CASE NO. 1. HEIRS OF BERTULDO[1] HINOG: Bertuldo Hinog II, Bertuldo Hinog III, Bertuldo Hinog, Jr.

, Jocelyn Hinog, Bertoldo Hinog IV,

Bertoldo Hinog V, Edgardo Hinog, Milagros H. Pabatao, Lilian H. King, Victoria H. Engracia, Terisita C. Hinog, Paz H. Besana, Roberto C.
Hinog, Vicente C. Hinog, Roel C. Hinog, Marilyn C. Hinog, Bebot C. Hinog, lordes C. Hinog, Pablo Chiong, Arlene Lanasang (All respresented
by Bertuldo Hinog III), petitioners, vs. HON. ACHILLES MELICOR, in his capacity as Presiding Judge, RTC, Branch 4, 7th Judicial Region,
Tagbiliran City, Bohol, and CUSTODIO BALANE, RUFO BALANE, HONORIO BALANE, and TOMAS BALANE
[G.R. No. 140954. April 12, 2005]
SECOND DIVISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for certiorari and prohibition under Rule 65 of the Rules of Court which assails the Orders dated March 22, 1999, August 13, 1999
and October 15, 1999 of the Regional Trial Court, Branch 4, of Tagbilaran City, Bohol in Civil Case No. 4923.

The factual background of the case is as follows:

On May 21, 1991, private respondents Custodio, Rufo, Tomas and Honorio, all surnamed Balane, filed a complaint for “Recovery of Ownership and
Possession, Removal of Construction and Damages” against Bertuldo Hinog (Bertuldo for brevity). They alleged that: they own a 1,399- square meter
parcel of land situated in Malayo Norte, Cortes, Bohol, designated as Lot No. 1714; sometime in March 1980, they allowed Bertuldo to use a portion of
the said property for a period of ten years and construct thereon a small house of light materials at a nominal annual rental of P100.00 only, considering
the close relations of the parties; after the expiration of the ten-year period, they demanded the return of the occupied portion and removal of the house
constructed thereon but Bertuldo refused and instead claimed ownership of the entire property.

Accordingly, private respondents sought to oust Bertuldo from the premises of the subject property and restore upon themselves the ownership and
possession thereof, as well as the payment of moral and exemplary damages, attorney’s fees and litigation expenses “in amounts justified by the
evidence.” [2]

On July 2, 1991, Bertuldo filed his Answer. He alleged ownership of the disputed property by virtue of a Deed of Absolute Sale dated July 2, 1980,
executed by one Tomas Pahac with the knowledge and conformity of private respondents.[3]

After the pre-trial, trial on the merits ensued. On November 18, 1997, private respondents rested their case. Thereupon, Bertuldo started his direct
examination. However, on June 24, 1998, Bertuldo died without completing his evidence.

On August 4, 1998, Atty. Sulpicio A. Tinampay withdrew as counsel for Bertuldo as his services were terminated by petitioner Bertuldo Hinog III. Atty.
Veronico G. Petalcorin then entered his appearance as new counsel for Bertuldo.[4]

On September 22, 1998, Atty. Petalcorin filed a motion to expunge the complaint from the record and nullify all court proceedings on the ground that
private respondents failed to specify in the complaint the amount of damages claimed so as to pay the correct docket fees; and that under
Manchester Development Corporation vs. Court of Appeals,[5] non-payment of the correct docket fee is jurisdictional.[6]

In an amended motion, filed on October 2, 1998, Atty. Petalcorin further alleged that the private respondents failed to pay the correct docket fee since
the main subject matter of the case cannot be estimated as it is for recovery of ownership, possession and removal of construction.[7]

Private respondents opposed the motion to expunge on the following grounds: (a) said motion was filed more than seven years from the institution of the
case; (b) Atty. Petalcorin has not complied with Section 16, Rule 3 of the Rules of Court which provides that the death of the original defendant requires
a substitution of parties before a lawyer can have legal personality to represent a litigant and the motion to expunge does not mention of any specific
party whom he is representing; (c) collectible fees due the court can be charged as lien on the judgment; and (d) considering the lapse of time, the
motion is merely a dilatory scheme employed by petitioners.[8]

In their Rejoinder, petitioners manifested that the lapse of time does not vest the court with jurisdiction over the case due to failure to pay the correct
docket fees. As to the contention that deficiency in payment of docket fees can be made as a lien on the judgment, petitioners argued that the payment
of filing fees cannot be made dependent on the result of the action taken.[9]

On January 21, 1999, the trial court, while ordering the complaint to be expunged from the records and the nullification of all court proceedings taken for
failure to pay the correct docket fees, nonetheless, held:

The Court can acquire jurisdiction over this case only upon the payment of the exact prescribed docket/filing fees for the main cause of action, plus
additional docket fee for the amount of damages being prayed for in the complaint, which amount should be specified so that the same can be
considered in assessing the amount of the filing fees. Upon the complete payment of such fees, the Court may take appropriate action in the light of the
ruling in the case of Manchester Development Corporation vs. Court of Appeals, supra.[10]

Accordingly, on January 28, 1999, upon payment of deficiency docket fee, private respondents filed a manifestation with prayer to reinstate the case.[11]
Petitioners opposed the reinstatement[12] but on March 22, 1999, the trial court issued the first assailed Order reinstating the case.[13]

On May 24, 1999, petitioners, upon prior leave of court,[14] filed their supplemental pleading, appending therein a Deed of Sale dated November 15,
1982.[15] Following the submission of private respondents’ opposition thereto,[16] the trial court, in its Order dated July 7, 1999, denied the
supplemental pleading on the ground that the Deed of Absolute Sale is a new matter which was never mentioned in the original answer dated July 2,
1991, prepared by Bertuldo’s original counsel and which Bertuldo verified; and that such new document is deemed waived in the light of Section 1, Rule
9[17] of the Rules of Court. The trial court also noted that no formal substitution of the parties was made because of the failure of defendant’s counsel to
give the names and addresses of the legal representatives of Bertuldo, so much so that the supposed heirs of Bertuldo are not specified in any pleading
in the case. [18]

On July 14, 1999, petitioners manifested that the trial court having expunged the complaint and nullified all court proceedings, there is no valid case and
the complaint should not be admitted for failure to pay the correct docket fees; that there should be no case to be reinstated and no case to proceed as
there is no complaint filed.[19]

After the submission of private respondents’ opposition[20] and petitioners’ rejoinder,[21] the trial court issued the second assailed Order on August 13,
1999, essentially denying petitioners’ manifestation/rejoinder. The trial court held that the issues raised in such manifestation/rejoinder are practically
the same as those raised in the amended motion to expunge which had already been passed upon in the Order dated January 21, 1999. Moreover, the
trial court observed that the Order dated March 22, 1999 which reinstated the case was not objected to by petitioners within the reglementary period or
even thereafter via a motion for reconsideration despite receipt thereof on March 26, 1999.[22]

On August 25, 1999, petitioners filed a motion for reconsideration[23] but the same was denied by the trial court in its third assailed Order dated October
15, 1999. The trial court held that the Manchester rule was relaxed in Sun Insurance Office, Ltd. vs. Asuncion.[24] Noting that there has been no
substitution of parties following the death of Bertuldo, the trial court directed Atty. Petalcorin to comply with the provisions of Section 16, Rule 3 of the
Rules of Court. The trial court also reiterated that the Order dated March 22, 1999 reinstating the case was not assailed by petitioners within the
reglementary period, despite receipt thereof on March 26, 1999.[25]

On November 19, 1999, Atty. Petalcorin complied with the directive of the trial court to submit the names and addresses of the heirs of Bertuldo.[26]

On November 24, 1999, petitioners filed before us the present petition for certiorari and prohibition.[27] They allege that the public respondent committed
grave abuse of discretion in allowing the case to be reinstated after private respondents paid the docket fee deficiency since the trial court had earlier
expunged the complaint from the record and nullified all proceedings of the case and such ruling was not contested by the private respondents.
Moreover, they argue that the public respondent committed grave abuse of discretion in allowing the case to be filed and denying the manifestation with
motion to dismiss, despite the defect in the complaint which prayed for damages without specifying the amounts, in violation of SC Circular No. 7, dated
March 24, 1988.

In their Comment, private respondents aver that no grave abuse of discretion was committed by the trial court in reinstating the complaint upon the
payment of deficiency docket fees because petitioners did not object thereto within the reglementary period. Besides, Atty. Petalcorin possessed no
legal personality to appear as counsel for the heirs of Bertuldo until he complies with Section 16, Rule 3 of the Rules of Court.[28]

At the outset, we note the procedural error committed by petitioners in directly filing the instant petition before this Court for it violates the established
policy of strict observance of the judicial hierarchy of courts.

Although the Supreme Court, Court of Appeals and the Regional Trial Courts have concurrent jurisdiction to issue writs of certiorari, prohibition,
mandamus, quo warranto, habeas corpus and injunction, such concurrence does not give the petitioner unrestricted freedom of choice of court
forum.[29] As we stated in People vs. Cuaresma:[30]

This Court's original jurisdiction to issue writs of certiorari is not exclusive. It is shared by this Court with Regional Trial Courts and with the Court of
Appeals. This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained freedom
of choice of the court to which application therefor will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue
of appeals, and also serves as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial
hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level (“inferior”) courts should be filed with the
Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Court’s original jurisdiction to issue
these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is [an]
established policy. It is a policy necessary to prevent inordinate demands upon the Court’s time and attention which are better devoted to those matters
within its exclusive jurisdiction, and to prevent further over-crowding of the Court’s docket.[31]

The rationale for this rule is two-fold: (a) it would be an imposition upon the precious time of this Court; and (b) it would cause an inevitable and resultant
delay, intended or otherwise, in the adjudication of cases, which in some instances had to be remanded or referred to the lower court as the proper
forum under the rules of procedure, or as better equipped to resolve the issues because this Court is not a trier of facts.[32]

Thus, this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts, and exceptional and
compelling circumstances, such as cases of national interest and of serious implications, justify the availment of the extraordinary remedy of writ of
certiorari, calling for the exercise of its primary jurisdiction. Exceptional and compelling circumstances were held present in the following cases: (a)
Chavez vs. Romulo[33] on citizens’ right to bear arms; (b) Government of the United States of America vs. Purganan[34] on bail in extradition
proceedings; (c) Commission on Elections vs. Quijano-Padilla[35] on government contract involving modernization and computerization of voters’
registration list; (d) Buklod ng Kawaning EIIB vs. Zamora[36] on status and existence of a public office; and (e) Fortich vs. Corona[37] on the so-called
“Win-Win Resolution” of the Office of the President which modified the approval of the conversion to agro-industrial area.

In this case, no special and important reason or exceptional and compelling circumstance analogous to any of the above cases has been adduced by
the petitioners so as to justify direct recourse to this Court. The present petition should have been initially filed in the Court of Appeals in strict
observance of the doctrine on the hierarchy of courts. Failure to do so is sufficient cause for the dismissal of the petition at bar.

In any event, even if the Court disregards such procedural flaw, the petitioners’ contentions on the substantive aspect of the case fail to invite judgment
in their favor.

The unavailability of the writ of certiorari and prohibition in this case is borne out of the fact that petitioners principally assail the Order dated March 22,
1999 which they never sought reconsideration of, in due time, despite receipt thereof on March 26, 1999. Instead, petitioners went through the motion of
filing a supplemental pleading and only when the latter was denied, or after more than three months have passed, did they raise the issue that the
complaint should not have been reinstated in the first place because the trial court had no jurisdiction to do so, having already ruled that the complaint
shall be expunged.

After recognizing the jurisdiction of the trial court by seeking affirmative relief in their motion to serve supplemental pleading upon private respondents,
petitioners are effectively barred by estoppel from challenging the trial court’s jurisdiction.[38] If a party invokes the jurisdiction of a court, he cannot
thereafter challenge the court’s jurisdiction in the same case.[39] To rule otherwise would amount to speculating on the fortune of litigation, which is
against the policy of the Court.[40]

Nevertheless, there is a need to correct the erroneous impression of the trial court as well as the private respondents that petitioners are barred from
assailing the Order dated March 22, 1999 which reinstated the case because it was not objected to within the reglementary period or even thereafter via
a motion for reconsideration despite receipt thereof on March 26, 1999.

It must be clarified that the said order is but a resolution on an incidental matter which does not touch on the merits of the case or put an end to the
proceedings.[41] It is an interlocutory order since there leaves something else to be done by the trial court with respect to the merits of the case.[42] As
such, it is not subject to a reglementary period. Reglementary period refers to the period set by the rules for appeal or further review of a final judgment
or order, i.e., one that ends the litigation in the trial court.
Moreover, the remedy against an interlocutory order is generally not to resort forthwith to certiorari, but to continue with the case in due course and,
when an unfavorable verdict is handed down, to take an appeal in the manner authorized by law.[43] Only when the court issued such order without or
in excess of jurisdiction or with grave abuse of discretion and when the assailed interlocutory order is patently erroneous and the remedy of appeal
would not afford adequate and expeditious relief will certiorari be considered an appropriate remedy to assail an interlocutory order.[44] Such special
circumstances are absolutely wanting in the present case.

Time and again, the Court has held that the Manchester rule has been modified in Sun Insurance Office, Ltd. (SIOL) vs. Asuncion[45] which defined the
following guidelines involving the payment of docket fees:

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

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

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

Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its non-payment at the time of filing does not automatically
cause the dismissal of the case, as long as the fee is paid within the applicable prescriptive or reglementary period, more so when the party involved
demonstrates a willingness to abide by the rules prescribing such payment.[46] Thus, when insufficient filing fees were initially paid by the plaintiffs and
there was no intention to defraud the government, the Manchester rule does not apply.[47]

Under the peculiar circumstances of this case, the reinstatement of the complaint was just and proper considering that the cause of action of private
respondents, being a real action, prescribes in thirty years,[48] and private respondents did not really intend to evade the payment of the prescribed
docket fee but simply contend that they could not be faulted for inadequate assessment because the clerk of court made no notice of demand or
reassessment.[49] They were in good faith and simply relied on the assessment of the clerk of court.

