal of the case because the petition was not filed by
the real party in interest. We held that:
[The] submissions of petitioner on the change of its corporate name [are]
satisfactory and [we] resolve not to dismiss the present Petition for
Review on the ground of not being prosecuted under the name of the
real party in interest. While we stand by our pronouncement in Philips
Export on the importance of the corporate name to the very existence of
corporations and the significance thereof in the corporation’s right to
sue, we shall not go so far as to dismiss a case filed by the proper party
using its former name when adequate identification is presented. 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. There
is no doubt in our minds that the party who filed the present Petition,
having presented sufficient evidence of its identity and being
represented by the same counsel as that of the defendant in the case
sought to be dismissed, is the entity that will be benefited if this Court
grants the dismissal prayed for.34
This case is different, however, because it involves two separate and
distinct entities. The corporation that initiated the complaint for B.P. 22
is different from the corporation that filed the memorandum at the RTC
and the petition for review before the CA. It appears that Palmer is suing
Magallanes in its own right, not as agent of Andrews, the real party in
interest.
Even assuming arguendo that Palmer is correct in asserting that it is the
agent of Andrews, the latter should have been included in the title of the
case, in accordance with procedural rules.
Admittedly, in his Omnibus Motion filed before the MeTC Branch 62,
Magallanes concluded differently saying that the real party in interest is
Palmer and not Andrews. This conclusion was based on Palmiery’s
testimony dated 10 August 2003 that Andrews transferred all its "assets
and credits" to Palmer.35
Procedural rules forbid parties to change the theory of the case on
appeal. In Bote v. Spouses Veloso,36 we defined the theory of the case
as:
[a] comprehensive and orderly mental arrangement of principle and
facts, conceived and constructed for the purpose of securing a judgment
or decree of a court in favor of a litigant; the particular line of reasoning
of either party to a suit, the purpose being to bring together certain facts
of the case in a logical sequence and to correlate them in a way that
produces in the decision maker’s mind a definite result or conclusion
favored by the advocate.
The rationale for this rule was discussed in the earlier case of Goyanko,
Jr. v. United Coconut Planters Bank:37
[Changing the theory of the case] violates basic rules of fair play, justice
and due process.1âwphi1 Our rulings are clear - "a party who
deliberately adopts a certain theory upon which the case was decided
by the lower court will not be permitted to change [it] on appeal";
otherwise, the lower courts will effectively be deprived of the opportunity
todecide the merits of the case fairly. Besides, courts of justice are
devoid of jurisdiction to resolve a question not in issue.
However, the change in Magallanes’ posture was due to the confusing
testimony of Palmiery. We quote below portions of Palmiery’s testimony
dated 16 September 2004, the same date the Omnibus Motion was filed:
Atty. Bermudez: Mr. Palmiery, the last hearing you undertook to bring
before this Court the Deed of Assignment and Liabilities of Andrews to
Palmer Asia, do you have it with you now?
A: No, Sir.
Q: Why?
A: There is no assignment.
Q: There was no assignment?
A: Yes, because it was mentioned by our lawyer a while ago it was not
a legal transfer, it was a marketing transfer because the owners, the
office, the line of business are exactly the same.38 (Emphasis supplied)
EMSAVILL, counsel for Palmer and Andrews, even clarified in their
Opposition to Magallanes' Omnibus Motion that:
x x x [A]ccused loses sight of the fact that Mr. Palmiery is an ordinary
layman, not versed with the technicalities of the law. Expectedly,
ordinary laymen, such as Mr. Palmiery, do not fully appreciate and
understand the legal implications of x x x technical and legal term[s] such
as "transfer of assets and liabilities."39
Thus, since Magallanes timely filed a motion to dismiss based on valid
grounds, we rule that the CA erred in denying the said motion.
WHEREFORE, the petition is GRANTED. The Decision of the Court of
Appeals dated 17 September 2012 and the Resolution dated 14 January
2013 are hereby REVERSED and SET ASIDE. The Decision of the
Makati Regional Trial Court, Branch 61, is hereby REINSTATED.
SO ORDERED.
INDISPENSABLE PARTY
PHILIPPINE VETERANS BANK, Petitioner, v. SPOUSES RAMON
AND ANNABELLE SABADO, Respondents.
DECISION
PERLAS-BERNABE, J.:
Before the Court is a petition for review on certiorari1 filed by petitioner
Philippine Veterans Bank (petitioner) assailing the Decision2 dated
October 29, 2015 and the Resolution3 dated April 20, 2016 of the Court
of Appeals (CA) in CA-G.R. SP No. 135922, which reversed and set-
aside the Decision4 dated November 28, 2013 and the Order5 dated
April 28, 2014 of the Regional Trial Court of Antipolo City, Branch 98
3
(RTC) in SCA Case No. 13-1290 and ordered that Haus Talk Project
Managers, Inc. (HTPMI) be impleaded as an indispensable party to the
unlawful detainer case against respondents spouses Ramon and
Annabelle Sabado (respondents).
The Facts
On May 3, 2007, HTPMI and respondents entered into a Contract to
Sell6 whereby HTPMI agreed to sell a real property located at Lot 26,
Block 1, Eastview Homes, Barangay Balimbing, Antipolo City (subject
property) to respondents. In consideration therefor, respondents paid
HTPMI the total amount of P869,400.00, consisting of a P174,400.00
downpayment and the balance of P695,000.00 payable in 120 equal
monthly instalments. The parties further agreed that respondents' failure
to pay any amount within the stipulated period of time shall mean the
forfeiture of the downpayment and any other payments made in
connection thereto, as well as the cancellation and rescission of the
Contract to Sell in accordance with law.7 Shortly thereafter, or on August
16, 2007, HTPMI executed a Deed of Assignment 8in favor of petitioner
assigning, among others, its rights and interests as seller in the aforesaid
Contract to Sell with respondents, including the right to collect payments
and execute any act or deed necessary to enforce compliance
therewith.9
On October 14, 2009, petitioner, through a Notice of Cancellation by
Notarial Act,10 cancelled or rescinded respondents' Contract to Sell due
to the latter's failure to pay their outstanding obligations thereunder.
Consequently, petitioner demanded that respondents vacate the subject
property, but to no avail. Thus, petitioner was constrained to file the
Complaint11 dated August 20, 2010 for ejectment or unlawful detainer
against respondents before the Municipal Trial Court in Cities of Antipolo
City, Branch 1 (MTCC), docketed as SCA Case No. 093-10.12
13
In their defense, respondents argued that petitioner is not the real party
in interest to institute such complaint, since ownership over the subject
property remained with HTPMI. They expounded that under the Deed of
Assignment, only the rights and interests pertaining to the receivables
under the Contract to Sell were assigned/transferred to petitioner and
not the ownership or the right to the possession of the subject property.14
The MTCC Ruling
In a Decision15 dated April 3, 2013, the MTCC ruled in favor of
petitioner and, accordingly, ordered respondents to vacate the subject
property, and pay petitioner the amounts of P661,919.47 as rent
arrears from July 31, 2008 up to July 31, 2010, P10,000.00 as
attorney's fees, including costs of suit.16
The MTCC held that by virtue of the Deed of Assignment, petitioner
was subrogated to the rights of HTPMI under the Contract to Sell and,
hence, is a real party in interest entitled to institute the instant suit
against respondents for the purpose of enforcing the provisions of the
Contract to Sell. Further, the MTCC found petitioner's claim for
compensation in the form of rental just and equitable, pointing out that
the same is necessary to prevent respondents from unjustly enriching
themselves at petitioner's expense. Finally, the MTCC awarded
petitioner attorney's fees and costs of suit since it was compelled to
litigate the instant complaint.17
Aggrieved, respondents appealed18 to the RTC.
The RTC Ruling
In a Decision19 dated November 28, 2013, the RTC affirmed the
MTCC's ruling in toto.20 It ruled that by virtue of the Deed of
Assignment executed by HTPMI in petitioner's favor, the latter acquired
not only the right to collect the balance of the purchase price of the
subject property, but also all the rights of the assignor, including the
right to sue in its own name as the legal assignee. 21
Respondents moved for reconsideration,22 which was, however, denied
in an Order23 dated April 28, 2014. Undaunted, they elevated the case
to the CA.24
The CA Ruling
In a Decision25 dated October 29, 2015, the CA reversed and set aside
the RTC's ruling, and accordingly: (a) remanded the case to the MTCC
for HTPMI to be impleaded therein; and (b) directed the MTCC to
proceed with the trial of the case with dispatch.26 Initially, it upheld
petitioner's right as real party in interest to file the instant suit as
HTPMI's assignee. However, since legal title to the subject property
was retained by HTPMI pursuant to the provisions of the Deed of
Assignment, the latter is not only a real party in interest, but also an
indispensible party which should have been impleaded as a plaintiff
thereon and without which no final determination can be had in the
present case.27
Dissatisfied, petitioners moved for reconsideration,28 which was,
however, denied in a Resolution29 dated April 20, 2016; hence, this
petition.
The Issue Before the Court
The primordial issue is whether or not the CA correctly ruled that
HTPMI is an indispensable party to petitioner's ejectment suit against
respondents and, thus, must be impleaded therein.
The Court's Ruling
The petition is meritorious.
Section 7, Rule 3 of the Rules of Court mandates that all indispensable
parties should be joined in a suit, viz.:
SEC. 7. Compulsory joinder of indispensable parties. - Parties in
interest without whom no final determination can be had of an action
shall be joined either as plaintiffs or defendants.
Case law defines an indispensable party as "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 In Regner v. Logarta,32 the Court laid
down the parameters in determining whether or not one is an
indispensable party, viz.:
An indispensable party is a party who has x x x an interest in the
controversy or subject matter that a final adjudication cannot be
made, in his absence, without injuring or affecting that interest, a
party who has not only an interest in the subject matter of the
controversy, but also has an interest of such nature that a final
decree cannot be made without affecting his interest or leaving
the controversy in such a condition that its final determination
may be wholly inconsistent with equity and good conscience. It
has also been considered that an indispensable party is a person in
whose absence there cannot be a determination between the parties
already before the court which is effective, complete, or equitable.
Further, an indispensable party is one who must be included in an
action before it may properly go forward.
A person is not an indispensable party, however, if his interest in the
controversy or subject matter is separable from the interest of the
other parties, so that it will not necessarily be directly or
injuriously affected by a decree which does complete justice
between them. Also, a person is not an indispensable party if his
presence would merely permit complete relief between him and those
4
already parties to the action, or if he has no interest in the subject
matter of the action. It is not a sufficient reason to declare a person to
be an indispensable party that his presence will avoid multiple
litigation.33 (Emphases and underscoring supplied)
Guided by the foregoing parameters and as will be explained
hereunder, the CA erred in holding that HTPMI is an indispensable
party to the ejectment suit filed by petitioner against respondents.
Under the Deed of Assignment, HTPMI assigned its rights - save for
the right of ownership - to petitioner under the Contract to Sell:
2. RIGHTS UNDER THE CONTRACTS TO SELL. By this assignment,
the ASSIGNEE hereby acquires all rights of the ASSIGNOR under
the Contracts to Sell and under the law, including the right to
endorse any and all terms and conditions of the Contracts to Sell
and the right to collect the amounts due thereunder from the
purchaser of the Property. The ASSIGNOR for this purpose
hereby names, constitutes and appoints the ASSIGNEE [as its]
attorney-in-fact to execute any act and deed necessary in the
exercise of all these rights. Notwithstanding the assignment of the
Contracts to Sell and the Receivables thereunder to the ASSIGNEE,
the legal title to the Property and obligations of the ASSIGNOR under
the Contracts to Sell, including the obligation to complete the
development of the property and the warranties of a builder under the
law, shall remain the ASSIGNOR'S. x x x.34 (Emphasis and
underscoring supplied)
Verily, HTPMI's assignment of rights to petitioner must be deemed to
include the rights to collect payments from respondents, and in the
event of the latter's default, to cancel or rescind the Contract to Sell,
and resultantly, recover actual possession over the subject property, as
follows:
TERMS AND CONDITIONS
b) the [respondents] herein agree to perform and undertake the
[HTPMI] Payment Plan with the following terms:
i) Downpayment x x x of ONE HUNDRED SEVENTY FOUR
THOUSAND FOUR HUNDRED PESOS ONLY (P174,400.00) to be
paid within twelve (12) months after payments [sic] of the
reservation. Failure to pay two (2) consecutive monthly
installments will mean cancellation of this contract and forfeiture
of all payments. Discount terms shall be based on [HTPMI] Agreed
Payment Plan.
xxxx
iii) Failure to pay any amount within the stimulated [sic] period of
time shall mean forfeiture of the down payment and any other
payments made and the Contract to Sell shall be cancelled and
rescinded in accordance with law.35(Emphases and underscoring
supplied)
In view of the foregoing, the Court agrees with the findings of the
courts a quo that petitioner had the right to institute the instant suit
against respondents.
However, the Court cannot subscribe to the CA's conclusion that since
HTPMI retained ownership over the subject property pursuant to the
Deed of Assignment, it is an indispensable party to the case. As
adverted to earlier, an indispensable party is one who has an interest
in the subject matter of the controversy which is inseparable from the
interest of the other parties, and that a final adjudication cannot be
made without affecting such interest. Here, the only issue in the instant
unlawful detainer suit is who between the litigating parties has the
better right to possess de facto the subject property.36Thus, HTPMI's
interest in the subject property, as one holding legal title thereto, is
completely separable from petitioner's rights under the Contract to Sell,
which include the cancellation or rescission of such contract and
resultantly, the recovery of actual possession of the subject property by
virtue of this case. Hence, the courts can certainly proceed to
determine who between petitioner and respondents have a better right
to the possession of the subject property and complete relief can be
had even without HTPMI's participation.
In sum, both the MTCC and the RTC are correct in ruling on the merits
of the instant unlawful detainer case even without the participation of
HTPMI.
WHEREFORE, the petition is hereby GRANTED. The Decision dated
October 29, 2015 and the Resolution dated April 20, 2016 of the Court
of Appeals in CA-G.R. SP No. 135922 are
hereby REVERSEDand SET-ASIDE. The Decision dated November
28, 2013 and the Order dated April 28, 2014 of the Regional Trial Court
of Antipolo City, Branch 98 in SCA Case No. 13-1290, affirming in
toto the Decision dated April 3, 2013 of the Municipal Trial Court in
Cities of Antipolo City, Branch 1 in SCA Case No. 093-10,
are REINSTATED.
SO ORDERED.
DIONISIA MONIS LAGUNILLA and RAFAEL MONIS, Petitioners,
vs.
ANDREA MONIS VELASCO and MACARIA MONIS, Respondents.
DECISION
NACHURA, J.:
For review is the Court of Appeals (CA) Decision1 dated July 13, 2005
in CA-G.R. CV No. 56998 affirming with modification the Regional Trial
Court (RTC) Decision2 dated April 24, 1997 in Civil Case No. 466 for
Annulment of Documents and Damages.
The facts, as culled from the records, are as follows:
Rev. Fr. Patricio (Patricio), Magdalena Catalina (Magdalena),
Venancio, and respondent Macaria, all surnamed Monis, as well as
respondent Andrea Monis - Velasco (Andrea), are siblings. Venancio is
the father of petitioners Dionisia Monis Lagunilla and Rafael Monis.
During their lifetime, Patricio and Magdalena acquired several
properties which included several parcels of land in the province of La
Union and another one situated in Quezon City, with an area of 208.35
sq. m. (otherwise known as the Quezon City property).3 The Quezon
City property was co-owned by Patricio and Magdalena, together with
Andrea and Pedro Velasco.
After the death of Patricio and Magdalena, or on February 24, 1993,
Andrea and Macaria (to the exclusion of Venancio’s children) executed
a Deed of Extrajudicial Settlement with Donation4 (hereinafter referred
to as the subject Deed) involving the Quezon City property, and
donated the same to Andrea’s son, Pedro Monis Velasco, Jr. (Pedro).
By virtue of said Deed, Transfer Certificate of Title (TCT) No. RT-
60455 (190472)5 was cancelled and a new one (TCT No. 85837) was
issued in the name of Pedro.6
On June 1, 1993, petitioners instituted an action for Annulment of
Documents and Damages7 before the Regional Trial Court (RTC) of
Balaoan, La Union against respondents. The case was raffled to
Branch 34 and was docketed as Civil Case No. 466. In their complaint,
petitioners sought the annulment of the subject Deed, allegedly
because of the fraudulent act committed by respondents in executing
the same. They claimed that respondents misrepresented that they
were the only surviving heirs of Patricio and Magdalena when, in fact,
they (petitioners) were also surviving heirs by virtue of their right to
represent their deceased father Venancio. In short, being Patricio and
Magdalena’s nephew and niece, they were asserting their rights, as co-
heirs, to the Quezon City property. Respondents’ fraudulent act was,
according to petitioners, a ground for the annulment of the subject
Deed. As a consequence of the nullity of the extrajudicial settlement,
they further sought the cancellation of the title and tax declarations
issued pursuant thereto, in the name of Pedro.
Respondents countered that nowhere in the subject Deed did they
assert to be the only surviving heirs of Patricio and Magdalena.
5
Admittedly, however, they claimed to be the only legitimate sisters of
the deceased. They added that annulment of the Deed was not
tenable, considering that petitioners already received advances on
their share of the properties of the decedent; besides, there were other
properties that had not been the subject of partition from which they
could obtain reparation, if they are so entitled. Contrary to petitioners’
claim, respondents insisted that there was no way that the subject
Deed could be annulled in the absence of any valid ground to rely on. 8
No amicable settlement was reached during the pre-trial; thus, trial on
the merits ensued.
After petitioners rested their case, they moved for the amendment of
the complaint to implead additional party and to conform to the
evidence presented.9 Petitioners averred that the resolution of the case
would affect the interest of Pedro as donee; hence, he is an
indispensable party. The RTC, however, denied the motion, as the
amendment of the complaint would result in the introduction of a
different cause of action prejudicial to respondents. The court further
held that the amendment of the complaint would unduly delay the
resolution of the case.
On April 24, 1997, the RTC decided in favor of respondents, disposing,
as follows:
WHEREFORE, taken in the above light, the Court hereby orders the
case DISMISSED and further orders the plaintiffs to pay the
defendants jointly and severally the following, thus:
1) ₱100,000.00 as moral damages;
2) ₱50,000.00 as exemplary damages;
3) ₱100,000.00 as attorney’s fees; and
4) To pay the costs of this suit.
SO ORDERED.10
Applying Article 887 of the Civil Code, the RTC ruled that petitioners
are not compulsory heirs; thus, they could not invoke bad faith as a
ground to rescind the subject Deed. As to respondents’ declaration that
they were the only surviving heirs of the decedents, the trial court said
that it was, in a way, a non-recognition of petitioners’ claim that they,
too, are heirs. The court, likewise, gave credence to respondents’ claim
that petitioners had previously received advances on their share of the
inheritance. As to the remedy of rescission, the court declared that it
was not available in the instant case because of the existence of other
remedies that may be availed of by petitioners, considering that there
were other properties from which they could obtain reparation,
assuming they are entitled.11
On appeal to the Court of Appeals, the appellate court affirmed with
modification the trial court’s decision, viz.:
WHEREFORE, premises considered, the assailed decision dated April
24, 1997 of the Regional Trial Court of Balao[a]n, La Union in Civil
Case No. 466 is hereby AFFIRMED with MODIFICATION, in that the
award of exemplary damages and attorney’s fees is deleted. No
pronouncement as to costs.
SO ORDERED.12
The appellate court made a definitive conclusion that petitioners,
together with respondents, are heirs of Macaria and Patricio. However,
considering that petitioners are not compulsory heirs, it agreed with the
RTC that they could not use "bad faith" as a ground to rescind the
contract as provided for in Article 1104 of the New Civil Code. The
appellate court also agreed with the trial court that bad faith on the part
of respondents was wanting. While recognizing the doctrine that the
subject Deed was not binding on petitioners because they did not
participate therein, the appellate court refused to annul the contract on
the basis thereof, in view of the existence of other properties previously
received by petitioners and those that may still be the subject of
partition. The court further denied the prayer to annul the donation
made in favor of Pedro, inasmuch as it was belatedly raised by
petitioners.13 The appellate court likewise found the deletion of the
award of exemplary damages and attorney’s fees proper.141awphi1
Unsatisfied, petitioners come to this Court in this petition for review on
certiorari raising the following issues:
I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION AND MANIFESTLY OVERLOOKED
RELEVANT FACTS NOT DISPUTED AND WHICH IF PROPERLY
CONSIDERED WOULD JUSTIFY A DIFFERENT CONCLUSION
THAT THERE IS FRAUD OR BAD FAITH ON THE PART OF
DEFENDANTS-APPELLEES IN EXCLUDING PLAINTIFFS-
APPELLANTS FROM THE DEED OF EXTRA JUDICIAL
SETTLEMENT WITH DONATION.
II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN CONCLUDING THAT "THE
MERE ACT OF REPUDIATING THE INTEREST OF A CO-OWNER IS
NOT SUFFICIENT TO SUPPORT A FINDING OF BAD FAITH SINCE
NO BAD FAITH CAN BE ATTRIBUTED TO A PERSON WHO ONLY
EXERCISES A PRIVILEGE GRANTED BY LAW."
III. WHETHER OR NOT THE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN CONCLUDING THAT THERE IS
ABSENCE OF FRAUD OR BAD FAITH ON THE PART OF
DEFENDANTS-APPELLEES IN EXCLUDING PLAINTIFFS-
APPELLANTS IN THE EXTRA JUDICIAL SETTLEMENT BASED ON
AN INFERENCE THAT IS MANIFESTLY MISTAKEN THAT
PLAINTIFFS-APPELLANTS HAVE ALREADY OBTAINED THEIR
ADVANCE OF INHERITANCE FROM THE DECEDENTS.
IV. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED AN ERROR OF LAW AND GRAVE ABUSE OF
DISCRETION IN CONCLUDING THAT THE ASSAILED
EXTRAJUDICIAL SETTLEMENT CANNOT BE ANNULLED SINCE
THE MISREPRESENTATION IS NOT SO GRAVE IN CHARACTER
AS TO AMOUNT TO BAD FAITH (AND) RULE 74, SECTION 1,
SECOND PARAGRAPH, DOES NOT DISCOUNT THE POSSIBILITY
THAT SOME HEIRS MAY HAVE BEEN EXCLUDED IN THE
EXECUTION OF THE EXTRAJUDICIAL SETTLEMENT.
V. WHETHER OR NOT THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO
AN ERROR OF LAW IN CONCLUDING THAT THE DEED OF
EXTRAJUDICIAL SETTLEMENT WITH DONATION CANNOT BE
ANNULLED.
VI. WHETHER OR NOT THE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN AWARDING MORAL DAMAGES
DESPITE FINDING THAT THE SUIT WAS MADE IN GOOD FAITH.
VII. WHETHER OR NOT THE COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION IN AFFIRMING THE DECISION OF
THE REGIONAL TRIAL COURT THAT THE MOTION TO AMEND
COMPLAINT TO IMPLEAD ADDITIONAL PARTY AND TO
CONFORM TO THE EVIDENCE PRESENTED FILED BY THE
PLAINTIFFS-APPELLANTS IS NOT PROPER.15
In fine, petitioners challenge the appellate court’s conclusions on the
validity of the extrajudicial settlement with donation and the denial of
the motion to amend the complaint to implead an indispensable party
and conform to the evidence presented.
Much as we would like to make a definitive conclusion on the
respective rights of all the parties and decide, once and for all, their
interests over the subject property, we are barred by a jurisdictional
issue.
Jurisdiction is the power invested in courts for administering justice,
that is, to hear and decide cases. For the court to exercise the authority
to dispose of the case on the merits, it must acquire jurisdiction over
the subject matter and the parties.16
6
Courts acquire jurisdiction over a party plaintiff upon the filing of the
complaint. On the other hand, jurisdiction over the person of a party
defendant is assured upon the service of summons in the manner
required by law or, otherwise, by his voluntary appearance. As a rule, if
a defendant has not been summoned, the court acquires no jurisdiction
over his person, and a personal judgment rendered against such
defendant is null and void. A decision that is null and void for want of
jurisdiction of the trial court is not a decision in contemplation of law
and can never become final and executory.17
Corollary to the issue of jurisdiction, and equally important, is the
mandatory rule on joinder of indispensable parties set forth in Section
7, Rule 3 of the Rules of Court, to wit:
SEC. 7. Compulsory joinder of indispensable parties. – Parties in
interest without whom no final determination can be had of an action
shall be joined either as plaintiffs or defendants.
The general rule with reference to parties to a civil action requires the
joinder of all necessary parties, where possible, and the joinder of all
indispensable parties under any and all conditions. 18 The evident intent
of the Rules on the joinder of indispensable and necessary parties is
the complete determination of all possible issues, not only between the
parties themselves but also as regards other persons who may be
affected by the judgment.19
In this case, petitioners challenge the denial of their motion to amend
the complaint to implead Pedro who, they claim, is an indispensable
party to the case. We are, therefore, compelled to address this
important question.
In Regner v. Logarta20 and Arcelona v. CA,21 we laid down the test to
determine if a party is an indispensable party, viz.:
An indispensable party is a party who has an interest in the
controversy or subject matter that a final adjudication cannot be made,
in his absence, without injuring or affecting that interest, a party who
has not only an interest in the subject matter of the controversy, but
also has an interest of such nature that a final decree cannot be made
without affecting his interest or leaving the controversy in such a
condition that its final determination may be wholly inconsistent with
equity and good conscience. It has also been considered that an
indispensable party is a person in whose absence there cannot be a
determination between the parties already before the court which is
effective, complete or equitable. Further, an indispensable party is one
who must be included in an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in the
controversy or subject matter is separable from the interest of the other
parties, so that it will not necessarily be directly or injuriously affected
by a decree which does complete justice between them. Also, a person
is not an indispensable party if his presence would merely permit
complete relief between him and those already parties to the action, or
if he has no interest in the subject matter of the action. It is not a
sufficient reason to declare a person to be an indispensable party that
his presence will avoid multiple litigation.22
In upholding the denial of the motion to amend the complaint, the
appellate court concluded that the sole desire of petitioners in
instituting the case was the annulment of the extrajudicial settlement.
Effectively, it separated the question of the validity of the extrajudicial
settlement from the validity of the donation. Accordingly, the court said,
the latter issue could be threshed out in a separate proceeding later.
This explains why Pedro was not considered an indispensable party by
the trial and appellate courts.1avvphi1
We beg to differ.
Even without having to scrutinize the records, a mere reading of the
assailed decision readily reveals that Pedro is an indispensable party.
At the time of the filing of the complaint, the title to the Quezon City
property was already registered in the name of Pedro, after TCT No.
60455 (190472) in the names of Pedro Velasco, Andrea, Magdalena
and Patricio Monis was cancelled, pursuant to the extrajudicial
settlement with donation executed by respondents. The central thrust
of the complaint was that respondents, by themselves, could not have
transferred the Quezon City property to Pedro because petitioners, as
heirs of Patricio and Magdalena, also have rights over it. Accordingly,
petitioners specifically prayed that the extrajudicial settlement with
donation be annulled and the transfer certificate of title and tax
declarations (in the name of Pedro) issued pursuant thereto be
canceled. The pertinent portion of the complaint is quoted for easy
reference:
WHEREFORE, in view of the foregoing, it is respectfully prayed that
judgment be rendered as follows –
1. By ordering the annulment of Annex "A" hereof as well as the
cancellation of transfer certificate of title and tax declarations issued
pursuant thereto.23
If such prayer and thrust were to be denied (as held by the trial and
appellate courts), the problem would be less obvious, as the status quo
would be maintained. However, if they were to be upheld, Pedro’s title
to the property would undoubtedly be directly and injuriously affected.
Even if we only resolve the validity of the extrajudicial settlement, there
would be no final adjudication of the case without involving Pedro’s
interest.
Verily, Pedro’s interest in the subject matter of the suit and in the relief
sought are so inextricably intertwined with that of the other parties. His
legal presence as a party to the proceedings is, therefore, an absolute
necessity.24 His interest in the controversy and in the subject matter is
not separable from the interest of the other parties.
It is unfortunate that petitioners failed to implead Pedro as defendant in
their complaint. Interestingly, however, they realized such mistake,
albeit belatedly, and thus sought the amendment of the complaint to
join him as a defendant, but the RTC refused to grant the same.
Well-settled is the rule that joinder of indispensable parties is
mandatory.25 It is a condition sine qua non to the exercise of judicial
power.26 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.27 Without the presence of indispensable parties to the suit, the
judgment of the court cannot attain finality.28 One who is not a party to
a case is not bound by any decision of the court; otherwise, he will be
deprived of his right to due process.29That is why the case is generally
remanded to the court of origin for further proceedings.30
In light of these premises, no final ruling can be had on the validity of
the extrajudicial settlement. While we wish to abide by the mandate on
speedy disposition of cases, we cannot render a premature judgment
on the merits. To do so could result in a possible violation of due
process. The inclusion of Pedro is necessary for the effective and
complete resolution of the case and in order to accord all parties the
benefit of due process and fair play.31
Nevertheless, as enunciated in Commissioner Domingo v.
Scheer,32 Lotte Phil. Co., Inc. v. Dela Cruz,33 and PepsiCo, Inc. v.
Emerald Pizza, Inc.,34 the non-joinder of indispensable parties is not a
ground for the dismissal of an action. The remedy is to implead the
non-party claimed to be indispensable. 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 at such times as are just. If the plaintiff refuses to
implead an indispensable party despite the order of the court, then the
court may dismiss the complaint for the plaintiff’s failure to comply with
a lawful court order.
In light of the foregoing, a remand of the case to the trial court is
imperative.
WHEREFORE, the Decision of the Court of Appeals dated July 13,
2005 in CA-G.R. CV No. 56998 is SET ASIDE. Let the case be
REMANDED to the Regional Trial Court for the inclusion of Pedro
Velasco, Jr. as an indispensable party, and for further proceedings.
SO ORDERED.
7

