G.R. No.
186993 August 22, 2012 that they reside in Bacolod City while the petitioners reside in Los Angeles,
THEODORE and NANCY ANG, represented by ELDRIGE MARVIN B.
ACERON, Petitioners,
vs.
SPOUSES ALAN and EM ANG, Respondents.
Before this Court is a petition for review on certiorari under Rule 45 of the Rules
of Court seeking to annul and set aside the Decision 1 dated August 28, 2008 and
the Resolution2 dated February 20, 2009 rendered by the Court of Appeals (CA)
in CA-G.R. SP No. 101159. The assailed decision annulled and set aside the
Orders dated April 12, 20073 and August 27, 20074 issued by the Regional Trial
Court (RTC) of Quezon City, Branch 81 in Civil Case No. Q-06-58834.
The Antecedent Facts
On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a
loan in the amount of Three Hundred Thousand U.S. Dollars (US$300,000.00)
from Theodore and Nancy Ang (petitioners). On even date, the respondents
executed a promissory note5 in favor of the petitioners wherein they promised to
pay the latter the said amount, with interest at the rate of ten percent (10%) per
annum, upon demand. However, despite repeated demands, the respondents
failed to pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the respondents a demand letter
asking them to pay their outstanding debt which, at that time, already amounted
to Seven Hundred Nineteen Thousand, Six Hundred Seventy-One U.S. Dollars
and Twenty-Three Cents (US$719,671.23), inclusive of the ten percent (10%)
annual interest that had accumulated over the years. Notwithstanding the receipt
of the said demand letter, the respondents still failed to settle their loan
obligation.
On August 6, 2006, the petitioners, who were then residing in Los Angeles,
California, United States of America (USA), executed their respective Special
Powers of Attorney6 in favor of Attorney Eldrige Marvin B. Aceron (Atty. Aceron)
for the purpose of filing an action in court against the respondents. On
September 15, 2006, Atty. Aceron, in behalf of the petitioners, filed a
Complaint7 for collection of sum of money with the RTC of Quezon City against
the respondents.
On November 21, 2006, the respondents moved for the dismissal of the
complaint filed by the petitioners on the grounds of improper venue and
prescription.8 Insisting that the venue of the petitioners’ action was improperly
laid, the respondents asserted that the complaint against them may only be filed
in the court of the place where either they or the petitioners reside. They averred
California, USA. Thus, the respondents maintain, the filing of the complaint
against them in the RTC of Quezon City was improper.
The RTC Orders
On April 12, 2007, the RTC of Quezon City issued an Order 9 which, inter alia,
denied the respondents’ motion to dismiss. In ruling against the respondents’
claim of improper venue, the court explained that:
Attached to the complaint is the Special Power of Attorney x x x which clearly
states that plaintiff Nancy Ang constituted Atty. Eldrige Marvin Aceron as her duly
appointed attorney-in-fact to prosecute her claim against herein defendants.
Considering that the address given by Atty. Aceron is in Quezon City, hence,
being the plaintiff, venue of the action may lie where he resides as provided in
Section 2, Rule 4 of the 1997 Rules of Civil Procedure.10
The respondents sought reconsideration of the RTC Order dated April 12, 2007,
asserting that there is no law which allows the filing of a complaint in the court of
the place where the representative, who was appointed as such by the plaintiffs
through a Special Power of Attorney, resides.11 The respondents’ motion for
reconsideration was denied by the RTC of Quezon City in its Order12 dated
August 27, 2007.
The respondents then filed with the CA a petition for certiorari 13 alleging in the
main that, pursuant to Section 2, Rule 4 of the Rules of Court, the petitioners’
complaint may only be filed in the court of the place where they or the petitioners
reside. Considering that the petitioners reside in Los Angeles, California, USA,
the respondents assert that the complaint below may only be filed in the RTC of
Bacolod City, the court of the place where they reside in the Philippines.
The respondents further claimed that, the petitioners’ grant of Special Power of
Attorney in favor of Atty. Aceron notwithstanding, the said complaint may not be
filed in the court of the place where Atty. Aceron resides, i.e., RTC of Quezon
City. They explained that Atty. Aceron, being merely a representative of the
petitioners, is not the real party in interest in the case below; accordingly, his
residence should not be considered in determining the proper venue of the said
complaint.
The CA Decision
On August 28, 2008, the CA rendered the herein Decision,14 which annulled and
set aside the Orders dated April 12, 2007 and August 27, 2007 of the RTC of
Quezon City and, accordingly, directed the dismissal of the complaint filed by the
petitioners. The CA held that the complaint below should have been filed in
Bacolod City and not in Quezon City. Thus:
As maybe clearly gleaned from the foregoing, the place of residence of the
plaintiff’s attorney-in-fact is of no moment when it comes to ascertaining the
venue of cases filed in behalf of the principal since what should be considered is
the residence of the real parties in interest, i.e., the plaintiff or the defendant, as
the case may be. Residence is the permanent home – the place to which,
whenever absent for business or pleasure, one intends to return. Residence is
vital when dealing with venue. Plaintiffs, herein private respondents, being
residents of Los Angeles, California, U.S.A., which is beyond the territorial
jurisdiction of Philippine courts, the case should have been filed in Bacolod City
where the defendants, herein petitioners, reside. Since the case was filed in
Quezon City, where the representative of the plaintiffs resides, contrary to Sec. 2
of Rule 4 of the 1997 Rules of Court, the trial court should have dismissed the
case for improper venue.15
The petitioners sought a reconsideration of the Decision dated August 28, 2008,
but it was denied by the CA in its Resolution dated February 20, 2009.16Hence,
the instant petition.
Issue
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR OF LAW WHEN IT RULED THAT THE COMPLAINT MUST BE
DISMISSED ON THE GROUND THAT VENUE WAS NOT PROPERLY LAID.17
The Court’s Ruling
The petition is denied.
Contrary to the CA’s disposition, the petitioners maintain that their complaint for
collection of sum of money against the respondents may be filed in the RTC of
Quezon City. Invoking Section 3, Rule 3 of the Rules of Court, they insist that
Atty. Aceron, being their attorney-in-fact, is deemed a real party in interest in the
case below and can prosecute the same before the RTC. Such being the case,
the petitioners assert, the said complaint for collection of sum of money may be
filed in the court of the place where Atty. Aceron resides, which is the RTC of
Quezon City.
On the other hand, the respondents in their Comment 18 assert that the petitioners
are proscribed from filing their complaint in the RTC of Quezon City. They assert
that the residence of Atty. Aceron, being merely a representative, is immaterial to
the determination of the venue of the petitioners’ complaint.
The petitioners’ complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.
It is a legal truism that the rules on the venue of personal actions are fixed for the
convenience of the plaintiffs and their witnesses. Equally settled, however, is the
principle that choosing the venue of an action is not left to a plaintiff’s caprice; the
matter is regulated by the Rules of Court.19
The petitioners’ complaint for collection of sum of money against the respondents
is a personal action as it primarily seeks the enforcement of a contract. The
Rules give the plaintiff the option of choosing where to file his complaint. He can
file it in the place (1) where he himself or any of them resides, or (2) where the
defendant or any of the defendants resides or may be found. The plaintiff or the
defendant must be residents of the place where the action has been instituted at
the time the action is commenced.20
However, if the plaintiff does not reside in the Philippines, the complaint in such
case may only be filed in the court of the place where the defendant resides. In
Cohen and Cohen v. Benguet Commercial Co., Ltd.,21 this Court held that there
can be no election as to the venue of the filing of a complaint when the plaintiff
has no residence in the Philippines. In such case, the complaint may only be filed
in the court of the place where the defendant resides. Thus:
Section 377 provides that actions of this character "may be brought in any
province where the defendant or any necessary party defendant may reside or
be found, or in any province where the plaintiff or one of the plaintiffs resides, at
the election of the plaintiff." The plaintiff in this action has no residence in the
Philippine Islands. Only one of the parties to the action resides here. There can
be, therefore, no election by plaintiff as to the place of trial. It must be in the
province where the defendant resides. x x x.22 (Emphasis ours)
Here, the petitioners are residents of Los Angeles, California, USA while the
respondents reside in Bacolod City. Applying the foregoing principles, the
petitioners’ complaint against the respondents may only be filed in the RTC of
Bacolod City – the court of the place where the respondents reside. The
petitioners, being residents of Los Angeles, California, USA, are not given the
choice as to the venue of the filing of their complaint.
Thus, the CA did not commit any reversible error when it annulled and set aside
the orders of the RTC of Quezon City and consequently dismissed the
petitioners’ complaint against the respondents on the ground of improper venue.
In this regard, it bears stressing that the situs for bringing real and personal civil
actions is fixed by the Rules of Court to attain the greatest convenience possible
to the litigants and their witnesses by affording them maximum accessibility to
the courts.23 And even as the regulation of venue is primarily for the convenience
of the plaintiff, as attested by the fact that the choice of venue is given to him, it
should not be construed to unduly deprive a resident defendant of the rights
conferred upon him by the Rules of Court.24
Atty. Aceron is not a real party in
interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.
Contrary to the petitioners’ claim, Atty. Aceron, despite being the attorney-in-fact
of the petitioners, is not a real party in interest in the case below. Section 2, Rule
3 of the Rules of Court reads:
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. (Emphasis
ours)
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. 25 A real party in
interest is the party who, by the substantive law, has the right sought to be
enforced.26
Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in
interest in the case below as he does not stand to be benefited or injured by any
judgment therein. He was merely appointed by the petitioners as their attorney-
in-fact for the limited purpose of filing and prosecuting the complaint against the
respondents. Such appointment, however, does not mean that he is subrogated
into the rights of petitioners and ought to be considered as a real party in interest.
Being merely a representative of the petitioners, Atty. Aceron in his personal
capacity does not have the right to file the complaint below against the
respondents. He may only do so, as what he did, in behalf of the petitioners – the
real parties in interest. To stress, the right sought to be enforced in the case
below belongs to the petitioners and not to Atty. Aceron. Clearly, an attorney-in-
fact is not a real party in interest.27
The petitioner’s reliance on Section 3, Rule 3 of the Rules of Court to support
their conclusion that Atty. Aceron is likewise a party in interest in the case below
is misplaced. Section 3, Rule 3 of the Rules of Court provides that:
Sec. 3. Representatives as parties. – Where the action is allowed to be
prosecuted and 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 property in interest. A representative may be a trustee of
an expert 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. (Emphasis ours)
Nowhere in the rule cited above is it stated or, at the very least implied, that the
representative is likewise deemed as the real party in interest. The said rule
simply states that, in actions which are allowed to be prosecuted or defended by
a representative, the beneficiary shall be deemed the real party in interest and,
hence, should be included in the title of the case.
Indeed, to construe the express requirement of residence under the rules on
venue as applicable to the attorney-in-fact of the plaintiff would abrogate the
meaning of a "real party in interest", as defined in Section 2 of Rule 3 of the 1997
Rules of Court vis-à-vis Section 3 of the same Rule.28
On this score, the CA aptly observed that:
As may be unerringly gleaned from the foregoing provisions, there is nothing
therein that expressly allows, much less implies that an action may be filed in the
city or municipality where either a representative or an attorney-in-fact of a real
party in interest resides. Sec. 3 of Rule 3 merely provides that the name or
names of the person or persons being represented must be included in the title of
the case and such person or persons shall be considered the real party in
interest. In other words, the principal remains the true party to the case and not
the representative. Under the plain meaning rule, or verba legis, if a statute is
clear, plain and free from ambiguity, it must be given its literal meaning and
applied without interpretation. xxx29 (Citation omitted)
At this juncture, it bears stressing that the rules on venue, like the other
procedural rules, are designed to insure a just and orderly administration of
justice or the impartial and even-handed determination of every action and
proceeding. Obviously, this objective will not be attained if the plaintiff is given
unrestricted freedom to choose the court where he may file his complaint or
petition. The choice of venue should not be left to the plaintiff's whim or caprice.
He may be impelled by some ulterior motivation in choosing to file a case in a
particular court even if not allowed by the rules on venue.30
WHEREFORE, in consideration of the foregoing disquisitions, the petition
is DENIED. The Decision dated August 28, 2008 and Resolution dated February
20, 2009 rendered by the Court of Appeals in CA-G.R. SP No. 101159
are AFFIRMED.
SO ORDERED.

G.R. No. L-59731 January 11, 1990
ALFREDO CHING, petitioner,
vs.
THE HONORABLE COURT OF APPEALS & PEDRO ASEDILLO, respondents.
This is a petition for review on certiorari which seeks to nullify the decision of
respondent Court of Appeals (penned by Hon. Rodolfo A. Nocon with the
concurrence of Hon. Crisolito Pascual and Juan A. Sison) in CA-G.R. No. 12358-
SP entitled Alfredo Ching v. Hon. M. V. Romillo, et al. which in effect affirmed the
decision of the Court of First Instance of Rizal, now Regional Trial Court (penned
by Judge Manuel V. Romillo, Jr. then District Judge, Branch XXVII Pasay City)
granting ex-parte the cancellation of title registered in the name of Ching Leng in
favor of Pedro Asedillo in Civil Case No. 6888-P entitled Pedro Asedillo v. Ching
Leng and/or Estate of Ching Leng.
The facts as culled from the records disclose that:
In May 1960, Decree No. N-78716 was issued to spouses Maximo Nofuente and
Dominga Lumandan in Land Registration Case No. N-2579 of the Court of First
Instance of Rizal and Original Certificate of Title No. 2433 correspondingly given
by the Register of Deeds for the Province of Rizal covering a parcel of land
situated at Sitio of Kay-Biga Barrio of San Dionisio, Municipality of Paranaque,
Province of Rizal, with an area of 51,852 square meters (Exhibit "7", p. 80,
CA, Rollo).
In August 1960, 5/6 portion of the property was reconveyed by said spouses to
Francisco, Regina, Perfects, Constancio and Matilde all surnamed Nofuente and
Transfer Certificate of Title No. 78633 was issued on August 10, 1960
accordingly (Exhibit "8", pp. 81 and 82, Ibid.).
By virtue of a sale to Ching Leng with postal address at No. 44 Libertad Street,
Pasay City, Transfer Certificate of Title No. 91137 was issued on September 18,
1961 and T.C.T. No. 78633 was deemed cancelled. (Exhibit "5-2", pp. 76-77 and
83, Ibid.).
On October 19, 1965, Ching Leng died in Boston, Massachusetts, United States
of America. His legitimate son Alfredo Ching filed with the Court of First Instance
of Rizal (now RTC) Branch III, Pasay City a petition for administration of the
estate of deceased Ching Leng docketed as Sp. Proc. No. 1956-P. Notice of
hearing on the petition was duly published in the "Daily Mirror", a newspaper of
general circulation on November 23 and 30 and December 7, 1965. No
oppositors appeared at the hearing on December 16, 1965, consequently after
presentation of evidence petitioner Alfredo Ching was appointed administrator of
Ching Leng's estate on December 28, 1965 and letters of administration issued
on January 3, 1966 (pp. 51-53, Rollo). The land covered by T.C.T. No. 91137
was among those included in the inventory submitted to the court (p. 75, Ibid.).
Thirteen (13) years after Ching Leng's death, a suit against him was commenced
on December 27, 1978 by private respondent Pedro Asedillo with the Court of
First Instance of Rizal (now RTC), Branch XXVII, Pasay City docketed as Civil
Case No. 6888-P for reconveyance of the abovesaid property and cancellation of
T.C.T. No. 91137 in his favor based on possession (p. 33, Ibid.). Ching Leng's
last known address is No. 44 Libertad Street, Pasay City which appears on the
face of T.C.T. No. 91137 (not No. 441 Libertad Street, Pasay City, as alleged in
private respondent's complaint). (Order dated May 29, 1980, p. 55, Ibid.). An
amended complaint was filed by private respondent against Ching Leng and/or
Estate of Ching Leng on January 30, 1979 alleging "That on account of the fact
that the defendant has been residing abroad up to the present, and it is not
known whether the defendant is still alive or dead, he or his estate may be
served by summons and other processes only by publication;" (p. 38, Ibid.).
Summons by publication to Ching Leng and/or his estate was directed by the trial
court in its order dated February 7, 1979. The summons and the complaint were
published in the "Economic Monitor", a newspaper of general circulation in the
province of Rizal including Pasay City on March 5, 12 and 19, 1979. Despite the
lapse of the sixty (60) day period within which to answer defendant failed to file a
responsive pleading and on motion of counsel for the private respondent, the
court a quo in its order dated May 25, 1979, allowed the presentation of
evidence ex-parte. A judgment by default was rendered on June 15, 1979, the
decretal portion of which reads:
WHEREFORE, finding plaintiffs causes of action in the complaint to be
duly substantiated by the evidence, judgment is hereby rendered in favor
of the plaintiff and against the defendant declaring the former (Pedro
Asedillo) to be the true and absolute owner of the property covered by
T.C.T. No. 91137; ordering the defendant to reconvey the said property
in favor of the plaintiff; sentencing the defendant Ching Leng and/or the
administrator of his estate to surrender to the Register of Deeds of the
Province of Rizal the owner's copy of T.C.T. No. 91137 so that the same
may be cancelled failing in which the said T.C.T. No. 91137 is hereby
cancelled and the Register of Deeds of the Province of Rizal is hereby
ordered to issue, in lieu thereof, a new transfer certificate of title over the
said property in the name of the plaintiff Pedro Asedillo of legal age, and
a resident of Estrella Street, Makati, Metro Manila, upon payment of the
fees that may be required therefor, including the realty taxes due the
Government.
IT IS SO ORDERED. (pp. 42-44, Ibid.)
Said decision was likewise served by publication on July 2, 9 and 16, 1979
pursuant to Section 7 of Rule 13 of the Revised Rules of Court (CA Decision, pp.
83-84, Ibid.). The title over the property in the name of Ching Leng was cancelled
and a new Transfer Certificate of Title was issued in favor of Pedro Asedillo (p.
77, CA Rollo) who subsequently sold the property to Villa Esperanza
Development, Inc. on September 3, 1979 (pp. 125-126, Ibid.).
On October 29, 1979 petitioner Alfredo Ching learned of the abovestated
decision. He filed a verified petition on November 10, 1979 to set it aside as null
and void for lack of jurisdiction which was granted by the court on May 29, 1980
(penned by Hon. Florentino de la Pena, Vacation Judge, pp. 54-59, Rollo).
On motion of counsel for private respondent the said order of May 29, 1980 was
reconsidered and set aside, the decision dated June 15, 1979 aforequoted
reinstated in the order dated September 2, 1980. (pp. 60-63, Ibid.)
On October 30, 1980, petitioner filed a motion for reconsideration of the said
latter order but the same was denied by the trial court on April 12, 1981 (pp. 77-
79, Ibid.)
Petitioner filed an original petition for certiorari with the Court of Appeals but the
same was dismissed on September 30, 1981. His motion for reconsideration was
likewise denied on February 10, 1982 (pp. 81-90, Ibid.)
Private respondent Pedro Asedillo died on June 7, 1981 at Makati, Metro Manila
during the pendency of the case with the Court of Appeals (p. 106, CA Rollo).
Hence, the instant petition.
Private respondent's comment was filed on June 1, 1982 (p. 117, Ibid.) in
compliance with the resolution dated April 26, 1982 (p. 109, Ibid.) Petitioner filed
a reply to comment on June 18, 1982 (p. 159, Ibid ), and the Court gave due
course to the petition in the resolution of June 28, 1982 (p. 191, Ibid.)
Petitioner raised the following:
ASSIGNMENTS OF ERROR
I hence, service of summons by publication may be allowed unto Ching Leng who
WHETHER OR NOT A DEAD MAN CHING LENG AND/OR HIS
ESTATE MAY BE VALIDLY SERVED WITH SUMMONS AND
DECISION BY PUBLICATION.
II
WHETHER OR NOT AN ACTION FOR RECONVEYANCE OF
PROPERTY AND CANCELLATION OF TITLE IS IN PERSONAM, AND
IF SO, WOULD A DEAD MAN AND/OR HIS ESTATE BE BOUND BY
SERVICE OF SUMMONS AND DECISION BY PUBLICATION.
III
WHETHER OR NOT THE PROCEEDINGS FOR RECONVEYANCE
AND CANCELLATION OF TITLE CAN BE HELD EX-PARTE.
IV
WHETHER OR NOT THE TRIAL COURT ACQUIRED JURISDICTION
OVER THE SUBJECT MATTER AND THE PARTIES.
V
WHETHER OR NOT PRIVATE RESPONDENT IS GUILTY OF LACHES
IN INSTITUTING THE ACTION FOR RECONVEYANCE AFTER THE
LAPSE OF 19 YEARS FROM THE TIME THE DECREE OF
REGISTRATION WAS ISSUED.
Petitioner's appeal hinges on whether or not the Court of Appeals has decided a
question of substance in a way probably not in accord with law or with the
applicable decisions of the Supreme Court.
Petitioner avers that an action for reconveyance and cancellation of title is in
personam and the court a quo never acquired jurisdiction over the deceased
Ching Leng and/or his estate by means of service of summons by publication in
accordance with the ruling laid down in Ang Lam v. Rosillosa et al., 86 Phil. 448
[1950].
On the other hand, private respondent argues that an action for cancellation of
title is quasi in rem, for while the judgment that may be rendered therein is not
strictly a judgment in in rem, it fixes and settles the title to the property in
controversy and to that extent partakes of the nature of the judgment in rem,
on the face of the complaint was a non-resident of the Philippines in line with the
doctrine enunciated in Perkins v. Dizon, 69 Phil. 186 [1939].
The petition is impressed with merit.
An action to redeem, or to recover title to or possession of, real property is not an
action in rem or an action against the whole world, like a land registration
proceeding or the probate of a will; it is an action in personam, so much so that a
judgment therein is binding only upon the parties properly impleaded and duly
heard or given an opportunity to be heard. Actions in personam and actions in
rem differ in that the former are directed against specific persons and seek
personal judgments, while the latter are directed against the thing or property or
status of a person and seek judgments with respect thereto as against the whole
world. An action to recover a parcel of land is a real action but it is an action in
personam, for it binds a particular individual only although it concerns the right to
a tangible thing (Ang Lam v. Rosillosa, supra).
Private respondent's action for reconveyance and cancellation of title being in
personam, the judgment in question is null and void for lack of jurisdiction over
the person of the deceased defendant Ching Leng. Verily, the action was
commenced thirteen (13) years after the latter's death. As ruled by this Court
in Dumlao v. Quality Plastic Products, Inc. (70 SCRA 475 [1976]) the decision of
the lower court insofar as the deceased is concerned, is void for lack of
jurisdiction over his person. He was not, and he could not have been validly
served with summons. He had no more civil personality. His juridical personality,
that is fitness to be subject of legal relations, was lost through death (Arts. 37 and
42 Civil Code).
The same conclusion would still inevitably be reached notwithstanding joinder of
Ching Leng's estate as co-defendant. it is a well-settled rule that an estate can
sue or be sued through an executor or administrator in his representative
capacity (21 Am. Jr. 872). Contrary to private respondent's claims, deceased
Ching Leng is a resident of 44 Libertad Street, Pasay City as shown in his death
certificate and T. C. T. No. 91137 and there is an on-going intestate proceedings
in the same court, Branch III commenced in 1965, and notice of hearing thereof
duly published in the same year. Such misleading and misstatement of facts
demonstrate lack of candor on the part of private respondent and his counsel,
which is censurable.
The complaint for cancellation of Ching Leng's Torrens Title must be filed in the
original land registration case, RTC, Pasig, Rizal, sitting as a land registration
court in accordance with Section 112 of the Land Registration Act (Act No. 496,
as amended) not in CFI Pasay City in connection with, or as a mere incident in
Civil Case No. 6888-P (Estanislao v. Honrado, 114 SCRA 748 [1982]).
Section 112 of the same law requires "notice to all parties in interest." Since
Ching Leng was already in the other world when the summons was published he
could not have been notified at all and the trial court never acquired jurisdiction
over his person. The ex-parte proceedings for cancellation of title could not have
been held (Estanislao v. Honrado, supra).
The cited case of Perkins v. Dizon, supra is inapplicable to the case at bar since
petitioner Perkins was a non-resident defendant sued in Philippine courts and
sought to be excluded from whatever interest she has in 52,874 shares of stocks
with Benguet Consolidated Mining Company. The action being a quasi in
rem summons by publication satisfied the constitutional requirement of due
process.
The petition to set aside the judgment for lack of jurisdiction should have been
granted and the amended complaint of private respondent based on possession
and filed only in 1978 dismissed outrightly. Ching Leng is an innocent purchaser
for value as shown by the evidence adduced in his behalf by petitioner herein,
tracing back the roots of his title since 1960, from the time the decree of
registration was issued.
The sole remedy of the landowner whose property has been wrongfully or
erroneously registered in another's name—after one year from the date of the
decree—is not to set aside the decree, but respecting the decree as
incontrovertible and no longer open to review, to bring an ordinary action in the
ordinary court of justice for damages if the property has passed unto the hands of
an innocent purchaser for value (Sy, Sr. v. Intermediate Appellate Court, G.R.
No. 66742; Teoville Development Corporation v. IAC, et al., G.R. No. 75011,
June 16, 1988).
Failure to take steps to assert any rights over a disputed land for 19 years from
the date of registration of title is fatal to the private respondent's cause of action
on the ground of laches. Laches is the failure or neglect, for an unreasonable
length of time to do that which by exercising due diligence could or should have
been done, earlier; it is negligence or omission to assert a right within a
reasonable time warranting a presumption that the party entitled to assert it either
has abandoned it or declined to assert it (Bailon-Casilao v. Court of Appeals,
G.R. No. 78178, April 15, 1988; Villamor v. Court of Appeals, G.R. No. 41508,
June 27, 1988).
The real purpose of the Torrens system is to quiet title to land and to stop forever
any question as to its legality. Once a title is registered, the owner may rest
secure, without the necessity of waiting in the portals of the court, or sitting on
the "mirador su casa," to avoid the possibility of losing his land (National Grains
Authority v. IAC, 157 SCRA 388 [1988]).
A Torrens title is generally a conclusive evidence of the ownership of the land
referred to therein (Section 49, Act 496). A strong presumption exists that
Torrens titles are regularly issued and that they are valid. A Torrens title is
incontrovertible against any "information possessoria" or title existing prior to the
issuance thereof not annotated on the title (Salamat Vda. de Medina v. Cruz,
G.R. No. 39272, May 4, 1988).
PREMISES CONSIDERED, (1) the instant petition is hereby GRANTED; (2) the
appealed decision of the Court of Appeals is hereby REVERSED and SET
ASIDE; (3) the trial court's decision dated June 15, 1979 and the Order dated
September 2, 1980 reinstating the same are hereby declared NULL and VOID for
lack of jurisdiction and (4) the complaint in Civil Case No. 6888-P is hereby
DISMISSED.
SO ORDERED.

G.R. No. 143870 September 30, 2005
MANILA INTERNATIONAL AIRPORT AUTHORITY, Petitioners,
vs.
RIVERA VILLAGE LESSEE HOMEOWNERS ASSOCIATION,
INCORPORATED, Respondent.
DECISION
Tinga, J.:
We resolve the Petition for Review on Certiorari1 dated August 23, 2000 filed by
the Manila International Airport Authority (MIAA), assailing the Decision2 of the
Court of Appeals dated June 30, 2000 which directed the issuance of a writ of
preliminary injunction restraining petitioner from evicting the homeowners of
Rivera Village from their dwellings.
The antecedents, culled from the petition and the assailed Decision, are as
follows:
The then Civil Aeronautics Administration (CAA) was entrusted with the
administration, operation, management, control, maintenance and development
of the Manila International Airport (MIA), now the Ninoy Aquino International
Airport. Among its powers was the power to enter into, make and execute
concessions and concession rights for purposes essential to the operation of the
airport.
On May 25, 1965, the CAA, through its Director, Capt. Vicente C. Rivera, entered
into individual lease contracts with its employees (lessees) for the lease of
portions of a four (4)-hectare lot situated in what is now known as Rivera Village
located in Barangay 199 and 200 in Pasay City. The leases were for a twenty-
five (25)-year period to commence on May 25, 1965 up to May 24, 1990 at
₱20.003 per annum as rental.
On May 4, 1982, Executive Order No. (EO) 778 was issued (later amended by
EO 903 on July 21, 1983), creating petitioner MIAA, transferring existing assets
of the MIA to MIAA, and vesting the latter with the power to administer and
operate the MIA.
Sometime in January 1995, MIAA stopped issuing accrued rental bills and
refused to accept rental payments from the lessees. As a result, respondent
Rivera Village Lessee Homeowners Association, Inc. (homeowners association),
purportedly representing the lessees, requested MIAA to sell the subject property
to its members, invoking the provisions of Presidential Decree No. (PD) 1517 or
the Urban Land Reform Act and PD 2016.
The MIAA, on February 14, 1996, denied the request, claiming that the subject
property is included in its Conceptual Development Plan intended for airport-
related activities.
Respondent then filed a petition for mandamus and prohibition with prayer for the
issuance of a preliminary injunction4 against MIAA and the National Housing
Authority (NHA). The petition, docketed as Civil Case No. 97-1598 in the
Regional Trial Court of Pasay City, Branch 109, sought to restrain the MIAA from
implementing its Conceptual Development Plan insofar as Rivera Village is
concerned. It also sought to compel MIAA to segregate Rivera Village from the
scope of the Conceptual Development Plan and the NHA to take the necessary
steps for the disposition of the property in favor of the members of the
homeowners association.
MIAA filed an answer5 alleging that the petition fails to state a cause of action in
view of the expiration of the lease contracts and the lack of personality to sue of
the homeowners association. MIAA also claimed that the homeowners
association is not entitled to a writ of mandamus because it does not have a clear
legal right to possess the subject property and MIAA does not have a
corresponding duty to segregate Rivera Village from its Conceptual Development
Plan.
A preliminary hearing on MIAA’s affirmative defenses was conducted, after which
the trial court issued an Order6 dated October 12, 1998, denying the prayer for
the issuance of a temporary restraining order and/or writ of preliminary injunction
and dismissing the petition for lack of merit. The dispositive portion of
the Order reads:
In view of all the foregoing, the prayer for the issuance of a temporary restraining
order and/or writ of preliminary injunction is hereby denied for lack of merit and
the above-entitled petition is hereby ordered dismissed for lack of merit.
SO ORDERED.7
The trial court held that PD 1818 bars the issuance of a restraining order,
preliminary injunction or preliminary mandatory injunction in any case, dispute or
controversy involving infrastructure projects of the government or any public
utility operated by the government. It also ruled that the petition failed to state a
cause of action inasmuch as petitioner therein (respondent homeowners
association) is not the real party-in-interest, the individual members of the
association being the ones who have possessory rights over their respective
premises. Moreover, the lease contracts have already expired.
As regards the contention that the lessees are entitled to possess the subject
property by virtue of PD 1517, Proclamation No. 1967 and PD 2016, which
respectively identify parcels of urban land as part of the Urban Land Reform
Zone, specify certain areas in Metro Manila, including Rivera Village, as areas for
priority development or urban land reform zones, and prohibit the eviction of
occupant families from such lands, the trial court declared that the subject
property has been reserved by MIAA for airport-related activities and, as such, is
exempt from the coverage of the Comprehensive and Continuing Urban
Development and Housing Program under Republic Act No. (RA) 7279.
Respondent filed an appeal with the Court of Appeals, interposing essentially the
same arguments raised before the trial court. The appellate court annulled and
set aside the order of the trial court and remanded the case for further
proceedings. The dispositive portion of the assailed Decision states:
WHEREFORE, the assailed October 12, 1998 Order is annulled, set aside and
reversed. The case is remanded to the court a quo for further proceedings.
A writ of preliminary injunction is issued restraining and preventing respondent
MIAA from evicting the members of petitioner Rivera Village Association from
their respective lots in the Rivera Village. Petitioner is ordered to post a bond in
the amount of ₱500,000.00 with the condition that petitioner will pay to
respondent MIAA all damages it may sustain by reason of the injunction if the
court should finally decided that petitioner is not entitled thereto. Upon approval
of the bond, the writ of preliminary injunction shall forthwith issue.
SO ORDERED.8
The appellate court foremost ruled that the case can be construed as a class suit
instituted by the Rivera Village lessees. The homeowners association,
considered as the representative of the lessees, merely instituted the suit for the
benefit of its members. It does not claim to have any right or interest in the lots
occupied by the lessees, nor seek the registration of the titles to the land in its
name.
On the issue of the expiration of the lease contracts and the application of PD
1517, Proclamation No. 1967 and PD 2016, the Court of Appeals held that the
expiration of the lease contracts cannot adversely affect the rights acquired by
the lessees under the foregoing laws. Besides, the lease contracts were impliedly
renewed by virtue of MIAA’s acceptance of rental payments from May 25, 1990
up to December 1994. This resulted in an implied new lease under Article 1670
of the Civil Code.
Moreover, the appellate court construed Sec. 5(c) of RA 7279 to mean that if the
government lot has not been utilized during the ten (10)-year period for the
purpose for which it has been reserved prior to 1983, then said lot is
encompassed by the law and is subject to distribution to the legitimate and
qualified residents of the area after appropriate proceedings have been
undertaken.
As to whether PD 1818 bars the issuance of an injunctive writ in this case, the
appellate court ruled that PD 1818 is a general law on the issuance of restraining
orders and writs of preliminary injunction. On the other hand, PD 2016 is a
special law specifically prohibiting the eviction of tenants from lands identified as
areas for priority development. Thus, the trial court can issue an injunctive writ if
the act sought to be restrained will enforce the eviction of tenants from urban
land reform zones.
The court, however, declared that it cannot make a definitive ruling on the rights
of the members of the homeowners association vis-à-vis the MIAA Conceptual
Development Plan, considering the need for a full-blown trial to ferret out whether
the claimed rights under the pertinent laws have ripened to actual legal and
vested rights in their favor.
MIAA now seeks a review of the Decision of the Court of Appeals. In the instant
petition, MIAA contends that the appellate court erred in ruling that PD 2016,
which prohibits the eviction of occupant families from real property identified as
areas for priority development or urban land reform zones, has modified PD
1818, which bars the issuance of injunctive writ in cases involving infrastructure
projects of the government, including public utilities for the transport of goods and
commodities.
It argues that the petition filed by the homeowners association with the trial court
fails to state a cause of action because the homeowners association is not the
real party-in-interest in the suit. Allegedly, the Board Resolution presented by
respondent shows that it was only the board of directors of the association, as
distinguished from the members thereof, which authorized respondent to act as
its representative in the suit.
MIAA also stresses that the subject property has recently been reserved by MIAA
for airport-related activities and, as such, Sec. 5(c) of RA 7279 applies. Under the
said law, lands which are used, reserved or otherwise set aside for government
offices, facilities and other installations are exempt from the coverage of the law.
Moreover, MIAA avers that the Court of Appeals should not have granted
injunctive relief to respondent, considering that the grant of an injunction would
inflict greater damage to petitioner and to the public.
Respondent filed a Comment9 dated November 20, 2000, arguing that MIAA is
mandated by law to dispose of Rivera Village to the homeowners thereof. Under
existing laws, the homeowners have the right to possess and enjoy the property.
To accept MIAA’s pretense that the property has been recently reserved for
airport-related activities and therefor exempt from the coverage of RA 7279 will
allegedly violate the right of the homeowners as bona fide tenants to socialized
housing.
Respondent further argues that PD 1818 is inapplicable to this case because it
has established a clear and unmistakable right to an injunction. Besides, PD
2016 which protects from eviction tenants of lands identified for priority
development, is a later enactment which should be deemed to prevail over PD
1818.
In the Resolution10 dated January 24, 2001, the petition was given due course
and the parties were required to submit their respective memoranda.
Accordingly, MIAA submitted its Memorandum11 dated March 20, 2001, while
respondent filed its Memorandum12 dated April 20, 2001. For its part, NHA
manifested that it is adopting the memorandum of MIAA as its own insofar as the
same is germane and material to NHA’s stand.13
As presented and discussed by the parties, the issues are the following:
1. Has PD 2016 modified PD 1818?
2. Did the petition filed by respondent with the trial court state a cause of action
against petitioner?
3. Is petitioner obliged to dispose of the subject properties in favor of the
members of respondent association after appropriate proceedings?
4. Is respondent entitled to the issuance of a writ of preliminary injunction?14
We first resolve the threshold question of whether respondent has personality to
sue.
MIAA contends that the real parties-in-interest in the petition filed with the trial
court are the individual members of the homeowners association. Not having
been brought in the name of the real parties-in-interest, the suit was correctly
dismissed by the trial court for failure to state a cause of action.
The 1997 Rules of Civil Procedure (Rules of Court) requires that every action
must be prosecuted or defended in the name of the real party-in-interest, i.e., the
party who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.15 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.16
The petition before the trial court was filed by the homeowners association,
represented by its President, Panfilo R. Chiutena, Sr., upon authority of a Board
Resolution empowering the latter to file "[A]ll necessary action to the Court of
Justice and other related acts necessary to have our Housing Project number 4
land be titled to the members of the Association."
Obviously, the petition cannot be considered a class suit under Sec. 12, Rule
317 of the Rules of Court, the requisites therefor not being present in the case,
notably because the petition does not allege the existence and prove the
requisites of a class suit, i.e., that 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, and because it was
brought only by one party.
In Board of Optometry v. Colet,18 we held that courts must exercise utmost
caution before allowing a class suit, which is the exception to the requirement 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.
There is, however, merit in the appellate court’s pronouncement that the petition
should be construed as a suit brought by the homeowners association as the
representative of the members thereof under Sec. 3, Rule 3 of the Rules of
Court, which provides:
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.
[Emphasis supplied.]
It is a settled rule that every action must be prosecuted or defended in the name
of the real party-in-interest. Where the action is allowed to be prosecuted or
defended by a representative acting in a fiduciary capacity, the beneficiary must
be included in the title of the case and shall be deemed to be the real party-in-
interest. The name of such beneficiaries shall, likewise, be included in the
complaint.19
Moreover, Sec. 4, Rule 8 of the Rules of Court provides that facts showing the
capacity of a party to sue or be sued, or the authority of a party to sue or be sued
in a representative capacity must be averred in the complaint. In order to
maintain an action in a court of justice, the plaintiff must have an actual legal
existence, that is, he or she or it must be a person in law and possessed of a
legal entity as either a natural or an artificial person. The party bringing suit has
the burden of proving the sufficiency of the representative character that he
claims. If a complaint is filed by one who claims to represent a party as plaintiff
but who, in fact, is not authorized to do so, such complaint is not deemed filed
and the court does not acquire jurisdiction over the complaint. It must be stressed
that an unauthorized complaint does not produce any legal effect.20
In this case, the petition filed with the trial court sufficiently avers that the
homeowners association, through its President, is suing in a representative
capacity as authorized under the Board Resolution attached to the petition.
Although the names of the individual members of the homeowners association
who are the beneficiaries and real parties-in-interest in the suit were not indicated
in the title of the petition, this defect can be cured by the simple expedient of
requiring the association to disclose the names of the principals and to amend
the title and averments of the petition accordingly.
Essentially, the purpose of the rule that actions should be brought or defended in
the name of the real party-in-interest is to protect against undue and
unnecessary litigation and to ensure that the court will have the benefit of having
before it the real adverse parties in the consideration of a case. This rule,
however, is not to be narrowly and restrictively construed, and its application
should be neither dogmatic nor rigid at all times but viewed in consonance with
extant realities and practicalities.21 As correctly noted by the Court of Appeals, the
dismissal of this case based on the lack of personality to sue of petitioner-
association will only result in the filing of multiple suits by the individual members
of the association.
What is more decisive to the resolution of the present controversy, however, is a
matter not addressed by the parties in the case before this Court, that is, the fact
that the petition filed before the trial court is for mandamus to compel MIAA to
segregate Rivera Village from the scope of its Conceptual Development Plan and
the NHA to take the necessary steps for the disposition of the subject property in
favor of the members of the homeowners association.
Parenthetically, while the procedural rule is that a party is required to indicate in
his brief an assignment of errors and only those assigned shall be considered by
the appellate court in deciding the case, it is equally settled that appellate courts
have ample authority to rule on matters not assigned as errors in an appeal, if
these are indispensable or necessary to the just resolution of the pleaded
issues.22
For instance, the Court has allowed the consideration of other grounds not raised
or assigned as errors specifically in the following instances: (1) grounds not
assigned as errors but affecting jurisdiction over the subject matter; (2) matters
not assigned as errors on appeal but are evidently plain or clerical errors within
the contemplation of the law; (3) matters not assigned as errors on appeal but
consideration of which is necessary in arriving at a just decision and complete
resolution of the case or to serve the interest of justice or to avoid dispensing
piecemeal justice; (4) matters not specifically assigned as errors on appeal but
raised in the trial court and are matters of record having some bearing on the
issue submitted which the parties failed to raise or which the lower court ignored;
(5) matters not assigned as errors on appeal but closely related to an error
assigned; and (6) matters not assigned as errors on appeal but upon which the
determination of a question properly assigned is dependent.23
In this case, although the propriety of the filing of a petition for mandamus was no
longer raised as an issue before this Court, MIAA asserted in its answer24 to the
original petition that the homeowners association is not entitled to a writ of
mandamus because it has not shown any legal right to possess the subject
property and a correlative obligation on the part of MIAA to segregate the
property from its Conceptual Development Plan. MIAA averred:
28. Petitioner is not entitled to the issuance of a writ of mandamus. For a writ of
mandamus to issue, it is essential that petitioner has a legal right to the thing
demanded and that it is the imperative duty of respondent to perform the act
required. The legal right of petitioner to the thing demanded must be well-
defined, clear and certain. The corresponding duty of respondent to perform the
required act must also be clear and specific (Cf. Lemi v. Valencia, 26 SCRA 203,
210 [1968]).
29. Petitioner, in view of the expiration of the lease contracts of its individual
members, has failed to show that it has the legal right to possess the subject
property.
30. There is therefore no corresponding duty on the part of respondent MIAA to
segregate the property from the scope of its Conceptual Development Plan.25
The question of whether the homeowners association is entitled to the issuance
of a writ of mandamus was again raised in the memorandum26 filed by MIAA with
the Court of Appeals. MIAA alleged:
Appellant is not entitled to the issuance of a writ of mandamus. For a writ of
mandamus to issue, it is essential that the appellant has a legal right to the thing
demanded and that it is the imperative duty of respondent to perform the act
required. The legal right of appellant to the thing demanded must be well-defined,
clear and certain. The corresponding duty of respondent to perform the required
act must also be clear and specific (cf. Lemi v. Valencia, 26 SCRA 203, 210
[1968]).
In view of the expiration of the lease contracts of its individual members,
appellant has failed to show that it has the legal right to possess the subject
property. There is therefore no corresponding duty on the part of the MIAA to
segregate the property from the scope of its conceptual development plan.27
The question of whether mandamus is the proper remedy was clearly raised in
the trial court and the Court of Appeals although it was largely ignored by both
courts. This issue being indispensable to the resolution of this case, we shall rule
on the matter.
A writ of mandamus can be issued only when petitioner’s legal right to the
performance of a particular act which is sought to be compelled is clear and
complete. A clear legal right is a right which is indubitably granted by law or is
inferable as a matter of law.28
In order that a writ of mandamus may aptly issue, it is essential that, on the one
hand, petitioner has a clear legal right to the claim that is sought and that, on the
other hand, respondent has an imperative duty to perform that which is
demanded of him. Mandamus will not issue to enforce a right, or to compel
compliance with
a duty, which is questionable or over which a substantial doubt exists. The
principal function of the writ of mandamus is to command and to expedite, not to
inquire and to adjudicate. Thus, it is neither the office nor the aim of the writ to
secure a legal right but to implement that which is already established. Unless
the right to relief sought is unclouded, mandamus will not issue.
In this case, the Court of Appeals itself conceded that no definitive ruling as
regards the rights of the individual members of the homeowners association
could yet be made considering the need for a full determination of whether their
claimed rights under the pertinent laws have ripened into actual legal and vested
rights. The appellate court even outlined the requisites under PD 1517 which
have yet to be complied with, namely: (1) the submission to the NHA of a
proposal to acquire the subject property as required under Sec. 929 of PD 1517;
and (2) proof that the members of the homeowners association are qualified to
avail of the benefits under PD 1517 as mandated by Sec. 630 of the same law.
Resort to mandamus is evidently premature because there is no showing that the
members of the homeowners association have already filed an application or
proposal with the NHA to acquire their respective lots. There is still an
administrative remedy open to the members of the homeowners association
which they should have first pursued, failing which they cannot invoke judicial
action.31
We note that while respondent alleges that its members enlisted themselves with
the NHA in order to avail of the benefits of the law, the NHA, in its answer32 to the
petition, denied this allegation for being self-serving. Whatever rights the
members of the homeowners association may have under the relevant laws are
still in substantial doubt or dispute. Hence, the petition for mandamus was
appropriately dismissed for failure to state a cause of action.
So, too, should the prayer for the issuance of a writ of prohibition contained in the
same petition be denied. Writs of certiorari, prohibition and mandamus are
prerogative writs of equity and their granting is ordinarily within the sound
discretion of the courts to be exercised on equitable principles. Said writs should
only be issued when the right to the relief is clear.33 As our findings in this case
confirm, the homeowners association failed to establish a clear legal right to the
issuance of the writs of mandamus and prohibition prayed for.
There is, moreover, another ground for the dismissal of the petition filed before
the trial court which appears to have been overlooked by the parties in this case.
In the original petition filed before the trial court, the homeowners association
averred that although EO 903 transferred to MIAA the properties and assets of
MIA, such transfer was made subject to what the homeowners association claims
to be the existing rights of its members.34 MIAA dismissed this allegation as an
erroneous conclusion of law.35
We cite the complete text of the relevant provision of EO 903 to fully understand
the import thereof and its effect on the present controversy. Section 3 thereof
states:
Sec. 3. Creation of the Manila International Airport Authority.—There is hereby
established a body corporate to be known as the Manila International Airport
Authority which shall be attached to the Ministry of Transportation and
Communications. The principal office of the Authority shall be located at the New
Manila International Airport. The Authority may establish such offices, branches,
agencies or subsidiaries as it may deem proper and necessary; Provided, That
any subsidiary that may be organized shall have the prior approval of the
President.
The land where the Airport is presently located as well as the surrounding
land area of approximately six hundred hectares, are hereby transferred,
conveyed and assigned to the ownership and administration of the
Authority,
subject to existing rights, if any. The Bureau of Lands and other appropriate
government agencies shall undertake an actual survey of the area transferred
within one year from the promulgation of this Executive Order and the
corresponding title to be issued in the name of the authority. Any portion
thereof shall not be disposed through sale or through any other mode
unless specifically approved by the President of the Philippines. [Emphasis
supplied.]
As can clearly be seen from the foregoing provision, while it is true that the
ownership and administration of the airport and its surrounding land was
assigned to MIAA subject to existing rights, which we may here understand to be
the rights granted under PD 1517, EO 903 specifically requires the approval of
the President of the Philippines before any disposition by sale or any other mode
may be made concerning the property transferred to MIAA.
The Executive Secretary as representative of the President of the Philippines is, SO ORDERED.
therefore, an indispensable party in actions seeking to compel the sale or
disposition of properties of the MIAA. Section 7, Rule 3 of the Rules of Court
provides that parties-in-interest without whom no final determination can be had
of an action shall be joined either as plaintiffs or defendants.

Thus, the presence of all indispensable parties is a condition sine qua non for the
exercise of judicial power. It is precisely when an indispensable party is not
before the court that the action should be dismissed. The plaintiff is mandated to
implead all indispensable parties, and the absence of one 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. One who is 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.36

For the foregoing reasons, the prayer for the issuance of the writ of preliminary
injunction must perforce be denied. Preliminary injunction is a mere ancillary
remedy which cannot stand separately or proceed independently of the main
case. Having declared that the petition filed before the trial court was correctly
dismissed, the determination of the homeowners association’s entitlement to a
writ of preliminary injunction is already moot and academic.37

Besides, as earlier noted, the right of the members of the homeowners

association to possess and purchase the subject property is still uncertain
considering that they have not completed the process for the acquisition of their
lots as outlined in PD 1517.

Injunction is a preservative remedy aimed at protecting substantive rights and

interests. The writ of preliminary injunction is issued by the court to prevent
threatened or continuous irreparable injury to parties before their claims can be
thoroughly studied and adjudicated. Its sole objective is to preserve the status
quo until the merits of the case can be heard fully. The writ is issued upon the
satisfaction of two requisites, namely: (1) the existence of a right to be protected;
and (2) acts which are violative of said right. In the absence of a clear legal right,
the issuance of the injunctive relief constitutes grave abuse of discretion.
Injunction is not designed to protect contingent or future rights. Where the
complainant’s right is doubtful or disputed, injunction is not proper. The possibility
of irreparable damage without proof of actual existing right is not a ground for an
injunction.38

With this conclusion, we deem it unnecessary to discuss the other issues raised
in this petition.

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of

Appeals dated June 30, 2000 is REVERSED and SET ASIDE. Civil Case No. 97-
1598 of the Regional Trial Court of Pasay City is ordered DISMISSED.