Furthermore, the fact that private respondents prayed for payment of damages “in amounts justified by the evidence” does not call for the dismissal of
the complaint for violation of SC Circular No. 7, dated March 24, 1988 which required that all complaints must specify the amount of damages sought not
only in the body of the pleadings but also in the prayer in order to be accepted and admitted for filing. Sun Insurance effectively modified SC Circular
No. 7 by providing that filing fees for damages and awards that cannot be estimated constitute liens on the awards finally granted by the trial court.[50]

Thus, while the docket fees were based only on the real property valuation, the trial court acquired jurisdiction over the action, and judgment awards
which were left for determination by the court or as may be proven during trial would still be subject to additional filing fees which shall constitute a lien
on the judgment. It would then be the responsibility of the Clerk of Court of the trial court or his duly authorized deputy to enforce said lien and assess
and collect the additional fees.[51]

It is worth noting that when Bertuldo filed his Answer on July 2, 1991, he did not raise the issue of lack of jurisdiction for non-payment of correct docket
fees. Instead, he based his defense on a claim of ownership and participated in the proceedings before the trial court. It was only in September 22,
1998 or more than seven years after filing the answer, and under the auspices of a new counsel, that the issue of jurisdiction was raised for the first time
in the motion to expunge by Bertuldo’s heirs.

After Bertuldo vigorously participated in all stages of the case before the trial court and even invoked the trial court’s authority in order to ask for
affirmative relief, petitioners, considering that they merely stepped into the shoes of their predecessor, are effectively barred by estoppel from
challenging the trial court’s jurisdiction. Although the issue of jurisdiction may be raised at any stage of the proceedings as the same is conferred by law,
it is nonetheless settled that a party may be barred from raising it on ground of laches or estoppel.[52]

Moreover, no formal substitution of the parties was effected within thirty days from date of death of Bertuldo, as required by Section 16, Rule 3[53] of the
Rules of Court. Needless to stress, the purpose behind the rule on substitution is the protection of the right of every party to due process. It is to ensure
that the deceased party would continue to be properly represented in the suit through the duly appointed legal representative of his estate.[54] Non-
compliance with the rule on substitution would render the proceedings and judgment of the trial court infirm because the court acquires no jurisdiction
over the persons of the legal representatives or of the heirs on whom the trial and the judgment would be binding.[55] Thus, proper substitution of heirs
must be effected for the trial court to acquire jurisdiction over their persons and to obviate any future claim by any heir that he was not apprised of the
litigation against Bertuldo or that he did not authorize Atty. Petalcorin to represent him.

The list of names and addresses of the heirs was submitted sixteen months after the death of Bertuldo and only when the trial court directed Atty.
Petalcorin to comply with the provisions of Section 16, Rule 3 of the Rules of Court. Strictly speaking therefore, before said compliance, Atty. Petalcorin
had no standing in the court a quo when he filed his pleadings. Be that as it may, the matter has been duly corrected by the Order of the trial court dated
October 15, 1999.

To be sure, certiorari under Rule 65[56] is a remedy narrow in scope and inflexible in character. It is not a general utility tool in the legal workshop.[57] It
offers only a limited form of review. Its principal function is to keep an inferior tribunal within its jurisdiction.[58] It can be invoked only for an error of
jurisdiction, that is, one where the act complained of was issued by the court, officer or a quasi-judicial body without or in excess of jurisdiction, or with
grave abuse of discretion which is tantamount to lack or in excess of jurisdiction,[59] not to be used for any other purpose,[60] such as to cure errors in
proceedings or to correct erroneous conclusions of law or fact.[61] A contrary rule would lead to confusion, and seriously hamper the administration of
justice.

Petitioners utterly failed to show that the trial court gravely abused its discretion in issuing the assailed resolutions. On the contrary, it acted prudently, in
accordance with law and jurisprudence.

WHEREFORE, the instant petition for certiorari is DISMISSED for lack of merit. No costs.
 CASE NO. 2. NEMENCIO C. EVANGELISTA, PASCUAL G. QUINTO, LUIS B. BUENA, EUSEBIA V. TABLADA, CANUTO G. TISBE, DAVID R.
CARULLO, SOFONIAS E. COLEGADO, FELIX B. BUENA, TORIBIO C. EVANGELISTA, LEBRADA A. NICOLAS, ALECIA J. RAMOS, MILA G. DE
LOS REYES, SALVADOR I. DE LA TORRE, MOISES CRUZ, RUFINO INFANTE, ALICIA ASTROLOGO, TRINIDAD LUMIQUED, LUZMINIDA
QUINIQUINI, & TEODORA C. TEMERAS vs. CARMELINO M. SANTIAGO
[G.R. No. 157447. April 29, 2005]
SECOND DIVISION
CHICO-NAZARIO, J.:

In this Petition for Review under Rule 45 of the Rules of Court, petitioners pray for the reversal of the Decision of the Court of Appeals in CA-G.R. CV
No. 64957,[1] affirming the Order of the Regional Trial Court (RTC) of San Mateo, Rizal, Branch 77, in Civil Case No. 1220,[2] dismissing petitioners’
Complaint for declaration of nullity of Original Certificate of Title (OCT) No. 670 and all other titles emanating therefrom.

In their Complaint, petitioners alleged that they occupied and possessed parcels of land, located in Sitio Panayawan, Barangay San Rafael, Montalban
(now Rodriquez), Province of Rizal (Subject Property), by virtue of several Deeds of Assignment, dated 15 April 1994 and 02 June 1994, executed by a
certain Ismael Favila y Rodriguez.[3]

According to the Deeds of Assignment, the Subject Property was part of a vast tract of land called “Hacienda Quibiga,” which extended to Parañaque,
Las Piñas, Muntinlupa, Cavite, Batangas, Pasay, Taguig, Makati, Pasig, Mandaluyong, Quezon City, Caloocan, Bulacan, and Rizal; awarded to Don
Hermogenes Rodriguez by the Queen of Spain and evidenced by a Spanish title. Ismael Favila claimed to be one of the heirs and successors-in-
interest of Don Hermogenes Rodriguez. Acting as Attorney-in-Fact pursuant to a Special Power of Attorney executed by his “mga kapatid” on 25
February 1965, Ismael Favila signed the aforementioned Deeds of Assignment, assigning portions of the Subject Property to the petitioners, each
portion measuring around 500 to 1,000 square meters, in exchange for the labor and work done on the Subject Property by the petitioners and their
predecessors.[4]

Petitioners came by information that respondent was planning to evict them from the Subject Property. Two of the petitioners had actually received
notices to vacate. Their investigations revealed that the Subject Property was included in Transfer Certificates of Titles (TCTs) No. 53028, No. 281660,
No. N-39258 and No. 205270, all originating from OCT No. 670, and now in the name of respondent.[5]

OCT No. 670 was issued in the name of respondent’s mother, Isabel Manahan y Francisco, and three other individuals, pursuant to Decree No. 10248,
dated 13 February 1913, in Case No. 8502 of the Court of Land Registration of the Philippine Islands. The whole property covered by OCT No. 670 was
subsequently adjudicated in favor of Isabel Manahan Santiago (formerly Isabel Manahan y Francisco). Consequently, OCT No. 670 was cancelled and
TCT No. T-53028 was issued exclusively in the name of Isabel Manahan Santiago. On 28 December 1968, Isabel Manahan Santiago executed a Deed
of Donation transferring the property to her son, respondent herein, who subsequently secured TCTs No. 281660, No. N-39258 and No. 205270 in his
own name.[6]

Petitioners filed with the trial court, on 29 April 1996, an action for declaration of nullity of respondent’s certificates of title on the basis that OCT No. 670
was fake and spurious. Among the defects of OCT No. 670 pointed out by petitioners were that: (1) OCT No. 670 was not signed by a duly authorized
officer; (2) Material data therein were merely handwritten and in different penmanships; (3) OCT No. 670 was not printed on the Official Form used in
1913, the year it was issued; (4) It failed to indicate the Survey Plan which was the basis of the Technical Description of the property covered by the title;
(5) Decree No. 10248 referred to in OCT No. 670 was issued only on 11 April 1913, while OCT No. 670 was issued earlier, on 13 February 1913; and (6)
Decree No. 10248 was issued over a property other than the one described in OCT No. 670, although also located in the Province of Rizal.[7]

Respondent filed his Answer with Prayer for Preliminary Hearing on the Affirmative Defenses on 03 July 1996. According to respondent, “[t]he
allegations in the Complaint would readily and patently show that the same are flimsy, fabricated, malicious, without basis in law and in fact…”[8]

As an affirmative defense, respondent claimed that the petitioners had no legal capacity to file the Complaint, and thus, the Complaint stated no cause of
action. Since OCT No. 670 was genuine and authentic on its face, then OCT No. 670 and all of respondent’s land titles derived therefrom, are
incontrovertible, indefeasible and conclusive against the petitioners and the whole world.[9]

Citing the consolidated cases of Director of Forestry, et al. v. Hon. Emmanuel M. Muñoz, et al. and Pinagcamaligan Indo-Agro Development Corporation
v. Hon. Macario Peralta, Jr., et al.,[10] respondent argued that the Spanish title, on which petitioners based their claim, was neither indefeasible nor
imprescriptible. Moreover, Presidential Decree (P.D.) No. 892, which took effect on 16 February 1976, required all holders of Spanish titles or grants to
apply for registration of their lands under Republic Act No. 496, otherwise known as the Land Registration Act,[11] within six months from effectivity of
the decree. After the given period, Spanish titles could no longer be used as evidence of land ownership in any registration proceedings under the
Torrens System. [12]

Respondent also raised the affirmative defense of prescription. He pointed out that any action against his certificates of title already prescribed,
especially with regard to OCT No. 670, which was issued in 1913 or more than 83 years prior to the filing of the Complaint by the petitioners. At the very
least, respondent contended, “it must be presumed that the questioned land titles were issued by the public officials concerned in the performance of
their regular duties and functions pursuant to the law.”[13]

Even assuming arguendo that the petitioners entered and occupied the Subject Property, they did so as mere intruders, squatters and illegal occupants,
bereft of any right or interest, since the Subject Property was already covered by Torrens certificates of title in the name of respondent and his
predecessors-in-interest.[14]

Lastly, respondent denied knowing the petitioners, much less, threatening to evict them. In fact, petitioners were not included as defendants in Civil
Case No. 783 entitled, “Carmelino M. Santiago v. Remigio San Pascual, et al.,” which respondent instituted before the same trial court against squatters
occupying the Subject Property. In its decision, dated 01 July 1992, the trial court held that “there is no doubt that the plaintiff (respondent herein) is the
owner of the land involved in this case on which the defendants have built their houses and shanties…” Although the decision in Civil Case No. 783 was
appealed to the Court of Appeals, it had become final and executory for failure of the defendants-appellants therein to file their appellants’ brief.[15]

In the instant case, the trial court held a preliminary hearing on the affirmative defenses as prayed for by the respondent. During said hearing,
petitioners presented their lone witness, Engineer Placido Naval, a supposed expert on land registration laws. In response to questions from Honorable
Judge Francisco C. Rodriguez of the trial court, Engineer Naval answered that a parcel of land titled illegally would revert to the State if the Torrens title
was cancelled, and that it was the State, through the Office of the Solicitor General, that should file for the annulment or cancellation of the title.
Respondent, on the other hand, did not present any evidence but relied on all the pleadings and documents he had so far submitted to the trial court.[16]
After the preliminary hearing, the trial court issued the questioned Order, dated 05 February 1999, dismissing petitioners’ Complaint. Pertinent portions
of the Order of the trial court read:

After considering the testimonial and documentary evidence presented, this Court is inclined not to grant plaintiffs (sic) prayer. Finding credence and
giving weight to plaintiffs (sic) lone but “expert witness”, it is crystal clear that, to quote:

1. “a parcel of land titled illegally will revert to the State

2. it is the State who must file the corresponding case of annulment of title through the Office of the Solicitor General, and
3. a land illegally titled in the name of private individual, the State through the Office of the Solicitor General should file the corresponding case for
cancellation of title.” (TSN August 26, 1997).

The above quoted testimony is straight from horse (sic) mouth so to speak as this was the testimony of the plaintiffs (sic) expert witness. And judging
from the said testimony alone aforecited, plaintiffs (sic) cause [of action] is bound to fail. “Plaintiffs (sic) own testimony” wrote “finis” to their case. From
the record, this case was initiated and filed by private individuals, Nemencio Evangelista, et. al., contradicting their witness (sic) testimony. To reiterate,
this Court finds credence to the testimony of the plaintiffs (sic) witness, i.e., is (sic) the State through the Office of the Solicitor General who must initiate
and file a case of this nature when title to a land is being claimed to be obtained through fraud and allegedly spurious.

The opinion of this Court anent the testimony of the witness is not without basis. Explicit is the pronouncement of the Supreme Court in the recent case
of Heirs of Marciano Nagano v. Court of Appeals, to wit:
An action for reversion has to be instituted by the Solicitor General pursuant to Section 101, Commonwealth Act No. 141. (282 SCRA 43).

As to the documentary evidence, having gone through with the “Deed of Assignment/s” purportedly executed by and between a certain Ismael Favila y
Rodriguez and the plaintiffs, which is the principal if not the only basis of plaintiffs claim ownership and possession of the subject parcel of land, the
same does not hold water in a manner of speaking, for being self-serving. “Assignor Ismael Favila y Rodriguez” claimed in said Deed that he is the
Attorney-in-Fact by virtue of an alleged Special Power of Attorney executed in his favor by his “mga kapatid” on February 23, 1965, but said Special
Power of Attorney was not presented before this Court, thus there arises a doubt as to its existence and execution not to mention doubt on the existence
of his “mga kapatid” who as alleged executed said Special Power Attorney (sic) in his favor.

Even if this Court granting arguendo would admit the authenticity of said “Deeds of Assignment/s”, that will not alter the outcome of the pending
incident/s before this Court. Why? Because the said “Deed of Assignment/s” which were based on Spanish title have lost their evidentiary value
pursuant to the Presidential Decree No. 892 i.e. “DISCONTINUANCE OF THE SPANISH MORTGAGE SYSTEM OF REGISTRATION AND OF THE
USE OF SPANISH TITLES AS EVIDENCE IN LAND REGISTRATION PROCEEDINGS.”