PHILIPPINE NATIONAL BANK, Petitioner,
vs.
HEIRS OF ESTANISLAO MILITAR AND DEOGRACIAS MILITAR,
represented by TRANQUILINA MILITAR, Respondents.
x---------------------------------x
G.R. No. 165165 June 30, 2006
SPOUSES JOHNNY LUCERO AND NONA ARIETE, Petitioners,
vs.
HEIRS OF ESTANISLAO MILITAR, DEOGRACIAS MILITAR, and
TRANQUILINA MILITAR (deceased), now represented by
AZUCENA MILITAR, FREDDIE MILITAR, EDUARDO MILITAR,
ROMEO L. MILITAR, NELLY LY BOLANIO, LETICIA LY and DELIA
LY SI ASOYCO, Respondents.
RESOLUTION
YNARES-SANTIAGO, J.:
Before us are the motions for reconsideration filed by petitioners
Philippine National Bank (PNB) in G.R. No. 164801 and Spouses
Johnny Lucero and Nona Ariete (Lucero Spouses) in G.R. No. 165165
seeking a reconsideration of our August 18, 2005 Decision in these
consolidated cases which affirmed in toto the June 4, 2004 Decision
and August 4, 2004 Resolution of the Court of Appeals in CA-G.R. CV
No. 54831 holding that both petitioners PNB and the Lucero Spouses
were not mortgagee and buyers in good faith, respectively.
In their separate motions for reconsideration, both petitioners PNB and
the Lucero Spouses in the main assert that they were mortgagee and
buyers for value in good faith, respectively. Thus, the Lucero Spouses
pray that we "take a second hard look at the facts and circumstances
of the case." Respondents however argue that PNB cannot be
considered a mortgagee in good faith as it failed to inspect the
disputed property when offered to it as security for the loan, which
could have led it to discover the forged instruments of sale. Similarly,
the Lucero Spouses cannot be regarded as innocent purchasers for
value, respondents’ claim, as they failed to inquire from the occupants
of the disputed property the status of the property. Before revisiting the
facts and circumstances of the instant case, a review of existing
jurisprudence may be expedient in resolving the twin motions for
reconsideration.
In Cabuhat v. Court of Appeals, we said that "it is well-settled that even
if the procurement of a certificate of title was tainted with fraud and
misrepresentation, such defective title may be the source of a
completely legal and valid title in the hands of an innocent purchaser
for value. Thus –
Where innocent third persons, relying on the correctness of the
certificate of title thus issued, acquire rights over the property the court
cannot disregard such rights and order the total cancellation of the
certificate. The effect of such an outright cancellation would be to
impair public confidence in the certificate of title, for everyone dealing
with property registered under the Torrens system would have to
inquire in every instance whether the title has been regularly or
irregularly issued. This is contrary to the evident purpose of the law.
Every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in
no way oblige him to go behind the certificate to determine the
condition of the property.1
Cabuhat was later invoked by Clemente v. Razo2 and Velasquez, Jr. v.
Court of Appeals.3 Accordingly, in Lim v. Chuatoco we said that "it is a
familiar doctrine that a forged or fraudulent document may become the
root of a valid title, if the property has already been transferred from the
name of the owner to that of the forger. This doctrine serves to
emphasize that a person who deals with registered property in good
faith will acquire good title from a forger and be absolutely protected by
a Torrens title. In the final analysis, the resolution of this case depends
on whether the petitioners are purchasers in good faith." 4
In a litany of cases, we have defined a purchaser in good faith as one
who buys property of another without notice that some other person
has a right to, or interest in, such property and pays full and fair price
for the same at the time of such purchase or before he has notice of
the claim or interest of some other person in the property.5
Thus, as a general rule, where the land sold is in the possession of a
person other than the vendor, the purchaser must go beyond the
certificate of title and make inquiries concerning the actual possessor.
A buyer of real property which is in possession of another must be
wary and investigate the rights of the latter. Otherwise, without such
inquiry, the buyer cannot be said to be in good faith and cannot have
any right over the property.6 We explained this principle in
Consolidated Rural Bank (Cagayan Valley), Inc. v. Court of Appeals
and also held therein that this rule likewise applies to mortgagees of
real property7 –
As this Court explained in the case of Spouses Mathay v. Court of
Appeals:
Although it is a recognized principle that a person dealing on a
registered land need not go beyond its certificate of title, it is also a
firmly settled rule that where there are circumstances which would put
a party on guard and prompt him to investigate or inspect the property
being sold to him, such as the presence of occupants/tenants thereon,
it is of course, expected from the purchaser of a valued piece of land to
inquire first into the status or nature of possession of the occupants,
i.e., whether or not the occupants possess the land en concepto de
dueño, in the concept of the owner. As is the common practice in the
real estate industry, an ocular inspection of the premises involved is a
safeguard a cautious and prudent purchaser usually takes. Should he
find out that the land he intends to buy is occupied by anybody else
other than the seller who, as in this case, is not in actual possession, it
would then be incumbent upon the purchaser to verify the extent of the
occupant’s possessory rights. The failure of a prospective buyer to take
such precautionary steps would mean negligence on his part and
would thereby preclude him from claiming or invoking the rights of a
"purchaser in good faith."
This Rule equally applies to mortgagees of real property. In the case of
Crisostomo v. Court of Appeals the Court held –
It is a well-settled rule that a purchaser or mortgagee cannot close his
eyes to facts which should put a reasonable man upon his guard, and
then claim that he acted in good faith under the belief that there was no
defect in the title of his vendor or mortgagor. His mere refusal to
believe that such defect exists, or his willful closing of his eyes to the
possibility of the existence of a defect in the vendor’s or mortgagor’s
title, will not make him an innocent purchaser or mortgagee for value, if
it afterwards develops that the title was in fact defective, and it appears
that he had such notice of the defects as would have led to its
discovery had he acted with the measure of a prudent man in like
situation.
Accordingly, for a purchaser of a property in the possession of another
to be in good faith, he must exercise due diligence, conduct an
investigation, and weigh the surrounding facts and circumstances like
what any prudent man in a similar situation would do. In Domalanta v.
Commission on Elections8 we noted the use in other jurisdictions of the
terms "man of reasonable caution"9 and "ordinarily prudent and
cautious man."10 These terms, we said, are legally synonymous and
their reference is not to a person with training in law such as a
prosecutor or a judge but to the average man on the street. It ought to
be emphasized that the average man weighs facts and circumstances
without resorting to the calibration of our technical rules of evidence of
which his knowledge is nil. Rather, he relies on the calculus of common
sense of which all reasonable men have an abundance. And, "[b]y law
and jurisprudence, a mistake upon a doubtful or difficult question of law
may properly be the basis of good faith."11
On the other hand, a mortgagee, particularly a bank or financial
institution whose business is impressed with public interest, is
expected to exercise more care and prudence than a private individual
in its dealings, even those involving registered lands.12 In Sunshine
Finance and Investment Corp. v. Intermediate Appellate Court we
8
presumed that an investment and financing corporation "is experienced
in its business. Ascertainment of the status and condition of properties
offered to it as security for loans it extends must be a standard and
indispensable part of its operations. Surely, it cannot simply rely on an
examination of a Torrens certificate to determine what the subject
property looks like as its condition is not apparent in the document. The
land might be in a depressed area. There might be squatters on it. It
might be easily inundated. It might be an interior lot, without convenient
access. These and other similar factors determine the value of the
property and so should be of practical concern to the (investment and
financing corporation)."13
In fine, the diligence with which the law requires the individual or a
corporation at all times to govern a particular conduct varies with the
nature of the situation in which one is placed, and the importance of
the act which is to be performed.14
Similarly, in ascertaining good faith, or the lack of it, which is a question
of intention, courts are necessarily controlled by the evidence as to the
conduct and outward acts by which alone the inward motive may, with
safety, be determined. Good faith, or want of it, is capable of being
ascertained only from the acts of one claiming its presence, for it is a
condition of the mind which can be judged by actual or fancied token or
signs.15 Good faith, or want of it, is not a visible, tangible fact that can
be seen or touched, but rather a state or condition of mind which can
only be judged by actual or fancied token or signs.16 Good faith
connotes an honest intention to abstain from taking unconscientious
advantage of another.17 Accordingly, in University of the East v. Jader
we said that "[g]ood faith connotes an honest intention to abstain from
taking undue advantage of another, even though the forms and
technicalities of law, together with the absence of all information or
belief of facts, would render the transaction unconscientious." 18
Withal, in Sigaya v. Mayuga the Court said that "good faith consists in
the possessor’s belief that the person from whom he received the thing
was the owner of the same and could convey his title. Good faith, while
it is always to be presumed in the absence of proof to the contrary,
requires a well founded belief that the person from whom title was
received was himself the owner of the land, with the right to convey it.
There is good faith where there is an honest intention to abstain from
taking any unconscientious advantage of another. Otherwise stated,
good faith is the opposite of fraud and it refers to the state of mind
which is manifested by the acts of the individual concerned."19
Contrastingly, in Magat, Jr. v. Court of Appeals the Court explained
that "[b]ad faith does not simply connote bad judgment or negligence. It
imports a dishonest purpose or some moral obliquity and conscious
doing of wrong. It means a breach of a known duty through some
motive or interest or ill will that partakes of the nature of fraud." 20 In
Arenas v. Court of Appeals the Court held that the determination of
whether one acted in bad faith is evidentiary in nature.21 Thus "[s]uch
acts (of bad faith) must be substantiated by evidence."22 Indeed, the
unbroken jurisprudence is that "[b]ad faith under the law cannot be
presumed; it must be established by clear and convincing evidence.23
All told, the ascertainment of good faith, or lack of it, and the
determination of whether due diligence and prudence were exercised
or not, are questions of fact. And while settled is the principle that this
Court is not a trier of facts24and the general rule is that the
determination of whether or not a buyer or mortgagee is in good faith is
generally outside the province of this Court to determine in a petition
for review,25 inGabriel v. Spouses Mabanta we said that "[t]his rule,
however, is not an iron-clad rule. In Floro v. Llenado we enumerated
the various exceptions and one which finds application to the present
case is when the findings of the Court of Appeals are contrary to those
of the trial court."26 Thus, in Clemente v. Razo we held that "the issue
of whether or not one is an innocent purchaser for value is a question
of fact which, as a rule, is not for this Court to determine. In the same
breath, however, there are recognized exceptions to such rule, not the
least of which is when, as in this case, the findings of the Court of
Appeals are contrary to that of the trial court."27
In the instant case, the trial court which had the sole opportunity to
observe first hand the demeanor of witnesses and consider the relative
weight of the evidence presented, concluded that "Philippine National
Bank and Spouses Johnny Lucero and Nona Ariete are purchasers in
good faith." Respondent appellate court however found that neither the
PNB nor the Lucero Spouses can be regarded as buyers in good faith
as they failed to inquire from the possessors the status of the disputed
property. We thus go back to the records of the case and the
substantiated allegations.
We begin with petitioner PNB. While it may be true that the bank could
not have known the forgery committed by the Jalbuna Spouses at the
time the disputed property was mortgaged to it, still it could not be
completely exonerated from any liability arising from its apparent
omission, if not negligence, to further investigate the nature of the
possession or the title of the respondents who were the alleged
occupants of the property. PNB did not present any witness before the
trial court who had personal knowledge of whether or not the bank had
conducted the requisite ocular inspection or investigation before
accepting the property as security for the loan of the Jalbuna Spouses.
Perhaps PNB inordinately relied on the presumption of regularity in its
compliance with the requirements for the Extrajudicial Foreclosure of
Mortgage, such as the publication of the notice of auction sale, and
assumed that the burden of proof was on the respondents to prove that
the bank was remiss in its obligation. Perhaps too, the bank assumed
that its presumed compliance with the foregoing requirements was
sufficient to operate as a constructive notice to all those claiming
ownership of or a right to possess the mortgaged property, or those
who would be adversely affected by the impending foreclosure sale. It
does not however alter the fact that the only witness presented by PNB
merely inherited from his predecessor the records relating to the
account of the Jalbuna Spouses, and hence had no personal
knowledge of whether or not an ocular inspection was in fact
conducted on the property. Thus –
Atty. Bañares:
Q Did you not know whether there was an inspector who made the
inspection of the property?
A I do not know.28
xxxx
Q So, is it safe to conclude now that you do not know whether
Philippine National Bank sent some inspectors to Lot 3017-B before
the loan…
Court:
Answered, he did not know. How will he know?
Atty. Bañares:
That will be all, Your Honor.29
Indeed, had petitioner PNB conducted an ocular inspection as it
claims, it would have found out that the mortgagors, Spouses Jalbuna,
were not in actual possession of the property but herein respondents
and their predecessors-in-interest, which information should have put it
on inquiry as to the real status of the property. Consequently, petitioner
PNB should have inquired into the circumstances of the possession by
herein respondents and their predecessors in interest.
In fine, there is no showing that petitioner PNB, a banking institution,
which is expected to exercise more care and prudence in its dealings
involving registered land, ascertained the status and condition of the
property being offered to it as a security for the loan before it approved
the loan. Hence, we therefore find that there is no reversible error
committed by the Court of Appeals in finding that PNB could not be
considered a mortgagee in good faith.
We now go to petitioners Lucero Spouses. The Lucero Spouses knew
from the very beginning that the disputed property was occupied by
third parties. They resided in the adjoining property. Thus, they went
beyond the title of petitioner PNB, and upon inquiry, were made to
9
believe that the partial occupation by private respondents of the
disputed property was merely being tolerated by the rightful owner.
Accordingly, before the trial court, petitioner Nona A. Lucero testified
that –
Atty. Posecion:
Q Did your mother not tell you that the Militar family has been residing
in the land so that it would be difficult if you buy the land?
A No, because I will make (the) transaction (with) the Philippine
National Bank, not (with) the Militars.
Q So that you disregarded whatever right the Militars have over the
land, right?
A No, because the vendee/buyer has the authority to make expenses
for all the squatters.30
The Lucero Spouses also knew that petitioner PNB had already
acquired the property in a foreclosure sale and that petitioner PNB had
in fact transferred the title to its name for almost five years already.
Their belief that petitioner PNB thereafter had the right to transfer title
over the disputed property was strengthened by the fact that they
similarly consolidated their ownership over the adjoining property after
buying it from respondent Romeo Militar and assuming his loan with
petitioner PNB.31
The reliance of the Lucero Spouses, who never participated in the
auction sale, on the right of petitioner PNB which had the title in its
name for almost five years already is not totally misplaced. On June 5,
1975 the disputed property was mortgaged to petitioner PNB. Some
three years later, on September 5, 1978, the mortgaged property was
extrajudicially foreclosed when the mortgagors defaulted in the
payment of their loan obligation, with petitioner PNB as the sole and
highest bidder for P119,961.36. Some four years thereafter, or on
November 11, 1982, a deed of sale was executed in favor of petitioner
PNB after the mortgagors failed to redeem the disputed property. On
December 6, 1982, title over the disputed property was issued to
petitioner PNB. Thus, presented during trial were, among others, the
Affidavit of Publication of Sheriff’s Notice of Sale at Public Auction
showing that petitioner PNB complied with the law on extrajudicial
foreclosure of mortgage;32 the Certificate of Sale at Public Auction of
September 5, 1978 issued in favor of petitioner PNB as the highest
bidder in the auction sale of the lot covering the disputed
property;33 and the Certification of September 27, 1994 issued by the
Register of Deeds of Iloilo stating that title to the lot covering the
disputed property was issued in favor of PNB.34 All told, it took almost
eight years for petitioner PNB to consolidate its title over the disputed
property from the time it was mortgaged to it.lawphil.net
The Lucero Spouses purchased the disputed property from petitioner
PNB as an acquired asset for P229,000.00 and only on November 9,
1987, or some nine years after it extrajudicially foreclosed the property,
and some five years after title was transferred to it. Hence, we cannot
really say that they acquired the property in bad faith; on the other
hand, we are more convinced, if not for fairness, equity and justice,
that they acquired the disputed property in good faith and for a
valuable consideration on the basis of the clean title of the bank.
And between the bank whose proof of ownership is the title acquired
after years of foreclosure proceedings and sale, and the supposed
tolerated occupation of herein respondents whose rights are dubious,
and at best vague, petitioners Lucero Spouses cannot be faulted for
considering petitioner PNB as having a better right over herein
respondents and could very well rely on the title of the bank. After all,
even this Court has "take(n) judicial notice of the uniform practice of
financing institutions to investigate, examine and assess the real
property offered as security for any loan application."35 It must be
remembered that the prudence required of the Lucero Spouses is not
that of a person with training in law, but rather that of an average man
who "weighs facts and circumstances without resorting to the
calibration of our technical rules of evidence of which his knowledge is
nil."36 Hence, petitioners Lucero Spouses bought the disputed property
with the honest belief that petitioner PNB was its rightful owner and
could convey title to the property. They can therefore be considered as
buyers in good faith as they have exercised due diligence required
under the circumstances.
Also, nowhere in the records does it show that the Lucero Spouses
were in bad faith. Neither were private respondents able to prove it,
much less were they able to establish it by clear and convincing
evidence as required by the rules. On the contrary, the trial court found
that the Lucero Spouses acted in good faith "since they bought the lot
in question from defendant, Philippine National Bank."37 They could
rely on what appears on the face of the Certificate of Title in light of the
attendant circumstances, especially after considering that the
requirements for the extrajudicial foreclosure of mortgage such as
publication and notice appear to have been religiously complied with by
PNB.
In contrast, we find, after a meticulous scrutiny of the records, that the
respondents are not entirely blameless. They have not established
their right or interest in the property aside from their belated and
unsubstantiated allegation that they were the successors-in-interest of
Deogracias, Glicerio, Tomas and Caridad, all surnamed Militar.
Deogracias died on March 17, 1964, Glicerio on March 22, 1939,
Tomas on August 20, 1959, and Caridad on April 29, 1957. Since the
deaths of their alleged predecessors-in-interest, respondents have not
shown that they have taken even the initial steps to have the property
registered in their names. Nor have they even alleged that they paid
any real property tax on the disputed property like any real owner
should do. For this would have put them on notice that the said
property has been registered in the name of a third party.
Thus, to reiterate for emphasis, the Deed of Sale which transferred the
property to the Spouses Jalbuna was executed on April 24, 1975.
Clearly, respondents had more than enough time and opportunity from
the death of their ascendants to institute proceedings to have the
property adjudicated to them, if indeed it was true that they were the
lawful heirs of Deogracias, Glicerio, Tomas and Caridad, and were the
new owners of the property by succession. This, they did not do. If they
did, the forgery allegedly committed by the Jalbuna Spouses which
resulted in the Deed of Absolute Sale of April 24, 1975 could not have
been committed or pushed through and the Lucero Spouses, as a
consequence, would not have been induced to buy the property.
The Jalbuna Spouses acquired title to the property on April 29, 1975.
From that time on the doctrine of "constructive notice" was already in
effect against all persons claiming any title or interests in the property
adverse to the registered owners.38
On June 5, 1975, the Spouses Jalbuna mortgaged the property to
PNB. On the same date, the mortgage was registered with the Register
of Deeds of Iloilo City. Again, from that date, the respondents were
deemed to have "constructive notice" of the registration.
Philippine National Bank foreclosed the mortgage on September 5,
1978. The Notice of Extrajudicial Foreclosure of Mortgage was
published in a newspaper of general circulation. The publication
likewise operated as "constructive notice" to all persons who would be
adversely affected by the impending foreclosure of the property. A
Certificate of Sale over the property was issued in favor of PNB as the
highest bidder in the auction sale. The Certificate of Sale was again
registered and annotated in the title of the property. Again, the
respondents had "constructive notice" of the registration.
On November 11, 1982, PNB consolidated its title to the property and a
Deed of Sale was issued in its favor. On December 6, 1982, a Transfer
Certificate of Title was issued in favor of PNB. Respondents should
likewise be charged with notice of such fact. Since that time up to
November 9, 1987 when the property was sold to the Lucero Spouses,
or for five (5) long years, the property was an acquired asset of the
bank. During this time it can be deduced that it was the bank who paid
the real estate taxes and who appeared as owner in the tax
declarations and other documents pertaining to the property.
It would appear that it was PNB who exercised acts of ownership over
the property during the five-year period, not the respondents who are
now claiming to be the owners. There is no evidence of any act of
10
ownership exercised by the respondents, such as payment of taxes
and introduction of improvements which would have shown, by
preponderance of evidence, the right of ownership to or interest in the
property, aside form their occupation thereof by mere tolerance. Since
the death of their predecessors, there has not even been a showing
that respondents verified, inquired or investigated with the Register of
Deeds or the Assessor’s Office as to the status of the property. If only
respondents have been more vigilant in the enforcement of their
alleged rights and interests, the property would not have been sold to
third persons who paid valuable consideration thereto. Far from being
vigilant, however, respondents have shown sheer disinterest in their
claim to the property, thus leading to the well-founded conclusion that
their claimed ownership rights are not anchored in reality. Vigilantibus
sed non dormientibus jura subveniunt. The law aids the vigilant, not
those who slumber on their rights.1avvphil.net
More. On November 9, 1987, the property was sold by PNB to the
petitioners Lucero Spouses and a Transfer Certificate of Title was
issued in their name on November 11, 1987. The respondents however
filed their Complaint for reconveyance and damages only on October
2, 1989, or nearly two (2) years after title to the property was issued in
favor of the Lucero Spouses. Respondents in fact amended their
complaint three (3) times, the last one on December 26, 1994. Clearly,
the actuations of respondents were not normal for those claiming in
good faith legitimate ownership over a parcel of land sufficient to make
third persons conclude that their claim is well-founded as against the
registered owner, in this case, PNB. Indeed, respondents were frozen
in the shackles of inactivity for too long. They bestirred themselves for
their long slumber after the Lucero Spouses started to recover
possession of the property which is a mere incident to the ownership
that they have already gained. In essence, the respondents slept on
their rights, and hence, must suffer the consequences of their passivity
and inaction.
WHEREFORE, the August 18, 2005 Decision of this Court is hereby
MODIFIED. The Motion for Reconsideration of the Philippine National
Bank is DENIED WITH FINALITY. However, the Motion for
Reconsideration of the Spouses Johnny Lucero and Nona Ariete is
GRANTED, and the October 18, 1995 Decision of the Regional Trial
Court of Iloilo, Br. 38, in Civil Case No. 18836 insofar as it holds
Spouses Johnny Lucero and Nona Ariete as innocent purchasers for
value in good faith is REINSTATED and their title to Lot 3017-B under
TCT No. 76938 issued on November 11, 1987 is declared and so
confirmed as VALID.
SO ORDERED.
NECESSARY PARTY
CHRISTINE CHUA, Petitioners,
vs.
JORGE TORRES and ANTONIO BELTRAN, Respondents.
DECISION
Tinga, J.:
The Court settles an issue, heretofore undecided, on whether the
absence of the signature in the required verification and certification
against forum-shopping of a party misjoined as a plaintiff is a valid
ground for the dismissal of the complaint. We rule in the negative.
The relevant facts in this Petition for Review are culled from the
records.
On 24 October 2001, a complaint for damages was lodged before the
Regional Trial Court (RTC) of Caloocan City, Branch 126.1 The
complaint was filed by Christine Chua, herein petitioner, impleading her
brother Jonathan Chua as a necessary co-plaintiff. Named as
defendants in the suit were herein respondents Jorge Torres and
Antonio Beltran. Torres was the owner of the 9th Avenue Caltex
Service Center (Caltex Service Center), while Beltran was an
employee of the said establishment as the head of its Sales and
Collection Division.2
The complaint alleged that on 3 April 2000, Jonathan Chua issued in
favor of the Caltex Service Center his personal Rizal Commercial
Banking Corporation (RCBC) Check No. 0412802 in the amount of
Nine Thousand Eight Hundred Forty Nine Pesos and Twenty Centavos
(₱9,849.20) in payment for purchases of diesel oil. However, the check
was dishonored by the drawee bank when presented for payment on
the ground that the account was closed. Beltran then sent petitioner a
demand letter informing her of the dishonor of the check and
demanding the payment thereof. Petitioner ignored the demand letter
on the ground that she was not the one who issued the said check.
Without bothering to ascertain who had actually issued the check,
Beltran instituted against petitioner a criminal action for violation of
Batas Pambansa Bilang 22 (B.P. 22). Subsequently, a criminal
information was filed against petitioner with the Metropolitan Trial Court
(MTC) of Caloocan City, Branch 50.3 The MTC then issued a warrant of
arrest against petitioner. The police officers tasked with serving the
warrant looked for her in her residence, in the auto repair shop of her
brother, and even at the Manila Central University were she was
enrolled as a medical student, all to the alleged embarrassment and
"social humiliation" of petitioner.4
Beltran’s purported negligence amounted to either malicious
prosecution or serious defamation in prosecuting petitioner resulting
from the issuance of a check she herself did not draw, and served
cause for a claim of moral damages. On the other hand, Torres, as
employer of Beltran, was alleged to have failed to observe the
diligence of a good father of the family to prevent the damage suffered
by petitioner. Exemplary damages and attorney’s fees were likewise
sought, thus bringing the
aggregate total of damages claimed to Two Million Pesos
(₱2,000,000.00), plus costs of suit.5
Significantly, while Jonathan Chua was named as a plaintiff to the suit,
it was explicitly qualified in the second paragraph of the complaint that
he was being "impleaded here-in as a necessary party-plaintiff".6 There
was no allegation in the complaint of any damage or injury sustained
by Jonathan, and the prayer therein expressly named petitioner as the
only party to whom respondents were sought to recompense. 7 Neither
did Jonathan Chua sign any verification or certification against forum-
shopping, although petitioner did sign an attestation, wherein she
identified herself as "the principal plaintiff".8
Upon motion of respondents, the RTC ordered the dismissal of the
complaint9 on the ground that Jonathan Chua had not executed a
certification against forum-shopping. The RTC stressed that Section 5,
Rule 7 of the Rules of Civil Procedure, the rule requiring the
certification, makes no distinction whether the plaintiff required to
execute the certification is a principal party, a nominal party or a
necessary party. Instead, the provision requires that a plaintiff or
principal party who files a complaint or initiatory pleading execute such
certification. Jonathan Chua, being a plaintiff in this case, was obliged
to execute or sign such certification.10 Hence, his failure to do so in
violation of the mandatory rule requiring the certification against forum-
shopping constituted valid cause for the dismissal of the petition. 11
After the RTC denied the motion for reconsideration12 lodged by
petitioner, the matter was elevated directly to this Court by way of
petition for review under Rule 45, raising a purely legal question, 13 cast,
if somewhat unwieldily, as "whether or not a co-plaintiff impleaded only
as a necessary party, who however has no claim for relief or is not
asserting any claim for relief in the complaint, should also make a
certification against forum shopping."14
Preliminarily, it bears noting that Jonathan Chua did not sign as well
any verification to the complaint, ostensibly in violation of Section 7,
Rule 4 of the Rules of Civil Procedure. The RTC failed to mention such
fact, as does petitioner in her present petition. In their arguments
before this Court, respondents do refer in passing to the verification
requirement15 , but do not place any particular focus thereto. The
verification requirement is separate from the certification
requirement.16 It is noted that as a matter of practice, the verification is
usually accomplished at the same time as the certification against
forum-shopping; hence the customary nomenclature, "Verification and
11
Certification of Non Forum-Shopping" or its variants. For this reason, it
is quite possible that the RTC meant to assail as well the failure of
Jonathan Chua to verify the complaint.
The verification requirement is significant, as it is intended to secure an
assurance that the allegations in the pleading are true and correct and
not the product of the imagination or a matter of speculation, and that
the pleading is filed in good faith.17 The absence of a proper verification
is cause to treat the pleading as unsigned and dismissible. 18 It would
be as well that the Court discuss whether under the circumstances,
Jonathan Chua is also required to execute a verification in respect to
petitioner’s complaint.
Having established the proper parameters of the petition, we proceed
to the core issues. We find the petition has merit, although we
appreciate the situation differently from petitioner. Our decision
proceeds from the fundamental premise that Jonathan Chua was
misjoined as a party plaintiff in this case.
It is elementary that it is only in the name of a real party in interest that
a civil suit may be prosecuted.19 Under Section 2, Rule 3 of the Rules
of Civil Procedure, 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. "Interest" within the meaning of the rule means
material interest, an interest in issue and to be affected by the decree,
as distinguished from mere interest in the question involved, or a mere
incidental interest.20 One having no right or interest to protect cannot
invoke the jurisdiction of the court as a party plaintiff in an action.21 To
qualify a person to be a real party in interest in whose name an action
must be prosecuted, he must appear to be the present real owner of
the right sought to enforced.22
The subject complaint does not allege any rights of Jonathan Chua
violated by respondents, present any rights of his to be enforced, or
seek in his behalf any rights to the avails of suit. In short, Jonathan
claims nothing, and for nothing, in the subject complaint. If he alone