G.R. No. 160347 November 29, 2006
ARCADIO and MARIA LUISA CARANDANG, Petitioners,
vs.
HEIRS OF QUIRINO A. DE GUZMAN, namely: MILAGROS DE GUZMAN,
VICTOR DE GUZMAN, REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and
QUIRINO DE GUZMAN, JR., Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari assailing the Court of Appeals
Decision1 and Resolution affirming the Regional Trial Court (RTC) Decision
rendering herein petitioners Arcadio and Luisa Carandang [hereinafter referred to
as spouses Carandang] jointly and severally liable for their loan to Quirino A. de
Guzman.
The Court of Appeals summarized the facts as follows:
[Quirino de Guzman] and [the Spouses Carandang] are stockholders as well as
corporate officers of Mabuhay Broadcasting System (MBS for brevity), with
equities at fifty four percent (54%) and forty six percent (46%) respectively.
On November 26, 1983, the capital stock of MBS was increased, from ₱500,000
to P1.5 million and ₱345,000 of this increase was subscribed by [the spouses
Carandang]. Thereafter, on March 3, 1989, MBS again increased its capital
stock, from ₱1.5 million to ₱3 million, [the spouses Carandang] yet again
subscribed to the increase. They subscribed to ₱93,750 worth of newly issued
capital stock.
[De Guzman] claims that, part of the payment for these subscriptions were paid
by him, ₱293,250 for the November 26, 1983 capital stock increase and ₱43,125
for the March 3, 1989 Capital Stock increase or a total of ₱336,375. Thus, on
March 31, 1992, [de Guzman] sent a demand letter to [the spouses Carandang]
for the payment of said total amount.
[The spouses Carandang] refused to pay the amount, contending that a pre-
incorporation agreement was executed between [Arcadio Carandang] and [de
Guzman], whereby the latter promised to pay for the stock subscriptions of the
former without cost, in consideration for [Arcadio Carandang’s] technical
expertise, his newly purchased equipment, and his skill in repairing and
upgrading radio/communication equipment therefore, there is no indebtedness
on their part [sic].
On June 5, 1992, [de Guzman] filed his complaint, seeking to recover the
₱336,375 together with damages. After trial on the merits, the trial court disposed
of the case in this wise:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of
[de Guzman]. Accordingly, [the spouses Carandang] are ordered to jointly and
severally pay [de Guzman], to wit:
(1) ₱336,375.00 representing [the spouses Carandang’s] loan to de
Guzman;
(2) interest on the preceding amount at the rate of twelve percent (12%)
per annum from June 5, 1992 when this complaint was filed until the
principal amount shall have been fully paid;
(3) ₱20,000.00 as attorney’s fees;
(4) Costs of suit.
The spouses Carandang appealed the RTC Decision to the Court of Appeals,
which affirmed the same in the 22 April 2003 assailed Decision:
WHEREFORE, in view of all the foregoing the assailed Decision is hereby
AFFIRMED. No costs.2
The Motion for Reconsideration filed by the spouses Carandang was similarly
denied by the Court of Appeals in the 6 October 2003 assailed Resolution:
WHEREFORE, in view thereof, the motion for reconsideration is hereby DENIED
and our Decision of April 22, 2003, which is based on applicable law and
jurisprudence on the matter is hereby AFFIRMED and REITERATED.3
The spouses Carandang then filed before this Court the instant Petition for
Review on Certiorari, bringing forth the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
MANIFEST ERROR IN FAILING TO STRICTLY COMPLY WITH SECTION 16,
RULE 3 OF THE 1997 RULES OF CIVIL PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN ITS FINDING THAT THERE IS AN ALLEGED LOAN FOR WHICH
PETITIONERS ARE LIABLE, CONTRARY TO EXPRESS PROVISIONS OF
BOOK IV, TITLE XI, OF THE NEW CIVIL CODE PERTAINING TO LOANS.
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN FINDING THAT THE RESPONDENTS WERE ABLE TO
DISCHARGE THEIR BURDEN OF PROOF, IN COMPLETE DISREGARD OF
THE REVISED RULES ON EVIDENCE.
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT FAILED TO APPLY SECTIONS 2 AND 7,
RULE 3 OF THE 1997 RULES OF CIVIL PROCEDURE.
V.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN FINDING THAT THE PURPORTED LIABILITY OF PETITIONERS
ARE JOINT AND SOLIDARY, IN VIOLATION OF ARTICLE 1207 OF THE NEW
CIVIL CODE.4
Whether or not the RTC Decision is void for failing to comply with Section 16,
Rule 3 of the Rules of Court
The spouses Carandang claims that the Decision of the RTC, having been
rendered after the death of Quirino de Guzman, is void for failing to comply with
Section 16, Rule 3 of the Rules of Court, which provides:
SEC. 16. Death of party; duty of counsel. – Whenever a party to a pending action
dies, and the claim is not thereby extinguished, it shall be the duty of his counsel
to inform the court within thirty (30) days after such death of the fact thereof, and
to give the name and address of his legal representative or representatives.
Failure of counsel to comply with this duty shall be a ground for disciplinary
action.
The heirs of the deceased may be allowed to be substituted for the deceased,
without requiring the appointment of an executor or administrator and the court
may appoint a guardian ad litem for the minor heirs.
The court shall forthwith order the legal representative or representatives to
appear and be substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if
the one so named shall fail to appear within the specified period, the court may
order the opposing party, within a specified time, to procure the appointment of
an executor or administrator for the estate of the deceased and the latter shall
immediately appear for and on behalf of the deceased. The court charges in
procuring such appointment, if defrayed by the opposing party, may be recovered
as costs.
The spouses Carandang posits that such failure to comply with the above rule
renders void the decision of the RTC, in adherence to the following
pronouncements in Vda. de Haberer v. Court of Appeals5 and Ferreria v. Vda. de
Gonzales6 :
Thus, it has been held that when a party dies in an action that survives and no
order is issued by the court for the appearance of the legal representative or of
the heirs of the deceased in substitution of the deceased, and as a matter of fact
no substitution has ever been effected, the trial held by the court without such
legal representatives or heirs and the judgment rendered after such trial are null
and void because the court acquired no jurisdiction over the persons of the legal
representatives or of the heirs upon whom the trial and judgment would be
binding.7
In the present case, there had been no court order for the legal representative of
the deceased to appear, nor had any such legal representative appeared in court
to be substituted for the deceased; neither had the complainant ever procured
the appointment of such legal representative of the deceased, including
appellant, ever asked to be substituted for the deceased. As a result, no valid
substitution was effected, consequently, the court never acquired jurisdiction over
appellant for the purpose of making her a party to the case and making the
decision binding upon her, either personally or as a representative of the estate
of her deceased mother.8
However, unlike jurisdiction over the subject matter which is conferred by law and
is not subject to the discretion of the parties,9 jurisdiction over the person of the
parties to the case may be waived either expressly or impliedly.10 Implied waiver
comes in the form of either voluntary appearance or a failure to object.11
In the cases cited by the spouses Carandang, we held that there had been no
valid substitution by the heirs of the deceased party, and therefore the judgment
cannot be made binding upon them. In the case at bar, not only do the heirs of
de Guzman interpose no objection to the jurisdiction of the court over their
persons; they are actually claiming and embracing such jurisdiction. In doing so,
their waiver is not even merely implied (by their participation in the appeal of said
Decision), but express (by their explicit espousal of such view in both the Court of
Appeals and in this Court). The heirs of de Guzman had no objection to being
bound by the Decision of the RTC.
Thus, lack of jurisdiction over the person, being subject to waiver, is a personal
defense which can only be asserted by the party who can thereby waive it by
silence.
It also pays to look into the spirit behind the general rule requiring a formal
substitution of heirs. The underlying principle therefor is not really because
substitution of heirs is a jurisdictional requirement, but because non-compliance
therewith results in the undeniable violation of the right to due process of those
who, though not duly notified of the proceedings, are substantially affected by the
decision rendered therein.12 Such violation of due process can only be asserted
by the persons whose rights are claimed to have been violated, namely the heirs
to whom the adverse judgment is sought to be enforced.
Care should, however, be taken in applying the foregoing conclusions. In People
v. Florendo,13 where we likewise held that the proceedings that took place after
the death of the party are void, we gave another reason for such nullity: "the
attorneys for the offended party ceased to be the attorneys for the deceased
upon the death of the latter, the principal x x x." Nevertheless, the case at bar
had already been submitted for decision before the RTC on 4 June 1998, several
months before the passing away of de Guzman on 19 February 1999. Hence, no
further proceedings requiring the appearance of de Guzman’s counsel were
conducted before the promulgation of the RTC Decision. Consequently, de
Guzman’s counsel cannot be said to have no authority to appear in trial, as trial
had already ceased upon the death of de Guzman.
In sum, the RTC Decision is valid despite the failure to comply with Section 16,
Rule 3 of the Rules of Court, because of the express waiver of the heirs to the
jurisdiction over their persons, and because there had been, before the
promulgation of the RTC Decision, no further proceedings requiring the
appearance of de Guzman’s counsel.
Before proceeding with the substantive aspects of the case, however, there is
still one more procedural issue to tackle, the fourth issue presented by the
spouses Carandang on the non-inclusion in the complaint of an indispensable
party.
Whether or not the RTC should have dismissed the case for failure to state a
cause of action, considering that Milagros de Guzman, allegedly an
indispensable party, was not included as a party-plaintiff
The spouses Carandang claim that, since three of the four checks used to pay
their stock subscriptions were issued in the name of Milagros de Guzman, the
latter should be considered an indispensable party. Being such, the spouses
Carandang claim, the failure to join Mrs. de Guzman as a party-plaintiff should
cause the dismissal of the action because "(i)f a suit is not brought in the name of
or against the real party in interest, a motion to dismiss may be filed on the
ground that the complaint states no cause of action."14
The Court of Appeals held:
We disagree. The joint account of spouses Quirino A de Guzman and Milagros
de Guzman from which the four (4) checks were drawn is part of their conjugal
property and under both the Civil Code and the Family Code the husband alone
may institute an action for the recovery or protection of the spouses’ conjugal
property.
Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held that "x x
x Under the New Civil Code, the husband is the administrator of the conjugal
partnership. In fact, he is the sole administrator, and the wife is not entitled as a
matter of right to join him in this endeavor. The husband may defend the conjugal
partnership in a suit or action without being joined by the wife. x x x Under the
Family Code, the administration of the conjugal property belongs to the husband
and the wife jointly. However, unlike an act of alienation or encumbrance where
the consent of both spouses is required, joint management or administration
does not require that the husband and wife always act together. Each spouse
may validly exercise full power of management alone, subject to the intervention
of the court in proper cases as provided under Article 124 of the Family Code. x x
x."
The Court of Appeals is correct. Petitioners erroneously interchange the terms
"real party in interest" and "indispensable party." A real party in interest is the
party who stands to be benefited or injured by the judgment of the suit, or the
party entitled to the avails of the suit.15 On the other hand, an indispensable party
is a party in interest without whom no final determination can be had of an
action,16 in contrast to a necessary party, which is one who is not indispensable
but who ought to be joined as a party if complete relief is to be accorded as to
those already parties, or for a complete determination or settlement of the claim
subject of the action.17
The spouses Carandang are indeed correct that "(i)f a suit is not brought in the
name of or against the real party in interest, a motion to dismiss may be filed on
the ground that the complaint states no cause of action."18 However, what
dismissal on this ground entails is an examination of whether the parties
presently pleaded are interested in the outcome of the litigation, and not whether
all persons interested in such outcome are actually pleaded. The latter query is
relevant in discussions concerning indispensable and necessary parties,
but not in discussions concerning real parties in interest. Both indispensable and
necessary parties are considered as real parties in interest, since both classes of
parties stand to be benefited or injured by the judgment of the suit.
Quirino and Milagros de Guzman were married before the effectivity of the
Family Code on 3 August 1988. As they did not execute any marriage settlement,
the regime of conjugal partnership of gains govern their property relations.19
All property acquired during the marriage, whether the acquisition appears to
have been made, contracted or registered in the name of one or both spouses, is
presumed to be conjugal unless the contrary is proved.20 Credits are personal
properties,21 acquired during the time the loan or other credit transaction was
executed. Therefore, credits loaned during the time of the marriage are
presumed to be conjugal property.
Consequently, assuming that the four checks created a debt for which the
spouses Carandang are liable, such credits are presumed to be conjugal
property. There being no evidence to the contrary, such presumption subsists. As
such, Quirino de Guzman, being a co-owner of specific partnership property,22 is
certainly a real party in interest. Dismissal on the ground of failure to state a
cause of action, by reason that the suit was allegedly not brought by a real party
in interest, is therefore unwarranted.
So now we come to the discussion concerning indispensable and necessary
parties. When an indispensable party is not before the court, the action should
likewise be dismissed.23 The absence of an indispensable party renders all
subsequent actuations of the court void, for want of authority to act, not only as to
the absent parties but even as to those present.24 On the other hand, the non-
joinder of necessary parties do not result in the dismissal of the case. Instead,
Section 9, Rule 3 of the Rules of Court provides for the consequences of such
non-joinder:
Sec. 9. Non-joinder of necessary parties to be pleaded. – Whenever in any
pleading in which a claim is asserted a necessary party is not joined, the pleader
shall set forth his name, if known, and shall state why he is omitted. Should the
court find the reason for the omission unmeritorious, it may order the inclusion of
the omitted necessary party if jurisdiction over his person may be obtained.
The failure to comply with the order for his inclusion, without justifiable cause,
shall be deemed a waiver of the claim against such party.
The non-inclusion of a necessary party does not prevent the court from
proceeding in the action, and the judgment rendered therein shall be without
prejudice to the rights of such necessary party.
Non-compliance with the order for the inclusion of a necessary party would not
warrant the dismissal of the complaint. This is an exception to Section 3, Rule 17
which allows the dismissal of the complaint for failure to comply with an order of
the court, as Section 9, Rule 3 specifically provides for the effect of such non-
inclusion: it shall not prevent the court from proceeding in the action, and the
judgment rendered therein shall be without prejudice to the rights of such
necessary party. Section 11, Rule 3 likewise provides that the non-joinder of
parties is not a ground for the dismissal of the action.
Other than the indispensable and necessary parties, there is a third set of
parties: the pro-forma parties, which are those who are required to be joined as
co-parties in suits by or against another party as may be provided by the
applicable substantive law or procedural rule.25 An example is provided by
Section 4, Rule 3 of the Rules of Court:
Sec. 4. Spouses as parties. – Husband and wife shall sue or be sued jointly,
except as provided by law.
Pro-forma parties can either be indispensable, necessary or neither
indispensable nor necessary. The third case occurs if, for example, a husband
files an action to recover a property which he claims to be part of his exclusive
property. The wife may have no legal interest in such property, but the rules
nevertheless require that she be joined as a party.
In cases of pro-forma parties who are neither indispensable nor necessary, the
general rule under Section 11, Rule 3 must be followed: such non-joinder is not a
ground for dismissal. Hence, in a case concerning an action to recover a sum of
money, we held that the failure to join the spouse in that case was not a
jurisdictional defect.26 The non-joinder of a spouse does not warrant dismissal as
it is merely a formal requirement which may be cured by amendment.27
Conversely, in the instances that the pro-forma parties are also indispensable or
necessary parties, the rules concerning indispensable or necessary parties, as
the case may be, should be applied. Thus, dismissal is warranted only if the pro-
forma party not joined in the complaint is an indispensable party.
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly
extended to the spouses Carandang, seems to be either an indispensable or a
necessary party. If she is an indispensable party, dismissal would be proper. If
she is merely a necessary party, dismissal is not warranted, whether or not there
was an order for her inclusion in the complaint pursuant to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on the contract
of partnership in all that is not in conflict with what is expressly determined in this
Chapter or by the spouses in their marriage settlements.
This provision is practically the same as the Civil Code provision it superceded:
Art. 147. The conjugal partnership shall be governed by the rules on the contract
of partnership in all that is not in conflict with what is expressly determined in this
Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-
owner with the other partners of specific partnership property." Taken with the
presumption of the conjugal nature of the funds used to finance the four checks
used to pay for petitioners’ stock subscriptions, and with the presumption that the
credits themselves are part of conjugal funds, Article 1811 makes Quirino and
Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may
separately bring an action for the recovery thereof. In the fairly recent cases
of Baloloy v. Hular28 and Adlawan v. Adlawan,29 we held that, in a co-ownership,
co-owners may bring actions for the recovery of co-owned property without the
necessity of joining all the other co-owners as co-plaintiffs because the suit is
presumed to have been filed for the benefit of his co-owners. In the latter case
and in that of De Guia v. Court of Appeals,30 we also held that Article 487 of the
Civil Code, which provides that any of the co-owners may bring an action for
ejectment, covers all kinds of action for the recovery of possession.31
In sum, in suits to recover properties, all co-owners are real parties in interest.
However, pursuant to Article 487 of the Civil Code and relevant jurisprudence,
any one of them may bring an action, any kind of action, for the recovery of co-
owned properties. Therefore, only one of the co-owners, namely the co-owner
who filed the suit for the recovery of the co-owned property, is an indispensable
party thereto. The other co-owners are not indispensable parties. They are not
even necessary parties, for a complete relief can be accorded in the suit even
without their participation, since the suit is presumed to have been filed for the
benefit of all co-owners.32
We therefore hold that Milagros de Guzman is not an indispensable party in the
action for the recovery of the allegedly loaned money to the spouses Carandang.
As such, she need not have been impleaded in said suit, and dismissal of the suit
is not warranted by her not being a party thereto.
Whether or not respondents were able to prove the loan sought to be collected
from petitioners
In the second and third issues presented by the spouses Carandang, they claim
that the de Guzmans failed to prove the alleged loan for which the spouses
Carandang were held liable. As previously stated, spouses Quirino and Milagros
de Guzman paid for the stock subscriptions of the spouses Carandang,
amounting to ₱336,375.00. The de Guzmans claim that these payments were in
the form of loans and/or advances and it was agreed upon between the late
Quirino de Guzman, Sr. and the spouses Carandang that the latter would repay
him. Petitioners, on the other hand, argue that there was an oral pre-
incorporation agreement wherein it was agreed that Arcardio Carandang would
always maintain his 46% equity participation in the corporation even if the capital
structures were increased, and that Quirino de Guzman would personally pay the
equity shares/stock subscriptions of Arcardio Carandang with no cost to the
latter.
On this main issue, the Court of Appeals held:
[The spouses Carandang] aver in its ninth assigned error that [the de Guzmans]
failed to prove by preponderance of evidence, either the existence of the
purported loan or the non-payment thereof.
Simply put, preponderance of evidence means that the evidence as a whole
adduced by one side is superior to that of the other. The concept of
preponderance of evidence refers to evidence that is of greater weight, or more
convincing, than that which is offered in opposition to it; it means probability of
truth.
[The spouses Carandang] admitted that it was indeed [the de Guzmans] who
paid their stock subscriptions and their reason for not reimbursing the latter is the
alleged pre-incorporation agreement, to which they offer no clear proof as to its
existence.
It is a basic rule in evidence that each party must prove his affirmative allegation.
Thus, the plaintiff or complainant has to prove his affirmative allegations in the
complaints and the defendant or respondent has to prove the affirmative
allegations in his affirmative defenses and counterclaims.33
The spouses Carandang, however, insist that the de Guzmans have not proven
the loan itself, having presented evidence only of the payment in favor of the
Carandangs. They claim:
It is an undeniable fact that payment is not equivalent to a loan. For instance, if
Mr. "A" decides to pay for Mr. "B’s" obligation, that payment by Mr. "A" cannot, by
any stretch of imagination, possibly mean that there is now a loan by Mr. "B" to
Mr. "A". There is a possibility that such payment by Mr. "A" is purely out of
generosity or that there is a mutual agreement between them. As applied to the
instant case, that mutual agreement is the pre-incorporation agreement (supra)
existing between Mr. de Guzman and the petitioners --- to the effect that the
former shall be responsible for paying stock subscriptions of the latter. Thus,
when Mr. de Guzman paid for the stock subscriptions of the petitioners, there
was no loan to speak of, but only a compliance with the pre-incorporation
agreement.34
The spouses Carandang are mistaken. If indeed a Mr. "A" decides to pay for a
Mr. "B’s" obligation, the presumption is that Mr. "B" is indebted to Mr. "A" for such
amount that has been paid. This is pursuant to Articles 1236 and 1237 of the
Civil Code, which provide:
Art. 1236. The creditor is not bound to accept payment or performance by a third
person who has no interest in the fulfillment of the obligation, unless there is a
stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the will of the
debtor, he can recover only insofar as the payment has been beneficial to the
debtor.
Art. 1237. Whoever pays on behalf of the debtor without the knowledge or
against the will of the latter, cannot compel the creditor to subrogate him in his
rights, such as those arising from a mortgage, guarantee, or penalty.
Articles 1236 and 1237 are clear that, even in cases where the debtor has no
knowledge of payment by a third person, and even in cases where the third
person paid against the will of the debtor, such payment would produce a debt in
favor of the paying third person. In fact, the only consequences for the failure to
inform or get the consent of the debtor are the following: (1) the third person can
recover only insofar as the payment has been beneficial to the debtor; and (2)
the third person is not subrogated to the rights of the creditor, such as those
arising from a mortgage, guarantee or penalty.35
We say, however, that this is merely a presumption. By virtue of the parties’
freedom to contract, the parties could stipulate otherwise and thus, as suggested
by the spouses Carandang, there is indeed a possibility that such payment by
Mr. "A" was purely out of generosity or that there was a mutual agreement
between them. But such mutual agreement, being an exception to presumed
course of events as laid down by Articles 1236 and 1237, must be adequately
proven.
The de Guzmans have successfully proven their payment of the spouses
Carandang’s stock subscriptions. These payments were, in fact, admitted by the
spouses Carandang. Consequently, it is now up to the spouses Carandang to
prove the existence of the pre-incorporation agreement that was their defense to
the purported loan.
Unfortunately for the spouses Carandang, the only testimony which touched on
the existence and substance of the pre-incorporation agreement, that of
petitioner Arcardio Carandang, was stricken off the record because he did not
submit himself to a cross-examination of the opposing party. On the other hand,
the testimonies of Romeo Saavedra,36 Roberto S. Carandang,37 Gertrudes Z.
Esteban,38 Ceferino Basilio,39 and Ma. Luisa Carandang40 touched on matters
other than the existence and substance of the pre-incorporation agreement. So
aside from the fact that these witnesses had no personal knowledge as to the
alleged existence of the pre-incorporation agreement, the testimonies of these
witnesses did not even mention the existence of a pre-incorporation agreement.
Worse, the testimonies of petitioners Arcadio Carandang and Ma. Luisa
Carandang even contradicted the existence of a pre-incorporation agreement
because when they were asked by their counsel regarding the matter of the
check payments made by the late Quirino A. de Guzman, Sr. in their behalf, they
said that they had already paid for it thereby negating their own defense that
there was a pre-incorporation agreement excusing themselves from paying Mr.
de Guzman the amounts he advanced or loaned to them. This basic and
irrefutable fact can be gleaned from their testimonies which the private
respondents are quoting for easy reference:
a. With respect to the testimony of Ma. Luisa Carandang
Q: Now, can you tell this Honorable Court how do you feel with respect to the
Complaint of the plaintiff in this case charging you that you paid for this year and
asking enough to paid (sic) your tax?
A: We have paid already, so, we are not liable for anything payment (sic).41
b. With respect to the testimony of Arcadio Carandang
"Q: How much?
A: ₱40,000.00 to ₱50,000.00 per month.
Q: The plaintiff also claimed thru witness Edgar Ragasa, that there were receipts
issued for the payment of your shares; which receipts were marked as Exhibits
"G" to "L" (Plaintiff).
I’m showing to you these receipts so marked by the plaintiff as their exhibits
which were issued in the name of Ma. Luisa Carandang, your wife; and also,
Arcadio M. Carandang. Will you please go over this Official Receipt and state for
the records, who made for the payment stated in these receipts in your name?
A: I paid for those shares."42
There being no testimony or documentary evidence proving the existence of the
pre-incorporation agreement, the spouses Carandang are forced to rely upon an
alleged admission by the original plaintiff of the existence of the pre-incorporation
agreement.
Petitioners claim that the late Quirino A. de Guzman, Sr. had admitted the
existence of the pre-incorporation agreement by virtue of paragraphs 13 and 14
of their Answer and paragraph 4 of private respondents’ Reply.
Paragraphs 13 and 14 of petitioners’ Answer dated 7 July 1992 state in full:
13. Sometime in November, 1973 or thereabout, herein plaintiff invited defendant
Arcadio M. Carandang to a joint venture by pooling together their technical
expertise, equipments, financial resources and franchise. Plaintiff proposed to
defendant and mutually agreed on the following:
1. That they would organize a corporation known as Mabuhay
Broadcasting Systems, Inc.
2. Considering the technical expertise and talent of defendant Arcadio
M. Carandang and his new equipments he bought, and his skill in
repairing and modifying radio/communication equipments into high
proficiency, said defendant would have an equity participation in the
corporation of 46%, and plaintiff 54% because of his financial resources
and franchise.
3. That defendant would always maintain his 46% equity participation in
the corporation even if the capital structures are increased, and that
plaintiff would personally pay the equity shares/stock subscriptions of
defendant with no cost to the latter.
4. That because of defendant’s expertise in the trade including the
marketing aspects, he would be the President and General Manager,
and plaintiff the Chairman of the Board.
5. That considering their past and trustworthy relations, they would
maintain such relations in the joint venture without any mental
reservation for their common benefit and success of the business.
14. Having mutually agreed on the above arrangements, the single
proprietorship of plaintiff was immediately spun-off into a corporation
now known as Mabuhay Broadcasting System, Inc. The incorporators
are plaintiff and his family members/nominees controlling jointly 54% of
the stocks and defendant Arcadio M. Carandang controlling singly 46%
as previously agreed.43
Meanwhile, paragraphs 3 and 4 of private respondents’ Reply dated 29 July 1992
state in full:
3. Plaintiffs admits the allegation in paragraph 13.1 of the Answer only insofar the
plaintiff and defendant Arcadio M. Carandang organized a corporation known as
Mabuhay Broadcasting Systems, Inc. Plaintiff specifically denies the other
allegations in paragraph 13 of the Answer, the same being devoid of any legal or
factual bases. The truth of the matter is that defendant Arcadio M. Carandang
was not able to pay plaintiff the agreed amount of the lease for a number of
months forcing the plaintiff to terminate lease. Additionally, the records would
show that it was the defendant Arcadio M. Carandang who proposed a joint
venture with the plaintiff.
It appears that plaintiff agreed to the formation of the corporation principally
because of a directive of then President Marcos indicating the need to broaden
the ownership of radio broadcasting stations. The plaintiff owned the franchise,
the radio transmitter, the antenna tower, the building containing the radio
transmitter and other equipment. Verily, he would be placed in a great
disadvantage if he would still have to personally pay for the shares of defendant
Arcadio M. Carandang.
4. Plaintiff admits the allegations in paragraph 14 of the Answer.44
In effect, the spouses Carandang are relying on the fact that Quirino de Guzman
stated that he admitted paragraph 14 of the Answer, which incidentally contained
the opening clause "(h)aving mutually agreed on the above arrangements, x x x."
Admissions, however, should be clear and unambiguous. This purported
admission by Quirino de Guzman reeks of ambiguity, as the clause "(h)aving
mutually agreed on the above arrangements," seems to be a mere introduction to
the statement that the single proprietorship of Quirino de Guzman had been
converted into a corporation. If Quirino de Guzman had meant to admit
paragraph 13.3, he could have easily said so, as he did the other paragraphs he
categorically admitted. Instead, Quirino de Guzman expressly stated the
opposite: that "(p)laintiff specifically denies the other allegations of paragraph 13
of the Answer."45 The Reply furthermore states that the only portion of paragraph
13 which Quirino de Guzman had admitted is paragraph 13.1, and only insofar as
it said that Quirino de Guzman and Arcardio Carandang organized Mabuhay
Broadcasting Systems, Inc.46
All the foregoing considered, we hold that Quirino de Guzman had not admitted
the alleged pre-incorporation agreement. As there was no admission, and as the
testimony of Arcardio Carandang was stricken off the record, we are constrained
to rule that there was no pre-incorporation agreement rendering Quirino de
Guzman liable for the spouses Carandang’s stock subscription. The payment by
the spouses de Guzman of the stock subscriptions of the spouses Carandang
are therefore by way of loan which the spouses Carandang are liable to pay. 1âw phi1
Whether or not the liability of the spouses Carandang is joint and solidary
Finally, the Court of Appeals also upheld the RTC Decision insofar as it decreed
a solidary liability. According to the Court of Appeals:
With regards (sic) the tenth assigned error, [the spouses Carandang] contend
that:
"There is absolutely no evidence, testimonial or documentary, showing that the
purported obligation of [the spouses Carandang] is joint and solidary. x x x
"Furthermore, the purported obligation of [the spouses Carandang] does not at all
qualify as one of the obligations required by law to be solidary x x x."

It is apparent from the facts of the case that [the spouses Carandang] were
married way before the effectivity of the Family Code hence; their property
regime is conjugal partnership under the Civil Code.

It must be noted that for marriages governed by the rules of conjugal partnership
of gains, an obligation entered into by the husband and wife is chargeable
against their conjugal partnership and it is the partnership, which is primarily
bound for its repayment. Thus, when the spouses are sued for the enforcement
of the obligation entered into by them, they are being impleaded in their capacity
as representatives of the conjugal partnership and not as independent debtors,
such that the concept of joint and solidary liability, as between them, does not
apply.47

The Court of Appeals is correct insofar as it held that when the spouses are sued
for the enforcement of the obligation entered into by them, they are being
impleaded in their capacity as representatives of the conjugal partnership and not
as independent debtors. Hence, either of them may be sued for the whole
amount, similar to that of a solidary liability, although the amount is chargeable
against their conjugal partnership property. Thus, in the case cited by the Court
of Appeals, Alipio v. Court of Appeals,48 the two sets of defendant-spouses
therein were held liable for ₱25,300.00 each, chargeable to their respective
conjugal partnerships.

WHEREFORE, the Decision of the Court of Appeals, affirming the judgment

rendered against the spouses Carandang, is hereby AFFIRMED with the
following MODIFICATION: The spouses Carandang are ORDERED to pay the
following amounts from their conjugal partnership properties:

(1) ₱336,375.00 representing the spouses Carandang’s loan to Quirino

de Guzman; and

(2) Interest on the preceding amount at the rate of twelve percent (12%)
per annum from 5 June 1992 when the complaint was filed until the
principal amount can be fully paid; and

(3) ₱20,000.00 as attorney’s fees.

No costs.

SO ORDERED.

G.R. No. L-66620 September 24, 1986
REMEDIO V. FLORES, petitioner,
vs.
HON. JUDGE HEILIA S. MALLARE-PHILLIPPS, IGNACIO BINONGCAL &
FERNANDO CALION, respondents.
The Court rules that the application of the totality rule under Section 33(l) of
Batas Pambansa Blg. 129 and Section 11 of the Interim Rules is subject to the
requirements for the permissive joinder of parties under Section 6 of Rule 3
which provides as follows:
Permissive joinder of parties.-All persons in whom or against
whom any right to relief in respect to or arising out of the same
transaction or series of transactions is alleged to exist, whether
jointly, severally, or in the alternative, may, except as otherwise
provided in these rules, join as plaintiffs or be joined as
defendants in one complaint, where any question of law or fact
common to all such plaintiffs or to all such defendants may arise
in the action; but the court may make such orders as may be
just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any
proceedings in which he may have no interest.
Petitioner has appealed by certiorari from the order of Judge Heilia S. Mallare-
Phillipps of the Regional Trial Court of Baguio City and Benguet Province which
dismissed his complaint for lack of jurisdiction. Petitioner did not attach to his
petition a copy of his complaint in the erroneous belief that the entire original
record of the case shall be transmitted to this Court pursuant to the second
paragraph of Section 39 of BP129. This provision applies only to ordinary
appeals from the regional trial court to the Court of Appeals (Section 20 of the
Interim Rules). Appeals to this Court by petition for review on certiorari are
governed by Rule 45 of the Rules of Court (Section 25 of the Interim Rules).
However, the order appealed from states that the first cause of action alleged in
the complaint was against respondent Ignacio Binongcal for refusing to pay the
amount of P11,643.00 representing cost of truck tires which he purchased on
credit from petitioner on various occasions from August to October, 1981; and
the second cause of action was against respondent Fernando Calion for
allegedly refusing to pay the amount of P10,212.00 representing cost of truck
tires which he purchased on credit from petitioner on several occasions from
March, 1981 to January, 1982.
On December 15, 1983, counsel for respondent Binongcal filed a Motion to
Dismiss on the ground of lack of jurisdiction since the amount of the demand
against said respondent was only P11,643.00, and under Section 19(8) of BP129
the regional trial court shall exercise exclusive original jurisdiction if the amount
of the demand is more than twenty thousand pesos (P20,000.00). It was further
averred in said motion that although another person, Fernando Calion, was
allegedly indebted to petitioner in the amount of P10,212.00, his obligation was
separate and distinct from that of the other respondent. At the hearing of said
Motion to Dismiss, counsel for respondent Calion joined in moving for the
dismissal of the complaint on the ground of lack of jurisdiction. Counsel for
petitioner opposed the Motion to Dismiss. As above stated, the trial court
dismissed the complaint for lack of jurisdiction.
Petitioner maintains that the lower court has jurisdiction over the case following
the "novel" totality rule introduced in Section 33(l) of BP129 and Section 11 of the
Interim Rules.
The pertinent portion of Section 33(l) of BP129 reads as follows:
... Provided,That where there are several claims or causes of
action between the same or different parties, embodied in the
same complaint, the amount of the demand shall be the totality
of the claims in all the causes of action, irrespective of whether
the causes of action arose out of the same or different
transactions. ...
Section 11 of the Interim Rules provides thus:
Application of the totality rule.-In actions where the jurisdiction
of the court is dependent on the amount involved, the test of
jurisdiction shall be the aggregate sum of all the money
demands, exclusive only of interest and costs, irrespective of
whether or not the separate claims are owned by or due to
different parties. If any demand is for damages in a civil action,
the amount thereof must be specifically alleged.
Petitioner compares the above-quoted provisions with the pertinent portion of the
former rule under Section 88 of the Judiciary Act of 1948 as amended which
reads as follows:
... Where there are several claims or causes of action between
the same parties embodied in the same complaint, the amount
of the demand shall be the totality of the demand in all the
causes of action, irrespective of whether the causes of action
arose out of the same or different transactions; but where the
claims or causes of action joined in a single complaint are
separately owned by or due to different parties, each separate
claim shall furnish the jurisdictional test. ...
and argues that with the deletion of the proviso in the former rule, the totality rule
was reduced to clarity and brevity and the jurisdictional test is the totality of the
claims in all, not in each, of the causes of action, irrespective of whether the
causes of action arose out of the same or different transactions.
This argument is partly correct. There is no difference between the former and
present rules in cases where a plaintiff sues a defendant on two or more
separate causes of action. In such cases, the amount of the demand shall be the
totality of the claims in all the causes of action irrespective of whether the causes
of action arose out of the same or different transactions. If the total demand
exceeds twenty thousand pesos, then the regional trial court has jurisdiction.
Needless to state, if the causes of action are separate and independent, their
joinder in one complaint is permissive and not mandatory, and any cause of
action where the amount of the demand is twenty thousand pesos or less may be
the subject of a separate complaint filed with a metropolitan or municipal trial
court.
On the other hand, there is a difference between the former and present rules in
cases where two or more plaintiffs having separate causes of action against a
defendant join in a single complaint. Under the former rule, "where the claims or
causes of action joined in a single complaint are separately owned by or due to
different parties, each separate claim shall furnish the jurisdictional test" (Section
88 of the Judiciary Act of 1948 as amended, supra). This was based on the ruling
in the case of Vda. de Rosario vs. Justice of the Peace, 99 Phil. 693. As worded,
the former rule applied only to cases of permissive joinder of parties plaintiff.
However, it was also applicable to cases of permissive joinder of parties
defendant, as may be deduced from the ruling in the case of Brillo vs. Buklatan,
thus:
Furthermore, the first cause of action is composed of separate
claims against several defendants of different amounts each of
which is not more than P2,000 and falls under the jurisdiction of
the justice of the peace court under section 88 of Republic Act
No, 296. The several claims do not seem to arise from the same
transaction or series of transactions and there seem to be no
questions of law or of fact common to all the defendants as may
warrant their joinder under Rule 3, section 6. Therefore, if new
complaints are to be filed in the name of the real party in
interest they should be filed in the justice of the peace court. (87
Phil. 519, 520, reiterated in Gacula vs. Martinez, 88 Phil. 142,
146)
Under the present law, the totality rule is applied also to cases where two or
more plaintiffs having separate causes of action against a defendant join in a
single complaint, as well as to cases where a plaintiff has separate causes of
action against two or more defendants joined in a single complaint. However, the
causes of action in favor of the two or more plaintiffs or against the two or more
defendants should arise out of the same transaction or series of transactions and
there should be a common question of law or fact, as provided in Section 6 of
Rule 3.
The difference between the former and present rules in cases of permissive
joinder of parties may be illustrated by the two cases which were cited in the
case of Vda. de Rosario vs. Justice of the Peace (supra) as exceptions to the
totality rule. In the case of Soriano y Cia vs. Jose (86 Phil. 523), where twenty-
nine dismissed employees joined in a complaint against the defendant to collect
their respective claims, each of which was within the jurisdiction of the municipal
court although the total exceeded the jurisdictional amount, this Court held that
under the law then the municipal court had jurisdiction. In said case, although the
plaintiffs' demands were separate, distinct and independent of one another, their
joint suit was authorized under Section 6 of Rule 3 and each separate claim
furnished the jurisdictional test. In the case of International Colleges, Inc. vs.
Argonza (90 Phil. 470), where twenty-five dismissed teachers jointly sued the
defendant for unpaid salaries, this Court also held that the municipal court had
jurisdiction because the amount of each claim was within, although the total
exceeded, its jurisdiction and it was a case of permissive joinder of parties
plaintiff under Section 6 of Rule 3.
Under the present law, the two cases above cited (assuming they do not fall
under the Labor Code) would be under the jurisdiction of the regional trial court.
Similarly, in the abovecited cases of Brillo vs. Buklatan and Gacula vs.
Martinez (supra), if the separate claims against the several defendants arose out
of the same transaction or series of transactions and there is a common question
of law or fact, they would now be under the jurisdiction of the regional trial court.
In other words, in cases of permissive joinder of parties, whether as plaintiffs or
as defendants, under Section 6 of Rule 3, the total of all the claims shall now
furnish the jurisdictional test. Needless to state also, if instead of joining or being
joined in one complaint separate actions are filed by or against the parties, the
amount demanded in each complaint shall furnish the jurisdictional test.
In the case at bar, the lower court correctly held that the jurisdictional test is
subject to the rules on joinder of parties pursuant to Section 5 of Rule 2 and
Section 6 of Rule 3 of the Rules of Court and that, after a careful scrutiny of the
complaint, it appears that there is a misjoinder of parties for the reason that the
claims against respondents Binongcal and Calion are separate and distinct and
neither of which falls within its jurisdiction.
WHEREFORE, the order appealed from is affirmed, without pronouncement as
to costs.
SO ORDERED.

G.R. No. 173946 June 19, 2013
BOSTON EQUITY RESOURCES, INC., Petitioner,
vs.
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari seeking to reverse and set
aside: (1) the Decision,1 dated 28 February 2006 and (2) the Resolution,2 dated 1
August 2006 of the Court of Appeals in CA-G.R. SP No. 88586. The challenged
decision granted herein respondent's petition for certiorari upon a finding that the
trial court committed grave abuse of discretion in denying respondent's motion to
dismiss the complaint against her.3 Based on this finding, the Court of Appeals
reversed and set aside the Orders, dated 8 November 20044 and 22 December
2004,5 respectively, of the Regional Trial Court (RTC) of Manila, Branch 24.
The Facts
On 24 December 1997, petitioner filed a complaint for sum of money with a
prayer for the issuance of a writ of preliminary attachment against the spouses
Manuel and Lolita Toledo.6 Herein respondent filed an Answer dated 19 March
1998 but on 7 May 1998, she filed a Motion for Leave to Admit Amended
Answer7 in which she alleged, among others, that her husband and co-defendant,
Manuel Toledo (Manuel), is already dead.8 The death certificate9 of Manuel states
"13 July 1995" as the date of death. As a result, petitioner filed a motion, dated 5
August 1999, to require respondent to disclose the heirs of Manuel.10 In
compliance with the verbal order of the court during the 11 October 1999 hearing
of the case, respondent submitted the required names and addresses of the
heirs.11 Petitioner then filed a Motion for Substitution,12 dated 18 January 2000,
praying that Manuel be substituted by his children as party-defendants. It
appears that this motion was granted by the trial court in an Order dated 9
October 2000.13
Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial
order containing, among others, the dates of hearing of the case.14
The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its
evidence and its exhibits were thereafter admitted.
On 26 May 2004, the reception of evidence for herein respondent was cancelled
upon agreement of the parties. On 24 September 2004, counsel for herein
respondent was given a period of fifteen days within which to file a demurrer to
evidence.15 However, on 7 October 2004, respondent instead filed a motion to
dismiss the complaint, citing the following as grounds: (1) that the complaint
failed to implead an indispensable party or a real party in interest; hence, the
case must be dismissed for failure to state a cause of action; (2) that the trial
court did not acquire jurisdiction over the person of Manuel pursuant to Section 5,
Rule 86 of the Revised Rules of Court; (3) that the trial court erred in ordering the
substitution of the deceased Manuel by his heirs; and (4) that the court must also
dismiss the case against Lolita Toledo in accordance with Section 6, Rule 86 of
the Rules of Court.16
The trial court, in an Order dated 8 November 2004, denied the motion to dismiss
for having been filed out of time, citing Section 1, Rule 16 of the 1997 Rules of
Court which states that: "Within the time for but before filing the answer to the
complaint or pleading asserting a claim, a motion to dismiss may be made x x
x."17 Respondent’s motion for reconsideration of the order of denial was likewise
denied on the ground that "defendants’ attack on the jurisdiction of this Court is
now barred by estoppel by laches" since respondent failed to raise the issue
despite several chances to do so.18
Aggrieved, respondent filed a petition for certiorari with the Court of Appeals
alleging that the trial court seriously erred and gravely abused its discretion in
denying her motion to dismiss despite discovery, during the trial of the case, of
evidence that would constitute a ground for dismissal of the case.19
The Court of Appeals granted the petition based on the following grounds:
It is elementary that courts acquire jurisdiction over the person of the defendant x
x x only when the latter voluntarily appeared or submitted to the court or by
coercive process issued by the court to him, x x x. In this case, it is undisputed
that when petitioner Boston filed the complaint on December 24, 1997, defendant
Manuel S. Toledo was already dead, x x x. Such being the case, the court a quo
could not have acquired jurisdiction over the person of defendant Manuel S.
Toledo.
x x x the court a quo’s denial of respondent’s motion to dismiss was based on its
finding that respondent’s attack on the jurisdiction of the court was already barred
by laches as respondent failed to raise the said ground in its [sic] amended
answer and during the pre-trial, despite her active participation in the
proceedings.
However, x x x it is well-settled that issue on jurisdiction may be raised at any
stage of the proceeding, even for the first time on appeal. By timely raising the
issue on jurisdiction in her motion to dismiss x x x respondent is not estopped
from raising the question on jurisdiction.
Moreover, when issue on jurisdiction was raised by respondent, the court a quo
had not yet decided the case, hence, there is no basis for the court a quo to
invoke estoppel to justify its denial of the motion for reconsideration;
It should be stressed that when the complaint was filed, defendant Manuel S.
Toledo was already dead. The complaint should have impleaded the estate of
Manuel S. Toledo as defendant, not only the wife, considering that the estate of
Manuel S. Toledo is an indispensable party, which stands to be benefited or be
injured in the outcome of the case. x x x
xxxx
Respondent’s motion to dismiss the complaint should have been granted by
public respondent judge as the same was in order. Considering that the
obligation of Manuel S. Toledo is solidary with another debtor, x x x, the claim x x
x should be filed against the estate of Manuel S. Toledo, in conformity with the
provision of Section 6, Rule 86 of the Rules of Court, x x x.20
The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this
petition.
The Issues
Petitioner claims that the Court of Appeals erred in not holding that:
1. Respondent is already estopped from questioning the trial court’s
jurisdiction;
2. Petitioner never failed to implead an indispensable party as the estate
of Manuel is not an indispensable party;
3. The inclusion of Manuel as party-defendant is a mere misjoinder of
party not warranting the dismissal of the case before the lower court;
and
4. Since the estate of Manuel is not an indispensable party, it is not
necessary that petitioner file its claim against the estate of Manuel.
In essence, what is at issue here is the correctness of the trial court’s orders
denying respondent’s motion to dismiss.
The Ruling of the Court
We find merit in the petition.
Motion to dismiss filed out of time
To begin with, the Court of Appeals erred in granting the writ of certiorari in favor
of respondent. Well settled is the rule that the special civil action for certiorari is
not the proper remedy to assail the denial by the trial court of a motion to
dismiss. The order of the trial court denying a motion to dismiss is merely
interlocutory, as it neither terminates nor finally disposes of a case and still
leaves something to be done by the court before a case is finally decided on the
merits.21 Therefore, "the proper remedy in such a case is to appeal after a
decision has been rendered."22
As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher
Education:23
A writ of certiorari is not intended to correct every controversial interlocutory
ruling; it is resorted only to correct a grave abuse of discretion or a whimsical
exercise of judgment equivalent to lack of jurisdiction. Its function is limited to
keeping an inferior court within its jurisdiction and to relieve persons from
arbitrary acts – acts which courts or judges have no power or authority in law to
perform. It is not designed to correct erroneous findings and conclusions made
by the courts. (Emphasis supplied)
Even assuming that certiorari is the proper remedy, the trial court did not commit
grave abuse of discretion in denying respondent’s motion to dismiss. It, in fact,
acted correctly when it issued the questioned orders as respondent’s motion to
dismiss was filed SIX YEARS AND FIVE MONTHS AFTER SHE FILED HER
AMENDED ANSWER. This circumstance alone already warranted the outright
dismissal of the motion for having been filed in clear contravention of the express
mandate of Section 1, Rule 16, of the Revised Rules of Court. Under this
provision, a motion to dismiss shall be filed within the time for but before the filing
of an answer to the complaint or pleading asserting a claim.24
More importantly, respondent’s motion to dismiss was filed after petitioner has
completed the presentation of its evidence in the trial court, giving credence to
petitioner’s and the trial court’s conclusion that the filing of the motion to dismiss
was a mere ploy on the part of respondent to delay the prompt resolution of the
case against her.
Also worth mentioning is the fact that respondent’s motion to dismiss under
consideration herein is not the first motion to dismiss she filed in the trial court. It
appears that she had filed an earlier motion to dismiss26 on the sole ground of the
unenforceability of petitioner’s claim under the Statute of Frauds, which motion
was denied by the trial court. More telling is the following narration of the trial
court in its Order denying respondent’s motion for reconsideration of the denial of
her motion to dismiss:
As can be gleaned from the records, with the admission of plaintiff’s exhibits,
reception of defendants’ evidence was set on March 31, and April 23, 2004 x x x
. On motion of the defendants, the hearing on March 31, 2004 was cancelled.
On April 14, 2004, defendants sought the issuance of subpoena ad testificandum
and duces tecum to one Gina M. Madulid, to appear and testify for the
defendants on April 23, 2004. Reception of defendants’ evidence was again
deferred to May 26, June 2 and June 30, 2004, x x x.
On May 13, 2004, defendants sought again the issuance of a subpoena duces
tecum and ad testificandum to the said Gina Madulid. On May 26, 2004,
reception of defendants [sic] evidence was cancelled upon the agreement of the
parties. On July 28, 2004, in the absence of defendants’ witness, hearing was
reset to September 24 and October 8, 2004 x x x.
On September 24, 2004, counsel for defendants was given a period of fifteen
(15) days to file a demurrer to evidence. On October 7, 2004, defendants filed
instead a Motion to Dismiss x x x.27
Respondent’s act of filing multiple motions, such as the first and earlier motion to
dismiss and then the motion to dismiss at issue here, as well as several motions
for postponement, lends credibility to the position taken by petitioner, which is
shared by the trial court, that respondent is
deliberately impeding the early disposition of this case. The filing of the second
motion to dismiss was, therefore, "not only improper but also dilatory."28 Thus, the
trial court, "far from deviating or straying off course from established
jurisprudence on the matter, x x x had in fact faithfully observed the law and legal
precedents in this case."29 The Court of Appeals, therefore, erred not only in
entertaining respondent’s petition for certiorari, it likewise erred in ruling that the
trial court committed grave abuse of discretion when it denied respondent’s
motion to dismiss.
On whether or not respondent is estopped from
questioning the jurisdiction of the trial court
At the outset, it must be here stated that, as the succeeding discussions will
demonstrate, jurisdiction over the person of Manuel should not be an issue in this
case. A protracted discourse on jurisdiction is, nevertheless, demanded by the
fact that jurisdiction has been raised as an issue from the lower court, to the
Court of Appeals and, finally, before this Court. For the sake of clarity, and in
order to finally settle the controversy and fully dispose of all the issues in this
case, it was deemed imperative to resolve the issue of jurisdiction.
1. Aspects of Jurisdiction
Petitioner calls attention to the fact that respondent’s motion to dismiss
questioning the trial court’s jurisdiction was filed more than six years after her
amended answer was filed. According to petitioner, respondent had several
opportunities, at various stages of the proceedings, to assail the trial court’s
jurisdiction but never did so for six straight years. Citing the doctrine laid down in
the case of Tijam, et al. v. Sibonghanoy, et al.30 petitioner claimed that
respondent’s failure to raise the question of jurisdiction at an earlier stage bars
her from later questioning it, especially since she actively participated in the
proceedings conducted by the trial court.
Petitioner’s argument is misplaced, in that, it failed to consider that the concept of
jurisdiction has several aspects, namely: (1) jurisdiction over the subject matter;
(2) jurisdiction over the parties; (3) jurisdiction over the issues of the case; and
(4) in cases involving property, jurisdiction over the res or the thing which is the
subject of the litigation.31
The aspect of jurisdiction which may be barred from being assailed as a result of
estoppel by laches is jurisdiction over the subject matter. Thus, in Tijam, the case
relied upon by petitioner, the issue involved was the authority of the then Court of
First Instance to hear a case for the collection of a sum of money in the amount
of ₱1,908.00 which amount was, at that time, within the exclusive original
jurisdiction of the municipal courts.
In subsequent cases citing the ruling of the Court in Tijam, what was likewise at
issue was the jurisdiction of the trial court over the subject matter of the case.
Accordingly, in Spouses Gonzaga v. Court of Appeals,32 the issue for
consideration was the authority of the regional trial court to hear and decide an
action for reformation of contract and damages involving a subdivision lot, it
being argued therein that jurisdiction is vested in the Housing and Land Use
Regulatory Board pursuant to PD 957 (The Subdivision and Condominium
Buyers Protective Decree). In Lee v. Presiding Judge, MTC, Legaspi
City,33 petitioners argued that the respondent municipal trial court had no
jurisdiction over the complaint for ejectment because the issue of ownership was
raised in the pleadings. Finally, in People v. Casuga,34 accused-appellant claimed
that the crime of grave slander, of which she was charged, falls within the
concurrent jurisdiction of municipal courts or city courts and the then courts of
first instance, and that the judgment of the court of first instance, to which she
had appealed the municipal court's conviction, should be deemed null and void
for want of jurisdiction as her appeal should have been filed with the Court of
Appeals or the Supreme Court.
In all of these cases, the Supreme Court barred the attack on the jurisdiction of
the respective courts concerned over the subject matter of the case based on
estoppel by laches, declaring that parties cannot be allowed to belatedly adopt
an inconsistent posture by attacking the jurisdiction of a court to which they
submitted their cause voluntarily.35
Here, what respondent was questioning in her motion to dismiss before the trial
court was that court’s jurisdiction over the person of defendant Manuel. Thus, the
principle of estoppel by laches finds no application in this case. Instead, the
principles relating to jurisdiction over the person of the parties are pertinent
herein.
The Rules of Court provide:
RULE 9
EFFECT OF FAILURE TO PLEAD
Section 1. Defenses and objections not pleaded. – Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived.
However, when it appears from the pleadings or the evidence on record that the
court has no jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the action is
barred by a prior judgment or by statute of limitations, the court shall dismiss the
claim.
RULE 15
MOTIONS
Sec. 8. Omnibus motion. – Subject to the provisions of Section 1 of Rule 9, a
motion attacking a pleading, order, judgment, or proceeding shall include all
objections then available, and all objections not so included shall be deemed
waived.
Based on the foregoing provisions, the "objection on jurisdictional grounds which
is not waived even if not alleged in a motion to dismiss or the answer is lack of
jurisdiction over the subject matter. x x x Lack of jurisdiction over the subject
matter can always be raised anytime, even for the first time on appeal, since
jurisdictional issues cannot be waived x x x subject, however, to the principle of
estoppel by laches."36
Since the defense of lack of jurisdiction over the person of a party to a case is not
one of those defenses which are not deemed waived under Section 1 of Rule 9,
such defense must be invoked when an answer or a motion to dismiss is filed in
order to prevent a waiver of the defense.37 If the objection is not raised either in a
motion to dismiss or in the answer, the objection to the jurisdiction over the
person of the plaintiff or the defendant is deemed waived by virtue of the first
sentence of the above-quoted Section 1 of Rule 9 of the Rules of Court.38
The Court of Appeals, therefore, erred when it made a sweeping pronouncement
in its questioned decision, stating that "issue on jurisdiction may be raised at any
stage of the proceeding, even for the first time on appeal" and that, therefore,
respondent timely raised the issue in her motion to dismiss and is, consequently,
not estopped from raising the question of jurisdiction. As the question of
jurisdiction involved here is that over the person of the defendant Manuel, the
same is deemed waived if not raised in the answer or a motion to dismiss. In any
case, respondent cannot claim the defense since "lack of jurisdiction over the
person, being subject to waiver, is a personal defense which can only be
asserted by the party who can thereby waive it by silence."39
2. Jurisdiction over the person of a defendant is acquired through a valid service
of summons; trial court did not acquire jurisdiction over the person of Manuel
Toledo
In the first place, jurisdiction over the person of Manuel was never acquired by
the trial court. A defendant is informed of a case against him when he receives
summons. "Summons is a writ by which the defendant is notified of the action
brought against him. Service of such writ is the means by which the court
acquires jurisdiction over his person."40
In the case at bar, the trial court did not acquire jurisdiction over the person of
Manuel since there was no valid service of summons upon him, precisely
because he was already dead even before the complaint against him and his
wife was filed in the trial court. The issues presented in this case are similar to
those in the case of Sarsaba v. Vda. de Te.41
In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was
illegally dismissed from employment and ordering the payment of his monetary
claims. To satisfy the claim, a truck in the possession of Sereno’s employer was
levied upon by a sheriff of the NLRC, accompanied by Sereno and his lawyer,
Rogelio Sarsaba, the petitioner in that case. A complaint for recovery of motor
vehicle and damages, with prayer for the delivery of the truck pendente lite was
eventually filed against Sarsaba, Sereno, the NLRC sheriff and the NLRC by the
registered owner of the truck. After his motion to dismiss was denied by the trial
court, petitioner Sarsaba filed his answer. Later on, however, he filed an omnibus
motion to dismiss citing, as one of the grounds, lack of jurisdiction over one of the
principal defendants, in view of the fact that Sereno was already dead when the
complaint for recovery of possession was filed.
Although the factual milieu of the present case is not exactly similar to that of
Sarsaba, one of the issues submitted for resolution in both cases is similar:
whether or not a case, where one of the named defendants was already dead at
the time of its filing, should be dismissed so that the claim may be pursued
instead in the proceedings for the settlement of the estate of the deceased
defendant. The petitioner in the Sarsaba Case claimed, as did respondent
herein, that since one of the defendants died before summons was served on
him, the trial court should have dismissed the complaint against all the
defendants and the claim should be filed against the estate of the deceased
defendant. The petitioner in Sarsaba, therefore, prayed that the complaint be
dismissed, not only against Sereno, but as to all the defendants, considering that
the RTC did not acquire jurisdiction over the person of Sereno.42 This is exactly
the same prayer made by respondent herein in her motion to dismiss.
The Court, in the Sarsaba Case, resolved the issue in this wise:
x x x We cannot countenance petitioner’s argument that the complaint against
the other defendants should have been dismissed, considering that the RTC
never acquired jurisdiction over the person of Sereno. The court’s failure to
acquire jurisdiction over one’s person is a defense which is personal to the
person claiming it. Obviously, it is now impossible for Sereno to invoke the same
in view of his death. Neither can petitioner invoke such ground, on behalf of
Sereno, so as to reap the benefit of having the case dismissed against all of the
defendants. Failure to serve summons on Sereno’s person will not be a cause for
the dismissal of the complaint against the other defendants, considering that they
have been served with copies of the summons and complaints and have long
submitted their respective responsive pleadings. In fact, the other defendants in
the complaint were given the chance to raise all possible defenses and
objections personal to them in their respective motions to dismiss and their
subsequent answers.43 (Emphasis supplied.)
Hence, the Supreme Court affirmed the dismissal by the trial court of the
complaint against Sereno only.
Based on the foregoing pronouncements, there is no basis for dismissing the
complaint against respondent herein. Thus, as already emphasized above, the
trial court correctly denied her motion to dismiss.
On whether or not the estate of Manuel
Toledo is an indispensable party
Rule 3, Section 7 of the 1997 Rules of Court states:
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.
An indispensable party is one who has such an interest in the controversy or
subject matter of a case that a final adjudication cannot be made in his or her
absence, without injuring or affecting that interest. He or she is a party who has
not only an interest in the subject matter of the controversy, but "an interest of
such nature that a final decree cannot be made without affecting that 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 proceed.44
On the other hand, a "person is not an indispensable party 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 or her and
those already parties to the action, or if he or she 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 simply because his or her presence will avoid multiple
litigations.45
Applying the foregoing pronouncements to the case at bar, it is clear that the
estate of Manuel is not an indispensable party to the collection case, for the
simple reason that the obligation of Manuel and his wife, respondent herein, is
solidary.
The contract between petitioner, on the one hand and respondent and
respondent’s husband, on the other, states:
FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise to pay
BOSTON EQUITY RESOURCES, INC. x x x the sum of PESOS: [ONE MILLION
FOUR HUNDRED (₱1,400,000.00)] x x x.47
The provisions and stipulations of the contract were then followed by the
respective signatures of respondent as "MAKER" and her husband as "CO-
MAKER."48 Thus, pursuant to Article 1216 of the Civil Code, petitioner may collect
the entire amount of the obligation from respondent only. The aforementioned
provision states: "The creditor may proceed against any one of the solidary
debtors or some or all of them simultaneously. The demand made against one of
them shall not be an obstacle to those which may subsequently be directed
against the others, so long as the debt has not been fully collected."
In other words, the collection case can proceed and the demands of petitioner
can be satisfied by respondent only, even without impleading the estate of
Manuel. Consequently, the estate of Manuel is not an indispensable party to
petitioner’s complaint for sum of money.
However, the Court of Appeals, agreeing with the contention of respondent, held
that the claim of petitioner should have been filed against the estate of Manuel in
accordance with Sections 5 and 6 of Rule 86 of the Rules of Court. The
aforementioned provisions provide:
SEC. 5. Claims which must be filed under the notice. If not filed, barred;
exceptions. All claims for money against the decedent, arising from contract,
express or implied, whether the same be due, not due, or contingent, all claims
for funeral expenses and judgment for money against the decedent, must be filed
within the time limited in the notice; otherwise, they are barred forever, except
that they may be set forth as counterclaims in any action that the executor or
administrator may bring against the claimants. x x x.
SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is
solidary with another debtor, the claim shall be filed against the decedent as if he
were the only debtor, without prejudice to the right of the estate to recover
contribution from the other debtor. x x x.
The Court of Appeals erred in its interpretation of the above-quoted provisions.
In construing Section 6, Rule 87 of the old Rules of Court, the precursor of
Section 6, Rule 86 of the Revised Rules of Court, which latter provision has been
retained in the present Rules of Court without any revisions, the Supreme Court,
in the case of Manila Surety & Fidelity Co., Inc. v. Villarama, et. al.,49 held:50
Construing Section 698 of the Code of Civil Procedure from whence [Section 6,
Rule 87] was taken, this Court held that where two persons are bound in solidum
for the same debt and one of them dies, the whole indebtedness can be proved
against the estate of the latter, the decedent’s liability being absolute and
primary; x x x. It is evident from the foregoing that Section 6 of Rule 87 provides
the procedure should the creditor desire to go against the deceased debtor, but
there is certainly nothing in the said provision making compliance with such
procedure a condition precedent before an ordinary action against the surviving
solidary debtors, should the creditor choose to demand payment from the latter,
could be entertained to the extent that failure to observe the same would deprive
the court jurisdiction to take cognizance of the action against the surviving
debtors. Upon the other hand, the Civil Code expressly allows the creditor to
proceed against any one of the solidary debtors or some or all of them
simultaneously. There is, therefore, nothing improper in the creditor’s filing of an
action against the surviving solidary debtors alone, instead of instituting a
proceeding for the settlement of the estate of the deceased debtor wherein his
claim could be filed.
The foregoing ruling was reiterated and expounded in the later case of Philippine
National Bank v. Asuncion51 where the Supreme Court pronounced:
A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals
that nothing therein prevents a creditor from proceeding against the surviving
solidary debtors. Said provision merely sets up the procedure in enforcing
collection in case a creditor chooses to pursue his claim against the estate of the
deceased solidary debtor. The rule has been set forth that a creditor (in a
solidary obligation) has the option whether to file or not to file a claim against the
estate of the solidary debtor. x x x
It is crystal clear that Article 1216 of the New Civil Code is the applicable
provision in this matter. Said provision gives the creditor the right to "proceed
against anyone of the solidary debtors or some or all of them simultaneously."
The choice is undoubtedly left to the solidary creditor to determine against whom
he will enforce collection. In case of the death of one of the solidary debtors, he
(the creditor) may, if he so chooses, proceed against the surviving solidary
debtors without necessity of filing a claim in the estate of the deceased debtors. It
is not mandatory for him to have the case dismissed as against the surviving
debtors and file its claim against the estate of the deceased solidary debtor, x x
x. For to require the creditor to proceed against the estate, making it a condition
precedent for any collection action against the surviving debtors to prosper,
would deprive him of his substantive rightsprovided by Article 1216 of the New
Civil Code. (Emphasis supplied.)
As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of
Court were applied literally, Article 1216 of the New Civil Code would, in effect,
be repealed since under the Rules of Court, petitioner has no choice but to
proceed against the estate of [the deceased debtor] only. Obviously, this
provision diminishes the [creditor’s] right under the New Civil Code to proceed
against any one, some or all of the solidary debtors. Such a construction is not
sanctioned by principle, which is too well settled to require citation, that a
substantive law cannot be amended by a procedural rule. Otherwise stated,
Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail over
Article 1216 of the New Civil Code, the former being merely procedural, while the
latter, substantive.
Based on the foregoing, the estate of Manuel is not an indispensable party and
the case can proceed as against respondent only. That petitioner opted to collect
from respondent and not from the estate of Manuel is evidenced by its opposition
to respondent’s motion to dismiss asserting that the case, as against her, should
be dismissed so that petitioner can proceed against the estate of Manuel.
On whether or not the inclusion of Manuel as
party defendant is a misjoinder of party
Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder nor non-
joinder of parties is ground for dismissal of an action. Parties may be dropped or
added by order of the court on motion of any party or on its own initiative at any
stage of the action and on such terms as are just. Any claim against a misjoined
party may be severed and proceeded with separately."
Based on the last sentence of the afore-quoted provision of law, a misjoined
party must have the capacity to sue or be sued in the event that the claim by or
against the misjoined party is pursued in a separate case. In this case, therefore,
the inclusion of Manuel in the complaint cannot be considered a misjoinder, as in
fact, the action would have proceeded against him had he been alive at the time
the collection case was filed by petitioner. This being the case, the remedy
provided by Section 11 of Rule 3 does not obtain here. The name of Manuel as
party-defendant cannot simply be dropped from the case. Instead, the procedure
taken by the Court in Sarsaba v. Vda. de Te,52 whose facts, as mentioned earlier,
resemble those of this case, should be followed herein. There, the Supreme
Court agreed with the trial court when it resolved the issue of jurisdiction over the
person of the deceased Sereno in this wise:
As correctly pointed by defendants, the Honorable Court has not acquired
jurisdiction over the person of Patricio Sereno since there was indeed no valid
service of summons insofar as Patricio Sereno is concerned. Patricio Sereno
died before the summons, together with a copy of the complaint and its annexes,
could be served upon him.
However, the failure to effect service of summons unto Patricio Sereno, one of
the defendants herein, does not render the action DISMISSIBLE, considering
that the three (3) other defendants, x x x, were validly served with summons and
the case with respect to the answering defendants may still proceed
independently. Be it recalled that the three (3) answering defendants have
previously filed a Motion to Dismiss the Complaint which was denied by the
Court.
Hence, only the case against Patricio Sereno will be DISMISSED and the same
may be filed as a claim against the estate of Patricio Sereno, but the case with
respect to the three (3) other accused [sic] will proceed. (Emphasis supplied.)53
As a result, the case, as against Manuel, must be dismissed.
In addition, the dismissal of the case against Manuel is further warranted by
Section 1 of Rule 3 of the Rules of Court, which states that: only natural or
juridical persons, or entities authorized by law may be parties in a civil action."
Applying this provision of law, the Court, in the case of Ventura v.
Militante,54 held:
Parties may be either plaintiffs or defendants. x x x. In order to maintain an action
in a court of justice, the plaintiff must have an actual legal existence, that is, he,
she or it must be a person in law and possessed of a legal entity as either a
natural or an artificial person, and no suit can be lawfully prosecuted save in the
name of such a person.
The rule is no different as regards party defendants. It is incumbent upon a
plaintiff, when he institutes a judicial proceeding, to name the proper party
defendant to his cause of action. In a suit or proceeding in personam of an
adversary character, the court can acquire no jurisdiction for the purpose of trial
or judgment until a party defendant who actually or legally exists and is legally
capable of being sued, is brought before it. It has even been held that the
question of the legal personality of a party defendant is a question of substance
going to the jurisdiction of the court and not one of procedure.
The original complaint of petitioner named the "estate of Carlos Ngo as
represented by surviving spouse Ms. Sulpicia Ventura" as the
defendant. Petitioner moved to dismiss the same on the ground that the
1âwphi1
defendant as named in the complaint had no legal personality. We agree.
x x x. Considering that capacity to be sued is a correlative of the capacity to sue,
to the same extent, a decedent does not have the capacity to be sued and may
not be named a party defendant in a court action. (Emphases supplied.)
Indeed, where the defendant is neither a natural nor a juridical person or an
entity authorized by law, the complaint may be dismissed on the ground that the
pleading asserting the claim states no cause of action or for failure to state a
cause of action pursuant to Section 1(g) of Rule 16 of the Rules of Court,
because a complaint cannot possibly state a cause of action against one who
cannot be a party to a civil action.55
Since the proper course of action against the wrongful inclusion of Manuel as
party-defendant is the dismissal of the case as against him, thus did the trial
court err when it ordered the substitution of Manuel by his heirs. Substitution is
proper only where the party to be substituted died during the pendency of the
case, as expressly provided for by Section 16, Rule 3 of the Rules of Court,
which states:
Death of party;duty of counsel. – Whenever a party to a pending action dies, and
the claim is not thereby extinguished, it shall be the duty of his counsel to inform
the court within thirty (30) days after such death of the fact thereof, and to give
the name and address of his legal representative or representatives. x x x
The heirs of the deceased may be allowed to be substituted for the deceased,
without requiring the appointment of an executor or administrator x x x.
The court shall forthwith order said legal representative or representatives to
appear and be substituted within a period of thirty (30) days from notice.
(Emphasis supplied.)
Here, since Manuel was already dead at the time of the filing of the complaint,
the court never acquired jurisdiction over his person and, in effect, there was no
party to be substituted.
WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006
and the Resolution dated 1 August 2006 of the Court of Appeals in CA-G.R. SP
No. 88586 are REVERSED and SET ASIDE. The Orders of the Regional Trial
Court dated 8 November 2004 and 22 December 2004, respectively, in Civil
Case No. 97-86672, are REINSTATED. The Regional Trial Court, Branch 24,
Manila is hereby DIRECTED to proceed with the trial of Civil Case No. 97-86672
against respondent Lolita G. Toledo only, in accordance with the above
pronouncements of the Court, and to decide the case with dispatch.
SO ORDERED.

G.R. No. 166519 March 31, 2009
NIEVES PLASABAS and MARCOS MALAZARTE, Petitioners,
vs.
COURT OF APPEALS (Special Former Ninth Division), DOMINADOR
LUMEN, and AURORA AUNZO, Respondents.
DECISION
NACHURA, J.:
Assailed in this petition for review on certiorari under Rule 45 of the Rules of
Court are the May 12, 2004 Decision1 of the Court of Appeals (CA) in CA-G.R.
CV No. 43085 and the December 1, 2004 Resolution2 denying reconsideration of
the challenged decision.
The pertinent facts and proceedings follow.
In 1974, petitioners3 filed a complaint for recovery of title to property with
damages before the Court of First Instance (now, Regional Trial Court [RTC]) of
Maasin, Southern Leyte against respondents. The case was docketed as Civil
Case No. R-1949. The property subject of the case was a parcel of coconut land
in Canturing, Maasin, Southern Leyte, declared under Tax Declaration No. 3587
in the name of petitioner Nieves with an area of 2.6360 hectares.4 In their
complaint, petitioners prayed that judgment be rendered confirming their rights
and legal title to the subject property and ordering the defendants to vacate the
occupied portion and to pay damages.5
Respondents, for their part, denied petitioners’ allegation of ownership and
possession of the premises, and interposed, as their main defense, that the
subject land was inherited by all the parties from their common ancestor,
Francisco Plasabas.6
Revealed in the course of the trial was that petitioner Nieves, contrary to her
allegations in the complaint, was not the sole and absolute owner of the land.
Based on the testimonies of petitioners’ witnesses, the property passed on from
Francisco to his son, Leoncio; then to Jovita Talam, petitioner Nieves’
grandmother; then to Antonina Talam, her mother; and then to her and her
siblings—Jose, Victor and Victoria.7
After resting their case, respondents raised in their memorandum the argument
that the case should have been terminated at inception for petitioners’ failure to
implead indispensable parties, the other co-owners – Jose, Victor and Victoria.
In its April 19, 1993 Order,8 the trial court, without ruling on the merits, dismissed
the case without prejudice, thus:
This Court, much as it wants to decide the instant case on the merits, being one
of the old inherited cases left behind, finds difficulty if not impossibility of doing so
at this stage of the proceedings when both parties have already rested their
cases. Reluctantly, it agrees with the defendants in the observation that some
important indispensable consideration is conspicuously wanting or missing.
It is not the Court’s wish to turn its back on the crucial part of the case, which is
the pronouncement of the judgment to settle the issues raised in the pleadings of
the parties once and for all, after all the time, effort and expense spent in going
through the trial process.
But, rules are rules. They have to be followed, to arrive at a fair and just verdict.
Section 7, Rule 3 of the Rules of Court provides:
"x x x 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."
What the Court wants to say here is that the instant case should have been
dismissed without prejudice a long time ago for lack of cause of action as the
plaintiffs spouses Marcos Malazarte and Nieves Plasabas Malazarte have no
complete legal personality to sue by themselves alone without joining the
brothers and sisters of Nieves who are as INDISPENSABLE as the latter in the
final determination of the case. Not impleading them, any judgment would have
no effectiveness.
They are that indispensable that a final decree would necessarily affect their
rights, so that the Court cannot proceed without their presence. There are
abundant authorities in this regard. Thus –
"The general rule with reference to the making of parties in a civil action requires
the joinder of all indispensable parties under any and all conditions, their
presence being a sine qua non of the exercise of judicial power. (Borlasa v.
Polistico, 47 Phil. 345, 348) For this reason, our Supreme Court has held that
when it appears of record that there are other persons interested in the subject
matter of the litigation, who are not made parties to the action, it is the duty of the
court to suspend the trial until such parties are made either plaintiffs or
defendants. (Pobre, et al. v. Blanco, 17 Phil. 156). x x x Where the petition failed
to join as party defendant the person interested in sustaining the proceeding in
the court, the same should be dismissed. x x x When an indispensable party is
not before the court, the action should be dismissed. (People, et al. v. Rodriguez,
et al., G.R. Nos. L-14059-62, September 30, 1959) (sic)
"Parties in interest without whom no final determination can be had of an action
shall be joined either as plaintiffs or defendants. (Sec. 7, Rule 3, Rules of Court).
The burden of procuring the presence of all indispensable parties is on the
plaintiff. (39 Amjur [sic] 885). The evident purpose of the rule is to prevent the
multiplicity of suits by requiring the person arresting a right against the defendant
to include with him, either as co-plaintiffs or as co-defendants, all persons
standing in the same position, so that the whole matter in dispute may be
determined once and for all in one litigation. (Palarca v. Baginsi, 38 Phil. 177,
178).
"An indispensable party is a party who has such an interest in the controversy or
subject matter that a final adjudication cannot be made, in his absence, without
inquiring or affecting such interest; a party who has not only an interest of such a
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. (67 C.J.S. 892). Indispensable
parties are those without whom no action can be finally determined." (Sanidad v.
Cabataje, 5 Phil. 204)
WHEREFORE, IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, both
the complaint and the counterclaim in the instant case are ordered DISMISSED
without prejudice. No pronouncement as to costs.
SO ORDERED.9
Aggrieved, petitioners elevated the case to the CA. In the challenged May 12,
2004 Decision,10 the appellate court affirmed the ruling of the trial court. The CA,
further, declared that the non-joinder of the indispensable parties would violate
the principle of due process, and that Article 487 of the Civil Code could not be
applied considering that the complaint was not for ejectment, but for recovery of
title or a reivindicatory action.11
With their motion for reconsideration denied in the further assailed December 1,
2004 Resolution,12 petitioners filed the instant petition.
The Court grants the petition and remands the case to the trial court for
disposition on the merits.
Article 487 of the Civil Code provides that any one of the co-owners may bring an
action for ejectment. The article covers all kinds of actions for the recovery of
1av vphi1.zw+
possession, including an accion publiciana and a reivindicatory action. A co-
owner may file suit without necessarily joining all the other co-owners as co-
plaintiffs because the suit is deemed to be instituted for the benefit of all. Any
judgment of the court in favor of the plaintiff will benefit the other co-owners, but if
the judgment is adverse, the same cannot prejudice the rights of the
unimpleaded co-owners.13
With this disquisition, there is no need to determine whether petitioners’
complaint is one for ejectment or for recovery of title. To repeat, Article 487 of the
Civil Code applies to both actions.
Thus, petitioners, in their complaint, do not have to implead their co-owners as
parties. The only exception to this rule is when the action is for the benefit of the
plaintiff alone who claims to be the sole owner and is, thus, entitled to the
possession thereof. In such a case, the action will not prosper unless the plaintiff
impleads the other co-owners who are indispensable parties.14
Here, the allegation of petitioners in their complaint that they are the sole owners
of the property in litigation is immaterial, considering that they acknowledged
during the trial that the property is co-owned by Nieves and her siblings, and that
petitioners have been authorized by the co-owners to pursue the case on the
latter’s behalf.15 Impleading the other co-owners is, therefore, not mandatory,
because, as mentioned earlier, the suit is deemed to be instituted for the benefit
of all.
In any event, the trial and appellate courts committed reversible error when they
summarily dismissed the case, after both parties had rested their cases following
a protracted trial commencing in 1974, on the sole ground of failure to implead
indispensable parties. The rule is settled that 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 petitioner refuses to implead an indispensable
party despite the order of the court, the latter may dismiss the complaint/petition
for the plaintiff’s/petitioner's failure to comply therewith.16
WHEREFORE, premises considered, the instant petition is GRANTED, and the
case is REMANDED to the trial court for appropriate proceedings. The trial court
is further DIRECTED to decide on the merits of the civil case WITH DISPATCH.
SO ORDERED.