…There is no need to elaborate on the above-cited provisions of PD 892 as they are self-explanatory. Suffice it to say that there is no showing, that
plaintiffs complied with the said law i.e. to “apply for registration of their lands under Act No. 496, otherwise known as the Land Registration Act, within
six (6) months from the effectivity of this decree (February 16, 1976). Thereafter, Spanish titles cannot be used as evidence of land ownership in any
registration proceedings under the Torrens System.”
This being the case and likewise being clear that plaintiffs were not the lawful owners of the land subject of this case, for they did not comply with PD
892, the said plaintiffs do not have the legal standing to bring before this Court the instant complaint…

Moreover, the principal issue in this case is for the declaration of nullity of defendant’s title, which has nothing to do with plaintiffs (sic) claim of ownership
and possession even if we set aside, albeit momentarily, the truth that plaintiffs (sic) claim were based on barred Spanish Title/s, and thus plaintiffs were
never the owners of the parcel of land subject of this case.

Further, defendants (sic) title especially so with the mother title OCT 670 was entered and issued in 1913 or more than Eighty Three (83) years ago, the
same not having been questioned by any party. Only now that it is being questioned, but sad to say, plaintiffs who are on the offensive and relying on
their lone expert witness, instead of bolstering their case, unwittingly sealed their fate… [17]
After the trial court denied petitioners’ Motion for Reconsideration in its Order, dated 20 July 1999,[18] petitioners appealed both Orders of the trial court
to the Court of Appeals.

The Court of Appeals, in its Decision, dated 29 July 2002,[19] affirmed the Order of the trial court, dated 05 February 1999, dismissing petitioners’
Complaint. The Court of Appeals denied petitioners’ Motion for Reconsideration in its Resolution, dated 14 February 2003.[20]
Thus, petitioners filed this Petition for Review [21] under Rule 45 of the Rules of Court, raising the following issues and praying for the reversal of the
aforementioned Decision of the Court of Appeals affirming the Order of dismissal of the trial court:

I. Whether the lower court’s dismissal of the petitioners’ complaint should be proscribed by the rules of evidence it being based inter alia on Engr.
Naval’s testimony, which was indisputably not based on facts but conclusion of law.
II. Whether the lower court’s dismissal of petitioners’ complaint should be proscribed by the rules of evidence it being done sans ample evidence
except bare allegations of respondent.
III. Whether the provision of P.D. 892, i.e., Spanish titles cannot be used as evidence of land ownership in any registration proceedings under the
Torrens system, holds of an exception.
IV. Whether an action for quieting of title, specifically where petitioners are in possession of subject land, can be subject of prescription.
In his Comment,[22] the respondent, for the most part, reiterated the findings of the trial court and the Court of Appeals.

The Court believes that the trial court rightfully dismissed petitioners’ Complaint, but for reasons different from those relied upon by the trial court and the
Court of Appeals.
According to the respondent, petitioners had no legal capacity to file the Complaint, and thus, the Complaint filed before the trial court stated no cause of
action.

Before anything else, it should be clarified that “the plaintiff has no legal capacity to sue”[23] and “the pleading asserting the claim states no cause of
action”[24] are two different grounds for a motion to dismiss or are two different affirmative defenses. Failure to distinguish between “the lack of legal
capacity to sue” from “the lack of personality to sue” is a fairly common mistake. The difference between the two is explained by this Court in Columbia
Pictures, Inc. v. Court of Appeals:[25]
Among the grounds for a motion to dismiss under the Rules of Court are lack of legal capacity to sue and that the complaint states no cause of action.
Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to appear in the
case, or does not have the character or representation he claims. On the other hand, 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. The term "lack of capacity to sue" should not be
confused with the term "lack of personality to sue." While the former refers to a plaintiff’s general disability to sue, such as on account of minority,
insanity, incompetence, lack of juridical personality or any other general disqualifications of a party, the latter refers to the fact that the plaintiff is not the
real party- in-interest. Correspondingly, the first can be a ground for a motion to dismiss based on the ground of lack of legal capacity to sue; whereas
the second can be used as a ground for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of
action.

In the present case, this Court may assume that the respondent is raising the affirmative defense that the Complaint filed by the petitioners before the
trial court stated no cause of action because the petitioners lacked the personality to sue, not being the real party-in-interest. It is the respondent’s
contention that only the State can file an action for annulment of his certificates of title, since such an action will result in the reversion of the ownership
of the Subject Property to the State.

The affirmative defense that the Complaint stated no cause of action, similar to a motion to dismiss based on the same ground, requires a hypothetical
admission of the facts alleged in the Complaint. In the case of Garcon v. Redemptorist Fathers,[26] this Court laid down the rules as far as this ground
for dismissal of an action or affirmative defense is concerned:

It is already well-settled by now that, 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 of fact made in the complaint to constitute a cause of action, and not on whether these allegations of
fact are true, for said motion must hypothetically admit the truth of the facts alleged in the complaint; that 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 said
complaint. Stated otherwise, the insufficiency of the cause of action must appear in the face of the complaint in order to sustain a dismissal on this
ground, for in the determination of whether or not a complaint states a cause of action, only the facts alleged therein and no other matter may be
considered, and the court may not inquire into the truth of the allegations, and find them to be false before a hearing is had on the merits of the case;
and it is improper to inject in the allegations of the complaint facts not alleged or proved, and use these as basis for said motion.

In resolving whether or not the Complaint in the present case stated a cause of action, the trial court should have limited itself to examining the
sufficiency of the allegations in the Complaint. It was proscribed from inquiring into the truth of the allegations in the Complaint or the authenticity of any
of the documents referred or attached to the Complaint, since these are deemed hypothetically admitted by the respondent. The trial court evidently
erred in making findings as to the authenticity of the Deeds of Assignment executed by Ismael Favila in favor of petitioners on 15 April 1994 and 02 June
1994; and questioning the existence and execution of the Special Power of Attorney in favor of said Ismael Favila by his siblings on 25 February 1965.
These matters may only be resolved after a proper trial on the merits.

Petitioners alleged in their Complaint, and respondent hypothetically admitted that: (1) Petitioners’ predecessors-in-interest, in the concept of owners,
had been in actual, physical, open, continuous and adverse possession of the Subject Property against the whole world since time immemorial; (2) The
Subject Property was part of the vast tract of land called “Hacienda Quibiga” awarded to Don Hermogenes Rodriguez by the Queen of Spain by virtue of
a Spanish title; (3) Ismael Favila, an heir and successor-in-interest of Don Hermogenes Rodriguez, acting as Attorney-in-Fact pursuant to a Special
Power of Attorney executed by his “mga kapatid” on 25 February 1965, executed Deeds of Assignment covering the Subject Property in favor of
petitioners; (4) Petitioners still occupied and possessed the Subject Property, on which their houses were erected, when they discovered that the Subject
Property was already covered by Torrens certificates of title in the name of respondent; and (5) That petitioners filed the Complaint to prevent their
eviction by the respondent. To determine whether these allegations are sufficient to constitute a cause of action, it is important for this Court to establish
first the nature of petitioners’ action.

Indeed, petitioners’ Complaint filed before the trial court was captioned as an action for declaration of nullity of respondent’s certificates of title.
However, the caption of the pleading should not be the governing factor, but rather the allegations therein should determine the nature of the action,
because even without the prayer for a specific remedy, the courts may nevertheless grant the proper relief as may be warranted by the facts alleged in
the Complaint and the evidence introduced.[27]

The trial court believed that petitioners’ action was ultimately one for reversion of the Subject Property to the public domain. Based on the testimony of
Engineer Naval and the case of Nagaño v. Court of Appeals,[28] it declared that the State, represented by the Office of the Solicitor General, is the
party-in-interest in an action for cancellation of a certificate of title illegally issued in the name of a private individual, because the eventual effect of such
cancellation is the reversion of the property to the State.
The Court disagrees in this pronouncement of the trial court, and calls for a far closer review of its decision in Nagaño v. Court of Appeals,[29] wherein
the Court held that –

It is then clear from the allegations in the complaint that private respondents claim ownership of the 2,250 square meter portion for having possessed it
in the concept of an owner, openly, peacefully, publicly, continuously and adversely since 1920. This claim is an assertion that the lot is private land, or
that even assuming it was part of the public domain, private respondents had already acquired imperfect title thereto under Section 48(b) of C.A. No.
141, otherwise known as the Public Land Act, as amended by R.A. No. 1942…

Under Section 48, a subject lot is, for all legal intents and purposes, segregated from the public domain, because the beneficiary is “conclusively
presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this
chapter.”
Consequently, merely on the basis of the allegations in the complaint, the lot in question is apparently beyond the jurisdiction of the Director of the
Bureau of Lands and could not be the subject of a Free Patent. Hence, dismissal of private respondents’ complaint was premature and trial on the
merits should have been conducted to thresh out evidentiary matters.

It would have been entirely different if the action were clearly for reversion, in which case, it would have to be instituted by the Solicitor General pursuant
to Section 101 of C.A. No. 141, which provides:
Sec. 101. All actions for the reversion to the Government of lands of the public domain or improvements thereon shall be instituted by the Solicitor
General or the officer acting in his stead, in the proper courts, in the name of the [Republic] of the Philippines.

In the more recent case of Heirs of Ambrocio Kionisala v. Heirs of Honorio Dacut,[30] the difference between an action for declaration of nullity of land
titles from an action for reversion was more thoroughly discussed as follows:

An ordinary civil action for declaration of nullity of free patents and certificates of title is not the same as an action for reversion. The difference between
them lies in the allegations as to the character of ownership of the realty whose title is sought to be nullified. In an action for reversion, the pertinent
allegations in the complaint would admit State ownership of the disputed land. Hence, in Gabila vs. Barriga [41 SCRA 131], where the plaintiff in his
complaint admits that he has no right to demand the cancellation or amendment of the defendant’s title because even if the title were canceled or
amended the ownership of the land embraced therein or of the portion affected by the amendment would revert to the public domain, we ruled that the
action was for reversion and that the only person or entity entitled to relief would be the Director of Lands.
On the other hand, a cause of action for declaration of nullity of free patent and certificate of title would require allegations of the plaintiff’s ownership of
the contested lot prior to the issuance of such free patent and certificate of title as well as the defendant’s fraud or mistake, as the case may be, in
successfully obtaining these documents of title over the parcel of land claimed by plaintiff. In such a case, the nullity arises strictly not from the fraud or
deceit but from the fact that the land is beyond the jurisdiction of the Bureau of Lands to bestow and whatever patent or certificate of title obtained
therefore is consequently void ab initio. The real party-in-interest is not the State but the plaintiff who alleges a pre-existing right of ownership over the
parcel of land in question even before the grant of title to the defendant…

In their Complaint, petitioners never alleged that the Subject Property was part of the public domain. On the contrary, petitioners asserted title over the
Subject Property by virtue of their actual, physical, open, continuous and adverse possession thereof, in the concept of owners, by themselves and
through their predecessors-in-interest, since time immemorial. The Deeds of Assignment executed in their favor and attached to their Complaint
referred to a Spanish title granted by the Queen of Spain to their predecessor-in-interest, Don Hermogenes Rodriguez. Clearly, petitioners are asserting
private title over the Subject Property, and consequently, their action could not be one for reversion.

In their instant Petition, petitioners further averred that rather than an action for nullity of respondent’s certificates of title, theirs was more appropriately
an action to remove a cloud on or to quiet their title over the Subject Property.

Article 476 of the Civil Code, on removal of a cloud on or quieting of title, provides that:
Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record, claim, encumbrance or
proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said
title, an action may be brought to remove such cloud or to quiet the title.

An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein.

Respondent’s certificates of title over the Subject Property appeared valid or effective; but according to the petitioners, they were fake, spurious and/or
fraudulent, and a cloud on their title to the same property that needed to be removed. A cloud on title has been defined as follows:

Cloud on Title. – A cloud on title is an outstanding instrument, record, claim, encumbrance or proceeding which is actually invalid or inoperative, but
which may nevertheless impair or affect injuriously the title to property. The matter complained of must have a prima facie appearance of validity or legal
efficacy. The cloud on title is a semblance of title which appears in some legal form but which is in fact unfounded. The invalidity or inoperativeness of
the instrument is not apparent on the face of such instrument, and it has to be proved by extrinsic evidence…[31]

Even as this Court agrees with the petitioners that their action was one for removal of a cloud on or quieting of title, it does arrive at the same conclusion
as the trial court and the Court of Appeals that petitioners had no personality to file the said action, not being the parties-in-interest, and their Complaint
should be dismissed for not stating a cause of action.

According to Article 477 of the Civil Code, the plaintiff, in an action to remove a cloud on or to quiet title, must have legal or equitable title to, or interest
in, the real property which is the subject matter of the action.[32] Petitioners failed to establish in their Complaint that they had any legal or equitable title
to, or legitimate interest in, the Subject Property so as to justify their right to file an action to remove a cloud on or to quiet title.

Title to real property refers to that upon which ownership is based. It is the evidence of the right of the owner or the extent of his interest, by which
means he can maintain control and, as a rule, assert right to exclusive possession and enjoyment of the property.[33]

In their Complaint, petitioners claimed title to the Subject Property by virtue of their actual and continuous possession of the same since time
immemorial, by themselves and through their predecessors-in-interest. Yet, the Deeds of Assignment executed by Ismael Favila in their favor, attached
to and an integral part of their Complaint, revealed that petitioners’ predecessors-in-interest based their right to the Subject Property on the Spanish title
awarded to Don Hermogenes Rodriguez.
There existed a contradiction when petitioners based their claim of title to the Subject Property on their possession thereof since time immemorial, and at
the same time, on the Spanish title granted to Don Hermogenes Rodriguez. Possession since time immemorial carried the presumption that the land
had never been part of the public domain or that it had been private property even before the Spanish conquest.[34] If the Subject Property was already
private property before the Spanish conquest, then it would have been beyond the power of the Queen of Spain to award or grant to anyone.
The title to and possession of the Subject Property by petitioners’ predecessors-in-interest could be traced only as far back as the Spanish title of Don
Hermogenes Rodriguez. Petitioners, having acquired portions of the Subject Property by assignment, could acquire no better title to the said portions
than their predecessors-in-interest, and hence, their title can only be based on the same Spanish title.
Respondent maintained that P.D. No. 892 prevents petitioners from invoking the Spanish title as basis of their ownership of the Subject Property. P.D.
No. 892 strengthens the Torrens system by discontinuing the system of registration under the Spanish Mortgage Law, and by categorically declaring all
lands recorded under the latter system, not yet covered by Torrens title, unregistered lands. It further provides that within six months from its effectivity,
all holders of Spanish titles or grants should apply for registration of their land under what is now P.D. No. 1529, otherwise known as the Land
Registration Decree. Thereafter, Spanish titles can no longer be used as evidence of land ownership in any registration proceedings under the Torrens
system. [35] Indubitably, P.D. No. 892 divests the Spanish titles of any legal force and effect in establishing ownership over real property.