filed the complaint, it would have been dismissed on the ground that
the complaint states no cause of action, instituted as it was by a person
who was not a real party in interest.
But was it proper for petitioner to have even impleaded Jonathan as a
co-plaintiff in the first place? Petitioner alleged in her complaint that
Jonathan was a necessary party, and remains consistent to that claim
even before this Court. She however fails to demonstrate how
Jonathan can be considered as a necessary party, other than by noting
that he was "the one who really
issued the check in controversy."23 Such fact, if proven, may establish
the malice of respondents in filing the criminal case against petitioner
for violation of B.P. 22, but does not create the need to require
Jonathan’s participation as a necessary party.
Section 8, Rule 7 of the Rules of Civil Procedure defines a necessary
party as "one who is not indispensable but who ought to be joined as a
party if complete relief is to be accorded as to those already parties, or
for a complete determination or settlement of the claim subject of the
action."24 Necessary parties are those whose presence is necessary to
adjudicate the whole controversy, but whose interests are so far
separable that a final decree can be made in their absence without
affecting them.25
An example of a necessary party may be found in Seno v.
Mangubat.26 Petitioner therein sold her property through a deed of sale
to three vendees. Two of the vendees then sold their shares to the
third buyer, who then sold the property to another set of persons.
Thereafter, petitioner, who claimed that the true intent of the first sale
was an equitable mortgage, filed a complaint seeking the reformation
of the deed of sale and the annulment of the second sale. The question
arose whether the two vendees who had since disposed of their shares
should be considered as indispensable parties or necessary parties. In
concluding that they were only necessary parties, the Court reasoned:
In the present case, there are no rights of defendants Andres
Evangelista and Bienvenido Mangubat to be safeguarded if the sale
should be held to be in fact an absolute sale nor if the sale is held to be
an equitable mortgage. Defendant Marcos Mangubat became the
absolute owner of the subject property by virtue of the sale to him of
the shares of the aforementioned defendants in the property. Said
defendants no longer have any interest in the subject property.
However, being parties to the instrument sought to be reformed,
their presence is necessary in order to settle all the possible
issues of the controversy. Whether the disputed sale be declared an
absolute sale or an equitable mortgage, the rights of all the defendants
will have been amply protected. Defendants-spouses Luzame in any
event may enforce their rights against defendant Marcos Mangubat. 27
In Seno, the persons deemed by the Court as necessary parties may
have had already disposed of their interests in the property. However,
should the lower court therein grant the prayer for the reformation of
the deed of sale, the ruling will undoubtedly have an effect on such
parties, on matters such as the purchase price which they may have
received, and on whatever transmission of rights that may have
occurred between them and the vendor.
In contrast, Jonathan Chua does not stand to be affected should the
RTC rule either favorably or unfavorably of the complaint. This is due
to the nature of the cause of action of the complaint, which alleges an
injury personal to petitioner, and the relief prayed for, which is to be
adjudicated solely to petitioner. There is no allegation in the complaint
alleging any violation or omission of any right of Jonathan, either
arising from contract or from law.
It may be so that Jonathan may be called to testify by his sister, in
order to prove the essential allegation that she did not issue the check
in question, and perhaps such testimony would be vital to petitioner’s
cause of action. But this does not mean that Jonathan should be
deemed a necessary party, as such circumstance would merely place
him in the same class as those witnesses whose testimony would be
necessary to prove the allegations of the complaint. But the fact
remains that Jonathan would stand unaffected by the final ruling on the
complaint. The judicial confirmation or rejection of the allegations
therein, or grant or denial of the reliefs prayed for will not infringe on or
augment any of his rights under the law. If there would be any effect to
Jonathan of the RTC’s ultimate decision on the complaint, it would be
merely emotional, arising from whatever ties of kinship he may retain
towards his sister, and no different from whatever effects that may be
similarly sustained on petitioner’s immediate family.
Since we are unconvinced by petitioner’s basic premise that Jonathan
was a necessary party, it is unnecessary to directly settle the issue as
couched by petitioner of "whether or not a co-plaintiff impleaded only
as a necessary party, who however has no claim for relief or is not
asserting any claim for relief in the complaint, should also make a
certification against forum shopping."28 We can note, as the RTC did,
that Section 5, Rule 7 of the 1997 Rules of Civil Procedure makes no
distinctions that would expressly exempt a necessary party from
executing the certification against forum shopping. Nonetheless, there
are dimensions to the matter, heretofore unraised, that may unsettle a
strict application of the rule, such as if the necessary party is
impleaded as a plaintiff or counterclaimant without his knowledge or
against his will.29 But these circumstances relevant to a necessary
party are not present in this case, and thus require no further comment
upon for now.
Instead, what the Court may rule upon is whether the absence of the
signature of the person misjoined as a party-plaintiff in either the
verification page or certification against forum-shopping is ground for
the dismissal of the action. We rule that it is not so, and that the RTC
erred in dismissing the instant complaint. There is no judicial precedent
affirming or rejecting such a view, but we are comfortable with making
such a pronouncement. A misjoined party plaintiff has no business
participating in the case as a plaintiff in the first place, and it would
make little sense to require the misjoined party in complying with all the
requirements expected of plaintiffs.
At the same time, Section 11, Rule 3 of the 1997 Rules of Civil
Procedure states:
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
12
the action and on such terms as are just. Any claim against a misjoined
party may be severed and proceeded with separately.30
Clearly, misjoinder of parties is not fatal to the complaint. The rule
prohibits dismissal of a suit on the ground of non-joinder or misjoinder
of parties.31 Moreover, the dropping of misjoined parties from the
complaint may be done motu proprio by the court, at any stage, without
need for a motion to such effect from the adverse party. 32 Section 11,
Rule 3 indicates that the misjoinder of parties, while erroneous, may be
corrected with ease through amendment, without further hindrance to
the prosecution of the suit.
It should then follow that any act or omission committed by a misjoined
party plaintiff should not be cause for impediment to the prosecution of
the case, much less for the dismissal of the suit. After all, such party
should not have been included in the first place, and no efficacy should
be accorded to whatever act or omission of
the party.33 Since the misjoined party plaintiff receives no recognition
from the court as either an indispensable or necessary party-plaintiff, it
then follows that whatever action or inaction the misjoined party may
take on the verification or certification against forum-shopping is
inconsequential. Hence, it should not have mattered to the RTC that
Jonathan Chua had failed to sign the certification against forum-
shopping, since he was misjoined as a plaintiff in the first place. The
fact that Jonathan was misjoined is clear on the face of the complaint
itself, and the error of the RTC in dismissing the complaint is not
obviated by the fact that the adverse party failed to raise this point.
After all, the RTC could have motu proprio dropped Jonathan as a
plaintiff, for the reasons above-stated which should have been evident
to it upon examination of the complaint.
There may be a school of thought that would nonetheless find some
satisfaction in petitioner’s woes before the RTC, as it was her error in
the first place of wrongfully impleading her brother as a party plaintiff
which ultimately served as cause for the dismissal of the complaint.
The blame may in the final analysis lie with petitioner, yet we should
not construe the rules of procedure to quench an unnecessary thirst to
punish at the expense of the intellectual integrity of the rules. For our
Rules of Court do not regard the misjoinder of parties as an error of
fatal consequence, and the logical extension of this principle is to
consider those procedural acts or omissions of misjoined parties as of
similar import.
WHEREFORE, the Petition is GRANTED. The Orders dated 3
December 2001 and 15 January 2002 of the Regional Trial Court of
Caloocan City, Branch 126, in Civil Case No. C-19863 are SET ASIDE,
and the Complaint in the aforementioned case is REINSTATED. The
lower court is enjoined to hear and decide the case with deliberate
dispatch. No pronouncement as to costs.
SO ORDERED.
CARAVAN TRAVEL AND TOURS INTERNATIONAL,
INC., Petitioner, v. ERMILINDA R. ABEJAR, Respondent.
DECISION
LEONEN, J.:
The plaintiff may first prove the employer's ownership of the vehicle
involved in a mishap by presenting the vehicle's registration in
evidence. Thereafter, a disputable presumption that the requirements
for an employer's liability under Article 21801 of the Civil Code have
been satisfied will arise. The burden of evidence then shifts to the
defendant to show that no liability under Article 2180 has ensued. This
case, thus, harmonizes the requirements of Article 2180, in relation to
Article 21762 of the Civil Code, and the so-called registered-owner rule
as established in this court's rulings in Aguilar, Sr. v. Commercial
Savings Bank,3Del Carmen, Jr. v. Bacoy,4Filcar Transport Services v.
Espinas,5 and Mendoza v. Spouses Gomez.6
7
Through this Petition for Review on Certiorari, Caravel Travel and
Tours International, Inc. (Caravan) prays that the Decision8 dated
October 3, 2005 and the Resolution9 dated November 29, 2005 of the
Court of Appeals Twelfth Division be reversed and set aside. 10
On July 13, 2000, Jesmariane R. Reyes (Reyes) was walking along the
west-bound lane of Sampaguita Street, United Parañaque Subdivision
IV, Parañaque City.11 A Mitsubishi L-300 van with plate number PKM
19512 was travelling along the east-bound lane, opposite Reyes.13 To
avoid an incoming vehicle, the van swerved to its left and hit
Reyes.14 Alex Espinosa (Espinosa), a witness to the accident, went to
her aid and loaded her in the back of the van.15 Espinosa told the driver
of the van, Jimmy Bautista (Bautista), to bring Reyes to the
hospital.16 Instead of doing so, Bautista appeared to have left the van
parked inside a nearby subdivision with Reyes still in the
van.17 Fortunately for Reyes, an unidentified civilian came to help and
drove Reyes to the hospital.18
Upon investigation, it was found that the registered owner of the van
was Caravan.19 Caravan is a corporation engaged in the business of
organizing travels and tours.20 Bautista was Caravan's employee
assigned to drive the van as its service driver.21
Caravan shouldered the hospitalization expenses of Reyes.22 Despite
medical attendance, Reyes died two (2) days after the accident. 23
Respondent Ermilinda R. Abejar (Abejar), Reyes' paternal aunt and the
person who raised her since she was nine (9) years old,24 filed before
the Regional Trial Court of Parañaque a Complaint25 for damages
against Bautista and Caravan. In her Complaint, Abejar alleged that
Bautista was an employee of Caravan and that Caravan is the
registered owner of the van that hit Reyes.26
Summons could not be served on Bautista.27 Thus, Abejar moved to
drop Bautista as a defendant.28 The Regional Trial Court granted her
Motion.29
After trial, the Regional Trial Court found that Bautista was grossly
negligent in driving the vehicle.30 It awarded damages in favor of
Abejar, as follows:
WHEREFORE, considering that the [respondent] was able to provide
by preponderance of evidence her cause of action against the
defendants, judgment is hereby rendered ordering defendants JIMMY
BAUTISTA and CARAVAN TRAVEL and TOURS[,] INC., to jointly and
solidarity pay the plaintiff, the following, to wit:
1. The amount of P35,000.00 representing actual damages;
2. The amount of P300,000.00 as moral damages;
3. The amount of P30,000.00 as exemplary damages;
4. The amount of P50,000.00 as and by way of attorney's fees; and
5. The cost of suit.
SO ORDERED.31ChanRoblesVirtualawlibrary
Caravan's Motion for Reconsideration32 was denied through the
October 20, 2003 Order33 of the Regional Trial Court.
The Court of Appeals affirmed with modification the Regional Trial
Court's July 31, 2003 Decision and October 20, 2003 Order, as follows:
WHEREFORE, premises considered, the instant appeal is DENIED for
lack of merit. The assailed Decision dated 31 July 2003 and Order
dated 20 October 2003 of the Regional Trial Court, City of
Para[ñ]aque, Branch 258, in Civil Case No. 00-0447
are AFFIRMEDwith the following MODIFICATIONS:
1. Moral Damages is REDUCED to Php 200,000.00;
13
 2. Death Indemnity of Php 50,000.00 is awarded;
3. The Php 35,000.00 actual damages, Php
200,000.00 moral damages, Php 30,000.00
exemplary damages and Php 50,000.00 attorney's
fees shall earn interest at the rate of 6% per
annum computed from 31 July 2003, the date of
the [Regional Trial Court's] decision; and upon
finality of this Decision, all the amounts due shall
earn interest at the rate of 12% per annum, in lieu
of 6% per annum, until full payment; and
4. The Php 50,000.00 death indemnity shall earn
interest at the rate of 6% per annumcomputed
from the date of promulgation of this Decision; and
upon finality of this Decision, the amount due shall
earn interest at the rate of 12% per annum, in lieu
of 6% per annum, until full payment.
Costs against [Caravan].
SO ORDERED.34ChanRoblesVirtualawlibrary
Caravan filed a Motion for Reconsideration, but it was denied in the
Court of Appeals' assailed November 29, 2005 Resolution. 35
Hence, this Petition was filed.
Caravan argues that Abejar has no personality to bring this suit
because she is not a real party in interest. According to Caravan,
Abejar does not exercise legal or substitute parental authority. She is
also not the judicially appointed guardian or the only living relative of
the deceased.36 She is also not "the executor or administrator of the
estate of the deceased."37 According to Caravan, only the victim herself
or her heirs can enforce an action based on culpa aquiliana such as
Abejar's action for damages.38
Caravan adds that Abejar offered no documentary or testimonial
evidence to prove that Bautista, the driver, acted "within the scope of
his assigned tasks"39 when the accident occurred.40 According to
Caravan, Bautista's tasks only pertained to the transport of company
personnel or products, and when the accident occurred, he had not
been transporting personnel or delivering products of and for the
company.41
Caravan also argues that "it exercised the diligence of a good father of
a family in the selection and supervision of its employees."42
Caravan further claims that Abejar should not have been awarded
moral damages, actual damages, death indemnity, exemplary
damages, and attorney's fees.43 It questions the Certificate provided by
Abejar as proof of expenses since its signatory, a certain Julian
Peñaloza (Peñaloza), was not presented in court, and Caravan was
denied the right to cross-examine him.44 Caravan argues that the
statements in the Certification constitute hearsay. 45 It also contends
that based on Article 2206(3)46 of the Civil Code, Abejar is not entitled
to moral damages.47 It insists that moral and exemplary damages
should not have been awarded to Abejar because Caravan acted in
good faith.48 Considering that moral and exemplary damages are
unwarranted, Caravan claims that the award of attorney's fees should
have also been removed.49
Lastly, Caravan argues that it should not be held solidarily liable with
Bautista since Bautista was already dropped as a party. 50
Abejar counters that Caravan failed to provide proof that it exercised
the requisite diligence in the selection and supervision of
Bautista.51 She adds that the Court of Appeals' ruling that Caravan is
solidarily liable with Bautista for moral damages, exemplary damages,
civil indemnity ex delicto, and attorney's fees should be
upheld.52 Abejar argues that since Caravan is the registered owner of
the van, it is directly, primarily, and solidarity liable for the tortious acts
of its driver.53
For resolution are the following issues:
First, whether respondent Ermilinda R. Abejar is a real party in interest
who may bring an action for damages against petitioner Caravan
Travel and Tours International, Inc. on account of Jesmariane R.
Reyes' death; and
Second, whether petitioner should be held liable as an employer,
pursuant to Article 2180 of the Civil Code.
We deny the Petition.
I
Having exercised substitute parental authority, respondent suffered
actual loss and is, thus, a real party in interest in this case.
In her Complaint, respondent made allegations that would sustain her
action for damages: that she exercised substitute parental authority
over Reyes; that Reyes' death was caused by the negligence of
petitioner and its driver; and that Reyes' death caused her
damage.54 Respondent properly filed an action based on quasi-delict.
She is a real party in interest.
Rule 3, Section 2 of the 1997 Rules of Civil Procedure defines a real
party in interest:
RULE 3. Parties to Civil Actions
....
SECTION 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.
"To qualify a person to be a real party in interest in whose name an
action must be prosecuted, he [or she] must appear to be the present
real owner of the right sought to be enforced."55 Respondent's capacity
to file a complaint against petitioner stems from her having exercised
substitute parental authority over Reyes.
Article 216 of the Family Code identifies the persons who exercise
substitute parental authority:
Art. 216. In default of parents or a judicially appointed guardian, the
following persons shall exercise substitute parental authority over the
child in the order indicated:
(1) The surviving grandparent, as provided in Art. 214;56
(2) The oldest brother or sister, over twenty-one years of age, unless
unfit or disqualified; and
(3) The child's actual custodian, over twenty-one years of age, unless
unfit or disqualified.
Whenever the appointment or a judicial guardian over the property of
the child becomes necessary, the same order of preference shall be
observed. (Emphasis supplied)
Article 233 of the Family Code provides for the extent of authority of
persons exercising substitute parental authority, that is, the same as
those of actual parents:
Art. 233. The person exercising substitute parental authority shall have
the same authority over the person of the child as the parents.
(Emphasis supplied)
14
Both of Reyes' parents are already deceased.57 Reyes' paternal
grandparents are also both deceased.58The whereabouts of Reyes'
maternal grandparents are unknown.59 There is also no record that
Reyes has brothers or sisters. It was under these circumstances that
respondent took custody of Reyes when she was a child, assumed the
role of Reyes' parents, and thus, exercised substitute parental authority
over her.60 As Reyes' custodian, respondent exercised the full extent of
the statutorily recognized rights and duties of a parent. Consistent with
Article 22061 of the Family Code, respondent supported Reyes'
education62 and provided for her personal needs.63 To echo
respondent's words in her Complaint, she treated Reyes as if she were
her own daughter.64
Respondent's right to proceed against petitioner, therefore, is based on
two grounds.
First, respondent suffered actual personal loss. With her affinity for
Reyes, it stands to reason that when Reyes died, respondent suffered
the same anguish that a natural parent would have felt upon the loss of
one's child. It is for this injury — as authentic and personal as that of a
natural parent — that respondent seeks to be indemnified.
Second, respondent is capacitated to do what Reyes' actual parents
would have been capacitated to do.
65
In Metro Manila Transit Corporation v. Court of Appeals, Tapdasan,
Jr. v. People,66 and Aguilar, Sr. v. Commercial Savings Bank,67 this
court allowed natural parents of victims to recover damages for the
death of their children. Inasmuch as persons exercising substitute
parental authority have the full range of competencies of a child's
actual parents, nothing prevents persons exercising substitute parental
authority from similarly possessing the right to be indemnified for their
ward's death.
We note that Reyes was already 18 years old when she died. Having
reached the age of majority, she was already emancipated upon her
death. While parental authority is terminated upon
emancipation,68respondent continued to support and care for Reyes
even after she turned 18.69 Except for the legal technicality of Reyes'
emancipation, her relationship with respondent remained the same.
The anguish and damage caused to respondent by Reyes' death was
no different because of Reyes' emancipation.
In any case, the termination of respondent's parental authority is not an
insurmountable legal bar that precludes the filing of her Complaint. In
interpreting Article 190270 of the old Civil Code, which is substantially
similar to the first sentence of Article 217671 of the Civil Code, this court
in The Receiver For North Negros Sugar Company, Inc. v. Ybañez, et
al.72 ruled that brothers and sisters may recover damages, except
moral damages, for the death of their sibling.73 This court declared that
Article 1902 of the old Civil Code (now Article 2176) is broad enough to
accommodate even plaintiffs who are not relatives of the deceased,
thus:74
This Court said: "Article 1902 of the Civil Code declares that any
person who by an act or omission, characterized by fault or negligence,
causes damage to another shall be liable for the damage done ... a
person is liable for damage done to another by any culpable act; and
by any culpable act is meant any act which is blameworthy when
judged by accepted legal standards. The idea thus expressed is
undoubtedly broad enough to include any rational conception of liability
for the tortious acts likely to be developed in any society." The word
"damage" in said article, comprehending as it does all that are
embraced in its meaning, includes any and all damages that a human
being may suffer in any and all the manifestations of his life: physical or
material, moral or psychological, mental or spiritual, financial,
economic, social, political, and religious.
It is particularly noticeable that Article 1902 stresses the passive
subject of the obligation to pay damages caused by his fault or
negligence. The article does not limit or specify the active subjects,
much less the relation that must exist between the victim of the culpa
aquiliana and the person who may recover damages, thus warranting
the inference that, in principle, anybody who suffers any damage from
culpa aquiliana, whether a relative or not of the victim, may recover
damages from the person responsible therefor[.]75(Emphasis supplied,
citations omitted)
II
Respondent's Complaint is anchored on an employer's liability for
quasi-delict provided in Article 2180, in relation to Article 2176 of the
Civil Code. Articles 2176 and 2180 read:
ARTICLE 2176. Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
.....
ARTICLE 2180. The obligation imposed by article 2176 is demandable
not only for one's own acts or omissions, but also for those of persons
for whom one is responsible.
The father and, in case of his death or incapacity, the mother, are
responsible for the damages caused by the minor children who live in
their company.
Guardians are liable for damages caused by the minors or
incapacitated persons who are under their authority and live in their
company.
The owners and managers of an establishment or enterprise are
likewise responsible for damages caused by their employees in the
service of the branches in which the latter are employed or on the
occasion of their functions.
Employers shall be liable for the damages caused by their employees
and household helpers acting within the scope of their assigned tasks,
even though the former are not engaged in any business or industry.
The State is responsible in like manner when it acts through a special
agent; but not when the damage has been caused by the official to
whom the task done properly pertains, in which case what is provided
in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be
liable for damages caused by their pupils and students or apprentices,
so long as they remain in their custody.
The responsibility treated of in this article shall cease when the
persons herein mentioned prove that they observed all the diligence of
a good father of a family to prevent damage. (Emphasis supplied)
Contrary to petitioner's position, it was not fatal to respondent's cause
that she herself did not adduce proof that Bautista acted within the
scope of his authority. It was sufficient that Abejar proved that
petitioner was the registered owner of the van that hit Reyes.
The resolution of this case must consider two (2) rules. First, Article
2180's specification that "[e]mployers shall be liable for the damages
caused by their employees . . . acting within the scope of their
assigned tasks[.]" Second, the operation of the registered-owner rule
that registered owners are liable for death or injuries caused by the
operation of their vehicles.76
These rules appear to be in conflict when it comes to cases in which
the employer is also the registered owner of a vehicle. Article 2180
requires proof of two things: first, an employment relationship between
the driver and the owner; and second, that the driver acted within the
scope of his or her assigned tasks. On the other hand, applying the
registered-owner rule only requires the plaintiff to prove that the
defendant-employer is the registered owner of the vehicle.
The registered-owner rule was articulated as early as 1957 in Erezo, et
al. v. Jepte,77 where this court explained that the registration of motor
15
vehicles, as required by Section 5(a)78 of Republic Act No. 4136, the
Land Transportation and Traffic Code, was necessary "not to make
said registration the operative act by which ownership in vehicles is
transferred, . . . but to permit the use and operation of the vehicle upon
any public highway[.]"79 Its "main aim . . . is to identify the owner so that
if any accident happens, or that any damage or injury is caused by the
vehicle on the public highways, responsibility therefor can be fixed on a
definite individual, the registered owner."80
Erezo notwithstanding, Castilex Industrial Corporation v. Vasquez,
Jr.81 relied on Article 2180 of the Civil Code even though the employer
was also the registered owner of the vehicle.82 The registered-owner
rule was not mentioned.
In Castilex, Benjamin Abad (Abad) was a manager of Castilex
Industrial Corporation (Castilex). Castilex was also the registered
owner of a Toyota Hi-Lux pick-up truck. While Abad was driving the
pick-up truck, it collided with a motorcycle driven by Romeo Vasquez
(Vasquez). Vasquez died a few days after. Vasquez's parents filed a
case for damages against Abad and Castilex.83 Castilex denied liability,
arguing that Abad was acting in his private capacity at the time of the
accident.84
This court absolved Castilex of liability, reasoning that it was incumbent
upon the plaintiff to prove that the negligent employee was acting
within the scope of his assigned tasks.85 Vasquez's parents failed to
prove this.86 This court outlined the process necessary for an employer
to be held liable for the acts of its employees and applied the process
to the case:
Under the fifth paragraph of Article 2180, whether or not engaged in
any business or industry, an employer is liable for the torts committed
by employees within the scope of his assigned tasks. But it is
necessary to establish the employer-employee relationship; once this
is done, the plaintiff must show, to hold the employer liable, that the
employee was acting within the scope of his assigned task when the
tort complained of was committed. It is only then that the employer may
find it necessary to interpose the defense of due diligence in the
selection and supervision of the employee.
....
Since there is paucity of evidence that ABAD was acting within the
scope of the functions entrusted to him, petitioner CASTILEX had no
duty to show that it exercised the diligence of a good father of a family
in providing ABAD with a service vehicle. Thus, justice and equity
require that petitioner be relieved of vicarious liability for the
consequences of the negligence of ABAD in driving its vehicle.
(Emphasis supplied, citations omitted)87ChanRoblesVirtualawlibrary
Aguilar, Sr. v. Commercial Savings Bank recognized the seeming
conflict between Article 2180 and the registered-owner rule and applied
the latter.88
In Aguilar, Sr., a Mitsubishi Lancer, registered in the name of
Commercial Savings Bank and driven by the bank's assistant vice-
president Ferdinand Borja, hit Conrado Aguilar, Jr. The impact killed
Conrado Aguilar, Jr. His father, Conrado Aguilar, Sr. filed a case for
damages against Ferdinand Borja and Commercial Savings Bank. The
Regional Trial Court found Commercial Savings Bank solidarity liable
with Ferdinand Borja.89
However, the Court of Appeals disagreed with the trial court's Decision
and dismissed the complaint against the bank. The Court of Appeals
reasoned that Article 2180 requires the plaintiff to prove that at the time
of the accident, the employee was acting within the scope of his or her
assigned tasks. The Court of Appeals found no evidence that
Ferdinand Borja was acting as the bank's assistant vice-president at
the time of the accident.90
The Court of Appeals' ruling was reversed by this court. 91Aguilar,
Sr. reiterated the following pronouncements made in Erezo in ruling
that the bank, as the registered owner of the vehicle, was primarily
liable to the plaintiff:92
The main aim of motor vehicle registration is to identify the owner so
that if any accident happens, or that any damage or injury is caused by
the vehicle on the public highways, responsibility therefor can be fixed
on a definite individual, the registered owner....
....
A victim of recklessness on the public highways is usually without
means to discover or identify the person actually causing the injury or
damage. He has no means other than by a recourse to the registration
in the Motor Vehicles Office to determine who is the owner. The
protection that the law aims to extend to him would become illusory
were the registered owner given the opportunity to escape liability by
disproving his ownership.93ChanRoblesVirtualawlibrary
Thus, Aguilar, Sr. concluded:
In our view, respondent bank, as the registered owner of the vehicle, is
primarily liable for Aguilar, Jr.'s death. The Court of Appeals erred
when it concluded that the bank was not liable simply because (a)
petitioner did not prove that Borja was acting as the bank's vice
president at the time of the accident; and (b) Borja had, according to
respondent bank, already bought the car at the time of the mishap. For
as long as the respondent bank remained the registered owner of the
car involved in the vehicular accident, it could not escape primary
liability for the death of petitioner's son.94 (Emphasis supplied)
Preference for the registered-owner rule became more pronounced
in Del Carmen, Jr. v. Bacoy:95
Without disputing the factual finding of the [Court of Appeals] that Allan
was still his employee at the time of the accident, a finding which we
see no reason to disturb, Oscar Jr. contends that Allan drove the jeep
in his private capacity and thus, an employer's vicarious liability for the
employee's fault under Article 2180 of the Civil Code cannot apply to
him.
The contention is no longer novel. In Aguilar Sr. v. Commercial
Savings Bank, the car of therein respondent bank caused the death of
Conrado Aguilar, Jr. while being driven by its assistant vice
president. Despite Article 2180, we still held the bank liable for
damages for the accident as said provision should defer to the
settled doctrine concerning accidents involving registered motor
vehicles, i.e., that the registered owner of any vehicle, even if not used
for public service, would primarily be responsible to the public or to
third persons for injuries caused the latter while the vehicle was being
driven on the highways or streets. We have already ratiocinated that:
The main aim of motor vehicle registration is to identify the owner so
that if any accident happens, or that any damage or injury is caused by
the vehicle on the public highways, responsibility therefor can be fixed
on a definite individual, the registered owner. Instances are numerous
where vehicles running on public highways caused accidents or
injuries to pedestrians or other vehicles without positive identification of
the owner or drivers, or with very scant means of identification. It is to
forestall these circumstances, so inconvenient or prejudicial to the
public, that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages or
injuries caused on public highways.96 (Emphasis supplied, citations
omitted)
Filcar Transport Services v. Espinas97 stated that the registered owner
of a vehicle can no longer use the defenses found in Article 2180: 98
Neither can Filcar use the defenses available under Article 2180 of the
Civil Code - that the employee acts beyond the scope of his assigned
task or that it exercised the due diligence of a good father of a family to
prevent damage - because the motor vehicle registration law, to a
certain extent, modified Article 2180 of the Civil Code by making these
defenses unavailable to the registered owner of the motor vehicle.
Thus, for as long as Filcar is the registered owner of the car involved in
the vehicular accident, it could not escape primary liability for the
damages caused to Espinas.99ChanRoblesVirtualawlibrary
16
Mendoza v. Spouses Gomez100 reiterated this doctrine.
Barangay Marcelo Green, United Parañaque
However, Aguilar, Sr., Del Carmen, Filcar, and Mendoza should not be Subdivision 4?
taken to mean that Article 2180 of the Civil Code should be completely
discarded in cases where the registered-owner rule finds application.