[G.R. NO. 183059 : August 28, 2009]
ELY QUILATAN & ROSVIDA QUILATAN-ELIAS, Petitioners, v. HEIRS OF
LORENZO QUILATAN, Respondents.
DECISION
YNARES-SANTIAGO, J.:
The issue for resolution is whether the Court of Appeals correctly reversed the
decision of the Regional Trial Court (RTC) of Pasig City, Branch 266, and
ordered the dismissal without prejudice of Civil Case No. 67367 on the ground of
failure to implead all the indispensable parties to the case.
On August 15, 1999, petitioners Ely Quilatan and Rosvida Quilatan-Elias filed
Civil Case No. 67367 for nullification of Tax Declaration Nos. D-014-00330 and
D-014-00204 and Partition of the Estate of the late Pedro Quilatan with damages
against respondent heirs of Lorenzo Quilatan. They claim that during his lifetime,
Pedro Quilatan owned two parcels of land covered by Tax Declaration Nos. 1680
and 2301, both located in Taguig, Metro Manila; that sometime in 1998,1 they
discovered that said tax declarations were cancelled without their knowledge and
new ones were issued, to wit: Tax Declaration No. D-014-00204 and D-014-
00330, under the names of Spouses Lorenzo Quilatan and Anita Lizertiquez as
owners thereof.2
On June 22, 2004, the trial court rendered its decision declaring as void the
cancellation of Tax Declaration Nos. 1680 and 2301. At the same time, it ordered
the partition of the subject properties into three equal shares among the heirs of
Francisco, Ciriaco and Lorenzo, all surnamed Quilatan.
On appeal, the Court of Appeals reversed without prejudice the decision of the
trial court on the ground that petitioners failed to implead other co-heirs who are
indispensable parties to the case. Thus, the judgment of the trial court was null
and void for want of jurisdiction.3 Petitioners filed a motion for
reconsideration4 but it was denied.
Hence, this Petition for Review where petitioners argue that the issue of failure to
implead indispensable parties was a mere afterthought because respondents did
not raise the same in their Answer to the complaint, but only for the first time in
their Motion for Reconsideration of the June 22, 2004 decision of the trial
court.5 Petitioners further argue that the order of dismissal without prejudice and
the re-filing of the case in order to implead the heirs of Ciriaco only invite
multiplicity of suits since the second action would be a repetition of the first
action, where the judgment therein rightly partitioned the subject properties into
three equal shares, apportioning each share to the heirs of the children of Pedro
Quilatan.6
The petition lacks merit.
Records show that Pedro Quilatan died intestate in 1960 and was survived by his
three children, namely, Ciriaco, Francisco and Lorenzo, all of whom are now
deceased. Ciriaco was survived by his children, namely Purita Santos, Rosita
Reyes, Renato Quilatan, Danilo Quilatan, and Carlito Quilatan; Francisco was
survived by herein petitioners and their two other siblings, Solita Trapsi and
Rolando Quilatan; while Lorenzo was survived by his children, herein
respondents.
In the complaint filed by petitioners before the trial court, they failed to implead
their two siblings, Solita and Rolando, and all the heirs of Ciriaco, as co-plaintiffs
or as defendants. It is clear that the central thrust of the complaint filed in Civil
Case No. 67367 was to revert the subject properties back to the estate of Pedro
Quilatan, thereby making all his heirs pro indiviso co-owners thereof, and to
partition them equally among themselves; and that all the co-heirs and persons
having an interest in the subject properties are indispensable parties to an action
for partition, which will not lie without the joinder of said parties.
Respondents could not be blamed if they did not raise this issue in their Answer
because in an action for partition of real estate, it is the plaintiff who is mandated
by the Rules to implead all the indispensable parties, considering that the
absence of one such 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.7 ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Thus, the Court of Appeals correctly applied Section 1, Rule 69 and Section 7,
Rule 3 of the Rules of Court, which read:
SECTION 1. Complaint in action for partition of real estate. - A person having the
right to compel the partition of real estate may do so as in this rule
prescribed, setting forth in his complaint the nature and extent of his title and an
adequate description of the real estate of which partition is demanded and joining
as defendants all the other persons interested in the property. (Emphasis
supplied)cralawlibrary
SECTION 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.
In Moldes v. Villanueva,8 the Court held that:
An indispensable party is one who has such 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. He is a person in whose absence
there cannot be a determination between the parties already before the court
which is effective, complete, or equitable. In Commissioner Andrea D. Domingo
v. Herbert Markus Emil Scheer, the Court held that the joinder of indispensable
parties is mandatory. Without the presence of indispensable parties to the suit,
the judgment of the court cannot attain real finality. Strangers to a case are not
bound by the judgment rendered by the court. The absence of an indispensable
party renders all subsequent actions of the court null and void, with no authority
to act not only as to the absent party but also as to those present. The
responsibility of impleading all the indispensable parties rests on the
petitioner/plaintiff.
Likewise, in Metropolitan Bank and Trust Company v. Hon. Floro T. Alejo, the
Court ruled that the evident aim and intent of the Rules regarding the joinder of
indispensable and necessary parties is 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. A valid judgment cannot even be
rendered where there is want of indispensable parties.
On the issue of multiplicity of suits, the Court of Appeals correctly ordered the
dismissal of Civil Case No. 67367 without prejudice for want of jurisdiction. The
dismissal could have been avoided had petitioners, instead of merely stating in
their complaint the unimpleaded indispensable parties, joined them as parties to
the case in order to have a complete and final determination of the action. As
aptly observed by the appellate court:
Solita Trapsi, and Rolando Quilatan were not joined as parties in the instant
case.9
The rationale for treating all the co-owners of a property as indispensable parties
in a suit involving the co-owned property is explained in Arcelona v. Court of
Appeals:10
As held by the Supreme Court, were the courts to permit an action in ejectment
to be maintained by a person having merely an undivided interest in any given
tract of land, a judgment in favor of the defendants would not be conclusive as
against the other co-owners not parties to the suit, and thus the defendant in
possession of the property might be harassed by as many succeeding actions of
ejectment, as there might be co-owners of the title asserted against him. The
purpose of this provision was to prevent multiplicity of suits by requiring the
person asserting a right against the defendant to include with him, either as co-
plaintiffs or as co-defendants, all persons standing in the same position, so that
the whole matter in dispute may be determined once and for all in one litigation.
In fine, 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. Hence, the trial court should have ordered
the dismissal of the complaint.
WHEREFORE, the Petition for Review on Certiorari is hereby DENIED. The
Decision of the Court of Appeals dated March 17, 2008 in CA-G.R. CV No.
88851 which reversed the decision of the Regional Trial Court of Pasig City,
Branch 266, for want of jurisdiction for failure to implead all indispensable parties
is AFFIRMED. The case is REMANDED to the trial court which is hereby
DIRECTED to implead all indispensable parties.
SO ORDERED.

Indeed, a perusal of the records will show that plaintiffs-appellees did not implead
their other co-heirs, either as plaintiffs or defendants in the case. Their complaint
squarely stated that Pedro Quilatan had three children, namely, Ciriaco Quilatan,
Francisco Quilatan, and Lorenzo Quilatan, who are now all deceased. Ciriaco
Quilatan is survived by his children, namely, Purita Santos, Rosita Reyes,
Renato Quilatan, Danilo Quilatan, and Carlito Quilatan. Defendants-appellants
are the children of Lorenzo Quilatan. The plaintiffs-appellees, along with Solita
Trapsi and Rolando Quilatan, are the children of Francisco Quilatan. However,
Purita Santos, Rosita Reyes, Renato Quilatan, Danilo Quilatan, Carlito Quilatan,
 On November 21, 1995 3 and January 30, 1996, 4 Spouses Raul and Cristina
Acampado obtained loans from petitioner in the amounts of P5,000,000
G.R. No. 141970. September 10, 2001 and P2,000,000, respectively. As security for the payment of these credit
accommodations, the Acampados executed in favor of petitioner a Real Estate
METROPOLITAN BANK, & TRUST COMPANY, Petitioner, v. Hon. FLORO T.
Mortgage 5 and an Amendment of Real Estate Mortgage 6 over a parcel of land
ALEJO, in His Capacity as Presiding Judge of Branch 172 of the Regional Trial
registered in their names. The land was covered by TCT No. V-41319 in the
Court of Valenzuela; and SY TAN SE, represented by his Attorney-in-Fact, SIAN
Registry of Deeds of Valenzuela City, where the contracts were also registered
SUAT NGO, Respondents.
on November 20, 1995 and January 23, 1996, respectively. 7cräläwvirtualibräry
DECISION
On June 3, 1996, a Complaint for Declaration of Nullity of TCT No. V-41319 was
filed by Respondent Sy Tan Se against Spouses Acampado. In the Regional
PANGANIBAN, J.:
Trial Court (RTC) of Valenzuela, Branch 172, it was docketed as Civil Case No.
In a suit to nullify an existing Torrens Certificate of Title (TCT) in which a real 4930-V-96, 8 the progenitor of the present controversy.
estate mortgage is annotated, the mortgagee is an indispensable party. In such
Despite being the registered mortgagee of the real property covered by the title
suit, a decision canceling the TCT and the mortgage annotation is subject to a
sought to be annulled, petitioner was not made a party to Civil Case No. 4930-V-
petition for annulment of judgment, because the non-joinder of the mortgagee
96, 9 nor was she notified of its existence.
deprived the court of jurisdiction to pass upon the controversy.
Because the spouses defaulted in the payment of their loan, extrajudicial
The Case
foreclosure proceedings over the mortgaged property were initiated on April 19,
Before this Court is a Petition for Review on Certiorari 1 under Rule 45 of the 1997.
Rules of Court, assailing the March 25, 1999 Resolution of the Court of Appeals
On June 17, 1997, the sheriff of Valenzuela conducted an auction sale of the
(CA) in CA-GR SP No. 50638, which states in full:
property, during which petitioner submitted the highest and winning bid. 10 On
This resolves the petition for annulment of judgment based on external (sic) fraud July 15, 1997, a Certificate of Sale was issued in its favor. 11 This sale was
filed by petitioner Metropolitan Bank and Trust Company seeking to annul the entered in the Registry of Deeds of Valenzuela on July 28, 1997.
Decision dated August 12, 1998 rendered by respondent judge, Honorable Floro
When the redemption period lapsed exactly a year after, on July 28, 1998,
T. Alejo, Presiding Judge of the Regional Trial Court, Branch 172, Valenzuela,
petitioner executed an Affidavit of Consolidation of Ownership to enable the
Metro Manila, in Civil Case No. 4930-V-96 entitled Sy Tan Se, represented by his
Registry of Deeds of Valenzuela to issue a new TCT in its name.
attorney-in-fact Sian Suat Ngo v. Raul Acampado, et al.
Upon presentation to the Register of Deeds of the Affidavit of Consolidation of
This Court has observed that petitioner knew of the questioned Decision
Ownership, petitioner was informed of the existence of the August 12, 1998 RTC
sometime [i]n October 1998 (Petition, Rollo, p. 3). This being the case, petitioner
Decision in Civil Case No. 4930-V-96, annulling TCT No. V-41319. The
should have first sought recourse by way of petition for relief from judgment
dispositive portion of the Decision 12 stated:
under Rule 38 of the 1997 Rules of Civil Procedure. Accordingly, the petition for
annulment of judgment is DENIED DUE COURSE and DISMISSED outright for
WHEREFORE, judgment is hereby rendered declaring as null and void Transfer
being insufficient in form and substance (Section 2, Rule 47, 1997 Rules of Civil
Certificate of Title No.V-41319 in the name of defendant Raul Acampado for
Procedure).
having proceeded from an illegitimate source. With costs against the defendant.
Also challenged is the January 27, 2000 CA Resolution 2 denying petitioners
SO ORDERED.
Motion for Reconsideration.
On January 27, 1999, petitioner filed with the Court of Appeals a Petition for
The Facts
Annulment of the RTC Decision.
Ruling of the Court of Appeals
For being insufficient in form and substance, the Petition for Annulment was
outrightly dismissed by the CA. It ruled that petitioner ought to have filed, instead,
a petition for relief from judgment or an action for quieting of title.
Hence, this Petition. 13
Issues
In its Memorandum, petitioner presents the following issues:
I
x x x [W]hether or not a petition for annulment of judgment under Rule 47 of the
1997 Rules of Civil Procedure is the proper remedy available to petitioner under
the circumstances.
II
x x x [W]hether or not the judgment of the trial court in Civil Case No. 4930-V-96
should be annulled.14
The Courts Ruling
The Petition is meritorious.
First Issue: Proper Remedy
Respondents aver that a petition for annulment is not proper, because there were
three different remedies available but they were not resorted to by petitioner.
We are not persuaded. First, a petition for relief, the remedy pointed to by the
Court of Appeals, was not available to petitioner. Section 1, Rule 38 of the Rules
of Court, states:
Petition for relief from judgment, order, or other proceedings.-When a judgment
or final order is entered, or any other proceeding is thereafter taken against a
party in any court through fraud, accident, mistake, or excusable negligence, he
may file a petition in such court and in the same case praying that the judgment,
order or proceeding be set aside. (Italics supplied)
It must be emphasized that petitioner was never a party to Civil Case No. 4930-
V-96. In Lagula et al. v. Casimiro et al., 15 the Court held that -- relative to a
motion for relief on the ground of fraud, accident, mistake, or excusable
negligence -- Rule 38 of the Rules of Court only applies when the one deprived
of his right is a party to the case. Since petitioner was never a party to the case
or even summoned to appear therein, then the remedy of relief from judgment
under Rule 38 of the Rules of Court was not proper. This is plainly provided in
the italicized words of the present provision just quoted.
Second , in denying petitioners Motion for Reconsideration of the Decision
dismissing the Petition for Annulment of Judgment, the Court of Appeals
reasoned that another remedy, an action for quieting of title, was also available to
petitioner.
We do not agree. It should be stressed that this case was instituted to ask for
relief from the peremptory declaration of nullity of TCT No. V-41319, which had
been issued without first giving petitioner an opportunity to be heard. Petitioner
focused on the judgment in Civil Case No. 4930-V-96 which adversely affected it,
and which it therefore sought to annul. Filing an action for quieting of title will not
remedy what it perceived as a disregard of due process; it is therefore not an
appropriate remedy.
Equally important, an action for quieting of title is filed only when there is a cloud
on title to real property or any interest therein. As defined, a cloud on title is a
semblance of title which appears in some legal form but which is in fact
unfounded. 16 In this case, the subject judgment cannot be considered as a cloud
on petitioners title or interest over the real property covered by TCT No. V-41319,
which does not even have a semblance of being a title.
It would not be proper to consider the subject judgment as a cloud that would
warrant the filing of an action for quieting of title, because to do so would require
the court hearing the action to modify or interfere with the judgment or order of
another co-equal court. Well-entrenched in our jurisdiction is the doctrine that a
court has no power to do so, as that action may lead to confusion and seriously
hinder the administration of justice. 17 Clearly, an action for quieting of title is not
an appropriate remedy in this case.
Third , private respondent cites a last remedy: the intervention by petitioner in
Civil Case No. 4930-V-96. The availability of this remedy hinges on petitioners
knowledge of the pendency of that case, which would have otherwise been
alerted to the need to intervene therein. Though presumed by private
respondent, any such knowledge prior to October 1998 is, however, emphatically
denied by petitioner.
The Petition for Annulment before the Court of Appeals precisely alleged that
private respondent purposely concealed the case by excluding petitioner as a
defendant in Civil Case No. 4930-V-96, even if the latter was an indispensable
party. Without due process of law, the former intended to deprive petitioner of the
latters duly registered property right. Indeed, the execution of the Decision in Civil
Case No. 4930-V-96 necessarily entailed its enforcement against petitioner, even
though it was not a party to that case. Hence, the latter concludes that annulment
of judgment was the only effective remedy open to it.
The allegation of extrinsic fraud, if fully substantiated by a preponderance of
evidence, may be the basis for annulling a judgment. 18 The resort to annulment
becomes proper because of such allegation, coupled with the unavailability of the
other remedies pointed to by Respondents.
Second Issue: Lack of Jurisdiction
It is undisputed that the property covered by TCT No. V-41319 was mortgaged to
petitioner, and that the mortgage was annotated on TCT No. V-41319 before the
institution of Civil Case No. 4930-V-96. It is also undisputed that all subsequent
proceedings pertaining to the foreclosure of the mortgage were entered in the
Registry of Deeds. The nullification and cancellation of TCT No. V-41319 carried
with it the nullification and cancellation of the mortgage annotation.
Although a mortgage affects the land itself and not merely the TCT covering it,
the cancellation of the TCT and the mortgage annotation exposed petitioner to
real prejudice, because its rights over the mortgaged property would no longer be
known and respected by third parties. Necessarily, therefore, the nullification of
TCT No. V-41319 adversely affected its property rights, considering that a real
mortgage is a real right and a real property by itself. 19cräläwvirtualibräry
Evidently, petitioner is encompassed within the definition of an indispensable
party; thus, it should have been impleaded as a defendant in Civil Case No.
4930-V-96.
An indispensable party is a party who has such 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.20cräläwvirtualibräry
The joinder of indispensable parties to an action is mandated by Section 7, Rule
3 of the Revised Rules of Civil Procedures, which we quote:
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.
Aside from the above provision, jurisprudence requires such joinder, as the
following excerpts indicate:
Indispensable parties must always be joined either as plaintiffs or defendants, for
the court cannot proceed without them. x x x. Indispensable parties are those
with such an interest in the controversy that a final decree would necessarily
affect their rights, so that the courts cannot proceed without their
presence.21cräläwvirtualibräry
"x x x. Without the precence of indispensable parties to a suit or proceeding, a
judgment of a Court cannot attain real finality."22cräläwvirtualibräry
Whenever it appears to the court in the course of a proceeding that an
indispensable party has not been joined, it is the duty of the court to stop the trial
and to order the inclusion of such party. (The Revised Rules of Court, Annotated
& Commented by Senator Vicente J. Francisco, Vol. I, p. 271, 1973 ed., See also
Cortez vs. Avila, 101 Phil. 705.) Such an order is unavoidable, for the general
rule with reference to the making of parties in a civil action requires the joinder of
all necessary parties wherever possible, and the joinder of all indispensable
parties under any and all conditions, the presence of those latter parties being a
sine qua non of the exercise of judicial power. (Borlasa vs. Polistico, 47 Phil. 345,
at p. 347.) It is precisely when an indispensable party is not before the court
(that) the action should be dismissed. (People vs. Rodriguez, 106 Phil. 325. at p.
327.) The absence of an indispensable party renders all subsequent actuations
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.23 (emphasis supplied)
The evident aim and intent of the Rules regarding the joinder of indispensable
and necessary parties is 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. A valid judgment cannot even be rendered where
there is want of indispensable parties.24cräläwvirtualibräry
From the above, it is clear that the presence of indispensable parties is
necessary to vest the court with jurisdiction, which is the authority to hear and
determine a cause, the right to act in a case. 25 We stress that the absence of
indispensable parties renders all subsequent actuations of the court null and
void, because of that courts want of authority to act, not only as to the absent
parties but even as to those present.
It is argued that petitioner cannot possibly be an indispensable party, since the
mortgage may not even be valid because of the possible absence of compliance
with the requirement 26 that the mortgagor be the absolute owner of the thing
mortgaged. It should be emphasized, however, that at the time the mortgage was
constituted, there was an existing TCT (No. V-41319), which named the
mortgagors, the Acampado spouses, as the registered owners of the property.
In Seno v. Mangubat 27 this Court held as follows:
The well-known rule in this jurisdiction is that a person dealing with a registered
land has a right to rely upon the face of the Torrens Certificate of Title and to
dispense with the need of inquiring further, except when the party concerned has
actual knowledge of facts and circumstances that would impel a reasonably
cautious man to make such inquiry.
In Leonor v. Court of Appeals 28 and Arcelona v. Court of Appeals, 29 we held
thus:
A void judgment for want of jurisdiction is no judgment at all. It cannot be the
source of any right nor the creator of any obligation. All acts performed pursuant
to it and all claims emanating from it have no legal effect. Hence, it can never
become final and any writ of execution based on it is void:x x x it may be said to
be a lawless thing which can be treated as an outlaw and slain at sight, or
ignored wherever and whenever it exhibits its head.
WHEREFORE , the Petition is GRANTED and the assailed Resolutions of the
Court of Appeals are REVERSED. The Decision of the Regional Trial Court in
Civil Case No. 4930-V-41319 is hereby NULLIFIED and SET ASIDE. No costs.
SO ORDERED.

xxx

Thus, where innocent third persons relying on the correctness of the certificate of
title issued, acquire rights over the property, the court cannot disregard such
rights and order the total cancellation of the certificate for that would impair public
confidence in the certificate of title; otherwise everyone dealing with property
registered under the Torrens system would have to inquire in every instance as
to whether the title ha[s] been regularly or irregularly issued by the court. Indeed
this is contrary to the evident purpose of the law.

The peremptory disregard of the annotations registered and entered in TCT No.
V-41319 constituted a deprivation of private property without due process of law
and was therefore unquestionably unjust and iniquitous. This, we cannot
countenance.

Clearly, it was the trial courts duty to order petitioners inclusion as a party to Civil
Case No. 4930-V-96. This was not done. Neither the court nor private
respondents bothered to implead petitioner as a party to the case. In the absence
of petitioner, an indispensable party, the trial court had no authority to act on the
case. Its judgment therein was null and void due to lack of jurisdiction over an
indispensable party.
G.R. No. 189486 September 5, 2012 004-014 under Gilbert’s name.3 These certificates were all with Gilbert’s
irrevocable endorsement and power of attorney to have these stocks transferred
SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and the HEIRS OF in the books of corporation.4 All of these certificates were always in the
THE LATE GRACE G. CHEU, Petitioners, undisturbed possession of the spouses Francisco and Simny, including Stock
vs. Certificate Nos. 004-014.5
GILBERT G. GUY, Respondent.
In 1999, the aging Francisco instructed Benjamin Lim, a nominal shareholder of
x-----------------------x GoodGold and his trusted employee, to collaborate with Atty. Emmanuel Paras,
to redistribute GoodGold’s shareholdings evenly among his children, namely,
G.R. No. 189699
Gilbert, Grace Guy-Cheu (Grace), Geraldine Guy (Geraldine), and Gladys Guy
SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and the HEIRS OF (Gladys), while maintaining a proportionate share for himself and his wife,
THE LATE GRACE G. CHEU, Petitioners, Simny.6
vs.
Accordingly, some of GoodGold’s certificates were cancelled and new ones were
THE HON. OFELIA C. CALO, in her capacity as Presiding Judge of the RTC
issued to represent the redistribution of GoodGold’s shares of stock. The new
-Mandaluyong City - Branch 211 and GILBERT G. GUY, Respondents.
certificates of stock were signed by Francisco and Atty. Emmanuel Paras, as
President and Corporate Secretary, respectively.
DECISION
The shares of stock were distributed among the following stockholders:
PEREZ, J.:

THE FACTS NAME NO. OF SHARES

With 519,997 shares of stock as reflected in Stock Certificate Nos. 004-014, Francisco Guy [husband] 195,000
herein respondent Gilbert G. Guy (Gilbert) practically owned almost 80 percent of
the 650,000 subscribed capital stock of GoodGold Realty & Development Simny G. Guy [wife] 195,000
Corporation (GoodGold),1 one of the multi-million corporations which Gilbert
claimed to have established in his 30s. GoodGold’s remaining shares were Gilbert G. Guy [son] 65,000
divided among Francisco Guy (Francisco) with 130,000 shares, Simny Guy
(Simny), Benjamin Lim and Paulino Delfin Pe, with one share each, respectively. Geraldine G. Guy [daughter] 65,000
Gilbert is the son of spouses Francisco and Simny. Simny, one of the petitioners,
however, alleged that it was she and her husband who established GoodGold, Grace G.Cheu (or her heirs) [daughter] 65,000
putting the bulk of its shares under Gilbert’s name. She claimed that with their
eldest son, Gaspar G. Guy (Gaspar), having entered the Focolare Missionary in Gladys G.Yao [daughter] 65,000
1970s, renouncing worldly possessions,2 she and Francisco put the future of the
Guy group of companies in Gilbert’s hands. Gilbert was expected to bring to new Total 650,0007
heights their family multi-million businesses and they, his parents, had high
hopes in him. In September 2004, or five years after the redistribution of GoodGold’s shares of
stock, Gilbert filed with the Regional Trial Court (RTC) of Manila, a Complaint for
Simny further claimed that upon the advice of their lawyers, upon the
the "Declaration of Nullity of Transfers of Shares in GoodGold and of General
incorporation of GoodGold, they issued stock certificates reflecting the shares
Information Sheets and Minutes of Meeting, and for Damages with Application for
held by each stockholder duly signed by Francisco as President and Atty.
a Preliminary Injunctive Relief," against his mother, Simny, and his sisters,
Emmanuel Paras as Corporate Secretary, with corresponding blank
Geraldine, Grace, and Gladys.8 Gilbert alleged, among others, that no stock
endorsements at the back of each certificate – including Stock Certificate Nos.
certificate ever existed;9 that his signature at the back of the spurious Stock
Certificate Nos. 004-014 which purportedly endorsed the same and that of the
corporate secretary, Emmanuel Paras, at the obverse side of the certificates
were forged, and, hence, should be nullified.10
Gilbert, however, withdrew the complaint, after the National Bureau of
Investigation (NBI) submitted a report to the RTC of Manila authenticating
Gilbert’s signature in the endorsed certificates.11 The NBI report stated:
FINDINGS:
Comparative analysis of the specimens submitted under magnification using
varied lighting process and with the aid of photographic enlargements disclosed
the presence of significant and fundamental similarities in the personal
handwriting habits existing between the questioned signatures of "GILBERT G.
GUY" and "EMMANUEL C. PARAS," on one hand, and their corresponding
standard specimen/exemplar signatures, on the other hand, such as in:
- Basic design of letters/elements;
- Manner of execution/line quality;
- Minute identifying details.
CONCLUSION:
A. The questioned and the standard specimen/exemplar signatures of Gilbert G.
Guy were written by one and the same person;
B. The questioned and the standard specimen/exemplar signatures of
"EMMANUEL C. PARAS" were written by one and the same person. (Emphasis
supplied)12
The present controversy arose, when in 2008, three years after the complaint
with the RTC of Manila was withdrawn, Gilbert again filed a complaint, this time,
with the RTC of Mandaluyong, captioned as "Intra-Corporate Controversy: For
the Declaration of Nullity of Fraudulent Transfers of Shares of Stock Certificates,
Fabricated Stock Certificates, Falsified General Information Sheets, Minutes of
Meetings, and Damages with Application for the Issuance of a Writ of Preliminary
and Mandatory Injunction," docketed as SEC-MC08-112, against his mother,
Simny, his sisters, Geraldine, Gladys, and the heirs of his late sister Grace.13
Gilbert alleged that he never signed any document which would justify and
support the transfer of his shares to his siblings and that he has in no way,
disposed, alienated, encumbered, assigned or sold any or part of his shares in
GoodGold.14 He also denied the existence of the certificates of stocks. According
to him, "there were no certificates of stocks under his name for the shares of
stock subscribed by him were never issued nor delivered to him from the time of
the inception of the corporation."15
Gilbert added that the Amended General Information Sheets (GIS) of GoodGold
for the years 2000 to 2004 which his siblings submitted to the Securities and
Exchange Commission (SEC) were spurious as these did not reflect his true
shares in the corporation which supposedly totaled to 595,000 shares;16 that no
valid stockholders’ annual meeting for the year 2004 was held, hence
proceedings taken thereon, including the election of corporate officers were null
and void;17 and, that his siblings are foreign citizens, thus, cannot own more than
forty percent of the authorized capital stock of the corporation.18
Gilbert also asked in his complaint for the issuance of a Writ of Preliminary and
Mandatory Injunction to protect his rights.19
In an Order dated 30 June 2008,20 the RTC denied Gilbert’s Motion for Injunctive
Relief21 which constrained him to file a motion for reconsideration, and,
thereafter, a Motion for Inhibition against Judge Edwin Sorongon, praying that the
latter recuse himself from further taking part in the case.
Meanwhile, Gilbert’s siblings filed a manifestation claiming that the complaint is a
nuisance and harassment suit under Section 1(b), Rule 1 of the Interim Rules of
Procedure on Intra-Corporate Controversies.
In an Order dated 6 November 2008,22 the RTC denied the motion for inhibition.
The RTC also dismissed the case, declaring it a nuisance and harassment suit,
viz.:
WHEREFORE, the court resolves:
(1) To DENY as it is hereby DENIED respondent’s Motion for Inhibition;
(2) To DENY as it is hereby DENIED respondent’s Motion for Reconsideration of
the June 30, 2008 Order; and,
(3) To declare as it is herby declared the instant case as a nuisance or
harassment suit. Accordingly, pursuant to Section 1(b), Rule 1 of the Interim
Rules of Procedure for Intra-Corporate Dispute, the instant case is hereby
DISMISSED. No pronouncement as to costs.23
This constrained Gilbert to assail the above Order before the Court of Appeals
(CA). The petition for review was docketed as CA-G.R. SP No. 106405.
In a Decision24 dated 27 May 2009, the CA upheld Judge Sorongon’s refusal to WHEREFORE, premises considered, the Motion to Defer Pre-Trial Conference
inhibit from hearing the case on the ground that Gilbert failed to substantiate his and Further Proceedings filed by petitioners is hereby DENIED. Set the pre-trial
allegation of Judge Sorongon’s partiality and bias.25 on October 20, 2009, at 8:30 in the morning.

The CA, in the same decision, also denied Gilbert’s Petition for the Issuance of The denial of the petitioners’ motion to defer pre-trial, compelled them to file with
Writ of Preliminary Injunction for failure to establish a clear and unmistakable this Court a Petition for Certiorari with Urgent Application for the Issuance of TRO
right that was violated as required under Section 3, rule 58 of the 1997 Rules of and/or A Writ of Preliminary Injunction, docketed as G.R. No. 189699. Because
Civil Procedure.26 of the pendency of the G.R. No. 189486 before us, the petitioners deemed
proper to question the said denial before us as an incident arising from the main
The CA, however, found merit on Gilbert’s contention that the complaint should controversy.29
be heard on the merits. It held that:
OUR RULING
A reading of the Order, supra, dismissing the respondent’s complaint for being a
harassment suit revealed that the court a quo relied heavily on the pieces of Suits by stockholders or members of a corporation based on wrongful or
documentary evidence presented by the Petitioners to negate Respondent’s fraudulent acts of directors or other persons may be classified into individual
allegation of fraudulent transfer of shares of stock, fabrication of stock certificates suits, class suits, and derivative suits.30
and falsification of General Information Sheets (GIS), inter alia. It bears emphasis
that the Respondent is even questioning the genuiness and authenticity of the An individual suit may be instituted by a stockholder against another stockholder
Petitioner’s documentary evidence. To our mind, only a full-blown trial on the for wrongs committed against him personally, and to determine their individual
merits can afford the determination of the genuineness and authenticity of the rights31 – this is an individual suit between stockholders. But an individual suit
documentary evidence and other factual issues which will ultimately resolve may also be instituted against a corporation, the same having a separate juridical
whether there was indeed a transfer of shares of stock.27 personality, which by its own may be sued. It is of course, essential that the suing
stockholder has a cause of action against the corporation.32
Hence, these consolidated petitions.
Individual suits against another stockholder or against a corporation are
G.R. No. 189486 is a Petition for Review under Rule 45 of the Rules of Court remedies which an aggrieved stockholder may avail of and which are recognized
filed by Simny, Geraldine, Gladys, and the heirs of the late Grace against Gilbert, in our jurisdiction as embedded in the Interim Rules on Intra-Corporate
which prays that this Court declare Civil Case No. SEC-MC08-112, a harassment Controversy. Together with this right is the parallel obligation of a party to comply
or nuisance suit. with the compulsory joinder of indispensable parties whether they may be
stockholders or the corporation itself.
Meanwhile, during the pendency of G.R. No. 189486, the trial court set the pre-
trial conference on the case subject of this controversy, constraining the The absence of an indispensable
petitioners to file a Motion to defer the pre-trial, which was, however, denied by party in a case renders all
the court a quo in an Order dated 11 September 2009,28 viz.: subsequent actions of the court null
and void for want of authority to act,
In a Resolution dated September 3, 2009, the Honorable Court of Appeals (CA) not only as to the absent parties but
(Former Second Division) denied the Motion for Partial Reconsideration filed [by even as to those present.33
petitioners] herein. Inasmuch as there is no longer any impediment to proceed
with the instant case and the fact that this court was specifically directed by the It bears emphasis that this controversy started with Gilbert’s complaint filed with
May 27, 2009 Decision of the CA Second Division to proceed with the trial on the the RTC of Mandaluyong City in his capacity as stockholder, director and Vice-
merits with dispatch, this court resolves to deny the motion under consideration. President of GoodGold.34

Gilbert’s complaint essentially prayed for the return of his original 519,997 shares
in GoodGold, by praying that the court declare that "there were no valid transfers
of the contested shares to defendants and Francisco."35 It baffles this Court, Settled is the rule that joinder of indispensable parties is compulsory40 being a
however, that Gilbert omitted Francisco as defendant in his complaint. While sine qua non for the exercise of judicial power,41 and, it is precisely "when an
Gilbert could have opted to waive his shares in the name of Francisco to justify indispensable party is not before the court that the action should be dismissed"
the latter’s non-inclusion in the complaint, Gilbert did not do so, but instead, for such absence renders all subsequent actions of the court null and void for
wanted everything back and even wanted the whole transfer of shares declared want of authority to act, not only as to the absent parties but even as to those
fraudulent. This cannot be done, without including Francisco as defendant in the present.42
original case. The transfer of the shares cannot be, as Gilbert wanted, declared
entirely fraudulent without including those of Francisco who owns almost a third It bears emphasis that Gilbert, while suing as a stockholder against his co-
of the total number. stockholders, should have also impleaded GoodGold as defendant. His
complaint also prayed for the annulment of the 2004 stockholders’ annual
Francisco, in both the 2004 and 2008 complaints, is an indispensable party meeting, the annulment of the 2004 election of the board of directors and of its
without whom no final determination can be had for the following reasons: (a) the officers, the annulment of 2004 GIS submitted to the SEC, issuance of an order
complaint prays that the shares now under the name of the defendants and for the accounting of all monies and rentals of GoodGold, and the issuance of a
Francisco be declared fraudulent; (b) Francisco owns 195,000 shares some of writ of preliminary and mandatory injunction. We have made clear that GoodGold
which, Gilbert prays be returned to him; (c) Francisco signed the certificates of is a separate juridical entity distinct from its stockholders and from its directors
stocks evidencing the alleged fraudulent shares previously in the name of Gilbert. and officers. The trial court, acting as a special commercial court, cannot settle
The inclusion of the shares of Francisco in the complaint makes Francisco an the issues with finality without impleading GoodGold as defendant. Like
indispensable party. Moreover, the pronouncement about the shares of Francisco, and for the same reasons, GoodGold is an indispensable party which
Francisco would impact on the hereditary rights of the contesting parties or on Gilbert should have impleaded as defendant in his complaint.
the conjugal properties of the spouses to the effect that Francisco, being
husband of Simny and father of the other contesting parties, must be included Allegations of deceit, machination,
for, otherwise, in his absence, there cannot be a determination between the false pretenses, misrepresentation,
parties already before the court which is effective, complete, or equitable. and threats are largely conclusions
of law that, without supporting
The definition in the Rules of Court, Section 7, Rule 3 thereof, of indispensable statements of the facts to which the
parties as "parties in interest without whom no final determination can be had of allegations of fraud refer, do not
an action" has been jurisprudentially amplified. In Sps. Garcia v. Garcia, sufficiently state an effective cause of
et.al.,36 this Court held that: action.43

An indispensable party is a party who has such 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.
"In all averments of fraud or mistake, the circumstances constituting fraud or
mistake must be stated with particularity"44 to "appraise the other party of what he
is to be called on to answer, and so that it may be determined whether the facts
and circumstances alleged amount to fraud."45 These particulars would
necessarily include the time, place and specific acts of fraud committed. 46 "The
reason for this rule is that an allegation of fraud concerns the morality of the
defendant’s conduct and he is entitled to know fully the ground on which the
allegations are made, so he may have every opportunity to prepare his case to
clear himself at the trial."47
The complaint of Gilbert states:

This was our pronouncements in Servicewide Specialists Inc. v. CA,37 Arcelona v. 13. The said spurious Amended GIS for the years 2000, 2001, 2002, 2003, 2004
CA,38 and Casals v. Tayud Golf and Country Club, Inc.39 and also in another falsified GIS for the year 2004, the petitioners indicated the
following alleged stockholders of GOODGOLD with their respective inception on June 6, 1988. Considering that the corporation is merely a family
shareholdings, to wit: corporation, plaintiff does not find the issuance of stock certificates necessary to
protect his corporate interest and he did not even demand for its issuance
NAME NO. OF SHARES despite the fact that he was the sole subscriber who actually paid his subscription
at the time of incorporation.48
Francisco Guy Co Chia 195,000
Tested against established standards, we find that the charges of fraud which
Simny G. Guy 195,000 Gilbert accuses his siblings are not supported by the required factual allegations.
In Reyes v. RTC of Makati,49 which we now reiterate, mutatis mutandis, while the
Gilbert G. Guy 65,000 complaint contained allegations of fraud purportedly committed by his siblings,
these allegations are not particular enough to bring the controversy within the
Geraldine G. Guy 65,000 special commercial court’s jurisdiction; they are not statements of ultimate facts,
but are mere conclusions of law: how and why the alleged transfer of shares can
Grace G.-Cheu 65,000 be characterized as "fraudulent" were not explained and elaborated on.50 As
emphasized in Reyes:
Gladys G.Yao 65,000
Not every allegation of fraud done in a corporate setting or perpetrated by
corporate officers will bring the case within the special commercial court’s
Total 650,000 jurisdiction. To fall within this jurisdiction, there must be sufficient nexus showing
that the corporation’s nature, structure, or powers were used to facilitate the
14. The above spurious GIS would show that form the original 519,997 shares of
fraudulent device or scheme.51 (Emphasis supplied)
stocks owned by the respondent, which is equivalent to almost 80% of the total
subscriptions and/or the outstanding capital stock of GOODGOLD, respondent’s Significantly, no corporate power or office was alleged to have facilitated the
subscription was drastically reduced to only 65,000 shares of stocks which is transfer of Gilbert’s shares. How the petitioners perpetrated the fraud, if ever they
merely equivalent to only 10 percent of the outstanding capital stock of the did, is an indispensable allegation which Gilbert must have had alleged with
corporation. particularity in his complaint, but which he failed to.

15. Based on the spurious GIS, shares pertaining to Benjamin Lim and Paulino Failure to specifically allege the
Delfin Pe were omitted and the total corporate shares originally owned by fraudulent acts in intra-corporate
incorporators including herein respondent have been fraudulently transferred and controversies is indicative of a
distributed, as follows: x x x (Emphasis supplied) harassment or nuisance suit and may
be dismissed motu proprio.
xxxx
In ordinary cases, the failure to specifically allege the fraudulent acts does not
18. To date, respondent is completely unaware of any documents signed by him
constitute a ground for dismissal since such a defect can be cured by a bill of
that would justify and support the foregoing transfer of his shares to the
particulars.52 Thus:
defendants. Respondent strongly affirms that he has not in any way, up to this
date of filing the instant complaint, disposed, alienated, encumbered, assigned or Failure to allege fraud or mistake with as much particularity as is desirable is not
sold any or part of the shares of stocks of GOODGOLD corporation owned by fatal if the general purport of the claim or defense is clear, since all pleadings
him and registered under his name under the books of the corporation. should be so construed as to do substantial justice. Doubt as to the meaning of
the pleading may be resolved by seeking a bill of particulars.
19. Neither has respondent endorsed, signed, assigned any certificates of stock
representing the tangible evidence of his stocks ownership, there being no
certificates of stocks issued by the corporation nor delivered to him since its
A bill of particulars may be ordered as to a defense of fraud or mistake if the Geraldine, Grace, and Gladys.57 Gilbert alleged, among others, that no stock
circumstances constituting fraud or mistake are not stated with the particularity certificate ever existed;58 that his signature at the back of the spurious Stock
required by the rule.53 Certificate Nos. 004-014 which purportedly endorsed the same and that of the
corporate secretary, Emmanuel Paras, at the obverse side of the certificates
The above-stated rule, however, does not apply to intra-corporate controversies. were forged, and, hence, should be nullified.59 Gilbert withdrew this complaint
In Reyes,54 we pronounced that "in cases governed by the Interim Rules of after the NBI submitted a report to the RTC of Manila authenticating Gilbert’s
Procedure on Intra-Corporate Controversies a bill of particulars is a prohibited signature in the endorsed certificates. And, it was only after three years from the
pleading. It is essential, therefore, for the complaint to show on its face what are withdrawal of the Manila complaint, that Gilbert again filed in 2008 a complaint
claimed to be the fraudulent corporate acts if the complainant wishes to invoke also for declaration of nullity of the transfer of the shares of stock, this time with
the court’s special commercial jurisdiction." This is because fraud in intra- the RTC of Mandaluyong. The caption of the complaint is "Intra-Corporate
corporate controversies must be based on "devises and schemes employed by, Controversy: For the Declaration of Nullity of Fraudulent Transfers of Shares of
or any act of, the board of directors, business associates, officers or partners, Stock Certificates, Fabricated Stock Certificates, Falsified General Information
amounting to fraud or misrepresentation which may be detrimental to the interest Sheets, Minutes of Meetings, and Damages with Application for the Issuance of a
of the public and/or of the stockholders, partners, or members of any corporation, Writ of Preliminary and Mandatory Injunction," docketed as SEC-MC08-112,
partnership, or association," as stated under Rule 1, Section 1 (a)(1) of the against his mother, Simny, his sisters, Geraldine, Gladys, and the heirs of his late
Interim Rules. The act of fraud or misrepresentation complained of becomes a sister Grace.60 1âwphi1
criterion in determining whether the complaint on its face has merits, or within the
jurisdiction of special commercial court, or merely a nuisance suit. When a stock certificate is endorsed
in blank by the owner thereof, it
It did not escape us that Gilbert, instead of particularly describing the fraudulent constitutes what is termed as "street
acts that he complained of, just made a sweeping denial of the existence of stock certificate," so that upon its face, the
certificates by claiming that such were not necessary, GoodGold being a mere holder is entitled to demand its
family corporation.55 As sweeping and bereft of particulars is his claim that he "is transfer his name from the issuing
unaware of any document signed by him that would justify and support the corporation.
transfer of his shares to herein petitioners."56 Even more telling is the
contradiction between the denial of the existence of stock certificates and the With Gilbert’s failure to allege specific acts of fraud in his complaint and his
denial of the transfer of his shares of stocks "under his name under the books of failure to rebut the NBI report, this Court pronounces, as a consequence thereof,
the corporations." that the signatures appearing on the stock certificates, including his blank
endorsement thereon were authentic. With the stock certificates having been
It is unexplained that while Gilbert questioned the authenticity of his signatures endorsed in blank by Gilbert, which he himself delivered to his parents, the same
indorsing the stock certificates, and that of Atty. Emmanuel Paras, the corporate can be cancelled and transferred in the names of herein petitioners.
secretary, he did not put in issue as doubtful the signature of his father which
also appeared in the certificate as President of the corporation. Notably, Gilbert, In Santamaria v. Hongkong and Shanghai Banking Corp.,61 this Court held that
during the entire controversy that started with his 2004 complaint, failed to rebut when a stock certificate is endorsed in blank by the owner thereof, it constitutes
the NBI Report which authenticated all the signatures appearing in the stock what is termed as "street certificate," so that upon its face, the holder is entitled
certificates. to demand its transfer into his name from the issuing corporation. Such certificate
is deemed quasi-negotiable, and as such the transferee thereof is justified in
Even beyond the vacant pleadings, its nature as nuisance is palpable. To believing that it belongs to the holder and transferor.1âwphi1
recapitulate, it was only after five years following the redistribution of GoodGold’s
shares of stock, that Gilbert filed with the RTC of Manila, a Complaint for the While there is a contrary ruling, as an exception to the general rule enunciated
"Declaration of Nullity of Transfers of Shares in GoodGold and of General above, what the Court held in Neugene Marketing Inc., et al., v CA,62 where stock
Information Sheets and Minutes of Meeting, and for Damages with Application for certificates endorsed in blank were stolen from the possession of the beneficial
a Preliminary Injunctive Relief," against his mother, Simny, and his sisters, owners thereof constraining this Court to declare the transfer void for lack of
delivery and want of value, the same cannot apply to Gilbert because the stock
certificates which Gilbert endorsed in blank were in the undisturbed possession
of his parents who were the beneficial owners thereof and who themselves as
such owners caused the transfer in their names. Indeed, even if Gilbert’s parents
were not the beneficial owners, an endorsement in blank of the stock certificates
coupled with its delivery, entitles the holder thereof to demand the transfer of said
stock certificates in his name from the issuing corporation.63
Interestingly, Gilbert also used the above discussed reasons as his arguments in
Gilbert Guy v. Court of Appeals, et a.l,64 a case earlier decided by this Court. In
that petition, Lincoln Continental, a corporation purportedly owned by Gilbert,
filed with the RTC, Branch 24, Manila, a Complaint for Annulment of the Transfer
of Shares of Stock against Gilbert’s siblings, including his mother, Simny. The
complaint basically alleged that Lincoln Continental owns 20,160 shares of stock
of Northern Islands; and that Gilbert’s siblings, in order to oust him from the
management of Northern Islands, falsely transferred the said shares of stock in
his sisters’ names.65 This Court dismissed Gilbert’s petition and ruled in favor of
his siblings viz:
to respondent sisters is fraudulent. As aptly held by the Court of Appeals, fraud is
never presumed but must be established by clear and convincing evidence.
Gilbert failed to discharge this burden. We agree with the Court of Appeals that
respondent sisters own the shares of stocks, Gilbert being their mere
trustee. 66 (Underlining supplied).
This Court finds no cogent reason to divert from the above stated ruling, these
two cases having similar facts.
WHEREFORE, premises considered, the petitions in G.R. Nos. 189486 and
189699 are hereby GRANTED. The Decision dated 27 May 2009 of the Court of
Appeals in CA-G .R. SP No. 106405 and its Resolution dated 03 September
2009 are REVERSED and SET ASIDE. The Court DECLARES that SEC-MC08-
112 now pending before the Regional Trial Court, Branch 211, Mandaluyong
City, is a nuisance suit and hereby ORDERS it to IMMEDIATELY DISMISS the
same for reasons discussed herein.
SO ORDERED.

One thing is clear. It was established before the trial court, affirmed by the Court
of Appeals, that Lincoln Continental held the disputed shares of stock of Northern
Islands merely in trust for the Guy sisters. In fact, the evidence proffered by
Lincoln Continental itself supports this conclusion. It bears emphasis that this
factual finding by the trial court was affirmed by the Court of Appeals, being
supported by evidence, and is, therefore, final and conclusive upon this Court.

Article 1440 of the Civil Code provides that:

"ART. 1440. A person who establishes a trust is called the trustor; one in whom
confidence is reposed as regards property for the benefit of another person is
known as the trustee; and the person for whose benefit the trust has been
created is referred to as the beneficiary."

In the early case of Gayondato v. Treasurer of the Philippine Islands, this Court
defines trust, in its technical sense, as "a right of property, real or personal, held
by one party for the benefit of another." Differently stated, a trust is "a fiduciary
relationship with respect to property, subjecting the person holding the same to
the obligation of dealing with the property for the benefit of another person."

Both Lincoln Continental and Gilbert claim that the latter holds legal title to the
shares in question. But record shows that there is no evidence to support their
claim. Rather, the evidence on record clearly indicates that the stock certificates
representing the contested shares are in respondents' possession. Significantly,
there is no proof to support his allegation that the transfer of the shares of stock

[G.R. NO. 169276 : June 16, 2009]
DIONISIA MONIS LAGUNILLA and RAFAEL MONIS, Petitioners, v. 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. 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) P100,000.00 as moral damages;
2) P50,000.00 as exemplary damages;
3) P100,000.00 as attorney's fees; andcralawlibrary
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.14 ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
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
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.ςηαñrοblεš νιr†υαl lαω
lιbrαrÿ
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.
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.

Verily, Pedro's interest in the subject matter of the suit and in the relief sought are SO ORDERED.
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.29 That 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

G.R. No. 176405 August 20, 2008
LEO WEE, petitioner,
vs.
GEORGE DE CASTRO (on his behalf and as attorney-in-fact of ANNIE DE
CASTRO and FELOMINA UBAN) and MARTINIANA DE
CASTRO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the
Revised Rules of Court filed by petitioner Leo Wee, seeking the reversal and
setting aside of the Decision2 dated 19 September 2006 and the
Resolution3 dated 25 January 2007 of the Court of Appeals in CA-G.R. SP No.
90906. The appellate court, in its assailed Decision, reversed the dismissal of
Civil Case. No. 1990, an action for ejectment instituted by respondent George de
Castro, on his own behalf and on behalf of Annie de Castro, Felomina de Castro
Uban and Jesus de Castro4 against petitioner, by the Municipal Trial Court (MTC)
of Alaminos City, which was affirmed by the Regional Trial Court (RTC), Branch
54, Alaminos City, Pangasinan; and, ruling in favor of the respondents, ordered
the petitioner to vacate the subject property. In its assailed Resolution dated 25
January 2007, the Court of Appeals refused to reconsider its earlier Decision of
19 September 2006.
In their Complaint5 filed on 1 July 2002 with the MTC of Alaminos City, docketed
as Civil Case No. 1990, respondents alleged that they are the registered owners
of the subject property, a two-storey building erected on a parcel of land
registered under Transfer Certificate of Title (TCT) No. 16193 in the Registry of
Deeds of Pangasinan, described and bounded as follows:
A parcel of land (Lot 13033-D-2, Psd-01550-022319, being a portion of Lot
13033-D, Psd-018529, LRC Rec. No. ____) situated in Pob., Alaminos City;
bounded on the NW. along line 1-2 by Lot 13035-D-1 of the subdivision plan; on
the NE. along line 2-3 by Vericiano St.; on the SE. along line 3-4 by Lot 13033-D-
2 of the subdivision plan; on the SW. along line 4-1 by Lot 575, Numeriano
Rabago. It is coverd by TCT No. 16193 of the Register of Deeds of Pangasinan
(Alaminos City) and declared for taxation purposes per T.D. No. 2075, and
assessed in the sum of P93,400.00.6
Respondents rented out the subject property to petitioner on a month to month
basis for P9,000.00 per month.7 Both parties agreed that effective 1 October
2001, the rental payment shall be increased from P9,000.00 to P15,000.00.
Petitioner, however, failed or refused to pay the corresponding increase on rent
when his rental obligation for the month of 1 October 2001 became due. The
rental dispute was brought to the Lupon Tagapagpamayapa of Poblacion,
Alaminos, Pangasinan, in an attempt to amicably settle the matter but the parties
failed to reach an agreement, resulting in the issuance by the Barangay Lupon of
a Certification to file action in court on 18 January 2002. On 10 June 2002,
respondent George de Castro sent a letter to petitioner terminating their lease
agreement and demanding that the latter vacate and turn over the subject
property to respondents. Since petitioner stubbornly refused to comply with said
demand letter, respondent George de Castro, together with his siblings and co-
respondents, Annie de Castro, Felomina de Castro Uban and Jesus de Castro,
filed the Complaint for ejectment before the MTC.
It must be noted, at this point, that although the Complaint stated that it was
being filed by all of the respondents, the Verification and the Certificate of Non-
Forum Shopping were signed by respondent George de Castro alone. He would
subsequently attach to his position paper filed before the MTC on 28 October
2002 the Special Powers of Attorney (SPAs) executed by his sisters Annie de
Castro and Felomina de Castro Uban dated 7 February 2002 and 14 March 2002
respectively, authorizing him to institute the ejectment case against petitioner.
Petitioner, on the other hand, countered that there was no agreement between
the parties to increase the monthly rentals and respondents' demand for an
increase was exorbitant. The agreed monthly rental was only for the amount
of P9,000.00 and he was religiously paying the same every month. Petitioner
then argued that respondents failed to comply with the jurisdictional requirement
of conciliation before the Barangay Lupon prior to the filing of Civil Case. No.
1990, meriting the dismissal of their Complaint therein. The Certification to file
action issued by the Barangay Lupon appended to the respondents' Complaint
merely referred to the issue of rental increase and not the matter of ejectment.
Petitioner asserted further that the MTC lacked jurisdiction over the ejectment
suit, since respondents' Complaint was devoid of any allegation that there was an
"unlawful withholding" of the subject property by the petitioner.8
During the Pre-Trial Conference9 held before the MTC, the parties stipulated that
in May 2002, petitioner tendered to respondents the sum of P9,000.00 as rental
payment for the month of January 2002; petitioner paid rentals for the months of
October 2001 to January 2002 but only in the amount of P9,000.00 per month;
respondents, thru counsel, sent a letter to petitioner on 10 June 2002 terminating
their lease agreement which petitioner ignored; and the Barangay Lupon did
issue a Certification to file action after the parties failed to reach an agreement
before it.
After the submission of the parties of their respective Position Papers, the MTC,
on 21 November 2002, rendered a Decision10 dismissing respondents' Complaint
in Civil Case No. 1990 for failure to comply with the prior conciliation requirement
before the Barangay Lupon. The decretal portion of the MTC Decision reads:
WHEREFORE, premised considered, judgment is hereby rendered ordering the
dismissal of this case. Costs against the [herein respondents].
On appeal, docketed as Civil Case No. A-2835, the RTC of Alaminos,
Pangasinan, Branch 54, promulgated its Decision11 dated 27 June 2005 affirming
the dismissal of respondents' Complaint for ejectment after finding that the
appealed MTC Decision was based on facts and law on the matter. The RTC
declared that since the original agreement entered into by the parties was for
petitioner to pay only the sum of P9.000.00 per month for the rent of the subject
property, and no concession was reached by the parties to increase such amount
to P15.000.00, petitioner cannot be faulted for paying only the originally agreed
upon monthly rentals. Adopting petitioner's position, the RTC declared that
respondents' failure to refer the matter to the Barangay court for conciliation
process barred the ejectment case, conciliation before the Lupon being a
condition sine qua non in the filing of ejectment suits. The RTC likewise agreed
with petitioner in ruling that the allegation in the Complaint was flawed, since
respondents failed to allege that there was an "unlawful withholding" of
possession of the subject property, taking out Civil Case No. 1990 from the
purview of an action for unlawful detainer. Finally, the RTC decreed that
respondents' Complaint failed to comply with the rule that a co-owner could not
maintain an action without joining all the other co-owners. Thus, according to the
dispositive portion of the RTC Decision:
WHEREFORE the appellate Court finds no cogent reason to disturb the findings
of the court a quo. The Decision dated November 21, 2002 appealed from is
hereby AFFIRMED IN TOTO.12
Undaunted, respondents filed a Petition for Review on Certiorari13 with the Court
of Appeals where it was docketed as CA-G.R. SP No. 90906. Respondents
argued in their Petition that the RTC gravely erred in ruling that their failure to
comply with the conciliation process was fatal to their Complaint, since it is only
respondent George de Castro who resides in Alaminos City, Pangasinan, while
respondent Annie de Castro resides in Pennsylvania, United States of America
(USA); respondent Felomina de Castro Uban, in California, USA; and respondent
Jesus de Castro, now substituted by his wife, Martiniana, resides in Manila.
Respondents further claimed that the MTC was not divested of jurisdiction over
their Complaint for ejectment because of the mere absence therein of the term
"unlawful withholding" of their subject property, considering that they had
sufficiently alleged the same in their Complaint, albeit worded differently. Finally,
respondents posited that the fact that only respondent George de Castro signed
the Verification and the Certificate of Non-Forum Shopping attached to the
Complaint was irrelevant since the other respondents already executed Special
Powers of Attorney (SPAs) authorizing him to act as their attorney-in-fact in the
institution of the ejectment suit against the petitioner.
On 19 September 2006, the Court of Appeals rendered a Decision granting the
respondents' Petition and ordering petitioner to vacate the subject property and
turn over the same to respondents. The Court of Appeals decreed:
WHEREFORE, premises considered, the instant petition is GRANTED. The
assailed Decision dated June 27, 2005 issued by the RTC of Alaminos City,
Pangasinan, Branch 54, is REVERSED and SET ASIDE. A new one is hereby
rendered ordering [herein petitioner] Leo Wee to SURRENDER and VACATE the
leased premises in question as well as to pay the sum of P15,000.00 per month
reckoned from March, 2002 until he shall have actually turned over the
possession thereof to petitioners plus the rental arrearages of P30,000.00
representing unpaid increase in rent for the period from October, 2001 to
February, 2002, with legal interest at 6% per annum to be computed from June 7,
2002 until finality of this decision and 12% thereafter until full payment thereof.
Respondent is likewise hereby ordered to pay petitioners the amount
of P20,000.00 as and for attorney's fees and the costs of suit.14
In a Resolution dated 25 January 2007, the appellate court denied the Motion for
Reconsideration interposed by petitioner for lack of merit.
Petitioner is now before this Court via the Petition at bar, making the following
assignment of errors:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING
THAT CONCILIATION PROCESS IS NOT A JURISDICTIONAL REQUIREMENT
THAT NON-COMPLIANCE THEREWITH DOES NOT AFFECT THE
JURISDICTION IN EJECTMENT CASE;
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING
THE SUFFICIENCY OF THE ALLEGATIONS IN THE COMPLAINT FOR
EJECTMENT DESPITE THE WANT OF ALLEGATION OF "UNLAWFUL
WITHOLDING PREMISES" (sic) QUESTIONED BY PETITIONER;
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT
THE FILING OF THE COMPLAINT OF RESPONDENT GEORGE DE CASTRO
WITHOUT JOINING ALL HIS OTHER CO-OWNERS OVER THE SUBJECT
PROPERTY IS PROPER;
IV.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT
APPLYING SUPREME COURT CIRCULAR NO. 10 WHICH DIRECTS A
PLEADER TO INDICATE IN HIS PLEADINGS HIS OFFICIAL RECEIPT OF HIS
PAYMENT OF HIS IBP DUES.15
Petitioner avers that respondents failed to go through the conciliation process
before the Barangay Lupon, a jurisdictional defect that bars the legal action for
ejectment. The Certification to file action dated 18 January 2002 issued by
the Barangay Lupon, appended by the respondents to their Complaint in Civil
Case No. 1990, is of no moment, for it attested only that there was confrontation
between the parties on the matter of rental increase but not on unlawful detainer
of the subject property by the petitioner. If it was the intention of the respondents
from the very beginning to eject petitioner from the subject property, they should
have brought up the alleged unlawful stay of the petitioner on the subject
property for conciliation before the Barangay Lupon.
The barangay justice system was established primarily as a means of easing up
the congestion of cases in the judicial courts. This could be accomplished
through a proceeding before the barangay courts which, according to the one
who conceived of the system, the late Chief Justice Fred Ruiz Castro, is
essentially arbitration in character; and to make it truly effective, it should also be
compulsory. With this primary objective of the barangay justice system in mind, it
would be wholly in keeping with the underlying philosophy of Presidential Decree
No. 1508 (Katarungang Pambarangay Law), which would be better served if an
out-of-court settlement of the case is reached voluntarily by the parties. 16 To
ensure this objective, Section 6 of Presidential Decree No. 1508 requires the
parties to undergo a conciliation process before the Lupon Chairman or
the Pangkat ng Tagapagkasundo as a precondition to filing a complaint in court
subject to certain exceptions. The said section has been declared compulsory in
nature.17
Presidential Decree No. 1508 is now incorporated in Republic Act No. 7160 (The
Local Government Code), which took effect on 1 January 1992.
The pertinent provisions of the Local Government Code making conciliation a
precondition to the filing of complaints in court are reproduced below:
SEC. 412. Conciliation.- (a) Pre-condition to filing of complaint in court. - No
complaint, petition, action, or proceeding involving any matter within the authority
of the lupon shall be filed or instituted directly in court or any other government
office for adjudication, unless there has been a confrontation between the parties
before the lupon chairman or the pangkat, and that no conciliation or settlement
has been reached as certified by the lupon secretary or pangkat secretary as
attested to by the lupon or pangkat chairman or unless the settlement has been
repudiated by the parties thereto.
(b) Where parties may go directly to court. - The parties may go directly to court
in the following instances:
(1) Where the accused is under detention;
(2) Where a person has otherwise been deprived of personal liberty calling
for habeas corpus proceedings;
(3) Where actions are coupled with provisional remedies such as preliminary
injunction, attachment, delivery of personal property, and support pendente lite;
and
(4) Where the action may otherwise be barred by the statute of limitations.
(c) Conciliation among members of indigenous cultural communities. - The
customs and traditions of indigenous cultural communities shall be applied in
settling disputes between members of the cultural communities.
SEC. 408. Subject Matter for Amicable Settlement; Exception Thereto. - The
lupon of each barangay shall have authority to bring together the parties actually
residing in the same city or municipality for amicable settlement of all disputes
except:
(a) Where one party is the government or any subdivision or instrumentality
thereof;
(b) Where one party is a public officer or employee, and the dispute relates to the
performance of his official functions;
(c) Offenses punishable by imprisonment exceeding one (1) year or a fine
exceeding Five thousand pesos (P5,000.00);
(d) Offenses where there is no private offended party;
(e) Where the dispute involves real properties located in different cities or
municipalities unless the parties thereto agree to submit their differences to
amicable settlement by an appropriate lupon;
(f) Disputes involving parties who actually reside in barangays of different cities
or municipalities, except where such barangay units adjoin each other and the
parties thereto agree to submit their differences to amicable settlement by an
appropriate lupon;
(g) Such other classes of disputes which the President may determine in the
interest of justice or upon the recommendation of the Secretary of Justice.
There is no question that the parties to this case appeared before the Barangay
Lupon for conciliation proceedings. There is also no dispute that the only matter
referred to the Barangay Lupon for conciliation was the rental increase, and not
the ejectment of petitioner from the subject property. This is apparent from a
perusal of the Certification to file action in court issued by the Barangay Lupon on
18 January 2002, to wit:
CERTIFICATION TO FILE COMPLAINTS
This is to certify that:
1. There was personal confrontation between parties before the barangay
Lupon regarding rental increase of a commercial building but conciliation failed;
2. Therefore, the corresponding dispute of the above-entitled case may now be
filed in Court/Government Office.18 (Emphasis ours.)
The question now to be resolved by this Court is whether the Certification dated
18 January 2002 issued by the Barangay Lupon stating that no settlement was
reached by the parties on the matter of rental increase sufficient to comply with
the prior conciliation requirement under the Katarungang Pambarangay Law to
authorize the respondents to institute the ejectment suit against petitioner.
The Court rules affirmatively.
While it is true that the Certification to file action dated 18 January 2002 of
the Barangay Lupon refers only to rental increase and not to the ejectment of
petitioner from the subject property, the submission of the same for conciliation
before the Barangay Lupon constitutes sufficient compliance with the provisions
of the Katarungang Pambarangay Law. Given the particular circumstances of the
case at bar, the conciliation proceedings for the amount of monthly rental should
logically and reasonably include also the matter of the possession of the property
subject of the rental, the lease agreement, and the violation of the terms thereof.
We now proceed to discuss the meat of the controversy.
The contract of lease between the parties did not stipulate a fixed period. Hence,
the parties agreed to the payment of rentals on a monthly basis. On this score,
Article 1687 of the Civil Code provides:
Art. 1687. If the period for the lease has not been fixed, it is understood to be
from year to year, if the rent agreed upon is annual; from month to month, if
it is monthly; from week to week, if the rent is weekly; and from day to day, if the
rent is to be paid daily. However, even though a monthly rent is paid, and no
period for the lease has been set, the courts may fix a longer term for the lease
after the lessee has occupied the premises for over one year. If the rent is
weekly, the courts may likewise determine a longer period after the lessee has
been in possession for over six months. In case of daily rent, the courts may also
fix a longer period after the lessee has stayed in the place for over one month.
(Emphasis supplied.)
The rentals being paid monthly, the period of such lease is deemed terminated at
the end of each month. Thus, respondents have every right to demand the
ejectment of petitioners at the end of each month, the contract having expired by
operation of law. Without a lease contract, petitioner has no right of possession
to the subject property and must vacate the same. Respondents, thus, should be
allowed to resort to an action for ejectment before the MTC to recover
possession of the subject property from petitioner.
Corollarily, petitioner's ejectment, in this case, is only the reasonable
consequence of his unrelenting refusal to comply with the respondents' demand
for the payment of rental increase agreed upon by both parties. Verily, the
lessor's right to rescind the contract of lease for non-payment of the demanded
increased rental was recognized by this Court in Chua v. Victorio19:
The right of rescission is statutorily recognized in reciprocal obligations, such as
contracts of lease. In addition to the general remedy of rescission granted under
Article 1191 of the Civil Code, there is an independent provision granting the
remedy of rescission for breach of any of the lessor or lessee's statutory
obligations. Under Article 1659 of the Civil Code, the aggrieved party may, at his
option, ask for (1) the rescission of the contract; (2) rescission and
indemnification for damages; or (3) only indemnification for damages, allowing
the contract to remain in force.
Payment of the rent is one of a lessee's statutory obligations, and, upon
non-payment by petitioners of the increased rental in September 1994, the
lessor acquired the right to avail of any of the three remedies outlined
above. (Emphasis supplied.)
Petitioner next argues that respondent George de Castro cannot maintain an
action for ejectment against petitioner, without joining all his co-owners.
Article 487 of the New Civil Code is explicit on this point:
ART. 487. Any one of the co-owners may bring an action in ejectment.
This article covers all kinds of action for the recovery of possession, i.e., forcible
entry and unlawful detainer (accion interdictal), recovery of possession (accion
publiciana), and recovery of ownership (accion de reivindicacion). As explained
by the renowned civilist, Professor Arturo M. Tolentino20:
A co-owner may bring such an action, without the necessity of joining all
the other co-owners as co-plaintiffs, because the suit is deemed to be
instituted for the benefit of all. If the action is for the benefit of the plaintiff
alone, such that he claims possession for himself and not for the co-ownership,
the action will not prosper. (Emphasis added.)
In the more recent case of Carandang v. Heirs of De Guzman,21 this Court
declared that a co-owner is not even a necessary party to an action for
ejectment, for complete relief can be afforded even in his absence, thus:
In sum, in suits to recover properties, all co-owners are real parties in interest.
However, pursuant to Article 487 of the Civil Code and the relevant
jurisprudence, any one of them may bring an action, any kind of action for the
recovery of co-owned properties. Therefore, only one of the co-owners, namely
the co-owner who filed the suit for the recovery of the co-owned property, is an
indispensable party thereto. The other co-owners are not indispensable parties.
They are not even necessary parties, for a complete relief can be afforded in the
suit even without their participation, since the suit is presumed to have been filed
for the benefit of all co-owners.
Moreover, respondents Annie de Castro and Felomina de Castro Uban each
executed a Special Power of Attorney, giving respondent George de Castro the
authority to initiate Civil Case No. 1990.
A power of attorney is an instrument in writing by which one person, as principal,
appoints another as his agent and confers upon him the authority to perform
certain specified acts or kinds of acts on behalf of the principal. The written
authorization itself is the power of attorney, and this is clearly indicated by the
fact that it has also been called a "letter of attorney."22
Even then, the Court views the SPAs as mere surplusage, such that the lack
thereof does not in any way affect the validity of the action for ejectment
instituted by respondent George de Castro. This also disposes of petitioner's
contention that respondent George de Castro lacked the authority to sign the
Verification and the Certificate of Non-Forum Shopping. As the Court ruled in
Mendoza v. Coronel23:
We likewise hold that the execution of the certification against forum
shopping by the attorney-in-fact in the case at bar is not a violation of the
requirement that the parties must personally sign the same. The attorney-in-
fact, who has authority to file, and who actually filed the complaint as the
representative of the plaintiff co-owner, pursuant to a Special Power of Attorney,
is a party to the ejectment suit. In fact, Section 1, Rule 70 of the Rules of Court
includes the representative of the owner in an ejectment suit as one of the parties
authorized to institute the proceedings. (Emphasis supplied.)
Failure by respondent George de Castro to attach the said SPAs to the
Complaint is innocuous, since it is undisputed that he was granted by his sisters
the authority to file the action for ejectment against petitioner prior to the
institution of Civil Case No. 1990. The SPAs in his favor were respectively
executed by respondents Annie de Castro and Felomina de Castro Uban on 7
February 2002 and 14 March 2002; while Civil Case No. 1990 was filed by
respondent George de Castro on his own behalf and on behalf of his siblings
only on 1 July 2002, or way after he was given by his siblings the authority to file
said action. The Court quotes with approval the following disquisition of the Court
of Appeals:
Moreover, records show that [herein respondent] George de Castro was indeed
authorized by his sisters Annie de Castro and Felomina de Castro Uban, to
prosecute the case in their behalf as shown by the Special Power of Attorney
dated February 7, 2002 and March 14, 2002. That these documents were
appended only to [respondent George de Castro's] position paper is of no unlawful detainer, an allegation that the defendant is unlawfully withholding
moment considering that the authority conferred therein was given prior to the possession from the plaintiff is deemed sufficient, without necessarily employing
institution of the complaint in July, 2002. x x x.24 the terminology of the law.30

Respondent deceased Jesus de Castro's failure to sign the Verification and
Certificate of Non-Forum Shopping may be excused since he already executed
an Affidavit25 with respondent George de Castro that he had personal knowledge
of the filing of Civil Case No. 1990. In Torres v. Specialized Packaging
Development Corporation,26 the Court ruled that the personal signing of the
verification requirement was deemed substantially complied with when, as in the
instant case, two out of 25 real parties-in-interest, who undoubtedly have
sufficient knowledge and belief to swear to the truth of the allegations in the
petition, signed the verification attached to it.
In the same vein, this Court is not persuaded by petitioner's assertion that
respondents' failure to allege the jurisdictional fact that there was "unlawful
withholding" of the subject property was fatal to their cause of action.
Petitioner's averment that the Court of Appeals should have dismissed
respondents' Petition in light of the failure of their counsel to attach the Official
Receipt of his updated payment of Integrated Bar of the Philippines (IBP) dues is
now moot and academic, since respondents' counsel has already duly complied
therewith. It must be stressed that judicial cases do not come and go through the
portals of a court of law by the mere mandate of technicalities.31 Where a rigid
application of the rules will result in a manifest failure or miscarriage of justice,
technicalities should be disregarded in order to resolve the case. 32
Finally, we agree in the ruling of the Court of Appeals that petitioner is liable for
the payment of back rentals, attorney's fees and cost of the suit. Respondents
must be duly indemnified for the loss of income from the subject property on
account of petitioner's refusal to vacate the leased premises.