P.D. No. 892 became effective on 16 February 1976. The successors of Don Hermogenes Rodriguez had only until 14 August 1976 to apply for a
Torrens title in their name covering the Subject Property. In the absence of an allegation in petitioners’ Complaint that petitioners’ predecessors-in-
interest complied with P.D. No. 892, then it could be assumed that they failed to do so. Since they failed to comply with P.D. No. 892, then the
successors of Don Hermogenes Rodriguez were already enjoined from presenting the Spanish title as proof of their ownership of the Subject Property in
registration proceedings.
Registration proceedings under the Torrens system do not create or vest title, but only confirm and record title already created and vested.[36] By virtue
of P.D. No. 892, the courts, in registration proceedings under the Torrens system, are precluded from accepting, confirming and recording a Spanish
title. Reason therefore dictates that courts, likewise, are prevented from accepting and indirectly confirming such Spanish title in some other form of
action brought before them (i.e., removal of cloud on or quieting of title), only short of ordering its recording or registration. To rule otherwise would open
the doors to the circumvention of P.D. No. 892, and give rise to the existence of land titles, recognized and affirmed by the courts, but would never be
recorded under the Torrens system of registration. This would definitely undermine the Torrens system and cause confusion and instability in property
ownership that P.D. No. 892 intended to eliminate.

Petitioners argued that the Spanish title may still be presented as proof of ownership on the basis of the exception provided in the fourth whereas clause
of P.D. No. 892, which reads:
WHEREAS, Spanish titles to lands which have not yet been brought under the operation of the Torrens system, being subject to prescription, are now
ineffective to prove ownership unless accompanied by proof of actual possession; . . .
Since Petitioners alleged that they were in actual possession of the Subject Property, then they could still present the Spanish title as evidence of their
ownership of the Subject Property. [37]
This Court cannot sustain petitioners’ argument. Actual proof of possession only becomes necessary because, as the same whereas clause points out,
Spanish titles are subject to prescription. A holder of a Spanish title may still lose his ownership of the real property to the occupant who actually
possesses the same for the required prescriptive period.[38] Because of this inherent weakness of a Spanish title, the applicant for registration of his
Spanish title under the Torrens system must also submit proof that he is in actual possession of the real property, so as to discount the possibility that
someone else has acquired a better title to the same property by virtue of prescription.
Moreover, legislative intent must be ascertained from a consideration of the statute as a whole, and not just a particular provision alone. A word or
phrase taken in the abstract may easily convey a meaning quite different from the one actually intended and evident when the word or phrase is
considered with those with which it is associated. An apparently general provision may have a limited application if read together with other provisions of
the statute.[39]

The fourth whereas clause of P.D. No. 892 should be interpreted and harmonized with the other provisions of the whole statute.[40] Note that the tenor
of the whole presidential decree is to discontinue the use of Spanish titles and to strip them of any probative value as evidence of ownership. It had
clearly set a deadline for the filing of applications for registration of all Spanish titles under the Torrens system (i.e., six months from its effectivity or on
14 August 1976), after which, the Spanish titles may no longer be presented to prove ownership.

All holders of Spanish titles should have filed applications for registration of their title on or before 14 August 1976. In a land registration proceeding, the
applicant should present to the court his Spanish title plus proof of actual possession of the real property. However, if such land registration proceeding
was filed and initiated after 14 August 1976, the applicant could no longer present his Spanish title to the court to evidence his ownership of the real
property, regardless of whether the real property was in his actual possession.

Therefore, the fact that petitioners were in actual possession of the Subject Property when they filed the Complaint with the trial court on 29 April 1996
does not exclude them from the application of P.D. No. 892, and their Spanish title remain inadmissible as evidence of their ownership of the Subject
Property, whether in a land registration proceeding or in an action to remove a cloud on or to quiet title.
The preceding discussion does not bar holders of Spanish titles from claiming ownership of the real property on some other basis, such as those
provided in either the Land Registration Decree[41] or the Public Land Act.[42] Petitioners though failed to allege any other basis for their titles in their
Complaint aside from possession of the Subject Property from time immemorial, which this Court has already controverted; and the Spanish title, which
is already ineffective to prove ownership over the Subject Property.

Therefore, without legal or equitable title to the Subject Property, the petitioners lacked the personality to file an action for removal of a cloud on, or
quieting of, title and their Complaint was properly dismissed for failing to state a cause of action. In view of the dismissal of the case on this ground, it is
already unnecessary for this Court to address the issue of prescription of the action.

Wherefore, this Court DENIES the instant petition and AFFIRMS the Decision of the Court of Appeals, dated 29 July 2002, and the Order of the
Regional Trial Court of San Mateo, Rizal, Branch 77, dated 05 February 1999, dismissing petitioners’ Complaint for failure to state a cause of action.

CASE NO. 3. EUFEMIO C. DOMINGO, CELSO D. GANGAN, PACASIO S. BANARIA, SOFRONIO B. URSAL, ALBERTO P. CRUZ, MARIA L.
MATIB, RACHEL U. PACPACO, ANGELO G. SANCHEZ, and SHERWIN A. SIP-AN vs. HON. GUILLERMO N. CARAGUE, in his capacity as
Chairman, Commission on Audit, HON. EMMANUEL M. DALMAN and HON. RAUL C. FLORES, in their capacities as Commissioners,
Commission on Audit
[G.R. No. 161065. April 15, 2005]
EN BANC
SANDOVAL-GUTIERREZ, J.:

Judicial power is the power to hear and decide cases pending between parties who have the right to sue in courts of law and equity.[1] Corollary to this
dictum is the principle of locus standi of a litigant. He who is directly affected and whose interest is immediate and substantial has the standing to sue.
Thus, a party must show a personal stake in the outcome of the case or an injury to himself that can be redressed by a favorable decision in order to
warrant an invocation of the court’s jurisdiction and justify the exercise of judicial power on his behalf.

Assailed in this petition for certiorari is the legality of Resolution No. 2002-05 of the Commission on Audit (COA) providing for Organizational
Restructuring Plan. The above-named petitioners basically alleged therein that this Plan is intrinsically void for want of an enabling law authorizing COA
to undertake the same and providing for the necessary standards, conditions, restrictions, limitations, guidelines, and parameters. Petitioners further
alleged that in initiating such Organizational Restructuring Plan without legal authority, COA committed grave abuse of discretion amounting to lack or
excess of jurisdiction.

At this point, it is pertinent to state that the COA is a quasi-judicial body and that its decision, order or ruling may be brought to the Supreme Court on
certiorari by the aggrieved party.[2]
Petitioners Eufemio C. Domingo, Celso C. Gangan, Pascasio S. Banaria are retired Chairmen, while Sofronio B. Ursal, and Alberto P. Cruz are retired
Commissioners of COA. All claim “to maintain a deep-seated abiding interest in the affairs of COA,”[3] especially in its Organizational Restructuring
Plan, as concerned taxpayers.

The other petitioners are incumbent officers or employees of COA. Maria L. Matib and Angelo G. Sanchez are State Auditor III and State Auditor II,
respectively, assigned to the Cordillera Administrative Region (CAR). Prior to the implementation of the questioned COA Organizational Restructuring
Plan, they were Resident Auditors and later Audit Team Leaders. Petitioner Rachel U. Pacpaco is a State Auditor III assigned to CAR and a Team
Supervisor, while petitioner Sherwin A. Sipi-an is a State Auditor I also assigned at the CAR. These petitioners claim that they were unceremoniously
divested of their designations/ranks as Unit Head, Team Supervisor, and Team Leader upon implementation of the COA Organizational Restructuring
Plan without just cause and without due process, in violation of Civil Service Law. Moreover, they were deprived of their respective Representation and
Transportation Allowances (RATA), thus causing them undue financial prejudice.

Petitioners now invoke this Court’s judicial power to strike down the COA Organizational Restructuring Plan for being unconstitutional or illegal.

Initially, for our resolution is the issue of whether petitioners have the legal standing to institute the instant petition.

Petitioners invoke our ruling in Chavez v. Public Estates Authority,[4] Agan, Jr. v. Philippine International Air Terminals Co., Inc.,[5] and Information
Technology Foundation of the Philippines v. Commission on Elections[6] that where the subject matter of a case is a matter of public concern and
imbued with public interest, then this fact alone gives them legal standing to institute the instant petition. Petitioners contend that the COA
Organizational Restructuring Plan is not just a mere reorganization but a revamp or overhaul of the COA, with a “spillover effect” upon its audit
performance. This will have an impact upon the rest of the government bodies subject to its audit supervision, thus, should be treated as a matter of
transcendental importance. Consequently, petitioners’ legal standing should be recognized and upheld.

Respondents, through the Office of the Solicitor General (OSG), counter that petitioners have no legal standing to file the present petition since following
our ruling in Kilusang Mayo Uno Labor Center v. Garcia, Jr.,[7] they have not shown “a personal stake in the outcome of the case” or an actual or
potential injury that can be redressed by our favorable decision. Petitioners themselves admitted that “they do not seek any affirmative relief nor impute
any improper or improvident act against the said respondents” and “are not motivated by any desire to seek affirmative relief from COA or from
respondents that would redound to their personal benefit or gain.” It is clear then that petitioners failed to show any “present substantial interest” in the
outcome of this case, citing Kilosbayan v. Morato.[8] Nor may petitioners claim that as taxpayers, they have legal standing since nowhere in their petition
do they claim that public funds are being spent in violation of law or that there is a misapplication of the taxpayers’ money, as we ruled in Dumlao v.
Comelec.[9]

Petitioners’ reliance upon our rulings in Chavez,[10] Agan, Jr.,[11] and Information Technology Foundation[12] is flawed.

In Chavez, we ruled that the petitioner has legal standing since he is a taxpayer and his purpose in filing the petition is to compel the Public Estate
Authority (PEA) to perform its constitutional duties with respect to: (a) the right of the citizens to information on matters of public concern; and (b) the
application of a constitutional provision intended to insure the equitable distribution of alienable lands of the public domain among Filipino citizens. The
thrust of the first is to compel PEA to disclose publicly information on the sale of Government lands worth billions of pesos, as mandated by the
Constitution and statutory law. The thrust of the second is to prevent PEA from alienating hundreds of hectares of alienable lands of the public domain,
thereby compelling it to comply with a constitutional duty to the nation. We held that these matters are of transcendental public importance.[13]
In Agan, Jr., we held that petitioners have legal standing as they have a direct and substantial interest to protect. By the implementation of the PIATCO
contracts, they stand to lose their source of livelihood, a property right zealously protected by the Constitution. Such financial prejudice on their part is
sufficient to confer upon them the requisite locus standi.[14]

In Information Technology Foundation, there were two reasons why petitioners’ standing was recognized. First, the nation’s political and economic
future virtually hangs in the balance, pending the outcome of the 2004 elections. Accordingly, the award for the automation of the electoral process was
a matter of public concern, imbued with public interest. Second, the individual petitioners, as taxpayers, asserted a material interest in seeing to it that
public funds are properly used.

Here, petitioners have not shown any direct and personal interest in the COA Organizational Restructuring Plan. There is no indication that they have
sustained or are in imminent danger of sustaining some direct injury as a result of its implementation. In fact, they admitted that “they do not seek any
affirmative relief nor impute any improper or improvident act against the respondents” and “are not motivated by any desire to seek affirmative relief from
COA or from respondents that would redound to their personal benefit or gain.” Clearly, they do not have any legal standing to file the instant suit.

We are well aware of the averments of petitioners Matib, Pacpaco, Sanchez, and Sipi-An that they were demoted and unceremoniously divested of their
previous designations as Unit Head, Team Supervisor, or Team Leader; that they were deprived of their RATA; that they were relegated to being mere
Team Members, entitled to only a reimbursable transportation allowance; and that they were denied due process.

Such averments lack merit. Actually, they were not demoted. Under Section 11, Rule VII of the Omnibus Rules Implementing Book V of the
Administrative Code of 1987, a demotion is the movement from one position to another involving the issuance of an appointment with diminution in
duties, responsibilities, status, or rank which may or may not involve reduction in salary.[15] A demotion by assigning an employee to a lower position in
the same service which has a lower rate of compensation is tantamount to removal, if no cause is shown for it.[16]

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

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

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

Pursuant to the COA Organizational Restructuring Plan, the COA issued Memorandum No. 2002-034[17] providing for the guidelines regarding the
payment of RATA, thus:
1. All holders of State Auditor IV position shall be entitled to fixed commutable RATA wherever they are assigned.
2. Henceforth, only State Auditors IV shall be assigned as new Unit Heads or Team Leaders.
3. State Auditors below State Auditor IV assigned as Unit Heads or Team Leaders who have been receiving fixed RATA shall continue to be designated
as such and to receive the RATA until relieved of the designation for incompetence, inefficiency, or misconduct.