As acknowledged in Filcar, there is no categorical statutory

pronouncement in the Land Transportation and Traffic Code stipulating
the liability of a registered owner.101 The source of a registered owner's WITNESS : I don't have the personal capacity to answer that,
liability is not a distinct statutory provision, but remains to be Articles Sir.
2176 and 2180 of the Civil Code:

While Republic Act No. 4136 or the Land Transportation and Traffic
Code does not contain any provision on the liability of registered
owners in case of motor vehicle mishaps, Article 2176, in relation with Q : So you don't have any knowledge why he was
Article 2180, of the Civil Code imposes an obligation upon Filcar, as there?
registered owner, to answer for the damages caused to Espinas'
car.102ChanRoblesVirtualawlibrary

Thus, it is imperative to apply the registered-owner rule in a manner

that harmonizes it with Articles 2176 and 2180 of the Civil Code. Rules
must be construed in a manner that will harmonize them with other
rules so as to form a uniform and consistent system of
jurisprudence.103 In light of this, the words used in Del Carmen are
particularly notable. There, this court stated that Article 2180 "should
defer to"104 the registered-owner rule. It never stated that Article 2180
should be totally abandoned.
Therefore, the appropriate approach is that in cases where both the
registered-owner rule and Article 2180 apply, the plaintiff must first
establish that the employer is the registered owner of the vehicle in
question. Once the plaintiff successfully proves ownership, there arises
a disputable presumption that the requirements of Article 2180 have
been proven. As a consequence, the burden of proof shifts to the
defendant to show that no liability under Article 2180 has arisen.
This disputable presumption, insofar as the registered owner of the
vehicle in relation to the actual driver is concerned, recognizes that
between the owner and the victim, it is the former that should carry the
costs of moving forward with the evidence. The victim is, in many
cases, a hapless pedestrian or motorist with hardly any means to
uncover the employment relationship of the owner and the driver, or
any act that the owner may have done in relation to that employment.
A : Yes, Sir.111 (Emphasis supplied)
Sally Bellido's testimony does not affect the presumption that Article
2180's requirements have been satisfied. Mere disavowals are not
proof that suffice to overturn a presumption. To this end, evidence
must be adduced. However, petitioner presented no positive evidence
to show that Bautista was acting in his private capacity at the time of
the incident.
On the third, petitioner likewise failed to prove that it exercised the
requisite diligence in the selection and supervision of Bautista.
In its selection of Bautista as a service driver, petitioner contented itself
with Bautista's submission of a non-professional driver's
license.112 Hence, in Sally Balledo's cross-examination:
Q : . . . when he was promoted as service driver, of
course, there were certain requirements and among
other else, you made mention about a driver's license.

The registration of the vehicle, on the other hand, is accessible to the

public.

Here, respondent presented a copy of the Certificate of

A : Yes, Sir.
Registration105 of the van that hit Reyes.106 The Certificate attests to
petitioner's ownership of the van. Petitioner itself did not dispute its
ownership of the van. Consistent with the rule we have just stated, a
presumption that the requirements of Article 2180 have been satisfied
arises. It is now up to petitioner to establish that it incurred no liability
under Article 2180. This it can do by presenting proof of any of the
following: first, that it had no employment relationship with Bautista; Q : Would you be able to show to this Honorable Court
second, that Bautista acted outside the scope of his assigned tasks; or whether indeed this person did submit a driver's
third, that it exercised the diligence of a good father of a family in the license to your company?
selection and supervision of Bautista.107

On the first, petitioner admitted that Bautista was its employee at the
time of the accident.108

On the second, petitioner was unable to prove that Bautista was not A : Yes, Sir.
acting within the scope of his assigned tasks at the time of the
accident. When asked by the court why Bautista was at the place of
the accident when it occurred, Sally Bellido, petitioner's accountant and
supervisor,109 testified that she did not "have the personal capacity to
answer [the question]"110 and that she had no knowledge to answer it:
....

COURT : Madam Witness, do you know the reason why your

driver, Jimmy Bautista, at around 10:00 o' clock in
the morning of July 13, 2000 was in the vicinity of

17

Q : Do you recall what kind of driver's license is this?
A : The Land Transportation Office.
Q : Is it a professional driver's license or non-proffesional
[sic] driver's license?
A : Non-professional.
Q : You are not sure?
COURT : Non professional, professional?
A : It's a non-professional.113 (Emphasis supplied)
Employing a person holding a non-professional driver's license to
operate another's motor vehicle violates Section 24 of the Land
Transportation and Traffic Code, which provides:
SEC. 24. Use of driver's license and badge. — ...
....
No owner of a motor vehicle shall engage, employ, or hire any person
to operate such motor vehicle, unless the person sought to be
employed is a duly licensed professional driver.
Evidently, petitioner did not only fail to exercise due diligence when it
selected Bautista as service driver; it also committed an actual violation
of law.
To prove that it exercised the required diligence in supervising
Bautista, petitioner presented copies of several memoranda and
company rules.114 These, however, are insufficient because petitioner
failed to prove actual compliance. Metro Manila Transit Corporation v.
Court of Appeals115 emphasized that to establish diligence in the
supervision of employees, the issuance of company policies must be
coupled with proof of compliance:
Due diligence in the supervision of employees, on the other hand,
includes the formulation of suitable rules and regulations for the
guidance of employees and the issuance of proper instructions
intended for the protection of the public and persons with whom the
employer has relations through his or its employees and the imposition
of necessary disciplinary measures upon employees in case of breach
or as may be warranted to ensure the performance of acts
indispensable to the business of and beneficial to their employer. To
this, we add that actual implementation and monitoring of consistent
compliance with said rules should be the constant concern of the
employer, acting through dependable supervisors who should regularly
report on their supervisory functions.
In order that the defense of due diligence in the selection and
supervision of employees may be deemed sufficient and plausible, it is
not enough to emptily invoke the existence of said company
guidelines and policies on hiring and supervision. As the
negligence of the employee gives rise to the presumption of negligence
on the part of the employer, the latter has the burden of proving that it
has been diligent not only in the selection of employees but also in the
actual supervision of their work. The mere allegation of the existence of
hiring procedures and supervisory policies, without anything more, is
decidedly not sufficient to overcome presumption.
We emphatically reiterate our holding, as a warning to all employers,
that "(t)he mere formulation of various company policies on
safety without showing that they were being complied with is not
sufficient to exempt petitioner from liability arising from negligence of
its employees. It is incumbent upon petitioner to show that in recruiting
and employing the erring driver the recruitment procedures and
company policies on efficiency and safety were followed." Paying lip-
service to these injunctions or merely going through the motions of
compliance therewith will warrant stern sanctions from the
Court.116(Emphasis supplied, citations omitted)
For failing to overturn the presumption that the requirements of Article
2180 have been satisfied, petitioner must be held liable.
III
Petitioner's argument that it should be excused from liability because
Bautista was already dropped as a party is equally unmeritorious. The
liability imposed on the registered owner is direct and primary.117 It
does not depend on the inclusion of the negligent driver in the action.
Agreeing to petitioner's assertion would render impotent the rationale
of the motor registration law in fixing liability on a definite person.
Bautista, the driver, was not an indispensable party under Rule 3,
Section 7118 of the 1997 Rules of Civil Procedure. Rather, he was a
necessary party under Rule 3, Section 8.119 Instead of insisting that
Bautista — who was nothing more than a necessary party — should
not have been dropped as a defendant, or that petitioner, along with
Bautista, should have been dropped, petitioner (as a co-defendant
insisting that the action must proceed with Bautista as party) could
have opted to file a cross-claim against Bautista as its remedy.
The 1997 Rules of Civil Procedure spell out the rules on joinder of
indispensable and necessary parties. These are intended to afford "a
complete determination of all possible issues, not only between the
parties themselves but also as regards to other persons who may be
affected by the judgment."120
However, while an exhaustive resolution of disputes is desired in every
case, the distinction between indispensable parties and necessary
parties delineates a court's capacity to render effective judgment. As
defined by Rule 3, Section 7, indispensable parties are "[p]arties in
interest without whom no final determination can be had of an action[.]"
Thus, their non-inclusion is debilitating: "the presence of indispensable
parties is a condition for the exercise of juridical power and when an
indispensable party is not before the court, the action should be
dismissed."121
In contrast, a necessary party's presence is not imperative, and his or
her absence is not debilitating. Nevertheless, it is preferred that they be
included in order that relief may be complete.
The concept of indispensable parties, as against parties whose
inclusion only allows complete relief, was explained in Arcelona v.
Court of Appeals:122
An indispensable party is a party who has such an interest in the
controversy or subject matter that a final adjudication cannot be made,
18
in his absence, without injuring or affecting that interest, a party who
Q: How much did you spend for the death of Jesmarian
has not only an interest in the subject matter of the controversy, but
[sic] Reyes?
also has an interest of such nature that a final decree cannot be made
without affecting his interest or leaving the controversy in such a
condition that its final determination may be wholly inconsistent with
equity and good conscience. It has also been considered that an
indispensable party is a person in whose absence there cannot be a
determination between the parties already before the court which is
effective, complete, or equitable. Further, an indispensable party is one A: 'Yun pong P35,000.00 na pagpapalibing at saka...
who must be included in an action before it may properly go forward.

A person is not an indispensable party, however, if his interest in the

controversy or subject matter is separable from the interest of the other
parties, so that it will not necessarily be directly or injuriously affected
by a decree which does complete justice between them. Also, a person Q: You said that you spent P35,000.00. Do you have any
is not an indispensable party if his presence would merely permit evidence or proof that you spent that amount?
complete relief between him and those already parties to the action, or
if he has no interest in the subject matter of the action. It is not a
sufficient reason to declare a person to be an indispensable party that
his presence will avoid multiple litigation.123ChanRoblesVirtualawlibrary

Petitioner's interest and liability is distinct from that of its driver. A: Meron po.
Regardless of petitioner's employer-employee relationship with
Bautista, liability attaches to petitioner on account of its being the
registered owner of a vehicle that figures in a mishap. This alone
suffices. A determination of its liability as owner can proceed
independently of a consideration of how Bautista conducted himself as
a driver. While certainly it is desirable that a determination of Bautista's Q: Showing to you this sort of certification. What relation
liability be made alongside that of the owner of the van he was driving, has this...
his non-inclusion in these proceedings does not absolutely hamper a
judicious resolution of respondent's plea for relief.

IV

A: 'Yan po' yung contractor nagumawa.

The Court of Appeals committed no reversible error when it awarded
actual damages to respondent. Respondent's claim for actual damages
was based on the Certificate124 issued and signed by a certain
Peñaloza showing that respondent paid Peñaloza P35,000.00 for
funeral expenses.
Q: Contractor of what?
Contrary to petitioner's claim, this Certificate is not hearsay. Evidence
is hearsay when its probative value is based on the personal
knowledge of a person other than the person actually
testifying.125 Here, the Certificate sought to establish that respondent
herself paid Peñaloza P35,000.00 as funeral expenses for Reyes'
death:126 A: 'Yan po' yung mismong binilhan ko ng lupa at nitso.