It is apodictic that what determines the nature of an action as well as which court
has jurisdiction over it are the allegations in the complaint and the character of
the relief sought. In an unlawful detainer case, the defendant's possession was
originally lawful but ceased to be so upon the expiration of his right to possess.
Hence, the phrase "unlawful withholding" has been held to imply possession on
the part of defendant, which was legal in the beginning, having no other source
than a contract, express or implied, and which later expired as a right and is
being withheld by defendant.27
WHEREFORE, premises considered, the instant Petition is DENIED. The
Decision dated 19 September 2006 and Resolution dated 25 January 2007 of the
Court of Appeals in CA-G.R. SP No. 90906 are hereby AFFIRMED in toto. Costs
against petitioner.
SO ORDERED.

In Barba v. Court of Appeals,28 the Court held that although the phrase
"unlawfully withholding" was not actually used by therein petitioner in her
complaint, the Court held that her allegations, nonetheless, amounted to an
unlawful withholding of the subject property by therein private respondents,
because they continuously refused to vacate the premises even after notice and
demand.

In the Petition at bar, respondents alleged in their Complaint that they are the
registered owners of the subject property; the subject property was being
occupied by the petitioner pursuant to a monthly lease contract; petitioner
refused to accede to respondents' demand for rental increase; the respondents
sent petitioner a letter terminating the lease agreement and demanding that
petitioner vacate and turn over the possession of the subject property to
respondents; and despite such demand, petitioner failed to surrender the subject
property to respondents.29 The Complaint sufficiently alleges the unlawful
withholding of the subject property by petitioner, constitutive of unlawful detainer,
although the exact words "unlawful withholding" were not used. In an action for
G.R. No. 178411 June 23, 2010
OFFICE OF THE CITY MAYOR OF PARAÑAQUE CITY, Petitioners,
vs.
MARIO D. EBIO AND HIS CHILDREN/HEIRS namely, ARTURO V. EBIO,
EDUARDO V. EBIO, RENATO V. EBIO, LOURDES E. MAGTANGOB, MILA V.
EBIO, and ARNEL V. EBIO, Respondents.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, assailing the January 31, 2007 Decision1 and June
8, 2007 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 91350
allegedly for being contrary to law and jurisprudence. The CA had reversed the
Order3 of the Regional Trial Court (RTC) of Parañaque City, Branch 196, issued
on April 29, 2005 in Civil Case No. 05-0155.
Below are the facts.
Respondents claim that they are the absolute owners of a parcel of land
consisting of 406 square meters, more or less, located at 9781 Vitalez
Compound in Barangay Vitalez, Parañaque City and covered by Tax Declaration
Nos. 01027 and 01472 in the name of respondent Mario D. Ebio. Said land was
an accretion of Cut-cut creek. Respondents assert that the original occupant and
possessor of the said parcel of land was their great grandfather, Jose Vitalez.
Sometime in 1930, Jose gave the land to his son, Pedro Vitalez. From then on,
Pedro continuously and exclusively occupied and possessed the said lot. In
1966, after executing an affidavit declaring possession and occupancy, 4 Pedro
was able to obtain a tax declaration over the said property in his name.5 Since
then, respondents have been religiously paying real property taxes for the said
property.6
Meanwhile, in 1961, respondent Mario Ebio married Pedro’s daughter, Zenaida.
Upon Pedro’s advice, the couple established their home on the said lot. In April
1964 and in October 1971, Mario Ebio secured building permits from the
Parañaque municipal office for the construction of their house within the said
compound.7 On April 21, 1987, Pedro executed a notarized Transfer of
Rights8 ceding his claim over the entire parcel of land in favor of Mario Ebio.
Subsequently, the tax declarations under Pedro’s name were cancelled and new
ones were issued in Mario Ebio’s name.9
On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed
Resolution No. 08, series of 199910 seeking assistance from the City Government
of Parañaque for the construction of an access road along Cut-cut Creek located
in the said barangay. The proposed road, projected to be eight (8) meters wide
and sixty (60) meters long, will run from Urma Drive to the main road of Vitalez
Compound11 traversing the lot occupied by the respondents. When the city
government advised all the affected residents to vacate the said area,
respondents immediately registered their opposition thereto. As a result, the road
project was temporarily suspended.12
In January 2003, however, respondents were surprised when several officials
from the barangay and the city planning office proceeded to cut eight (8) coconut
trees planted on the said lot. Respondents filed letter-complaints before the
Regional Director of the Bureau of Lands, the Department of Interior and Local
Government and the Office of the Vice Mayor.13 On June 29, 2003,
the Sangguniang Barangay of Vitalez held a meeting to discuss the construction
of the proposed road. In the said meeting, respondents asserted their opposition
to the proposed project and their claim of ownership over the affected
property.14 On November 14, 2003, respondents attended another meeting with
officials from the city government, but no definite agreement was reached by and
among the parties.15
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents
ordering them to vacate the area within the next thirty (30) days, or be physically
evicted from the said property.16 Respondents sent a letter to the Office of the
City Administrator asserting, in sum, their claim over the subject property and
expressing intent for a further dialogue.17 The request remained
unheeded.1avvphi1
Threatened of being evicted, respondents went to the RTC of Parañaque City on
April 21, 2005 and applied for a writ of preliminary injunction against
petitioners.18 In the course of the proceedings, respondents admitted before the
trial court that they have a pending application for the issuance of a sales patent
before the Department of Environment and Natural Resources (DENR).19
On April 29, 2005, the RTC issued an Order20 denying the petition for lack of
merit. The trial court reasoned that respondents were not able to prove
successfully that they have an established right to the property since they have
not instituted an action for confirmation of title and their application for sales
patent has not yet been granted. Additionally, they failed to implead the Republic
of the Philippines, which is an indispensable party.
Respondents moved for reconsideration, but the same was denied.21
Aggrieved, respondents elevated the matter to the Court of Appeals. On January
31, 2007, the Court of Appeals issued its Decision in favor of the respondents.
According to the Court of Appeals--
The issue ultimately boils down to the question of ownership of the lands
adjoining Cutcut Creek particularly Road Lot No. 8 (hereinafter RL 8) and the
accreted portion beside RL 8.
The evidentiary records of the instant case, shows that RL 8 containing an area
of 291 square meters is owned by Guaranteed Homes, Inc. covered by TCT No.
S-62176. The same RL 8 appears to have been donated by the Guaranteed
Homes to the City Government of Parañaque on 22 March 1966 and which was
accepted by the then Mayor FLORENCIO BERNABE on 5 April 1966. There is
no evidence however, when RL 8 has been intended as a road lot.
On the other hand, the evidentiary records reveal that PEDRO VITALEZ
possessed the accreted property since 1930 per his Affidavit dated 21 March
1966 for the purpose of declaring the said property for taxation purposes. The
property then became the subject of Tax Declaration No. 20134 beginning the
year 1967 and the real property taxes therefor had been paid for the years 1966,
1967, 1968, 1969, 1970, 1972, 1973, 1974, 1978, 1980, 1995, 1996, 1997, 1998,
1999, 2000, 2001, 2002, 2003, and 2004. Sometime in 1964 and 1971,
construction permits were issued in favor of Appellant MARIO EBIO for the
subject property. On 21 April 1987, PEDRO VITALEZ transferred his rights in the
accreted property to MARIO EBIO and his successors-in-interest.
Applying [Article 457 of the Civil Code considering] the foregoing documentary
evidence, it could be concluded that Guaranteed Homes is the owner of the
accreted property considering its ownership of the adjoining RL 8 to which the
accretion attached. However, this is without the application of the provisions of
the Civil Code on acquisitive prescription which is likewise applicable in the
instant case.
xxxx
The subject of acquisitive prescription in the instant case is the accreted portion
which [was] duly proven by the Appellants. It is clear that since 1930, Appellants
together with their predecessor-in-interest, PEDRO VITALEZ[,] have been in
exclusive possession of the subject property and starting 1964 had introduced
improvements thereon as evidenced by their construction permits. Thus, even by
extraordinary acquisitive prescription[,] Appellants have acquired ownership of
the property in question since 1930 even if the adjoining RL 8 was subsequently
registered in the name of Guaranteed Homes. x x x.
xxxx
Further, it was only in 1978 that Guaranteed Homes was able to have RL 8
registered in its name, which is almost fifty years from the time PEDRO VITALEZ
occupied the adjoining accreted property in 1930. x x x.
xxxx
We likewise note the continuous payment of real property taxes of Appellants
which bolster their right over the subject property. x x x.
xxxx
In sum, We are fully convinced and so hold that the Appellants [have] amply
proven their right over the property in question.
WHEREFORE, premises considered, the instant appeal is hereby GRANTED.
The challenged Order of the court a quo is REVERSED and SET ASIDE.
SO ORDERED.22
On June 8, 2007, the appellate court denied petitioners’ motion for
reconsideration. Hence, this petition raising the following assignment of errors:
I. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE
HONORABLE COURT OF APPEALS THAT RESPONDENTS HAVE A RIGHT
IN ESSE IS IN ACCORD WITH THE LAW AND ESTABLISHED
JURISPRUDENCE[;]
II. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE
HONORABLE COURT OF APPEALS THAT THE SUBJECT LOT IS AVAILABLE
FOR ACQUISITIVE PRESCRIPTION IS IN ACCORD WITH THE LAW AND
ESTABLISHED JURISPRUDENCE[;] AND
III. WHETHER OR NOT THE STATE IS AN INDISPENSABLE PARTY TO THE
COMPLAINT … FILED BY RESPONDENTS IN THE LOWER COURT.23
The issues may be narrowed down into two (2): procedurally, whether the State
is an indispensable party to respondents’ action for prohibitory injunction; and
substantively, whether the character of respondents’ possession and occupation
of the subject property entitles them to avail of the relief of prohibitory injunction.
The petition is without merit.
An action for injunction is brought specifically to restrain or command the
performance of an act.24 It is distinct from the ancillary remedy of preliminary
injunction, which cannot exist except only as part or as an incident to an
independent action or proceeding. Moreover, in an action for injunction, the
auxiliary remedy of a preliminary prohibitory or mandatory injunction may issue.25
In the case at bar, respondents filed an action for injunction to prevent the local
government of Parañaque City from proceeding with the construction of an
access road that will traverse through a parcel of land which they claim is owned
by them by virtue of acquisitive prescription.
Petitioners, however, argue that since the creek, being a tributary of the river, is
classified as part of the public domain, any land that may have formed along its
banks through time should also be considered as part of the public domain. And
respondents should have included the State as it is an indispensable party to the
action.
We do not agree.
It is an uncontested fact that the subject land was formed from the alluvial
deposits that have gradually settled along the banks of Cut-cut creek. This being
the case, the law that governs ownership over the accreted portion is Article 84
of the Spanish Law of Waters of 1866, which remains in effect,26 in relation to
Article 457 of the Civil Code.
Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership
over alluvial deposits along the banks of a creek. It reads:
ART. 84. Accretions deposited gradually upon lands contiguous to creeks,
streams, rivers, and lakes, by accessions or sediments from the waters thereof,
belong to the owners of such lands.27
Interestingly, Article 457 of the Civil Code states:
Art. 457. To the owners of lands adjoining the banks of rivers belong the
accretion which they gradually receive from the effects of the current of the
waters.
It is therefore explicit from the foregoing provisions that alluvial deposits along
the banks of a creek do not form part of the public domain as the alluvial property
automatically belongs to the owner of the estate to which it may have been
added. The only restriction provided for by law is that the owner of the adjoining
property must register the same under the Torrens system; otherwise, the alluvial
property may be subject to acquisition through prescription by third persons.28
In contrast, properties of public dominion cannot be acquired by prescription. No
matter how long the possession of the properties has been, there can be no
prescription against the State regarding property of public domain.29 Even a city
or municipality cannot acquire them by prescription as against the State. 30
Hence, while it is true that a creek is a property of public dominion,31 the land
which is formed by the gradual and imperceptible accumulation of sediments
along its banks does not form part of the public domain by clear provision of law.
Moreover, an indispensable party is one whose interest in the controversy is
such that a final decree would necessarily affect his/her right, so that the court
cannot proceed without their presence.32 In contrast, a necessary party is one
whose presence in the proceedings is necessary to adjudicate the whole
controversy but whose interest is separable such that a final decree can be made
in their absence without affecting them.33
In the instant case, the action for prohibition seeks to enjoin the city government
of Parañaque from proceeding with its implementation of the road construction
project. The State is neither a necessary nor an indispensable party to an action
where no positive act shall be required from it or where no obligation shall be
imposed upon it, such as in the case at bar. Neither would it be an indispensable
party if none of its properties shall be divested nor any of its rights infringed.
We also find that the character of possession and ownership by the respondents
over the contested land entitles them to the avails of the action.
A right in esse means a clear and unmistakable right.34 A party seeking to avail of
an injunctive relief must prove that he or she possesses a right in esse or one
that is actual or existing.35 It should not be contingent, abstract, or future rights, or
one which may never arise.36
In the case at bar, respondents assert that their predecessor-in-interest, Pedro
Vitalez, had occupied and possessed the subject lot as early as 1930. In 1964,
respondent Mario Ebio secured a permit from the local government of Parañaque
for the construction of their family dwelling on the said lot. In 1966, Pedro
executed an affidavit of possession and occupancy allowing him to declare the
property in his name for taxation purposes. Curiously, it was also in 1966 when
Guaranteed Homes, Inc., the registered owner of Road Lot No. 8 (RL 8) which
adjoins the land occupied by the respondents, donated RL 8 to the local
government of Parañaque.
From these findings of fact by both the trial court and the Court of Appeals, only
one conclusion can be made: that for more than thirty (30) years, neither
Guaranteed Homes, Inc. nor the local government of Parañaque in its corporate
or private capacity sought to register the accreted portion. Undoubtedly,
respondents are deemed to have acquired ownership over the subject property
through prescription. Respondents can assert such right despite the fact that they
have yet to register their title over the said lot. It must be remembered that the
purpose of land registration is not the acquisition of lands, but only the
registration of title which the applicant already possessed over the land.
Registration was never intended as a means of acquiring ownership. 37 A decree
of registration merely confirms, but does not confer, ownership.38

Did the filing of a sales patent application by the respondents, which remains
pending before the DENR, estop them from filing an injunction suit?

We answer in the negative.

Confirmation of an imperfect title over a parcel of land may be done either

through judicial proceedings or through administrative process. In the instant
case, respondents admitted that they opted to confirm their title over the property
administratively by filing an application for sales patent.

Respondents’ application for sales patent, however, should not be used to

prejudice or derogate what may be deemed as their vested right over the subject
property. The sales patent application should instead be considered as a mere
superfluity particularly since ownership over the land, which they seek to buy
from the State, is already vested upon them by virtue of acquisitive prescription.
Moreover, the State does not have any authority to convey a property through
the issuance of a grant or a patent if the land is no longer a public land.39

Nemo dat quod dat non habet. No one can give what he does not have. Such
principle is equally applicable even against a sovereign entity that is the State.

WHEREFORE, the petition is DENIED for lack of merit. The January 31, 2007
Decision, as well as the July 8, 2007 Resolution, of the Court of Appeals in CA-
G.R. SP No. 91350 are hereby AFFIRMED.

With costs against petitioners.

SO ORDERED.

G.R. No. L-72714 June 29, 1989
MELECIO V. EMATA, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. DANIEL C. MACARAEG in
his capacity as Presiding Judge of Branch LV, Regional Trial Court of
Manila and SERVICEWIDE SPECIALISTS. INC., respondents.
Melecio Virgilio Emata Law Office for petitioner.
Nelson A Loyola for private respondent.
REGALAD0, J.:
On July 18, 1985 the then Intermediate Appellate Court promulgated a decision
in AC-G.R. CV No. 02939-R 1 affirming in toto the decision of the Regional Trial
Court of Manila, Branch LV, in Civil Case No. 141977 2 an action for replevin and
damages.
The factual antecedents culminating in and constituting the bases of both
decisions had their inchoation in petitioner's purchase of a car on installment
from Violago Motor Sales Corporation (Violago, for brevity) with a down payment
of P 14,982.00. Petitioner likewise executed in favor of the seller a promissory
note and a chattel mortgage over the car as security for the payment of the note.
Said promissory note provides:
For value received, I/We, jointly and severally promise to pay VIOLAGO MOTOR
SALES CORPORATION or order, at its office in the (sic) San Fernando,
Pampanga the principal sum of fifty seven thousand two hundred four pesos only
(P 57,204.00) Philippine currency, which amount includes interest at 12% per
annum based on the diminishing balance, the said principal sum, to be payable,
without need of notice or demand, in installments of the amounts following and at
the dates hereinafter set forth, to wit: P 1,589.00 monthly for 36 months due and
payable on the 25th day of each month starting SEPTEMBER 25, 1978 thru and
inclusive of AUGUST 25, 1981 ..., provided that interest at 14% per annum shall
be added on each unpaid installment from maturity hereof until fully paid. 3
Thus, the total amount that the petitioner was supposed to pay was P 72,186.00,
with P 57,204.00 as the balance after deducting the down payment. The total
amount payable was P 22,246.00 more than the "list cash price" of P 49,940.00
for said vehicle.
After the execution of said documents, Violago endorsed the promissory note
and assigned the chattel mortgage to Filinvest Credit Corporation (hereafter,
Filinvest for short) upon payment by the latter of P 34,958.00, the unpaid balance
of the list cash price of the car. Three years later, Filinvest assigned to private
respondent Servicewide Specialists, Inc. the remaining installment balance due
on and corresponding to the period from February 25, 1981 to August 25, 1981.
Alleging non-payment of five (5) consecutive installments from February 25 to
June 25, 1981, private respondent initiated the case in the trial court for a writ of
replevin to effect the seizure of the car or, alternatively, for the payment by
petitioner of the sum of P 1,332.40, with interest thereon of fourteen percent
(14%) per annum from July 10, 1981 until fully paid and, additionally, for
attorney's fees and costs of suit.
Herein petitioner, in answer thereto and as summarized by the court a quo,
alleged that "the promissory note does not express the true intent and agreement
of the parties, the same having been procured through fraud, deceit, trickery and
misrepresentation, that the chattel mortgage was intended to secure the payment
of P 34,958.00 which was the unpaid balance of the purchase price of the Toyota
car; that he was made to sign the note and the mortgage in blank; that he has
paid, and even overpaid, Filinvest by P 9,388.22; that the promissory note by
inflating its value and charging more than the prescribed rates in violation of the
Financing Company Act (Republic Act No. 5980) violates the Usury Law; that the
note and the mortgage are null and void; and that the demand set forth in the
complaint has long been extinguished." 4 Furthermore, petitioner claimed that
Filinvest, aside from charging usurious interest as earlier stated, violated the
provisions of the Truth in Lending Act (Republic Act No. 3765) for failure to
provide him a copy of the disclosure statement containing entries required by
said law. He consequently set up a counterclaim against Filinvest for various
items of damages and attorney's fees all amounting to more than P
1,100,000.00. 5
On November 5, 1981, petitioner filed a "Motion to Implead Filinvest Credit
Corporation" on the theory that "for all legal purposes the corporation sought to
be impleaded is the real party in interest" because it retained interest over the
balance of the petitioner's account in spite of its assignment to private
respondent. 6 An opposition thereto was filed by private respondent corporation
on January 18, 1982. 7
Subsequently, in its order of April 26, 1982, the court below held in abeyance the
pre-trial hearing of the case since, "(u)pon motion of Atty. Melecio Virgilio
Emata," said petitioner was given a "Period of fifteen (15) days to file the third-
party complaint against the third party defendant (Filinvest)." 8 Petitioner ,
however, did not file any third-party complaint, hence the trial court set the case
for pre-trial on May 3, 1983, it being understood that petitioner was no longer
interested in impleading the herein private respondent as a third-party defendant
therein.
On May 2, 1983, petitioner filed an urgent motion to cancel the scheduled pre-
trial and the trial court reset the same to June 9, 1983. Another motion for
postponement of the scheduled pre-trial filed by petitioner on June 8, 1983 was
denied by the lower court, which consequently issued an order declaring
petitioner as in default for failure to appear at the pre-trial of June 9, 1983.
Respondent corporation was then allowed to present evidence ex parte despite
an opposition of petitioner.
However, upon a subsequent motion of petitioner, in its order of August 17, 1983
the trial court not only lifted the default order but also allowed him to cross-
examine private respondent's sole witness "as a last opportunity to adduce
evidence in support of the material allegations of his answer." The same order
declared that the order of April 26, 1982, hereinbefore stated, must be
maintained since petitioner had opted not to comply therewith, hence his motion
to implead Filinvest was in effect already resolved in said order of April 26,
1982. 9
At the continuation of the trial on September 1, 1983, the court a quo, in order to
587654321 simplify the proceedings, allowed both parties to submit their
respective lists of payments made by petitioner to respondent corporation, with
the court determining the proper application of each payment. The parties then
filed their respective memoranda and submitted the case for decision.
On March 6, 1984, judgment was rendered by the trial court as follows:
WHEREFORE, premises considered, judgment is hereby rendered against the
defendant and in favor of the plaintiff, ordering the former to deliver to the latter
the Toyota Car hereinabove described, or to pay the latter the sum of P
11,332.40, plus interest thereon at the rate of 14% per annum.
In either case, the defendant is also ordered to pay the plaintiff the following
sums: P 2,800.00 as attorney's fees and P 424.50 as bonding fees.
Should the defendant fail to satisfy, or comply with the foregoing, his bondsman
or surety, Sanpiro Insurance Corporation, shall be hable therefor in accordance
with the counter-bond.
With costs against the defendant. 10
Petitioner takes exception to respondent court's affirmance of said decision,
hence this petition. Petitioner raises both procedural and substantive issues.
Initially, he complains that the trial court erred in requiring him to file a third- party
complaint against Filinvest, instead of impleading the latter either as party plaintiff
or defendant. 11 He insists that Filinvest is the real party in interest in the present
case and it should be impleaded under Rule 3 of the Rules of Court which
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.
Sec. 11. Misjoinder and non-joinder of parties. -Misjoinder of parties is not
ground for dismissal of an action. Parties may be dropped or added by order of
the court on motion of any party or on its own initiative at any stage of the action
and on such terms as are just. Any claim against a party may be severed and
proceeded with separately.
which he complements with a provision in Rule 6, to wit:
Sec. 14. Bringing new parties. When the presence of parties other than those to
the original action is required for the granting of complete relief in the
determination of a counterclaim or cross-claim, the court shall order them to be
brought in as defendants if jurisdiction over them can be obtained.
Concededly, additional parties may be brought in under the above-quoted
provisions of the Rules. A third-party complaint, however, is not to be eschewed
or disregarded in the procedural scheme since it may, in fact, be the very vehicle
for impleading a third person as a party to the case. Thus, for purposes of
Section 14 of Rule 6, above quoted, the court may authorize the filing of the
proper third-party complaint to implead the other parties not included in the
original complaint, in keeping with the injunction that "all pleadings shall be
liberally construed so as to do substantial justice." 12
We reject petitioner's complaint that the order of the court a quo requiring the
filing of a third-party complaint is improper. A third- party complaint is "a claim
that a defending party may, with leave of court, file against a person not a party
to the action, called the third- party defendant, for contribution, indemnity,
subrogation or any other relief in respect of his opponent's claim." 13 Obviously, a
third-party complaint against Filinvest, had petitioner filed the same, would be a
claim in respect of the plaintiffs claim since the former arises from the same
transaction on which the plaintiffs claim is based, that is, the promissory note
which was eventually assigned to private respondent. 14 Although the petitioner
did not admit in his answer that any amount is due from the corporation sought to
be impleaded, that is not indicative of nor does it support his thesis of the alleged
impropriety of a third-party complaint. Apparently, petitioner failed to take into
consideration that the remedy is also applicable where the defendant seeks "any
other relief in respect of his opponent's claim," a remedial grant of power broad
enough to include the relief he seeks in the case at bar.
Petitioner cannot rely on the provisions of Section 10, Rule 3 which envisages a
party who should be joined as a plaintiff but who does not assent to such joinder.
Obviously and necessarily, such unwilling party must be a real party in interest.
In the case at bar, Filinvest's position and the evidence thereon was that it was
not a real party in interest, as it was no longer entitled to the avails of the suit by
reason of the anterior assignment it made in favor of private respondent. Hence,
at the very least, its capacity was in issue and it would be a case of
procedural petitio principii for the trial court to have categorized it as an unwilling
co-plaintiff, with the procedural consequences thereof, although such operative
issue was still unresolved. Furthermore, the option lies with the plaintiff on
whether or not to join an additional party in his complaint. The original plaintiff
cannot be compelled, on the mere representations of the defendant, to implead
anyone, especially if it does not appear that such joinder is proper or is
necessary for the complete and expeditious adjudication of the case.
Nor can the general rule in Section 11, Rule 3, on the power to order the addition
or dropping of a party at any stage of action, be of solace to the petitioner. This is
a power addressed to the sound discretion of the court to be exercised on such
terms as are just, and by this is meant that it must be just to all the other
parties. 15 Obviously, given the facts of this case, the trial court wisely exercised
its discretion in refusing to give in to the unjustified importunings of petitioner.
Petitioner should be reminded that the courts, as the arbiters of the rights of the
parties, stand in a better position and are clothed with ample authority to rule on
the procedural measures that are proper in cases before them. If a party believes
that the order of the court is not in accordance with law, he is not without other
alternative remedial avenues. If, on the other hand, the order does not suffer
from any legal infirmities, the same is binding on the parties and to this they must
submit with grace. We cannot but be displeased with petitioner's unseemly
motivation and stance when he "adopted an attitude of inaction and completely
ignored" the order of the trial court requiring the filing of a third-party complaint,
especially in view of the factual finding that it was he who manifested on April 26,
1982 that he would file said third party complaint . 16
Apart from all these considerations, the inclusion of Filinvest would at any rate
have been a useless recourse in the light of the fact that the arguments on which
this petition is moored are bereft of merit .
On the issue of usury, the present rule that usury at present is legally non-
existent 17 would not apply to the instant case. The present controversy arose
before the adoption on December 3, 1982 of Resolution No. 224 by the Central
Bank Monetary Board on which the existing rule is based.
Nevertheless, the records of this case reveal that the Usury Law, Act No. 2655, is
not applicable thereto. The amount added to the cash price of the car is what is
commonly known as the "time price differential" and not interest within the
meaning of the Usury Law. The law is applicable only in case of a loan or
forbearance of money, goods or credit which is not the case here. The
transaction involved here being admittedly a conditional sale based on an
installment plan and not a loan, it has been held that the alleged increase in the
price of the article sold cannot be considered a mere pretext to cover a usurious
loan. "The increase in price, when the sale is on credit serves not only to cover
the expenses generally entailed by such transactions on credit, but also to
encourage cash sales, so useful to commerce. It is up to the purchaser to decide
which price he prefers in making the purchase. ... if on the contrary, he prefers to
buy on credit, he cannot complain of the increase of the price demanded by the
vendor. " 18
Neither is the Usury Law applicable to the assignment of indebtedness to
Filinvest and to private respondent. The Financing Company Act provides for the
rate of the purchase discount that may be availed of by a financing company.
The purchase discount is defined as the "difference between the value of the
receivable purchased or credit assigned, and the net amount paid by the finance
company for such purchase or assignment, exclusive of fees, service charges,
interest and other charges incident to the extension of the credit." 19 Under
Section 5 of the same Act, it is provided that:
In case of assignment of credit or the buying of installment papers, accounts
receivable and the evidences of indebtedness by financing companies, the
purchase discount, exclusive of interest and other charges, shall be limited to
fourteen per cent (14%), or such percentage as may be prescribed by the
Monetary Board of the value of the credit assigned or the value of the installment
papers, accounts .receivable and other evidences of indebtedness purchased
baged on a period of twelve months or less, and to one and one-sixth per cent (I
-1/ 6%), or such percentage as may be prescribed by the Monetary Board, for
each additional month or fraction thereof in excess of twelve months, regardless
of the terms and conditions of the assignment or purchase.
The petitioner avers that the amount of P 22,246.00, or forty-four and five-
hundredths percent (44.05%), added to the list cash price is way above the
purchase discount prescribed by Republic Act No. 5980, as well as Central Bank
Circular No. 586 providing for nineteen percent (19%) per annum as the effective
rate of yield from purchase of receivables. 20 We do not have to unnecessarily
clutter this decision with unduly involved or extensively complex computations to
demonstrate the incorrectness of petitioner's position. The finding of the trial
court, that the stipulated interest in the promissory note is well within the
allowable rate, is adequately supported by the evidence of record. Although,
forty-four and five- hundredths percent (44.05%) was added to the list cash price
of the car, the same was actually spread over a three-year period of amortization.
Thus, whether it be fourteen percent (14%) plus one and one-sixth percent (1-
1/6%) under Republic Act No. 5980 or nineteen percent (19%) under Circular No.
586, it is clear that the yield or purchase discount, as the case may be, is within
the limits prescribed by law.

No violation of the Truth in Lending Act, Republic Act No. 3765, was established
either. The disclosure statement furnished to petitioner shows on its face that it
contains all the data required by law and that it was signed by the seller on July
31, 1978 before the assignment of the indebtedness to private respondent. We
agree with private respondent that the petitioner, a practicing lawyer for more
than twenty years, would not be so gullible or negligent as to sign documents in
blank knowing fully well the legal implications and consequences of such action
. 21 Of course, petitioner does not deny that Filinvest had nothing to do with the
disclosure statement since it is the private respondent which is obligated to
furnish, as in fact it did furnish, petitioner a copy of said statement . 22

Regarding the computations of the petitioner based on the formula provided by

Circular No. 158 of the Central Bank implementing the Truth in Lending
Act, 23 petitioner should not confuse "time price differential" with the "simple
annual rate" determined by the formula. "Simple annual rate" is the uniform
percentage which represents the ratio, on an annual basis, between the finance
charges and the amount to be financed. It is not the measure of the total amount
that is allowed to be added to the cash price.

IN VIEW OF THE FOREGOING, no reversible error having been committed by

respondent court, its assailed decision is hereby AFFIRMED

SO ORDERED.
 peritoneal carcinosis and infiltration of the bladder, possibly lung metastasis, and
anemia; Candida Esophagitis; and Chronic Gastritis. He was advised to undergo
[G.R. No. 179169 : March 03, 2010] chemotherapy and continuous supportive treatment, such as pain-killers and
blood transfusion.[6]
LEONIS NAVIGATION CO., INC. AND WORLD MARINE PANAMA, S.A.,
PETITIONERS, VS. CATALINO U. VILLAMATER AND/OR THE HEIRS OF Villamater was later repatriated, under medical escort, as soon as he was
THE LATE CATALINO U. VILLAMATER, REPRESENTED HEREIN BY SONIA deemed fit to travel. As soon as he arrived in the Philippines, Villamater was
MAYUYU VILLAMATER; AND NATIONAL LABOR RELATIONS referred to company-designated physicians. The diagnosis and the
COMMISSION, RESPONDENTS. recommended treatment abroad were confirmed. He was advised to undergo six
(6) cycles of chemotherapy. However, Dr. Kelly Siy Salvador, one of the
DECISION company-designated physicians, opined that Villamater's condition "appears to
be not work-related," but suggested a disability grading of 1.[7]

In the course of his chemotherapy, when no noticeable improvement occurred,

NACHURA, J.:
Villamater filed a complaint[8] before the Arbitration Branch of the National Labor
Relations Commission (NLRC) for payment of permanent and total disability
benefits in the amount of US$80,000.00, reimbursement of medical and
This is a petition for review on certiorari[1] under Rule 45 of the Rules of Court, hospitalization expenses in the amount of P11,393.65, moral damages in the
seeking to annul and set aside the Decision[2] dated May 3, 2007 and the sum of P1,000,000.00, exemplary damages in the amount of P1,000,000.00, as
Resolution[3] dated July 23, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. well as attorney's fees.
85594, entitled "Leonis Navigation Co., Inc., et al. v. Catalino U. Villamater, et al."
After the submission of the required position papers, the Labor Arbiter rendered a
The antecedents of this case are as follows: decision[9] dated July 28, 2003 in favor of Villamater, holding that his illness was
compensable, but denying his claim for moral and exemplary damages. The
Private respondent Catalino U. Villamater (Villamater) was hired as Chief Labor Arbiter disposed as follows--
Engineer for the ship MV Nord Monaco, owned by petitioner World Marine
Panama, S.A., through the services of petitioner Leonis Navigation Co., Inc. WHEREFORE, foregoing premises considered, judgment is hereby rendered
(Leonis), as the latter's local manning agent. Consequent to this employment, declaring complainant's illness to be compensable and ordering respondents
Villamater, on June 4, 2002, executed an employment contract,[4] incorporating LEONIS NAVIGATION CO., INC. and WORLD MARINE PANAMA, S.A. liable to
the Standard Terms and Conditions Governing the Employment of Filipino pay, jointly and severally, complainant CATALINO U. VILLAMATER, the amount
Seafarers on Board Ocean-Going Vessels as prescribed by the Philippine of US$60,000.00 or its Philippine Peso equivalent at the time of actual payment,
Overseas Employment Administration (POEA). representing the latter's permanent total disability benefits plus ten percent (10%)
thereof as Attorney's Fees.
Prior to his deployment, Villamater underwent the required Pre-Employment
Medical Examination (PEME). He passed the PEME and was declared "Fit to All other claims are dismissed for lack of merit.
Work."[5] Thereafter, Villamater was deployed on June 26, 2002.
SO ORDERED.[10]
Sometime in October 2002, around four (4) months after his deployment,
Villamater suffered intestinal bleeding and was given a blood transfusion.
Petitioners appealed to the NLRC. Villamater also filed his own appeal,
Thereafter, he again felt weak, lost considerable weight, and suffered intermittent
questioning the award of the Labor Arbiter and claiming that the 100% degree of
intestinal pain. He consulted a physician in Hamburg, Germany, who advised
disability should be compensated in the amount of US$80,000.00, pursuant to
hospital confinement. Villamater was diagnosed with Obstructive
Section 2, Article XXI of the ITF-JSU/AMOSUP Collective Bargaining Agreement
Adenocarcinoma of the Sigmoid, with multiple liver metastases, possibly local
(CBA) between petitioners and Associated Marine Officers & Seamen's Union of
the Philippines, which covered the employment contract of Villamater.
On February 4, 2004, the NLRC issued its resolution,[11] dismissing the
respective appeals of both parties and affirming in toto the decision of the Labor
Arbiter.
Petitioners filed their motion for reconsideration of the February 4, 2004
resolution, but the NLRC denied the same in its resolution dated June 15, 2004.
Before delving into the merits of this petition, we deem it fit to discuss the
procedural issues raised by petitioners.
First. It is worthy to note that the CA dismissed the petition, considering that (1)
the June 15, 2004 Resolution of the NLRC had already become final and
executory on June 26, 2004, and the same was already recorded in the NLRC
Book of Entries of Judgments; and that (2) the award of the Labor Arbiter was
already executed, thus, the case was closed and terminated.

Aggrieved, petitioners filed a petition for certiorari under Rule 65 of the Rules of According to Sections 14 and 15, Rule VII of the 2005 Revised Rules of
Court before the CA. After the filing of the required memoranda, the CA rendered Procedure of the NLRC--
its assailed May 3, 2007 Decision, dismissing the petition. The appellate court,
likewise, denied petitioners' motion for reconsideration in its July 23, 2007 Section 14. Finality of decision of the commission and entry of judgment. -
Resolution. a) Finality of the Decisions, Resolutions or Orders of the Commission. - Except
as provided in Section 9 of Rule X, the decisions, resolutions or orders of the
Hence, this petition based on the following grounds, to wit: Commission shall become final and executory after ten (10) calendar days from
receipt thereof by the parties.
First, the Court of Appeals erroneously held that [the] Commission's Dismissal
Decision does not constitute grave abuse of discretion amounting to lack or b) Entry of Judgment. - Upon the expiration of the ten (10) calendar day
excess of jurisdiction but mere error of judgment, considering that the decision period provided in paragraph (a) of this Section, the decision, resolution, or
lacks evidentiary support and is contrary to both evidence on record and order shall be entered in a book of entries of judgment.
prevailing law and jurisprudence.
The Executive Clerk or Deputy Executive Clerk shall consider the decision,
Second, the Court of Appeals seriously erred in upholding the NLRC's decision to resolution or order as final and executory after sixty (60) calendar days from date
award Grade 1 Permanent and Total Disability Benefits in favor of seaman of mailing in the absence of return cards, certifications from the post office, or
Villamater despite the lack of factual and legal basis to support such award, and other proof of service to parties.
more importantly, when it disregarded undisputed facts and substantial evidence
presented by petitioners which show that seaman Villamater's illness was not Section 15. Motions for reconsideration. - Motion for reconsideration of any
work-related and hence, not compensable, as provided by the Standard Terms of decision, resolution or order of the Commission shall not be entertained except
the POEA Contract. when based on palpable or patent errors; provided that the motion is under oath
and filed within ten (10) calendar days from receipt of decision, resolution or
Third, the Court of Appeals erred in holding that non-joinder of indispensable order, with proof of service that a copy of the same has been furnished, within
parties warrant the outright dismissal of the Petition for Review on Certiorari. the reglementary period, the adverse party; and provided further, that only one
such motion from the same party shall be entertained.
Fourth, the Court of Appeals erroneously held that final and executory decisions
or resolutions of the NLRC render appeals to superior courts moot and Should a motion for reconsideration be entertained pursuant to this
academic. SECTION, the resolution shall be executory after ten (10) calendar days
from receipt thereof.[13]
Last, the Court of Appeals seriously erred in upholding the award of attorney's
fees considering that the grant has neither factual nor legal basis.[12]
Petitioners received the June 15, 2004 resolution of the NLRC, denying their
motion for reconsideration, on June 16, 2004. They filed their petition
for certiorari before the CA only on August 9, 2004,[14] or 54 calendar days from
the date of notice of the June 15, 2004 resolution. Considering that the above-
mentioned 10-day period had lapsed without petitioners filing the appropriate
appeal, the NLRC issued an Entry of Judgment dated June 28, 2004.
Moreover, by reason of the finality of the June 15, 2004 NLRC resolution, the
Labor Arbiter issued on July 29, 2004 a Writ of Execution. [15] Consequently,
Leonis voluntarily paid Villamater's widow, Sonia M. Villamater (Sonia), the
amount of P3,649,800.00, with Rizal Commercial and Banking Corporation
(RCBC) Manager's Check No. 0000008550[16] dated August 12, 2004, as
evidenced by the Acknowledgment Receipt[17] dated August 13, 2004, and the
Cheque Voucher[18] dated August 12, 2004. Following the complete satisfaction
of the judgment award, the Labor Arbiter issued an Order[19] dated September 8,
2004 that reads--
There being complete satisfaction of the judgment award as shown by the record
upon receipt of the complainant of the amount of P3,649,800.00, voluntarily paid
by the respondent, as full and final satisfaction of the Writ of Execution dated July
29, 2004; and finding the same to be not contrary to law, morals, good custom,
and public policy, and pursuant to Section 14, Rule VII of the Rules of Procedure
of the National Labor Relations Commission (NLRC), this case is hereby
ordered DISMISSED with prejudice, and
considered CLOSED and TERMINATED.
SO ORDERED.
Petitioners never moved for a reconsideration of this Order regarding the
voluntariness of their payment to Sonia, as well as the dismissal with prejudice
and the concomitant termination of the case.
However, petitioners argued that the finality of the case did not render the
petition for certiorari before the CA moot and academic. On this point, we agree
with petitioners.
In the landmark case of St. Martin Funeral Home v. NLRC,[20] we ruled that
judicial review of decisions of the NLRC is sought via a petition
for certiorari under Rule 65 of the Rules of Court, and the petition should be filed
before the CA, following the strict observance of the hierarchy of courts. Under
Rule 65, Section 4,[21] petitioners are allowed sixty (60) days from notice of the
assailed order or resolution within which to file the petition. Thus, although the
petition was not filed within the 10-day period, petitioners reasonably filed their
petition for certiorari before the CA within the 60-day reglementary period under
Rule 65.
Further, a petition for certiorari does not normally include an inquiry into the
correctness of its evaluation of the evidence. Errors of judgment, as distinguished
from errors of jurisdiction, are not within the province of a special civil action
for certiorari, which is merely confined to issues of jurisdiction or grave abuse of
discretion. It is, thus, incumbent upon petitioners to satisfactorily establish that
the NLRC acted capriciously and whimsically in order that the extraordinary writ
of certiorari will lie. By grave abuse of discretion is meant such capricious and
whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it must
be shown that the discretion was exercised arbitrarily or despotically.
The CA, therefore, could grant the petition for certiorari if it finds that the NLRC,
in its assailed decision or resolution, committed grave abuse of discretion by
capriciously, whimsically, or arbitrarily disregarding evidence that is material to or
decisive of the controversy; and it cannot make this determination without looking
into the evidence of the parties. Necessarily, the appellate court can only
evaluate the materiality or significance of the evidence, which is alleged to have
been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation
to all other evidence on record.[22] Notably, if the CA grants the petition and
nullifies the
decision or resolution of the NLRC on the ground of grave abuse of discretion
amounting to excess or lack of jurisdiction, the decision or resolution of the NLRC
is, in contemplation of law, null and void ab initio; hence, the decision or
resolution never became final and executory. [23]
In the recent case Bago v. National Labor Relations Commission,[24] we had
occasion to rule that although the CA may review the decisions or resolutions of
the NLRC on jurisdictional and due process considerations, particularly when the
decisions or resolutions have already been executed, this does not affect the
statutory finality of the NLRC decisions or resolutions in view of Rule VIII, Section
6 of the 2002 New Rules of Procedure of the NLRC, viz.:
RULE VIII
x x x x
SECTION 6. EFFECT OF FILING OF PETITION FOR CERTIORARI ON
EXECUTION. - A petition for certiorari with the Court of Appeals or the Supreme
Court shall not stay the execution of the assailed decision unless a temporary
restraining order is issued by the Court of Appeals or the Supreme Court.[25]

Simply put, the execution of the final and executory decision or resolution of the
NLRC shall proceed despite the pendency of a petition for certiorari, unless it is
restrained by the proper court. In the present case, petitioners already paid
Villamater's widow, Sonia, the amount of P3,649,800.00, representing the total
and permanent disability award plus attorney's fees, pursuant to the Writ of
Execution issued by the Labor Arbiter. Thereafter, an Order was issued declaring
the case as "closed and terminated." However, although there was no motion for
reconsideration of this last Order, Sonia was, nonetheless, estopped from
claiming that the controversy had already reached its end with the issuance of
the Order closing and terminating the case. This is because the Acknowledgment
Receipt she signed when she received petitioners' payment was without
prejudice to the final outcome of the petition for certiorari pending before the CA.
Second. We also agree with petitioners in their position that the CA erred in
dismissing outright their petition for certiorari on the ground of non-joinder of
indispensable parties. It should be noted that petitioners impleaded only the then
deceased Villamater[26] as respondent to the petition, excluding his heirs.
Rule 3, Section 7 of the Rules of Court defines indispensable parties as those
who are parties in interest without whom there can be no final determination of
an action.[27] They are those parties who possess such an interest in the
controversy that a final decree would necessarily affect their rights, so that the
courts cannot proceed without their presence.[28] A party is indispensable if his
interest in the subject matter of the suit and in the relief sought is inextricably
intertwined with the other parties' interest.[29]
Unquestionably, Villamater's widow stands as an indispensable party to this
case.
Under Rule 3, Section 11 of the Rules of Court, neither misjoinder nor non-
joinder of parties is a ground for the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder
of parties is ground for dismissal of an action. Parties may be dropped or added
by order of the court on motion of any party or on its own initiative at any stage of
the action and on such terms as are just. Any claim against a misjoined party
may be severed and proceeded with separately.
The proper remedy is to implead the indispensable party at any stage of the
action. The court, either motu proprio or upon the motion of a party, may order
the inclusion of the indispensable party or give the plaintiff an opportunity to
amend his complaint in order to include indispensable parties. If the plaintiff
ordered to include the indispensable party refuses to comply with the order of the
court, the complaint may be dismissed upon motion of the defendant or upon the
court's own motion. Only upon unjustified failure or refusal to obey the order to
include or to amend is the action dismissed.[30]
On the merits of this case, the questions to be answered are: (1) Is Villamater
entitled to total and permanent disability benefits by reason of his colon cancer?
(2) If yes, would he also be entitled to attorney's fees?
As to Villamater's entitlement to total and permanent disability benefits,
petitioners argue, in essence, that colon cancer is not among the occupational
diseases listed under Section 32-A of the POEA Standard Terms and Conditions
Governing the Employment of Filipino Seafarers On-Board Ocean Going Vessels
(POEA Standard Contract), and that the risk of contracting the same was not
increased by Villamater's working conditions during his deployment. Petitioners
posit that Villamater had familial history of colon cancer; and that, although
dietary considerations may be taken, his diet -- which might have been high in fat
and low in fiber and could have thus increased his predisposition to develop
colon cancer -- might only be attributed to him, because it was he who chose
what he ate on board the vessels he was assigned to. Petitioners also cited the
supposed declaration of their company-designated physicians who attended to
Villamater that his disease was not work-related.
We disagree.
It is true that under Section 32-A of the POEA Standard Contract, only two types
of cancers are listed as occupational diseases - (1) Cancer of the epithelial lining
of the bladder (papilloma of the bladder); and (2) cancer, epithellematous or
ulceration of the skin or of the corneal surface of the eye due to tar, pitch,
bitumen, mineral oil or paraffin, or compound products or residues of these
substances. Section 20 of the same Contract also states that those illnesses not
listed under Section 32 are disputably presumed as work-related. Section 20
should, however, be read together with Section 32-A on the conditions to be
satisfied for an illness to be compensable,[31] to wit:
For an occupational disease and the resulting disability or death to be
compensable, all the following conditions must be established:
1. The seafarer's work must involve the risk described herein;
2. The disease was contracted as a result of the seafarer's exposure to the
described risks;
 3. The disease was contracted within a period of exposure and under such
other factors necessary to contract it; A person's genetic background is an important factor in colon cancer risk. Among
first-degree relatives of colon-cancer patients, the lifetime risk of developing
4. There was no notorious negligence on the part of the seafarer. colon cancer is 18%. Even though family history of colon cancer is an important
risk factor, majority (80%) of colon cancers occur sporadically in patients with no
family history of it. Approximately 20% of cancers are associated with a family
Colon cancer, also known as colorectal cancer or large bowel cancer, includes
history of colon cancer. And 5% of colon cancers are due to hereditary colon
cancerous growths in the colon, rectum and appendix. With 655,000 deaths
cancer syndromes. Hereditary colon cancer syndromes are disorders where
worldwide per year, it is the fifth most common form of cancer in the United
affected family members have inherited cancer-causing genetic defects from one
States of America and the third leading cause of cancer-related deaths in the
or both of the parents.[37]
Western World. Colorectal cancers arise from adenomatous polyps in the colon.
These mushroom-shaped growths are usually benign, but some develop into
In the case of Villamater, it is manifest that the interplay of age, hereditary, and
cancer over time. Localized colon cancer is usually diagnosed through
dietary factors contributed to the development of colon cancer. By the time he
colonoscopy.[32]
signed his employment contract on June 4, 2002, he was already 58 years old,
having been born on October 5, 1943,[38] an age at which the incidence of colon
Tumors of the colon and rectum are growths arising from the inner wall of the
cancer is more likely.[39] He had a familial history of colon cancer, with a brother
large intestine. Benign tumors of the large intestine are called polyps. Malignant
who succumbed to death and an uncle who underwent surgery for the same
tumors of the large intestine are called cancers. Benign polyps can be easily
illness.[40] Both the Labor Arbiter and the NLRC found his illness to be
removed during colonoscopy and are not life-threatening. If benign polyps are not
compensable for permanent and total disability, because they found that his
removed from the large intestine, they can become malignant (cancerous) over
dietary provisions while at sea increased his risk of contracting colon cancer
time. Most of the cancers of the large intestine are believed to have developed as
because he had no choice of what to eat on board except those provided on the
polyps. Colorectal cancer can invade and damage adjacent tissues and organs.
vessels and these consisted mainly of high-fat, high-cholesterol, and low-fiber
Cancer cells can also break away and spread to other parts of the body (such as
foods.
liver and lung) where new tumors form. The spread of colon cancer to distant
organs is called metastasis of the colon cancer. Once metastasis has occurred in
While findings of the Labor Arbiter, which were affirmed by the NLRC, are
colorectal cancer, a complete cure of the cancer is unlikely. [33]
entitled to great weight and are binding upon the courts, nonetheless, we find it
also worthy to note that even during the proceedings before the Labor Arbiter,
Globally, colorectal cancer is the third leading cause of cancer in males and the
Villamater cited that the foods provided on board the vessels were mostly meat,
fourth leading cause of cancer in females. The frequency of colorectal cancer
high in fat and high in cholesterol. On this matter, noticeably, petitioners were
varies around the world. It is common in the Western world and is rare in Asia
silent when they argued that Villamater's affliction was brought about by diet and
and in Africa. In countries where the people have adopted western diets, the
genetics. It was only after the Labor Arbiter issued his Decision, finding colon
incidence of colorectal cancer is increasing. [34]
cancer to be compensable because the risk was increased by the victuals
provided on board, that petitioners started claiming that the foods available on
Factors that increase a person's risk of colorectal cancer include high fat intake,
the vessels also consisted of fresh fruits and vegetables, not to mention fish and
a family history of colorectal cancer and polyps, the presence of polyps in the
poultry. It is also worth mentioning that while Dr. Salvador declared that
large intestine, and chronic ulcerative colitis.[35]
Villamater's cancer "appears to be not work-related," she nevertheless suggested
to petitioners Disability Grade 1, which, under the POEA Standard Contract,
Diets high in fat are believed to predispose humans to colorectal cancer. In
"shall be considered or shall constitute total and permanent disability."[41] During
countries with high colorectal cancer rates, the fat intake by the population is
his confinement in Hamburg, Germany, Villamater was diagnosed to have colon
much higher than in countries with low cancer rates. It is believed that the
cancer and was advised to undergo chemotherapy and medical treatment,
breakdown products of fat metabolism lead to the formation of cancer-causing
including blood transfusions. These findings were, in fact, confirmed by the
chemicals (carcinogens). Diets high in vegetables and high-fiber foods may rid
findings of the company-designated physicians. The statement of Dr. Salvador
the bowel of these carcinogens and help reduce the risk of cancer.[36]
that Villamater's colon cancer "appears to be not work-related" remained at that,
without any medical explanation to support the same. However, this statement,
not definitive as it is, was negated by the same doctor's suggestion of Disability
Grade 1. Under Section 20-B of the Philippine Overseas Employment
Administration-Standard Employment Contract (POEA-SEC), it is the company-
designated physician who must certify that the seafarer has suffered a
permanent disability, whether total or partial, due to either injury or illness, during
the term of his employment.[42]

On these points, we sustain the Labor Arbiter and the NLRC in granting total and
permanent disability benefits in favor of Villamater, as it was sufficiently shown
that his having contracted colon cancer was, at the very least, aggravated by his
working conditions,[43] taking into consideration his dietary provisions on board,
his age, and his job as Chief Engineer, who was primarily in charge of the
technical and mechanical operations of the vessels to ensure voyage safety.
Jurisprudence provides that to establish compensability of a non-occupational
disease, reasonable proof of work-connection and not direct causal relation is
required. Probability, not the ultimate degree of certainty, is the test of proof in
compensation proceedings.[44]

The Labor Arbiter correctly awarded Villamater total and permanent disability
benefits, computed on the basis of the schedule provided under the POEA
Standard Contract, considering that the schedule of payment of benefits under
the ITF-JSU/AMOSUP CBA refers only to permanent disability as a result of an
accident or injury.[45]

By reason of Villamater's entitlement to total and permanent disability benefits,

he (or in this case his widow Sonia) is also entitled to the award of attorney's
fees, not under Article 2208(2) of the Civil Code, "[w]hen the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest," but under Article 2208(8) of the same Code,
involving actions for indemnity under workmen's compensation and employer's
liability laws.

WHEREFORE, the petition is DENIED and the assailed May 3, 2007 Decision
and the July 23, 2007 Resolution of the Court of Appeals are AFFIRMED. Costs
against petitioners.

SO ORDERED.