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

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

Thus, in the implementation of the COA Organizational Restructuring Plan, we fail to see how petitioners could have sustained personal injury as they
have not shown to have a personal stake therein. Accordingly, they are wanting in legal standing to institute the instant petition. Corollarily, we find no
reason to delve into the constitutionality or legality of the COA Organizational Restructuring Plan.
WHEREFORE, the petition is DISMISSED. No pronouncement as to costs.
 CASE NO. 4. COMMISSIONER ANDREA D. DOMINGO, BUREAU OF IMMIGRATION v. HERBERT MARKUS EMIL SCHEER
G.R. No. 154745 : January 29, 2004
SECOND DIVISION
CALLEJO, SR., J.:

This is a petition for review under Rule 45 of the Rules of Court, as amended, of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 71094
granting the respondents petition for certiorari and prohibition annulling the order of arrest issued by the petitioner, and permanently enjoining her from
deporting the respondent from the Philippines. Through its decision, the CA virtually reversed the Summary Deportation Order[2] of the Board of
Commissioners (BOC) and its Omnibus Resolution[3] denying the respondents Urgent Motion for Reconsideration of said Order, and enjoining the
petitioner from deporting the respondent.
The facts as culled from the records are as follows:

Respondent Herbert Markus Emil Scheer, a native of Ochsenfurt, Germany, was a frequent visitor of the Philippines.On July 18, 1986, his application for
permanent resident status was granted.[4] The Bureau of Immigration and Deportation (BID) issued in favor of the respondent Alien Certificate of
Registration No. B-396907 dated September 16, 1987[5] and Immigration Certificate of Residence No. 256789 dated February 24, 1988.[6] The
Commissioner stated that the granting of the petition would redound to the benefit of the Filipino people.[7] During his sojourn in the Philippines, the
respondent married widowed Edith delos Reyes[8] with whom he had two daughters. They had a son, Herbert Scheer, Jr., but he passed away on
November 13, 1995.[9] They resided in Puerto Princesa City, Palawan, where the respondent established and managed the Bavaria Restaurant. On
May 21, 1991, he was appointed Confidential Agent by then NBI Director Alfredo S. Lim.[10]

In a Letter dated June 29, 1995, Vice Consul Jutta Hippelein informed the Philippine Ambassador to Bonn, Germany, that the respondent had police
records and financial liabilities in Germany.[11]

The Department of Foreign Affairs received from the German Embassy in Manila Note Verbale No. 369/95 dated July 26, 1995, informing it that the
respondent was wanted by the German Federal Police; that a warrant of arrest had been issued against him; and that the respondent will be served with
an official document requesting him to turn over his German passport to the Embassy which was invalidated on July 2, 1995.[12] The Embassy
requested the Department of Foreign Affairs to inform the competent Philippine authorities of the matter. The BOC thereafter issued a Summary
Deportation Order dated September 27, 1997. The penultimate paragraph of the Order reads:

WHEREFORE, the foregoing considered, the Board of Commissioners hereby orders the following:

1.Cancellation of respondents permanent residence visa;

2.Respondents summary deportation and permanent exclusion from the Philippines; and

3.Inclusion of his name on the Bureaus Blacklist.

PROVIDED, however that said summary deportation should be held in abeyance in case said alien has a pending final and executory criminal conviction
where the imposed penalty is imprisonment, in which case, he has to serve first such imposed penalty, and/or has a pending criminal, civil or
administrative action and a Hold Departure Order has been issued or that his presence in said action is indispensable. In such instances, the alien
should remain in the custody of the Bureau until his turnover to the proper authorities in case he has to serve imprisonment or in case of pendency of
civil or criminal administrative action, he shall remain in the custody of the Bureau until such time that his pending cases shall have been decided,
terminated or settled, as the case may be, unless circumstances demand the immediate implementation of this summary deportation.

. . SO ORDERED.

In issuing the said order, the BOC relied on the correspondence from the German Vice Consul on its speculation that it was unlikely that the German
Embassy will issue a new passport to the respondent; on the warrant of arrest issued by the District Court of Germany against the respondent for
insurance fraud; and on the alleged illegal activities of the respondent in Palawan.[14] The BOC concluded that the respondent was not only an
undocumented but an undesirable alien as well.

When the respondent was apprised of the deportation order, he forthwith aired his side to then BID Commissioner Leandro T. Verceles. The
Commissioner allowed the respondent to remain in the Philippines, giving the latter time to secure a clearance and a new passport from the German
Embassy.[15] Then Presidential Assistant Teodorico K. Imperial wrote a Testimonial dated November 24, 1995, in behalf of the respondent addressed to
Commissioner Verceles. Nonetheless, the respondent, through counsel, filed on December 5, 1995 an Urgent Motion for Reconsideration of the
Summary Deportation Order of the BOC.[16] In his motion, the respondent alleged, inter alia, that:

1.The elementary rules of due process require notice and opportunity to be heard before a person can be lawfully deprived of his right (Ute Paterok vs.
Bureau of Customs, 193 SCRA 132). In the instant case, although it is acknowledged that the Honorable Office may conduct summary deportation
proceedings, respondent was not given notice and opportunity to be heard before said Summary Deportation Order was issued. Respondents right to
procedural due process was therefore violated. Consequently, the Summary Deportation Order is invalid.

2.In issuing, the Summary Deportation Order, this Honorable Office relied on Note Verbal No. 369/95 issued by the Embassy of the Federal Republic of
Germany, Manila, notifying the Department of Foreign Affairs and this Honorable Office about the warrant of arrest against respondent for alleged illegal
insurance fraud and illegal activities. However, a close scrutiny of said note verbal shows that nowhere therein does it state that respondent was
involved in insurance fraud or in any kind of illegal activities in Germany or anywhere else in the world, such as in Palawan. Therefore, the main basis of
the Summary Deportation Order is incompetent as evidence against respondent who is, like every Filipino, presumed to be innocent until his guilt is
proven beyond reasonable doubt.

3.The power to deport alien is a police power measure necessary against undesirable alien whose presence in the country is injurious to the public good
and domestic tranquility of the country (Board of Commissioner Commission on Immigration vs. De la Rosa, 197 SCRA 853). It is respectfully submitted
that respondent is not an undesirable alien. He has stayed in the Philippines for more or less than (10) years. He has married a Filipina and has three (3)
minor children. He has established his business in Palawan and he has no police record whatsoever. Respondent has considered the Philippines his
second home and he has nowhere else to go back to in Germany. Under the circumstances and for humanitarian considerations, respondent is not an
undesirable alien whose deportation is warranted. Likewise, the mere fact that his passport was not renewed by the German Embassy does not also
automatically justify the deportation of respondent.[17]

However, the BOC did not resolve the respondents motion. The respondent was neither arrested nor deported.

Meanwhile, on February 15, 1996, the District Court of Straubing rendered a Decision dismissing the criminal case against the respondent for physical
injuries.[18] The German Embassy in Manila, thereafter, issued a temporary passport to the respondent.

In a Letter dated March 1, 1996, the respondent informed Commissioner Verceles that his passport had been renewed following the dismissal of the said
criminal case. He reiterated his request for the cancellation of the Summary Deportation Order dated September 27, 1995 and the restoration of his
permanent resident status.[19] Subsequently, on March 12, 1996, the German Embassy issued to the respondent a regular passport, to expire on March
11, 2006.

The BOC still failed to resolve the respondents Urgent Motion for Reconsideration. Commissioner Verceles did not respond to the respondents March 1,
1996 Letter. The respondent remained in the Philippines and maintained his business in Palawan. On March 20, 1997, the Department of Labor and
Employment approved his application for Alien Employment Registration Certificate as manager of the Bavaria Restaurant in Puerto Princesa City.

In the meantime, petitioner Immigration Commissioner Andrea T. Domingo assumed office. She wrote the German Embassy and inquired if the
respondent was wanted by the German police. On April 12, 2002, the German Embassy replied that the respondent was not so wanted.[20] At about
midnight on June 6, 2002, Marine operatives and BID agents apprehended the respondent in his residence on orders of the petitioner. He was whisked
to the BID Manila Office and there held in custody while awaiting his deportation. Despite entreaties from the respondents wife[21] and his employees,
the petitioner refused to release the respondent.[22]

Shocked at the sudden turn of events, the respondent promptly communicated with his lawyer. The latter filed with the BID a motion for bail to secure the
respondents temporary liberty. On June 11, 2002, the respondents counsel filed with the Court of Appeals a petition for certiorari, prohibition and
mandamus with a prayer for temporary restraining order and writ of preliminary injunction, to enjoin the petitioner from proceeding with the respondents
deportation.[23] The respondent (petitioner therein) alleged, inter alia, that his arrest and detention were premature, unjust, wrongful, illegal and
unconstitutional, effected without sufficient cause and without jurisdiction or with grave abuse of discretion. He asserted that there was no speedy
remedy open to him in the ordinary course of law[24] and that his Urgent Motion for Reconsideration of the Summary Deportation Order of the BOC had
not yet been resolved despite the lapse of more than six years. The respondent averred that he was a fully documented alien, a permanent resident and
a law-abiding citizen. He, thus, prayed as follows:

PRAYER

WHEREFORE, it is most respectfully prayed of this Honorable Court that:

1.Upon the filing of this Petition, this Honorable Court issue a Temporary Restraining Order to enjoin respondent Commissioner from enforcing any order
to deport petitioner;

2.After due hearing, a writ of preliminary and mandatory injunction be correspondingly issued to maintain the status quo pending resolution of the
Petition on the merits.

3.After hearing, judgment be rendered:

a)Directing and mandating respondent Commissioner and the body she heads to resolve the Motion for Reconsideration filed in 1995, in his favor, and
nullifying or suspending the implementation of any order, oral or written, she may have issued or issue to deport petitioner; and

b)Making the injunction in petitioners favor permanent.

Petitioner likewise prays for such other and further relief as may be deemed just and equitable in the premises, such as directing respondent, if Herbert
Scheer is deported before the matter is heard on notice, to authorize his return.[25]

The BOC ruled that its September 27, 1995 Order had become final and executory after the lapse of one year, citing our rulings in Sy vs. Vivo,[26] and
Lou vs. Vivo.[27] The BOC also held that it was not competent to reverse the September 27, 1995 Order, citing our ruling in Immigration Commissioner
vs. Fernandez.[28] It declared that the respondent may seek the waiver of his exclusion via deportation proceedings through the exceptions provided by
Commonwealth Act No. 613,[29] Section 29 (a)(15), but that his application for the waiver presupposes his prior removal from the Philippines.

In a parallel development, the respondent procured a letter from the National Bureau of Investigation (NBI) in Puerto Princesa City certifying that he had
no pending criminal record.[30] The Puerto Princesa City Philippine National Police (PNP) also issued a certification that the respondent had no pending
criminal or derogatory records in the said office.[31]

Meanwhile, on June 26, 2002, the Court of Appeals issued a status quo order restraining the petitioner from deporting the respondent on a bond of
P100,000.00.[32] On July 18, 2002, the BOC issued an Omnibus Resolution dated June 14, 2002, pendente lite denying the respondents Urgent Motion
for Reconsideration, Motion for Bail/Recognizance, and the Letter dated June 11, 2002. The decretal portion of the resolution reads:

Wherefore, in view of the foregoing circumstances, we deny the prayers of the Urgent Motion for Reconsideration of 5 December 1995, the Motion for
Bail/Recognizance dated 7 June 2002 and the Letter of 11 June 2002. Further, we hereby order the following:

1.Subject to the submission of appropriate clearances, the summary deportation order the respondent Herbert Scheer, German, under BI Office
Memorandum Order No. 34 (series of 1989) and the BOC Summary Deportation Order of 27 September 1995;

2.Permanent exclusion of Herbert Scheer from the Philippines under C.A. No. 613, Section 40 (a)(15).
3.Inclusion of the name of Herbert Scheer in the Immigration Black List; and

4.Forfeiture of the bail bond, if any, of Herbert Scheer under C.A. No. 613, Section 40 (a)(15).

...

IT IS SO ORDERED.[33]

During the hearing of the respondents plea for a writ of preliminary mandatory injunction before the CA on July 22, 2002, the Office of the Solicitor
General (OSG) manifested that the State had no opposition to the respondents re-entry and stay in the Philippines, provided that he leave the country
first and re-apply for admission and residency status with the assurance that he would be re-admitted.[34] The respondents counsel manifested to the
appellate court that he had just been informed by the OSG of the Omnibus Resolution of the BOC dated June 14, 2002.

In her Comment on the Petition, the petitioner (the respondent therein) alleged, inter alia, the following:

1)that the BOC was an indispensable party to the petition;

2)the petitioners failure to implead the BOC warranted the denial of the petition;

3)the allowance by then Immigration Commissioner Leandro Verceles for the petitioner therein to renew his passport and secure clearances, even if
proved, was not binding on the BOC;

4)the September 27, 1995 Order of the BOC was already executory when the respondent filed her petition in the CA;

5)the German Embassys issuance of a new passport did not legalize the respondents stay in this country, which became illegal on July 2, 1995 when his
passport expired;

6)the respondent therein did not act with abuse of discretion in causing the arrest and detention of the respondent based on the BOCs Summary
Deportation Order; and

7)the BOC did not act with grave abuse of discretion in issuing its Summary Deportation Order and Omnibus Resolution and such order and resolution
were not mooted by the German Embassys issuance of a new passport in favor of the respondent.

In view of the Omnibus Resolution of the BOC, the respondent (petitioner therein) in his Memorandum prayed for the nullification of the BOCs Order, as
well as its Omnibus Resolution denying his Urgent Motion for Reconsideration considering that with the issuance of a new passport, there was no more
basis for his deportation, thus:

RELIEF

WHEREFORE, it is most respectfully prayed of this Honorable Court that:

1.Upon the filing of this Memorandum, this Honorable Court forthwith direct and authorize the immediate release of petitioner, even on undersigneds
recognizance, until further orders from this Honorable Court;

2.The Summary Deportation Order of September 27, 19[9]5, affirmed by respondent allegedly on June 14, 2002 and made known only yesterday, be
nullified to the extent that it directs the deportation of petitioner, who has removed the very basis of said Order of not having a valid passport, and that
the Resolution of June 14, 2002 be nullified in toto; and,

3.The Temporary Restraining Order of June 26, 2002 be converted into a permanent injunction or writ of prohibition.

Petitioner likewise prays for such other and further relief as may be deemed just and equitable in the premises.[35]

Surprisingly, the respondents counsel received on July 24, 2003 a Letter from the petitioner dated July 16, 2002 stating that, the BOC was in the course
of reviewing the deportation case against Mr. Scheer, and that its findings would be given in due time.[36]

On August 20, 2002, the Court of Appeals rendered a Decision in favor of the respondent granting his petition for certiorari and prohibition and
permanently enjoining the petitioner from deporting the respondent. The decretal portion of the Decision reads:

WHEREFORE, premises considered, the petitions for certiorari and prohibition are hereby GRANTED. Accordingly, any order, oral or written, issued by
respondent Commissioner Domingo against petitioner, in relation to his deportation, is hereby ANNULLED, and respondent Commissioner Domingo is
hereby permanently enjoined/prohibited from deporting petitioner, in so far as this case is concerned.