3. Na ang aking kontrata ay nagkakahalaga ng

P35,000-00 [sic] sa lahat ng nagamit na materiales
at labor nito kasama ang lote na ibinayad sa akin
ni Gng. ERMILINDA REYES ABEJAR na siyang
aking kakontrata sa pagsasagawa ng naturang ....
paglilibingan.127 (Emphasis supplied)

It was respondent herself who identified the Certificate. She testified

that she incurred funeral expenses amounting to P35,000.00, that she
paid this amount to Peñaloza, and that she was present when
Peñaloza signed the Certificate: ATTY. There is a signature at the top of the printed name
LIM : Julian Penalosa [sic]. Whose signature is this?

[ATTY. Did you incur any expenses?

LIM] :

A: 'Yan po' yung mismong contractor.

A: Meron po.

....

19

Q: Did you see him sign this?
A: Opo.128 (Emphasis supplied)
Respondent had personal knowledge of the facts sought to be proved
by the Certificate, i.e. that she spent P35,000.00 for the funeral
expenses of Reyes. Thus, the Certificate that she identified and
testified to is not hearsay. It was not an error to admit this Certificate as
evidence and basis for awarding P35,000.00 as actual damages to
respondent.
The Court of Appeals likewise did not err in awarding civil indemnity
and exemplary damages.
Article 2206 of the Civil Code provides:
ARTICLE 2206. The amount of damages for death caused by a crime
or quasi-delict shall be at least three thousand pesos, even though
there may have been mitigating circumstances[.]
Further, Article 2231 of the Civil Code provides:
ARTICLE 2231. In quasi-delicts, exemplary damages may be granted if
the defendant acted with gross negligence.
Both the Court of Appeals and the Regional Trial Court found Bautista
grossly negligent in driving the van and concluded that Bautista's gross
negligence was the proximate cause of Reyes' death. Negligence and
causation are factual issues.129 Findings of fact, when established by
the trial court and affirmed by the Court of Appeals, are binding on this
court unless they are patently unsupported by evidence or unless the
judgment is grounded on a misapprehension of facts.130 Considering
that petitioner has not presented any evidence disputing the findings of
the lower courts regarding Bautista's negligence, these findings cannot
be disturbed in this appeal. The evidentiary bases for the award of civil
indemnity and exemplary damages stand. As such, petitioner must pay
the exemplary damages arising from the negligence of its driver. 131 For
the same reasons, the award of P50,000.00 by way of civil indemnity is
justified.132
The award of moral damages is likewise proper.
Article 2206(3) of the Civil Code provides:
ARTICLE 2206. The amount of damages for death caused by a crime
or quasi-delict shall be at least three thousand pesos, even though
there may have been mitigating circumstances. In addition:
....
(3) The spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for
mental anguish by reason of the death of the deceased.
(Emphasis supplied)
For deaths caused by quasi-delict, the recovery of moral damages is
limited to the spouse, legitimate and illegitimate descendants, and
ascendants of the deceased.133
Persons exercising substitute parental authority are to be considered
ascendants for the purpose of awarding moral damages. Persons
exercising substitute parental authority are intended to stand in place
of a child's parents in order to ensure the well-being and welfare of a
child.134 Like natural parents, persons exercising substitute parental
authority are required to, among others, keep their wards in their
company,135 provide for their upbringing,136 show them love and
affection,137 give them advice and counsel,138 and provide them with
companionship and understanding.139 For their part, wards shall always
observe respect and obedience towards the person exercising parental
authority.140 The law forges a relationship between the ward and the
person exercising substitute parental authority such that the death or
injury of one results in the damage or prejudice of the other.
Moral damages are awarded to compensate the claimant for his or her
actual injury, and not to penalize the wrongdoer.141 Moral damages
enable the injured party to alleviate the moral suffering resulting from
the defendant's actions.142 It aims to restore — to the extent possible
— "the spiritual status quo ante[.]"143
Given the policy underlying Articles 216 and 220 of the Family Code as
well as the purposes for awarding moral damages, a person exercising
substitute parental authority is rightly considered an ascendant of the
deceased, within the meaning of Article 2206(3) of the Civil Code.
Hence, respondent is entitled to moral damages.
As exemplary damages have been awarded and as respondent was
compelled to litigate in order to protect her interests, she is rightly
entitled to attorney's fees.144
However, the award of interest should be modified. This modification
must be consistent with Nacar v. Gallery Frames,145 in which we ruled:
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated
claims or damages, except when or until the demand
can be established with reasonable certainty.
Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extrajudicially
(Art. 1169, Civil Code), but when such certainty cannot
be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date
the judgment of the court is made (at which time the
quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
credit.146 (Emphasis supplied)
WHEREFORE, the Decision of the Court of Appeals dated October 3,
2005 is AFFIRMED with the following MODIFICATIONS: (a) actual
damages in the amount of P35,000.00 shall earn interest at the rate of
6% per annum from the time it was judicially or extrajudicially
demanded from petitioner Caravan Travel and Tours International, Inc.
until full satisfaction; (b) moral damages, exemplary damages, and
attorney's fees shall earn interest at the rate of 6% per annum from the
date of the Regional Trial Court Decision until full satisfaction; and (c)
civil indemnity shall earn interest at the rate of 6% per annum from the
date of the Court of Appeals Decision until full satisfaction.
SO ORDERED.
UNWILLING CO-PLAINTIFF
RESIDENT MARINE MAMMALS OF THE PROTECTED SEASCAPE
TAÑON STRAIT, e.g., TOOTHED WHALES, DOLPHINS,
20
PORPOISES, AND OTHER CETACEAN SPECIES, Joined in and
Represented herein by Human Beings Gloria Estenzo Ramos and
Rose-Liza Eisma-Osorio, In Their Capacity as Legal Guardians of
the Lesser Life-Forms and as Responsible Stewards of God's
Creations, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity as Secretary of the
Department of Energy (DOE), SECRETARY JOSE L. ATIENZA, in
his capacity as Secretary of the Department of Environment and
Natural Resources (DENR), LEONARDO R. SIBBALUCA, DENR
Regional Director-Region VII and in his capacity as Chairperson
of the Tañon Strait Protected Seascape Management Board,
Bureau of Fisheries and Aquatic Resources (BFAR), DIRECTOR
MALCOLM J. SARMIENTO, JR., BFAR Regional Director for
Region VII ANDRES M. BOJOS, JAPAN PETROLEUM
EXPLORATION CO., LTD. (JAPEX), as represented by its
Philippine Agent, SUPPLY OILFIELD SERVICES,
INC. Respondents.
x-----------------------x
G.R. No. 181527
CENTRAL VISAYAS FISHERFOLK DEVELOPMENT CENTER
(FIDEC), CERILO D. ENGARCIAL, RAMON YANONG, FRANCISCO
LABID, in their personal capacity and as representatives of the
SUBSISTENCE FISHERFOLKS OF THE MUNICIPALITIES OF
ALOGUINSAN AND PINAMUNGAJAN, CEBU, AND THEIR
FAMILIES, AND THE PRESENT AND FUTURE GENERATIONS OF
FILIPINOS WHOSE RIGHTS ARE SIMILARLY
AFFECTED, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity as Secretary of the
Department of Energy (DOE), JOSE L. ATIENZA, in his capacity as
Secretary of the Department of Environment and Natural
Resources (DENR), LEONARDO R. SIBBALUCA, in his capacity as
DENR Regional Director-Region VII and as Chairperson of the
Tañon Strait Protected Seascape Management Board, ALAN
ARRANGUEZ, in his capacity as Director - Environmental
Management Bureau-Region VII, DOE Regional Director for
Region VIII1 ANTONIO LABIOS, JAPAN PETROLEUM
EXPLORATION CO., LTD. (JAPEX), as represented by its
Philippine Agent, SUPPLY OILFIELD SERVICES,
INC., Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before Us are two consolidated Petitions filed under Rule 65 of the
1997 Rules of Court, concerning Service Contract No. 46 (SC-46),
which allowed the exploration, development, and exploitation of
petroleum resources within Tañon Strait, a narrow passage of water
situated between the islands of Negros and Cebu. 2
The Petition docketed as G.R. No. 180771 is an original Petition for
Certiorari, Mandamus, and Injunction, which seeks to enjoin
respondents from implementing SC-46 and to have it nullified for willful
and gross violation of the 1987 Constitution and certain international
and municipal laws.3
Likewise, the Petition docketed as G.R. No. 181527 is an original
Petition for Certiorari, Prohibition, and Mandamus, which seeks to
nullify the Environmental Compliance Certificate (ECC) issued by the
Environmental Management Bureau (EMB) of the Department of
Environment and Natural Resources (DENR), Region VII in connection
with SC-46; to prohibit respondents from implementing SC-46; and to
compel public respondents to provide petitioners access to the
pertinent documents involving the Tañon Strait Oil Exploration Project.4
ANTECEDENT FACTS AND PROCEEDINGS
Petitioners in G.R. No. 180771, collectively referred to as the "Resident
Marine Mammals" in the petition, are the toothed whales, dolphins,
porpoises, and other cetacean species, which inhabit the waters in and
around the Tañon Strait. They are joined by Gloria Estenzo Ramos
(Ramos) and Rose-Liza Eisma-Osorio (Eisma-Osorio) as their legal
guardians and as friends (to be collectively known as "the Stewards")
who allegedly empathize with, and seek the protection of, the
aforementioned marine species. Also impleaded as an unwilling co-
petitioner is former President Gloria Macapagal-Arroyo, for her express
declaration and undertaking in the ASEAN Charter to protect the
Tañon Strait, among others.5
Petitioners in G.R. No. 181527 are the Central Visayas Fisherfolk
Development Center (FIDEC), a non-stock, non-profit, non-
governmental organization, established for the welfare of the marginal
fisherfolk in Region VII; and Cerilo D. Engarcial (Engarcial), Ramon
Yanong (Yanong) and Francisco Labid (Labid), in their personal
capacities and as representatives of the subsistence fisherfolk of the
municipalities of Aloguinsan and Pinamungajan, Cebu.
Named as respondents in both petitions are the late Angelo T. Reyes,
as then Secretary of the Department of Energy (DOE); Jose L. Atienza,
as then Secretary of the DENR; Leonardo R. Sibbaluca, as then
DENRRegional Director for Region VII and Chairman of the Tañon
Strait Protected Seascape Management Board; Japan Petroleum
Exploration Co., Ltd. (JAPEX), a company organized and existing
under the laws of Japan with a Philippine branch office; and Supply
Oilfield Services, Inc. (SOS), as the alleged Philippine agent of JAPEX.
In G.R. No. 181527, the following were impleaded as additional public
respondents: Alan C. Arranguez (Arranguez) and Antonio Labios
(Labios), in their capacities as then Director of the EMB, Region VII
and then Regional Director of the DOE, Region VII, respectively. 6
On June 13, 2002, the Government of the Philippines, acting through
the DOE, entered into a Geophysical Survey and Exploration Contract-
I 02 (GSEC-102) with JAPEX. This contract involved geological and
geophysical studies of the Tañon Strait. The studies included surface
geology, sample analysis, and reprocessing of seismic and magnetic
data. JAPEX, assisted by DOE, also conducted geophysical and
satellite surveys, as well as oil and gas sampling in Tañon Strait. 7
On December 21, 2004, DOE and JAPEX formally converted GSEC-
102 into SC-46 for the exploration, development, and production of
petroleum resources in a block covering approximately 2,850 square
kilometers offshore the Tañon Strait.8
From May 9 to 18, 2005, JAPEX conducted seismic surveys in and
around the Tañon Strait. A multi-channel sub-bottom profiling covering
approximately 751 kilometers was also done to determine the area's
underwater composition.9
JAPEX committed to drill one exploration well during the second sub-
phase of the project. Since the well was to be drilled in the marine
waters of Aloguinsan and Pinamungajan, where the Tañon Strait was
declared a protected seascape in 1988,10 JAPEX agreed to comply
with the Environmental Impact Assessment requirements pursuant to
Presidential Decree No. 1586, entitled "Establishing An Environmental
Impact Statement System, Including Other Environmental
Management Related Measures And For Other Purposes."11
On January 31, 2007, the Protected Area Management Board12 of the
Tañon Strait (PAMB-Tañon Strait) issued Resolution No. 2007-
001,13 wherein it adopted the Initial Environmental Examination (IEE)
commissioned by JAPEX, and favorably recommended the approval of
JAPEX's application for an ECC.
On March 6, 2007, the EMB of DENR Region VII granted an ECC to
the DOE and JAPEX for the offshore oil and gas exploration project in
Tañon Strait.14 Months later, on November 16, 2007, JAPEX began to
drill an exploratory well, with a depth of 3,150 meters, near
Pinamungajan town in the western Cebu Province.15 This drilling lasted
until February 8, 2008.16
It was in view of the foregoing state of affairs that petitioners applied to
this Court for redress, via two separate original petitions both dated
December 1 7, 2007, wherein they commonly seek that respondents
21
be enjoined from implementing SC-46 for, among others, violation of
the 1987 Constitution.
On March 31, 2008, SOS filed a Motion to Strike17 its name as a
respondent on the ground that it is not the Philippine agent of JAPEX.
In support of its motion, it submitted the branch office application of
JAPEX,18 wherein the latter's resident agent was clearly identified.
SOS claimed that it had acted as a mere logistics contractor for JAPEX
in its oil and gas exploration activities in the Philippines.
Petitioners Resident Marine Mammals and Stewards opposed SOS' s
motion on the ground that it was premature, it was pro-forma, and it
was patently dilatory. They claimed that SOS admitted that "it is in law
a (sic) privy to JAPEX" since it did the drilling and other exploration
activities in Tañon Strait under the instructions of its principal, JAPEX.
They argued that it would be premature to drop SOS as a party as
JAPEX had not yet been joined in the case; and that it was
"convenient" for SOS to ask the Court to simply drop its name from the
parties when what it should have done was to either notify or ask
JAPEX to join it in its motion to enable proper substitution. At this
juncture, petitioners Resident Marine Mammals and Stewards also
asked the Court to" implead JAPEX Philippines as a corespondent or
as a substitute for its parent company, JAPEX.19
On April 8, 2008, the Court resolved to consolidate G.R. No. 180771
and G.R. No. 181527.
On May 26, 2008, the FIDEC manifested20 that they were adopting in
toto the Opposition to Strike with Motion to Implead filed by petitioners
Resident Marine Mammals and Stewards in G.R. No. 180771.
On June 19, 2008, public respondents filed their Manifestation21 that
they were not objecting to SOS's Motion to Strike as it was not
JAPEX's resident agent. JAPEX during all this time, did not file any
comment at all.
Thus, on February 7, 2012, this Court, in an effort to ensure that all the
parties were given ample chance and opportunity to answer the issues
herein, issued a Resolution directing the Court's process servicing unit
to again serve the parties with a copy of the September 23, 2008
Resolution of the Court, which gave due course to the petitions in G.R.
Nos. 180771 and 181527, and which required the parties to submit
their respective memoranda. The February 7, 2012 Resolution22 reads
as follows:
G.R. No. 180771 (Resident Marine Mammals of the Protected
Seascape Tañon Strait, e.g., Toothed Whales, Dolphins, Porpoises
and Other Cetacean Species, et al. vs. Hon. Angelo Reyes, in his
capacity as Secretary of the Department of Energy, et al.) and G.R.
No. 181527 (Central Visayas Fisherfolk Development Center, et al. vs.
Hon. Angelo Reyes, et al.). - The Court Resolved to direct the Process
Servicing Unit to RE-SEND the resolution dated September 23, 2008
to the following parties and counsel, together with this resolution:
Atty. Aristeo O. Carino 20th Floor Pearlbank Centre
Counsel for Respondent Supply 146 Valero Street
Oilfield Services, Inc. Salcedo Village, Makati City
JAPEX Philippines Ltd. 20th Floor Pearlbank Centre
146 Valero Street
Salcedo Village, Makati City
JAPEX Philippines Ltd. 19th Floor Pearlbank Centre
c/o Atty. Maria Farah Z.G. 146 Valero Street
Nicolas-Suchianco Salcedo Village, Makati City
Resident Agent of JAPEX
Philippines Ltd.
This Resolution was personally served to the above parties, at the
above addresses on February 23, 2012. On March 20, 2012, JAPEX
Philippines, Ltd. (JAPEX PH), by way of special appearance, filed a
Motion to Admit23 its Motion for Clarification,24 wherein JAPEX PH
requested to be clarified as to whether or not it should deem the
February 7, 2012 Resolution as this Court's Order of its inclusion in the
case, as it has not been impleaded. It also alleged that JAPEX PH had
already stopped exploration activities in the Taft. on Strait way back in
2008, rendering this case moot.
On March 22, 2012, JAPEX PH, also by special appearance, filed a
Motion for Extension of Time25 to file its Memorandum. It stated that
since it received the February 7, 2012 Resolution on February 23,
2012, it had until March 22, 2012 to file its Memorandum. JAPEX PH
then asked for an additional thirty days, supposedly to give this Court
some time to consider its Motion for Clarification.
On April 24, 2012, this Court issued a Resolution26 granting JAPEX
PH's Motion to Admit its Motion for Clarification. This Court, addressing
JAPEX PH's Motion for Clarification, held:
With regard to its Motion for Clarification (By Special Appearance)
dated March 19, 2012, this Court considers JAPEX Philippines, Ltd. as
a real party-in-interest in these cases. Under Section 2, Rule 3 of the
1997 Rules of Court, 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. Contrary to JAPEX Philippines, Ltd. 's
allegation that it is a completely distinct corporation, which should not
be confused with JAPEX Company, Ltd., JAPEX Philippines, Ltd. is a
mere branch office, established by JAPEX Company, Ltd. for the
purpose of carrying out the latter's business transactions here in the
Philippines. Thus, JAPEX Philippines, Ltd., has no separate personality
from its mother foreign corporation, the party impleaded in this case.
Moreover, Section 128 of the Corporation Code provides for the
responsibilities and duties of a resident agent of a foreign corporation:
SECTION 128. Resident agent; service of process. - The Securities
and Exchange Commission shall require as a condition precedent to
the issuance of the license to transact business in the Philippines by
any foreign corporation that such corporation file with the Securities
and Exchange Commission a written power of attorney designating
some person who must be a resident of the Philippines, on whom any
summons and other legal processes may be served in all actions or
other legal proceedings against such corporation, and consenting that
service upon such resident agent shall be admitted and held as valid
as if served upon the duly authorized officers of the foreign corporation
at its home office. Any such foreign corporation shall likewise execute
and file with the Securities and Exchange Commission an agreement
or stipulation, executed by the proper authorities of said corporation, in
form and substance as follows:
"The (name of foreign corporation) does hereby stipulate and agree, in
consideration of its being granted by the Securities and Exchange
Commission a license to transact business in the Philippines, that if at
any time said corporation shall cease to transact business in the
Philippines, or shall be without any resident agent in the Philippines on
whom any summons or other legal processes may be served, then in
any action or proceeding arising out of any business or transaction
which occurred in the Philippines, service of any summons or other
legal process may be made upon the Securities and Exchange
Commission and that such service shall have the same force and
effect as if made upon the duly-authorized officers of the corporation at
its home office."