G.R. No. L-63559 May 30, 1986
NEWSWEEK, INC., petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, and NATIONAL FEDERATION
OF SUGARCANE PLANTERS INC., respondents.
FERIA, J.:
Petitioner, Newsweek, Inc., a foreign corporation licensed to do business in the
Philippines, in this special action for certiorari, prohibition with preliminary
injunction, seeks to annul the decision of the Intermediate Appellate Court dated
December 17, 1982 sustaining the Order of the then Court of First Instance of
Bacolod City which denied petitioner's Motion to Dismiss the complaint for libel
filed by private respondents (Civil Case No. 15812), and the Resolution dated
March 10, 1983 which denied its Motion for Reconsideration.
It appears that on March 5, 1981, private respondents, incorporated associations
of sugarcane planters in Negros Occidental claiming to have 8,500 members and
several individual sugar planters, filed Civil Case No. 15812 in their own behalf
and/or as a class suit in behalf of all sugarcane planters in the province of
Negros Occidental, against petitioner and two of petitioners' non-resident
correspondents/reporters Fred Bruning and Barry Came. The complaint alleged
that petitioner and the other defendants committed libel against them by the
publication of the article "An Island of Fear" in the February 23, 1981 issue of
petitioner's weekly news magazine Newsweek. The article supposedly portrayed
the island province of Negros Occidental as a place dominated by big
landowners or sugarcane planters who not only exploited the impoverished and
underpaid sugarcane workers/laborers, but also brutalized and killed them with
imprunity. Complainants therein alleged that said article, taken as a whole,
showed a deliberate and malicious use of falsehood, slanted presentation and/or
misrepresentation of facts intended to put them (sugarcane planters) in bad light,
expose them to public ridicule, discredit and humiliation here in the Philippines
and abroad, and make them objects of hatred, contempt and hostility of their
agricultural workers and of the public in general. They prayed that defendants be
ordered to pay them PlM as actual and compensatory damages, and such
amounts for moral, exemplary and corrective damages as the court may
determine, plus expenses of litigation, attorney's fees and costs of suit. A photo
copy of the article was attached to the complaint.
On November 5, 1981, petitioner filed a motion to dismiss on the grounds that (1)
the printed article sued upon is not actionable in fact and in law; and (2) the
complaint is bereft of allegations that state, much less support a cause of action.
It pointed out the non-libelous nature of the article and, consequently, the failure
of the complaint to state a cause of action. Private respondents filed an
Opposition to the motion to dismiss and petitioner filed a reply.
On March 17, 1982, the trial court denied the motion to dismiss, stating that the
grounds on which the motion to dismiss are predicated are not indubitable as the
complaint on its face states a valid cause of action; and the question as to
whether the printed article sued upon its actionable or not is a matter of
evidence. Petitioner's motion for reconsideration was denied on May 28, 1982.
On June 18, 1982, petitioner filed a petition for certiorari with respondent Court
(CA-G. R. No. 14406) seeking the annulment of the aforecited trial court's Orders
for having been issued with such a grave abuse of discretion as amounting to
lack of jurisdiction and praying for the dismissal of the complaint for failure to
state a cause of action.
As earlier stated, respondent Court affirmed the trial court's Orders in a Decision
dated December 17, 1982 and ordered the case to be tried on the merits on the
grounds that -(1) the complaint contains allegations of fact which called for the
presentation of evidence; and (2) certiorari under Rule 65 cannot be made to
substitute for an appeal where an appeal would lie at a proper time.
Subsequently, on March 10, 1983, the respondent Court denied petitioner's
Motion for Reconsideration of the aforesaid decision, hence this petition.
The proper remedy which petitioner should have taken from the decision of
respondent Court is an appeal by certiorari under Rule 45 of the Rules of Court
and not the special civil action of certiorari and prohibition under Rule 65 of said
Rules. However, since the petition was filed on time within fifteen days from
notice of the Resolution denying the motion for reconsideration, we shall treat the
same as a petition for review on certiorari. The two (2) issues raised in the
petition are: (1) whether or not the private respondents' complaint failed to state a
cause of action; and (2) whether or not the petition for certiorari and prohibition is
proper to question the denial of a motion to dismiss for failure to state a cause of
action.
First, petitioner argues that private respondents' complaint failed to state a cause
of action because the complaint made no allegation that anything contained in
the article complained of regarding sugarcane planters referred specifically to
any one of the private respondents; that libel can be committed only against
individual reputation; and that in cases where libel is claimed to have been
directed at a group, there is actionable defamation only if the libel can be said to
reach beyond the mere collectivity to do damage to a specific, individual group
member's reputation.
We agree with petitioner.
In the case of Corpus vs. Cuaderno, Sr. (16 SCRA 807) this Court ruled that "in
order to maintain a libel suit, it is essential that the victim be identifiable (People
vs. Monton, L-16772, November 30, 1962), although it is not necessary that he
be named (19 A.L.R. 116)." In an earlier case, this Court declared that" ...
defamatory matter which does not reveal the Identity of the person upon whom
the imputation is cast, affords no ground of action unless it be shown that the
readers of the libel could have Identified the personality of the individual
defamed." (Kunkle vs. Cablenews-American and Lyons 42 Phil. 760).
This principle has been recognized to be of vital importance, especially where a
group or class of persons, as in the case at bar, claim to have been defamed, for
it is evident that the larger the collectivity, the more difficult it is for the individual
member to prove that the defamatory remarks apply to him. (Cf. 70 ALR 2d.
1384).
In the case of Uy Tioco vs. Yang Shu Wen , 32 Phil. 624, this Court held as
follows:
Defamatory remarks directed at a class or group of persons in general language
only, are not actionable by individuals composing the class or group unless the
statements are sweeping; and it is very probable that even then no action would
lie where the body is composed of so large a number of persons that common
sense would tell those to whom the publication was made that there was room
for persons connected with the body to pursue an upright and law abiding course
and that it would be unreasonable and absurd to condemn all because of the
actions of a part. (supra p. 628).
It is evident from the above ruling that where the defamation is alleged to have
been directed at a group or class, it is essential that the statement must be so
sweeping or all-embracing as to apply to every individual in that group or class,
or sufficiently specific so that each individual in the class or group can prove that
the defamatory statement specifically pointed to him, so that he can bring the
action separately, if need be.
We note that private respondents filed a "class suit" in representation of all the
8,500 sugarcane planters of Negros Occidental. Petitioner disagrees and argues
that the absence of any actionable basis in the complaint cannot be cured by the
filing of a class suit on behalf of the aforesaid sugar planters.
We find petitioner's contention meritorious.
The case at bar is not a class suit. It is not a case where one or more may sue
for the benefit of all (Mathay vs. Consolidated Bank and Trust Company, 58
SCRA 559) or where the representation of class interest affected by the
judgment or decree is indispensable to make each member of the class an actual
party (Borlaza vs. Polistico, 47 Phil. 348). We have here a case where each of
the plaintiffs has a separate and distinct reputation in the community. They do not
have a common or general interest in the subject matter of the controversy.
The disputed portion of the article which refers to plaintiff Sola and which was
claimed to be libelous never singled out plaintiff Sola as a sugar planter. The
news report merely stated that the victim had been arrested by members of a
special police unit brought into the area by Pablo Sola, the mayor of Kabankalan.
Hence, the report, referring as it does to an official act performed by an elective
public official, is within the realm of privilege and protected by the constitutional
guarantees of free speech and press.
The article further stated that Sola and the commander of the special police unit
were arrested. The Court takes judicial notice of this fact. (People vs. Sola, 103
SCRA 393.)
The second issue to be resolved here is whether or not the special civil action of
certiorari or prohibition is available to petitioner whose motion to dismiss the
complaint and subsequent motion for reconsideration were denied.
As a general rule, an order denying a motion to dismiss is merely interlocutory
and cannot be subject of appeal until final judgment or order is rendered. (Sec. 2
of Rule 4 1). The ordinary procedure to be followed in such a case is to file an
answer, go to trial and if the decision is adverse, reiterate the issue on appeal
from the final judgment. The same rule applies to an order denying a motion to
quash, except that instead of filing an answer a plea is entered and no appeal
lies from a judgment of acquittal.
This general rule is subject to certain exceptions. If the court, in denying the
motion to dismiss or motion to quash, acts without or in excess of jurisdiction or
with grave abuse of discretion, then certiorari or prohibition lies. The reason is
that it would be unfair to require the defendant or accused to undergo the ordeal
and expense of a trial if the court has no jurisdiction over the subject matter or
offense, or is not the court of proper venue, or if the denial of the motion to
dismiss or motion to quash is made with grave abuse of discretion or a whimsical
and capricious exercise of judgment. In such cases, the ordinary remedy of
appeal cannot be plain and adequate. The following are a few examples of the
exceptions to the general rule.
In De Jesus vs. Garcia (19 SCRA 554), upon the denial of a motion to dismiss
based on lack of jurisdiction over the subject matter, this Court granted the
petition for certiorari and prohibition against the City Court of Manila and directed
the respondent court to dismiss the case.
In Lopez vs. City Judge (18 SCRA 616), upon the denial of a motion to quash
based on lack of jurisdiction over the offense, this Court granted the petition for
prohibition and enjoined the respondent court from further proceeding in the
case.
In Enriquez vs. Macadaeg (84 Phil. 674), upon the denial of a motion to dismiss
based on improper venue, this Court granted the petition for prohibition and
enjoined the respondent judge from taking cognizance of the case except to
dismiss the same.
In Manalo vs. Mariano (69 SCRA 80), upon the denial of a motion to dismiss
based on bar by prior judgment, this Court granted the petition for certiorari and
directed the respondent judge to dismiss the case.
In Yuviengco vs. Dacuycuy (105 SCRA 668), upon the denial of a motion to
dismiss based on the Statute of Frauds, this Court granted the petition for
certiorari and dismissed the amended complaint.
The complaint contains a recital of the favorable working conditions of the
agricultural workers in the sugar industry and the various foundations and
programs supported by planters' associations for the benefit of their workers.
Undoubtedly, the statements in the article in question are sweeping and
exaggerated; but, paraphrasing the ruling in the Uy Tioco case above quoted, it
would be unreasonable and absurd to condemn the majority of the sugarcane
planters, who have at heart the welfare of their workers, because of the actions
of a part. Nonetheless, articles such as the one in question may also serve to
prick the consciences of those who have but are not doing anything or enough
for those who do not have.
On the other hand, petitioner would do well to heed the admonition of the
President to media that they should check the sources of their information to
ensure the publication of the truth. Freedom of the press, like all freedoms,
should be exercised with responsibility.
WHEREFORE, the decision of the Intermediate Appellate Court is reversed and
the complaint in Civil Case No. 15812 of the Court of First Instance of Negros
Occidental is dismissed, without pronouncement as to costs.
SO ORDERED.

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

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

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

Petitioner's motion to dismiss is based on the ground that the complaint states no
cause of action against it by pointing out the non-libelous nature of the article
sued upon. There is no need of a trial in view of the conclusion of this Court that
the article in question is not libelous. The specific allegation in the complaint, to
the effect that the article attributed to the sugarcane planters the deaths and
brutalization of sugarcane workers, is not borne out by a perusal of the actual
text.

G.R. No. L-23136 August 26, 1974
ISMAEL MATHAY, JOSEFINA MATHAY, DIOGRACIAS T. REYES and S.
ADOR DIONISIO, plaintiffs-appellants,
vs.
THE CONSOLIDATED BANK AND TRUST COMPANY, JOSE MARINO
OLONDRIZ, WILFRIDO C. TECSON, SIMON R. PATERNO, FERMIN Z.
CARAM, JR., ANTONIO P. MADRIGAL, JOSE P. MADRIGAL, CLAUDIO
TEEHANKEE, and ALFONSO JUAN OLONDRIZ, defendants-
appellees., movants-intervenors-appellants.
ZALDIVAR, J.:p
In this appeal, appellants-plaintiffs and movants-intervenors seek the reversal of
the order dated March 21, 1964 of the Court of First Instance of Manila
dismissing the complaint together with all other pending incidents in Civil Case
No. 55810.
The complaint in this case, filed on December 24, 1963 as a class suit, under
Section 12, Rule 3, of the Rules of Court, contained six causes of action. Under
the first cause of action, plaintiffs-appellants alleged that they were, on or before
March 28, 1962, stockholders in the Consolidated Mines, Inc. (hereinafter
referred to as CMI), a corporation duly organized and existing under Philippine
laws; that the stockholders of the CMI, including the plaintiffs-appellants, passed,
at a regular stockholders' meeting, a Resolution providing: (a) that the
Consolidated Bank & Trust Co. (hereinafter referred to as Bank) be organized
with an authorized capital of P20,000,000.00; (b) that the organization be
undertaken by a Board of Organizers composed of the President and Members
of the Board of Directors of the CMI; (c) that all stockholders of the CMI, who
were legally qualified to become stockholders, would be entitled to subscribe to
the capital stock of the proposed Bank "at par value to the same extent and in the
same amount as said stockholders' respective share holdings in the CMI," as
shown in its stock books on a date to be fixed by the Board of Directors [which
date was subsequently fixed as January 15, 1963], provided that the right to
subscribe should be exercised within thirty days from the date so fixed, and "that
if such right to subscription be not so exercised then the stockholders concerned
shall be deemed to have thereby waived and released ipso facto their right to
such subscription in favor of the Interim Board of Organizers of the Defendant
Bank or their assignees;" and (d) that the Board of Directors of the CMI be
authorized to declare a "special dividend" in an amount it would fix, which the
subscribing stockholders might authorize to be paid directly to the treasurer of
the proposed Bank in payment of the subscriptions; that the President and
members of the Board of Directors of the CMI, who are the individuals-
defendants-appellees in the instant case, constituted themselves as the Interim
Board of Organizers; that said Board sent out, on or about November 20, 1962,
to the CMI stockholders, including the plaintiffs-appellants, circular letters with
"Pre-Incorporation Agreement to Subscribe" forms that provided that the
payment of the subscription should be made in cash from time to time or by the
application of the special dividend declared by the CMI, and that the subscription
must be made within the period from December 4, 1962 to January 15, 1963,
"otherwise such subscription right shall be deemed to have been thereby ipso
facto waived and released in favor of the Board of Organizers of the Defendant
Bank and their assignees"; that the plaintiffs-appellants accomplished and filed
their respective "Pre-Incorporation Agreement to Subscribe" and paid in full their
subscriptions; that plaintiffs-appellants and the other CMI subscribing
stockholders in whose behalf the action was brought also subscribed to a very
substantial amount of shares; that on June 25, 1963, the Board of Organizers
caused the execution of the Articles or Incorporation of the proposed Bank
indicating an original subscription of 50,000 shares worth P5,000,000 subscribed
and paid only by six of the individuals-defendants-appellees, namely, Antonio P.
Madrigal, Jose P. Madrigal Simon R. Paterno, Fermin Z. Caram, Jr., Claudio
Teehankee, and Wilfredo C. Tecson, thereby excluding the plaintiffs-appellants
and the other CMI subscribing stockholders who had already subscribed; that the
execution of said Articles of Incorporation was "in violation of law and in breach
of trust and contractual agreement as a means to gain control of Defendant Bank
by Defendant Individuals and persons or entities chosen by them and for their
personal profit or gain in disregard of the rights of Plaintiffs and other CMI
Subscribing Stockholders;" that the paid-in capital stock was raised, as required
by the Monetary Board, to P8,000,000.00, and individuals-defendants-appellees
caused to be issued from the unissued shares 30,000 shares amounting to
P3,000,000.00, all of which were again subscribed and paid for entirely by
individuals-defendants-appellees or entities chosen by them "to the exclusion of
Plaintiffs and other CMI subscribing stockholders" "in violation of law and breach
of trust and of the contractual agreement embodied in the contractual agreement
of March 28, 1962"; that the Articles were filed with the Securities and Exchange
Commission which issued the Certificate of Incorporation on June 25, 1963; that
as of the date of the Complaint, the plaintiffs-appellants and other CMI
subscribing stockholders had been denied, through the unlawful acts and
manipulation of the defendant Bank and Individuals-defendants-appellees, the
right to subscribe at par value, in proportion to their equities established under
their respective "Pre-Incorporation Agreements to Subscribe" to the capital stock,
i.e., (a) to the original issue of 50,000 shares and/or (b) to the additional issue of
30,000 shares, and/or (c) in that portion of said original or additional issue which
was unsubscribed; that the individuals-defendants-appellees and the persons
chosen by them had unlawfully acquired stockholdings in the defendant-appellee
Bank in excess of what they were lawfully entitled and held such shares "in trust"
for the plaintiffs-appellants and the other CMI stockholders; that it would have
been vain and futile to resort to intra corporate remedies under the facts and
circumstances alleged above. As relief on the first cause of action, plaintiffs-
appellants prayed that the subscriptions and share holdings acquired by the
individuals-defendants- appellees and the persons chosen by them, to the extent
that plaintiffs-appellants and the other CMI stockholders had been deprived of
their right to subscribe, be annulled and transferred to plaintiffs-appellants and
other CMI subscribing stockholders.
Besides reproducing all the above allegations in the other causes of action,
plaintiffs-appellants further alleged under the second cause of action that on or
about August 28, 1963, defendants-appellees Antonio P. Madrigal, Jose P.
Madrigal: Fermin Z. Caram, Jr., and Wilfredo C. Tecson "falsely certified to the
calling of a special stockholders' meeting allegedly pursuant to due notice and
call of Defendant Bank" although plaintiffs-appellants and other CMI stockholders
were not notified thereof, and amended the Articles of Incorporation increasing
the number of Directors from 6 to 7, and had the illegally created Position of
Director filled up by defendant-appellee Alfonso Juan Olondriz, who was not
competent or qualified to hold such position. In the third cause of action,
plaintiffs-appellants claimed actual damages in an amount equivalent to the
difference between the par value of the shares they were entitled, but failed, to
acquire and the higher market value of the same shares. In the fourth cause of
action, Plaintiffs-appellants claimed moral damages; in the fifth, exemplary
damages; and in the sixth, attorney's fees.
In his manifestation to the court on January 4, 1964, Francisco Sevilla, who was
one of the original plaintiffs, withdrew. On January 15, 1964 Cipriano Azada,
Maria Cristina Olondriz Pertierra, Maria del Puy Olondriz de Stevens (who later
withdrew as intervenors-appellants) and Carmen Sievert de Amoyo, filed a
motion to intervene, and to join the plaintiffs-appellants on record, to which
motion defendants-appellees, except Fermin Z. Caram, Jr., filed, on January 17,
1964 their opposition.
On February 7, 1964 defendants-appellees, except Fermin Z. Caram, Jr., filed a
motion to dismiss on the grounds that (a) plaintiffs-appellants had no legal
standing or capacity to institute the alleged class suit; (b) that the complaint did
not state a sufficient and valid cause of action; and (c) that plaintiffs-appellants'
complaint against the increase of the number of directors did not likewise state a
cause of action. Plaintiffs-appellants filed their opposition thereto on February 21,
1964.
On March 4, 1964 appellants, plaintiffs and intervenors, filed a verified petition for
a writ of preliminary injunction to enjoin defendants-appellees from considering or
ratifying by resolution, at the meeting of the stockholders of defendant-appellee
Bank to be held the following day, the unlawful apportionment of the shares of
the defendant-appellee Bank and the illegal amendment to its Articles of
Incorporation increasing the number of Directors, The Court, after hearing,
granted the writ, but subsequently set it aside upon the appellees' filing a counter
bond.
Some subscribers to the capital stock of the Bank like Concepcion Zuluaga, et
al., and Carlos Moran Sison, et al., filed separate manifestations that they were
opposing and disauthorizing the suit of plaintiffs-appellants.
On March 7, 1964 defendants-appellees, except Fermin Z. Caram, Jr., filed a
supplemental ground for their motion to dismiss, to wit, that the stockholders,
except Fermin Z. Caram, Jr., who abstained, had unanimously, at their regular
annual meeting held on March 5, 1964, ratified and confirmed all the actuations
of the organizers-directors in the incorporation, organization and establishment of
the Bank.
In its order, dated March 21, 1964, the trial court granted the motion to dismiss,
holding, among other things, that the class suit could not be maintained because
of the absence of a showing in the complaint that the plaintiffs-appellants were
sufficiently numerous and representative, and that the complaint failed to state a
cause of action. From said order, appellants, plaintiffs and intervenors,
interposed this appeal to this Court on questions of law and fact, contending that
the lower court erred as follows:
1. In holding that plaintiffs-appellants could not maintain the present class suit
because of the absence of a showing in the complaint that they were sufficiently
numerous and representative;
II. In holding that the instant action could not be maintained as a class suit
because plaintiffs-appellants did not have a common legal interest in the subject
matter of the suit;
III. In dismissing the present class suit on the ground that it did not meet the
requirements of Rule 3, section 12 of the Rules of Court;
IV. In holding that the complaint was fatally defective in that it failed to state with
particularity that plaintiffs-appellants had resorted to, and exhausted, intra-
corporate remedies;
V. In resolving defendants-appellees' motion on the basis of facts not alleged in
the complaint;
VI. In holding that plaintiffs-appellants' complaint stated no valid cause of action
against defendants-appellees;
VII. In not holding that a trust relationship existed between the Interim Board of
Organizers of defendant-appellee Bank and the CMI subscribing stockholders
and in not holding that the waiver was in favor of the Board of Trustees for the
CMI subscribing stockholders;
VIII. In holding that the failure of plaintiffs-appellants to allege that they had paid
or had offered to pay for the shares allegedly pertaining to them constituted
another ground for dismissal;
XI. In holding that the allegations under the second cause of action stated no
valid cause of action due to a fatal omission to allege that plaintiffs-appellants
were stockholders of record at the time of the holding of the special stockholders'
meeting;
X. In holding that plaintiffs-appellants' complaint stated no cause of action against
defendant-appellee Bank; and
XI. In considering the resolution of ratification and confirmation and in holding
that the resolution rendered the issues in this case moot.
The assigned error revolve around two questions namely: (1) whether the instant
action could be maintained as a class suit, and (2) whether the complaint stated
a cause of action. These issues alone will be discussed.
1. Appellants contended in the first three assigned errors that the trial court erred
in holding that the present suit could not be maintained as a class suit, and in
support thereof argued that the propriety of a class suit should be determined by
the common interest in the subject matter of the controversy; that in the instant
case there existed such common interest which consisted not only in the
recovery of the shares of which the appellants were unlawfully deprived, but also
in divesting the individuals-defendants-appellees and the person or entities
chosen by them of control of the appellee Bank.1 ; that the complaint showed that
besides the four plaintiff-appellants of record, and the four movant-intervenors-
appellants there were in the appellee Bank many other stockholders who, tough
similarly situated as the appellants, did not formally include themselves as parties
on record in view of the representative character of the suit; that the test, in order
to determine the legal standing of a party to institute a class suit, was not one, of
number, but whether or not the interest of said party was representative of the
persons in whose behalf the class suit was instituted; that granting arguendo,
that the plaintiffs-appellants were not sufficiently numerous and representative,
the court should not have dismissed the action, for insufficiency of number in a
class suit was not a ground for a motion to dismiss, and the court should have
treated the suit as an action under Rule 3, section 6, of the Rules of Court which
permits a joinder of parties.
Defendants-appellees, on the contrary, stressed that the instant suit was
instituted as a class suit and the plaintiffs-appellants did not sue in their individual
capacities for the protection of their individual interests; that the plaintiffs
appellants of record could not be considered numerous and representative, as
said plaintiffs-appellants were only four out of 1,500 stockholders, and owned
only 8 shares out of the 80,000 shares of stock of the appellee Bank; that even if
to the four plaintiffs-appellants were added the four movants-intervenors-
appellants the situation would be the same as two of the intervenors, to wit, Ma.
Cristina Olondriz Pertierra and Ma. del Puy Olondriz de Stevens, could not sue
as they did not have their husbands' consent; that it was necessary that in a
class suit the complaint itself should allege facts showing that the plaintiffs were
sufficiently numerous and representative, and this did not obtain in the instant
case, as the complaint did not. even allege how many other CMI stockholders
were "similarly situated"; that the withdrawal of one plaintiff, Francisco Sevilla,
the subsequent disclaimers of any interest in the suit made in two separate
pleadings by other CMI stockholders and the disauthorization of their being
represented by plaintiffs-appellants by the 986 (out of 1,663) stockholders who
attended the annual meeting of bank stockholders on March 5, 1964, completely
negated plaintiffs-appellants' pretension that they were sufficiently numerous and
representative or that there were many other stockholders similarly situated
whom the plaintiffs-appellants allegedly represented; that plaintiffs-appellants did
not have that common or general interest required by the Rules of Court in the
subject matter of the suit.2
In their Reply Brief, appellants insisted that non-compliance with Section 12, Rule
3, not being one enumerated in Rules 16 and 17, was not a ground for dismissal;
that the requirements for a class had been complied with; that the required
common interest existed even if the interests were several for there was a
common question of law or fact and a common relief was sought; that the
common or general interest could be in the object of the action, in the result of
the proceedings, or in the question involved in the action, as long as there was a
common right based on the same essential facts; that plaintiffs-appellants
adequately represented the aggrieved group of bank stockholders, inasmuch as
appellants' interests were not antagonistic to those of the latter, and appellants
were in the same position as the group in whose behalf the complaint was filed.
The governing statutory provision for the maintenance of a class suit is Section
12 of Rule 3 of the Rules of Court, which reads as follows:
Sec. 12. Class suit — When the subject matter of the controversy is one of
common or general interest to many persons, and the parties are so numerous
that it is impracticable to bring them all before the court, one or more may sue or
defend for the benefit of -ill. But in such case the court shall make sure that the
parties actually before it are sufficiently numerous and representative so that all
interests concerned are fully protected. Any party in interest shall have a right to
intervene in protection of his individual interest.
The necessary elements for the maintenance of a class suit are accordingly: (1)
that the subject matter of the controversy be one of common or general interest
to many persons, and (2) that such persons be so numerous as to make it
impracticable to bring them all to the court. An action does not become a class
suit merely because it is designated as such in the pleadings. Whether the suit is
or is not a class quit depends upon the attending facts, and the complaint, or
other pleading initiating the class action should allege the existence of the
necessary facts, to wit, the existence of a subject matter of common interest, and
the existence of a class and the number of persons in the alleged class,3 in order
that the court might be enabled to determine whether the members of the class
are so numerous as to make it impracticable to bring them all before the court, to
contrast the number appearing on the record with the number in the class and to
determine whether claimants on record adequately represent the class and the
subject matter of general or common interest.4
The complaint in the instant case explicitly declared that the plaintiffs- appellants
instituted the "present class suit under Section 12, Rule 3, of the Rules of Court
in. behalf of CMI subscribing stockholders"5 but did not state the number of said
CMI subscribing stockholders so that the trial court could not infer, much
less make sure as explicitly required by the sufficiently numerous and
representative in order that all statutory provision, that the parties actually before
it were interests concerned might be fully protected, and that it was impracticable
to bring such a large number of parties before the court.
The statute also requires, as a prerequisite to a class suit, that the subject-matter
of the controversy be of common or general interest to numerous persons.
Although it has been remarked that the "innocent 'common or general interest'
requirement is not very helpful in determining whether or not the suit is
proper",6 the decided cases in our jurisdiction have more incisively certified the
matter when there is such common or general interest in the subject matter of the
controversy. By the phrase "subject matter of the action" is meant "the physical
facts, the things real or personal, the money, lands, chattels, and the like, in
relation to which the suit is prosecuted, and not the delict or wrong committed by
the defendant."7
This Court has ruled that a class suit did not lie in an action for recovery of real
property where separate portions of the same parcel were occupied and claimed
individually by different parties to the exclusion of each other, such that the
different parties had determinable, though undivided interests, in the property in
question.8 It his likewise held that a class suit would not lie against 319
defendants individually occupying different portions of a big parcel of land, where
each defendant had an interest only in the particular portion he was occupying,
which portion was completely different from the other portions individually
occupied by other defendants, for the applicable section 118 of the Code of Civil
Procedure relates to a common and general interest in single specific things and
not to distinct ones.9 In an action for the recovery of amounts that represented
surcharges allegedly collected by the city from some 30,000 customers of four
movie houses, it was held that a class suit did not lie, as no one plaintiff had any
right to, or any share in the amounts individually claimed by the others, as each
of them was entitled, if at all, only to the return of what he had personally paid. 10
The interest, subject matter of the class suits in the above cited cases, is
analogous to the interest claimed by appellants in the instant case. The interest
that appellants, plaintiffs and intervenors, and the CMI stockholders had in the
subject matter of this suit — the portion of stocks offering of the Bank left
unsubscribed by CMI stockholders who failed to exercise their right to subscribe
on or before January 15, 1963 — was several, not common or general in the
sense required by the statute. Each one of the appellants and the CMI
stockholders had determinable interest; each one had a right, if any, only to his
respective portion of the stocks. No one of them had any right to, or any interest
in, the stock to which another was entitled. Anent this point, the trial court
correctly remarked:
It appears to be the theory of the plaintiffs borne out by the prayer, that each
subscribing CMI stockholder is entitled to further subscribe to a certain
Proportion depending upon his stockholding in the CMI, of the P8 million capital
stock of the defendant bank open to subscription (out of the 20 million authorized
capital stock) as well as the unsubscribed portion of the P8 million stock offering
which were left unsubscribed by those CMI stockholders who for one reason or
another had failed to exercise their subscription rights on or before January 15,
1963. Under the plaintiffs' theory therefore, each subscribing CMI stockholder
was entitled to subscribe to a definite number of shares both in the original
offering of P8 million and in that part thereof not subscribed on or before the
deadline mentioned, so that one subscribing CMI stockholder may be entitled to
subscribe to one share, another to 3 shares and a third to 11 shares, and so on,
depending upon the amount and extent of CMI stockholding. But except for the
fact that a question of law — the proper interpretation of the waiver provisions of
the CMI stockholders' resolution of March 28, 1962 — is common to all, each
CMI subscribing stock holder has a legal interest in, and a claim to, only his
respective proportion of shares in the defendant bank, and none with regard to
any of the shares to which another stockholder is entitled. Thus plaintiff Ismael
Mathay has no legal interest in, or claim to, any share claimed by any or all of his
co-plaintiffs from the defendant individuals. Hence, no CMI subscribing
stockholder or, for that matter, not any number of CMI stockholders can maintain
a class suit in behalf of others,... 11
Even if it be assumed, for the sake of argument, that the appellants and the CMI
stockholders suffered wrongs that had been committed by similar means and
even pursuant to a single plan of the Interim Board of Organizers of the Bank, the
wrong suffered by each of them would constitute a wrong separate from those
suffered by the other stockholders, and those wrongs alone would not create that
common or general interest in the subject matter of the controversy as would
entitle any one of them to bring a class suit on behalf of the others. Anent this
point it has been said that:
Separate wrongs to separate persons, although committed by similar means and
even pursuant to a single plan, do not alone create a 'common' or 'general'
interest in those who are wronged so as to entitle them to maintain a
representative action. 12
Appellants, however, insisted, citing American authorities, 13 that a class suit
might be brought even if the interests of plaintiffs-appellants might be several as
long as there was a common question of law or fact affecting them and a
common relief was sought. We have no conflict with the authorities cited; those
were rulings under the Federal Rules of Civil Procedure, pursuant to Rule 23 of
which, there were three types of class suits, namely: the true, the hybrid, and the
spurious, and these three had only one feature in common, that is, in each the
persons constituting the class must be so numerous as to make it impracticable
to bring them all before the court. The authorities cited by plaintiffs-appellants
refer to the spurious class action (Rule 23 (a) (3) which involves a right sought to
be enforced, which is several, and there is a common question of law or fact
affecting the several rights and a common relief is sought. 14 The spurious class
action is merely a permissive joinder device; between the members of the class
there is no jural relationship, and the right or liability of each is distinct, the class
being formed solely by the presence of a common question of law or fact. 15 This
permissive joinder is provided in Section 6 of Rule 3, of our Rules of Court. Such
joinder is not and cannot be regarded as a class suit, which this action purported
and was intended to be as per averment of the complaint.
It may be granted that the claims of all the appellants involved the same question
of law. But this alone, as said above, did not constitute the common interest over
the subject matter indispensable in a class suit. The right to purchase or
subscribe to the shares of the proposed Bank, claimed by appellants herein, is
analogous to the right of preemption that stockholders have when their
corporation increases its capital. The right to preemption, it has been said, is
personal to each stockholder, 16 and while a stockholder may maintain a suit to
compel the issuance of his proportionate share of stock, it has been ruled,
nevertheless, that he may not maintain a representative action on behalf of other
stockholders who are similarly situated. 17 By analogy, the right of each of the
appellants to subscribe to the waived stocks was personal, and no one of them
could maintain on behalf of others similarly situated a representative suit.
Straining to make it appear that appellants and the CMI subscribing stockholders
had a common or general interest in the subject matter of the suit, appellants
stressed in their brief that one of the reliefs sought in the instant action was
"to divest defendant individuality and the persons or entities chosen by them of
control of the defendant bank." 18 This relief allegedly sought by appellants did
not, however, appear either in the text or in the prayer of the complaint.
Appellants, furthermore, insisted that insufficiency of number in a class suit was
not a ground for dismissal of one action. This Court has, however, said that
where it appeared that no sufficient representative parties had been joined, the
dismissal by the trial court of the action, despite the contention by plaintiffs that it
was a class suit, was correct. 19 Moreover, insofar as the instant case is
concerned, even if it be granted for the sake of argument, that the suit could not
be dismissed on that ground, it could have been dismissed, nevertheless, on the
ground of lack of cause of action which will be presently discussed. .
2. Appellants supported their assigned error that the court erred in holding that
the complaint stated no valid cause of action, by claiming that paragraph 15
together with the other allegations of the complaint to the effect that defendants-
appellees had unlawfully acquired stockholdings in the capital stock of
defendant-appellee Bank in excess of what they were lawfully entitled to, in
violation of law and in breach of trust and the contractual agreement, constituted
a valid and sufficient cause of action; 20 and that only the allegations in the
complaint should have been considered by the trial court in determining whether
the complaint stated a cause of action or not.
Defendants-appellees, on the contrary, maintained that the allegations of the
complaint should not be the only ones to be considered in determining whether
there is a cause of action; that even if the ultimate facts alleged in the first cause
of action of the complaint be the only ones considered the complaint would still
fail to state a valid cause of action on the following grounds: first, there was no
allegation regarding appellants' qualification to subscribe to the capital stock of
the appellee Bank, for under the CMI stockholders' resolution of March 28, 1962,
only those qualified under the law were entitled to subscribe, and under the
regulations of the Monetary Board, only natural-born Filipino citizens could be
stockholders of a banking corporation organized under the laws of the
Philippines, and nowhere did the complaint alleged that plaintiffs-appellants were
natural born Filipino citizens. 21 Second, appellants' averment in paragraph 8 that
they "subscribed," and their averment in paragraph 15 that they were "denied the
right to subscribe ... to the capital stock of the defendant Bank", were
inconsistent, and hence neutralized each other, thereby leaving in shambles the
first cause of action. Third, there was no allegation that appellants had not yet
received or had not been issued the corresponding certificates of stock covering
the shares they had subscribed and paid for. Fourth, the allegations failed to
show the existence of the supposed trust; and fifth, the complaint failed to allege
that plaintiffs-appellants had paid or offered to pay for the shares allegedly
pertaining to them. 22
Let us premise the legal principles governing the motion to dismiss on the ground
of lack of cause of action.
Section 1, Rule 16 of the Rules of Court providing in part that: .
Within the time for pleading a motion to dismiss may be made on any of the
following grounds: ....
(g) That the complaint states no cause of action. ..1.
explicitly requires that the sufficiency of the complaint must be tested exclusively
on the basis of the complaint itself and no other should be considered when the
ground for motion to dismiss is that the complaint states no cause of action.
Pursuant thereto this Court has ruled that:
As a rule the sufficiency of the complaint, when Challenged in a motion to
dismiss, must be determined exclusively on the basis of the facts alleged
therein. 23
It has been likewise held that a motion to dismiss based on lack of cause of
action hypothetically admits the truth of the allegations of fact made in the
complaint. 24 It is to be noted that only the facts well pleaded in the complaint,
and likewise, any inferences fairly deducible therefrom, are deemed admitted by
a motion to dismiss. Neither allegations of conclusions 25 nor allegations of facts
the falsity of which the court may take judicial notice are deemed admitted. 26 The
question, therefore, submitted to the Court in a motion to dismiss based on lack
of cause of action is not whether the facts alleged in the complaint are true, for
these are hypothetically admitted, but whether the facts alleged are sufficient to
constitute a cause of action such that the court may render a valid judgment
upon the facts alleged therein.
A cause of action is an act or omission of one party in violation of the legal right
of the other. Its essential elements are, namely: (1) the existence of a legal right
in the plaintiff, (2) a correlative legal duty in the defendant, and (3) an act or
omission of the defendant in violation of plaintiff's right with consequential injury
or damage to the plaintiff for which he may maintain an action for the recovery of
damages or other appropriate relief. 27 On the other hand, Section 3 of Rule 6 of
the Rules of Court provides that the complaint must state the ultimate facts
constituting the plaintiff's cause of action. Hence, where the complaint states
ultimate facts that constitute the three essential elements of a cause of action,
the complaint states a cause of action; 28 otherwise, the complaint must succumb
to a motion to dismiss on that ground.
The legal principles having been premised, let us now analyze and discuss
appellant's various causes of action.
Appellants' first cause of action, pursuant to what has been premised above,
should have consisted of: (1) the right of appellants as well as of the other CMI
stockholders to subscribe, in proportion to their equities established under their
respective "Pre-Incorporation Agreements to Subscribe", to that portion of the
capital stock which was unsubscribed because of failure of the CMI stockholders
to exercise their right to subscribe thereto; (2) the legal duty of the appellant to
have said portion of the capital stock to be subscribed by appellants and other
CMI stockholders; and (3) the violation or breach of said right of appellants and
other CMI stockholders by the appellees.
Did the complaint state the important and substantial facts directly forming the
basis of the primary right claimed by plaintiffs? Before proceeding to elucidate
this question, it should be noted that a bare allegation that one is entitled to
something is an allegation of a conclusion. Such allegations adds nothing to the
pleading, it being necessary to plead specifically the facts upon which such
conclusion is founded. 29 The complaint alleged that appellants were
stockholders of the CMI; that as such stockholders, they were entitled; by virtue
of the resolution of March 28, 1962, to subscribe to the capital stock of the
proposed Consolidated Bank and Trust Co., at par value to the same extent and
in the same amount as said stockholders' respective share holdings in the CMI
as shown in the latter's stock book as of January 15, 1963, the right to subscribe
to be exercised until January 15, 1963, provided said stockholders of the CMI
were qualified under the law to become stockholders of the proposed
Bank; 30 that appellants accomplished and filed their respective "Pre-
Incorporation Agreements to Subscribe" and fully paid the subscription. 31
These alleged specific facts did not even show that appellants were entitled to
subscribe to the capital stock of the proposed Bank, for said right depended on a
condition precedent, which was, that they were qualified under the law to become
stockholders of the Bank, and there was no direct averment in the complaint of
the facts that qualified them to become stockholders of the Bank. The allegation
of the fact that they subscribed to the stock did not, by necessary implication,
show that they were possessed of the necessary qualifications to become
stockholders of the proposed Bank.
Assuming arguendo that appellants were qualified to become stockholders of the
Bank, they could subscribe, pursuant to the explicit terms of the resolution of
March 28, 1962, "to the same extent and in the same amount as said
stockholders' respective stockholdings in the CMI" as of January 15,
1963. 32 This was the measure of the right they could claim to subscribe to
waived stocks. Appellants did not even aver that the stocks waived to the
subscription of which they claimed the right to subscribe, were comprised in "the
extent and amount" of their respective share holdings in the CMI. It is not
surprising that they did not make such an averment for they did not even allege
the amount of shares of stock to which they claimed they were entitled to
subscribe. The failure of the complaint to plead specifically the above facts
rendered it impossible for the court to conclude by natural reasoning that the
appellants and other CMI stockholders had a right to subscribe to the waived
shares of stock, and made any allegation to that effect a conclusion of the
pleader, not an ultimate fact, in accordance with the test suggested by the
California Supreme Court, to wit:
If from the facts in evidence, the result can be reached by that process of natural
reasoning adopted in the investigation of truth, it becomes an ultimate fact, to be
found as such. If, on the other hand, resort must be had to the artificial processes
of the law, in order to reach a final determination, the result is a conclusion of
law. 33
Let us now pass to the second and third elements that would have constituted
the first cause of action. Did the complaint allege as ultimate facts the legal duty
of defendants-appellees to have a portion of the capital stock subscribed to by
appellants? Did the complaint allege as ultimate facts that defendants appellees
had violated appellants' right?
Even if it be assumed arguendo that defendants-appellees had the duty to have
the waived stocks subscribed to by the CMI stockholders, this duty was not owed
to all the CMI stockholders, but only to such CMI stockholders as were qualified
to become stockholders of the proposed Bank. Inasmuch as it has been shown
that the complaint did not contain ultimate facts to show that plaintiffs-appellants
were qualified to become stockholders of the Bank, it follows that the complaint
did not show that defendants-appellees were under duty to have plaintiffs-
appellants subscribe to the stocks of the proposed Bank. It inevitably follows also
that the complaint did not contain ultimate facts to show that the right of the
plaintiffs-appellants to subscribe to the shares of the proposed Bank had been
violated by defendants-appellees. How could a non-existent right be violated?
Let us continue the discussion further. The complaint alleged that by virtue of the
resolution of March 28, 1962, the President and Members of the Board of
Directors of the CMI would be constituted as a Board of Organizers to undertake
and carry out the organization of the Bank; 34 that the Board of Organizers was
constituted and proceeded with the establishment of the Bank, 35 that the
persons composing the Board of Organizers were the individuals-defendants-
appellees; 36 that the Board of Organizers sent our circular letters with "Pre-
Incorporation Agreement to Subscribe" forms 37 which specified, among others,
"such subscription right shall be deemed ipso facto waived and released in favor
of the Board of Organizers of the defendant Bank and their assignees"; 38 that in
the Articles of Incorporation prepared by the Board of Organizers, the individuals-
defendants-appellees alone appeared to have subscribe to the 50, shares; 39 and
that individuals-defendants-appellees again subscribe to all the additional 30,000
shares. 40 From these facts, appellants concluded that they were denied their
right to subscribe in proportion to their equities; 41 that the individuals-defendants-
appellees unlawfully acquired stockholdings far in excess of what they were
lawfully entitled in violation of law and in breach of trust and of contractual
agreement; 42 and that, because of matters already alleged, the individuals-
defendants-appellees "hold their shares in the defendant bank in trust for
plaintiffs." 43
The allegation in the complaint that the individuals-defendants-appellees held
their shares "in trust" for plaintiffs-appellants without averment of the facts from
which the court could conclude the existence of the alleged trust, was not
deemed admitted by the motion to dismiss for that was a conclusion of law.
Express averments "that a party was the beneficial owner of certain property; ...
that property or money was received or held in trust, or for the use of another;
that particular funds were trust funds; that a particular transaction created an
irrevocable trust; that a person held Property as constructive trustee; that on the
transfer of certain property a trust resulted" have been considered as mere
conclusions of law. 44 The facts alleged in the complaint did not, by logical
reasoning, necessarily lead to the conclusion that defendants-appellees were
trustees in favor of appellants of the shares of stock waived by the CMI
stockholders who failed to exercise their right to subscribe. In this connection, it
has been likewise said that:
"The general rule is that an allegation of duty in terms unaccompanied by a
statement of the facts showing the existence of the duty, is a mere conclusion of
law, unless there is a relation set forth from which the law raises the duty." 45
In like manner, the allegation that individuals-defendants-appellees held said
shares in trust was no more than an interpretation by appellants of the effect of
the waiver clause of the Resolution and as such it was again a mere conclusion
of law. It has been said that:
The following are also conclusions of law: ... an allegation characterizing an
instrument or purporting to interpret it and state its effects, ... 46
Allegations in petition in the nature of conclusions about the meaning of contract,
inconsistent with stated terms of the contract, cannot be considered. 47
The allegation that the defendants-appellee acquired stockholdings far in excess
of what they were lawfully entitled, in violation of law and in breach of trust and of
contractual agreement, is also mere conclusion of law.
An averment that ... an act was 'unlawful' or 'wrongful' is a mere legal conclusion
or opinion of the pleader. The same is true of allegations that an instrument was
'illegally' certified or ... that an act was arbitrarily done ..." 50
A pleader states a mere conclusion when he makes any of the following
allegations: that a party was incapacitated to enter into a contract or convey
property ... 51
The third, fourth, fifth and sixth causes of action depended on the first cause of
action, which, as has been shown, did not state ultimate facts sufficient to
constitute a cause of action. It stands to reason, therefore, that said causes of
action would also be fatally defective.
It having been shown that the complaint failed to state ultimate facts to constitute
a cause of action, it becomes unnecessary to discuss the other assignments of
errors.
WHEREFORE, the instant appeal is dismissed, and the order dated March 21,
1964 of the Court of First Instance of Manila dismissing the complaint in Civil
Case No. 55810 is affirmed, with costs in this instance against appellants. It is so
ordered.

Of course, the allegation that there was a violation of trust duty was plainly a
conclusion of law, for "a mere allegation that it was the duty of a party to do this
or that, or that he was guilty of a breach of duty, is a statement of a conclusion
not of fact." 48

An averment ... that an act was 'unlawful' or 'wrongful' is a mere legal conclusion
or opinion of the pleader. 49

Moreover, plaintiffs-appellants did not state in the complaint the amount of

subscription the individual defendant-appellee were entitled to; hence there was
no basis for the court to determine what amount subscribed to by them was
excessive.

From what has been said, it is clear that the ultimate facts stated under the first
cause of action are not sufficient to constitute a cause of action.

The further allegations in the second cause of action that the calling of a special
meeting was "falsely certified", that the seventh position of Director was "illegally
created" and that defendant Alfonso Juan Olondriz was "not competent or
qualified" to be a director are mere conclusions of law, the same not being
necessarily inferable from the ultimate facts stated in the first and second causes
of action. It has been held in this connection that:

G.R. No. L-22909 January 28, 1925
VICTORIANO BORLASA, ET AL., plaintiffs-appellants,
vs.
VICENTE POLISTICO, ET AL., defendants-appellees.
Sumulong and Lavides for appellants.
Ramon Diokno for appellees.
STREET, J.:
This action was instituted in the Court of First Instance of Laguna on July 25,
1917, by Victoriano Borlasa and others against Vicente Polistico and others,
chiefly for the purpose of securing the dissolution of a voluntary association
named Turuhan Polistico & Co., and to compel the defendants to account for and
surrender the money and property of the association in order that its affairs may
be liquidated and its assets applied according to law. The trial judge having
sustained a demurrer for defect of parties and the plaintiffs electing not to amend,
the cause was dismissed, and from this order an appeal was taken by the
plaintiffs to this court.
The material allegations of the complaint, so far as affects the present appeal,
are to the following effect: In the month of April, 1911, the plaintiffs and
defendants, together with several hundred other persons, formed an association
under the name of Turuhan Polistico & Co. Vicente Polistico, the principal
defendant herein, was elected president and treasurer of the association, and his
house in Lilio, Laguna, was made its principal place of business. The life of the
association was fixed at fifteen years, and under the by-laws each member
obligated himself to pay to Vicente Polistico, as president-treasurer, before 3
o'clock in the afternoon of every Sunday the sum of 50 centavos, except that on
every fifth Sunday the amount was P1, if the president elected to call this
amount, as he always did. It is alleged that from April, 1911, until April, 1917, the
sums of money mentioned above were paid weekly by all of the members of the
society with few irregularities. The inducement to these weekly contributions was
found in provisions of the by-laws to the effect that a lottery should be conducted
weekly among the members of the association and that the successful member
should be paid the amount collected each week, from which, however, the
president-treasurer of the society was to receive the sum of P200, to be held by
him as funds of the society.
It is further alleged that by virtue of these weekly lotteries Vicente Polistico, as
president-treasurer of the association, received sums of money amounting to
P74,000, more or less, in the period stated, which he still retains in his power or
has applied to the purchase of real property largely in his own name and partly in
the names of others. The defendants in the complaint are the members of the
board of directors of the association, including Vicente Polistico, as president-
treasurer, Alfonso Noble, secretary, Felix Garcia and Vivencio Zulaybar, as
promoter (propagandistas), and Afroniano de la Peña and Tomas Orencia, as
members (vocales) of the board.
In an amended answer the defendants raised the question of lack of parties and
set out a list of some hundreds of persons whom they alleged should be brought
in as parties defendant on the ground, among others, that they were in default in
the payment of their dues to the association. On November 28, 1922, the court
made an order requiring the plaintiffs to amend their complaint within a stated
period so as to include all of the members of the Turnuhan Polistico & Co. either
as plaintiffs or defendants. The plaintiffs excepted to this order, but acquiesced to
the extent of amending their complaint by adding as additional parties plaintiff
some hundreds of persons, residents of Lilio, said to be members of the
association and desirous of being joined as plaintiffs. Some of these new
plaintiffs had not been named in the list submitted by the defendants with their
amended answer; and on the other hand many names in said list were here
omitted, it being claimed by the plaintiffs that the persons omitted were not
residents of Lilio but residents of other places and that their relation to the
society, so far as the plaintiffs could discover, was fictitious. The defendants
demurred to the amended complaint on the ground that it showed on its face a
lack of necessary parties and this demurrer was sustained, with the ultimate
result of the dismissal of the action, as stated in the first paragraph of this
opinion.
The trial judge appears to have supposed that all the members of the Turnuhan
Polistico & Co. should be brought in either plaintiffs or defendants. This notion is
entirely mistaken. The situation involved is precisely the one contemplated in
section 118 of the Code of Civil Procedure, where one or more may sue for the
benefit of all. It is evident from the showing made in the complaint, and from the
proceedings in the court below, that it would be impossible to make all of the
persons in interest parties to the cases and to require all of the members of the
association to be joined as parties would be tantamount to a denial of justice.
The general rule with reference to the making of parties in a civil action requires,
of course, the joinder of all necessary parties wherever possible, and the joinder
of all indispensable parties under any and all conditions, the presence of those
latter being a sine qua non of the exercise of judicial power. The class suit
contemplates an exceptional situation where there are numerous persons all in
the same plight and all together constituting a constituency whose presence in
the litigation is absolutely indispensable to the administration of justice. Here the The order appealed from is reversed, the demurrer of the defendants based upon
strict application of the rule as to indispensable parties would require that each supposed lack of parties is overruled, and the defendants are required to answer
and every individual in the class should be present. But at this point the practice to the amended complaint within the time allowed by law and the rules of the
is so far relaxed as to permit the suit to proceed, when the class is sufficient court. The costs of this appeal will be paid by the defendants. So ordered.
represented to enable the court to deal properly and justly with that interest and
with all other interest involved in the suit. In the class suit, then, representation of
a class interest which will be affected by the judgment is indispensable; but it is
not indispensable to make each member of the class an actual party.

A common illustration in American procedure of the situation justifying a class

suit is that presented by the creditors' bill, which is filed by one party interested in
the estate of an insolvent, to secure the distribution of the assets distributable
among all the creditors. In such cases the common practice is for one creditor to
sue as plaintiff in behalf of himself and other creditors. (Johnson vs. Waters, 111
U.S., 640; 28 Law. ed., 547.) Another illustration is found in the case of Smith vs.
Swormstedt (16 How., 288; 14 Law. ed., 942), where a limited number of
individuals interested in a trust for the benefit of superannuated preachers were
permitted to maintain an action in their own names and as representatives of all
other persons in the same right.

His Honor, the trial judge, in sustaining this demurrer was possibly influenced to
some extent by the case of Rallonza vs. Evangelista (15 Phil., 531); but we do
not consider that case controlling, inasmuch as that was an action for the
recovery of real property and the different parties in interest had determinable,
though undivided interests, in the property there in question. In the present case,
the controversy involves an indivisible right affecting many individuals whose
particular interest is of indeterminate extent and is incapable of separation.

The addition of some hundreds of persons to the number of the plaintiffs, made
in the amendment to the complaint of December 13, 1922, was unnecessary,
and as the presence of so many parties is bound to prove embarrassing to the
litigation from death or removal, it is suggested that upon the return of this record
to the lower court for further proceedings, the plaintiff shall again amend their
complaint by dismissing as to unnecessary parties plaintiffs, but retaining a
sufficient number of responsible persons to secure liability for costs and fairly to
present all the members of the association.

There is another feature of the complaint which makes a slight amendment

desirable, which is, that the complaint should be made to show on its face that
the action is intended to be litigated as a class suit. We accordingly recommend
that the plaintiffs further amend by adding after the names of the parties plaintiffs
the words, "in their own behalf and in behalf of other members of Turuhan
Polistico & Co."

G.R. No. 111014 May 31, 1996
LIANA'S SUPERMARKET, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL LABOR
UNION, respondents.
BELLOSILLO, J.:p
LIANA's SUPERMARKET, as its name implies, is a departmentized self-service
retail market selling foods, convenience goods, and household merchandise with
business outlets in Sucat, Parañaque, and Pasig City. Sometime in 1980, 1981
and 1982 it employed as sales ladies, cooks, packers, cashiers, electricians,
warehousemen, etc., members of private respondent National Labor Union.
However in the course of their employment they were allegedly underpaid and
required, among others, to work more than eight (8) hours a day without overtime
pay and deprived of legal holiday pay and monthly emergency allowance.
Starting late 1982 and early 1983 they aired their grievances to petitioner through
Peter Sy, its General Manager, and Rosa Sy, its Consultant, but were only
scolded and threatened with outright dismissal. Consequently, they formed a
labor union and affiliated it with respondent National Labor Union. Thereafter
they demanded from petitioner recognition and compliance with Existing labor
laws.
On 30 April 1983 petitioner entered into a three-year contract with Warner Laputt,
owner of BAVSPIA International Services, to supply petitioner with laborers.
About November and December 1984 Rosa Sy met with the employees
individually and told them to quit their membership with the union under pain of
being suspended, dismissed or criminally prosecuted. When they refused, many
were dismissed without any charges and others were given memorandum on
concocted offenses and violations.
Meanwhile in March and April 1984 petitioner through Peter Sy and Rosa Sy
required the other employees to resign from employment and to accomplish
information sheets and/or application forms with BAVSPIA otherwise they would
be dismissed and/or not paid their salaries. With some degree of reluctance they
complied. Nonetheless, they were allowed to continue working with petitioner
under the same terms and conditions of their previous employment.
On 24 March 1984 respondent Union on behalf of its members filed a complaint
against petitioner and/or Peter Sy, Rosa Sy, BAVSPIA and Warner Laputt before
the Labor Arbiter for underpayment of wages, nonpayment of overtime pay,
monthly emergency allowance, legal holiday pay, service incentive leave pay and
13th month pay (NLRC-NCR Case No. 3-1270-84). On 24 May 1984 the
complaint was amended since respondent Union manifested through its
authorized representative that it was intended as a class suit.
On 28 August 1984 another case was filed, docketed as NLRC-NCR Case No. 8-
3043-84, with Elorde Fadilla, Jr., et al., as complainants.
On 22 October 1984 a third case was filed, docketed as NLRC-NCR Case No.
10-3755-84, with Carmelita Reyes, Elizabeth Mahanlud, Danny Sida, Omar
Napiri and Edgar Mahusay as individual complainants.
On 12 December 1984 still another case was filed, docketed as NLRC-NCR
Case No. 12-4312-84, with Gloria Estoque and Estrellita Bansig as individual
complainants.
Subsequently the four (4) cases were consolidated. Respondent National Labor
Union submitted two (2) lists of one hundred thirty-six (136) workers, seventy-
three (73) assigned at Sucat and sixty-three (63) at Pasig City. There were
eighty-five (85) original complainants in the lists. However Sixteen (16)
complainants later filed motions to withdraw with prejudice and five (5) were
found to be non-employees of petitioner. On 27 January 1987 three (3) other
complainants settled with petitioner and moved to dismiss their complaints. Thus,
a total of twenty-four (24) complainants were dropped from the lists thereby
reducing the number to sixty-one (61). But twenty-seven (27) more employees
submitted their sworn statements thus increasing again the number of
complainants to eighty-eight (88).
When petitioner learned of the charges before the Labor Arbiter it demanded the
resignation of the employees from the Union and withdrawal of their cases or
face criminal charges. It also threatened to withhold their wages and even to
dismiss them from their employment. Since they refused to resign petitioner
dismissed them. Hence, charges of unfair labor practice and illegal dismissal
were added as causes of action in their complaints.
Petitioner contended that there was no unfair labor practice because there was
no ongoing union activity before the alleged illegal dismissals; but even if there
were, the dismissals were not effected by petitioner as complainants were not its
employees but of BAVSPZA. If what were referred to as illegal dismissals were
those of complainants who resigned, there can be no unfair labor practice as
their resignations were voluntary and their applications with BAVSPIA were of
their own volition.
On 6 February 1987, after the consolidated cases were submitted for decision,
petitioner filed what was purportedly a compromise agreement between itself and
the local chapter of respondent Union. It appeared to have been signed by
representatives of petitioner and the President, Vice President and another
officer of the local chapter of respondent Union with a prayer that the
consolidated cases be dismissed.
BAVSPIA participated during the initial stages of the hearings but later moved to
have its name dropped as co-respondent when it noted, after complainants have
rested, that the evidence formally offered was directed only against petitioner.
On 28 February 1989 the Labor Arbiter held that (1) petitioner was the employer
of complainants with BAVSPIA being engaged in labor-only contracting; (2)
complainants were illegally dismissed; (3) Peter Sy and Rosa Sy were not
personally liable; and, (4) the charge of unfair labor practice and all labor
standards claims were unsubstantiated by evidence. Corollarily, petitioner was
ordered to reinstate all the complainants and to pay them backwages and all
benefits reckoned from the date of their respective dismissals until actual
reinstatement but not to exceed three (3) years, and if reinstatement was no
longer feasible the complainants should be granted separation pay equivalent to
one-half month salary for every year of service, a fraction of at least six (6)
months to be considered as one (1) whole year.1
On 30 June 1993 public respondent National Labor Relations Commission
affirmed the ruling of the Labor Arbiter.2
The petitioner now asks how many individual complainants are there in these
cases, whether seven (7) or eighty-five (85); whether these complainants were
illegally dismissed; and, whether a compromise agreement with a motion to
dismiss filed by a local chapter of respondent Union may be given legal effect.
Petitioner claims that there are only seven (7) individual complainants in these
cases whose names appear in the captions of the decision of the Labor Arbiter.
Anent thereto, petitioner argues that Sec. 3, Rule 6, of the Rules of Court clearly
provides that the names and residences of the parties plaintiff and defendant
must be stated in the complaint; similarly, Sec. 1, Rule III, of the New Rules of
Procedure of respondent NLRC states that the full names of all the real parties in
interest, whether natural or juridical persons or entities authorized by law, shall
be stated in the caption of the complaint or petition as well as in the decision,
award or judgment. Moreover, according to petitioner, these cases do not fall
under the term "class suit" as defined in Sec. 12, Rule 3, of the Rules of Court
because the parties are not so numerous that it would be impracticable to bring
them all before the court. It is further the position of petitioner that BAVSPIA is
the true employer of the complainants and the resignations of certain employees
were voluntary. Petitioner still further argues that the compromise agreement
duly signed by the officers of the local chapter of respondent Union and filed
while the case was still pending before the Labor Arbiter is binding on all the
complainants.
We disagree with petitioner. This is a "representative suit" as distinguished from
"class suit" defined in Sec. 12, Rule 3, of the Rules of
Court —
Sec. 12. Class suit. — When the subject matter of the controversy is one of
common or general interest to many persons, and the parties are so numerous
that it is impracticable to bring them all before the court, one or more may sue or
defend for the benefit of all. But in such case the court shall make sure that the
parties actually before it are sufficiently numerous and representative so that all
interests concerned are fully protected. Any party in interest shall have a right to
intervene in protection of his individual interest.
In Re: Request of the Heirs of the Passengers of the Doña Paz to Set Aside the
Order Dated January 4, 1988 of Judge B. D. Chingcuangco,3 the Court had
occasion to explain "class suit" —
What is contemplated, as will be noted, is that (a) the subject matter in
controversy is of common or general interest to many persons, and (b) those
persons are so numerous as to make it impracticable to bring them all before the
court . . . What makes the situation a proper case for a class suit is the
circumstance that there is only one right or cause of action pertaining or
belonging in common to many persons (emphasis supplied), not separately or
severally to distinct individuals . . . . The object of the suit is to obtain relief for or
against numerous persons as a group or as an integral entity, and not as
separate, distinct individuals whose rights or liabilities are separate from and
independent of those affecting the others. . . The other factor that serves to
distinguish the rule on class suits . . . is . . . the numerousness of parties involved
. . . The rule is that for a class suit to be allowed, it is needful inter alia that the
parties be so numerous that it would be impracticable to bring them all before the
court.
In the present case, there are multiple rights or causes of action pertaining
separately to several, distinct employees who are members of respondent Union.
Therefore, the applicable rule is that provided in Sec. 3, Rule 3, of the Rules of
Court on "representative parties," which states —
Sec. 3. Representative parties. A trustee of a an express trust, a guardian,
executor or administrator or a party authorized by statute (emphasis supplied),
may sue or be sued without joining the party for whose benefit the action is
presented or defended; but the court may, at any stage of the proceedings, order
such beneficiary to be made a party. . .
One of the rights granted by Art. 242 of the Labor Code to a legitimate labor
organization, like respondent Union, is to sue and be sued in its registered name.
In Liberty Manufacturing Workers Union v. Court of First Instance of
Bulacan,4 citing National Brewery and Allied Industries Labor Union of the
Philippines v. San Miguel Brewery, Inc.,5 and Itogon-Suyoc Mines, Inc. v.
Sañgilo-Itogon Workers' Union,6 the Court held that the aforementioned provision
authorizes a union to file a "representative suit" for the benefit of its members in
the interest of avoiding an otherwise cumbersome procedure of joining all union
members in the complaint, even if they number by the hundreds. The Court
further rationalized that —
To hold otherwise and compel the 57 union members-employees to file
57 separate cases on their own individual and respective causes of action before
the municipal court rather than through the present single collective action filed
by petitioner union on their behalf and for their benefit would be to unduly clog
the court dockets and slow down the prompt and expeditious determination of
cases by the sheer number, time and volume of paper work that would be
involved and required in disposing of 57 identical cases that could be adjudged in
a single case such as that filed before the lower court.
What is worse then . . . by such an unrealistic approach, the courts would not
keep faith with the Constitutional injunction to extend protection to labor . . .
In another case, Davao Free Workers Front v. Court of Industrial Relations,7 the
Court stated that the detail that the number and names of the striking members
of petitioner union were not specified in the decision nor in the complaint is of no
consequence. Reiterating the rule in the Liberty case, the Court held that it was
the function precisely of a labor union to carry the representation of its members
and to file an action for their benefit and behalf without joining them and avoid the
cumbersome procedure of joining each and every member as a separate party.
Still, in La Carlota Sugar Central v. Court of Industrial Relations,8 the Court
emphasized that it would be an unwarranted impairment of the right to self-
organization through formation of labor associations if thereafter such collective
entities would be barred from instituting action in their representative capacity.
A "representative suit" is akin to a "class suit" in the limited sense that the
phrases found in Sec. 12 of Rule 3, "one or more may sue or defend for the
benefit of all," and "the parties actually before it are sufficiently numerous and
representative," are similar to the phrase may sue or be sued without joining the
party for whose benefit the action is presented or defended" found in Sec. 3 of
the same Rule. In other words, both suits are always filed in behalf of another or
others. That is why the two terms are sometimes used interchangeably.
Apparently respondent Union, the Labor Arbiter and respondent Commission
merely denominated the suit, although erroneously, as a "class suit" when, in
reality, it is a "representative suit." Anyway, the issue as to the actual number of
complainants in this case was correctly resolved by the Labor Arbiter with this
ratiocination —
The very first complaint (No. 3-1270-84) filed in these consolidated cases was
captioned National Labor Union for and in behalf of its members as
complainants. It was dated March 24, 1984. When the same was amended on
May 24, 1984, the same caption for complainants also appeared . . . Consistently
with the instruction of said Arbiter as to the number of complainants allegedly
prejudiced by the acts of respondents, their counsel submitted two lists (Exhs. A-
1 & A-2) containing a total of one hundred thirty-six names. However, said
counsel submitted in evidence only around sixty affidavits of complainants,
thereby giving credence to the allegation of respondents that not all those listed
are actually complaining. Nonetheless and considering that respondents
recognized that there are eighty-five complainants (Exhs. 48 & 49) we hold that
the instant cases have been filed by the said Union for and in behalf of such
number (85) of complainants.9
Section 1, Rule III, of the NLRC New Rules of Procedure cited by petitioner is
simply inapplicable because it was issued on 31 August 1990 or six (6) years
after the complaints in these cases were filed in 1984.
The evidence clearly establishes that complainants were employed by petitioner.
According to the Labor Arbiter —
As to the issue of which company is the employer of complainants, we hold that it
is respondent Liana's. This is so because we find the co-respondent BAVSPIA
engaged in labor-only contracting which is prohibited under the Labor Code. 10
Article 106, par. 4, of the Labor Code provides that there is "labor-only
contracting" where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries,
work premises, among others, and the workers recruited and placed by such
person are performing activities which are directly related to the principal
business of such employer.
In such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him. The conclusion
of the Labor Arbiter was bolstered by the fact that —
. . . even the employees who allegedly resigned from Liana's and
applied/accepted by BAVSPIA were also re-assigned to Liana's. These
employees were performing jobs which are necessary and desirable in the usual
business or trade of Liana's. Even the premises, tools and equipment used by
the employees were those of Liana's. And, more important, these employees
were under the control and supervision of said respondent Liana's. 11
laborer concerned. The beneficiaries are the individual complainants themselves.
The union to which they belong can only assist them but cannot decide for them .
...
There is no evidence on record that the compromise agreement was approved
by the complainants individually. The document does not bear their signatures
except those of the local Union's President, Vice President and another officer.
Neither is there evidence to show that the compromise agreement was ever
approved by the Labor Arbiter. Clearly then, it cannot bind the complainants.