It is likewise ordered that petitioner be released from his confinement/detention in the Bureau of Immigration UNLESS there is/are fresh new
grounds/cases that will warrant his continued detention. SO ORDERED.

The Court of Appeals ruled that the German Embassys subsequent issuance of passport to the respondent before the BOCs issuance of its Omnibus
Resolution had mooted the September 27, 1995 Summary Deportation Order, as well as the arrest and detention of the respondent. According to the
court, it made no sense to require the respondent to leave the country and thereafter re-apply for admission with the BOC. Furthermore, since the
grounds cited by the BOC in its Summary Deportation Order no longer existed, there was no factual and legal basis to disqualify the respondent from
staying in the country.

On the issue of whether the members of the BOC were indispensable parties, the CA ruled as follows:
a)There are quite a number of cases in relevant jurisprudence wherein only the Immigration Commissioner was impleaded to decide whether an alien
may stay or be deported, such as in the case of Vivo vs. Arca (19 SCRA 878) and Vivo vs. Cloribel (22 SCRA 159).

b)In the case of Caruncho III vs. COMELEC (315 SCRA 693), it was pronounced that: Ordinarily, the nonjoinder of an indispensable party or the real
party interest is not by itself a ground for the dismissal of the petition. The court before which the petition is filed must first require the joinder of such
party. It is the noncompliance with said order that would be a ground for the dismissal of the petition.

thus, c)respondent may be estopped for not raising such issue earlier.[38]

Aggrieved, the respondent therein, now the petitioner, through the Office of the Solicitor General, appealed to us for relief. The petitioner contends that
the Court of Appeals erred on a question of law in granting the respondents petition in CA-G.R. SP No. 71094.[39]

In support of his contention, the Solicitor General has submitted the following arguments:

I.THE WRIT OF MANDAMUS DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU OF IMMIGRATION TO RESOLVE RESPONDENTS
URGENT MOTION FOR RECONSIDERATION OF THE SUMMARY DEPORTATION ORDER, CONSIDERING THAT IT IS THE BOARD OF
COMMISSIONERS, AND NOT THE COMMISSIONER ALONE, WHICH HAS AUTHORITY TO MAKE SAID RESOLUTION.

II.THE WRIT OF CERTIORARI DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU OF IMMIGRATION, CONSIDERING THAT IT IS
THE BOARD OF COMMISSIONERS, AND NOT THE COMMISSIONER ALONE, WHICH ISSUED THE SUMMARY DEPORTATION ORDER AND THE
OMNIBUS RESOLUTION.

III.THE WRIT OF PROHIBITION DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU OF IMMIGRATION, PROHIBITING THE
IMPLEMENTATION OF THE SUMMARY DEPORTATION ORDER AND THE OMNIBUS RESOLUTION, CONSIDERING THAT THE BOARD OF
COMMISSIONERS WAS NOT IMPLEADED AS PARTY-RESPONDENT IN THE PETITION IN CA-G.R. SP NO. 71094.

IV.ASSUMING BUT WITHOUT ADMITTING THAT THE BOARD OF COMMISSIONERS WAS PROPERLY IMPLEADED AS PARTY-RESPONDENT IN
THE PETITION IN CA-G.R. SP NO. 71094, NEVERTHELESS, THE SUMMARY DEPORTATION ORDER AND THE OMNIBUS RESOLUTION WERE
NOT ISSUED WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF (SIC) EXCESS
OF JURISDICTION.

V.FURTHER ASSUMING BUT WITHOUT ADMITTING THAT THE BOARD OF COMMISSIONERS WAS PROPERLY IMPLEADED AS PARTY-
RESPONDENT IN THE PETITION IN CA-G.R. SP NO. 71094, THE COMMISSIONER OF THE BUREAU OF IMMIGRATION DID NOT ACT WITHOUT
OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
IMPLEMENTING THE SUMMARY DEPORTATION ORDER AND THE OMNIBUS RESOLUTION.[40]

Elucidating on his first three arguments, the petitioner maintains that the respondents petition for certiorari, prohibition and mandamus before the Court
of Appeals should have been dismissed because he failed to implead the real party-in-interest as mandated by Rule 3, Section 7 of the Rules of Court,
as amended; in this case, the BOC. According to the Solicitor General, this was a fatal procedural error. The inclusion of the BOC as respondent in the
case was necessary in order that its actions could be directly attacked and for the court to acquire jurisdiction over it. The fact that Immigration
Commissioner Andrea T. Domingo was impleaded as the sole respondent was not enough, as she is only one of the four Commissioners. Furthermore,
the assailed Orders were issued by the Board, and not by the Immigration Commissioner alone.

The respondent counters that the petitioner is already estopped from raising this issue. He argues that -

In quite a number of jurisprudence, only the Immigration Commissioner is impleaded to decide whether an alien may stay here or not. The bottom line is
petitioner, head of the Bureau of Immigration, was more than fully heard on its institutional position, a Bureau which speaks with a single voice in this
case. She is in estoppel for not raising the issue earlier, either in a timely Comment or during the oral argument[41]

In Caruncho III v. Comelec, it was held that-

[O]rdinarily, the nonjoinder of an indispensable party or real party in interest is not by itself a ground for the dismissal of the petition. The court before
which the petition is filed must first require the joinder of such party. It is the noncompliance with said order that would be a ground for the dismissal of
the petition.

But even as the Court of Appeals did not require respondent of such joinder of parties, the respondent, in fact, begged leave, ad cautelam, in its Reply
Memorandum dated July 31, 2002 to implead the Board which speaks with a single voice anyway in this case, and therefore, no claim can be made that
a valid point of view has not been heard.

Moreover, according to the respondent, the petitioner is clearly the BIDs chosen instrumentality for the relevant purpose. What the respondent ultimately
questioned are the acts or orders of the petitioner for the arrest and immediate deportation of the respondent by way of implementing the BOCs
Summary Deportation Order.

By way of reply, the Office of the Solicitor General asserted that the Summary Deportation Order and Omnibus Resolution were collegial actions of the
BOC and not of the petitioner alone. Although its Chairperson, the petitioner, is merely a member thereof, her decisions and actions are still subject to
the collective will of the majority.

The Ruling of the Court

The BOC is an Indispensable Party

We agree with the petitioners contention that the BOC was an indispensable party to the respondents petition for certiorari, prohibition and mandamus in
the Court of Appeals. The respondent was arrested and detained on the basis of the Summary Deportation Order of the BOC. The petitioner caused the
arrest of the respondent in obedience to the said Deportation Order. The respondent, in his Memorandum, prayed that the CA annul not only the
Summary Deportation Order of the BOC but also the latters Omnibus Resolution, and, thus, order the respondents immediate release. The respondent
also prayed that the CA issue a writ of mandamus for the immediate resolution of his Urgent Motion for Reconsideration. The said motion had to be
resolved by the BOC as the order sought to be resolved and reconsidered was issued by it and not by the petitioner alone. The powers and duties of the
BOC may not be exercised by the individual members of the Commission.[44]

Section 7, Rule 3 of the Rules of Court, as amended, requires indispensable parties to be joined as plaintiffs or defendants. The joinder of indispensable
parties is mandatory. Without the presence of indispensable parties to the suit, the judgment of the court cannot attain real finality.[45] Strangers to a
case are not bound by the judgment rendered by the court.[46] The absence of an indispensable party renders all subsequent actions of the court null
and void. Lack of authority to act not only of the absent party but also as to those present.[47] The responsibility of impleading all the indispensable
parties rests on the petitioner/plaintiff.[48]

However, the non-joinder of indispensable parties is not a ground for the dismissal of an action. Parties may be added by order of the court on motion of
the party or on its own initiative at any stage of the action and/or such times as are just.[49] If the petitioner/plaintiff refuses to implead an indispensable
party despite the order of the court, the latter may dismiss the complaint/petition for the petitioner/plaintiffs failure to comply therefor.[50] The remedy is
to implead the non-party claimed to be indispensable.[51] In this case, the CA did not require the respondent (petitioner therein) to implead the BOC as
respondent, but merely relied on the rulings of the Court in Vivo v. Arca,[52] and Vivo v. Cloribel.[53] The CAs reliance on the said rulings is, however,
misplaced. The acts subject of the petition in the two cases were those of the Immigration Commissioner and not those of the BOC; hence, the BOC was
not a necessary nor even an indispensable party in the aforecited cases.

The Non-joinder of an Indispensable Party is not a Ground for the Dismissal of the Petition

The Court may be curing the defect in this case by adding the BOC as party-petitioner. The petition should not be dismissed because the second action
would only be a repetition of the first.[54] In Salvador, et al., v. Court of Appeals, et al.,[55] we held that this Court has full powers, apart from that power
and authority which is inherent, to amend the processes, pleadings, proceedings and decisions by substituting as party-plaintiff the real party-in-interest.
The Court has the power to avoid delay in the disposition of this case, to order its amendment as to implead the BOC as party-respondent. Indeed, it
may no longer be necessary to do so taking into account the unique backdrop in this case, involving as it does an issue of public interest.[56] After all,
the Office of the Solicitor General has represented the petitioner in the instant proceedings, as well as in the appellate court, and maintained the validity
of the deportation order and of the BOCs Omnibus Resolution. It cannot, thus, be claimed by the State that the BOC was not afforded its day in court,
simply because only the petitioner, the Chairperson of the BOC,[57] was the respondent in the CA, and the petitioner in the instant recourse. In Alonso v.
Villamor,[58] we had the occasion to state:

There is nothing sacred about processes or pleadings, their forms or contents. Their sole purpose is to facilitate the application of justice to the rival
claims of contending parties. They were created, not to hinder and delay, but to facilitate and promote, the administration of justice. They do not
constitute the thing itself, which courts are always striving to secure to litigants. They are designed as the means best adapted to obtain that thing. In
other words, they are a means to an end. When they lose the character of the one and become the other, the administration of justice is at fault and
courts are correspondingly remiss in the performance of their obvious duty.

The CA had Jurisdiction Over the Petition for Certiorari, ProhibitioN and Mandamus

We do not agree with the petitioners contention that the issue before the CA, as to the power of the President to determine whether an alien may remain
or be deported from the Philippines, is beyond the appellate courts competence to delve into and resolve. The contention of the petitioner is based on a
wrong premise.

The settled rule is that the authority to exclude or expel aliens by a power affecting international relation is vested in the political department of the
government, and is to be regulated by treaty or by an act of Congress, and to be executed by the executive authority according to the regulations so
established, except in so far as the judicial department has been authorized by treaty or by statute, or is required by the Constitution to intervene.[59]
The judicial department cannot properly express an opinion upon the wisdom or the justice of the measures executed by Congress in the exercise of the
power conferred on it,[60] by statute or as required by the Constitution. Congress may, by statute, allow the decision or order of the Immigration
Commissioner or the BOC to be reviewed by the President of the Philippines or by the courts, on the grounds and in the manner prescribed by law.

Article VIII, Section 1 of the Constitution has vested judicial power in the Supreme Court and the lower courts such as the Court of Appeals, as
established by law. Although the courts are without power to directly decide matters over which full discretionary authority has been delegated to the
legislative or executive branch of the government and are not empowered to execute absolutely their own judgment from that of Congress or of the
President,[61] the Court may look into and resolve questions of whether or not such judgment has been made with grave abuse of discretion, when the
act of the legislative or executive department violates the law or the Constitution. In Harvy Bridges v. I.F. Wixon,[62] the United States Federal Supreme
Court reversed an Order of Deportation made by the Attorney General for insufficiency of evidence and for improper admission of evidence. In Nging v.
Nagh,[63] the United States Court of Appeals (9th Circuit Court) held that conclusions of administrative offices on the issues of facts are invulnerable in
courts unless when they are not rendered by fair-minded men; hence, are arbitrary. In Toon v. Stump,[64] the Court ruled that courts may supervise the
actions of the administrative offices authorized to deport aliens and reverse their rulings when there is no evidence to sustain them. When acts or
omissions of a quasi-judicial agency are involved, a petition for certiorari or prohibition may be filed in the Court of Appeals as provided by law or by the
Rules of Court, as amended.

In this case, the respondent alleges that the petitioner acted arbitrarily, contrary to law and with grave abuse of discretion in causing his arrest and
detention at a time when his Urgent Motion for Reconsideration of the BOCs Summary Deportation Order had yet to be resolved. There was no factual
or legal basis for his deportation considering that he was a documented alien and a law-abiding citizen; the respondent, thus, prayed for a writ of
mandamus to compel the petitioner, the Chairperson of the BOC, to resolve the said motion. The petition before the CA did not involve the act or power
of the President of the Philippines to deport or exclude an alien from the country. This being so, the petition necessarily did not call for a substitution of
the Presidents discretion on the matter of the deportation of the respondent with that of the judgment of the CA.

Irrefragably, the CA had jurisdiction over the petition of the respondent.

The BOC Committed a Grave Abuse of Discretion Amounting To Lack or Excess of Jurisdiction In Issuing its Summary Deportation Order and Omnibus
Resolution; The Petitioner Committed a Grave Abuse Of Her Discretion Amounting to Lack or Excess of Jurisdiction in Causing the Arrest and
Detention Of The Private Respondent

On the Solicitor Generals fourth and fifth arguments, we are convinced that the BOC committed a grave abuse of discretion amounting to excess or lack
of jurisdiction in issuing its Summary Deportation Order and Omnibus Resolution, and that the petitioner committed grave abuse of discretion amounting
to excess or lack of jurisdiction in causing the arrest and detention of the private respondent.
The settled rule is that the entry or stay of aliens in the Philippines is merely a privilege and a matter of grace; such privilege is not absolute nor
permanent and may be revoked. However, aliens may be expelled or deported from the Philippines only on grounds and in the manner provided for by
the Constitution, the Immigration Act of 1940, as amended, and administrative issuances pursuant thereto. In Mejoff v. Director of Prisons,[66] we held,
thus:

Moreover, by its Constitution (Art. II, Sec. 3) the Philippines adopts the generally accepted principles of international law a part of the law of Nation. And
in a resolution entitled Universal Declaration of Human Rights and approved by the General Assembly of the United Nations of which the Philippines is a
member, at its plenary meeting on December 10, 1948, the right to life and liberty and all other fundamental rights as applied to all human beings were
proclaimed. It was there resolved that All human beings are born free and equal in degree and rights (Art. 1); that Everyone is entitled to all the rights
and freedom set forth in this Declaration, without distinction of any kind, such as race, color, sex, language, religion, political or other opinion, nationality
or social origin, property, birth, or other status (Art. 2); that Every one has the right to an effective remedy by the competent national tribunals for acts
violating the fundamental rights granted him by the Constitution or by law (Art. 8); that No one shall be subjected to arbitrary arrest, detention or exile
(Art. 9); etc.