Whenever such service of summons or other process shall be made

Atty. Maria Farah Z.G.
Nicolas-Suchianco
Suite 2404 Discovery Centre
25 ADB Avenue
Ortigas Center, Pasig City
upon the Securities and Exchange Commission, the Commission shall,
within ten (10) days thereafter, transmit by mail a copy of such
summons or other legal process to the corporation at its home or
principal office. The sending of such copy by the Commission shall be
a necessary part of and shall complete such service. All expenses
22
incurred by the Commission for such service shall be paid in advance
by the party at whose instance the service is made.
In case of a change of address of the resident agent, it shall be his or
its duty to immediately notify in writing the Securities and Exchange
Commission of the new address.
It is clear from the foregoing provision that the function of a resident
agent is to receive summons or legal processes that may be served in
all actions or other legal proceedings against the foreign corporation.
These cases have been prosecuted in the name of JAPEX Company,
Ltd., and JAPEX Philippines Ltd., as its branch office and resident
agent, had been receiving the various resolutions from this Court, as
evidenced by Registry Return Cards signed by its representatives.
And in the interest of justice, this Court resolved to grant JAPEX PH's
motion for extension of time to file its memorandum, and was given
until April 21, 2012, as prayed for, within which to comply with the
submission.27
Without filing its Memorandum, JAPEX PH, on May 14, 2012, filed a
motion, asking this Court for an additional thirty days to file its
Memorandum, to be counted from May 8, 2012. It justified its request
by claiming that this Court's April 24, 2012 Resolution was issued past
its requested deadline for filing, which was on April 21, 2012. 28
On June 19, 2012, this Court denied JAPEX PH's second request for
additional time to file its Memorandum and dispensed with such filing.
Since petitioners had already filed their respective memoranda,29 and
public respondents had earlier filed a Manifestation30 that they were
adopting their Comment dated March 31, 2008 as their memorandum,
this Court submitted the case for decision.
Petitioners.' Allegations
Protesting the adverse ecological impact of JAPEX's oil exploration
activities in the Tañon Strait, petitioners Resident Marine Mammals
and Stewards aver that a study made after the seismic survey showed
that the fish catch was reduced drastically by 50 to 70 percent. They
claim that before the seismic survey, the average harvest per day
would be from 15 to 20 kilos; but after the activity, the fisherfolk could
only catch an average of 1 to 2 kilos a day. They attribute this "reduced
fish catch" to the destruction of the ''payao," also known as the "fish
aggregating device" or "artificial reef."31 Petitioners Resident Marine
Mammals and Stewards also impute the incidences of "fish
kill"32observed by some of the local fisherfolk to the seismic survey.
And they further allege that the ECC obtained by private respondent
JAPEX is invalid because public consultations and discussions with the
affected stakeholders, a pre-requisite to the issuance of the ECC, were
not held prior to the ECC's issuance.
In its separate petition, petitioner FIDEC confirms petitioners Resident
Marine Mammals and Stewards' allegations of reduced fish catch and
lack of public consultations or discussions with the fisherfolk and other
stakeholders prior to the issuance of the ECC. Moreover, it alleges that
during the seismic surveys and drilling, it was barred from entering and
fishing within a 7-kilometer radius from the point where the oilrig was
located, an area greater than the 1.5-kilometer radius "exclusion zone"
stated in the IEE.33 It also agrees in the allegation that public
respondents DENR and EMB abused their discretion when they issued
an ECC to public respondent DOE and private respondent JAPEX
without ensuring the strict compliance with the procedural and
substantive requirements under the Environmental Impact Assessment
system, the Fisheries Code, and their implementing rules and
regulations.34It further claims that despite several requests for copies of
all the documents pertaining to the project in Tañon Strait, only copies
of the P AMB-Tañon Strait Resolution and the ECC were given to the
fisherfolk.35
Public Respondents' Counter-Allegations
Public respondents, through the Solicitor General, contend that
petitioners Resident Marine Mammals and Stewards have no legal
standing to file the present petition; that SC-46 does not violate the
1987 Constitution and the various laws cited in the petitions; that the
ECC was issued in accordance with existing laws and regulations; that
public respondents may not be compelled by mandamus to furnish
petitioners copies of all documents relating to SC-46; and that all the
petitioners failed to show that they are entitled to injunctive relief. They
further contend that the issues raised in these petitions have been
rendered moot and academic by the fact that SC-46 had been mutually
terminated by the parties thereto effective June 21, 2008.36
ISSUES
The following are the issues posited by petitioners Resident Marine
Mammals and Stewards in G.R. No. 180771:
I. WHETHER OR NOT PETITIONERS HAVE LOCUS
STAND! TO FILE THE INSTANT PETITION;
II. WHETHER OR NOT SERVICE CONTRACT NO. 46 IS
VIOLA T[IVE] OF THE 1987 PHILIPPINE CONSTITUTION
AND STATUTES;
III. WHETHER OR NOT THE ON-GOING EXPLORATION
AND PROPOSED EXPLOITATION FOR OIL AND
NATURAL GAS AT, AROUND, AND UNDERNEATH THE
MARINE WATERS OF THE TAÑON STRAIT PROTECTED
SEASCAPE IS INCONSISTENT WITH THE PHILIPPINE
COMMITMENTS TO INTERNATIONAL ENVIRONMENTAL
LAWS AND INSTRUMENTS; AND
IV. WHETHER OR NOT THE ISSUANCE OF THE
ENVIRONMENTAL COMPLIANCE CERTIFICATE (ECC) IN
ENVIRONMENTALLY CRITICAL AREAS AND HABITATS
OF MARINE WILDLIFE AND ENDANGERED SPECIES IS
LEGAL AND PROPER.37
Meanwhile, in G.R. No. 181527, petitioner FIDEC presented the
following issues for our consideration:
I. WHETHER OR NOT SERVICE CONTRACT NO. 46
EXECUTED BETWEEN RESPONDENTS DOE AND JAPEX
SHOULD BE NULLIFIED AND SET ASIDE FOR BEING IN
DIRECT VIOLATION OF SPECIFIC PROVISIONS OF THE
1987 PHILIPPINE CONSTITUTION AND APPLICABLE
LAWS;
II. WHETHER OR NOT THE OFF-SHORE OIL
EXPLORAT[I]ON CONTEMPLATED UNDER SERVICE
CONTRACT NO. 46 ·IS LEGALLY PERMISSIBLE
WITHOUT A LAW BEING DULY PASSED EXPRESSLY
FOR THE PURPOSE;
III. WHETHER OR NOT THE OIL EXPLORATION BEING
CONDUCTED WITHIN THE TAÑON STRAIT PROTECTED
SEASCAPE VIOLATES THE RIGHTS AND LEGAL
PROTECTION GRANTED TO PETITIONERS UNDER THE
CONSTITUTION AND APPLICABLE LAWS.
IV. WHETHER OR NOT THE ISSUANCE OF THE
ENVIRONMENTAL COMPLIANCE CERTIFICATE (ECC)
FOR SUCH AN ENVIRONMENTALLY CRITICAL PROJECT
INSIDE AN ENVIRONMENTALLY CRITICAL AREA SUCH
AS THE TAÑON STRAIT PROTECTED SEASCAPE
CONFORMED TO LAW AND EXISTING RULES AND
REGULATIONS ON THE MATTER.
V. WHETHER OR NOT THE RESPONDENTS MAY BE
COMPELLED BY MANDAMUS TO FURNISH
PETITIONERS WITH COPIES OF THE DOCUMENTS
PERTAINING TO THE TAÑON STRAIT OIL EXPLORATION
PROJECT.38
In these consolidated petitions, this Court has determined that the
various issues raised by the petitioners may be condensed into two
primary issues:
23
I. Procedural Issue: Locus Standi of the Resident Marine Mammals
and Stewards, petitioners in G.R. No. 180771; and
II. Main Issue: Legality of Service Contract No. 46.
DISCUSSION
At the outset, this Court makes clear that the "'moot and academic
principle' is not a magical formula that can automatically dissuade the
courts in resolving a case." Courts have decided cases otherwise moot
and academic under the following exceptions:
1) There is a grave violation of the Constitution;
2) The exceptional character of the situation and the
paramount public interest is involved;
3) The constitutional issue raised requires formulation of
controlling principles to guide the bench, the bar, and the
public; and
4) The case is capable of repetition yet evading review.39
In this case, despite the termination of SC-46, this Court deems it
necessary to resolve these consolidated petitions as almost all of the
foregoing exceptions are present in this case. Both petitioners allege
that SC-46 is violative of the Constitution, the environmental and
livelihood issues raised undoubtedly affect the public's interest, and the
respondents' contested actions are capable of repetition.
Procedural Issues
Locus Standi of Petitioners Resident Marine Mammals and Stewards
The Resident Marine Mammals, through the Stewards, "claim" that
they have the legal standing to file this action since they stand to be
benefited or injured by the judgment in this suit.40 Citing Oposa v.
Factoran, Jr.,41 they also assert their right to sue for the faithful
performance of international and municipal environmental laws created
in their favor and for their benefit. In this regard, they propound that
they have the right to demand that they be accorded the benefits
granted to them in multilateral international instruments that the
Philippine Government had signed, under the concept of stipulation
pour autrui.42
For their part, the Stewards contend that there should be no question
of their right to represent the Resident Marine Mammals as they have
stakes in the case as forerunners of a campaign to build awareness
among the affected residents of Tañon Strait and as stewards of the
environment since the primary steward, the Government, had failed in
its duty to protect the environment pursuant to the public trust
doctrine.43
Petitioners Resident Marine Mammals and Stewards also aver that this
Court may lower the benchmark in locus standi as an exercise of
epistolary jurisdiction.44
In opposition, public respondents argue that the Resident Marine
Mammals have no standing because Section 1, Rule 3 of the Rules of
Court requires parties to an action to be either natural or juridical
persons, viz.:
Section 1. Who may be parties, plaintiff and defendant. - Only natural
or juridical persons, or entities authorized by law may be parties in a
civil action. The term "plaintiff' may refer to the claiming party, the
counter-claimant, the cross-claimant, or the third (fourth, etc.)-party
plaintiff. The term "defendant" may refer to the original defending party,
the defendant in a counterclaim, the cross-defendant, or the third
(fourth, etc.)-party defendant.
The public respondents also contest the applicability of Oposa, pointing
out that the petitioners therein were all natural persons, albeit some of
them were still unborn.45
As regards the Stewards, the public respondents likewise challenge
their claim of legal standing on the ground that they are representing
animals, which cannot be parties to an action. Moreover, the public
respondents argue that the Stewards are not the real parties-in-interest
for their failure to show how they stand to be benefited or injured by the
decision in this case.46 Invoking the alter ego principle in political law,
the public respondents claim that absent any proof that former
President Arroyo had disapproved of their acts in entering into and
implementing SC-46, such acts remain to be her own.47
The public respondents contend that since petitioners Resident Marine
Mammals and Stewards' petition was not brought in the name of a real
party-in-interest, it should be dismissed for failure to state a cause of
action.48
The issue of whether or not animals or even inanimate objects should
be given legal standing in actions before courts of law is not new in the
field o f animal rights and environmental law. Petitioners Resident
Marine Mammals and Stewards cited the 1972 United States case
Sierra Club v. Rogers C.B. Morton,49 wherein Justice William 0.
Douglas, dissenting to the conventional thought on legal standing,
opined:
The critical question of "standing" would be simplified and also put
neatly in focus if we fashioned a federal rule that allowed
environmental issues to be litigated before federal agencies or federal
courts in the name of the inanimate object about to be despoiled,
defaced, or invaded by roads and bulldozers and where injury is the
subject of public outrage. x x x. Inanimate objects are sometimes
parties in litigation. A ship has a legal personality, a fiction found useful
for maritime purposes. The corporation sole - a creature of
ecclesiastical law - is an acceptable adversary and large fortunes ride
on its cases. The ordinary corporation is a "person" for purposes of the
adjudicatory processes, whether it represents proprietary, spiritual,
aesthetic, or charitable causes.
So it should be as respects valleys, alpine meadows, rivers, lakes,
estuaries, beaches, ridges, groves of trees, swampland, or even air
that feels the destructive pressures of modem technology and modem
life. The river, for example, is the living symbol of all the life it sustains
or nourishes-fish, aquatic insects, water ouzels, otter, fisher, deer, elk,
bear, and all other animals, including man, who are dependent on it or
who enjoy it for its sight, its sound, or its life. The river as plaintiff
speaks for the ecological unit of life that is part of it. Those people who
have a meaningful relation to that body of water-whether it be a
fisherman, a canoeist, a zoologist, or a logger-must be able to speak
for the values which the river represents and which are threatened with
destruction.50 (Citations omitted.)
The primary reason animal rights advocates and environmentalists
seek to give animals and inanimate objects standing is due to the need
to comply with the strict requirements in bringing a suit to court. Our
own 1997 Rules of Court demand that parties to a suit be either natural
or juridical persons, or entities authorized by law. It further necessitates
the action to be brought in the name of the real party-in-interest, even if
filed by a representative, viz.:
Rule 3
Parties to Civil Actions
Section 1. Who may be parties; plaintiff and defendant. - Only natural
or juridical persons, or entities authorized by law may be parties in a
civil action. The term "plaintiff' may refer to the claiming party, the
counter-claimant, the cross-claimant, or the third (fourth, etc.)-party
plaintiff. The term "defendant" may refer to the original defending party,
the defendant in a counterclaim, the cross-defendant, or the third
(fourth, etc.)-party defendant.
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.
24
Sec. 3. Representatives as parties. - Where the action is allowed to be
prosecuted or defended by a representative or someone acting in a
fiduciary capacity, the beneficiary shall be included in the title of the
case and shall be deemed to be the real party in interest. A
representative may be a trustee of an express trust, a guardian, an
executor or administrator, or a party authorized by law or these Rules.
An agent acting in his own name and for the benefit of an undisclosed
principal may sue or be sued without joining the principal except when
the contract involves things belonging to the principal.
It had been suggested by animal rights advocates and
environmentalists that not only natural and juridical persons should be
given legal standing because of the difficulty for persons, who cannot
show that they by themselves are real parties-in-interests, to bring
actions in representation of these animals or inanimate objects. For
this reason, many environmental cases have been dismissed for failure
of the petitioner to show that he/she would be directly injured or
affected by the outcome of the case. However, in our jurisdiction, locus
standi in environmental cases has been given a more liberalized
approach. While developments in Philippine legal theory and
jurisprudence have not progressed as far as Justice Douglas's
paradigm of legal standing for inanimate objects, the current trend
moves towards simplification of procedures and facilitating court
access in environmental cases.
Recently, the Court passed the landmark Rules of Procedure for
Environmental Cases,51 which allow for a "citizen suit," and permit any
Filipino citizen to file an action before our courts for violations of our
environmental laws:
SEC. 5. Citizen suit. - Any Filipino citizen in representation of others,
including minors or generations yet unborn, may file an action to
enforce rights or obligations under environmental laws. Upon the filing
of a citizen suit, the court shall issue an order which shall contain a
brief description of the cause of action and the reliefs prayed for,
requiring all interested parties to manifest their interest to intervene in
the case within fifteen (15) days from notice thereof. The plaintiff may
publish the order once in a newspaper of a general circulation in the
Philippines or furnish all affected barangays copies of said order.
Citizen suits filed under R.A. No. 8749 and R.A. No. 9003 shall be
governed by their respective provisions.52(Emphasis ours.)
Explaining the rationale for this rule, the Court, in the Annotations to
the Rules of Procedure for Environmental Cases, commented:
Citizen suit. To further encourage the protection of the environment,
the Rules enable litigants enforcing environmental rights to file their
cases as citizen suits. This provision liberalizes standing for all cases
filed enforcing environmental laws and collapses the traditional rule on
personal and direct interest, on the principle that humans are stewards
of nature. The terminology of the text reflects the doctrine first
enunciated in Oposa v. Factoran, insofar as it refers to minors and
generations yet unborn.53 (Emphasis supplied, citation omitted.)
Although this petition was filed in 2007, years before the effectivity of
the Rules of Procedure for Environmental Cases, it has been
consistently held that rules of procedure "may be retroactively applied
to actions pending and undetermined at the time of their passage and
will not violate any right of a person who may feel that he is adversely
affected, inasmuch as there is no vested rights in rules of procedure."54
Elucidating on this doctrine, the Court, in Systems Factors Corporation
v. National Labor Relations Commission55held that:
Remedial statutes or statutes relating to remedies or modes of
procedure, which do not create new or take away vested rights, but
only operate in furtherance of the remedy or confirmation of rights
already existing, do not come within the legal conception of a
retroactive law, or the general rule against retroactive operation of
statutes. Statutes regulating the procedure of the courts will be
construed as applicable to actions pending and undetermined at the
time of their passage. Procedural laws are retroactive in that sense and
to that extent. x x x.
Moreover, even before the Rules of Procedure for Environmental ·
Cases became effective, this Court had already taken a permissive
position on the issue of locus standi in environmental cases. In Oposa,
we allowed the suit to be brought in the name of generations yet
unborn "based on the concept of intergenerational responsibility insofar
as the right to a balanced and healthful ecology is
concerned."56 Furthermore, we said that the right to a balanced and
healthful ecology, a right that does not even need to be stated in our
Constitution as it is assumed to exist from the inception of humankind,
carries with it the correlative duty to refrain from impairing the
environment.57
In light of the foregoing, the need to give the Resident Marine
Mammals legal standing has been eliminated by our Rules, which
allow any Filipino citizen, as a steward of nature, to bring a suit to
enforce our environmental laws. It is worth noting here that the
Stewards are joined as real parties in the Petition and not just in
representation of the named cetacean species. The Stewards, Ramos
and Eisma-Osorio, having shown in their petition that there may be
possible violations of laws concerning the habitat of the Resident
Marine Mammals, are therefore declared to possess the legal standing
to file this petition.
Impleading Former President Gloria Macapagal-Arroyo
as an Unwilling Co-Petitioner
Petitioners Stewards in G.R. No. 180771 impleaded as an unwilling co-
petitioner former President Gloria Macapagal-Arroyo for the following
reasons, which we quote:
Her Excellency Gloria Macapagal-Arroyo, also of legal age, Filipino
and resident of Malacailang Palace, Manila Philippines. Steward Gloria
Macapagal-Arroyo happens to be the incumbent President of the
Philippine Islands. She is personally impleaded in this suit as an
unwilling co-petitioner by reason of her express declaration and
undertaking under the recently signed ASEAN Charter to protect Your
Petitioners' habitat, among others. She is meantime dominated as an
unwilling co-petitioner due to lack of material time in seeking her
signature and imprimatur hereof and due to possible legal
complications that may hereafter arise by reason of her official
relations with public respondents under the alter ego principle in
political law.58 This is incorrect.
Section 10, Rule 3 of the Rules of Court provides:
Sec. 10. Unwilling co-plaintiff. - If the consent of any party who should
be joined as plaintiff can not be obtained, he may be made a defendant
and the reason therefor shall be stated in the complaint.
Under the foregoing rule, when the consent of a party who should be
joined as a plaintiff cannot be obtained, he or she may be made a party
defendant to the case. This will put the unwilling party under the
jurisdiction of the Court, which can properly implead him or her through
its processes. The unwilling party's name cannot be simply included in
a petition, without his or her knowledge and consent, as such would be
a denial of due process.
Moreover, the reason cited by the petitioners Stewards for including
former President Macapagal-Arroyo in their petition, is not sufficient to
implead her as an unwilling co-petitioner. Impleading the former
President as an unwilling co-petitioner, for an act she made in the
performance of the functions of her office, is contrary to the public
policy against embroiling the President in suits, "to assure the exercise
of Presidential duties and functions free from any hindrance or
distraction, considering that being the Chief Executive of the
Government is a job that, aside from requiring all of the office holder's
time, also demands undivided attention."59
Therefore, former President Macapagal-Arroyo cannot be impleaded
as one of the petitioners in this suit. Thus, her name is stricken off the
title of this case.
Main Issue:
25
Legality of Service Contract No. 46
Service Contract No. 46 vis-a-vis
Section 2, Article XII of the
1987 Constitution
Petitioners maintain that SC-46 transgresses the Jura Regalia
Provision or paragraph 1, Section 2, Article XII of the 1987 Constitution
because JAPEX is 100% Japanese-owned.60 Furthermore, the FIDEC
asserts that SC-46 cannot be considered as a technical and financial
assistance agreement validly executed under paragraph 4 of the same
provision.61 The petitioners claim that La Bugal-B'laan Tribal
Association, Inc. v. Ramos62 laid down the guidelines for a valid service
contract, one of which is that there must exist a general law for oil
exploration before a service contract may be entered into by the
Government. The petitioners posit that the service contract in La Bugal
is presumed to have complied with the requisites of (a) legislative
enactment of a general law after the effectivity of the 1987 Constitution
(such as Republic Act No. 7942, or the Philippine Mining Law of 1995,
governing mining contracts) and (b) presidential notification. The
petitioners thus allege that the ruling in La Bugal, which involved
mining contracts under Republic Act No. 7942, does not apply in this
case.63 The petitioners also argue that Presidential Decree No. 87 or
the Oil Exploration and Development Act of 1972 cannot legally justify
SC-46 as it is deemed to have been repealed by the 1987 Constitution
and subsequent laws, which enunciate new policies concerning the
environment.64 In addition, petitioners in G.R. No. 180771 claim that
paragraphs 2 and 3 of Section 2, Article XII of the 1987 Constitution
mandate the exclusive use and enjoyment by the Filipinos of our
natural resources,65 and paragraph 4 does not speak of service
contracts but of FTAAs or Financial Technical Assistance
Agreements.66
The public respondents again controvert the petitioners' claims and
asseverate that SC-46 does not violate Section 2, Article XII of the
1987 Constitution. They hold that SC-46 does not fall under the
coverage of paragraph 1 but instead, under paragraph 4 of Section 2,
Article XII of the 1987 Constitution on FTAAs. They also insist that
paragraphs 2 and 3, which refer to the grant of exclusive fishing right to
Filipinos, are not applicable to SC-46 as the contract does not grant
exclusive fishing rights to JAPEX nor does it otherwise impinge on the
FIDEC's right to preferential use of communal marine and fishing
resources.67
Ruling of the Court
On the legality of Service Contract No. 46
vis-a-vis Section 2, Article XII of the 1987 Constitution
The petitioners insist that SC-46 is null and void for having violated
Section 2, Article XII of the 1987 Constitution, which reads as follows:
Section 2. All lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural
lands, all other natural resources shall not be alienated. The
exploration, development, and utilization of natural resources shall be
under the full control and supervision of the State. The State may
directly undertake such activities, or it may enter into co-production,
joint venture, or production-sharing agreements with Filipino citizens,
or corporations or associations at least sixty per centum of whose
capital is owned by such citizens. Such agreements may be for a
period not exceeding twenty-five years, renewable for not more than
twenty-five years, and under such terms and conditions as may be
provided by law. In cases of water rights for irrigation, water supply,
fisheries, or industrial uses other than the development of water power,
beneficial use may be the measure and limit of the grant.
The State shall protect the nation's marine wealth in its archipelagic
waters, territorial sea, and exclusive economic zone, and reserve its
use and enjoyment exclusively to Filipino citizens. The Congress may,
by law, allow small-scale utilization of natural resources by Filipino
citizens, as well as cooperative fish farming, with priority to subsistence
fishermen and fishworkers in rivers, lakes, bays, and lagoons.
The President may enter into agreements with foreign-owned
corporations involving either technical or financial assistance for large-
scale exploration, development, and utilization of minerals, petroleum,
and other mineral oils according to the general terms and conditions
provided by law, based on real contributions to the economic growth
and general welfare of the country. In such agreements, the State shall
promote the development and use of local scientific and technical
resources.
The President shall notify the Congress of every contract entered into
in accordance with this provision, within thirty days from its execution.
(Emphases ours.)
This Court has previously settled the issue of whether service contracts
are still allowed under the 1987 Constitution. In La Bugal, we held that
the deletion of the words "service contracts" in the 1987 Constitution
did not amount to a ban on them per se. In fact, in that decision, we
quoted in length, portions of the deliberations of the members of the
Constitutional Commission (ConCom) to show that in deliberating on
paragraph 4, Section 2, Article XII, they were actually referring to
service contracts as understood in the 1973 Constitution, albeit with
safety measures to eliminate or minimize the abuses prevalent during
the martial law regime, to wit: Summation of the
ConCom Deliberations
At this point, we sum up the matters established, based on a careful
reading of the Con Com deliberations, as follows:
In their deliberations on what was to become paragraph 4, the framers
used the term service contracts in referring to agreements x x x
involving either technical or financial assistance.
They spoke of service contracts as the concept was understood in the
1973 Constitution.
It was obvious from their discussions that they were not about to ban or
eradicate service contracts.
Instead, they were plainly crafting provisions to put in place safeguards
that would eliminate or minimize the abuses prevalent during the
marital law regime. In brief, they were going to permit service contracts
with foreign corporations as contractors, but with safety measures to
prevent abuses, as an exception to the general norm established in the
first paragraph of Section 2 of Article XII. This provision reserves or
limits to Filipino citizens -- and corporations at least 60 percent of
which is owned by such citizens -- the exploration, development and
utilization of natural resources.
This provision was prompted by the perceived insufficiency of Filipino
capital and the felt need for foreign investments in the EDU of minerals
and petroleum resources.
The framers for the most part debated about the sort of safeguards that
would be considered adequate and reasonable. But some of them,
having more "radical" leanings, wanted to ban service contracts
altogether; for them, the provision would permit aliens to exploit and
benefit from the nation's natural resources, which they felt should be
reserved only for Filipinos.
In the explanation of their votes, the individual commissioners were
heard by the entire body. They sounded off their individual opinions,
openly enunciated their philosophies, and supported or attacked the
provisions with fervor. Everyone's viewpoint was heard.
In the final voting, the Article on the National Economy and Patrimony -
- including paragraph 4 allowing service contracts with foreign
corporations as an exception to the general norm in paragraph 1 of
Section 2 of the same article --was resoundingly approved by a vote of
32 to 7, with 2 abstentions.
Agreements Involving Technical
Or Financial Assistance Are
Service Contracts with Safeguards
26
From the foregoing, we are impelled to conclude that the phrase
agreements involving either technical or financial assistance, referred
to in paragraph 4, are in fact service contracts. But unlike those of the
1973 variety, the new ones are between foreign corporations acting as
contractors on the one hand; and on the other, the government as
principal or "owner" of the works. In the new service contracts, the
foreign contractors provide capital, technology and technical know-
how, and managerial expertise in the creation and operation of large-
scale mining/extractive enterprises; and the government, through its
agencies (DENR, MGB), actively exercises control and supervision
over the entire operation.68
In summarizing the matters discussed in the ConCom, we established
that paragraph 4, with the safeguards in place, is the exception to
paragraph 1, Section 2 of Article XII. The following are the safeguards
this Court enumerated in La Bugal:
Such service contracts may be entered into only with respect to
minerals, petroleum and other mineral oils. The grant thereof is subject
to several safeguards, among which are these requirements:
(1) The service contract shall be crafted in accordance with a
general law that will set standard or uniform terms,
conditions and requirements, presumably to attain a certain
uniformity in provisions and avoid the possible insertion of
terms disadvantageous to the country.
(2) The President shall be the signatory for the government