Likewise, the evidence sufficiently proves that complainants were illegally
dismissed by petitioner —
Coming now to the main thrust of these complaints — the issue of illegal
dismissal — we find that indeed the complainants were illegally dismissed.
Respondents' contention that complainants were dismissed not by them but by
BAVSPIA is untenable precisely because the latter was engaged in labor-only
contracting. In this connection, respondent Liana's (has) not been able to show
that the dismissals of complainants were for a just cause and, if ever, they were
accorded due process. In short, said respondent Liana's failed to prove that their
(its) dismissals of complainants were justified.
xxx xxx xxx
The grave abuse of discretion imputed to public respondent NLRC does not
exist. But the alternative award of separation pay granted by the Labor Arbiter in
an amount equivalent to one-half month salary for every year of service must be
modified, It has been our consistent ruling that in awarding separation pay to an
illegally dismissed employee, in lieu of reinstatement, the amount to be awarded
shall be equivalent to one month salary for every year of service. 15 We have no
reason to hold otherwise.
WHEREFORE, the resolution of the National Labor Relations Commission dated
30 June 1993 affirming the decision of the Labor Arbiter dated 28 February 1989
is AFFIRMED, subject to the modification that the separation pay granted as an
alternative relief shall be equivalent to one-month salary for every year of service,
a fraction of at least six (6) months to be considered one (1) whole year.

The alleged resignation of thirty-three other complainants (who later applied to Costs against petitioner.
BAVSPIA) cannot be given effect, not because they were forced to do so but in
view of our finding that said BAVSPIA was engaged in labor-only contracting. SO ORDERED.
Hence, they could not have been working without any employer. Besides,
resigned from Liana's and then apply to BAVSPIA only to be re-assigned later to
the former, not to mention the glaring fact that all such letters of resignations are
uniformly worded. 12

Before money claims can be the object of settlement through a union, the
individual consent of the employees concerned should first be procured. This is
because waiver of money claims is considered a personal right which must be
protected by the courts on consideration of public policy. To really give teeth to
the constitutional mandate of giving laborers maximum protection and security,
they must be protected not only against their employer but also against the
leaders of their own labor union. Thus, in General Rubber and Footwear
Corporation v. Drilon, 13 citing Kaisahan ng Manggagawa sa La Campana
v. Sarmiento, 14 it was held —

Money claims due to laborers cannot be the object of settlement or compromise

effected by a union or counsel without the specific individual consent of each

G.R. No. L-21839 April 30, 1968
INSURANCE COMPANY OF NORTH AMERICA, plaintiff-appellant,
vs.
UNITED STATES LINES CO. and THE MANILA PORT SERVICE and/or
MANILA RAILROAD COMPANY defendants-appellees.
ZALDIVAR, J.:
Appeal by plaintiff Insurance Company of North America from the decision of the
Court of First Instance of Manila dismissing the action in Civil Case No. 48660.
On October 10, 1960, there were loaded on "SS Pioneer Mart" at the port of New
York 12 cases of cinematograph film, shipped by the Eastman Kodak Co. and
consigned to the order of the Prudential Bank & Trust Co., Manila. The shipment
had an invoice value of $8,685.36, and the cargo was insured with plaintiff
insurance company against the risk of loss and damage. The "SS Pioneer Mart"
was operated by defendant United States Lines Co., a foreign corporation
licensed to do business in the Philippines and operating under the name of
American Pioneer Lines.
The shipment arrived in Manila on November 6, 1960, and the last package
thereof was discharged on November 7, 1960 into defendant Manila Port
Service, a subsidiary of defendant Manila Railroad Company, which was the
arrastre operator at the Port of Manila. Upon the presentation of the pertinent
documents and payment of the arrastre service fees the broker of the consignee
made demand for the delivery of the shipment from the Manila Port Service. Of
the 12 cases constituting the shipment, only nine cases were first delivered.
Later, two cases were found, one of which was found short of its contents. One
case was missing and could not be delivered to the consignee.
On November 14, 1960, within the 15-day period from the date of discharge of
the last package of the shipment, the broker of the consignee filed a provisional
claim for loss and damage with the Manila Port Service for one case missing and
one case partly short of its contents. The consignee filed its claim against the
United States Lines Co., as operator of the carrying vessel, and against the
plaintiff insurance company through the Eastman Kodak Co. for the insurance.
The insurance was paid by the plaintiff to the consignee, in the sum of $1,228.48,
and the plaintiff insurance company thereby became subrogated to all the rights
of the consignee to recover the value of the loss. Plaintiff made demands upon
the United States Lines Co. and with the Manila Port Service for the payment of
the sum equivalent to what was paid to the consignee as insurance of the goods
that were lost. Upon refusal by the United States Lines Co. and the Manila Port
Service to make payment, plaintiff filed an action against the said parties,
including the Manila Railroad Co., in the Court of First Instance of Manila, for the
recovery of the sum of $1,228.48 or its peso equivalent at the current rate of
exchange, with legal interest from the date of the filing of the complaint plus the
costs of the suit. The Manila Railroad Company was made party defendant
because the Manila Port Service is a subsidiary of the railroad company.
The action filed by the plaintiff against the defendants was an alternative one —
an action in admiralty against the United States Lines Co. on its liability as a
carrier, and against the Manila Port Service and/or the Manila Railroad Company
on their liability is the arrastre operator of the Port of Manila. Thus paragraph 8 of
the complaint contains the following allegation:
8. The losses occurred while the vessel had custody of the cargo and failed to
discharge the same or, alternately, after discharge of the cargo, while defendant
Port Service had custody of the goods, in either of which case, there was
violation of the duty properly to safely carry and discharge the goods on the part
of the vessel or, in the alternative, to make delivery of the goods on the part of
defendant Port Service.
After trial the lower court, on June 20, 1963, rendered decision, finding that the
total value of the lost merchandise was $1,116.80, to which had been added the
cost of survey of $37.65 and an over-insurance of $111.68, such that the total
liability arising from the loss amounted to $1,266.13. The lower court found that
the full shipment had been unloaded from the carrying vessel unto the care and
custody of defendant Manila Port Service in good order. We quote the following
paragraph of the decision:
Having thus received the said cargo which was fully discharged unto the care
and custody of the Manila Port Service, it goes without saying that the
responsibility for the loss devolves upon them. As the operator of the arrastre
service, it is their duty to receive and take good care of the same in order that
they may be delivered completely to the consignee to whom they belong. If any
part of the cargo be missing, it is they who should answer for the loss because
they are the depositary.
But while the lower court had declared that defendant Manila Port Service was
responsible for the loss, it nevertheless dismissed the case upon the ground that
it had no jurisdiction over the action of the plaintiff against defendants Manila Port
Service and Manila Railroad Company, it appearing that the value of the claim of
the plaintiff against said defendants was less than P5,000.00 so that the action
was well within the exclusive jurisdiction of the Municipal Court of Manila. Said
the lower court in its decision:
... This Court holds the view that when this case was filed against the shipping
company, it was properly vested with jurisdiction to entertain the same
notwithstanding the small amount involved herein, which falls within the
jurisdiction of the Municipal Court. The Manila Port Service, however, is an
alternative defendant and the claim against the same cannot be considered a
mere incident of the admiralty jurisdiction, for it is a separate claim for the
recovery of the missing goods from its warehouse with a total value well within
the exclusive jurisdiction of the Municipal Court. If the action had been filed
directly against the said Manila Port Service, there is no doubt that the same
could not be filed with this Court for lack of jurisdiction. It makes no difference
that it is made an alternative defendant, because the action against the shipping
company falls within the exclusive jurisdiction of the Court of First Instance. If
they had filed this case against the said party directly without including the
defendant Manila Port Service, there is no doubt that the same could have been
entertained. Its jurisdiction could not be questioned. After it has been established,
therefore, that the shipping company had been relieved of this cargo by full
discharge thereof unto the care and custody of the Manila Port Service, this case
assumes an entirely different color. It no longer is an admiralty case but an
ordinary civil case which must be governed by the law governing jurisdiction of
our courts. It would have been a different situation if the amount alleged herein
were more than P5,000, because then after the admiralty aspect had
disappeared in this case, the ordinary civil aspect thereof would still bring it within
the ordinary jurisdiction of this court, but, as already pointed out, it happens in
this case that the amount is so far below the jurisdictional limit of this Court that it
must, of necessity, find that it had no jurisdiction to try and determine the
controversy with respect to the said party....
In the present appeal, plaintiff-appellant maintains that the lower court erred: (1)
when it ruled that plaintiff's alternative action against defendant operator of the
carrying vessel and the defendant arrastre operator as separable; (2) when it
ruled that plaintiff's action ceased to be admiralty after the evidence had
established that the shipment had been discharged to the defendant arrastre
operator complete and in good order; and (3) in not rendering judgment against
defendant Manila Port Service and/or Manila Railroad Company as arrastre
operator.
The appeal is well taken. The reason of the lower court in dismissing plaintiff's
action is not in accord with the ruling of this Court in a line of decisions. 1 The
circumstances obtaining, and the question of law involved, in the case of Rizal
Surety and Insurance Co. v. Manila Railroad Co., et al., G. R. No. L-20875, April
30, 1966, are similar to those that We find in the present case. The ruling that We
made in the Rizal Surety case, which We herein quote in part, squarely settle the
questions involved in the present appeal:
The sole issue is one purely of law, whether or not the court below had
jurisdiction over the case.
The complaint in this case named as alternative defendants under alternative
causes of action (1) C. F. Sharp & Co., Inc., for breach of contract of carriage by
sea, and (2) Manila Port Service and Manila Railroad Company, for violation of
arrastre contract. The cause of action against C. F. Sharp & Co., Inc., being in
admiralty, comes within the jurisdiction of the Court of First Instance whereas, the
cause of action against the Manila Port Service and Manila Railroad Company
comes within the exclusive original jurisdiction of the municipal court inasmuch
as the amount of the demand is less than P5,000.00.
At the time the complaint was filed, plaintiff did not know at what precise stage of
the series of transactions the loss complained of occurred. If the loss took place
in transit, C. F. Sharp & Co., Inc. would be liable therefor, but if the loss occurred
after the goods were landed and discharged from the carrying vessel, the Manila
Port Service would bear the loss. Hence, the joinder of causes of action and
parties defendants in the alternative which is permitted by Section 5 of Rule 2 of
the Rules of Court, quoted hereunder:
SEC. 5. Joinder of causes of action. — Subject to rules regarding jurisdiction,
venue and joinder of parties, a party may in one pleading state, in the alternative
or otherwise, as many causes of action as he may have against an oppossing
party (a) if the said causes of action arise out of the same contract, transaction or
relation between the parties, or (b) if the causes of action are for demands for
money, or are of the same nature and character.
In the cases falling under clause (a) of the preceding paragraph, the action shall
be filed in the inferior court unless any of the causes joined falls within the
jurisdiction of the Court of First Instance, in which case it shall be filed in the
latter court.
In the cases falling under clause (b) the jurisdiction shall be determined by the
aggregate amount of the demands, if for money or by their nature and character,
if otherwise.
And, since one of the causes of action is cognizable by the Court of First
Instance the suit should be filed, as was correctly done by the plaintiff, in said
court, notwithstanding that the other cause of action — if standing alone — would
fall within the jurisdiction of the municipal court, by reason of the amount of the
demand. In International Harvester Co. of the Philippines v. Judge Aragon, where
a similar action was filed with the municipal court, we held that the municipal
court lacked jurisdiction over the case inasmuch as one of the alternative causes
of action, against the shipping firm, was an action in admiralty, cognizable by the
Court of First Instance.

The subsequent dismissal of the cases against C. F. Sharp & Co., Inc. did not
bring the case within the exclusive original jurisdiction of the municipal court nor
deprive the Court of First Instance of Manila of the jurisdiction it had already
acquired over the case when the complaint was filed. It is well settled that
jurisdiction once acquired is not lost but continues until the case is finally
terminated.

WHEREFORE, the decision appealed from should be, as it is hereby, reversed

and the defendants-appellees, Manila Port Service and/or Manila Railroad Co.,
are ordered to pay plaintiff-appellant Insurance Company of North America the
sum of $1,266.13, or its peso equivalent at the current rate of exchange, with
legal interest from the date of the filing of the complaint until payment is made;
with costs against the said defendants-appellees. It is so ordered.
 with the lease running from 1986 to 1991; thus, the petitioner then knew that
Josefa no longer owned Lot 1220-D.
G.R. No. 149787 June 18, 2008
Civil Case No. 12816 is a complaint that Menendez filed on April 4, 1996 with the
JUDGE ANTONIO C. SUMALJAG, petitioner, RTC for the declaration of the inexistence of lease contract, recovery of
vs. possession of land, and damages against the petitioner and Josefa after the RTC
SPOUSES DIOSDIDIT and MENENDEZ M. LITERATO; and MICHAELES dismissed the respondent spouses' counterclaim in Civil Case No. 1239. The
MAGLASANG RODRIGO, respondents. complaint alleged that Josefa, who had previously sold Lot 1220-D to Menendez,
leased it, together with Lot 1220-E, to the petitioner. Menendez further averred
DECISION
that the petitioner and Josefa were in bad faith in entering their contract of lease
as they both knew that Josefa did not own the leased lots. Menendez prayed,
CARPIO MORALES, J.:
among others, that this lease contract between Josefa and the petitioner be
Before this Court is the Petition for Review on Certiorari under Rule 45 of the declared null and void.
Rules of Court assailing the Decision1 of the Court of Appeals ("CA") dated June
Josefa died on May 3, 1999 during the pendency of Civil Case Nos. B-1239 and
26, 2001 and its related Resolution2 dated September 4, 2001 in CA-G.R. SP
No. 59712. The assailed Decision dismissed the petition for certiorari filed by B-1281.
petitioner Judge Antonio C. Sumaljag (the "petitioner") in the interlocutory matter
On August 13, 1999, Atty. Zenen A. Puray ("Atty. Puray") - the petitioner's and
outlined below in Civil Cases B-1239 and B-1281 before the trial court. The
Josefa's common counsel - asked the RTC in Civil Case No. 1239 that he be
challenged Resolution denied the petitioner's motion for reconsideration.
given an extended period or up to September 10, 1999 within which to file a
ANTECEDENT FACTS formal notice of death and substitution of party.

The RTC granted the motion in an order dated August 13, 1999.7 On August 26,
On November 16, 1993, Josefa D. Maglasang ("Josefa") filed with the Regional
1999, Atty. Puray filed with the RTC a notice of death and substitution of
Trial Court ("RTC"), Branch 14, Baybay, Leyte a complaint3 (docketed as Civil
party,8 praying that Josefa - in his capacity as plaintiff and third party
Case No. B-1239) for the nullity of the deed of sale of real property purportedly
counterclaim defendant - be substituted by the petitioner. The submission alleged
executed between her as vendor and the spouses Diosdidit and Menendez
that prior to Josefa's death, she executed a Quitclaim Deed9 over Lot 1220-D in
Literato (the "respondent spouses") as vendees. The complaint alleged that this
favor of Remismundo D. Maglasang10 who in turn sold this property to the
deed of sale dated October 15, 1971 of Lot 1220-D is spurious. Josefa was the
petitioner.
sister of Menendez Maglasang Literato ("Menendez"). They were two (2) of the
six (6) heirs who inherited equal parts of a 6.3906-hectare property (Lot 1220)
Menendez, through counsel, objected to the proposed substitution, alleging that
passed on to them by their parents Cristito and Inecita Diano Maglasang.4 Lot
Atty. Puray filed the notice of death and substitution of party beyond the thirty-
1220-D was partitioned to Josefa, while Lot 1220-E was given to Menendez.
day period provided under Section 16, Rule 3 of the 1997 Rules of Civil
Procedure, as amended. She recommended instead that Josefa be substituted
The respondent spouses' response to the complaint was an amended answer
with counterclaim5 denying that the deed of sale was falsified. They impleaded by the latter's full-blood sister, Michaeles Maglasang Rodrigo ("Michaeles").
the petitioner with Josefa as counterclaim defendant on the allegation that the
The RTC denied Atty. Puray's motion for substitution and instead ordered the
petitioner, at the instance of Josefa, occupied Lot 1220-D and Lot 1220-E without
appearance of Michaeles as representative of the deceased Josefa. This Order
their (the respondent spouses') authority; Lot 1220-E is theirs by inheritance
provides:
while 1220-D had been sold to them by Josefa. They also alleged that the
petitioner acted in bad faith in acquiring the two (2) lots because he prepared and WHEREFORE, in view of the foregoing, the motion is hereby DENIED for lack of
notarized on September 26, 1986 the contract of lease over the whole of Lot merit and instead order the appearance of Mrs. Mechailes Maglasang-Rodrigo of
1220 between all the Maglasang heirs (but excluding Josefa) and Vicente Tolo, Brgy. Binulho, Albuera, Leyte, as representative of the deceased Josefa
Maglasang.
SO ORDERED.11
The RTC subsequently denied the petitioner's motion for reconsideration in an
order12 dated May 25, 2000.
The petitioner went to the CA on a petition for certiorari (docketed as CA-G.R. SP
No. 59712) to question the above interlocutory orders. In a Decision13 dated June
26, 2001, the CA dismissed the petition for lack of merit. The appellate court
similarly denied the petitioner's motion for reconsideration in its
Resolution14 dated September 4, 2001.
The present petition essentially claims that the CA erred in dismissing CA-G.R.
No. SP 59712 since: (a) the property under litigation was no longer part of
Josefa's estate since she was no longer its owner at the time of her death; (b) the
petitioner had effectively been subrogated to the rights of Josefa over the
property under litigation at the time she died; (c) without an estate, the heir who
was appointed by the lower court no longer had any interest to represent; (d) the
notice of death was seasonably submitted by the counsel of Josefa to the RTC
within the extended period granted; and (e) the petitioner is a transferee
pendente lite who the courts should recognize pursuant to Rule 3, Section 20 of
the Rules of Court.
THE COURT'S RULING
We resolve to deny the petition for lack of merit.
The Governing Rule.
The rule on substitution in case of death of a party is governed by Section 16,
Rule 3 of the 1997 Rules of Civil Procedure, as amended, which provides:
Section 16. Death of a party; duty of counsel. -Whenever a party to a pending
action dies, and the claim is not thereby extinguished, it shall be the duty of his
counsel to inform the court within thirty (30) days after such death of the fact
thereof, and to give the name and address of his legal representative or
representatives. Failure of counsel to comply with this duty shall be a ground for
disciplinary action.
The heirs of the deceased may be allowed to be substituted for the
deceased, without requiring the appointment of an executor or
administrator and the court may appoint a guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or representatives to
appear and be substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if
the one so named shall fail to appear within the specified period, the court may
order the opposing party, within a specified time, to procure the appointment of
an executor or administrator for the estate of the deceased, and the latter shall
immediately appear for and on behalf of the deceased. The court charges in
procuring such appointment, if defrayed by the opposing party, may be recovered
as costs. (Emphasis ours)
The purpose behind this rule is the protection of the right to due process of every
party to the litigation who may be affected by the intervening death. The
deceased litigant is herself or himself protected as he/she continues to be
properly represented in the suit through the duly appointed legal representative
of his estate.15
Application of the Governing Rule.
a. Survival of the pending action
A question preliminary to the application of the above provision is whether Civil
Case Nos. B-1239 and B-1281 are actions that survive the death of Josefa. We
said in Gonzalez v. Pagcor:16
"The criteria for determining whether an action survives the death of a plaintiff or
petitioner was elucidated upon in Bonilla v. Barcena (71 SCRA 491 (1976). as
follows:
. . . The question as to whether an action survives or not depends on the nature
of the action and the damage sued for. In the causes of action which survive, the
wrong complained [of] affects primarily and principally property and property
rights, the injuries to the person being merely incidental, while in the causes of
action which do not survive, the injury complained of is to the person, the
property and rights of property affected being incidental. . . .
Since the question involved in these cases relate to property and property rights,
then we are dealing with actions that survive so that Section 16, Rule 3 must
necessarily apply.
b. Duty of Counsel under the Rule.
The duty of counsel under the aforecited provision is to inform the court within
thirty (30) days after the death of his client of the fact of death, and to give the
name and address of the deceased's legal representative or representatives.
Incidentally, this is the only representation that counsel can undertake after the
death of a client as the fact of death terminated any further lawyer-client
relationship.17
In the present case, it is undisputed that the counsel for Josefa did in fact notify
the lower court, although belatedly, of the fact of her death. 18 However, he did as
well inform the lower court that -
"2. That before she died she executed a QUITCLAIM DEED in favor of
REMISMUNDO D. MAGLASANG over the land in question (Lot No. 1220-D of
Benolho, Albuera, Leyte), evidenced by a QUITCLAIM DEED, copy of which is
hereto attached as Annex "B" who in turn sold it in favor of JUDGE ANTONIO
SUMALJAG, evidenced by a DEED OF ABSOLUTE SALE, copy of which is
hereto attached as Annex "C"."
Further, counsel asked that "the deceased Josefa Maglasang in her capacity as
plaintiff and as Third Party Counterclaim Defendant be substituted in the case at
bar by JUDGE ANTONIO SUMALJAG whose address is 38 Osmena Street,
Ormoc City" pursuant to "Section 16, Rule 3 of the 1997 Rules of Civil
Procedure".
This notification, although filed late, effectively informed the lower court of the
death of litigant Josefa Maglasang so as to free her counsel of any liability for
failure to make a report of death under Section 16, Rule 3 of the Rules of Court.
In our view, counsel satisfactorily explained to the lower court the circumstances
of the late reporting, and the latter in fact granted counsel an extended period.
The timeliness of the report is therefore a non-issue.
The reporting issue that goes into the core of this case is whether counsel
properly gave the court the name and address of the legal representative of the
deceased that Section 16, Rule 3 specifies. We rule that he did not. The "legal
representatives" that the provision speaks of, refer to those authorized by law -
the administrator, executor or guardian19 who, under the rule on settlement of
estate of deceased persons,20 is constituted to take over the estate of the
deceased. Section 16, Rule 3 likewise expressly provides that "the heirs of the
deceased may be allowed to be substituted for the deceased, without requiring
the appointment of an executor or administrator . . .". Significantly, the person -
now the present petitioner - that counsel gave as substitute was not one of those
mentioned under Section 16, Rule 3. Rather, he is a counterclaim co-defendant
of the deceased whose proferred justification for the requested substitution is the
transfer to him of the interests of the deceased in the litigation prior to her death.
Under the circumstances, both the lower court and the CA were legally correct in
not giving effect to counsel's suggested substitute.
First, the petitioner is not one of those allowed by the Rules to be a substitute.
Section 16, Rule 3 speaks for itself in this respect.
Second, as already mentioned above, the reason for the Rule is to protect all
concerned who may be affected by the intervening death, particularly the
deceased and her estate. We note in this respect that the Notice that counsel
filed in fact reflects a claim against the interest of the deceased through the
transfer of her remaining interest in the litigation to another party. Interestingly,
the transfer is in favor of the very same person who is suggested to the court as
the substitute. To state the obvious, the suggested substitution effectively brings
to naught the protection that the Rules intend; plain common sense tells us that
the transferee who has his own interest to protect, cannot at the same time
represent and fully protect the interest of the deceased transferor.
Third, counsel has every authority to manifest to the court changes in interest
that transpire in the course of litigation. Thus, counsel could have validly
manifested to the court the transfer of Josefa's interests in the subject matter of
litigation pursuant to Section 19, Rule 3.21 But this can happen only while the
client-transferor was alive and while the manifesting counsel was still the
effective and authorized counsel for the client-transferor, not after the death of
the client when the lawyer-client relationship has terminated. The fact that the
alleged transfer may have actually taken place is immaterial to this conclusion, if
only for the reason that it is not for counsel, after the death of his client, to make
such manifestation because he then has lost the authority to speak for and bind
his client. Thus, at most, the petitioner can be said to be a transferee pendente
lite whose status is pending with the lower court.
Lastly, a close examination of the documents attached to the records disclose
that the subject matter of the Quitclaim allegedly executed by Josefa in favor of
Remismundo is Lot 1220-E, while the subject matter of the deed of sale executed
by Remismundo in the petitioner's favor is Lot 1220-D. This circumstance alone
raises the possibility that there is more than meets the eye in the transactions
related to this case.
c. The Heirs as Legal Representatives.
The CA correctly harked back to the plain terms of Section 16, Rule 3 in
determining who the appropriate legal representative/s should be in the absence
of an executor or administrator. The second paragraph of the Section 16, Rule 3
of the 1997 Rules of Court, as amended, is clear - the heirs of the deceased may
be allowed to be substituted for the deceased, without requiring the appointment
of an executor or administrator. Our decisions on this matter have been clear and
unequivocal. In San Juan, Jr. v. Cruz, this Court held:
The pronouncement of this Court in Lawas v. Court of Appeals x x x that priority
is given to the legal representative of the deceased (the executor or
administrator) and that it is only in case of unreasonable delay in the appointment
of an executor or administrator, or in cases where the heirs resort to an extra-
judicial settlement of the estate that the court may adopt the alternative of
allowing the heirs of the deceased to be substituted for the deceased, is no
longer true.22 (Emphasis ours)

We likewise said in Gochan v. Young: 23

For the protection of the interests of the decedent, this Court has in previous
instances recognized the heirs as proper representatives of the decedent, even
when there is already an administrator appointed by the court. When no
administrator has been appointed, as in this case, there is all the more reason to
recognize the heirs as the proper representatives of the deceased.

Josefa's death certificate24 shows that she was single at the time of her death.
The records do not show that she left a will. Therefore, as correctly held by the
CA, in applying Section 16, Rule 3, her heirs are her surviving sisters (Michaelis,
Maria, Zosima, and Consolacion) and the children of her deceased sister,
Lourdes (Manuel, Cesar, Huros and Regulo) who should be her legal
representatives. Menendez, although also a sister, should be excluded for being
one of the adverse parties in the cases before the RTC.

WHEREFORE, premises considered, we DENY the petition for lack of merit.

We AFFIRM the Court of Appeals decision that the surviving heirs of the
deceased Josefa - namely Michaelis M. Rodrigo; Maria M. Cecilio; Zosima D.
Maglasang; Consolacion M. Bag-aw; and the children of Lourdes M. Lumapas,
namely Manuel Lumapas, Cesar Lumapas, Huros Lumapas and Regulo
Maquilan - should be her substitutes and are hereby so ordered to be substituted
for her in Civil Case Nos. B-1239 and B-1281.

Costs against the petitioner.

SO ORDERED.
 Respondent denied the allegations against him.11 He averred that his relatives
requested his assistance in welcoming a niece's fiancé, Mizutani
G.R. No. 141834 July 30, 2007 Ryoichiro.12 Although he was aware that a Mizutani Ryoichiro had been declared
an undesirable alien, he was informed that the blacklisted Ryoichiro was born in
COMMISSIONER RUFUS B. RODRIGUEZ and ASSOCIATE COMMISSIONER
198813 while his niece told him that her fiancé was in his fifties. 14 Furthermore,
ALAN ROULLO YAP of the Bureau of Immigration, Petitioners,
respondent reasoned that the accusations against Ryoichiro were unfounded
vs.
because neither a conviction nor a police report linking Ryoichiro to the Yakuza
SAMUEL A. JARDIN,1 Respondent.
was ever presented.15
RESOLUTION
On June 4, 1999, Ylagan-Cortez, as acting immigration commissioner,16 ordered
the preventive suspension of respondent for 90 days.17 The administrative case
CORONA, J.:
against respondent was then referred to petitioner Alan Roullo Yap, an associate
This petition for review on certiorari2 seeks to set aside the decision of the Court commissioner at that time, for formal investigation and reception of
of Appeals (CA) in CA-G.R. SP No. 544653 and its resolution denying evidence.18 Respondent moved for the suspension of proceedings and
reconsideration. reconsideration19 but petitioner Yap denied his motion.20

In the evening of May 8, 1999, Edgardo D. Cabrrera, Gerardo R. Gorrospe and On July 8, 1999, respondent sought the review of the June 4, 1999 order by the
Dorotea T. Hiyas, intelligence agents of the Bureau of Immigration (BI), saw Secretary of Justice.21
respondent Samuel A. Jardin, chief of the BI's Law and Intelligence Division, with
Despite the lapse of his preventive suspension on September 4, 1999 and
three unidentified male companions, including a Japanese national who arrived
pending the resolution of his appeal with the Secretary of Justice, respondent
on board a flight from Osaka, Japan, at the arrival area of the Ninoy Aquino
filed a special civil action for certiorari22 with the CA, assailing the June 4, 1999
International Airport (NAIA). Cabrrera noticed that the Japanese national's fifth
order. On November 19, 1999, the appellate court nullified the order and directed
finger on the left hand was missing. This aroused his suspicion, mutilation being
petitioners to reinstate respondent to his position.23 Petitioners' motion for
a common practice among members of the Yakuza.4 Hence, the BI agents
reconsideration was denied.24
closely watched respondent and his companions.
On February 21, 2000, petitioners in their official capacities filed this
After identifying the Japanese national as Mizutani Ryoichiro, an alien declared
appeal.25 They contended that the CA erred in granting respondent's petition for
undesirable in 1999 and prohibited from entering the Philippines,5 they
certiorari and in annulling the June 4, 1999 order.26
immediately apprehended him and sent him back to Japan pursuant to an
exclusion order.6
On June 15, 2002, respondent moved to declare the petition moot. He averred
7 that petitioner Rodriguez had in the meantime been replaced by Andrea D.
The following day, the BI agents filed a spot report (relating the previous night's
Domingo as immigration commissioner while petitioner Yap had been appointed
incident) with the chief of intelligence of the BI stationed in NAIA. Acting
to the Office of the Government Corporate Counsel.27 Despite the lapse of 30
immigration officer Jude C. Hinolan, in his memorandum,8 confirmed the spot
days, no substitution was effected pursuant to Section 17, Rule 3 of the Rules of
report and relayed the service of the exclusion order on the airline and the
Court which provides:
consequent deportation of Ryoichiro.
Sec. 17. Death or separation of a party who is a public officer. — When a public
On May 14, 1999, petitioner Rufus Rodriguez, immigration commissioner at that
officer is a party in an action in his official capacity and during its pendency dies,
time, ordered associate commissioner Ma. Luisa Ylagan-Cortez to investigate the
resigns, or otherwise ceases to hold office, the action may be continued and
allegations contained in the spot report of the agents and Hinolan's
maintained by or against his successor if within thirty (30) days after the
memorandum.9 Accordingly, Ylagan-Cortez ordered respondent to file his sworn
successor takes office or such time as may be granted by the court, it is
explanation.10
satisfactorily shown to the court by any party that there is a substantial need for
continuing or maintaining it and that the successor adopts or continues or
threatens to continue or adopt the action of his predecessor. Before a
substitution is made, the party or officer affected, unless expressly assenting
thereto, shall be given reasonable notice of the application therefor and accorded
an opportunity to be heard.1avvphil

On April 30, 2003, the Office of the Solicitor General (OSG) manifested that
Andrea D. Domingo had indeed been appointed the new immigration
commissioner replacing petitioner Rodriguez. The OSG also stated that
Commissioner Domingo was not adopting the position of her predecessor,
petitioner Rodriguez.28

Despite serious misgivings, we agree with respondent but purely on technicality.

Well-settled is the rule that failure to make a substitution pursuant to Section 17,
Rule 3 of the Rules of Court is a ground for the dismissal of an action.29 For the
valid substitution of a public officer who has sued or has been sued in his or her
official capacity, the following requisites must be satisfied:

1. satisfactory proof by any party that there is substantial need for continuing or
maintaining the action;

2. the successor adopts or continues or threatens to adopt or continue the acts of

his or her predecessor;

3. the substitution must be effected within 30 days after the successor assumes
office or within the time granted by the court; and,

4. notice of the application to the other party.

Here, petitioner Rodriguez's successor categorically expressed her lack of

interest in pursuing this appeal, hence, the failure to effect a substitution.

WHEREFORE, the petition is hereby DENIED.

No costs.

SO ORDERED.

G. R. No. 76431 October 16, 1989
FORTUNE MOTORS, (PHILS.) INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, METROPOLITAN BANK and
TRUST COMPANY, respondents.
Quirante & Associates Law Office for petitioner.
Bautista, Cruz & Associates Law Offices for private respondent.
PARAS, J.:
This is a petition for review on certiorari seeking the reversal of: (a) the July 30,
1986 decision of the Court of Appeals in AC-G.R. SP No. 09255
entitled "Metropolitan Bank & Trust Co. v. Hon. Herminio C. Mariano, et
al." dismissing Civil Case No. 8533218 entitled "Fortune Motors (Phils.) Inc. v.
Metropolitan Bank & Trust Co." filed in the Regional Trial Court of Manila, Branch
IV for improper venue and (b) the resolution dated October 30, 1986 denying
petitioner's motion for reconsideration.
The undisputed facts of the case are as follows:
On March 29,1982 up to January 6,1984, private respondent Metropolitan Bank
extended various loans to petitioner Fortune Motors in the total sum of
P32,500,000.00 (according to the borrower; or P34,150,000.00 according to the
Bank) which loan was secured by a real estate mortgage on the Fortune building
and lot in Makati, Rizal. (Rollo, pp. 60-62)
Due to financial difficulties and the onslaught of economic recession, the
petitioner was not able to pay the loan which became due. (Rollo, p. 62)
For failure of the petitioner to pay the loans, the respondent bank initiated
extrajudicial foreclosure proceedings. After notices were served, posted, and
published, the mortgaged property was sold at public auction for the price of
P47,899,264.91 to mortgagee Bank as the highest bidder. (Rollo, p. 11)
The sheriff's certificate of sale was registered on October 24, 1984 with the one-
year redemption period to expire on October 24,1985. (Rollo, p. 12)
On October 21, 1985, three days before the expiration of the redemption period,
petitioner Fortune Motors filed a complaint for annulment of the extrajudicial
foreclosure sale alleging that the foreclosure was premature because its
obligation to the Bank was not yet due, the publication of the notice of sale was
incomplete, there was no public auction, and the price for which the property was
sold was "shockingly low". (Rollo, pp. 60-68)
Before summons could be served private respondent Bank filed a motion to
dismiss the complaint on the ground that the venue of the action was improperly
laid in Manila for the realty covered by the real estate mortgage is situated in
Makati, therefore the action to annul the foreclosure sale should be filed in the
Regional Trial Court of Makati. (Rollo, pp. 67-71-A )
The motion was opposed by petitioner Fortune Motors alleging that its action "is
a personal action" and that "the issue is the validity of the extrajudicial
foreclosure proceedings" so that it may have a new one year period to redeem.
(Rollo, pp. 72-73)
On January 8, 1986 an order was issued by the lower court reserving the
resolution of the Bank's motion to dismiss until after the trial on the merits as the
grounds relied upon by the defendant were not clear and indubitable. (Rollo, p.
81)
The Bank filed a motion for reconsideration of the order dated January 8, 1986
but it was denied by the lower court in its order dated May 28, 1986. (Rollo,
Annex "L" pp. 93-96; Annex "N" p. 99)
On June 11, 1986 the respondent Bank filed a petition for certiorari and
prohibition in the Court of Appeals. (Rollo, Annex "O" pp. 100-115)
And on July 30, 1986, a decision was issued by the Court of Appeals, the
dispositive part of which reads as follows:
WHEREFORE, the petition for certiorari and prohibition is granted. The complaint
in the Civil Case No. 85-33218 is dismissed without prejudice to its being filed in
the proper venue. Costs against the private respondent.
SO ORDERED. (Rollo, p. 15)
A motion for reconsideration was filed on August 11, 1986 on the said decision
and on October 30, 1986 a resolution was issued denying such motion for
reconsideration. (Rollo, Annex "O" pp. 121-123; Annex "S" p. 129)
Hence, the petition for review on certiorari.
On June 10, 1987 the Court gave due course to the petition, required the parties
to file their respective memoranda within twenty (20) days from the notice hereof,
and pay deposit for costs in the amount of P80.40.
Both parties have filed their respective memoranda, and the case was submitted
for Court's resolution in the resolution dated December 14, 1987.
(Rollo,Metrobank's Memorandum pp. 45-59; petitioner's memorandum pp.130-
136; Res. p. 138)
The only issue in this case is whether petitioner's action for annulment of the real
estate mortgage extrajudicial foreclosure sale of Fortune Building is a personal
action or a real action for venue purposes.
In a real action, the plaintiff seeks the recovery of real property, or as indicated in
Sec. 2 (a) of Rule 4, a real action is an action affecting title to real property, or for
the recovery of possession, or for the partition or condemnation of, or foreclosure
of a mortgage on real property. (Comments on the Rules of Court by Moran, Vol.
1, p. 122)
Real actions or actions affecting title to, or for the recovery of possession, or for
the partition or condemnation of, or foreclosure of mortgage on real property,
must be instituted in the Court of First Instance of the province where the
property or any part thereof lies. (Enriquez v. Macadaeg, 84 Phil. 674,1949;
Garchitorena v. Register of Deeds, 101 Phil. 1207, 1957)
claim for damages are closely intertwined with the issue of ownership of the
building which, under the law, is considered immovable property, the recovery of
which is petitioner's primary objective. The prevalent doctrine is that an action for
the annulment or rescission of a sale of real property does not operate to efface
the fundamental and prime objective and nature of the case, which is to recover
said real property. It is a real action. Respondent Court, therefore, did not err in
dismissing the case on the ground of improper venue (Sec. 2, Rule 4) which was
timely raised (Sec. 1, Rule 16). (Punzalan, Jr. v. Vda. de Lacsamana, 121 SCRA
336, [1983]).
Thus, as aptly decided by the Court of Appeals in a decision penned by then
Court of Appeals Associate Justice now Associate Justice of the Supreme Court
Carolina C. Griño-Aquino, the pertinent portion reads: "Since an extrajudicial
foreclosure of real property results in a conveyance of the title of the property
sold to the highest bidder at the sale, an action to annul the foreclosure sale is
necessarily an action affecting the title of the property sold. It is therefore a real
action which should be commenced and tried in the province where the property
or part thereof lies."
PREMISES CONSIDERED, the instant petition is DENIED for lack of merit and
the assailed decision of the respondent Court of Appeals is AFFIRMED.
SO ORDERED.

Personal actions upon the other hand, may be instituted in the Court of First
Instance where the defendant or any of the defendants resides or may be found,
or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff
(Sec. 1, Rule 4, Revised Rules of Court).

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

An action for the annulment or rescission of a sale of real property is a real

action. Its prime objective is to recover said real property. (Gavieres v. Sanchez,
94 Phil. 760,1954)

An action to annul a real estate mortgage foreclosure sale is no different from an

action to annul a private sale of real property. (Munoz v. Llamas, 87 Phil.
737,1950)

While it is true that petitioner does not directly seek the recovery of title or
possession of the property in question, his action for annulment of sale and his

G.R. No. 179018 June 18, 2012
PAGLAUM MANAGEMENT & DEVELOPMENT CORP. and HEALTH
MARKETING TECHNOLOGIES, INC., Petitioners,
vs.
UNION BANK OF THE PHILIPPINES, NOTARY PUBLIC JOHN DOE, and
REGISTER OF DEEDS of Cebu City and Cebu Province Respondents.
J. KING & SONS CO., INC. Intervenor.
DECISION
SERENO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules
of Court, assailing the Decision dated 31 May 20071 and Resolution dated 24
July 20072 issued by the Court of Appeals (CA).
Petitioner Paglaum Management and Development Corporation (PAGLAUM) is
the registered owner of three parcels of land located in the Province of Cebu3 and
covered by Transfer Certificate of Title (TCT) Nos. 112488,4 112489,5 and T-
68516.6 These lots are co-owned by Benjamin B. Dy, the president of petitioner
Health Marketing Technologies, Inc. (HealthTech), and his mother and siblings.7
On 3 February 1994, respondent Union Bank of the Philippines (Union Bank)
extended HealthTech a credit line in the amount of ₱ 10,000,000. 8 To secure this
obligation, PAGLAUM executed three Real Estate Mortgages on behalf of
HealthTech and in favor of Union Bank.9 It must be noted that the Real Estate
Mortgage, on the provision regarding the venue of all suits and actions arising
out of or in connection therewith, originally stipulates:
Section 9. Venue. – The venue of all suits and actions arising out of or in
connection with this Mortgage shall be in Makati, Metro Manila or in the place
where any of the Mortgaged Properties is located, at the absolute option of the
Mortgagee, the parties hereto waiving any other venue.10 (Emphasis supplied.)
However, under the two Real Estate Mortgages dated 11 February 1994, the
following version appears:
Section 9. Venue. – The venue of all suits and actions arising out of or in
connection with this Mortgage shall be in Cebu City Metro Manila or in the place
where any of the Mortgaged Properties is located, at the absolute option of the
Mortgagee, the xxxxxxxxxxxxx any other venue.11 (Emphasis supplied.)
Meanwhile, the same provision in the Real Estate Mortgage dated 22 April 1998
contains the following:
Section 9. Venue. – The venue of all suits and actions arising out of or in
connection with this Mortgage shall be in _________ or in the place where any of
the Mortgaged Properties is located, at the absolute option of the Mortgagee, the
parties hereto waiving any other venue.12
HealthTech and Union Bank agreed to subsequent renewals and increases in the
credit line,13 with the total amount of debt reaching ₱ 36,500,000.14 Unfortunately,
according to HealthTech, the 1997 Asian financial crisis adversely affected its
business and caused it difficulty in meeting its obligations with Union
Bank.15 Thus, on 11 December 1998, both parties entered into a Restructuring
Agreement,16 which states that any action or proceeding arising out of or in
connection therewith shall be commenced in Makati City, with both parties
waiving any other venue.17
Despite the Restructuring Agreement, HealthTech failed to pay its obligation,
prompting Union Bank to send a demand letter dated 9 October 2000, stating
that the latter would be constrained to institute foreclosure proceedings, unless
HealthTech settled its account in full.18
Since HealthTech defaulted on its payment, Union Bank extra-judicially
foreclosed the mortgaged properties.19 The bank, as the sole bidder in the
auction sale, was then issued a Certificate of Sale dated 24 May
2001.20 Thereafter, it filed a Petition for Consolidation of Title.21
Consequently, HealthTech filed a Complaint for Annulment of Sale and Titles
with Damages and Application for Temporary Restraining Order and Writ of
Injunction dated 23 October 2001, praying for: (a) the issuance of a temporary
restraining order, and later a writ of preliminary injunction, directing Union Bank
to refrain from exercising acts of ownership over the foreclosed properties; (b)
the annulment of the extra-judicial foreclosure of real properties; (c) the
cancellation of the registration of the Certificates of Sale and the resulting titles
issued; (d) the reinstatement of PAGLAUM’s ownership over the subject
properties; and (e) the payment of damages.22 The case was docketed as Civil
Case No. 01-1567 and raffled to the Regional Trial Court, National Capital
Judicial Region, Makati City, Branch 134 (RTC Br. 134), which issued in favor of
PAGLAUM and HealthTech a Writ of Preliminary Injunction restraining Union
Bank from proceeding with the auction sale of the three mortgaged properties.23
On 23 November 2001, Union Bank filed a Motion to Dismiss on the following
grounds: (a) lack of jurisdiction over the issuance of the injunctive relief; (b)
improper venue; and (c) lack of authority of the person who signed the
Complaint.24 RTC Br. 134 granted this Motion in its Order dated 11 March 2003, Being a real action, the filing and trial of the Civil Case No. 01-1567 should be
resulting in the dismissal of the case, as well as the dissolution of the Writ of governed by the following relevant provisions of the Rules of Court (the Rules):
Preliminary Injunction.25 It likewise denied the subsequent Motion for
Reconsideration filed by PAGLAUM and HealthTech.26 Rule 4
VENUE OF ACTIONS
PAGLAUM and HealthTech elevated the case to the CA, which affirmed the
Order dated 11 March 200327 and denied the Motion for Reconsideration.28 Section 1. Venue of real actions. – Actions affecting title to or possession of real
property, or interest therein, shall be commenced and tried in the proper court
In the instant Petition, PAGLAUM and HealthTech argue that: (a) the which has jurisdiction over the area wherein the real property involved, or a
Restructuring Agreement governs the choice of venue between the parties, and portion thereof, is situated.
(b) the agreement on the choice of venue must be interpreted with the
convenience of the parties in mind and the view that any obscurity therein was Forcible entry and detainer actions shall be commenced and tried in the
caused by Union Bank.29 municipal trial court of the municipality or city wherein the real property involved,
or a portion thereof, is situated.
On the other hand, Union Bank contends that: (a) the Restructuring Agreement is
applicable only to the contract of loan, and not to the Real Estate Mortgage, and Sec. 3. When Rule not applicable. – This Rule shall not apply –
(b) the mortgage contracts explicitly state that the choice of venue exclusively
(a) In those cases where a specific rule or law provides otherwise; or
belongs to it.30
(b) Where the parties have validly agreed in writing before the filing of the action
Meanwhile, intervenor J. King & Sons Company, Inc. adopts the position of
on the exclusive venue thereof. (Emphasis supplied.)
Union Bank and reiterates the position that Cebu City is the proper venue.31
In Sps. Lantin v. Lantion,34 this Court explained that a venue stipulation must
The sole issue to be resolved is whether Makati City is the proper venue to assail
contain words that show exclusivity or restrictiveness, as follows:
the foreclosure of the subject real estate mortgage. This Court rules in the
affirmative. At the outset, we must make clear that under Section 4 (b) of Rule 4 of the 1997
Rules of Civil Procedure, the general rules on venue of actions shall not apply
Civil Case No. 01-1567, being an action for Annulment of Sale and Titles
where the parties, before the filing of the action, have validly agreed in writing on
resulting from the extrajudicial foreclosure by Union Bank of the mortgaged real
an exclusive venue. The mere stipulation on the venue of an action, however, is
properties, is classified as a real action. In Fortune Motors v. Court of
not enough to preclude parties from bringing a case in other venues. The parties
Appeals,32 this Court held that a case seeking to annul a foreclosure of a real
must be able to show that such stipulation is exclusive. In the absence of
estate mortgage is a real action, viz:
qualifying or restrictive words, the stipulation should be deemed as merely an
An action to annul a real estate mortgage foreclosure sale is no different from an agreement on an additional forum, not as limiting venue to the specified place.
action to annul a private sale of real property. (Muñoz v. Llamas, 87 Phil. 737,
xxx xxx xxx
1950).
Clearly, the words "exclusively" and "waiving for this purpose any other venue"
While it is true that petitioner does not directly seek the recovery of title or
are restrictive and used advisedly to meet the requirements.35 (Emphasis
possession of the property in question, his action for annulment of sale and his
supplied.)
claim for damages are closely intertwined with the issue of ownership of the
building which, under the law, is considered immovable property, the recovery of
According to the Rules, real actions shall be commenced and tried in the court
which is petitioner’s primary objective. The prevalent doctrine is that an action for
that has jurisdiction over the area where the property is situated. In this case, all
the annulment or rescission of a sale of real property does not operate to efface
the mortgaged properties are located in the Province of Cebu. Thus, following the
the fundamental and prime objective and nature of the case, which is to recover
general rule, PAGLAUM and HealthTech should have filed their case in Cebu,
said real property. It is a real action.33
and not in Makati.
However, the Rules provide an exception, in that real actions can be commenced and all other instruments or documents covering the Indebtedness or otherwise
and tried in a court other than where the property is situated in instances where made pursuant to this Restructuring Agreement (the "Secured Obligations"), shall
the parties have previously and validly agreed in writing on the exclusive venue continue to be secured by the following security arrangements (the "Collaterals"):
thereof. In the case at bar, the parties claim that such an agreement exists. The
only dispute is whether the venue that should be followed is that contained in the a. Real Estate Mortgage dated February 11, 1994 executed by Paglaum
Real Estate Mortgages, as contended by Union Bank, or that in the Restructuring Management and Development Corporation over a 474 square meter property
Agreement, as posited by PAGLAUM and HealthTech. This Court rules that the covered by TCT No. 112489;
venue stipulation in the Restructuring Agreement should be controlling.
b. Real Estate Mortgage dated February 11, 1994 executed by Paglaum
The Real Estate Mortgages were executed by PAGLAUM in favor of Union Bank Management and Development Corporation over a 2,796 square meter property
to secure the credit line extended by the latter to HealthTech. All three mortgage covered by TCT No. T-68516;
contracts contain a dragnet clause, which secures succeeding obligations,
c. Real Estate Mortgage dated April 22, 1998 executed by Paglaum Management
including renewals, extensions, amendments or novations thereof, incurred by
and Development Corporation over a 3,711 square meter property covered by
HealthTech from Union Bank, to wit:
TCT No. 112488;
Section 1. Secured Obligations. – The obligations secured by this Mortgage (the
d. Continuing Surety Agreement of Benjamin B. Dy;
"Secured Obligations") are the following:
Without need of any further act and deed, the existing Collaterals, shall remain in
a) All the obligations of the Borrower and/or the Mortgagor under: (i) the Notes,
full force and effect and continue to secure the payment and performance of the
the Agreement, and this Mortgage; (ii) any and all instruments or documents
obligations of the BORROWER arising from the Notes and this Restructuring
issued upon the renewal, extension, amendment or novation of the Notes, the
Agreement.37 (Emphasis supplied.)
Agreement and this Mortgage, irrespective of whether such obligations as
renewed, extended, amended or novated are in the nature of new, separate or
Meanwhile, Section 20 of the Restructuring Agreement as regards the venue of
additional obligations; and (iii) any and all instruments or documents issued
actions state:
pursuant to the Notes, the Agreement and this Mortgage;
20. Venue – Venue of any action or proceeding arising out of or connected with
b) All other obligations of the Borrower and/or the Mortgagor in favor of the
this Restructuring Agreement, the Note, the Collateral and any and all related
Mortgagee, whether presently owing or hereinafter incurred and whether or not
documents shall be in Makati City, [HealthTech] and [Union Bank] hereby
arising from or connected with the Agreement, the Notes and/or this Mortgage;
waiving any other venue.38 (Emphasis supplied.)
and
These quoted provisions of the Real Estate Mortgages and the later
c) Any and all expenses which may be incurred in collecting any and all of the
Restructuring Agreement clearly reveal the intention of the parties to implement a
above and in enforcing any and all rights, powers and remedies of the Mortgagee
restrictive venue stipulation, which applies not only to the principal obligation, but
under this Mortgage.36
also to the mortgages. The phrase "waiving any other venue" plainly shows that
the choice of Makati City as the venue for actions arising out of or in connection
On the other hand, the Restructuring Agreement was entered into by HealthTech
with the Restructuring Agreement and the Collateral, with the Real Estate
and Union Bank to modify the entire loan obligation. Section 7 thereof provides:
Mortgages being explicitly defined as such, is exclusive.
Security. – The principal, interests, penalties and other charges for which the
Even if this Court were to consider the venue stipulations under the Real Estate
BORROWER may be bound to the BANK under the terms of this Restructuring
Mortgages, it must be underscored that those provisions did not contain words
Agreement, including the renewal, extension, amendment or novation of this
showing exclusivity or restrictiveness. In fact, in the Real Estate Mortgages dated
Restructuring Agreement, irrespective of whether the obligations arising out of or
11 February 1994, the phrase "parties hereto waiving" – from the entire phrase
in connection with this Restructuring Agreement, as renewed, extended,
"the parties hereto waiving any other venue" – was stricken from the final
amended or novated, are in the nature of new, separate or additional obligations,
executed contract. Following the ruling in Sps. Lantin as earlier quoted, in the
absence of qualifying or restrictive words, the venue stipulation should only be
deemed as an agreement on an additional forum, and not as a restriction on a
specified place.1âwphi1

Considering that Makati City was agreed upon by the parties to be the venue for
all actions arising out of or in connection with the loan obligation incurred by
HealthTech, as well as the Real Estate Mortgages executed by PAGLAUM, the
CA committed reversible error in affirming the dismissal of Civil Case No. 01-
1567 by RTC Br. 134 on the ground of improper venue.

WHEREFORE, the Petition for Review is GRANTED. The Decision dated 31

May 2007 and Resolution dated 24 July 2007 in CA-G.R. CV No. 82053 of the
Court of Appeals, as well as the Orders dated 11 March 2003 and 19 September
2003 issued by the Regional Trial Court, Makati City, Branch 134, are
REVERSED and SET ASIDE. The Complaint in Civil Case No. 01-1567 is hereby
REINSTATED.

SO ORDERED.
G.R. No. 192877 March 23, 2011
SPOUSES HERMES P. OCHOA and ARACELI D. OCHOA, Petitioners,
vs.
CHINA BANKING CORPORATION, Respondent.
RESOLUTION
NACHURA, J.:
For resolution is petitioners’ motion for reconsideration1 of our January 17, 2011
Resolution2 denying their petition for review on certiorari3 for failing to sufficiently
show any reversible error in the assailed judgment4 of the Court of Appeals (CA).
Petitioners insist that it was error for the CA to rule that the stipulated exclusive
venue of Makati City is binding only on petitioners’ complaint for Annulment of
Foreclosure, Sale, and Damages filed before the Regional Trial Court of
Parañaque City, but not on respondent bank’s Petition for Extrajudicial
Foreclosure of Mortgage, which was filed with the same court.
We disagree.
The extrajudicial foreclosure sale of a real estate mortgage is governed by Act
No. 3135, as amended by Act No. 4118, otherwise known as "An Act to Regulate
the Sale of Property Under Special Powers Inserted In or Annexed to Real-
Estate Mortgages." Sections 1 and 2 thereof clearly state:
Section 1. When a sale is made under a special power inserted in or attached to
any real-estate mortgage hereafter made as security for the payment of money
or the fulfillment of any other obligation, the provisions of the following sections
shall govern as to the manner in which the sale and redemption shall be effected,
whether or not provision for the same is made in the power.
Sec. 2. Said sale cannot be made legally outside of the province in which the
property sold is situated; and in case the place within said province in which the
sale is to be made is the subject of stipulation, such sale shall be made in said
place or in the municipal building of the municipality in which the property or part
thereof is situated.5
The case at bar involves petitioners’ mortgaged real property located in
Parañaque City over which respondent bank was granted a special power to
foreclose extra-judicially. Thus, by express provision of Section 2, the sale can
only be made in Parañaque City.
The exclusive venue of Makati City, as stipulated by the parties 6 and sanctioned
by Section 4, Rule 4 of the Rules of Court,7 cannot be made to apply to the
Petition for Extrajudicial Foreclosure filed by respondent bank because the
provisions of Rule 4 pertain to venue of actions, which an extrajudicial
foreclosure is not.
Pertinent are the following disquisitions in Supena v. De la Rosa:8
Section 1, Rule 2 [of the Rules of Court] defines an action in this wise:
"Action means an ordinary suit in a court of justice, by which one party
prosecutes another for the enforcement or protection of a right, or the prevention
or redress of a wrong."
Hagans v. Wislizenus does not depart from this definition when it states that "[A]n
action is a formal demand of one's legal rights in a court of justice in the manner
prescribed by the court or by the law. x x x." It is clear that the determinative or
operative fact which converts a claim into an "action or suit" is the filing of the
same with a "court of justice." Filed elsewhere, as with some other body or office
not a court of justice, the claim may not be categorized under either term. Unlike
an action, an extrajudicial foreclosure of real estate mortgage is initiated by filing
a petition not with any court of justice but with the office of the sheriff of the
province where the sale is to be made.1avvphi1 By no stretch of the imagination
can the office of the sheriff come under the category of a court of justice. And as
aptly observed by the complainant, if ever the executive judge comes into the
picture, it is only because he exercises administrative supervision over the
sheriff. But this administrative supervision, however, does not change the fact
that extrajudicial foreclosures are not judicial proceedings, actions or suits.9
These pronouncements were confirmed on August 7, 2001 through A.M. No. 99-
10-05-0, entitled "Procedure in Extra-Judicial Foreclosure of Mortgage," the
significant portions of which provide:
In line with the responsibility of an Executive Judge under Administrative Order
No. 6, date[d] June 30, 1975, for the management of courts within his
administrative area, included in which is the task of supervising directly the work
of the Clerk of Court, who is also the Ex-Office Sheriff, and his staff, and the
issuance of commissions to notaries public and enforcement of their duties under
the law, the following procedures are hereby prescribed in extra-judicial
foreclosure of mortgages:
1. All applications for extrajudicial foreclosure of mortgage whether under the
direction of the sheriff or a notary public, pursuant to Act 3135, as amended by
Act 4118, and Act 1508, as amended, shall be filed with the Executive Judge,
through the Clerk of Court who is also the Ex-Officio Sheriff.

Verily then, with respect to the venue of extrajudicial foreclosure sales, Act No.
3135, as amended, applies, it being a special law dealing particularly with
extrajudicial foreclosure sales of real estate mortgages, and not the general
provisions of the Rules of Court on Venue of Actions.

Consequently, the stipulated exclusive venue of Makati City is relevant only to

actions arising from or related to the mortgage, such as petitioners’ complaint for
Annulment of Foreclosure, Sale, and Damages.

The other arguments raised in the motion are a mere reiteration of those already
raised in the petition for review. As declared in this Court’s Resolution on January
17, 2011, the same failed to show any sufficient ground to warrant the exercise of
our appellate jurisdiction.

WHEREFORE, premises considered, the motion for reconsideration is hereby

DENIED.

SO ORDERED.