In this case, the BOC ordered the private respondents deportation on September 27, 1995 without even conducting summary deportation proceedings.
The BOC merely relied on the June 29, 1995 Letter of the German Vice Consul and of the German Embassys Note Verbale No. 369/95 dated July 26,
1995.It issued the Summary Deportation Order on September 27, 1995 allegedly under paragraph 3 of Office Memorandum Order No. 34 dated August
21, 1989 which reads:

3.If a foreign embassy cancels the passport of the alien or does not reissue a valid passport to him, the alien loses the privilege to remain in the country,
under the Immigration Act, Sections 10 and 15 (Schonemann vs. Santiago, et al., G.R. No. 81461, 30 May 1989). The automatic loss of the privilege
obviates deportation proceedings. In such instance, the Board of Commissioners may issue summary judgment of deportation which shall be
immediately executory.

However, as gleaned from the Summary Deportation Order, the respondent was ordered deported not only because his passport had already expired;
the BOC speculated that the respondent committed insurance fraud and illegal activities in the Philippines and would not, thus, be issued a new
passport. This, in turn, caused the BOC to conclude that the respondent was an undesirable alien. Section 37(c) of Commonwealth Act No. 613, as
amended, provides that:

No alien shall be deported without being informed of the specific grounds for deportation or without being given a hearing under rules of procedure to be
prescribed by the Commissioner of Immigration.

Under paragraphs 4 and 5 of Office Memorandum Order No. 34, an alien cannot be deported unless he is given a chance to be heard in a full
deportation hearing, with the right to adduce evidence in his behalf, thus:

4.All other cases shall be tried in full deportation hearing, with due observance of the pertinent provisions of Law Instruction No. 39.

5.In all cases, the right of the alien to be informed of the charges against him, to be notified of the time and place of hearing, when necessary, to
examine the evidence against him, and to present evidence in his own behalf, where appropriate, shall be observed.

The respondent was not afforded any hearing at all. The BOC simply concluded that the respondent committed insurance fraud and illegal activities in
Palawan without any evidence. The respondent was not afforded a chance to refute the charges. He cannot, thus, be arrested and deported without due
process of law as required by the Bill of Rights of the Constitution. In Lao Gi v. Court of Appeals,[67] we held that:

Although a deportation proceeding does not partake of the nature of a criminal action, however, considering that it is a harsh and extraordinary
administrative proceeding affecting the freedom and liberty of a person, the constitutional right of such person to due process should not be denied.
Thus, the provisions of the Rules of Court of the Philippines particularly on criminal procedure are applicable to deportation proceedings.

It must be noted that the respondent was a permanent resident before his passport expired on July 2, 1995. In Chew v. Colding,[68] the United States
Federal Supreme Court ruled:

It is well established that if an alien is a lawful permanent resident of the United States and remains physically present there, he is a person within the
protection of the Fifth Amendment.He may not be deprived of his life, liberty or property without due process of law. Although it later may be established,
as respondents contend, that petitioner can be expelled and deported, yet before his expulsion, he is entitled to notice of the nature of the charge and a
hearing at least before an executive or administrative tribunal. Although Congress may prescribe conditions for his expulsion and deportation, not even
Congress may expel him without allowing him a fair opportunity to be heard.

As Mr. Justice Murphy said in his concurring opinion in Bridges v. Wixon:[69]

The Bill of Rights belongs to them as well as to all citizens. It protects them as long as they reside within the boundaries of our land. It protects them in
the exercise of the great individual rights necessary to a sound political and economic democracy.

According to Vattal,[70] an alien who is a permanent resident in a country is a member of the new society, at least as a permanent inhabitant, and is a
kind of citizen of inferior order from the native citizens; but is, nevertheless, limited and subject to the society, without participating in all its advantages.
Sir Robert Philconse called them de facto, though not de jure citizens of the country of their domicile.[71]

Such permanent resident[72] may be classified as a denizen, a kind of middle state between alien and a natural-born subject and partakes of both.
Paraphrasing Justice Brewer in his dissenting opinion in Fong Yue Ting v. United States,[73] when the right to liberty and residence is involved, some
other protection than the mere discretion of the petitioner or the BOC is required. We recall the warning of the United States Supreme Court in Boyd v.
United States:[74]

Illegitimate and unconstitutional practices get their first footing in that way, namely, by silent approaches and slight deviations from legal modes of
procedure. This can only be obviated by adhering to the rule that constitutional provisions for the security of person and property should be liberally
construed. A close and literal construction deprives them of half their efficacy, and leads to a gradual depreciation of the right, as if it consisted more in
sound than in substance. It is the duty of the courts to be watchful for the constitutional rights of the citizen, and against any stealthy encroachments
thereon. Their motto should be obsta principiis.
In sum, the arrest and detention of the respondent and his deportation under the Summary Deportation Order of the BOC for insurance fraud and illegal
activities in Palawan violated his constitutional and statutory rights to due process.

The Respondents Arrest and Detention was Premature, Unwarranted and Arbitrary

We agree that the Immigration Commissioner is mandated to implement a legal and valid Summary Deportation Order within a reasonable time. But in
this case, the arrest of the respondent in his house, at near midnight, and his subsequent detention was premature, unwarranted and arbitrary. Like a
thunderbolt in the sky, the BID agents and marines arrested the respondent on June 6, 2002, on orders of the petitioner based on the September 27,
1995 Summary Deportation Order. Under the basic rudiments of fair play and due process, the petitioner was required to first resolve the respondents
Urgent Motion for Reconsideration of the said Order, which was filed more than six years before or on December 5, 1995.

It may be argued that respondents filing of an Urgent Motion for Reconsideration did not ipso facto suspend the efficacy of the BOCs deportation
order.However, such an argument cannot be sustained in this case because of the extant and peculiar factual milieu. It bears stressing that more than
six years had elapsed, from the time the Summary Deportation Order was issued, until the respondent was finally arrested. Supervening facts and
circumstances rendered the respondents arrest and detention unjust, unreasonable, barren of factual and legal basis. The BOC should have set the
respondents motion for hearing to afford him a chance to be heard and adduce evidence in support thereon. It was bad enough that the BOC issued its
Summary Deportation Order without a hearing; the BOC dealt the respondent a more severe blow when it refused to resolve his motion for
reconsideration before causing his arrest on June 6, 2002.

As aforestated, the BOC ordered the deportation of the respondent after a summary proceeding without prior notice on the following grounds: (a) the
respondents German passport had expired; (b) there was a pending criminal case for physical injuries against him in Germany; (c) the respondent
indulged in illegal activities in Palawan; (d) that in all likelihood, the respondents passport will not be renewed by the German Embassy as he was
wanted for insurance fraud in Germany; and, (e) he was an undesirable alien. But then, in response to the written query of no less than the petitioner
herself, the German Embassy declared that the respondent was not wanted by the German police for any crime, including insurance fraud. This could
only mean that the warrant of arrest issued by the German Federal police mentioned in Note Verbale No. 369/95 had been lifted, and that the
respondent was not involved in any illegal activities in Germany. The criminal case against the respondent for physical injuries, which does not involve
moral turpitude, was dismissed by the German District Court. Furthermore, there was no evidence of insurance fraud against the respondent.

The BOC issued its Summary Deportation Order without affording the respondent the right to be heard on his motion and adduce evidence thereon. It
merely concluded that the respondent was involved in illegal activities in Palawan. What made matters worse was that the BOC indulged in sheer
speculation, that the German Embassy is unlikely to issue a new passport to the respondent. The deportation of aliens should not be based on mere
speculation or a mere product of procrastinations as in this case. As it turned out, the German Embassy re-issued the respondents passport; he was
issued a temporary passport, and, thereafter, a regular passport, yet to expire on March 12, 2006. The petitioner cannot feign ignorance of this matter
because the respondent himself, six years before he was arrested, informed then Immigration Commissioner Verceles in a Letter dated March 1, 1996.
The respondents letter forms part of the records of the BOC. There is no evidence on record that the respondent committed any illegal activities in
Palawan. He was even designated as special agent of the NBI, and was, in fact, issued clearances by the PNP and the NBI no less.Despite all the
foregoing, the petitioner ordered and caused the arrest and detention of the respondent.

What is most nettlesome is the apparent antedating of the BOC Omnibus Resolution. The records show that the petitioner sought to assuage the
respondents concern on the belated resolution of his pending urgent motion for reconsideration in a Letter to the latters counsel dated July 18, 2002 in
which the petitioner assured the respondent that the BOC will provide him of its action on the said motion:

Dear Atty. Sagisag,

We respond to your letter of 17 June 2002 by informing you that the case of Mr. Herbert Scheer is being evaluated by the Board of Commissioners
(BOC). The BOC will provide you of the results of its collegial action in due time.

Very truly yours, (Sgd.) ANDREA D. DOMINGO

Commissioner[75]

However, the Omnibus Resolution of the BOC was dated June 14, 2002, although on its face it was filed with the Records Division of the BID only on
July 18, 2002.

The foregoing gave reason for the CA to suspect that the Omnibus Resolution of the BOC was antedated.[76] The petition of the respondent in the CA
must have jolted the petitioner and the BOC from its stupor because it came out with its Omnibus Resolution on July 18, 2002, which was, however,
dated as early as June 14, 2002. The respondent had to wait in anxiety for the BOC to quench his quest for justice. The BOCs wanton acts amounted to
an abdication of its duty to act and/or resolve cases/incidents with reasonable dispatch. To recall our ruling in Board of Commissioners v. De la
Rosa,[77] citing Sheor v. Bengson,[78] thus:

This inaction or oversight on the part of the immigration officials has created an anomalous situation which, for reasons of equity, should be resolved in
favor of the minor herein involved.

The petitioner and the BOC should have taken to heart the following pronouncement in Commissioner of Immigration v. Fernandez:[79]

In the face of the disclosure that Teban Caoili had been all along working in the Avenue Electrical Supply Co. (Avesco), located at No. 653 Rizal Avenue,
Manila, until his arrest, and the documentary evidence showing that he had been issued a Philippine Passport; had regularly paid his Residence Tax
Certificates (A & B), and filed Income Tax Returns, a finding of fact is necessary whether the Commissioner really had intended to notify Teban Caoili of
the exclusion proceedings the Board had conducted in his absence. While it may be true that the proceedings is purely administrative in nature, such a
circumstance did not excuse the serving of notice. There are cardinal primary rights which must be respected even in proceedings of administrative
character, the first of which is the right of the party interested or affected to present his own case and submit evidence in support thereof.[80]

. . .Since the proceedings affected Caoilis status and liberty, notice should have been given. And in the light of the actuations of the new Board of
Commissioners, there is a necessity of determining whether the findings of the Board of Special Inquiry and the old Board of Commissioners are correct
or not. This calls for an examination of the evidence, and, the law on the matter.[81]
Apparently, the BOC did not bother to review its own records in resolving the respondents Urgent Motion for Reconsideration. It anchored its Omnibus
Resolution only on the following: the membership of the BOC had changed when it issued its September 27, 1995 Summary Deportation Order and
under Commonwealth Act No. 613, Section 27(b); the BOC is precluded from reversing a previous order issued by it;[82]and, the September 27, 1995
Order of the BOC had become final and could no longer be reviewed and reversed by it after the lapse of one year.[83] However, the rulings cited by the
petitioner are not applicable in the instant case, as the said cases cited involve appeals to the BOC from the decisions of the Board of Special Inquiry
(BSI). In Sy v. Vivo[84] and Lou v. Vivo,[85] we ruled that under Section 27(b) of Commonwealth Act No. 613, as amended, the Decision of the BOC on
appeal from the decision of the BSI becomes final and executory after one year:

(b)A board of special inquiry shall have authority (1) to determine whether an alien seeking to enter or land in the Philippines shall be allowed to enter or
land or shall be excluded, and (2) to make its findings and recommendations in all the cases provided for in section twenty-nine of this Act wherein the
Commissioner of Immigration may admit an alien who is otherwise inadmissible. For this purpose, the board or any member thereof, may administer
oaths and take evidence and in case of necessity may issue subpoena and/or subpoena duces tecum.The hearing of all cases brought before a board of
special inquiry shall be conducted under rules of procedure to be prescribed by the Commissioner of Immigration. The decision of any two members of
the board shall prevail and shall be final unless reversed on appeal by the Board of Commissioners as hereafter stated, or in the absence of an appeal,
unless reversed by the Board of Commissioners after a review by it, motu propio, of the entire proceedings within one year from the promulgation of the
decision.

In Commissioner of Immigration v. Fernandez,[86] we held that the BOC composed of new members is precluded from reversing, motu proprio, the
decision of the BOC on appeal from a BSI decision. But not to be ignored was our ruling that at any rate, the issue of authority should be made in
accordance with the procedure established by law, with a view to protecting the rights of individuals.

In this case, the Summary Deportation Order was issued by the BOC in the exercise of its authority under Office Memorandum Order No. 34, and not in
the exercise of its appellate jurisdiction of BSI decisions. There is no law nor rule which provides that a Summary Deportation Order issued by the BOC
in the exercise of its authority becomes final after one year from its issuance,[88] or that the aggrieved party is barred from filing a motion for a
reconsideration of any order or decision of the BOC.The Rules of Court may be applied in a suppletory manner to deportation proceedings[89] and
under Rule 37, a motion for reconsideration of a decision or final order may be filed by the aggrieved party.