because, supposedly before an agreement is presented to
the President for signature, it will have been vetted several
times over at different levels to ensure that it conforms to law
and can withstand public scrutiny.
(3) Within thirty days of the executed agreement, the
President shall report it to Congress to give that branch of
government an opportunity to look over the agreement and
interpose timely objections, if any.69
Adhering to the aforementioned guidelines, this Court finds that SC-46
is indeed null and void for noncompliance with the requirements of the
1987 Constitution.
1. The General Law on Oil Exploration
The disposition, exploration, development, exploitation, and utilization
of indigenous petroleum in the Philippines are governed by Presidential
Decree No. 87 or the Oil Exploration and Development Act of 1972.
This was enacted by then President Ferdinand Marcos to promote the
discovery and production of indigenous petroleum through the
utilization of government and/or local or foreign private resources to
yield the maximum benefit to the Filipino people and the revenues to
the Philippine Government.70
Contrary to the petitioners' argument, Presidential Decree No. 87,
although enacted in 1972, before the adoption of the 1987 Constitution,
remains to be a valid law unless otherwise repealed, to wit:
ARTICLE XVIII - TRANSITORY PROVISIONS
Section 3. All existing laws, decrees, executive orders, proclamations,
letters of instructions, and other executive issuances not inconsistent
with this Constitution shall remain operative until amended, repealed,
or revoked.
If there were any intention to repeal Presidential Decree No. 87, it
would have been done expressly by Congress. For instance, Republic
Act No. 7160, more popularly known as the Local Government Code of
1991, expressly repealed a number of laws, including a specific
provision in Presidential Decree No. 87, viz.:
SECTION 534. Repealing Clause. - (a) Batas Pambansa Blg. 337,
otherwise known as the "Local Government Code," Executive Order
No. 112 (1987), and Executive Order No. 319 (1988) are hereby
repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other
decrees, orders, instructions, memoranda and issuances
related to or concerning the barangay are hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No.
1939 regarding hospital fund; Section 3, a (3) and b (2) of
Republic Act No. 5447 regarding the Special Education
Fund; Presidential Decree No. 144 as amended by
Presidential Decree Nos. 559 and 1741; Presidential Decree
No. 231 as amended; Presidential Decree No. 436 as
amended by Presidential Decree No. 558; and Presidential
Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136
are hereby repealed and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar
as it governs locally-funded projects.
(e) The following provisions are hereby repealed or amended
insofar as they are inconsistent with the provisions of this
Code: Sections 2, 16 and 29 of Presidential Decree No. 704;
Section 12 of Presidential Decree No. 87, as amended;
Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of
Presidential Decree No. 463, as amended; and Section 16 of
Presidential Decree No. 972, as amended, and
(f) All general and special laws, acts, city charters, decrees,
executive orders, proclamations and administrative
regulations, or part or parts thereof which are inconsistent
with any of the provisions of this Code are hereby repealed
or modified accordingly. (Emphasis supplied.)
This Court could not simply assume that while Presidential Decree No.
87 had not yet been expressly repealed, it had been impliedly
repealed. As we held in Villareña v. The Commission on
Audit,71 "[i]mplied repeals are not lightly presumed." It is a settled rule
that when laws are in conflict with one another, every effort must be
exerted to reconcile them. In Republic of the Philippines v. Marcopper
Mining Corporation,72 we said:
The two laws must be absolutely incompatible, and a clear finding
thereof must surface, before the inference of implied repeal may be
drawn. The rule is expressed in the maxim, interpretare et concordare
leqibus est optimus interpretendi, i.e., every statute must be so
interpreted and brought into accord with other laws as to form a
uniform system of jurisprudence. The fundament is that the legislature
should be presumed to have known the existing laws on the subject
and not have enacted conflicting statutes. Hence, all doubts must be
resolved against any implied repeal, and all efforts should be exerted in
order to harmonize and give effect to all laws on the subject. (Citation
omitted.)
Moreover, in cases where the statute seems to be in conflict with the
Constitution, but a construction that it is in harmony with the
Constitution is also possible, that construction should be
preferred.73 This Court, in Pangandaman v. Commission on
Elections74 expounding on this point, pronounced:
It is a basic precept in statutory construction that a statute should be
interpreted in harmony with the Constitution and that the spirit, rather
than the letter of the law determines its construction; for that reason, a
statute must be read according to its spirit and intent. x x x. (Citation
omitted.)
Consequently, we find no merit in petitioners' contention that SC-46 is
prohibited on the ground that there is no general law prescribing the
standard or uniform terms, conditions, and requirements for service
contracts involving oil exploration and extraction.
But note must be made at this point that while Presidential Decree No.
87 may serve as the general law upon which a service contract for
petroleum exploration and extraction may be authorized, as will be
discussed below, the exploitation and utilization of this energy resource
in the present case may be allowed only through a law passed by
Congress, since the Tañon Strait is a NIPAS75 area.
27
2. President was not the signatory to SC-46 and the same was not
submitted to Congress
While the Court finds that Presidential Decree No. 87 is sufficient to
satisfy the requirement of a general law, the absence of the two other
conditions, that the President be a signatory to SC-46, and that
Congress be notified of such contract, renders it null and void.
As SC-46 was executed in 2004, its terms should have conformed not
only to the provisions of Presidential Decree No. 87, but also to those
of the 1987 Constitution. The Civil Code provides: ARTICLE 1306. The
contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy.
(Italics ours.)
In Heirs of San Miguel v. Court of Appeals,76 this Court held that:
It is basic that the law is deemed written into every contract. Although a
contract is the law between the parties, the provisions of positive law
which regulate contracts are deemed written therein and shall limit and
govern the relations between the parties. x x x. (Citations omitted.)
Paragraph 4, Section 2, Article XII of the 1987 Constitution requires
that the President himself enter into any service contract for the
exploration of petroleum. SC-46 appeared to have been entered into
and signed only by the DOE through its then Secretary, Vicente S.
Perez, Jr., contrary to the said constitutional requirement. Moreover,
public respondents have neither shown nor alleged that Congress was
subsequently notified of the execution of such contract.
Public respondents' implied argument that based on the "alter ego
principle," their acts are also that of then President Macapagal-
Arroyo's, cannot apply in this case. In Joson v. Torres,77 we explained
the concept of the alter ego principle or the doctrine of qualified political
agency and its limit in this wise:
Under this doctrine, which recognizes the establishment of a single
executive, all executive and administrative organizations are adjuncts
of the Executive Department, the heads of the various executive
departments are assistants and agents of the Chief Executive, and,
except in cases where the Chief Executive is required by the
Constitution or law to act in person or the exigencies of the situation
demand that he act personally, the multifarious executive and
administrative functions of the Chief Executive are performed by and
through the executive departments, and the acts of the Secretaries of
such departments, performed and promulgated in the regular course of
business, are, unless disapproved or reprobated by the Chief
Executive presumptively the acts of the Chief Executive. (Emphasis
ours, citation omitted.)
While the requirements in executing service contracts in paragraph 4,
Section 2 of Article XII of the 1987 Constitution seem like mere
formalities, they, in reality, take on a much bigger role. As we have
explained in La Bugal, they are the safeguards put in place by the
framers of the Constitution to "eliminate or minimize the abuses
prevalent during the martial law regime."78 Thus, they are not just mere
formalities, which will only render a contract unenforceable but not
void, if not complied with. They are requirements placed, not just in an
ordinary statute, but in the fundamental law, the non-observance of
which will nullify the contract. Elucidating on the concept of a
"constitution," this Court, in Manila Prince Hotel v. Government Service
Insurance System,79 held:
A constitution is a system of fundamental laws for the governance and
administration of a nation. It is supreme, imperious, absolute and
unalterable except by the authority from which it emanates. It has been
defined as the fundamental and paramount law of the nation. It
prescribes the permanent framework of a system of government,
assigns to the different departments their respective powers and
duties, and establishes certain fixed principles on which government is
founded. The fundamental conception in other words is that it is a
supreme law to which all other laws must conform and in accordance
with which all private rights must be determined and all public authority
administered. Under the doctrine of constitutional supremacy, if a law
or contract violates any norm of the constitution that law or contract
whether promulgated by the legislative or by the executive branch or
entered into by private persons for private purposes is null and void
and without any force and effect. Thus, since the Constitution is the
fundamental, paramount and supreme law of the nation, it is deemed
written in every statute and contract. (Emphasis ours.)
As this Court has held in La Bugal, our Constitution requires that the
President himself be the signatory of service agreements with foreign-
owned corporations involving the exploration, development, and
utilization of our minerals, petroleum, and other mineral oils. This
power cannot be taken lightly.
In this case, the public respondents have failed to show that the
President had any participation in SC-46. Their argument that their acts
are actually the acts of then President Macapagal-Arroyo, absent proof
of her disapproval, must fail as the requirement that the President
herself enter into these kinds of contracts is embodied not just in any
ordinary statute, but in the Constitution itself. These service contracts
involving the exploitation, development, and utilization of our natural
resources are of paramount interest to the present and future
generations. Hence, safeguards were put in place to insure that the
guidelines set by law are meticulously observed and likewise to
eradicate the corruption that may easily penetrate departments and
agencies by ensuring that the President has authorized or approved of
these service contracts herself.
Even under the provisions of Presidential Decree No. 87, it is required
that the Petroleum Board, now the DOE, obtain the President's
approval for the execution of any contract under said statute, as shown
in the following provision:
SECTION 5. Execution of contract authorized in this Act. -Every
contract herein authorized shall, subject to the approval of the
President, be executed by the Petroleum Board created in this Act,
after due public notice pre-qualification and public bidding or concluded
through negotiations. In case bids are requested or if requested no bid
is submitted or the bids submitted are rejected by the Petroleum Board
for being disadvantageous to the Government, the contract may be
concluded through negotiation.
In opening contract areas and in selecting the best offer for petroleum
operations, any of the following alternative procedures may be resorted
to by the Petroleum Board, subject to prior approval of the President[.]
Even if we were inclined to relax the requirement in La Bugal to
harmonize the 1987 Constitution with the aforementioned provision of
Presidential Decree No. 87, it must be shown that the government
agency or subordinate official has been authorized by the President to
enter into such service contract for the government. Otherwise, it
should be at least shown that the President subsequently approved of
such contract explicitly. None of these circumstances is evident in the
case at bar.
Service Contract No. 46 vis-a-vis Other Laws
Petitioners in G.R. No. 180771 claim that SC-46 violates Section 27 of
Republic Act. No. 9147 or the Wildlife Resources Conservation and
Protection Act, which bans all marine exploration and exploitation of oil
and gas deposits. They also aver that Section 14 of Republic Act No.
7586 or the National Integrated Protected Areas System Act of 1992
(NIPAS Act), which allows the exploration of protected areas for the
purpose of information-gathering, has been repealed by Section 27 of
Republic Act No. 914 7. The said petitioners further claim that SC-46 is
anathema to Republic Act No. 8550 or the Philippine Fisheries Code of
1998, which protects the rights of the fisherfolk in the preferential use
of municipal waters, with the exception being limited only to research
and survey activities.80
The FIDEC, for its part, argues that to avail of the exceptions under
Section 14 of the NIP AS Act, the gathering of information must be in
accordance with a DENR-approved program, and the exploitation and
utilization of energy resources must be pursuant to a general law
passed by Congress expressly for that purpose. Since there is neither
a DENR approved program nor a general law passed by Congress, the
seismic surveys and oil drilling operations were all done illegally. 81 The
28
FIDEC likewise contends that SC-46 infringes on its right to the
preferential use of the communal fishing waters as it is denied free
access within the prohibited zone, in violation not only of the Fisheries
Code but also of the 1987 Constitutional provisions on subsistence
fisherfolk and social justice.82 Furthermore, the FIDEC believes that the
provisions in Presidential Decree No. 87, which allow offshore drilling
even in municipal waters, should be deemed to have been rendered
inoperative by the provisions of Republic Act No. 8550 and Republic
Act No. 7160, which reiterate the social justice provisions of the
Constitution.83
The public respondents invoke the rules on statutory construction and
argue that Section 14 of the NIP AS Act is a more particular provision
and cannot be deemed to have been repealed by the more general
prohibition in Section 27 of Republic Act No. 9147. They aver that
Section 14, under which SC-46 falls, should instead be regarded as an
exemption to Section 27.84 Addressing the claim of petitioners in G.R.
No. 180771 that there was a violation of Section 27 of Republic Act No.
9147, the public respondents assert that what the section prohibits is
the exploration of minerals, which as defined in the Philippine Mining
Act of 1995, exclude energy materials such as coal, petroleum, natural
gas, radioactive materials and geothennal energy. Thus, since SC-46
involves oil and gas exploration, Section 27 does not apply.85
The public respondents defend the validity of SC-46 and insist that it
does not grant exclusive fishing rights to JAPEX; hence, it does not
violate the rule on preferential use of municipal waters. Moreover, they
allege that JAPEX has not banned fishing in the project area, contrary
to the FIDEC's claim. The public respondents also contest the
attribution of the declining fish catch to the seismic surveys and aver
that the allegation is unfounded. They claim that according to the
Bureau of Fisheries and Aquatic Resources' fish catch data, the
reduced fish catch started in the 1970s due to destructive fishing
practices.86
Ruling of the Court
On the legality of Service Contract No. 46
vis-a-vis Other Laws
Although we have already established above that SC-46 is null and
void for being violative of the 1987 Constitution, it is our duty to still rule
on the legality of SC-46 vis-a-vis other pertinent laws, to serve as a
guide for the Government when executing service contracts involving
not only the Tafion Strait, but also other similar areas. While the
petitioners allege that SC-46 is in violation of several laws, including
international ones, their arguments focus primarily on the protected
status of the Tañon Strait, thus this Court will concentrate on those
laws that pertain particularly to the Tañon Strait as a protected
seascape.
The Tañon Strait is a narrow passage of water bounded by the islands
of Cebu in the East and Negros in the West. It harbors a rich
biodiversity of marine life, including endangered species of dolphins
and whales. For this reason, former President Fidel V. Ramos declared
the Tañon Strait as a protected seascape in 1998 by virtue of
Proclamation No. 1234 -Declaring the Tañon Strait situated in the
Provinces of Cebu, Negros Occidental and Negros Oriental as a
Protected Area pursuant to the NIP AS Act and shall be known as
Tañon Strait Protected Seascape. During former President Joseph E.
Estrada's time, he also constituted the Tañon Strait Commission via
Executive Order No. 76 to ensure the optimum and sustained use of
the resources in that area without threatening its marine life. He
followed this with Executive Order No. 177,87 wherein he included the
mayor of Negros Occidental Municipality/City as a member of the
Tañon Strait Commission, to represent the LGUs concerned. This
Commission, however, was subsequently abolished in 2002 by then
President Gloria Macapagal-Arroyo, via Executive Order No. 72.88
True to the constitutional policy that the "State shall protect and
advance the right of the people to a balanced and healthful ecology in
accord with the rhythm and harmony of nature,"89 Congress enacted
the NIP AS Act to secure the perpetual existence of all native plants
and animals through the establishment of a comprehensive system of
integrated protected areas. These areas possess common ecological
values that were incorporated into a holistic plan representative of our
natural heritage. The system encompasses outstandingly remarkable
areas and biologically important public lands that are habitats of rare
and endangered species of plants and animals, biogeographic zones
and related ecosystems, whether terrestrial, wetland, or marine.90 It
classifies and administers all the designated protected areas to
maintain essential ecological processes and life-support systems, to
preserve genetic diversity, to ensure sustainable use of resources
found therein, and to maintain their natural conditions to the greatest
extent possible.91 The following categories of protected areas were
established under the NIPAS Act:
a. Strict nature reserve;
b. Natural park;
c. Natural monument;
d. Wildlife sanctuary;
e. Protected landscapes and seascapes;
f. Resource reserve;
g. Natural biotic areas; and
h. Other categories established by law, conventions or
international agreements which the Philippine Government is
a signatory.92
Under Section 4 of the NIP AS Act, a protected area refers to portions
of land and water, set aside due to their unique physical and biological
significance, managed to enhance biological diversity and protected
against human exploitation.
The Tañon Strait, pursuant to Proclamation No. 1234, was set aside
and declared a protected area under the category of Protected
Seascape. The NIP AS Act defines a Protected Seascape to be an
area of national significance characterized by the harmonious
interaction of man and land while providing opportunities for public
enjoyment through recreation and tourism within the normal lifestyle
and economic activity of this areas;93 thus a management plan for each
area must be designed to protect and enhance the permanent
preservation of its natural conditions.94 Consistent with this endeavor is
the requirement that an Environmental Impact Assessment (EIA) be
made prior to undertaking any activity outside the scope of the
management plan. Unless an ECC under the EIA system is obtained,
no activity inconsistent with the goals of the NIP AS Act shall be
implemented.95
The Environmental Impact Statement System (EISS) was established
in 1978 under Presidential Decree No. 1586. It prohibits any person,
partnership or corporation from undertaking or operating any declared
environmentally critical project or areas without first securing an ECC
issued by the President or his duly authorized
representative.96Pursuant to the EISS, which called for the proper
management of environmentally critical areas,97 Proclamation No.
214698 was enacted, identifying the areas and types of projects to be
considered as environmentally critical and within the scope of the
EISS, while DENR Administrative Order No. 2003-30 provided for its
Implementing Rules and Regulations (IRR).
DENR Administrative Order No. 2003-30 defines an environmentally
critical area as "an area delineated as environmentally sensitive such
that significant environmental impacts are expected if certain types of
proposed projects or programs are located, developed, or implemented
in it";99 thus, before a project, which is "any activity, regardless of scale
or magnitude, which may have significant impact on the
environment,"100 is undertaken in it, such project must undergo an EIA
to evaluate and predict the likely impacts of all its stages on the
environment.101An EIA is described in detail as follows:
h. Environmental Impact Assessment (EIA) - process that involves
evaluating and predicting the likely impacts of a project (including
29
cumulative impacts) on the environment during construction,
commissioning, operation and abandonment. It also includes designing
appropriate preventive, mitigating and enhancement measures
addressing these consequences to protect the environment and the
community's welfare. The process is undertaken by, among others, the
project proponent and/or EIA Consultant, EMB, a Review Committee,
affected communities and other stakeholders.102
Under Proclamation No. 2146, the Tañon Strait is an environmentally
critical area, having been declared as a protected area in 1998;
therefore, any activity outside the scope of its management plan may
only be implemented pursuant to an ECC secured after undergoing an
EIA to determine the effects of such activity on its ecological system.
The public respondents argue that they had complied with the
procedures in obtaining an ECC103 and that SC-46 falls under the
exceptions in Section 14 of the NIP AS Act, due to the following
reasons:
1) The Tañon Strait is not a strict nature reserve or natural
park;
2) Exploration is only for the purpose of gathering
information on possible energy resources; and 3) Measures
are undertaken to ensure that the exploration is being done
with the least damage to surrounding areas.104
We do not agree with the arguments raised by the public respondents.
Sections 12 and 14 of the NIPAS Act read:
SECTION 12. Environmental Impact Assessment. - Proposals for
activities which are outside the scope of the management plan for
protected areas shall be subject to an environmental impact
assessment as required by law before they are adopted, and the
results thereof shall be taken into consideration in the decision-making
process.
No actual implementation of such activities shall be allowed without the
required Environmental Compliance Certificate (ECC) under the
Philippine Environmental Impact Assessment (EIA) system. In
instances where such activities are allowed to be undertaken, the
proponent shall plan and carry them out in such manner as will
minimize any adverse effects and the preventive and remedial action
when appropriate. The proponent shall be liable for any damage due to
lack of caution or indiscretion.
SECTION 14. Survey for Energy Resources. - Consistent with the
policies declared in Section 2 hereof, protected areas, except strict
nature reserves and natural parks, may be subjected to exploration
only for the purpose of gathering information on energy resources and
only if such activity is carried out with the least damage to surrounding
areas. Surveys shall be conducted only in accordance with a program
approved by the DENR, and the result of such surveys shall be made
available to the public and submitted to the President for
recommendation to Congress. Any exploitation and utilization of
energy resources found within NIP AS areas shall be allowed only
through a law passed by Congress.
It is true that the restrictions found under the NIP AS Act are not
without exceptions. However, while an exploration done for the
purpose of surveying for energy resources is allowed under Section 14
of the NIP AS Act, this does not mean that it is exempt from the
requirement to undergo an EIA under Section 12. In Sotto v.
Sotto,105 this Court explained why a statute should be construed as a
whole:
A statute is passed as a whole and not in parts or sections and is
animated by one general purpose and intent. Consequently each part
or section should be construed in connection with every other part or
section and so as to produce a harmonious whole. It is not proper to
confine the attention to the one section to be construed. It is always an
unsafe way of construing a statute or contract to divide it by a process
of etymological dissection, into separate words, and then apply to
each, thus separated from its context, some particular definition given
by lexicographers, and then reconstruct the instrument upon the basis
of these definitions. An instrument must always be construed as a
whole, and the particular meaning to be attached to any word or
phrase is usually to be ascertained from the context, the nature of the
subject treated of and the purpose or intention of the parties who
executed the contract, or of the body which enacted or framed the
statute or constitution. x x x.
Surveying for energy resources under Section 14 is not an exemption
from complying with the EIA requirement in Section 12; instead,
Section 14 provides for additional requisites before any exploration for
energy resources may be done in protected areas.
The rationale for such additional requirements are incorporated m
Section 2 of the NIP AS Act, to wit:
SECTION 2. Declaration of Policy - Cognizant of the profound impact
of man's activities on all components of the natural environment
particularly the effect of increasing population, resource exploitation
and industrial advancement and recognizing the critical importance of
protecting and maintaining the natural biological and physical
diversities of the environment notably on areas with biologically unique
features to sustain human life and development, as well as plant and
animal life, it is hereby declared the policy of the State to secure for the
Filipino people of present and future generations the perpetual
existence of all native plants and animals through the establishment of
a comprehensive system of integrated protected areas within the
classification of national park as provided for in the Constitution.
It is hereby recognized that these areas, although distinct in features,
possess common ecological values that may be incorporated into a
holistic plan representative of our natural heritage; that effective
administration of this area is possible only through cooperation among
national government, local government and concerned private
organizations; that the use and enjoyment of these protected areas
must be consistent with the principles of biological diversity and
sustainable development.
To this end, there is hereby established a National Integrated
Protected Areas System (NIPAS), which shall encompass
outstandingly remarkable areas and biologically important public lands
that are habitats of rare and endangered species of plants and
animals, biogeographic zones and related ecosystems, whether
terrestrial, wetland or marine, all of which shall be designated as
"protected areas."
The public respondents themselves admitted that JAPEX only started
to secure an ECC prior to the second sub-phase of SC-46, which
required the drilling of an oil exploration well. This means that when the
seismic surveys were done in the Tañon Strait, no such environmental
impact evaluation was done. Unless seismic surveys are part of the
management plan of the Tañon Strait, such surveys were done in
violation of Section 12 of the NIPAS Act and Section 4 of Presidential
Decree No. 1586, which provides:
Section 4. Presidential Proclamation of Environmentally Critical Areas
and Projects. - The President of the Philippines may, on his own
initiative or upon recommendation of the National Environmental
Protection Council, by proclamation declare certain projects,
undertakings or areas in the country as environmentally critical. No
person, partnership or corporation shall undertake or operate any such
declared environmentally critical project or area without first securing
an Environmental Compliance Certificate issued by the President or his
duly authorized representative. For the proper management of said
critical project or area, the President may by his proclamation
reorganize such government offices, agencies, institutions,
corporations or instrumentalities including the re-alignment of
government personnel, and their specific functions and responsibilities.
For the same purpose as above, the Ministry of Human Settlements
shall: (a) prepare the proper land or water use pattern for said critical
project(s) or area(s); (b) establish ambient environmental quality
standards; (c) develop a program of environmental enhancement or
protective measures against calamitous factors such as earthquakes,
30
floods, water erosion and others, and (d) perform such other functions
as may be directed by the President from time to time.
The respondents' subsequent compliance with the EISS for the second
sub-phase of SC-46 cannot and will not cure this violation. The
following penalties are provided for under Presidential Decree No.
1586 and the NIPAS Act.
Section 9 of Presidential Decree No. 1586 provides for the penalty
involving violations of the ECC requirement:
Section 9. Penalty for Violation. - Any person, corporation or
partnership found violating Section 4 of this Decree, or the terms and
conditions in the issuance of the Environmental Compliance Certificate,
or of the standards, rules and regulations issued by the National
Environmental Protection Council pursuant to this Decree shall be
punished by the suspension or cancellation of his/its certificates and/or
a fine in an amount not to exceed Fifty Thousand Pesos (₱50,000.00)
for every violation thereof, at the discretion of the National
Environmental Protection Council. (Emphasis supplied.)
Violations of the NIP AS Act entails the following fines and/or
imprisonment under Section 21:
SECTION 21. Penalties. - Whoever violates this Act or any rules and
regulations issued by the Department pursuant to this Act or whoever
is found guilty by a competent court of justice of any of the offenses in