G.R. No. 154096 August 22, 2008
IRENE MARCOS-ARANETA, DANIEL RUBIO, ORLANDO G. RESLIN, and
JOSE G. RESLIN, petitioners,
vs.
COURT OF APPEALS, JULITA C. BENEDICTO, and FRANCISCA
BENEDICTO-PAULINO, respondents.
The Case
This Petition for Review on Certiorari under Rule 45 assails and seeks to nullify
the Decision1 dated October 17, 2001 of the Court of Appeals (CA) in CA-G.R.
SP No. 64246 and its Resolution2 of June 20, 2002 denying petitioners' motion
for reconsideration. The assailed CA decision annulled and set aside the Orders
dated October 9, 2000, December 18, 2000, and March 15, 2001 of the Regional
Trial Court (RTC), Branch 17 in Batac, Ilocos Norte which admitted petitioners'
amended complaint in Civil Case Nos. 3341-17 and 3342-17.
The Facts
Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now deceased,
and his business associates (Benedicto Group) organized Far East Managers
and Investors, Inc. (FEMII) and Universal Equity Corporation (UEC), respectively.
As petitioner Irene Marcos-Araneta would later allege, both corporations were
organized pursuant to a contract or arrangement whereby Benedicto, as trustor,
placed in his name and in the name of his associates, as trustees, the shares of
stocks of FEMII and UEC with the obligation to hold those shares and their fruits
in trust and for the benefit of Irene to the extent of 65% of such shares. Several
years after, Irene, through her trustee-husband, Gregorio Ma. Araneta III,
demanded the reconveyance of said 65% stockholdings, but the Benedicto
Group refused to oblige.
In March 2000, Irene thereupon instituted before the RTC two similar complaints
for conveyance of shares of stock, accounting and receivership against the
Benedicto Group with prayer for the issuance of a temporary restraining order
(TRO). The first, docketed as Civil Case No. 3341-17, covered the UEC shares
and named Benedicto, his daughter, and at least 20 other individuals as
defendants. The second, docketed as Civil Case No. 3342-17, sought the
recovery to the extent of 65% of FEMII shares held by Benedicto and the other
defendants named therein.
Respondent Francisca Benedicto-Paulino,3 Benedicto's daughter, filed a Motion
to Dismiss Civil Case No. 3341-17, followed later by an Amended Motion to
Dismiss. Benedicto, on the other hand, moved to dismiss 4 Civil Case No. 3342-
17, adopting in toto the five (5) grounds raised by Francisca in her amended
motion to dismiss. Among these were: (1) the cases involved an intra-corporate
dispute over which the Securities and Exchange Commission, not the RTC, has
jurisdiction; (2) venue was improperly laid; and (3) the complaint failed to state a
cause of action, as there was no allegation therein that plaintiff, as beneficiary of
the purported trust, has accepted the trust created in her favor.
To the motions to dismiss, Irene filed a Consolidated Opposition, which
Benedicto and Francisca countered with a Joint Reply to Opposition.
Upon Benedicto's motion, both cases were consolidated.
During the preliminary proceedings on their motions to dismiss, Benedicto and
Francisca, by way of bolstering their contentions on improper venue, presented
the Joint Affidavit5 of Gilmia B. Valdez, Catalino A. Bactat, and Conchita R.
Rasco who all attested being employed as household staff at the Marcos'
Mansion in Brgy. Lacub, Batac, Ilocos Norte and that Irene did not maintain
residence in said place as she in fact only visited the mansion twice in 1999; that
she did not vote in Batac in the 1998 national elections; and that she was staying
at her husband's house in Makati City.
Against the aforesaid unrebutted joint affidavit, Irene presented her PhP 5
community tax certificate6 (CTC) issued on "11/07/99" in Curimao, Ilocos Norte to
support her claimed residency in Batac, Ilocos Norte.
In the meantime, on May 15, 2000, Benedicto died and was substituted by his
wife, Julita C. Benedicto, and Francisca.
On June 29, 2000, the RTC dismissed both complaints, stating that these partly
constituted "real action," and that Irene did not actually reside in Ilocos Norte,
and, therefore, venue was improperly laid. In its dismissal order,7 the court also
declared "all the other issues raised in the different Motions to Dismiss x x x moot
and academic."
From the above order, Irene interposed a Motion for Reconsideration8 which
Julita and Francisca duly opposed.
Pending resolution of her motion for reconsideration, Irene filed on July 17,
2000 a Motion (to Admit Amended Complaint),9 attaching therewith a copy of the
Amended Complaint10 dated July 14, 2000 in which the names of Daniel Rubio,
Orlando G. Reslin, and Jose G. Reslin appeared as additional plaintiffs. As
stated in the amended complaint, the added plaintiffs, all from Ilocos Norte, were
Irene's new trustees. Parenthetically, the amended complaint stated practically
the same cause of action but, as couched, sought the reconveyance of the FEMII
shares only.
During the August 25, 2000 hearing, the RTC dictated in open court an order
denying Irene's motion for reconsideration aforementioned, but deferred action
on her motion to admit amended complaint and the opposition thereto.11
On October 9, 2000, the RTC issued an Order12 entertaining the amended
complaint, dispositively stating:
WHEREFORE, the admission of the Amended Complaint being tenable and
legal, the same is GRANTED.
Let copies of the Amended Complaint be served to the defendants who are
ordered to answer within the reglementary period provided by the rules.
The RTC predicated its order on the following premises:
(1) Pursuant to Section 2, Rule 10 of the Rules of Court, 13 Irene may opt to file,
as a matter of right, an amended complaint.
(2) The inclusion of additional plaintiffs, one of whom was a Batac, an Ilocos
Norte resident, in the amended complaint setting out the same cause of action
cured the defect of improper venue.
(3) Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the filing of the
amended complaint in question in the place of residence of any of Irene's co-
plaintiffs.
In time, Julita and Francisca moved to dismiss the amended complaint, but the
RTC, by Order14 dated December 18, 2000, denied the motion and reiterated its
directive for the two to answer the amended complaint.
In said order, the RTC stood pat on its holding on the rule on amendments of
pleadings. And scoffing at the argument about there being no complaint to
amend in the first place as of October 9, 2000 (when the RTC granted the motion
to amend) as the original complaints were dismissed with finality earlier, i.e., on
August 25, 2000 when the court denied Irene's motion for reconsideration of the
June 29, 2000 order dismissing the original complaints, the court stated thusly:
there was actually no need to act on Irene's motion to admit, it being her right as
plaintiff to amend her complaints absent any responsive pleading thereto.
Pushing its point, the RTC added the observation that the filing of the amended
complaint on July 17, 2000 ipso facto superseded the original complaints, the
dismissal of which, per the June 29, 2000 Order, had not yet become final at the
time of the filing of the amended complaint.
Following the denial on March 15, 2001 of their motion for the RTC to reconsider
its December 18, 2000 order aforestated, Julita and Francisca, in a bid to evade
being declared in default, filed on April 10, 2001 their Answer to the amended
complaint.15 But on the same day, they went to the CA via a petition for certiorari,
docketed as CA-G.R. SP No. 64246, seeking to nullify the following RTC orders:
the first, admitting the amended complaint; the second, denying their motion to
dismiss the amended complaint; and the third, denying their motion for
reconsideration of the second issuance.
Inasmuch as the verification portion of the joint petition and the certification on
non-forum shopping bore only Francisca's signature, the CA required the joint
petitioners "to submit x x x either the written authority of Julita C. Benedicto to
Francisca B. Paulino authorizing the latter to represent her in these proceedings,
or a supplemental verification and certification duly signed by x x x Julita C.
Benedicto."16 Records show the submission of the corresponding authorizing
Affidavit17 executed by Julita in favor of Francisca.
Later developments saw the CA issuing a TRO18 and then a writ of preliminary
injunction19 enjoining the RTC from conducting further proceedings on the
subject civil cases.
On October 17, 2001, the CA rendered a Decision, setting aside the assailed
RTC orders and dismissing the amended complaints in Civil Case Nos. 3341-17
and 3342-17. The fallo of the CA decision reads:
WHEREFORE, based on the foregoing premises, the petition is hereby
GRANTED. The assailed Orders admitting the amended complaints are SET
ASIDE for being null and void, and the amended complaints a quo are,
accordingly, DISMISSED.20
Irene and her new trustees' motion for reconsideration of the assailed decision
was denied through the equally assailed June 20, 2002 CA Resolution. Hence,
this petition for review is before us.
The Issues
Petitioners urge the setting aside and annulment of the assailed CA decision and
resolution on the following submissions that the appellate court erred in: (1)
allowing the submission of an affidavit by Julita as sufficient compliance with the
requirement on verification and certification of non-forum shopping; (2) ruling on
the merits of the trust issue which involves factual and evidentiary determination,
processes not proper in a petition for certiorari under Rule 65 of the Rules of
Court; (3) ruling that the amended complaints in the lower court should be
dismissed because, at the time it was filed, there was no more original complaint
to amend; (4) ruling that the respondents did not waive improper venue; and (5)
ruling that petitioner Irene was not a resident of Batac, Ilocos Norte and that none
of the principal parties are residents of Ilocos Norte.21
The Court's Ruling
We affirm, but not for all the reasons set out in, the CA's decision.
First Issue: Substantial Compliance with the Rule
on Verification and Certification of Non-Forum Shopping
Petitioners tag private respondents' petition in CA-G.R. SP No. 64246 as
defective for non-compliance with the requirements of Secs. 422 and 523 of Rule 7
of the Rules of Court at least with regard to Julita, who failed to sign the
verification and certification of non-forum shopping. Petitioners thus fault the
appellate court for directing Julita's counsel to submit a written authority for
Francisca to represent Julita in the certiorari proceedings.
We are not persuaded.
Verification not Jurisdictional; May be Corrected
Verification is, under the Rules, not a jurisdictional but merely a formal
requirement which the court may motu proprio direct a party to comply with or
correct, as the case may be. As the Court articulated in Kimberly Independent
Labor Union for Solidarity, Activism and Nationalism (KILUSAN)-Organized
Labor Associations in Line Industries and Agriculture (OLALIA) v. Court
of Appeals:
V]erification is a formal, not a jurisdictional requisite, as it is mainly intended to secure an assurance that the allegations therein
made are done in good faith or are true and correct and not mere speculation. The Court may order the correction of the
pleading, if not verified, or act on the unverified pleading if the attending circumstances are such that a strict compliance with the
rule may be dispensed with in order that the ends of justice may be served.24
Given this consideration, the CA acted within its sound discretion in ordering the
submission of proof of Francisca's authority to sign on Julita's behalf and
represent her in the proceedings before the appellate court.
Signature by Any of the Principal Petitioners is Substantial Compliance
Regarding the certificate of non-forum shopping, the general rule is that all the
petitioners or plaintiffs in a case should sign it.25 However, the Court has time and
again stressed that the rules on forum shopping, which were designed to
promote the orderly administration of justice, do not interdict substantial
compliance with its provisions under justifiable circumstances. 26 As has been
ruled by the Court, the signature of any of the principal petitioners27 or principal
parties,28 as Francisca is in this case, would constitute a substantial compliance
with the rule on verification and certification of non-forum shopping. It cannot be
overemphasized that Francisca herself was a principal party in Civil Case No.
3341-17 before the RTC and in the certiorari proceedings before the CA. Besides
being an heir of Benedicto, Francisca, with her mother, Julita, was substituted for
Benedicto in the instant case after his demise.
And should there exist a commonality of interest among the parties, or where the
parties filed the case as a "collective," raising only one common cause of action
or presenting a common defense, then the signature of one of the petitioners or
complainants, acting as representative, is sufficient compliance. We said so
in Cavile v. Heirs of Clarita Cavile.29 Like Thomas Cavile, Sr. and the other
petitioners in Cavile, Francisca and Julita, as petitioners before the CA, had filed
their petition as a collective, sharing a common interest and having a common
single defense to protect their rights over the shares of stocks in question.
Second Issue: Merits of the Case cannot be Resolved
on Certiorari under Rule 65
Petitioners' posture on the second issue is correct. As they aptly pointed out, the
CA, in the exercise of its certiorari jurisdiction under Rule 65, is limited to
reviewing and correcting errors of jurisdiction only. It cannot validly delve into the
issue of trust which, under the premises, cannot be judiciously resolved without
first establishing certain facts based on evidence.
Whether a determinative question is one of law or of fact depends on the nature
of the dispute. A question of law exists when the doubt or controversy concerns
the correct application of law or jurisprudence to a certain given set of facts; or
when the issue does not call for an examination of the probative value of the
evidence presented, the truth or falsehood of facts being admitted. A question of
fact obtains when the doubt or difference arises as to the truth or falsehood of
facts or when the query invites the calibration of the whole evidence considering
mainly the credibility of the witnesses, the existence and relevancy of specific
surrounding circumstances, as well as their relation to each other and to the
whole, and the probability of the situation.30
Clearly then, the CA overstepped its boundaries when, in disposing of private
respondents' petition for certiorari, it did not confine itself to determining whether
or not lack of jurisdiction or grave abuse of discretion tainted the issuance of the
assailed RTC orders, but proceeded to pass on the factual issue of the existence
and enforceability of the asserted trust. In the process, the CA virtually resolved
petitioner Irene's case for reconveyance on its substantive merits even before
evidence on the matter could be adduced. Civil Case Nos. 3341-17 and 3342-17
in fact have not even reached the pre-trial stage. To stress, the nature of the trust
allegedly constituted in Irene's favor and its enforceability, being evidentiary in
nature, are best determined by the trial court. The original complaints and the
amended complaint certainly do not even clearly indicate whether the asserted
trust is implied or express. To be sure, an express trust differs from the implied
variety in terms of the manner of proving its existence.31 Surely, the onus of
factually determining whether the trust allegedly established in favor of Irene, if
one was indeed established, was implied or express properly pertains, at the first
instance, to the trial court and not to the appellate court in a special civil action
for certiorari, as here. In the absence of evidence to prove or disprove the
constitution and necessarily the existence of the trust agreement between Irene,
on one hand, and the Benedicto Group, on the other, the appellate court cannot
intelligently pass upon the issue of trust. A pronouncement on said issue of trust
rooted on speculation and conjecture, if properly challenged, must be struck
down. So it must be here.
Third Issue: Admission of Amended Complaint Proper
As may be recalled, the CA veritably declared as reversibly erroneous the
admission of the amended complaint. The flaw in the RTC's act of admitting the
amended complaint lies, so the CA held, in the fact that the filing of the amended
complaint on July 17, 2000 came after the RTC had ordered with finality the
dismissal of the original complaints. According to petitioners, scoring the CA for
its declaration adverted to and debunking its posture on the finality of the said
RTC order, the CA failed to take stock of their motion for reconsideration of the
said dismissal order.
We agree with petitioners and turn to the governing Sec. 2 of Rule 10 of the
Rules of Court which provides:
SEC. 2. Amendments as a matter of right. -- A party may amend his pleading
once as a matter of right at any time before a responsive pleading is served or in
the case of a reply, at any time within ten (10) days after it is served.
As the aforequoted provision makes it abundantly clear that the plaintiff may
amend his complaint once as a matter of right, i.e., without leave of court, before
any responsive pleading is filed or served. Responsive pleadings are those which
seek affirmative relief and/or set up defenses,32 like an answer. A motion to
dismiss is not a responsive pleading for purposes of Sec. 2 of Rule 10.33 Assayed
against the foregoing perspective, the RTC did not err in admitting petitioners'
amended complaint, Julita and Francisca not having yet answered the original
complaints when the amended complaint was filed. At that precise moment,
Irene, by force of said Sec. 2 of Rule 10, had, as a matter of right, the option of
amending her underlying reconveyance complaints. As aptly observed by the
RTC, Irene's motion to admit amended complaint was not even necessary. The
Court notes though that the RTC has not offered an explanation why it saw fit to
grant the motion to admit in the first place.
In Alpine Lending Investors v. Corpuz, the Court, expounding on the propriety of
admitting an amended complaint before a responsive pleading is filed, wrote:
W]hat petitioner Alpine filed in Civil Case No. C-20124 was a motion to dismiss, not an answer. Settled is the rule that a motion
to dismiss is not a responsive pleading for purposes of Section 2, Rule 10. As no responsive pleading had been filed, respondent
could amend her complaint in Civil Case No. C-20124 as a matter of right. Following this Court's ruling in Breslin v. Luzon
Stevedoring Co. considering that respondent has the right to amend her complaint, it is the correlative duty of the trial court to
accept the amended complaint; otherwise, mandamus would lie against it. In other words, the trial court's duty to admit the
amended complaint was purely ministerial. In fact, respondent should not have filed a motion to admit her amended complaint.34
It may be argued that the original complaints had been dismissed through the
June 29, 2000 RTC order. It should be pointed out, however, that the finality of
such dismissal order had not set in when Irene filed the amended complaint on
July 17, 2000, she having meanwhile seasonably sought reconsideration thereof.
Irene's motion for reconsideration was only resolved on August 25, 2000. Thus,
when Irene filed the amended complaint on July 17, 2000, the order of dismissal
was not yet final, implying that there was strictly no legal impediment to her
amending her original complaints.35
Fourth Issue: Private Respondents did not Waive Improper Venue
Petitioners maintain that Julita and Francisca were effectively precluded from
raising the matter of improper venue by their subsequent acts of filing numerous
pleadings. To petitioners, these pleadings, taken together, signify a waiver of
private respondents' initial objection to improper venue.
This contention is without basis and, at best, tenuous. Venue essentially
concerns a rule of procedure which, in personal actions, is fixed for the greatest
convenience possible of the plaintiff and his witnesses. The ground of improperly
laid venue must be raised seasonably, else it is deemed waived. Where the
defendant failed to either file a motion to dismiss on the ground of improper
venue or include the same as an affirmative defense, he is deemed to have
waived his right to object to improper venue.36 In the case at bench, Benedicto
and Francisca raised at the earliest time possible, meaning "within the time for
but before filing the answer to the complaint,"37 the matter of improper venue.
They would thereafter reiterate and pursue their objection on venue, first, in their
answer to the amended complaints and then in their petition for certiorari before
the CA. Any suggestion, therefore, that Francisca and Benedicto or his
substitutes abandoned along the way improper venue as ground to defeat Irene's
claim before the RTC has to be rejected.
Fifth Issue: The RTC Has No Jurisdiction
on the Ground of Improper Venue
Subject Civil Cases are Personal Actions
It is the posture of Julita and Francisca that the venue was in this case
improperly laid since the suit in question partakes of a real action involving real
properties located outside the territorial jurisdiction of the RTC in Batac.
This contention is not well-taken. In a personal action, the plaintiff seeks the
recovery of personal property, the enforcement of a contract, or the recovery of
damages.38 Real actions, on the other hand, are those affecting title to or
possession of real property, or interest therein. In accordance with the wordings
of Sec. 1 of Rule 4, the venue of real actions shall be the proper court which has
territorial jurisdiction over the area wherein the real property involved, or a portion
thereof, is situated. The venue of personal actions is the court where the plaintiff
or any of the principal plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident defendant where he
may be found, at the election of the plaintiff.39
In the instant case, petitioners are basically asking Benedicto and his Group, as
defendants a quo, to acknowledge holding in trust Irene's purported 65%
stockownership of UEC and FEMII, inclusive of the fruits of the trust, and to
execute in Irene's favor the necessary conveying deed over the said 65%
shareholdings. In other words, Irene seeks to compel recognition of the trust
arrangement she has with the Benedicto Group. The fact that FEMII's assets
include real properties does not materially change the nature of the action, for the
ownership interest of a stockholder over corporate assets is only inchoate as the
corporation, as a juridical person, solely owns such assets. It is only upon the
liquidation of the corporation that the stockholders, depending on the type and
nature of their stockownership, may have a real inchoate right over the corporate
assets, but then only to the extent of their stockownership.
The amended complaint is an action in personam, it being a suit against
Francisca and the late Benedicto (now represented by Julita and Francisca), on
the basis of their alleged personal liability to Irene upon an alleged trust
constituted in 1968 and/or 1972. They are not actions in rem where the actions
are against the real properties instead of against persons.40 We particularly note
that possession or title to the real properties of FEMII and UEC is not being
disputed, albeit part of the assets of the corporation happens to be real
properties.
Given the foregoing perspective, we now tackle the determinative question of
venue in the light of the inclusion of additional plaintiffs in the amended
complaint.
Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2 of Rule 4
We point out at the outset that Irene, as categorically and peremptorily found by
the RTC after a hearing, is not a resident of Batac, Ilocos Norte, as she claimed.
The Court perceives no compelling reason to disturb, in the confines of this case,
the factual determination of the trial court and the premises holding it together.
Accordingly, Irene cannot, in a personal action, contextually opt for Batac as
venue of her reconveyance complaint. As to her, Batac, Ilocos Norte is not what
Sec. 2, Rule 4 of the Rules of Court adverts to as the place "where the plaintiff or
any of the principal plaintiffs resides" at the time she filed her amended
complaint. That Irene holds CTC No. 1701945141 issued sometime in June 2000
in Batac, Ilocos Norte and in which she indicated her address as Brgy. Lacub,
Batac, Ilocos is really of no moment. Let alone the fact that one can easily secure
a basic residence certificate practically anytime in any Bureau of Internal
Revenue or treasurer's office and dictate whatever relevant data one desires
entered, Irene procured CTC No. 17019451 and appended the same to her
motion for reconsideration following the RTC's pronouncement against her being
a resident of Batac.
Petitioners, in an attempt to establish that the RTC in Batac, Ilocos Norte is the
proper court venue, asseverate that Batac, Ilocos Norte is where the principal
parties reside.
Pivotal to the resolution of the venue issue is a determination of the status of
Irene's co-plaintiffs in the context of Secs. 2 and 3 of Rule 3 in relation to Sec. 2
of Rule 4, which pertinently provide as follows:
Rule 3
PARTIES TO CIVIL ACTIONS
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.
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.
Rule
VENUE OF ACTIONS
SEC. 2. Venue of personal actions. -- All other actions may be commenced and
tried where the plaintiff or any of the principal plaintiffs resides, or where the
defendant or any of the principal defendants resides, or in the case of a non-
resident defendant where he may be found, at the election of the plaintiff.
Venue is Improperly Laid
There can be no serious dispute that the real party-in-interest plaintiff is Irene. As
self-styled beneficiary of the disputed trust, she stands to be benefited or entitled
to the avails of the present suit. It is undisputed too that petitioners Daniel Rubio,
Orlando G. Reslin, and Jose G. Reslin, all from Ilocos Norte, were included as
co-plaintiffs in the amended complaint as Irene's new designated trustees. As
trustees, they can only serve as mere representatives of Irene.
Upon the foregoing consideration, the resolution of the crucial issue of whether or
not venue had properly been laid should not be difficult.
Sec. 2 of Rule 4 indicates quite clearly that when there is more than one plaintiff
in a personal action case, the residences of the principal parties should be the
basis for determining proper venue. According to the late Justice Jose Y. Feria,
"the word 'principal' has been added [in the uniform procedure rule] in order to
prevent the plaintiff from choosing the residence of a minor plaintiff or defendant
as the venue."42 Eliminate the qualifying term "principal" and the purpose of the
Rule would, to borrow from Justice Regalado, "be defeated where a nominal or
formal party is impleaded in the action since the latter would not have the degree
of interest in the subject of the action which would warrant and entail the
desirably active participation expected of litigants in a case."43
Before the RTC in Batac, in Civil Case Nos. 3341-17 and 3342-17, Irene stands
undisputedly as the principal plaintiff, the real party-in-interest. Following Sec. 2
of Rule 4, the subject civil cases ought to be commenced and prosecuted at the
place where Irene resides.
Principal Plaintiff not a Resident in Venue of Action
As earlier stated, no less than the RTC in Batac declared Irene as not a resident
of Batac, Ilocos Norte. Withal, that court was an improper venue for her
conveyance action.
The Court can concede that Irene's three co-plaintiffs are all residents of Batac,
Ilocos Norte. But it ought to be stressed in this regard that not one of the three
can be considered as principal party-plaintiffs in Civil Case Nos. 3341-17 and
4 3342-17, included as they were in the amended complaint as trustees of the
principal plaintiff. As trustees, they may be accorded, by virtue of Sec. 3 of Rule
3, the right to prosecute a suit, but only on behalf of the beneficiary who must be
included in the title of the case and shall be deemed to be the real party-in-
interest. In the final analysis, the residences of Irene's co-plaintiffs cannot be
made the basis in determining the venue of the subject suit. This conclusion
becomes all the more forceful considering that Irene herself initiated and was
actively prosecuting her claim against Benedicto, his heirs, assigns, or
associates, virtually rendering the impleading of the trustees unnecessary.
And this brings us to the final point. Irene was a resident during the period
material of Forbes Park, Makati City. She was not a resident of Brgy. Lacub,
Batac, Ilocos Norte, although jurisprudence44 has it that one can have several
residences, if such were the established fact. The Court will not speculate on the
reason why petitioner Irene, for all the inconvenience and expenses she and her
adversaries would have to endure by a Batac trial, preferred that her case be
heard and decided by the RTC in Batac. On the heels of the dismissal of the
original complaints on the ground of improper venue, three new personalities
were added to the complaint doubtless to insure, but in vain as it turned out, that
the case stays with the RTC in Batac.
Litigants ought to bank on the righteousness of their causes, the superiority of
their cases, and the persuasiveness of arguments to secure a favorable verdict.
It is high time that courts, judges, and those who come to court for redress keep
this ideal in mind.
WHEREFORE, the instant petition is hereby DISMISSED. The Decision and
Resolution dated October 17, 2001 and June 20, 2002, respectively, of the CA in
CA-G.R. SP No. 64246, insofar as they nullified the assailed orders of the RTC,
Branch 17 in Batac, Ilocos Norte in Civil Case Nos. 3341-17 and 3342-17 on the
ground of lack of jurisdiction due to improper venue, are hereby AFFIRMED. The
Orders dated October 9, 2000, December 18, 2000, and March 15, 2001 of the
RTC in Civil Case Nos. 3341-17 and 3342-17 are
accordingly ANNULLED and SET ASIDE and said civil cases are DISMISSED.
 3

[G.R. No. 129184. February 28, 2001.] On August 27, 1996, TRB filed a Motion to Dismiss 4 the complaint on the
ground of improper venue. On September 18, 1996 the trial court denied the
EMERGENCY LOAN PAWNSHOP INCORPORATED and DANILO R. motion to dismiss. 5 On October 21, 1996, TRB filed a motion for
NAPALA, Petitioners, v. THE COURT OF APPEALS (Tenth Division) and reconsideration. 6 On November 14, 1996, the trial court denied the motion. 7
TRADERS ROYAL BANK, Respondents.
On January 15, 1997, TRB elevated the case to the Court of Appeals by petition
DECISION for certiorari and prohibition with preliminary injunction or temporary restraining
order, contending that the trial court committed a grave abuse of discretion in
denying its motion to dismiss the complaint on the ground of improper venue. 8

After due proceedings, on March 11, 1997, the Court of Appeals promulgated its
PARDO, J.:
decision, the dispositive portion of which reads:jgc:chanrobles.com.ph

"WHEREFORE, finding merit in the petition, the Orders dated September

18,1996 and November 14, 1996 are hereby ANNULLED and SET ASIDE and
May an appeal be taken from a decision of the Regional Trial Court denying a Civil Case No. 24, 317-96 is hereby DISMISSED on ground of improper venue."
motion to dismiss the complaint on the ground of improper venue? If not, 9
will certiorari lie?chanrob1es virtua1 1aw 1ibrary
Hence, this petition. 10
The case before the Court is a petition for review on certiorari assailing the
decision of the Court of Appeals, 1 granting respondent’s petition Petitioners seek to set aside the decision of the Court of Appeals alleging
for certiorari and dismissing the complaint below on the ground of improper that:chanrob1es virtual 1aw library
venue.
1. The Court of Appeals erred in entertaining the petition for certiorari and
On January 18, 1996, Traders Royal Bank (TRB for brevity) sold in favor of prohibition, for lack of jurisdiction;chanrob1es virtua1 1aw 1ibrary
petitioner Emergency Loan Pawnshop Incorporated (ELPI for brevity) a parcel of
land located at Km. 3 Asin, Baguio City for Five Hundred Thousand Pesos 2. The Court of Appeals erred in ruling that the Regional Trial Court erred in not
(P500,000.00). 2 dismissing the complaint for improper venue. 11

At the time of the sale, TRB misrepresented to ELPI that the subject property According to petitioners, the determination of whether the venue of an action was
was a vacant residential lot valued at P600.00 to P800.00 per square meter, with improperly laid was a question of law, thus, the Court of Appeals had no
a usable land area of 1,143.75 square meters (approximately 75% of the land jurisdiction to entertain the petition for certiorari and prohibition, which involved
area of 1,525 sq. m.) without any illegal occupants or squatters, when it truth the pure questions of law.
subject property was dominantly a public road with only 140 square meters
usable area. Petitioners further alleged that an order denying a motion to dismiss is
interlocutory in nature that can not be the subject of an appeal and can not be
ELPI, after having spent to fully ascertain the actual condition of the property, even reviewed by a special civil action for certiorari.
demanded from TRB the rescission and cancellation of the sale of the property.
TRB refused, hence, on April 16, 1996, ELPI filed with the Regional Trial Court, We find the petition not meritorious.
Davao, Branch 17, a complaint for annulment of sale and damages against TRB.
The general rule is that the denial of a motion to dismiss a complaint is an
interlocutory order and, hence, cannot be appealed or questioned via a special
civil action of certiorari until a final judgment on the merits of the case is
rendered. 12

The remedy of the aggrieved party is to file an answer to the complaint and to
interpose as defenses the objections raised in his motion to dismiss, proceed to
trial, and in case of an adverse decision, to elevate the entire case by appeal in
due course. However, the rule is not ironclad. Under certain situations, recourse
to certiorari or mandamus is considered appropriate, that is, (a) when the trial
court issued the order without or in excess of jurisdiction; (b) where there is
patent grave abuse of discretion by the trial court; or, (c) appeal would not prove
to be a speedy and adequate remedy as when an appeal would not promptly
relieve a defendant from the injurious effects of the patently mistaken order
maintaining the plaintiff’s baseless action and compelling the defendant
needlessly to go through a protracted trial and clogging the court dockets by
another futile case." 13

In the case at bar, we agree with the Court of Appeals that the trial court erred
grievously amounting to ousting itself of jurisdiction. The motion of respondent
TRB was well founded because venue was clearly improperly laid. The action in
the Regional Trial Court was for annulment of sale involving a parcel of land
located at Km. 3 Asin Road, Baguio City. The venue of such action is
unquestionably within the territorial jurisdiction of the proper court where the real
property or part thereof lies. 14 An action affecting title to real property, or for
recovery of, or foreclosure of mortgage on real property, shall be commenced
and tried in the proper court having jurisdiction over the area where the real
property or any part thereof lies. 15

Hence, the case at bar clearly falls within the exceptions to the rule. The
Regional Trial Court has committed a palpable and grievous error amounting to
lack or excess of jurisdiction in denying the motion to dismiss the complaint on
the ground of improper venue.chanrob1es virtua1 1aw 1ibrary

WHEREFORE, the Court denies the petition and affirms the decision of the Court
of Appeals in CA-G. R. SP No. 43095, in toto.

No costs.

SO ORDERED.

[G.R. NO. 161026 October 24, 2005]
HYATT ELEVATORS AND ESCALATORS
CORPORATION, Petitioner, v. GOLDSTAR ELEVATORS, PHILS.,
INC.,*Respondent.
DECISION
PANGANIBAN, J.:
Well established in our jurisprudence is the rule that the residence of a
corporation is the place where its principal office is located, as stated in its
Articles of Incorporation.
The Case
Before us is a Petition for Review1 on Certiorari, under Rule 45 of the Rules of
Court, assailing the June 26, 2003 Decision2 and the November 27, 2003
Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 74319. The decretal
portion of the Decision reads as follows:
"WHEREFORE, in view of the foregoing, the assailed Orders dated May 27,
2002 and October 1, 2002 of the RTC, Branch 213, Mandaluyong City in Civil
Case No. 99-600, are hereby SET ASIDE. The said case is hereby
ordered DISMISSED on the ground of improper venue."4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The Facts
The relevant facts of the case are summarized by the CA in this wise:
"Petitioner [herein Respondent] Goldstar Elevator Philippines, Inc. (GOLDSTAR
for brevity) is a domestic corporation primarily engaged in the business of
marketing, distributing, selling, importing, installing, and maintaining elevators
and escalators, with address at 6th Floor, Jacinta II Building, 64 EDSA,
Guadalupe, Makati City.
"On the other hand, private respondent [herein petitioner] Hyatt Elevators and
Escalators Company (HYATT for brevity) is a domestic corporation similarly
engaged in the business of selling, installing and maintaining/servicing elevators,
escalators and parking equipment, with address at the 6th Floor, Dao I
Condominium, Salcedo St., Legaspi Village, Makati, as stated in its Articles of
Incorporation.
"On February 23, 1999, HYATT filed a Complaint for unfair trade practices and
damages under Articles 19, 20 and 21 of the Civil Code of the Philippines against
LG Industrial Systems Co. Ltd. (LGISC) and LG International Corporation (LGIC),
alleging among others, that: in 1988, it was appointed by LGIC and LGISC as the
exclusive distributor of LG elevators and escalators in the Philippines under a
'Distributorship Agreement'; x x x LGISC, in the latter part of 1996, made a
proposal to change the exclusive distributorship agency to that of a joint venture
partnership; while it looked forward to a healthy and fruitful negotiation for a joint
venture, however, the various meetings it had with LGISC and LGIC, through the
latter's representatives, were conducted in utmost bad faith and with malevolent
intentions; in the middle of the negotiations, in order to put pressures upon it,
LGISC and LGIC terminated the Exclusive Distributorship Agreement; x x x [A]s
a consequence, [HYATT] suffered P120,000,000.00 as actual damages,
representing loss of earnings and business opportunities, P20,000,000.00 as
damages for its reputation and goodwill, P1,000,000.00 as and by way of
exemplary damages, and P500,000.00 as and by way of attorney's fees.
"On March 17, 1999, LGISC and LGIC filed a Motion to Dismiss raising the
following grounds: (1) lack of jurisdiction over the persons of defendants,
summons not having been served on its resident agent; (2) improper venue; and
(3) failure to state a cause of action. The [trial] court denied the said motion in an
Order dated January 7, 2000.
"On March 6, 2000, LGISC and LGIC filed an Answer with Compulsory
Counterclaim ex abundante cautela. Thereafter, they filed a 'Motion for
Reconsideration and to Expunge Complaint' which was denied.
"On December 4, 2000, HYATT filed a motion for leave of court to amend the
complaint, alleging that subsequent to the filing of the complaint, it learned that
LGISC transferred all its organization, assets and goodwill, as a consequence of
a joint venture agreement with Otis Elevator Company of the USA, to LG Otis
Elevator Company (LG OTIS, for brevity). Thus, LGISC was to be substituted or
changed to LG OTIS, its successor-in-interest. Likewise, the motion averred that
x x x GOLDSTAR was being utilized by LG OTIS and LGIC in perpetrating their
unlawful and unjustified acts against HYATT. Consequently, in order to afford
complete relief, GOLDSTAR was to be additionally impleaded as a party-
defendant. Hence, in the Amended Complaint, HYATT impleaded x x x
GOLDSTAR as a party-defendant, and all references to LGISC were
correspondingly replaced with LG OTIS.
"On December 18, 2000, LG OTIS (LGISC) and LGIC filed their opposition to
HYATT's motion to amend the complaint. It argued that: (1) the inclusion of
GOLDSTAR as party-defendant would lead to a change in the theory of the case
since the latter took no part in the negotiations which led to the alleged unfair
trade practices subject of the case; and (b) HYATT's move to amend the
complaint at that time was dilatory, considering that HYATT was aware of the
existence of GOLDSTAR for almost two years before it sought its inclusion as
party-defendant.
"On January 8, 2001, the [trial] court admitted the Amended Complaint. LG OTIS
(LGISC) and LGIC filed a motion for reconsideration thereto but was similarly
rebuffed on October 4, 2001.
"On April 12, 2002, x x x GOLDSTAR filed a Motion to Dismiss the amended
complaint, raising the following grounds: (1) the venue was improperly laid, as
neither HYATT nor defendants reside in Mandaluyong City, where the original
case was filed; and (2) failure to state a cause of action against [respondent],
since the amended complaint fails to allege with certainty what specific ultimate
acts x x x Goldstar performed in violation of x x x Hyatt's rights. In the Order
dated May 27, 2002, which is the main subject of the present petition, the [trial]
court denied the motion to dismiss, ratiocinating as follows:
'Upon perusal of the factual and legal arguments raised by the movants-
defendants, the court finds that these are substantially the same issues posed by
the then defendant LG Industrial System Co. particularly the matter dealing [with]
the issues of improper venue, failure to state cause of action as well as this
court's lack of jurisdiction. Under the circumstances obtaining, the court resolves
to rule that the complaint sufficiently states a cause of action and that the venue
is properly laid. It is significant to note that in the amended complaint, the same
allegations are adopted as in the original complaint with respect to the Goldstar
Philippines to enable this court to adjudicate a complete determination or
settlement of the claim subject of the action it appearing preliminarily as
sufficiently alleged in the plaintiff's pleading that said Goldstar Elevator
Philippines Inc., is being managed and operated by the same Korean officers of
defendants LG-OTIS Elevator Company and LG International Corporation.'
"On June 11, 2002, [Respondent] GOLDSTAR filed a motion for reconsideration
thereto. On June 18, 2002, without waiving the grounds it raised in its motion to
dismiss, [it] also filed an 'Answer Ad Cautelam'. On October 1, 2002, [its] motion
for reconsideration was denied.
"From the aforesaid Order denying x x x Goldstar's motion for reconsideration, it
filed the x x x petition for certiorari [before the CA] alleging grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the [trial] court
in issuing the assailed Orders dated May 27, 2002 and October 1, 2002."5
Ruling of the Court of Appeals
The CA ruled that the trial court had committed palpable error amounting to
grave abuse of discretion when the latter denied respondent's Motion to Dismiss.
The appellate court held that the venue was clearly improper, because none of
the litigants "resided" in Mandaluyong City, where the case was filed.
According to the appellate court, since Makati was the principal place of business
of both respondent and petitioner, as stated in the latter's Articles of
Incorporation, that place was controlling for purposes of determining the proper
venue. The fact that petitioner had abandoned its principal office in Makati years
prior to the filing of the original case did not affect the venue where personal
actions could be commenced and tried.
Hence, this Petition.6
The Issue
In its Memorandum, petitioner submits this sole issue for our consideration:
"Whether or not the Court of Appeals, in reversing the ruling of the Regional Trial
Court, erred as a matter of law and jurisprudence, as well as committed grave
abuse of discretion, in holding that in the light of the peculiar facts of this case,
venue was improper[.]"7
This Court's Ruling
The Petition has no merit.
Sole Issue:
Venue
The resolution of this case rests upon a proper understanding of Section 2 of
Rule 4 of the 1997 Revised Rules of Court:
"Sec. 2. Venue of personal actions. - All other actions may be commenced and
tried where the plaintiff or any of the principal plaintiff resides, or where the
defendant or any of the principal defendant resides, or in the case of a non-
resident defendant where he may be found, at the election of the plaintiff."
Since both parties to this case are corporations, there is a need to clarify the
meaning of "residence." The law recognizes two types of persons: (1) natural and
(2) juridical. Corporations come under the latter in accordance with Article 44(3)
of the Civil Code.8
Residence is the permanent home - - the place to which, whenever absent for
business or pleasure, one intends to return.9 Residence is vital when dealing with
venue.10 A corporation, however, has no residence in the same sense in which
this term is applied to a natural person. This is precisely the reason why the
Court in Young Auto Supply Company v. Court of Appeals11 ruled that "for
practical purposes, a corporation is in a metaphysical sense a resident of the
place where its principal office is located as stated in the articles of
incorporation."12 Even before this ruling, it has already been established that the
residence of a corporation is the place where its principal office is established. 13
This Court has also definitively ruled that for purposes of venue, the term
"residence" is synonymous with "domicile."14 Correspondingly, the Civil Code
provides:
"Art. 51. When the law creating or recognizing them, or any other provision does
not fix the domicile of juridical persons, the same shall be understood to be the
place where their legal representation is established or where they exercise their
principal functions."15
It now becomes apparent that the residence or domicile of a juridical person is
fixed by "the law creating or recognizing" it. Under Section 14(3) of the
Corporation Code, the place where the principal office of the corporation is to be
located is one of the required contents of the articles of incorporation, which shall
be filed with the Securities and Exchange Commission (SEC).
In the present case, there is no question as to the residence of respondent. What
needs to be examined is that of petitioner. Admittedly,16 the latter's principal
place of business is Makati, as indicated in its Articles of Incorporation. Since the
principal place of business of a corporation determines its residence or domicile,
then the place indicated in petitioner's articles of incorporation becomes
controlling in determining the venue for this case.
Petitioner argues that the Rules of Court do not provide that when the plaintiff is
a corporation, the complaint should be filed in the location of its principal office as
indicated in its articles of incorporation.17 Jurisprudence has, however, settled
that the place where the principal office of a corporation is located, as stated in
the articles, indeed establishes its residence.18 This ruling is important in
determining the venue of an action by or against a corporation,19 as in the
present case.
Without merit is the argument of petitioner that the locality stated in its Articles of
Incorporation does not conclusively indicate that its principal office is still in the
same place. We agree with the appellate court in its observation that the
requirement to state in the articles the place where the principal office of the
corporation is to be located "is not a meaningless requirement. That proviso
would be rendered nugatory if corporations were to be allowed to simply
disregard what is expressly stated in their Articles of Incorporation."20
Inconclusive are the bare allegations of petitioner that it had closed its Makati
office and relocated to Mandaluyong City, and that respondent was well aware of
those circumstances. Assuming arguendo that they transacted business with
each other in the Mandaluyong office of petitioner, the fact remains that, in law,
the latter's residence was still the place indicated in its Articles of Incorporation.
Further unacceptable is its faulty reasoning that the ground for the CA's dismissal
of its Complaint was its failure to amend its Articles of Incorporation so as to
reflect its actual and present principal office. The appellate court was clear
enough in its ruling that the Complaint was dismissed because the venue had
been improperly laid, not because of the failure of petitioner to amend the latter's
Articles of Incorporation.
Indeed, it is a legal truism that the rules on the venue of personal actions are
fixed for the convenience of the plaintiffs and their witnesses. Equally settled,
however, is the principle that choosing the venue of an action is not left to a
plaintiff's caprice; the matter is regulated by the Rules of Court.21 Allowing
petitioner's arguments may lead precisely to what this Court was trying to avoid
in Young Auto Supply Company v. CA:22 the creation of confusion and untold
inconveniences to party litigants. Thus enunciated the CA:
"x x x. To insist that the proper venue is the actual principal office and not that
stated in its Articles of Incorporation would indeed create confusion and work
untold inconvenience. Enterprising litigants may, out of some ulterior motives,
easily circumvent the rules on venue by the simple expedient of closing old
offices and opening new ones in another place that they may find well to suit their
needs."23
We find it necessary to remind party litigants, especially corporations, as follows:
"The rules on venue, like the other procedural rules, are designed to insure a just
and orderly administration of justice or the impartial and evenhanded
determination of every action and proceeding. Obviously, this objective will not
be attained if the plaintiff is given unrestricted freedom to choose the court where
he may file his complaint or petition.
"The choice of venue should not be left to the plaintiff's whim or caprice. He may
be impelled by some ulterior motivation in choosing to file a case in a particular
court even if not allowed by the rules on venue."24

WHEREFORE, the Petition is hereby DENIED,and the assailed Decision and

Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. L-28882 May 31, 1971
TIME, INC., petitioner,
vs.
HON. ANDRES REYES, as Judge of the Court of First Instance of Rizal,
ELISEO S. ZARI, as Deputy Clerk of Court, Branch VI, Court of First
Instance of Rizal, ANTONIO J. VILLEGAS and JUAN PONCE
ENRILE, respondents.
Sycip, Salazar, Luna, Manalo & Feliciano for petitioner.
Angel C. Cruz Law Office for respondents.
REYES, J.B.L., J.:
Petition for certiorari and prohibition, with preliminary injunction, to annul certain
orders of the respondent Court of First Instance of Rizal, issued in its Civil Case
No. 10403, entitled "Antonio J. Villegas and Juan Ponce Enrile vs. Time, Inc.,
and Time-Life International, Publisher of 'Time' Magazine (Asia Edition)", and to
prohibit the said court from further proceeding with the said civil case.
Upon petitioner's posting a bond of P1,000.00, this Court, as prayed for, ordered,
on 15 April 1968, the issuance of a writ of preliminary injunction.
The petition alleges that petitioner Time, Inc.,1 is an American corporation with
principal offices at Rocketfeller Center, New York City, N. Y., and is the publisher
of "Time", a weekly news magazine; the petition, however, does not allege the
petitioner's legal capacity to sue in the courts of the Philippine.2
In the aforesaid Civil Case No. 10403, therein plaintiffs (herein respondents)
Antonio J. Villegas and Juan Ponce Enrile seek to recover from the herein
petitioner damages upon an alleged libel arising from a publication of Time (Asia
Edition) magazine, in its issue of 18 August 1967, of an essay, entitled
"Corruption in Asia", which, in part, reads, as follows:
The problem of Manila's mayor, ANTONIO VILLEGAS, is a case in point. When it
was discovered last year that the mayor's coffers contained far more pesos than
seemed reasonable in the light of his income, an investigation was launched.
Witnesses who had helped him out under curious circumstance were asked to
explain in court. One government official admitted lending Villegas P30,000
pesos ($7,700) without interest because he was the mayor's compadre. An
assistant declared he had given Villegas loans without collateral because he
regarded the boss as my own son. A wealthy Manila businessman testified that
he had lent Villegas' wife 15,000 pesos because the mayor was like a brother to
me. With that, Villegas denounced the investigation as an invasion of his family's
privacy. The case was dismissed on a technicality, and Villegas is still mayor.3
More specifically, the plaintiffs' complaint alleges, inter alia that:
(4) Defendants, conspiring and confederating, published a libelous article,
publicly, falsely and maliciously imputing to Plaintiffs the commission of the
crimes of graft, corruption and nepotism; that said publication particularly referred
to Plaintiff Mayor Antonio J. Villegas as a case in point in connection with graft,
corruption and nepotism in Asia; that said publication without any doubt referred
to co-plaintiff Juan Ponce Enrile as the high government official who helped
under curious circumstances Plaintiff Mayor Antonio J. Villegas in lending the
latter approximately P30,000.00 ($7,700.00) without interest because he was the
Mayor's compadre; that the purpose of said Publications is to cause the dishonor,
discredit and put in public contempt the Plaintiffs, particularly Plaintiff Mayor
Antonio J. Villegas.
On motion of the respondents-plaintiffs, the respondent judge, on 25 November
1967, granted them leave to take the depositions "of Mr. Anthony Gonzales,
Time-Life international", and "Mr. Cesar B. Enriquez, Muller & Phipps (Manila)
Ltd.", in connection with the activities and operations in the Philippines of the
petitioner, and, on 27 November 1967, issued a writ of attachment on the real
and personal estate of Time, Inc.
Petitioner received the summons and a copy of the complaint at its offices in New
York on 13 December 1967 and, on 27 December 1967, it filed a motion to
dismiss the complaint for lack of jurisdiction and improper venue, relying upon
the provisions of Republic Act 4363. Private respondents opposed the motion.
In an order dated 26 February 1968, respondent court deferred the determination
of the motion to dismiss until after trial of the case on the merits, the court having
considered that the grounds relied upon in the motion do not appear to be
indubitable.
Petitioner moved for reconsideration of the deferment private respondents again
opposed.
On 30 March 1968, respondent judge issued an order re-affirming the previous
order of deferment for the reason that "the rule laid down under Republic Act. No.
4363, amending Article 360 of the Revised Penal Code, is not applicable to
actions against non-resident defendants, and because questions involving
harassment and inconvenience, as well as disruption of public service do not
appear indubitable. ..."
Failing in its efforts to discontinue the taking of the depositions, previously
adverted to, and to have action taken, before trial, on its motion to dismiss,
petitioner filed the instant petition for certiorari and prohibition.
The orders for the taking of the said depositions, for deferring determination of
the motion to dismiss, and for reaffirming the deferment, and the writ of
attachment are sought to be annulled in the petition..
There is no dispute that at the time of the publication of the allegedly offending
essay, private respondents Antonio Villegas and Juan Ponce Enrile were the
Mayor Of the City of Manila and Undersecretary of Finance and concurrently
Acting Commissioner of Customs, respectively, with offices in the City of Manila.
The issues in this case are:
1. Whether or not, under the provisions of Republic Act No. 4363 the respondent
Court of First Instance of Rizal has jurisdiction to take cognizance of the civil suit
for damages arising from an allegedly libelous publication, considering that the
action was instituted by public officers whose offices were in the City of Manila at
the time of the publication; if it has no jurisdiction, whether or not its erroneous
assumption of jurisdiction may be challenged by a foreign corporation by writ
of certiorari or prohibition; and
2. Whether or not Republic Act 4363 is applicable to action against a foreign
corporation or non-resident defendant.
Provisions of Republic Act No. 4363, which are relevant to the resolution of the
foregoing issues, read, as follows:
Section 1. Article three hundred sixty of the Revised Penal Code, as amended by
Republic Act Numbered Twelve hundred and eighty-nine, is further amended to
read as follows:
'ART. 360. Persons responsible. — Any person who shall publish, exhibit, or
cause the publication or exhibition of any defamation in writing or by similar
means, shall be responsible for the same.
The author or editor of a book or pamphlet, or the editor or business manager of
a daily newspaper, magazine or serial publication, shall be responsible for the
defamations contained therein to the extent as if he were the author thereof.
The criminal and civil action for damages in cases of written defamations as
provided for in this chapter, shall be filed simultaneously or separately with the
court of first instance of the province or city where the libelous article is printed
and first published or where any of the offended parties actually resides at the
time of the commission of the offense; Provided, however, That where one of the
offended parties is a public officer whose office is in the City of Manila at the time
of the commission of the offense, the action shall be filed in the Court of First
Instance of the City of Manila or of the city or province where the libelous article
is printed and first published, and in case such public officer does not hold office
in the City of Manila, the action shall be filed in the Court of First Instance of the
province or city where he held office at the time of the commission of the offense
or where the libelous article is printed and first published and in case one of the
offended parties is a private individual, the action shall be filed in the Court of
First Instance of the province or city where he actually resides at the time of the
commission of the offense or where the libelous matter is printed and first
published; Provided, further, That the civil action shall be filed in the same court
where the criminal action is filed and vice versa; Provided, furthermore, That the
court where the criminal action or civil action for damages is first filed, shall
acquire jurisdiction to the exclusion of other courts; And provided finally, That this
amendment shall not apply to cases of written defamations, the civil and/or
criminal actions which have been filed in court at the time of the effectivity of the
law
xxx xxx xxx
xxx xxx xxx
Sec. 3. This Act shall take effect only if and when, within thirty days from its
approval, the newspapermen in the Philippines shall organize, and elect the
members of, a Philippine Press Council, a private agency of the said
newspapermen, whose function shall be to promulgate a Code of Ethics for them
and the Philippine press investigate violations thereof, and censure any
newspaperman or newspaper guilty of any violation of the said Code, and the
fact that such Philippine Press Council has been organized and its members
have been duly elected in accordance herewith shall be ascertained and
proclaimed by the President of the Philippines.
Under the first proviso in section 1, the venue of a civil action for damages in
cases of written defamations is localized upon the basis of, first, whether the
offended party or plaintiff is a public officer or a private individual; and second, if
he is a public officer, whether his office is in Manila or not in Manila, at the time of
the commission of the offense. If the offended party is a public officer in the office
in the City of Manila, the proviso limits him to two (2) choices of venue, namely,
in the Court of First instance of the City of Manila or in the city or province where
the libelous article is printed and first published ..."
The complaint lodged in the court of Rizal by respondents does not allege that
the libelous article was printed and first published in the province of Rizal and,
since the respondents-plaintiffs are public officers with offices in Manila at the
time of the commission of the alleged offense, it is clear that the only place left
for them wherein to file their action, is the Court of First Instance of Manila.
The limitation of the choices of venue, as introduced into the Penal Code through
its amendments by Republic Act 4363, was intended "to minimize or limit the
filing of out-of-town libel suits" to protect an alleged offender from "hardships,
inconveniences and harassments" and, furthermore, to protect "the interest of the
public service" where one of the offended parties is a public officer."4 The intent,
of the law is clear: a libeled public official might sue in the court of the locality
where he holds office, in order that the prosecution of the action should interfere
as little as possible with the discharge of his official duties and labors. The only
alternative allowed him by law is to prosecute those responsible for the libel in
the place where the offending article was printed and first published. Here, the
law tolerates the interference with the libeled officer's duties only for the sake of
avoiding unnecessary harassment of the accused. Since the offending
publication was not printed in the Philippines, the alternative venue was not open
to respondent Mayor Villegas of Manila and Undersecretary of Finance Enrile,
who were the offended parties.
But respondents-plaintiffs argue that Republic Act No. 4363 is not applicable
where the action is against non-existent defendant, as petitioner Time, Inc., for
several reasons. They urge that, in enacting Republic Act No. 4363, Congress
did not intend to protect non-resident defendants as shown by Section 3, which
provides for the effectivity of the statute only if and when the "newspapermen in
the Philippines" have organized a "Philippine Press Council" whose function shall
be to promulgate a Code of Ethics for "them" and "the Philippine press"; and
since a non-resident defendant is not in a position to comply with the conditions
imposed for the effectivity of the statute, such defendant may not invoke its
provisions; that a foreign corporation is not inconvenienced by an out-of-town
libel suit; that it would be absurd and incongruous, in the absence of an
extradition treaty, for the law to give to public officers with office in Manila the
second option of filing a criminal case in the court of the place where the libelous
article is printed and first published if the defendant is a foreign corporation and
that, under the "single publication" rule which originated in the United States and
imported into the Philippines, the rule was understood to mean that publications
in another state are not covered by venue statutes of the forum.
The implication of respondents' argument is that the law would not take effect as
to non-resident defendants or accused. We see nothing in the text of the law that
would sustain such unequal protection to some of those who may be charged
with libel. The official proclamation that a Philippine Press Council has been
organized is made a pre-condition to the effectivity of the entire Republic Act No.
4363, and no terms are employed therein to indicate that the law can or will be
effective only as to some, but not all, of those that may be charged with libeling
our public officers.
The assertion that a foreign corporation or a non-resident defendant is not
inconvenienced by an out-of-town suit is irrelevant and untenable, for venue and
jurisdiction are not dependent upon convenience or inconvenience to a party;
and moreover, venue was fixed under Republic Act No. 4363, pursuant to the
basic policy of the law that is, as previously stated, to protect the interest of the
public service when the offended party is a public officer, by minimizing as much
as possible any interference with the discharge of his duties.
That respondents-plaintiffs could not file a criminal case for libel against a non-
resident defendant does not make Republic Act No. 4363 incongruous of absurd,
for such inability to file a criminal case against a non-resident natural person
equally exists in crimes other than libel. It is a fundamental rule of international
jurisdiction that no state can by its laws, and no court which is only a creature of
the state, can by its judgments or decrees, directly bind or affect property or
persons beyond the limits of the state.5 Not only this, but if the accused is a
corporation, no criminal action can lie against it,6 whether such corporation or
resident or non-resident. At any rate, the case filed by respondents-plaintiffs is
case for damages.
50 Am. Jur. 2d 659 differentiates the "multiple publication" and "single
publication" rules (invoked by private respondents) to be as follows:
The common law as to causes of action for tort arising out of a single publication
was to the effect that each communication of written or printed matter was a
distinct and separate publication of a libel contained therein, giving rise to a
separate cause of action. This rule ('multiple publication' rule) is still followed in
several American jurisdictions, and seems to be favored by the American Law
Institute. Other jurisdictions have adopted the 'single publication' rule which
originated in New York, under which any single integrated publication, such as
one edition of a newspaper, book, or magazine, or one broadcast, is treated as a
unit, giving rise to only one cause of action, regardless of the number of times it
is exposed to different people. ...
These rules are not pertinent in the present scheme because the number of
causes of action that may be available to the respondents-plaintiffs is not here in
issue. We are here confronted by a specific venue statute, conferring jurisdiction
in cases of libel against Public officials to specified courts, and no other. The rule
is that where a statute creates a right and provides a remedy for its enforcement,
the remedy is exclusive; and where it confers jurisdiction upon a particular court,
that jurisdiction is likewise exclusive, unless otherwise provided. Hence, the
venue provisions of Republic Act No. 4363 should be deemed mandatory for the
party bringing the action, unless the question of venue should be waived by the
defendant, which was not the case here. Only thus can the policy of the Act be
upheld and maintained. Nor is there any reason why the inapplicability of one
alternative venue should result in rendering the other alternative, also
inapplicable.
The dismissal of the present petition is asked on the ground that the petitioner
foreign corporation failed to allege its capacity to sue in the courts of the
Philippines. Respondents rely on section 69 of the Corporation law, which
provides:
SEC. 69. No foreign corporation or corporations formed, organized, or existing
under any laws other than those of the Philippines shall be permitted to ...
maintain by itself or assignee any suit for the recovery of any debt, claim, or
demand whatever, unless it shall have the license prescribed in the section
immediately preceding. ..." ...;
They also invoke the ruling in Marshall-Wells Co. vs. Elser & Co., Inc.7 that no
foreign corporation may be permitted to maintain any suit in the local courts
unless it shall have the license required by the law, and the ruling in Atlantic
Mutual Ins. Co., Inc. vs. Cebu Stevedoring Co., Inc.8 that "where ... the
law denies to a foreign corporation the right to maintain suit unless it has
previously complied with a certain requirement, then such compliance or the fact
that the suing corporation is exempt therefrom, becomes a necessary averment
in the complaint." We fail to see how these doctrines can be a propos in the case
at bar, since the petitioner is not "maintaining any suit" but is merely defending
one against itself; it did not file any complaint but only a corollary defensive
petition to prohibit the lower court from further proceeding with a suit that it had
no jurisdiction to entertain.
Petitioner's failure to aver its legal capacity to institute the present petition is not
fatal, for ...
A foreign corporation may, by writ of prohibition, seek relief against the wrongful
assumption of jurisdiction. And a foreign corporation seeking a writ of prohibition
against further maintenance of a suit, on the ground of want of jurisdiction in
which jurisdiction is not bound by the ruling of the court in which the suit was
brought, on a motion to quash service of summons, that it has jurisdiction.9
It is also advanced that the present petition is premature, since respondent court
has not definitely ruled on the motion to dismiss, nor held that it has jurisdiction,
but only argument is untenable. The motion to dismiss was predicated on the
respondent court's lack of jurisdiction to entertain the action; and the rulings of
this Court are that writs of certiorari or prohibition, or both, may issue in case of a
denial or deferment of action on such a motion to dismiss for lack of jurisdiction.
If the question of jurisdiction were not the main ground for this petition for review
by certiorari, it would be premature because it seeks to have a review of an
interlocutory order. But as it would be useless and futile to go ahead with the
proceedings if the court below had no jurisdiction this petition was given due
course.' (San Beda vs. CIR, 51 O.G. 5636, 5638).
'While it is true that action on a motion to dismiss may be deferred until the trial
and an order to that effect is interlocutory, still where it clearly appears that the
trial judge or court is proceeding in excess or outside of its jurisdiction, the
remedy of prohibition would lie since it would be useless and a waste of time to
go ahead with the proceedings. (Philippine International Fair, Inc., et al. vs.
Ibañez, et al., 50 Off. Gaz. 1036; Enrique v. Macadaeg, et al., 47 Off. Gaz. 1207;
see also San Beda College vs. CIR, 51 Off. Gaz. 5636.)' (University of Sto.
Tomas v. Villanueva, L-13748, 30 October 1959.).
Similarly, in Edward J. Nell Co. vs. Cubacub, L-20843, 23 June 1965, 14 SCRA
419, this Court held:
'.......................................................... It is a settledrule that the jurisdiction of a
court over the subject-matter is determined by the allegations in the complaint;
and when a motion to dismiss is filed for lack of jurisdiction those allegations are
deemed admitted for purposes of such motion, so that it may be resolved without
waiting for the trial. Thus it has been held that the consideration thereof may not
be postponed in the hope that the evidence may yield other qualifying or
concurring data which would bring the case under the court's jurisdiction.'
To the same effect are the rulings in: Ruperto vs. Fernando, 83 Phil.
943; Administrator of Hacienda Luisita Estate vs. Alberto, L-12133, 21 October
1958.
Summing up, We hold:
(1) The under Article 360 of the Revised Penal Code, as amended by Republic
Act No. 4363, actions for damages by public officials for libelous publications
against them can only be filed in the courts of first instance ofthe city or province
where the offended functionary held office at the time ofthe commission of the
offense, in case the libelous article was first printed or published outside the
Philippines.
(2) That the action of a court in refusing to rule, or deferring its ruling, on a motion
to dismiss for lack of jurisdiction over the subject matter, or for improper venue, is
in excess of jurisdiction and correctable by writ of prohibition or certiorari sued
out in the appellate Court, even before trial on the merits is had.

WHEREFORE, the writs applied for are granted: the respondent Court of First
Instance of Rizal is declared without jurisdiction to take cognizance of its Civil
Case No. 10403; and its orders issued in connection therewith are hereby
annulled and set aside,. Respondent court is further commanded to desist from
further proceedings in Civil case No. 10403 aforesaid. Costs against private
respondents, Antonio J. Villegas and Juan Ponce Enrile.

G.R. No. 190071 August 15, 2012
UNION BANK OF THE PHILIPPINES, Petitioner,
vs.
MAUNLAD HOMES, INC. and all other persons or entities claiming rights
under it, Respondents.
VILLARAMA, JR.,*
DECISION
BRION, J.:
Before the Court is the petition for review on certiorari1 under Rule 45 of the
Rules of Court filed by petitioner Union Bank of the Philippines (Union Bank),
assailing the decision dated October 28, 20092 of the Court of Appeals (CA) in
CA-G.R. SP No. 107772.
THE FACTS
Union Bank is the owner of a commercial complex located in Malolos, Bulacan,
known as the Maunlad Shopping Mall.
Sometime in August 2002, Union Bank, as seller, and respondent Maunlad
Homes, Inc. (Maunlad Homes), as buyer, entered into a contract to sell3 involving
the Maunlad Shopping Mall. The contract set the purchase price at ₱ 151 million,
₱ 2.4 million of which was to be paid by Maunlad Homes as down payment
payable on or before July 5, 2002, with the balance to be amortized over the
succeeding 180-month period.4 Under the contract, Union Bank authorized
Maunlad Homes to take possession of the property and to build or introduce
improvements thereon. The parties also agreed that if Maunlad Homes violates
any of the provisions of the contract, all payments made will be applied as rentals
for the use and possession of the property, and all improvements introduced on
the land will accrue in favor of Union Bank.5 In the event of rescission due to
failure to pay or to comply with the terms of the contract, Maunlad Homes will be
required to immediately vacate the property and must voluntarily turn possession
over to Union Bank.6
When Maunlad Homes failed to pay the monthly amortization, Union Bank sent
the former a Notice of Rescission of Contract7 dated February 5, 2003,
demanding payment of the installments due within 30 days from receipt;
otherwise, it shall consider the contract automatically rescinded. Maunlad Homes
failed to comply. Hence, on November 19, 2003, Union Bank sent Maunlad
Homes a letter demanding payment of the rentals due and requiring that the
subject property be vacated and its possession turned over to the bank. When
Maunlad Homes continued to refuse, Union Bank instituted an ejectment suit
before the Metropolitan Trial Court (MeTC) of Makati City, Branch 64, on
February 19, 2004. Maunlad Homes resisted the suit by claiming, among others,
that it is the owner of the property as Union Bank did not reserve ownership of
the property under the terms of the contract.8 By virtue of its ownership, Maunlad
Homes claimed that it has the right to possess the property.
On May 18, 2005, the MeTC dismissed Union Bank’s ejectment complaint. 9 It
found that Union Bank’s cause of action was based on a breach of contract and
that both parties are claiming a better right to possess the property based on
their respective claims of ownership of the property.
The MeTC ruled that the appropriate action to resolve these conflicting claims
was an accion reivindicatoria, over which it had no jurisdiction.
On appeal, the Regional Trial Court (RTC) of Makati City, Branch 139, affirmed
the MeTC in its decision dated July 17, 2008;10 it agreed with the MeTC that the
issues raised in the complaint extend beyond those commonly involved in an
unlawful detainer suit. The RTC declared that the case involved a determination
of the rights of the parties under the contract. Additionally, the RTC noted that the
property is located in Malolos, Bulacan, but the ejectment suit was filed by Union
Bank in Makati City, based on the contract stipulation that "the venue of all suits
and actions arising out or in connection with the Contract to Sell shall be in
Makati City."11 The RTC ruled that the proper venue for the ejectment action is in
Malolos, Bulacan, pursuant to the second paragraph of Section 1, Rule 4 of the
Rules of Court, which states:
Section 1. Venue of real actions. - Actions affecting title to or possession of real
property, or interest therein, shall be commenced and tried in the proper court
which has jurisdiction over the area wherein the real property involved, or a
portion thereof, is situated.
Forcible entry and detainer actions shall be commenced and tried in the
municipal trial court of the municipality or city wherein the real property involved,
or a portion thereof, is situated. [emphasis ours]
The RTC declared that Union Bank cannot rely on the waiver of venue provision
in the contract because ejectment is not an action arising out of or connected
with the contract.
Union Bank appealed the RTC decision to the CA through a petition for review
under Rule 42 of the Rules of Court. The CA affirmed the RTC decision in its
October 28, 2009 decision,12 ruling that Union Bank’s claim of possession is
based on its claim of ownership which in turn is based on its interpretation of the
terms and conditions of the contract, particularly, the provision on the
consequences of Maunlad Homes’ breach of contract. The CA determined that
Union Bank’s cause of action is premised on the interpretation and enforcement
of the contract and the determination of the validity of the rescission, both of
which are matters beyond the jurisdiction of the MeTC. Therefore, it ruled that the
dismissal of the ejectment suit was proper. The CA, however, made no further
ruling on the issue of venue of the action.
From the CA’s judgment, Union Bank appealed to the Court by filing the present
petition for review on certiorari under Rule 45 of the Rules of Court.
THE PARTIES’ ARGUMENTS
Union Bank disagreed with the CA’s finding that it is claiming ownership over the
property through the ejectment action. It claimed that it never lost ownership over
the property despite the execution of the contract, since only the right to possess
was conceded to Maunlad Homes under the contract; Union Bank never
transferred ownership of the property to Maunlad Homes. Because of Maunlad
Homes’ failure to comply with the terms of the contract, Union Bank believes that
it rightfully rescinded the sale, which rescission terminated Maunlad Homes’ right
to possess the subject property. Since Maunlad Homes failed to turn over the
possession of the subject property, Union Bank believes that it correctly instituted
the ejectment suit.
The Court initially denied Union Bank’s petition in its Resolution dated March 17,
2010.13 Upon motion for reconsideration filed by Union Bank, the Court set aside
its Resolution of March 17, 2010 (in a Resolution dated May 30, 2011 14 ) and
required Maunlad Homes to comment on the petition.
Maunlad Homes contested Union Bank’s arguments, invoking the rulings of the
lower courts. It considered Union Bank’s action as based on the propriety of the
rescission of the contract, which, in turn, is based on a determination of whether
Maunlad Homes indeed failed to comply with the terms of the contract; the
propriety of the rescission, however, is a question that is within the RTC’s
jurisdiction. Hence, Maunlad Homes contended that the dismissal of the
ejectment action was proper.
THE COURT’S RULING
We find the petition meritorious.
The authority of the MeTC to
interpret contracts in an unlawful
detainer action
In any case involving the question of jurisdiction, the Court is guided by the
settled doctrine that the jurisdiction of a court is determined by the nature of the
action pleaded by the litigant through the allegations in his complaint.15
Unlawful detainer is an action to recover possession of real property from one
who unlawfully withholds possession after the expiration or termination of his
right to hold possession under any contract, express or implied. The possession
of the defendant in unlawful detainer is originally legal but became illegal due to
expiration or termination of the right to possess.16 Under Section 1, Rule 70 of the
Rules of Court, the action must be filed "within one (1) year after the unlawful
deprivation or withholding of possession." Thus, to fall within the jurisdiction of
the MeTC, the complaint must allege that –
1. the defendant originally had lawful possession of the property, either by virtue
of a contract or by tolerance of the plaintiff; 2. eventually, the defendant’s
possession of the property becameillegal or unlawful upon notice by the plaintiff
to defendant of the expiration or the termination of the defendant’s right of
possession;
3. thereafter, the defendant remained in possession of the property and deprived
the plaintiff the enjoyment thereof; and
4. within one year from the unlawful deprivation or withholding of possession, the
plaintiff instituted the complaint for ejectment.17
Contrary to the findings of the lower courts, all four requirements were alleged in
Union Bank’s Complaint. Union Bank alleged that Maunlad Homes "maintained
possession of the subject properties" pursuant to the Contract to Sell.18 Maunlad
Homes, however, "failed to faithfully comply with the terms of payment,"
prompting Union Bank to "rescind the Contract to Sell in a Notice of Rescission
dated February 5, 2003."19 When Maunlad Homes "refused to turn over and
vacate the subject premises,"20 Union Bank sent another Demand Letter on
November 19, 2003 to Maunlad Homes requiring it (1) "[t]o pay the equivalent
rentals-in-arrears as of October 2003 in the amount of ₱ 15,554,777.01 and
monthly thereafter until the premises are fully vacated and turned over" to Union
Bank, and (2) to vacate the property peacefully and turn over possession to
Union Bank.21 As the demand went unheeded, Union Bank instituted an action for
unlawful detainer before the MeTC on February 19, 2004, within one year from
the date of the last demand. These allegations clearly demonstrate a cause of
action for unlawful detainer and vested the MeTC jurisdiction over Union Bank’s MeTC can resolve the conflicting claims of the parties based on the facts
action. presented and proved.