the preceding section shall be fined in the amount of not less than Five
thousand pesos (₱5,000) nor more than Five hundred thousand pesos
(₱500,000), exclusive of the value of the thing damaged or
imprisonment for not less than one (1) year but not more than six (6)
years, or both, as determined by the court: Provided, that, if the area
requires rehabilitation or restoration as determined by the court, the
offender shall be required to restore or compensate for the restoration
to the damages: Provided, further, that court shall order the eviction of
the offender from the land and the forfeiture in favor of the Government
of all minerals, timber or any species collected or removed including all
equipment, devices and firearms used in connection therewith, and any
construction or improvement made thereon by the offender. If the
offender is an association or corporation, the president or manager
shall be directly responsible for the act of his employees and laborers:
Provided, finally, that the DENR may impose administrative fines and
penalties consistent with this Act. (Emphases supplied.) Moreover, SC-
46 was not executed for the mere purpose of gathering information on
the possible energy resources in the Tañon Strait as it also provides for
the parties' rights and obligations relating to extraction and petroleum
production should oil in commercial quantities be found to exist in the
area. While Presidential Decree No. 87 may serve as the general law
upon which a service contract for petroleum exploration and extraction
may be authorized, the exploitation and utilization of this energy
resource in the present case may be allowed only through a law
passed by Congress, since the Tañon Strait is a NIPAS area. 106Since
there is no such law specifically allowing oil exploration and/or
extraction in the Tañon Strait, no energy resource exploitation and
utilization may be done in said protected seascape.
In view of the foregoing premises and conclusions, it is no longer
necessary to discuss the other issues raised in these consolidated
petitions.
WHEREFORE, the Petitions in G.R. Nos. 180771 and 181527 are
GRANTED, Service Contract No. 46 is hereby declared NULL AND
VOID for violating the 1987 Constitution, Republic Act No. 7586, and
Presidential Decree No. 1586.
SO ORDERED.
WHO MAY BE THE PARTIES
BOARD OF OPTOMETRY, represented by its Chairman, DR.
PRIMITIVA Y. PEREZ-SISON, PROFESSIONAL REGULATION
COMMISSION, represented by its Commissioner, HERMOGENES
P. POBRE, DEPARTMENT OF HEALTH, represented by its
Secretary, DR. HILARION M. RAMIRO, BUREAU OF FOODS AND
DRUGS, represented by its Director, DR. QUINTIN L. KINTANAR,
DEPARTMENT OF BUDGET AND MANAGEMENT, represented by
its Secretary, SALVADOR M. ENRIQUEZ, JR., and BUREAU OF
HIGHER EDUCATION, represented by its Director, MONA D.
VALISNO, petitioners,
vs.
HON. ANGEL B. COLET, Presiding Judge, Regional Trial Court of
Manila, Branch 29, ACEBEDO OPTICAL COMPANY, INC.,
represented by its President and Chairman of the Board, MIGUEL
P. ACEBEDO, OPTOMETRY PRACTITIONERS ASSOCIATION OF
THE PHILIPPINES (OPAP), represented by its President, DR.
MIRIAM F. LLAVE, CENEVIS OPTOMETRIST ASSOCIATION (COA),
represented by its President, DR. ROBERTO RODIS, JR.,
ASSOCIATION OF CHRISTIAN-MUSLIM OPTOMETRIST (ACMO),
represented by its President, DR. CYRIL CORALES, SOUTHERN
MINDANAO OPTOMETRIST ASSOCIATION OF THE PHILS., INC.
(SMOAP), represented by its President, DR. ELMER VILLAROSA,
and REPUBLICA A. PANOL, No. 9 Gen. Malvar St., Araneta Center,
Cubao, Quezon City, respondents.
DAVIDE, JR., J.:p
Petitioners seek to annul and set aside for having been rendered with
grave abuse of discretion the order of 25 August 1995 issued by public
respondent Judge Angel V. Colet in Civil Case No. 95-74770 which
granted a writ of preliminary injunction restraining, enjoining, and
prohibiting the petitioners herein "from undertaking in any form of
manner, the enforcement or implementation of the Revised Optometry
Law [R.A. No. 8050] or any regulations or Code of Ethics issued
thereunder."
The background facts are not disputed.
R.A. No. 8050,1 entitled "An Act Regulating the Practice of Optometry
Education, Integrating Optometrists, and for Other Purposes,"
otherwise known as the Revised Optometry Law of 1995, was
consolidation of House Bill (HBO.) No. 141002 and Senate Bill (SB) No.
1998,3 which were respectively approved by both Houses
Committee.4 The Reconciled Bill5 was then separately ratified by both
the Senate and the House of Representatives6 and approved into law
by the President on 7 June 1995.
On 31 July 1995, the private respondents filed with the Regional Trial
Court (RTC) of Manila a petition for declaratory relief and for prohibition
and injunction, with a prayer for a temporary restraining order.7 As
grounds for their petition, the private respondents alleged that:
1. There were surreptitious and unauthorized insertion and
addition of provisions in the Reconciled bill which were made
without the knowledge and conformity of the Senate panel,
thereby derogating the orderly procedure essential to the
legislative process and vitiating legislative consent;
2. R.A. No. 8050 derogates and violates the fundamental
right of ever Filipino to reasonable safeguards against
deprivation of life, liberty and property without due process of
law in that it authorizes optometrists to engage in acts of
practice within the zone of medical practice through
permitted use in certain kinds of diagnostic pharmaceutical
agents thereby exposing and subjecting those who avail of
the services of optometrists to definite hazards which would
inflict upon them impairment of vision, resultant blindness, or
possible loss of life;
3. R.A, No. 8050 derogates and violates the principle against
undue delegation of legislative power when it provides for a
penalty of imprisonment for a maximum of eight years and a
fine not exceeding P40,000.00 upon any person found
violating any rule or regulation promulgated pursuant to said
law;
4. R.A. No. 8050 suppresses truthful advertising concerning
optical goods and services in violation of the guaranty of
freedom of speech and press; and
31
5. R.A. No. 8050 employs vague ambiguous terms in
defining prohibitions and restrictions, hence, it falls within the
ambit of void-for-vagueness doctrine which safeguards the
guaranty of due process of law
They then prayed that after due notice and hearing, an order
be issued granting a writ of preliminary injunction enjoining,
restraining, restricting, and forbidding the respondents
therein (herein petitioners), their agents, officers, and
employees from performing or undertaking any act in
implementation or enforcement of R.A. No. 8050, or any of
its provisions, or its Code of Ethics, during the pendency of
the case, until further orders of the court; and that after trial
on the merits, judgment be rendered: (a) declaring R.A. No.
8050 and its Code of Ethics null and void due to
constitutional violations and transgressions; (b) granting a
writ of prohibition against all the respondents therein
enjoining and restraining them from enforcing or
implementing R.A. No. 8050 or its Code of Ethics in whole or
in part; and (c) making permanent the writ or preliminary
injunction.
An examination of the petition, docketed as Civil Case No.
95-74770 in Branch 29 of the RTC of Manila, disclosed that
among the petitioners included in the caption of the petition
were Acebedo Optical Co., Inc.; Optometry Practitioner
Association of the Philippines (OPAP); Cenevis Optometrist
Association (COA); Association of Christian-Muslim
Optometrist (ACMO); and Southern Mindanao Optometrist
Association of the Philippine (SMOAP) — each allegedly
represented by its president. The body of the petition,
however, gave no details as to the juridical personality and
addresses of these alleged associations, save for Acebedo
Optical Co., Inc. It merely listed the names of the alleged
presidents as well as their profession and home addresses.
8
As likewise disclosed in the petitioners' Compliance filed
with the trial court on 18 August 1995, the names of Miguel
Acebedo, representing Acebedo Optical Co., Inc.; Miriam F.
Llave, representing the OPAP; and Republica A. Panol,
another petitioner in Civil Case No. 95-74770, did not appear
in the registration books of the Board of Optometry to be
authorized optometry practitioners in the Philippines, as
evidence by certifications issued by the Professionals
Regulation Commission (PRC). Private respondents CAO
and ACMO were neither registered with the Securities and
Exchange Commission (SEC), as evidence by the
certifications issued by the latter.
On 1 August 1995, the trial court, per respondent Judge
Angel V. Colet, issued a Temporary Restraining
Order9 enjoining the respondents from enforcing or
implementing R.A. No. 8050 or its Code of Ethics, until
further orders of the court; directing that summons, with a
copy of the petition and of the temporary restraining order,
be served immediately; and setting the application for a writ
of preliminary injunction for hearing on 15 August 1995.
On 11 August 1995, the petitioners herein, as respondents
below, filed an Opposition10 to the application for preliminary
injunction and alleged that:
(1) No proper ground exists to warrant the
issuance of a writ as
(a) petitioners therein do not possess
the requisite right as would entitle them
to the relief demanded;
(b) petitioners have unquestionably not
shown their Legal existence or capacity
to file the case, much Less their
authority to file it in a representative
capacity; and
(c) petitioners have misled the court into
believing that an act is being done in the
implementation of R.A. No. 8050 tending
to make the judgment ineffectual;
(2) The implementation of R.A. No. 8050 carries
no injurious effect; and
(3) Petitioners failed to overcome the presumption
of constitutionally in favor of R.A. No. 8050.
At the hearing of the application for a writ of preliminary
injunction, the parties indicated their intention to present
witnesses in support of their respective positions.
Nevertheless, the trial court, finding such procedure "not [to
be] conducive to the summary procedure appropriate to the
auxiliary remedy of preliminary injunction," merely directed
the parties to submit their other arguments in writing with
supporting evidence, after which the application for a writ of
preliminary injunction would be deemed submitted for
resolution.11 The parties complied therewith.
On 25 August 1995, the trial court issued the challenged
order,12 the dispositive portion of which reads as follows:
PREMISES CONSIDERED, the Court grants the
writ of preliminary injunction prayed for until further
orders of the Court, respondents and their officials,
agents and employees, are restrained, enjoined,
and prohibited from undertaking in any form or
manner, the enforcement or implementation of the
Revised Optometry Law [R.A. 8050] or any
regulation or Code of Ethics issued thereunder.
Let the writ issue upon filing with this Court a bond
in the amount of ONE HUNDRED THOUSAND
[P100,000.00] PESOS in favor of respondents,
conditioned upon payment of damages sustained
by respondents in case the writ is later adjudge to
have been improvidently or improperly issued.
We quote its ratiocinations to support the above disposition:
Viewing the petition as a whole, which is duly
verified, particularly the constitutional infirmities
alleged by the petitioners, and the supporting
exhibits, the court is inclined to find prima facie,
that petitioners have legal rights affected by the
Revised Optometry Law, and that in its operation,
said Law is likely to inflict serious and irreparable
injury to such legal rights.
There is clear public right that laws enacted for the
governance of citizens should be the product of
the untrammeled will of the people's
representatives in Congress, Petitioners content
and have adduced at least sufficient evidence to
support this order that, in the Revised Optometry
Law, approved by the two Houses of Congress,
there is a showing that at least one major
paragraph imposing penalties on corporate
officers, was surreptitiously "smuggled" into the
measure, because the clear tenor and the content
of the provision (Sec. 33) as agreed upon in the
Bicameral Conference Committee, duly reflected
in its Minutes (Exhs. "S" and "T") did not include
such paragraph. The fraud upon the legislative
process thus practiced through surreptitious and
insidious tampering, manifestly contravenes and
violates said public right, which violation
petitioners as members of the Philippine body
politic, have the status and standing to vindicate
by the present petition for extraordinary legal
remedies. (See the rulings in Tanada v. Tuvera,
32
136 SCRA 27, particularly pp. 36-37, citing
Severino v. Governor-General, Phil. 366, 378).
Similarly, there is likewise a public right that the
laws enacted for the public good should in truth
and in fact promote the public good. Such public
right would be negated and violated if, as
petitioners allege. The Revised Optometry Law
which is intended to provide our people with better
opportunities and better facilities for better vision,
institutes a practice which in its actual operation,
exposes persons availing of optometric services to
serious risk of impairment of vision, possible loss
of sight and even possible loss of life, through
administration by optometrists of DPA's. If this be
true, the law under question violates that public
right, because it permits inflicting of serious injury
upon our people using services of optometrists.
After examining the different exhibits submitted by
petitioners, in which trained experts in our
government agencies themselves attest to the dire
consequences that persons on whom DPA's are
used may suffer, the Court finds prima facie basis
for danger of irreparable injury to public health,
which the Court should forestall in the exercise of
prudence by a preliminary writ of injunction,
pending full inquiry and thorough determination
after trial. Apart from the public rights, which
petitioners are entitled to assert in this action,
there are also private individual rights of
petitioners which the Revised Optometry law tends
to injure, and which would be injured irreparably
with the actual operation of said law.
Hardest hit in this regard are the optometrists,
whose vested right to continue in the practice is
virtually bludgeoned by the Revised Optometrist
Law, as virtually admitted by respondents in their
Opposition. On the one hand, the revised concept
of the practice of optometry [Sec. 4] mandates as
standard, the use of DPA's in optometric
examination. For this reason, said Law authorizes
virtual suspension of the licenses of the present
crop of optometrists insists on practicing without
the mandatory training, their practice could be
viewed as substandard if they would avoid use of
DPA's [Sec. 4]. Alternatively, if they use DPA's
before they are qualified through mandatory
training, they could incur criminal liability [Secs. 32
and 33]. In either case, their use DPA's without or
after qualifying training, would expose them to
malpractice suits from persons who might have
sustained injury through the use of DPA's. Again,
they might not have the option of refraining from
the use of DPA's, since they could face an ethics
charge for substandard practice in not using DPA's
in their practice.
Finally, even petitioner Acebedo Co. would suffer
injury in its operations because its activities, based
on the affidavits submitted as exhibits, would
surely touch the boundaries of conduct prohibited
and penalized in the Revised Optometry Law. For
one thing, its right to continue in employment, the
optometrists working in its optical shop clinics
[including affiant petitioners] might be injured
through a criminal charge that such employment
constitutes a prohibited indirect practice of
optometry within the strictures of Section 5 in
relation to Sec. 32. Or its advertising of optical
goods and wares, which is its right under the
general law and the Constitution, could be charged
as an offense under Section 32. and subjected to
penalty under Section 33. These restraints, which
could seriously prejudice existing legal rights,
entitle the petitioner corporation to the
extraordinary remedy of declaratory relief, and to
preliminary injunction pending the holding of a trial
on the merits. The Court understands that
petitioner could have adduced more evidence than
what appears especially on the matter of the
jeopardy to public health as a result of changes of
optometric practice introduced by the Revised
Optometry Law. But as the Court understands it,
preponderance is not required for evidentiary
support for the grant of preliminary injunction. As
the rule stands, a "sampling" of relevant evidence
is enough, so as to give the Court a justification for
the issuance of the writ [See Olalio v. Hizon, 196
SCRA 665; Syndicated Media Access vs. C.A. 219
SCRA 794].
Jurisprudence likewise supports the grant of
preliminary writs of injunction, to maintain
the status quo, in suits questioning the
constitutionality of laws with demonstrable
prejudice of legal rights [J.M. & Co. v. C.A., 3
SCRA 696].
On the basis of the main petition, which is for
declaratory relief directed at the nullification of
R.A. 8050 on constitutional grounds, and for a writ
of prohibition, likewise premised on the nullity of
said law due to constitutional infirmities, the Court
finds that the whole or part of the relief which
petitioners are seeking and to which prima
facie they are entitled, consists in restraining the
enforcement or implementation of the law.
The Court likewise concludes, on its finding that
both public rights would be prejudiced by the
operation of R.A. 8050, that its enforcement
pendente would inflict substantial injustice to
petitioners.13
On 1 September 1995, respondent Judge Colet issued a
Writ of Preliminary Injunction,14 the dispositive portion of
which reads:
IT IS HEREBY ORDERED by the undersigned
that, until further orders, you, the said defendants,
and all your attorneys, representatives, agents,
and any other person assisting you refrain from
enforcing and/or implementing R.A. No. 8050 or its
Code of Ethics.
The petitioners then filed this special civil action
for certiorari and prohibition with a prayer for a writ of
preliminary injunction and/or temporary restraining order and
alleged that:
I
RESPONDENT JUDGE GRAVELY HIS
DISCRETION AND/OR ACTED WITHOUT OR IN
EXCESS OF JURISDICTION IN FINDING THAT
PRIVATE RESPONDENTS HAVE LOCUS
STANDI TO FILE THE PETITION A QUO.
II
RESPONDENT JUDGE GRAVELY ABUSED HIS
DISCRETION AND/OR ACTED IN EXCESS OF
JURISDICTION IN DECREEING THAT PRIMA
FACIE EVIDENCE OF
UNCONSTITUTIONALITY/INVALIDITY OF R.A.
8050 EXISTS WHICH WARRANT THE
ENJOINMENT OF ITS IMPLEMENTATION.
III
33
 RESPONDENT JUDGE GRAVELY ABUSED HIS
DISCRETION AND/OR ACTED IN EXCESS OF
JURISDICTION IN PRELIMINARILY ENJOINING
R.A. 8050 ON MERE ALLEGATIONS BY
PRIVATE RESPONDENTS THAT THE SAME
WOULD BRING INJURIOUS EFFECTS TO THE
HEALTH AND SAFETY OF THE PUBLIC.
IV
RESPONDENT JUDGE GRAVELY ABUSED HIS
DISCRETION AND/OR ACTED WITHOUT OR IN
EXCESS OF JURISDICTION IS ISSUING THE
WRIT OF PRELIMINARY INJUNCTION.
As we see it, the assigned errors quoted above may be
reduced to two key issues, viz.:
(1) The locus standi of the private respondents to
question the Constitutionality of R.A. No. 8050;
and
(2) The absence of a valid cause of action for
either declaratory relief or prohibition.
The petitioners maintain that for a party to have locus
standi to question the validity of a statute, he must have a
personal and substantial interest in the case such that he
has sustained or will sustain direct injury as a result of its
enforcement.15 In this light, the private respondents do not
have the requisite personal and substantial interest to assail
the constitutionality of R.A. No. 8050 for, per the
certifications of the SEC, private respondents COA and
ACMO are not registered associations; and two of the
alleged presidents of the respondent associations are not
duly registered optometrists as certified to by the PRC.
Finally, the petitioners aver, the private respondents did not
allege in their petition in Civil Case No. 95-74770, and in
their Rejoinder to the Opposition therein, their capacity to
bring suit as required by Section 4, Rule 8 of the Rules of
Court.
Refuting this charge, the private respondents claim in their
Comment on the petition that they have, as held by the trial
court, locus standi "under the rule of Public Right" pursuant
to Tañada vs. Tuvera,16 citing Severino vs. Governor
General;17 moreover, as also found by the trial court, their
rights as optometrists or optical companies would be
adversely affected by the assailed law. They further claim
that they seek to protect their Constitutional rights to property
and freedom of expression from enforcement of the
provisions of the challenged law, which bar truthful
advertisements and impose vague and unreasonable
conditions for the continued practice of their profession.
Insofar as private respondents Acebedo Optical Co., Inc.,
and Panol are concerned, the said law would likewise
adversely affect the conduct of their business of maintaining
optical shops and expose them to threats of criminal
prosecution. Finally, they contend that they also seek, "as
taxpayers and citizens, under the concepts of Public Right,
to bar the enforcement of the law because it endangers the
Public's health," a danger "clearly seen from the oppositions
to the law filed before both houses" of Congress.
I
Only natural and juridical persons or entities authorized by
law may be parties in a civil action, and every action must be
prosecuted or defended in the name of the real party in
interest.18 Under Article 44 of the Civil Code, an association
is considered a juridical person if the law grants it a
personality separate and distinct from that of its members.
There is serious doubt as to the existence of private
respondents OPAP, COA, ACMO, and SMOAP. For one, the
body of the petition in Civil Case No. 95-74770 makes no
mention of these associations nor state their addresses.
Further, nowhere is it claimed therein that they are juridical
entities. These run counter to Section 4, Rule 8 of the Rules
of Court, which provides that facts showing the capacity of a
party to sue or the legal existence of an organized
association of persons that is made a party must be averred.
Second, not even in the sworn statements.19 of the alleged
presidents representing the "associations," which were
offered in evidence in support of the application for a writ of
preliminary injunction, were such "associations" mentioned
or named. Finally, in their Comment on the instant petition,
the private respondents chose to remain silent on the issue
of the juridical personality of their "associations."
For having failed to show that they are juridical entities,
private respondents OPAP, COA, ACMO, and SMOAP must
then be deemed to be devoid of legal personality to bring an
action, such as Civil Case No. 95-74770.
A real party in interest under Section 2, Rule 3 of the Rules
of Court is a party who stands to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of
the suit.20
In the case at bench, since OPAP, COA, ACMO, and
SMOAP were not shown to be juridical entities, they cannot,
for obvious reasons, be deemed real parties in interest.
Moreover, since the names of private respondents Miguel
Acebedo, Miriam F. Llave, and Republica A. Panol do not
appear in the registration books of the Board of Optometry
as authorized optometry practitioners in the
Philippines,21 they do not have requisite personal and
substantial interest in the case. Even further, although
private respondents Roberto Rodis, Jr., Cyril Corales, and
Elmer Villarosa claim to be practicing optometrist, the
petition in Civil Case No. 95-74770 is bereft of any allegation
to make them real parties in interest to challenge the
constitutionality of R.A. No. 8050.
As an attempt in extremis, the private respondents now
assert in their comment that the petition for declaratory relief,
prohibition, and injunction was filed in their capacity as
"taxpayers and citizens, under the concept of Public Right, to
bar the enforcement of the law because it endangers public
health."22 They thus suggest that their petition is in the nature
of a taxpayers' class suit.
As a class suit, Civil Case No. 95-74770 must fail. Not only
did the private respondents fail to allege this in their petition,
they likewise failed to allege the existence and prove the
requisites of a class suit, viz., the subject matter of the
controversy is one of common or general interest to many
persons, and the parties are so numerous that it is
impracticable to bring them all before the court.23
Courts must exercise utmost caution before allowing a class
suit, which is the exception to the requirements of joinder of
all indispensable parties. For while no difficulty may arise if
the decision secured is favorable to the plaintiffs, a quandary
would result if the decision were otherwise as those who
were deemed impleaded by their self-appointed
representatives would certainly claim denial of due
process.24
Neither may the private respondents be allowed at this late
stage to seek refuge under the doctrine allowing taxpayers'
suits. While they claimed their petition in Civil Case No. 95-
74770 was taxpayers' suit, and although this Court, in a
catena of cases, has shown liberality in granting locus standi
to taxpayers in taxpayers' suits,25 the private respondents
have not adequately shown that this liberality must be
extended to them. Their plea of injury or damage is nothing
but a sweeping generalization.
34
Civil Case No. 95-74770 must fail for yet another reason. As
a special civil action for declaratory relief,26 its requisites are:
(1) the existence of a justiciable controversy; (2) the
controversy is between persons whose interests are
adverse; (3) that the party seeking the relief has a legal
interest in the controversy; and (4) that the issue invoked is
ripe for judicial determination.27 On this score, we find no
difficulty holding that at least the first and fourth requisites
are wanting.
Then there is the unbending rule in constitutional law that
courts will not assume jurisdiction over a constitutional
question unless the following requisites are first satisfied: (1)
there must be an actual case or controversy involving a
conflict or rights susceptible of judicial determination; (2) the
constitutional question must be raised by a proper party; (3)
the constitutional question must be raised at the earliest
opportunity; and (4) the resolution of the constitutional
question must be necessary to the resolution of the case.28
An actual case or controversy means as existing case or
controversy that is appropriate or ripe for determination, not
conjectural or anticipatory.29 It cannot be disputed that there
is yet no actual case or controversy involving all or any of the
private respondents on one hand, and all or any of the
petitioners on the other, with respect to rights or obligations
under R.A. No. 8050. This is plain because Civil Case No.
95-74770 is for declaratory relief. Then, too, as adverted to
earlier, the private respondents have not sufficiently
established their locus standi to question the validity of R.A.
No. 8050.
The conclusion then is inevitable that the respondent Judge
acted with grave abuse of discretion when he issued a writ of
preliminary injunction restraining the implementation of R.A.
No. 8050, as well as of the Code of Ethics promulgated
thereunder, if one has been issued. Even if there was before
him a case involving the law, prudence dictated that the
respondent Judge should not have issued the writ with
undue haste, bearing in mind our decision, penned by Mr.
Justice Isagani A. Cruz, in Drilon vs. Lim,30 where we stated:
We stress at the outset that the lower court had
jurisdiction to consider the constitutionality of
Section 187, this authority being embraced in the
general definition of the judicial power to
determine what are the valid and binding laws by
the criterion of BP 129 vests in the regional trial
courts jurisdiction over all civil cases in which the
subject of the litigation is incapable of pecuniary
estimation, even as the accused in a criminal
action has the right to question in his defense the
constitutionality of a law he is charge with violating
and of the proceedings taken against him,
particularly as they contravene the Bill of Rights.
Moreover, Article X, Section 5(2), of the
Constitution vests in the Supreme Court appellate
jurisdiction over final judgments and orders of
lower courts in all cases in which the
constitutionality or validity of any treaty,
international or executive agreement, law,
presidential decree, proclamation, order,
instruction, ordinance, or regulation is in question.
In the exercise of this jurisdiction, lower courts are
advised to act with the utmost circumspection,
bearing in mind the consequences of a declaration
of unconstitutionality upon the stability of laws, no
less than on the doctrine of separation of powers.
As the questioned act is usually the handiwork of
the legislative or the executive departments, or
both, it will be prudent for such courts, if only out of
a becoming modesty, to defer to the higher
judgment of this Court in the consideration of its
validity, which is better determined after a through
deliberation of a collegiate body and with the
concurrence of the majority of those who
participated in its discussion.
It is also emphasized that every court, including
this Court, is charged with the duty of a purposeful
hesitation before declaring a law unconstitutional,
on the theory that the measure was first carefully
studied by the executive and legislative
departments and determined by them to be in
accordance with the fundamental law before it was
finally approved. To doubt is to sustain. The
presumption of constitutionality can be overcome
only by the clearest showing that there was indeed
an infraction of the Constitution, and only when
such a conclusion is reached by the required
majority may the Court pronounce, in the
discharge of the duty it cannot escape, that the
challenged act be struck down.
WHEREFORE, the instant petition is GRANTED. The
challenged order of 25 August 1995 of respondent Judge
Angel V. Colet in Civil Case No. 95-74770 granting the
application for the issuance of a writ of preliminary injunction,
and the writ of preliminary injunction issued on 1 September
1995 are hereby ANNULLED and SET ASIDE.
The respondent Judge is further DIRECTED to DISMISS
Civil Case No. 95-74770.
Cost against private respondents Acebedo Optical Co., Inc.,
Republica A. Panol, and the alleged "presidents" of
Optometry Practitioner Association of the Philippines,
Cenevis Optometrist Association, Association of Christian-
Muslim Optometrist, Southern Mindanao Optometrist
Association of the Philippines.
SO ORDERED.
INDIGENT/PAUPER LITIGANTS
CLASS SUIT
DEFENDANT
JOINDER OF PARTIES
DISTINGUISHED FROM LOCUS STANDI
EFFECT OF DEATH OF PARTY UPON AN ACTION
ACTION
REAL
PERSONAL
IN PERSONAM
IN REM
QUASI IN REM
VENUE
CONDITIONS PRECEDENT
ART. 151, FAMILY CODE
MANNER OF MAKING ALLEGATIONS IN A COMPLAINT
35
ULTIMATE FACTS VS. EVIDENTIARY FACTS VS. CONCLUSIONS
OF LAW

FRAUD, MISTAKE, MALICE, OTHER CONDITIONS OF THE MIND,

OFFICIAL DOCUMENTS

ACTIONABLE DOCUMENT

PARTS OF A PLEADING

SIGNATURE OF COUNSEL AND OTHER REQUIRED DETAILS

VERIFICATION & CERTIFICATION OF NON-FORUM SHOPPING

POST-FILING SCENARIOS

AMENDMENT OF THE COMPLAINT & SUPPLEMENTAL FINDINGS

SERVICE OF SUMMONS

36