Maunlad Homes denied Union Bank’s claim that its possession of the property The right to possess the property was
had become unlawful. It argued that its failure to make payments did not extinguished when the contract to
terminate its right to possess the property because it already acquired ownership sell failed to materialize
when Union Bank failed to reserve ownership of the property under the contract.
Despite Maunlad Homes’ claim of ownership of the property, the Court rules that Maunlad Homes acquired possession of the property based on its contract with
the MeTC retained its jurisdiction over the action; a defendant may not divest the Union Bank. While admitting that it suspended payment of the
MeTC of its jurisdiction by merely claiming ownership of the property. 22 Under installments,25 Maunlad Homes contended that the suspension of payment did
Section 16, Rule 70 of the Rules of Court, "when the defendant raises the not affect its right to possess the property because its contract with Union Bank
defense of ownership in his pleadings and the question of possession cannot be was one of sale and not to sell; hence, ownership of the
resolved without deciding the issue of ownership, the issue of ownership shall be
property has been transferred to it, allowing it to retain possession
resolved only to determine the issue of possession." Section 18, Rule 70 of the
notwithstanding nonpayment of installments. The terms of the contract, however,
Rules of Court, however, states that "the judgment x x x shall be conclusive with
do not support this conclusion.
respect to the possession only and shall in no wise bind the title or affect the
ownership of the land or building." Section 11 of the contract between Union Bank and Maunlad Homes provides
that "upon payment in full of the Purchase Price of the Property x x x, the
The authority granted to the MeTC to preliminarily resolve the issue of ownership
SELLER shall execute and deliver a Deed of Absolute Sale conveying the
to determine the issue of possession ultimately allows it to interpret and enforce
Property to the BUYER."26 "Jurisprudence has established that where the seller
the contract or agreement between the plaintiff and the defendant. To deny the
promises to execute a deed of absolute sale upon the completion by the buyer of
MeTC jurisdiction over a complaint merely because the issue of possession
the payment of the price, the contract is only a contract to sell."27 The presence of
requires the interpretation of a contract will effectively rule out unlawful detainer
this provision generally identifies the contract as being a mere contract to
as a remedy. As stated, in an action for unlawful detainer, the defendant’s right to
sell.28 After reviewing the terms of the contract between Union Bank and Maunlad
possess the property may be by virtue of a contract, express or implied;
Homes, we find no reasonable ground to exempt the present case from the
corollarily, the termination of the defendant’s right to possess would be governed
general rule; the contract between Union Bank and Maunlad Homes is a contract
by the terms of the same contract. Interpretation of the contract between the
to sell.
plaintiff and the defendant is inevitable because it is the contract that initially
granted the defendant the right to possess the property; it is this same contract
In a contract to sell, the full payment of the purchase price is a positive
that the plaintiff subsequently claims was violated or extinguished, terminating
suspensive condition whose non-fulfillment is not a breach of contract, but merely
the defendant’s right to possess. We ruled in Sps. Refugia v. CA23 that –
an event that prevents the seller from conveying title to the purchaser. "The non-
payment of the purchase price renders the contract to sell ineffective and without
where the resolution of the issue of possession hinges on a determination of the
force and effect."29 Maunlad Homes’ act of withholding the installment payments
validity and interpretation of the document of title or any other contract on which
rendered the contract ineffective and without force and effect, and ultimately
the claim of possession is premised, the inferior court may likewise pass upon
deprived itself of the right to continue possessing Maunlad Shopping Mall.
these issues.
The propriety of filing the unlawful
The MeTC’s ruling on the rights of the parties based on its interpretation of their
detainer action in Makati City
contract is, of course, not conclusive, but is merely provisional and is binding only
pursuant to the venue stipulation in
with respect to the issue of possession.
the contract
Thus, despite the CA’s opinion that Union Bank’s "case involves a determination
Maunlad Homes questioned the venue of Union Bank’s unlawful detainer action
of the rights of the parties under the Contract to Sell,"24 it is not precluded from
which was filed in Makati City while the contested property is located in Malolos,
resolving this issue. Having acquired jurisdiction over Union Bank’s action, the
Bulacan. Citing Section 1, Rule 4 of the Rules of Court, Maunlad Homes claimed
that the unlawful detainer action should have been filed with the municipal trial
court of the municipality or city where the real property involved is situated. Union
Bank, on the other hand, justified the filing of the complaint with the MeTC of
Makati City on the venue stipulation in the contract which states that "the venue
of all suits and actions arising out of or in connection with this Contract to Sell
shall be at Makati City."30

While Section 1, Rule 4 of the Rules of Court states that ejectment actions shall
be filed in "the municipal trial court of the municipality or city wherein the real
property involved x x x is situated," Section 4 of the same Rule provides that the
rule shall not apply "where the parties have validly agreed in writing before the
filing of the action on the exclusive venue thereof." Precisely, in this case, the
parties provided for a different venue. In Villanueva v. Judge Mosqueda, etc., et
al.,31 the Court upheld the validity of a stipulation in a contract providing for a
venue for ejectment actions other than that stated in the Rules of Court. Since
the unlawful detainer action is connected with the contract, Union Bank rightfully
filed the complaint with the MeTC of Makati City.

WHEREFORE, we hereby GRANT the petition and SET ASIDE the decision
dated October 28, 2009 of the Court of Appeals in CA-G.R. SP No. 107772.
Respondent Maunlad Homes, Inc. is ORDERED TO VACATE the Maunlad
Shopping Mall, the property subject of the case, immediately upon the finality of
this Decision. Respondent Maunlad Homes, Inc. is further ORDERED TO
PAY the rentals-in-arrears, as well as rentals accruing in the interim until it
vacates the property.

The case is REMANDED to the Metropolitan Trial Court of Makati City, Branch
64, to determine the amount of rentals due. In addition to the amount determined
as unpaid rent, respondent Maunlad Homes, Inc. is ORDERED TO PAY legal
interest of six percent (6o/o) per annum, from November 19, 2003, when the
demand to pay and to vacate was made, up to the finality of this Decision.
Thereafter, an interest of twelve percent ( 12%) per annum shall be imposed on
the total amount due until full payment is made.

SO ORDERED.

G. R. No. 156966 May 7, 2004
PILIPINO TELEPHONE CORPORATION, petitioner,
vs.
DELFINO TECSON, respondent.
DECISION
VITUG, J.:
The facts, by and large, are undisputed.
On various dates in 1996, Delfino C. Tecson applied for six (6) cellular phone
subscriptions with petitioner Pilipino Telephone Corporation (PILTEL), a
company engaged in the telecommunications business, which applications were
each approved and covered, respectively, by six mobiline service agreements.
On 05 April 2001, respondent filed with the Regional Trial Court of Iligan City,
Lanao Del Norte, a complaint against petitioner for a "Sum of Money and
Damages." Petitioner moved for the dismissal of the complaint on the ground of
improper venue, citing a common provision in the mobiline service agreements to
the effect that -
"Venue of all suits arising from this Agreement or any other suit directly or
indirectly arising from the relationship between PILTEL and subscriber shall be in
the proper courts of Makati, Metro Manila. Subscriber hereby expressly waives
any other venues."1
In an order, dated 15 August 2001, the Regional Trial Court of Iligan City, Lanao
del Norte, denied petitioner’s motion to dismiss and required it to file an answer
within 15 days from receipt thereof.
Petitioner PILTEL filed a motion for the reconsideration, through registered mail,
of the order of the trial court. In its subsequent order, dated 08 October 2001, the
trial court denied the motion for reconsideration.
Petitioner filed a petition for certiorari under Rule 65 of the Revised Rules of Civil
Procedure before the Court of Appeals.
The Court of Appeals, in its decision of 30 April 2002, saw no merit in the petition
and affirmed the assailed orders of the trial court. Petitioner moved for a
reconsideration, but the appellate court, in its order of 21 January 2003, denied
the motion.
There is merit in the instant petition.
Section 4, Rule 4, of the Revised Rules of Civil Procedure2 allows the parties to
agree and stipulate in writing, before the filing of an action, on the exclusive
venue of any litigation between them. Such an agreement would be valid and
binding provided that the stipulation on the chosen venue is exclusive in nature
or in intent, that it is expressed in writing by the parties thereto, and that it is
entered into before the filing of the suit. The provision contained in paragraph 22
of the "Mobile Service Agreement," a standard contract made out by petitioner
PILTEL to its subscribers, apparently accepted and signed by respondent, states
that the venue of all suits arising from the agreement, or any other suit directly or
indirectly arising from the relationship between PILTEL and subscriber, "shall be
in the proper courts of Makati, Metro Manila." The added stipulation that the
subscriber "expressly waives any other venue"3 should indicate, clearly enough,
the intent of the parties to consider the venue stipulation as being preclusive in
character.
The appellate court, however, would appear to anchor its decision on the thesis
that the subscription agreement, being a mere contract of adhesion, does not
bind respondent on the venue stipulation.
Indeed, the contract herein involved is a contract of adhesion. But such an
agreement is not per se inefficacious. The rule instead is that, should there be
ambiguities in a contract of adhesion, such ambiguities are to be construed
against the party that prepared it. If, however, the stipulations are not obscure,
but are clear and leave no doubt on the intention of the parties, the literal
meaning of its stipulations must be held controlling.4
A contract of adhesion is just as binding as ordinary contracts. It is true that this
Court has, on occasion, struck down such contracts as being assailable when the
weaker party is left with no choice by the dominant bargaining party and is thus
completely deprived of an opportunity to bargain effectively. Nevertheless,
contracts of adhesion are not prohibited even as the courts remain careful in
scrutinizing the factual circumstances underlying each case to determine the
respective claims of contending parties on their efficacy.
In the case at bar, respondent secured six (6) subscription contracts for cellular
phones on various dates. It would be difficult to assume that, during each of
those times, respondent had no sufficient opportunity to read and go over the
terms and conditions embodied in the agreements. Respondent continued, in
fact, to acquire in the pursuit of his business subsequent subscriptions and
remained a subscriber of petitioner for quite sometime.
In Development Bank of the Philippines vs. National Merchandising
Corporation,5 the contracting parties, being of age and businessmen of
experience, were presumed to have acted with due care and to have signed the
assailed documents with full knowledge of their import. The situation would be no
less true than that which obtains in the instant suit. The circumstances in Sweet
Lines, Inc. vs. Teves,6 wherein this Court invalidated the venue stipulation
contained in the passage ticket, would appear to be rather peculiar to that case.
There, the Court took note of an acute shortage in inter-island vessels that left
passengers literally scrambling to secure accommodations and tickets from
crowded and congested counters. Hardly, therefore, were the passengers
accorded a real opportunity to examine the fine prints contained in the tickets, let
alone reject them.

A contract duly executed is the law between the parties, and they are obliged to
comply fully and not selectively with its terms. A contract of adhesion is no
exception.7

WHEREFORE, the instant petition is GRANTED, and the questioned decision

and resolution of the Court of Appeals in CA-G.R. SP No. 68104 are REVERSED
and SET ASIDE. Civil Case No. 5572 pending before the Regional Trial Court of
Iligan City, Branch 4, is DISMISSED without prejudice to the filing of an
appropriate complaint by respondent against petitioner with the court of proper
venue. No costs.

SO ORDERED.
G.R. No. 170281 January 18, 2008
REPUBLIC OF THE PHILIPPINES, represented by the ANTI-MONEY
LAUNDERING COUNCIL, petitioner,
vs.
GLASGOW CREDIT AND COLLECTION SERVICES, INC. and CITYSTATE
SAVINGS BANK, INC., respondents.
DECISION
CORONA, J.:
This is a petition for review1 of the order2 dated October 27, 2005 of the Regional
Trial Court (RTC) of Manila, Branch 47, dismissing the complaint for
forfeiture3 filed by the Republic of the Philippines, represented by the Anti-Money
Laundering Council (AMLC) against respondents Glasgow Credit and Collection
Services, Inc. (Glasgow) and Citystate Savings Bank, Inc. (CSBI).
On July 18, 2003, the Republic filed a complaint in the RTC Manila for civil
forfeiture of assets (with urgent plea for issuance of temporary restraining order
[TRO] and/or writ of preliminary injunction) against the bank deposits in account
number CA-005-10-000121-5 maintained by Glasgow in CSBI. The case, filed
pursuant to RA 9160 (the Anti-Money Laundering Act of 2001), as amended, was
docketed as Civil Case No. 03-107319.
Acting on the Republic’s urgent plea for the issuance of a TRO, the executive
judge4 of RTC Manila issued a 72-hour TRO dated July 21, 2003. The case was
thereafter raffled to Branch 47 and the hearing on the application for issuance of
a writ of preliminary injunction was set on August 4, 2003.
After hearing, the trial court (through then Presiding Judge Marivic T. Balisi-
Umali) issued an order granting the issuance of a writ of preliminary injunction.
The injunctive writ was issued on August 8, 2003.
Meanwhile, summons to Glasgow was returned "unserved" as it could no longer
be found at its last known address.
On October 8, 2003, the Republic filed a verified omnibus motion for (a) issuance
of alias summons and (b) leave of court to serve summons by publication. In an
order dated October 15, 2003, the trial court directed the issuance
of alias summons. However, no mention was made of the motion for leave of
court to serve summons by publication.
In an order dated January 30, 2004, the trial court archived the case allegedly for
failure of the Republic to serve the alias summons. The Republic filed an ex
parte omnibus motion to (a) reinstate the case and (b) resolve its pending motion
for leave of court to serve summons by publication.
In an order dated May 31, 2004, the trial court ordered the reinstatement of the
case and directed the Republic to serve the alias summons on Glasgow and
CSBI within 15 days. However, it did not resolve the Republic’s motion for leave
of court to serve summons by publication declaring:
Until and unless a return is made on the alias summons, any action on [the
Republic’s] motion for leave of court to serve summons by publication would be
untenable if not premature.
On July 12, 2004, the Republic (through the Office of the Solicitor General
[OSG]) received a copy of the sheriff’s return dated June 30, 2004 stating that
the alias summons was returned "unserved" as Glasgow was no longer holding
office at the given address since July 2002 and left no forwarding address.
Meanwhile, the Republic’s motion for leave of court to serve summons by
publication remained unresolved. Thus, on August 11, 2005, the Republic filed a
manifestation and ex parte motion to resolve its motion for leave of court to serve
summons by publication.
On August 12, 2005, the OSG received a copy of Glasgow’s "Motion to Dismiss
(By Way of Special Appearance)" dated August 11, 2005. It alleged that (1) the
court had no jurisdiction over its person as summons had not yet been served on
it; (2) the complaint was premature and stated no cause of action as there was
still no conviction for estafa or other criminal violations implicating Glasgow and
(3) there was failure to prosecute on the part of the Republic.
The Republic opposed Glasgow’s motion to dismiss. It contended that its suit
was an action quasi in rem where jurisdiction over the person of the defendant
was not a prerequisite to confer jurisdiction on the court. It asserted that prior
conviction for unlawful activity was not a precondition to the filing of a civil
forfeiture case and that its complaint alleged ultimate facts sufficient to establish
a cause of action. It denied that it failed to prosecute the case.
On October 27, 2005, the trial court issued the assailed order. It dismissed the
case on the following grounds: (1) improper venue as it should have been filed in
the RTC of Pasig where CSBI, the depository bank of the account sought to be
forfeited, was located; (2) insufficiency of the complaint in form and substance
and (3) failure to prosecute. It lifted the writ of preliminary injunction and directed
CSBI to release to Glasgow or its authorized representative the funds in CA-005-
10-000121-5.
Raising questions of law, the Republic filed this petition.
On November 23, 2005, this Court issued a TRO restraining Glasgow and CSBI,
their agents, representatives and/or persons acting upon their orders from
implementing the assailed October 27, 2005 order. It restrained Glasgow from
removing, dissipating or disposing of the funds in account no. CA-005-10-
000121-5 and CSBI from allowing any transaction on the said account.
The petition essentially presents the following issue: whether the complaint for
civil forfeiture was correctly dismissed on grounds of improper venue,
insufficiency in form and substance and failure to prosecute.
The Court agrees with the Republic.
The Complaint Was Filed
In The Proper Venue
In its assailed order, the trial court cited the grounds raised by Glasgow in
support of its motion to dismiss:
1. That this [c]ourt has no jurisdiction over the person of Glasgow considering
that no [s]ummons has been served upon it, and it has not entered its
appearance voluntarily;
2. That the [c]omplaint for forfeiture is premature because of the absence of a
prior finding by any tribunal that Glasgow was engaged in unlawful activity: [i]n
connection therewith[,] Glasgow argues that the [c]omplaint states no cause of
action; and
3. That there is failure to prosecute, in that, up to now, summons has yet to be
served upon Glasgow.5
But inasmuch as Glasgow never questioned the venue of the Republic’s
complaint for civil forfeiture against it, how could the trial court have dismissed
the complaint for improper venue? In Dacoycoy v. Intermediate Appellate
Court6 (reiterated in Rudolf Lietz Holdings, Inc. v. Registry of Deeds of
Parañaque City),7 this Court ruled:
The motu proprio dismissal of petitioner’s complaint by [the] trial court on the
ground of improper venue is plain error…. (emphasis supplied)
At any rate, the trial court was a proper venue.
On November 15, 2005, this Court issued A.M. No. 05-11-04-SC, the Rule of
Procedure in Cases of Civil Forfeiture, Asset Preservation, and Freezing of
Monetary Instrument, Property, or Proceeds Representing, Involving, or Relating
to an Unlawful Activity or Money Laundering Offense under RA 9160, as
amended (Rule of Procedure in Cases of Civil Forfeiture). The order dismissing
the Republic’s complaint for civil forfeiture of Glasgow’s account in CSBI has not
yet attained finality on account of the pendency of this appeal. Thus, the Rule of
Procedure in Cases of Civil Forfeiture applies to the Republic’s
complaint.8 Moreover, Glasgow itself judicially admitted that the Rule of
Procedure in Cases of Civil Forfeiture is "applicable to the instant case."9
Section 3, Title II (Civil Forfeiture in the Regional Trial Court) of the Rule of
Procedure in Cases of Civil Forfeiture provides:
Sec. 3. Venue of cases cognizable by the regional trial court. – A petition for civil
forfeiture shall be filed in any regional trial court of the judicial region where
the monetary instrument, property or proceeds representing, involving, or
relating to an unlawful activity or to a money laundering offense are
located; provided, however, that where all or any portion of the monetary
instrument, property or proceeds is located outside the Philippines, the petition
may be filed in the regional trial court in Manila or of the judicial region where any
portion of the monetary instrument, property, or proceeds is located, at the option
of the petitioner. (emphasis supplied)
Under Section 3, Title II of the Rule of Procedure in Cases of Civil Forfeiture,
therefore, the venue of civil forfeiture cases is any RTC of the judicial region
where the monetary instrument, property or proceeds representing, involving, or
relating to an unlawful activity or to a money laundering offense are located.
Pasig City, where the account sought to be forfeited in this case is situated, is
within the National Capital Judicial Region (NCJR). Clearly, the complaint for civil
forfeiture of the account may be filed in any RTC of the NCJR. Since the RTC
Manila is one of the RTCs of the NCJR,10 it was a proper venue of the Republic’s
complaint for civil forfeiture of Glasgow’s account.
The Complaint Was Sufficient In Form And Substance
In the assailed order, the trial court evaluated the Republic’s complaint to
determine its sufficiency in form and substance:
At the outset, this [c]ourt, before it proceeds, takes the opportunity to examine
the [c]omplaint and determine whether it is sufficient in form and substance.
Before this [c]ourt is a [c]omplaint for Civil Forfeiture of Assets filed by the
[AMLC], represented by the Office of the Solicitor General[,] against Glasgow
and [CSBI] as necessary party. The [c]omplaint principally alleges the following:
(a) Glasgow is a corporation existing under the laws of the Philippines, with
principal office address at Unit 703, 7th Floor, Citystate Center [Building], No. 709
Shaw Boulevard[,] Pasig City;
(b) [CSBI] is a corporation existing under the laws of the Philippines, with
principal office at Citystate Center Building, No. 709 Shaw Boulevard, Pasig City;
(c) Glasgow has funds in the amount of P21,301,430.28 deposited with [CSBI],
under CA 005-10-000121-5;
(d) As events have proved, aforestated bank account is related to the unlawful
activities of Estafa and violation of Securities Regulation Code;
(e) The deposit has been subject of Suspicious Transaction Reports;
(f) After appropriate investigation, the AMLC issued Resolutions No. 094 (dated
July 10, 2002), 096 (dated July 12, 2002), 101 (dated July 23, 2002), and 108
(dated August 2, 2002), directing the issuance of freeze orders against the bank
accounts of Glasgow;
(g) Pursuant to said AMLC Resolutions, Freeze Orders Nos. 008-010, 011 and
013 were issued on different dates, addressed to the concerned banks;
(h) The facts and circumstances plainly showing that defendant Glasgow’s bank
account and deposit are related to the unlawful activities of Estafa and violation
of Securities Regulation Code, as well as to a money laundering offense [which]
[has] been summarized by the AMLC in its Resolution No. 094; and
(i) Because defendant Glasgow’s bank account and deposits are related to the
unlawful activities of Estafa and violation of Securities Regulation Code, as well
as [to] money laundering offense as aforestated, and being the subject of
covered transaction reports and eventual freeze orders, the same should
properly be forfeited in favor of the government in accordance with Section 12,
R.A. 9160, as amended.11
In a motion to dismiss for failure to state a cause of action, the focus is on the
sufficiency, not the veracity, of the material allegations.12 The determination is
confined to the four corners of the complaint and nowhere else.13
In a motion to dismiss a complaint based on lack of cause of action, the question
submitted to the court for determination is the sufficiency of the allegations made
in the complaint to constitute a cause of action and not whether those allegations
of fact are true, for said motion must hypothetically admit the truth of the facts
alleged in the complaint.
The test of the sufficiency of the facts alleged in the complaint is whether
or not, admitting the facts alleged, the court could render a valid judgment
upon the same in accordance with the prayer of the complaint.14 (emphasis
ours)
In this connection, Section 4, Title II of the Rule of Procedure in Cases of Civil
Forfeiture provides:
Sec. 4. Contents of the petition for civil forfeiture. - The petition for civil forfeiture
shall be verified and contain the following allegations:
(a) The name and address of the respondent;
(b) A description with reasonable particularity of the monetary instrument,
property, or proceeds, and their location; and
(c) The acts or omissions prohibited by and the specific provisions of the Anti-
Money Laundering Act, as amended, which are alleged to be the grounds relied
upon for the forfeiture of the monetary instrument, property, or proceeds; and
[(d)] The reliefs prayed for.
Here, the verified complaint of the Republic contained the following allegations:
(a) the name and address of the primary defendant therein, Glasgow;15
(b) a description of the proceeds of Glasgow’s unlawful activities with
particularity, as well as the location thereof, account no. CA-005-10-000121-5 in
the amount of P21,301,430.28 maintained with CSBI;
(c) the acts prohibited by and the specific provisions of RA 9160, as amended,
constituting the grounds for the forfeiture of the said proceeds. In particular,
suspicious transaction reports showed that Glasgow engaged in unlawful
activities of estafa and violation of the Securities Regulation Code (under Section
3(i)(9) and (13), RA 9160, as amended); the proceeds of the unlawful activities
were transacted and deposited with CSBI in account no. CA-005-10-000121-5
thereby making them appear to have originated from legitimate sources; as such,
Glasgow engaged in money laundering (under Section 4, RA 9160, as
amended); and the AMLC subjected the account to freeze order and
(d) the reliefs prayed for, namely, the issuance of a TRO or writ of preliminary
injunction and the forfeiture of the account in favor of the government as well as
other reliefs just and equitable under the premises.
The form and substance of the Republic’s complaint substantially conformed with
Section 4, Title II of the Rule of Procedure in Cases of Civil Forfeiture.
Moreover, Section 12(a) of RA 9160, as amended, provides:
SEC. 12. Forfeiture Provisions. –
(a) Civil Forfeiture. – When there is a covered transaction report made, and the
court has, in a petition filed for the purpose ordered seizure of any monetary
instrument or property, in whole or in part, directly or indirectly, related to said
report, the Revised Rules of Court on civil forfeiture shall apply.
In relation thereto, Rule 12.2 of the Revised Implementing Rules and Regulations
of RA 9160, as amended, states:
RULE 12
Forfeiture Provisions
xxx xxx xxx
Rule 12.2. When Civil Forfeiture May be Applied. – When there is a
SUSPICIOUS TRANSACTION REPORT OR A COVERED TRANSACTION
REPORT DEEMED SUSPICIOUS AFTER INVESTIGATION BY THE AMLC, and
the court has, in a petition filed for the purpose, ordered the seizure of any
monetary instrument or property, in whole or in part, directly or indirectly, related
to said report, the Revised Rules of Court on civil forfeiture shall apply.
RA 9160, as amended, and its implementing rules and regulations lay down two
conditions when applying for civil forfeiture:
(1) when there is a suspicious transaction report or a covered transaction report
deemed suspicious after investigation by the AMLC and
(2) the court has, in a petition filed for the purpose, ordered the seizure of any
monetary instrument or property, in whole or in part, directly or indirectly, related
to said report.
It is the preliminary seizure of the property in question which brings it within the
reach of the judicial process.16 It is actually within the court’s possession when it
is submitted to the process of the court.17 The injunctive writ issued on August 8,
2003 removed account no. CA-005-10-000121-5 from the effective control of
either Glasgow or CSBI or their representatives or agents and subjected it to the
process of the court.
Since account no. CA-005-10-000121-5 of Glasgow in CSBI was (1) covered by
several suspicious transaction reports and (2) placed under the control of the trial
court upon the issuance of the writ of preliminary injunction, the conditions
provided in Section 12(a) of RA 9160, as amended, were satisfied. Hence, the
Republic, represented by the AMLC, properly instituted the complaint for civil
forfeiture.
Whether or not there is truth in the allegation that account no. CA-005-10-
000121-5 contains the proceeds of unlawful activities is an evidentiary matter
that may be proven during trial. The complaint, however, did not even have to
show or allege that Glasgow had been implicated in a conviction for, or the
commission of, the unlawful activities of estafa and violation of the Securities
Regulation Code.
A criminal conviction for an unlawful activity is not a prerequisite for the institution
of a civil forfeiture proceeding. Stated otherwise, a finding of guilt for an unlawful
activity is not an essential element of civil forfeiture.
Section 6 of RA 9160, as amended, provides:
SEC. 6. Prosecution of Money Laundering. –
(a) Any person may be charged with and convicted of both the offense of money
laundering and the unlawful activity as herein defined.
(b) Any proceeding relating to the unlawful activity shall be given precedence
over the prosecution of any offense or violation under this Act without prejudice
to the freezing and other remedies provided. (emphasis supplied)
Rule 6.1 of the Revised Implementing Rules and Regulations of RA 9160, as
amended, states:
Rule 6.1. Prosecution of Money Laundering –
(a) Any person may be charged with and convicted of both the offense of money
laundering and the unlawful activity as defined under Rule 3(i) of the AMLA.
(b) Any proceeding relating to the unlawful activity shall be given precedence
over the prosecution of any offense or violation under the AMLA without
prejudice to the application ex-parte by the AMLC to the Court of Appeals for a
freeze order with respect to the monetary instrument or property involved therein
and resort to other remedies provided under the AMLA, the Rules of Court
and other pertinent laws and rules. (emphasis supplied)
Finally, Section 27 of the Rule of Procedure in Cases of Civil Forfeiture provides:
Sec. 27. No prior charge, pendency or conviction necessary. – No prior criminal
charge, pendency of or conviction for an unlawful activity or money
laundering offense is necessary for the commencement or the resolution of a
petition for civil forfeiture. (emphasis supplied)
Thus, regardless of the absence, pendency or outcome of a criminal prosecution
for the unlawful activity or for money laundering, an action for civil forfeiture may
be separately and independently prosecuted and resolved.
There Was No Failure
To Prosecute
The trial court faulted the Republic for its alleged failure to prosecute the case.
Nothing could be more erroneous.
Immediately after the complaint was filed, the trial court ordered its deputy
sheriff/process server to serve summons and notice of the hearing on the
application for issuance of TRO and/or writ of preliminary injunction. The
subpoena to Glasgow was, however, returned unserved as Glasgow "could no
longer be found at its given address" and had moved out of the building since
August 1, 2002.
Meanwhile, after due hearing, the trial court issued a writ of preliminary injunction
enjoining Glasgow from removing, dissipating or disposing of the subject bank
deposits and CSBI from allowing any transaction on, withdrawal, transfer,
removal, dissipation or disposition thereof.
As the summons on Glasgow was returned "unserved," and considering that its
whereabouts could not be ascertained despite diligent inquiry, the Republic filed
a verified omnibus motion for (a) issuance of alias summons and (b) leave of
court to serve summons by publication on October 8, 2003. While the trial court
issued an alias summons in its order dated October 15, 2003, it kept quiet on the
prayer for leave of court to serve summons by publication.
Subsequently, in an order dated January 30, 2004, the trial court archived the
case for failure of the Republic to cause the service of alias summons. The
Republic filed an ex parte omnibus motion to (a) reinstate the case and (b)
resolve its pending motion for leave of court to serve summons by publication.
In an order dated May 31, 2004, the trial court ordered the reinstatement of the
case and directed the Republic to cause the service of the alias summons on
Glasgow and CSBI within 15 days. However, it deferred its action on the
Republic’s motion for leave of court to serve summons by publication until a
return was made on the alias summons.
Meanwhile, the Republic continued to exert efforts to obtain information from
other government agencies on the whereabouts or current status of respondent
Glasgow if only to save on expenses of publication of summons. Its efforts,
however, proved futile. The records on file with the Securities and Exchange
Commission provided no information. Other inquiries yielded negative results.
On July 12, 2004, the Republic received a copy of the sheriff’s return dated June
30, 2004 stating that the alias summons had been returned "unserved" as
Glasgow was no longer holding office at the given address since July 2002 and
left no forwarding address. Still, no action was taken by the trial court on the
Republic’s motion for leave of court to serve summons by publication. Thus, on
August 11, 2005, the Republic filed a manifestation and ex parte motion to
resolve its motion for leave of court to serve summons by publication.
It was at that point that Glasgow filed a motion to dismiss by way of special
appearance which the Republic vigorously opposed. Strangely, to say the least,
the trial court issued the assailed order granting Glasgow’s motion.
Given these circumstances, how could the Republic be faulted for failure to
prosecute the complaint for civil forfeiture? While there was admittedly a delay in
the proceeding, it could not be entirely or primarily ascribed to the Republic. That
Glasgow’s whereabouts could not be ascertained was not only beyond the
Republic’s control, it was also attributable to Glasgow which left its principal
office address without informing the Securities and Exchange Commission or any
official regulatory body (like the Bureau of Internal Revenue or the Department of
Trade and Industry) of its new address. Moreover, as early as October 8, 2003,
the Republic was already seeking leave of court to serve summons by
publication.
In Marahay v. Melicor,18 this Court ruled:
While a court can dismiss a case on the ground of non prosequitur, the real test
for the exercise of such power is whether, under the circumstances, plaintiff is
chargeable with want of due diligence in failing to proceed with reasonable
promptitude. In the absence of a pattern or scheme to delay the disposition
of the case or a wanton failure to observe the mandatory requirement of the
rules on the part of the plaintiff, as in the case at bar, courts should decide
to dispense with rather than wield their authority to dismiss. (emphasis
supplied)
We see no pattern or scheme on the part of the Republic to delay the disposition
of the case or a wanton failure to observe the mandatory requirement of the
rules. The trial court should not have so eagerly wielded its power to dismiss the
Republic’s complaint.
Service Of Summons
May Be By Publication
In Republic v. Sandiganbayan,19 this Court declared that the rule is settled that
forfeiture proceedings are actions in rem. While that case involved forfeiture
proceedings under RA 1379, the same principle applies in cases for civil
forfeiture under RA 9160, as amended, since both cases do not terminate in the
imposition of a penalty but merely in the forfeiture of the properties either
acquired illegally or related to unlawful activities in favor of the State.
As an action in rem, it is a proceeding against the thing itself instead of against
the person.20 In actions in rem or quasi in rem, jurisdiction over the person of the
defendant is not a prerequisite to conferring jurisdiction on the court, provided
that the court acquires jurisdiction over the res.21 Nonetheless, summons must be
served upon the defendant in order to satisfy the requirements of due
process.22 For this purpose, service may be made by publication as such mode
of service is allowed in actions in rem and quasi in rem.23
WHEREFORE, the petition is hereby GRANTED. The October 27, 2005 order of
the Regional Trial Court of Manila, Branch 47, in Civil Case No. 03-107319
is SET ASIDE. The August 11, 2005 motion to dismiss of Glasgow Credit and
Collection Services, Inc. is DENIED. And the complaint for forfeiture of the
Republic of the Philippines, represented by the Anti-Money Laundering Council,
is REINSTATED.
The case is hereby REMANDED to the Regional Trial Court of Manila, Branch 47
which shall forthwith proceed with the case pursuant to the provisions of A.M. No.
05-11-04-SC. Pending final determination of the case, the November 23, 2005
temporary restraining order issued by this Court is hereby MAINTAINED.
SO ORDERED.

In this connection, Section 8, Title II of the Rule of Procedure in Cases of Civil

Forfeiture provides:

Sec. 8. Notice and manner of service. - (a) The respondent shall be given notice
of the petition in the same manner as service of summons under Rule 14 of the
Rules of Court and the following rules:

1. The notice shall be served on respondent personally, or by any other means

prescribed in Rule 14 of the Rules of Court;

2. The notice shall contain: (i) the title of the case; (ii) the docket number; (iii) the
cause of action; and (iv) the relief prayed for; and

3. The notice shall likewise contain a proviso that, if no comment or opposition is

filed within the reglementary period, the court shall hear the case ex parte and
render such judgment as may be warranted by the facts alleged in the petition
and its supporting evidence.

(b) Where the respondent is designated as an unknown owner or whenever his

whereabouts are unknown and cannot be ascertained by diligent inquiry,
service may, by leave of court, be effected upon him by publication of the
notice of the petition in a newspaper of general circulation in such places
and for such time as the court may order. In the event that the cost of
publication exceeds the value or amount of the property to be forfeited by ten
percent, publication shall not be required. (emphasis supplied)
G.R. No. 204528 February 19, 2013
SECRETARY LEILA M. DE LIMA, DIRECTOR NONNATUS R. ROJAS and
DEPUTY DIRECTOR REYNALDO 0. ESMERALDA, Petitioners,
vs.
MAGTANGGOL B. GATDULA, Respondent.
RESOLUTION
LEONEN, J.:
Submitted for our resolution is a prayer for the issuance of a temporary
restraining order and/or writ of preliminary injunction to enjoin "the Regional Trial
Court, Branch 26, in Manila from implementing its Decision x x x in Civil Case
No. 12-127405 granting respondent's application for the issuance of inspection
and production orders x x x."1 This is raised through a Petition for Review on
Certiorari under Rule 45 from the "Decision" rendered by the Regional Trial Court
dated 20 March 2012.
From the records, it appears that on 27 February 2012, respondent Magtanggol
B. Gatdula filed a Petition for the Issuance of a Writ of Amparo in the Regional
Trial Court of Manila.2 This case was docketed as In the Matter of the Petition for
Issuance of Writ of Amparo of Atty. Magtanggol B. Gatdula, SP No. 12-127405. It
was raffled to the sala of Judge Silvino T. Pampilo, Jr. on the same day.
The Amparo was directed against petitioners Justice Secretary Leila M. De Lima,
Director Nonnatus R. Rojas and Deputy Director Reynaldo O. Esmeralda of the
National Bureau of Investigation (DE LIMA, ET AL. for brevity). Gatdula wanted
De Lima, et al. "to cease and desist from framing up Petitioner [Gatdula] for the
fake ambush incident by filing bogus charges of Frustrated Murder against
Petitioner [Gatdula] in relation to the alleged ambush incident."3
Instead of deciding on whether to issue a Writ of Amparo, the judge issued
summons and ordered De Lima, et al. to file an Answer.4 He also set the case for
hearing on 1 March 2012. The hearing was held allegedly for determining
whether a temporary protection order may be issued. During that hearing,
counsel for De Lima, et al. manifested that a Return, not an Answer, is
appropriate for Amparo cases.5
In an Order dated 2 March 2012,6 Judge Pampilo insisted that "[s]ince no writ
has been issued, return is not the required pleading but answer".7 The judge
noted that the Rules of Court apply suppletorily in Amparo cases.8 He opined that
the Revised Rules of Summary Procedure applied and thus required an Answer.9
Judge Pampilo proceeded to conduct a hearing on the main case on 7 March
2012.10 Even without a Return nor an Answer, he ordered the parties to file their
respective memoranda within five (5) working days after that hearing. Since the
period to file an Answer had not yet lapsed by then, the judge also decided that
the memorandum of De Lima, et al. would be filed in lieu of their Answer.11
On 20 March 2012, the RTC rendered a "Decision" granting the issuance of the
Writ of Amparo. The RTC also granted the interim reliefs prayed for, namely:
temporary protection, production and inspection orders. The production and
inspection orders were in relation to the evidence and reports involving an on-
going investigation of the attempted assassination of Deputy Director Esmeralda.
It is not clear from the records how these pieces of evidence may be related to
the alleged threat to the life, liberty or security of the respondent Gatdula.
In an Order dated 8 October 2012, the RTC denied the Motion for
Reconsideration dated 23 March 2012 filed by De Lima, et al.
Petitioners Sec. De Lima, et al. thus came to this Court assailing the RTC
"Decision" dated 20 March 2012 through a Petition for Review on Certiorari (With
Very Urgent Application for the Issuance of a Temporary Restraining Order/Writ
of Preliminary Injunction) via Rule 45, as enunciated in Section 19 of the Rule on
the Writ of Amparo (A.M. No. 07-9- 12-SC, 25 September 2007), viz:
SEC. 19. Appeal. – Any party may appeal from the final judgment or order to
the Supreme Court under Rule 45. The appeal may raise questions of fact or law
or both. x x x (Emphasis supplied).
It is the Court’s view that the "Decision" dated 20 March 2012 granting the writ
of Amparo is not the judgment or final order contemplated under this rule. Hence,
a Petition for Review under Rule 45 may not yet be the proper remedy at this
time.
The RTC and the Parties must understand the nature of the remedy of Amparo to
put its procedures in the proper context.
The remedy of the Writ of Amparo is an equitable and extraordinary remedy to
safeguard the right of the people to life, liberty12 and security13 as enshrined in
the 1987 Constitution.14 The Rule on the Writ of Amparo was issued as an
exercise of the Supreme Court's power to promulgate rules concerning the
protection and enforcement of constitutional rights.15 It aims to address concerns
such as, among others, extrajudicial killings and enforced disappearances.16
Due to the delicate and urgent nature of these controversies, the procedure was
devised to afford swift but decisive relief.17 It is initiated through a petition18 to be
filed in a Regional Trial Court, Sandiganbayan, the Court of Appeals, or the their purpose, the judgment will be satisfied. In Amparo cases, this is when the
Supreme Court.19 The judge or justice then makes an "immediate" evaluation20 of threats to the petitioner’s life, liberty and security cease to exist as evaluated by
the facts as alleged in the petition and the affidavits submitted "with the attendant the court that renders the judgment. Parenthetically, the case may also be
circumstances detailed".21 After evaluation, the judge has the option to issue the terminated through consolidation should a subsequent case be filed – either
Writ of Amparo22 or immediately dismiss the case. Dismissal is proper if the criminal or civil.31 Until the full satisfaction of the judgment, the extraordinary
petition and the supporting affidavits do not show that the petitioner's right to life, remedy of Amparo allows vigilant judicial monitoring to ensure the protection of
liberty or security is under threat or the acts complained of are not unlawful. On constitutional rights.
the other hand, the issuance of the writ itself sets in motion presumptive judicial
protection for the petitioner. The court compels the respondents to appear before The "Decision" dated 20 March 2012 assailed by the petitioners could not
a court of law to show whether the grounds for more permanent protection and be the judgment or final order that is appealable under Section 19 of the Rule on
interim reliefs are necessary. the Writ of Amparo. This is clear from the tenor of the dispositive portion of the
"Decision", to wit:
The respondents are required to file a Return23 after the issuance of the writ
through the clerk of court. The Return serves as the responsive pleading to the The Branch Clerk of Court of Court [sic] is hereby DIRECTED to issue the Writ
petition.24 Unlike an Answer, the Return has other purposes aside from of Amparo.
identifying the issues in the case. Respondents are also required to detail the
Likewise, the Branch Clerk of Court is hereby DIRECTED to effect the service of
actions they had taken to determine the fate or whereabouts of the aggrieved
the Writ of Amparo in an expeditious manner upon all concerned, and for this
party.
purpose may call upon the assistance of any military or civilian agency of the
If the respondents are public officials or employees, they are also required to government.
state the actions they had taken to: (i) verify the identity of the aggrieved party;
This "Decision" pertained to the issuance of the writ under Section 6 of the Rule
(ii) recover and preserve evidence related to the death or disappearance of the
on the Writ of Amparo, not the judgment under Section 18. The "Decision" is
person identified in the petition; (iii) identify witnesses and obtain statements
thus an interlocutory order, as suggested by the fact that temporary protection,
concerning the death or disappearance; (iv) determine the cause, manner,
production and inspection orders were given together with the decision. The
location, and time of death or disappearance as well as any pattern or practice
temporary protection, production and inspection orders are interim reliefs that
that may have brought about the death or disappearance; and (vi) bring the
may be granted by the court upon filing of the petition but before final judgment is
suspected offenders before a competent court.25 Clearly these matters are
rendered.32
important to the judge so that s/he can calibrate the means and methods that will
be required to further the protections, if any, that will be due to the petitioner.
The confusion of the parties arose due to the procedural irregularities in the RTC.
26
There will be a summary hearing only after the Return is filed to determine the
First, the insistence on filing of an Answer was inappropriate. It is the Return that
merits of the petition and whether interim reliefs are warranted. If the Return is
serves as the responsive pleading for petitions for the issuance of Writs
not filed, the hearing will be done ex parte.27 After the hearing, the court will
of Amparo. The requirement to file an Answer is contrary to the intention of the
render the judgment within ten (10) days from the time the petition is submitted
Court to provide a speedy remedy to those whose right to life, liberty and security
for decision.28
are violated or are threatened to be violated. In utter disregard of the Rule on the
Writ of Amparo, Judge Pampilo insisted on issuing summons and requiring an
If the allegations are proven with substantial evidence, the court shall grant the
Answer.
privilege of the writ and such reliefs as may be proper and appropriate.29 The
judgment should contain measures which the judge views as essential for the
Judge Pampilo’s basis for requiring an Answer was mentioned in his Order dated
continued protection of the petitioner in the Amparo case. These measures must
2 March 2012:
be detailed enough so that the judge may be able to verify and monitor the
actions taken by the respondents. It is this judgment that could be subject Under Section 25 of the same rule [on the Writ of Amparo], the Rules of Court
to appeal to the Supreme Court via Rule 45.30 After the measures have served shall apply suppletorily insofar as it is not inconsistent with the said rule.
Considering the summary nature of the petition, Section 5 of the Revised Rules
of Summary Procedure shall apply.
Section 5. Answer – Within ten (10) days from service of summons, the
defendant shall file his Answer to the complaint and serve a copy thereof on the
plaintiff. x x x
WHEREFORE, based on the foregoing, the respondents are required to file their
Answer ten (days) from receipt of this Order.33
The 1991 Revised Rules of Summary Procedure is a special rule that the Court
has devised for the following circumstances:
SECTION 1. Scope. – This rule shall govern the summary procedure in the
Metropolitan Trial Courts, the Municipal Trial Courts in Cities, the Municipal Trial
Courts, and the Municipal Circuit Trial Courts in the following cases falling within
their jurisdiction:
A. Civil Cases:
(1) All cases of forcible entry and unlawful detainer, x x x.
(2) All other cases, except probate proceedings, where the total amount of the
plaintiff’s claim does not exceed x x x.
B. Criminal Cases:
(1) Violations of traffic laws, rules and regulations;
(2) Violations of the rental law;
(3) Violations of municipal or city ordinances;
(4) All other criminal cases where the penalty prescribed by law for the offense
charged is imprisonment not exceeding six months, or a fine not exceeding one
thousand pesos (P1,000.00), or both, x x x.
xxxx
It is clear from this rule that this type of summary procedure only applies to
MTC/MTCC/MCTCs. It is mind-boggling how this rule could possibly apply to
proceedings in an RTC. Aside from that, this Court limited the application of
summary procedure to certain civil and criminal cases. A writ of Amparo is
a special proceeding. It is a remedy by which a party seeks to establish a
status, a right or particular fact.34 It is not a civil nor a criminal action, hence, the
application of the Revised Rule on Summary Procedure is seriously misplaced.
The second irregularity was the holding of a hearing on the main case prior to the
issuance of the writ and the filing of a Return. Without a Return, the issues could
not have been properly joined.
Worse, is the trial court’s third irregularity: it required a memorandum in lieu of a
responsive pleading (Answer) of De Lima, et al.
The Return in Amparo cases allows the respondents to frame the issues subject
to a hearing. Hence, it should be done prior to the hearing, not after. A
memorandum, on the other hand, is a synthesis of the claims of the party litigants
and is a final pleading usually required before the case is submitted for decision.
One cannot substitute for the other since these submissions have different
functions in facilitating the suit.
More importantly, a memorandum is a prohibited pleading under the Rule on the
Writ of Amparo.35
The fourth irregularity was in the "Decision" dated 20 March 2012 itself. In the
body of its decision, the RTC stated:
"Accordingly this court GRANTS the privilege of the writ and
the interim reliefs prayed for by the petitioner." (Emphasis supplied).
This gives the impression that the decision was the judgment since the
phraseology is similar to Section 18 of the Rule on the Writ of Amparo:
"SEC. 18. Judgment. — The court shall render judgment within ten (10) days
from the time the petition is submitted for decision. If the allegations in the
petition are proven by substantial evidence, the court shall grant the privilege of
the writ and such reliefs as may be proper and appropriate; otherwise, the
privilege shall be denied." (Emphasis supplied).
The privilege of the Writ of Amparo should be distinguished from the actual
order called the Writ of Amparo. The privilege includes availment of the entire
procedure outlined in A.M. No. 07-9-12-SC, the Rule on the Writ of Amparo. After
examining the petition and its attached affidavits, the Return and the evidence
presented in the summary hearing, the judgment should detail the required acts
from the respondents that will mitigate, if not totally eradicate, the violation of or
the threat to the petitioner's life, liberty or security.
A judgment which simply grants "the privilege of the writ" cannot be
executed.1âwphi1 It is tantamount to a failure of the judge to intervene and grant
judicial succor to the petitioner. Petitions filed to avail of the privilege of the Writ further deviation or improvisation from the procedure set in A.M. No. 07-9-12-SC
of Amparo arise out of very real and concrete circumstances. Judicial responses shall be meted with severe consequences.
cannot be as tragically symbolic or ritualistic as "granting the privilege of the Writ
of Amparo." SO ORDERED.

The procedural irregularities in the RTC affected the mode of appeal that
petitioners used in elevating the matter to this Court.

It is the responsibility of counsels for the parties to raise issues using the proper
procedure at the right time. Procedural rules are meant to assist the parties and
courts efficiently deal with the substantive issues pertaining to a case. When it is
the judge himself who disregards the rules of procedure, delay and confusion
result.

The Petition for Review is not the proper remedy to assail the interlocutory order
denominated as "Decision" dated 20 March 2012. A Petition for Certiorari, on the
other hand, is prohibited.36 Simply dismissing the present petition, however, will
cause grave injustice to the parties involved. It undermines the salutary purposes
for which the Rule on the Writ of Amparo were promulgated.

In many instances, the Court adopted a policy of liberally construing its rules in
order to promote a just, speedy and inexpensive disposition of every action and
proceeding.37 The rules can be suspended on the following grounds: (1) matters
of life, liberty, honor or property, (2) the existence of special or compelling
circumstances, (3) the merits of the case, (4) a cause not entirely attributable to
the fault or negligence of the party favored by the suspension of the rules, (5) a
lack of any showing that the review sought is merely frivolous and dilatory, and
(6) the other party will not be unjustly prejudiced thereby.38

WHEREFORE, in the interest of justice, as a prophylactic to the irregularities

committed by the trial court judge, and by virtue of its powers under Article VIII,
Section 5 (5) of the Constitution, the Court RESOLVES to:

(1) NULLIFY all orders that are subject of this Resolution issued by Judge Silvino
T. Pampilo, Jr. after respondent Gatdula filed the Petition for the Issuance of a
Writ of Amparo;

(2) DIRECT Judge Pampilo to determine within forty-eight (48) hours from his
receipt of this Resolution whether the issuance of the Writ of Amparo is proper on
the basis of the petition and its attached affidavits.

The Clerk of Court is DIRECTED to cause the personal service of

this Resolution on Judge Silvino T. Pampilo, Jr. of Branch 26 of the Regional
Trial Court of Manila for his proper guidance together with a WARNING that
G.R. No. 200804 January 22, 2014
A.L. ANG NETWORK, INC., Petitioner,
vs.
EMMA MONDEJAR, accompanied by her husband, EFREN
MONDEJAR, Respondent.
RESOLUTION
PERLAS-BERNABE, J.:
This is a direct recourse1 to the Court from the Decision2 dated November 23,
2011and Order3 dated February 16, 2012 of the Regional Trial Court of Bacolod
City, Branch 45 (RTC) in RTC Case No. 11-13833 which dismissed, on the
ground of improper remedy, petitioner A.L. Ang Network, Inc.'s (petitioner)
petition for certiorari from the Decision4 dated June 10, 2011 of the Municipal
Trial Court in Cities of Bacolod City, Branch 4 (MTCC) in Civil Case No. SCC-
1436, a small claims case for sum of money against respondent Emma Mondejar
(respondent).
The Facts
On March 23, 2011, petitioner filed a complaint5 for sum of money under the Rule
of Procedure for Small Claims Cases6 before the MTCC, seeking to collect from
respondent the amount of ₱23,111.71 which represented her unpaid water bills
for the period June 1, 2002 to September 30, 2005.7
Petitioner claimed that it was duly authorized to supply water to and collect
payment therefor from the homeowners of Regent Pearl Subdivision, one of
whom is respondent who owns and occupies Lot 8, Block 3 of said subdivision.
From June 1, 2002 until September 30, 2005, respondent and her family
consumed a total of 1,150 cubic meters (cu. m.) of water, which upon application
of the agreed rate of ₱113.00 for every 10 cu. m. of water, plus an additional
charge of ₱11.60 for every additional cu. m. of water, amounted to
₱28,580.09.8 However, respondent only paid the amount of ₱5,468.38, thus,
leaving a balance of ₱23,111.71 which was left unpaid despite petitioner’s
repeated demands.9
In defense, respondent contended that since April 1998 up to February 2003, she
religiously paid petitioner the agreed monthly flat rate of ₱75.00 for her water
consumption. Notwithstanding their agreement that the same would be adjusted
only upon prior notice to the homeowners, petitioner unilaterally charged her
unreasonable and excessive adjustments (at the average of 40 cu. m. of water
per month or 1.3 cu. m. of water a day) far above the average daily water
consumption for a household of only 3 persons. She also questioned the
propriety and/or basis of the aforesaid ₱23,111.71 claim.10
In the interim, petitioner disconnected respondent’s water line for not paying the
adjusted water charges since March 2003 up to August 2005.11
The MTCC Ruling
On June 10, 2011, the MTCC rendered a Decision12 holding that since petitioner
was issued a Certificate of Public Convenience (CPC)13 by the National Water
Resources Board (NWRB) only on August 7, 2003, then, it can only charge
respondent the agreed flat rate of ₱75.00 per month prior thereto or the sum of
₱1,050.00 for the period June 1, 2002 to August 7, 2003. Thus, given that
respondent had made total payments equivalent to ₱1,685.99 for the same
period, she should be considered to have fully paid petitioner.14
The MTCC disregarded petitioner’s reliance on the Housing and Land Use
Regulatory Board’s (HLURB) Decision15 dated August 17, 2000 in HLURB Case
No. REM C6-00-001 entitled Nollie B. Apura, et al. v. Dona Carmen I
Subdivision, et al., as source of its authority to impose new water consumption
rates for water consumed from June 1, 2002 to August 7, 2003 in the absence of
proof (a) that petitioner complied with the directive to inform the HLURB of the
result of its consultation with the concerned homeowners as regards the rates to
be charged, and (b) that the HLURB approved of the same.16
Moreover, the MTCC noted that petitioner failed to submit evidence showing (a)
the exact date when it actually began imposing the NWRB approved rates; and
(b) that the parties had a formal agreement containing the terms and conditions
thereof, without which it cannot establish with certainty respondent’s
obligation.17 Accordingly, it ruled that the earlier agreed rate of ₱75.00 per month
should still be the basis for respondent’s water consumption charges for the
period August 8, 2003 to September 30, 2005.18 Based on petitioner’s
computation, respondent had only paid ₱300.00 of her ₱1,500.00 obligation for
said period. Thus, it ordered respondent to pay petitioner the balance thereof,
equivalent to ₱1,200.00 with legal interest at the rate of 6% per annum from date
of receipt of the extrajudicial demand on October 14, 2010 until fully paid.19
Aggrieved, petitioner filed a petition for certiorari20 under Rule 65 of the Rules of
Court before the RTC, ascribing grave abuse of discretion on the part of the
MTCC in finding that it (petitioner) failed to establish with certainty respondent’s
obligation, and in not ordering the latter to pay the full amount sought to be
collected.
The RTC Ruling
On November 23, 2011, the RTC issued a Decision21 dismissing the petition for
certiorari, finding that the said petition was only filed to circumvent the non-
appealable nature of small claims cases as provided under Section 23 22 of the
Rule of Procedure on Small Claims Cases. To this end, the RTC ruled that it
cannot supplant the decision of the MTCC with another decision directing
respondent to pay petitioner a bigger sum than that which has been awarded.
Petitioner moved for reconsideration23 but was denied in an Order24 dated
February 16, 2012, hence, the instant petition.
The Issue Before the Court
The sole issue in this case is whether or not the RTC erred in dismissing
petitioner’s recourse under Rule 65 of the Rules of Court assailing the propriety
of the MTCC Decision in the subject small claims case.
The Court’s Ruling
The petition is meritorious.
Section 23 of the Rule of Procedure for Small Claims Cases states that:
SEC. 23. Decision. — After the hearing, the court shall render its decision on the
same day, based on the facts established by the evidence (Form 13-SCC). The
decision shall immediately be entered by the Clerk of Court in the court docket
for civil cases and a copy thereof forthwith served on the parties.
The decision shall be final and unappealable.
Considering the final nature of a small claims case decision under the above-
stated rule, the remedy of appeal is not allowed, and the prevailing party may,
thus, immediately move for its execution.25 Nevertheless, the proscription on
appeals in small claims cases, similar to other proceedings where appeal is not
an available remedy,26 does not preclude the aggrieved party from filing a petition
for certiorari under Rule 65 of the Rules of Court. This general rule has been
enunciated in the case of Okada v. Security Pacific Assurance
Corporation,27 wherein it was held that:
In a long line of cases, the Court has consistently ruled that "the extraordinary
writ of certiorari is always available where there is no appeal or any other plain,
speedy and adequate remedy in the ordinary course of law." In Jaca v. Davao
Lumber Co., the Court ruled:
x x x Although Section 1, Rule 65 of the Rules of Court provides that the special
civil action of certiorari may only be invoked when "there is no appeal, nor any
plain, speedy and adequate remedy in the course of law," this rule is not without
exception. The availability of the ordinary course of appeal does not constitute
sufficient ground to prevent a party from making use of the extraordinary remedy
of certiorari where appeal is not an adequate remedy or equally beneficial,
speedy and sufficient. It is the inadequacy – not the mere absence – of all other
legal remedies and the danger of failure of justice without the writ that usually
determines the propriety of certiorari.
This ruling was reiterated in Conti v. Court of Appeals:
Truly, an essential requisite for the availability of the extraordinary remedies
under the Rules is an absence of an appeal nor any "plain, speedy and adequate
remedy" in the ordinary course of law, one which has been so defined as a
"remedy which (would) equally (be) beneficial, speedy and sufficient not merely a
remedy which at some time in the future will bring about a revival of the judgment
x x x complained of in the certiorari proceeding, but a remedy which will promptly
relieve the petitioner from the injurious effects of that judgment and the acts of
the inferior court or tribunal" concerned. x x x (Emphasis supplied)
In this relation, it may not be amiss to placate the RTC’s apprehension that
respondent’s recourse before it (was only filed to circumvent the non-appealable
nature of [small claims cases], because it asks [the court] to supplant the
decision of the lower [c]ourt with another decision directing the private
respondent to pay the petitioner a bigger sum than what has been
awarded."28 Verily, a petition for certiorari, unlike an appeal, is an original
action29 designed to correct only errors of jurisdiction and not of judgment. Owing
to its nature, it is therefore incumbent upon petitioner to establish that
jurisdictional errors tainted the MTCC Decision. The RTC, in turn, could either
grant or dismiss the petition based on an evaluation of whether or not the MTCC
gravely abused its discretion by capriciously, whimsically, or arbitrarily
disregarding evidence that is material to the controversy.30
In view of the foregoing, the Court thus finds that petitioner correctly availed of
the remedy of certiorari to assail the propriety of the MTCC Decision in the
subject small claims case, contrary to the RTC’s ruling.
Likewise, the Court finds that petitioner filed the said petition before the proper
forum (i.e., the RTC).1âwphi1 To be sure, the Court, the Court of Appeals and
the Regional Trial Courts have concurrent jurisdiction to issue a writ of
certiorari.31 Such concurrence of jurisdiction, however, does not give a party
unbridled freedom to choose the venue of his action lest he ran afoul of the
doctrine of hierarchy of courts. Instead, a becoming regard for judicial hierarchy
dictates that petitions for the issuance of writs of certiorari against first level
courts should be filed with the Regional Trial Court, and those against the latter,
with the Court of Appeals, before resort may be had before the Court.32 This
procedure is also in consonance with Section 4, Rule 65 of the Rules of Court.33

Hence, considering that small claims cases are exclusively within the jurisdiction
of the Metropolitan Trial Courts, Municipal Trial Courts in Cities, Municipal Trial
Courts, and Municipal Circuit Trial Courts,34 certiorari petitions assailing its
dispositions should be filed before their corresponding Regional Trial Courts.
This petitioner complied with when it instituted its petition for certiorari before the
RTC which, as previously mentioned, has jurisdiction over the same. In fine, the
RTC erred in dismissing the said petition on the ground that it was an improper
remedy, and, as such, RTC Case No. 11-13833 must be reinstated and
remanded thereto for its proper disposition.

WHEREFORE, the petition is GRANTED. The Decision dated November 23,

2011 and Resolution dated February 16, 2012 of the Regional Trial Court of
Bacolod City, Branch 45 are REVERSED and SET ASIDE. RTC Case No. 11-
13833 is hereby REINSTATED and the court a quo is ordered to resolve the
same with dispatch.

SO ORDERED.