Neither is there any law nor rule providing that the BOC, composed of new members, cannot revise a Summary Deportation Order previously issued by
a different body of Commissioners. The BOC that issued the Summary Deportation Order and the BOC which resolved the respondents Urgent Motion
for Reconsideration are one and the same government entity, with the same powers and duties regardless of its membership. Similarly, an RTC judge
who replaces another judge who presided over a case may review the judgment or order of his predecessor as long as the said judgment or order has
not as yet become final or executory. The act subject of review is not the act of the judge but the act of the court.

The petitioners contention that it failed to resolve the respondents motion for reconsideration because of the change of administration in the BOC was
branded by the CA as flimsy, if not bordering on the absurd:

Firstly, it was issued three days (June 14, 2002) after petitioner filed this instant petition on June 11, 2002 or almost seven years from the time the
motion for reconsideration was filed;

Secondly, respondents counsels excuse that it took such time to resolve it because it was only later that the motion for reconsideration was discovered
because of change of administration, is flimsy, if not bordering on the absurd;

The Issuance of a New and Regular Passport to the Respondent Rendered the Summary Deportation Order Moot and Academic, and the Omnibus
Resolution of the BOC Lacking In Legal Basis

We agree with the petitioner that a foreign embassys cancellation of the passport it had issued to its citizens, or its refusal to issue a new one in lieu of a
passport that has expired, will result in the loss of the aliens privilege to stay in this country and his subsequent deportation therefrom. But even the BOC
asserted in its Summary Deportation Order that an embassys issuance of a new passport to any of its citizens may bar the latters deportation, citing the
resolution of this Court in Schonemann v. Commissioner Santiago.[91]

Irrefragably, Commissioner Verceles was mandated to cause the arrest of the respondent preparatory to his deportation from the Philippines. However,
there was no fixed period in the Order within which to comply with the same. The Commissioner is not mandated to deport an alien immediately upon
receipt of the BOCs deportation order. It is enough that the Commissioner complies with the Order within a reasonable time, which, in Mejoff v. Director
of Prisons,[92] we held to connote as follows:

The meaning of reasonable time depends upon the circumstances, specially the difficulties of obtaining a passport, the availability of transportation, the
diplomatic arrangements with the governments concerned and the efforts displayed to send the deportee away; but the Court warned that under
established precedents, too long a detention may justify the issuance of a writ of habeas corpus.

In this case, the BOC had yet to act on the respondents Urgent Motion for Reconsideration. The respondent was also given a chance to secure a
clearance and a new passport with the German Embassy.After all, the possibility that the German Embassy would renew the respondents passport
could not be ruled out. This was exactly what happened: the German Embassy issued a new passport to the respondent on March 12, 1996 after the
German District Court dismissed the case for physical injuries. Thus, the respondent was no longer an undocumented alien; nor was he an undesirable
one for that matter.

The petitioner even admits that there is no longer a legal or factual basis to disqualify the respondent from remaining in the country as a permanent
resident. Yet, the OSG insists that he has to be deported first so that the BOCs Summary Deportation Order could be implemented. This contention was
rejected by the CA, thus:

During the hearing of petitioners prayer for issuance of a writ of preliminary injunction before Us, respondents counsel from the Office of the Solicitor
General had the occasion to manifest in open court that the State has no opposition to petitioners stay in the country provided he first leave and re-enter
and re-apply for residency if only to comply with the Summary Deportation Order of 1995. That, to Our mind, seems preposterous, if not ridiculous. An
individuals human rights and rights to freedom, liberty and self-determination recognize no boundaries in the democratic, free and civilized world. Such
rights follow him wherever he may be. If presently, there is no factual or legal impediment to disqualify petitioner in his stay in the country, other than
allegedly those relied upon in the Summary Deportation Order of 1995 (as hereinbefore discussed, had ceased to exist), requiring petitioner to leave the
country and re-enter and re-apply for residency makes little sense or no sense at all, more so, in the case of petitioner who, for many years past, had
lived herein and nurtured a family that is Filipino.

Thus, opined, We, therefore, believe and hereby rule, that there is presently every reason to enjoin/prohibit the Bureau of Immigration, respondent
Commissioner Domingo in particular, from presently deporting petitioner.[93]

We agree with the Court of Appeals.The Summary Deportation Order had been rendered moot and academic upon the German Embassys issuance of a
new passport to the respondent. The respondent had been in the Philippines as a permanent resident since July 18, 1986, and had married a Filipino
citizen, with whom he has two children. He is not a burden to the country nor to the people of Palawan. He put up, and has been managing, the Bavaria
Restaurant with about 30 employees. He has no pending criminal case; nor does he have any derogatory record. The respondent was allowed by then
Immigration Commissioner Verceles to renew his passport and was given time to secure a clearance from the German Embassy. The respondent was
able to do so. The case against him for physical injuries was dismissed by the German District Court. Thus, the inceptual basis for the respondents
deportation had ceased to exist.

The power to deport is a police matter against undesirable aliens, whose presence in the country is found to be injurious to the public good. We believe
that the deportation of the respondent late in the day did not achieve the said purpose. The petitioner admitted that there is no longer a factual and legal
basis to disqualify the respondent from staying in the country. He is not an undesirable alien; nor is his presence in the country injurious to public good.
He is even an entrepreneur and a productive member of society.

Arrest, detention and deportation orders of aliens should not be enforced blindly and indiscriminately, without regard to facts and circumstances that will
render the same unjust, unfair or illegal.[94] To direct the respondent to leave the country first before allowing him re-entry is downright iniquitous.[95] If
the respondent does leave the country, he would thereby be accepting the force and effect of the BOCs Summary Deportation Order with its attendant
infirmities. He will thereby lose his permanent resident status and admit the efficacy of the cancellation of his permanent resident visa. Moreover, his
entry into the country will be subject to such conditions as the petitioner may impose.

The deportation of an alien is not intended as a punishment or penalty. But in a real sense, it is. In Bridges v. Wixon,[96] Mr. Justice Murphy declared
that the impact of deportation upon the life of an alien is often as great if not greater than the imposition of a criminal sentence. In dealing with
deportation, there is no justifiable reason for disregarding the democratic and human tenets of our legal system and descending to the practices of
despotism. As Justice Brewer opined in Fong Yue Ting v. United States,[97] deportation is a punishment because it requires first, an arrest, a
deprivation of liberty and second, a removal from home, from family, from business, from property. To be forcibly taken away from home, family,
business and property and sent across the ocean to a distant land is punishment; and that oftentimes is most severe and cruel. It would be putting salt
on the respondents woes occasioned by the BOCs ineptitude. Considering the peculiar backdrop and the equities in this case, the respondents
deportation and the cancellation of his permanent resident visa as a precondition to his re-entry into this country is severe and cruel; it is a form of
punishment.

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

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

CASE NO. 5. Elpidio S. Uy, doing business under the name and style EDISON DEVELOPMENT & CONSTRUCTION - versus -
honorable Court of Appeals and the HERITAGE PARK MANAGEMENT CORPORATION (HPMC),
G.R. No. 157065 July 11, 2006
THIRD DIVISION
QUISUMBING, J.:

This is a Petition for Review seeking to reverse and set aside the Decision[1] dated January 31, 2003 of the Court of Appeals in CA-G.R. SP. No. 69771.

The Heritage Memorial Park is a flagship project of the Bases Conversion Development Authority (BCDA) in Fort Bonifacio. To implement the project,
the BCDA, on September 9, 1994, entered into an agreement denominated as the Pool Formation Trust Agreement[2] (PFTA) with the Philippine
National Bank (PNB) and the Public Estates Authority (PEA). The BCDA was designated as the Project Owner; PEA, the Project Manager; and PNB as
the Trustee.

As project owner, the BCDA was tasked to sell the Heritage Park Investment Certificates to the public and buyers become certificate holders. The
certificate gives the PNB the absolute legal and beneficial title to Heritage Park in trust for the certificate holders. The PNB, as trustee, shall protect the
values of the assets in the trust, receive and have custody over the proceeds from the sale of the certificates, administer the various funds, including
disbursements for project costs and related expenses, turnover the Perpetual Care Fund to the Successor Trustee, turnover custody over documents
pertaining to the Heritage Park and the residual funds to BCDA, and turnover all the documents and records to the Board of Trustees after completion of
the project.[3]

PEA, as project manager, is tasked to implement and complete the various engineering works and improvements of Heritage Park.

On November 20, 1996, PEA and the petitioner, a single proprietorship doing business under the name and style of Edison Development and
Construction, executed a Landscaping and Construction Agreement whereby the petitioner undertook to do all the landscaping, including the
construction of a terrasoleum of the Heritage Park. The Heritage Park Executive Committee[4] approved the agreement on May 29, 1997.[5]

Pursuant to Section 11.01[6] of the PFTA, in April 1999, the certificate holders of the project organized themselves into a non-stock, non-profit
corporation, the Heritage Park Management Corporation (HPMC), now the private respondent herein.

In October 1999, alleging delay in the construction of the projects and huge discrepancy between the Accomplishment Report and the actual physical
accomplishment of petitioner’s construction firm, the Heritage Park Executive Committee terminated the two construction contracts namely, the
landscaping and nursery works, and the construction of the terrasoleum.
On March 17, 2000, pursuant to the terms of the PFTA, HPMC assumed all the functions, duties and responsibilities of the PEA, including those under
an assailed contract.[7]

On May 31, 2001, petitioner filed a complaint[8] against the PEA before the Construction Industry Arbitration Commission (CIAC) where it sought to
recover payment for its progress billings on the said projects.

On December 18, 2001, CIAC promulgated its decision, holding that:

On the basis of the evidence presented and the findings, judgment is hereby rendered in favor of the Claimant Contractor ELPIDIO S. UY and Award is
hereby made on its monetary claims as follows:

P 2,354,607.40- Progress Billing No. 09

2,949,767.71- Progress Billing No. 10
8,197,396.65- Performed Work on Change Order No. 1
16,210,108.28- Equipment Stand-by Costs
6,421,398.50 - Manpower Stand-by Costs
1,045,532.07 - Escalation of Contract Price
2,211,148.26- Unpaid Balance on Materials on Site
489,535.02- Interest on Billing Nos. 9 and 10
3,987,949.39- Attorney’s Fees
445,665.15- Reimbursement of Arbitration fees
- Total Amount

Interest at the rate of 6% per annum on the total amount of P39,879,493.89 (Attorney’s fees and reimbursement of arbitration fees exclude) shall be paid
from the date this Decision is promulgated until finality of this Decision, after which interest at the rate of 12% per annum shall be paid on the total
amount of P39,879,493.89 until full payment of the awarded amount shall have been made. SO ORDERED.

On March 14, 2002, an Alias Writ of Execution[11] was issued by CIAC and on the following day, a Notice of Garnishment was served on private
respondent.

Private respondent HPMC then filed a petition for Injunction/Prohibition before the Court of Appeals on the ground that CIAC had no jurisdiction over the
subject matter since HPMC was not impleaded as a party thereby depriving it of its right to be heard.[12] The appellate court ruled in favor of
respondent, as follows

WHEREFORE, premises considered, the Petition is GRANTED and the assailed three (3) rulings of public respondent in CIAC 21-2001 are hereby
declared VOID AB INITIO and produces no legal effect insofar as the HPMC’s interests are concerned. No costs. SO ORDERED.

Petitioner before us ascribes the following as errors on the part of the appellate court:

I. The Court of Appeals committed gross reversible error and decided questions of substance in a way not in accordance with law and the
applicable decisions of the honorable court when it declared void the CIAC Decision dated 18 December 2001, the Amended Writ of
Execution dated 25 March 2002, and the amended notice of garnishment dated 27 March 2002, on the sole grossly erroneous basis that
respondent HPMC is allegedly a real party-in-interest and an indispensable party in CIAC Case No. 21-2001 for which reason it should
allegedly have been impleaded in said arbitration case, considering that:

A. Under the Pool Formation Trust Agreement (PFTA) which provides for the creation of respondent HPMC, the trusteeship rights conferred upon it
insofar as the heritage funds are concerned were expressly limited by the PFTA itself which earmarked or allocated said funds to answer for liabilities
under the construction agreements entered into by the PEA, thereby constituting respondent HPMC as a mere custodian or escrow agent of said funds;
accordingly, respondent HPMC is not a real party-in-interest or indispensable party to CIAC Case No. 21-2001.
B. By claiming to be the trustee of the construction/development fund, respondent HPMC is estopped from asserting its alleged ownership of said
fund.
C. The construction/development fund was expressly earmarked to pay for the costs of development of the heritage park, including arbitral awards;
and thus, CIAC acted within its discretion when it issued a writ of execution directed against the said fund.

II. The Court of Appeals committed gross and reversible error and decided questions of substance in a way not in accordance with law and
the applicable decisions of the honorable court when it ruled that respondent HPMC is allegedly a real party-in-interest or an
indispensable party considering that the honorable court has already conclusively ruled that there was no valid novation of the
construction agreements between petitioner UY and PEA. In fact, the court of appeals already dismissed a similar petition filed by
respondent HPMC invoking the same groundS as in its petition a quo.

III. The Court of Appeals committed gross reversible error in granting the extraordinary remedies of prohibition and injunction to enjoin the
execution of the award in CIAC Case No. 21-2001, considering that:

A. Respondent HPMC does not have any right, much less a clear and unmistakable right, which would entitle it to the extraordinary remedies of
prohibition and injunction.
B. Respondent HPMC miserably failed to establish that it would suffer any injury, much less grave and irreparable injury, as a result of the execution
of the said award.
C. Respondent HPMC’s said petition for injunction/prohibition was fatally defective in both form and substance; and hence, should have been
dismissed.
D. Respondent HPMC was clearly guilty of forum-shopping when it filed its petition for injunction/prohibition with the court of appeals during the
pendency of a similar petition with the honorable court (G.R. No. 148133).

IV. The court of appeals committed gross reversible error when it went beyond the issues of the case and the allegations in respondent
HPMC’s petition by declaring the CIAC Decision dated 18 December 2001, the Amended Writ of Execution dated 25 March 2002, and
the amended notice of garnishment dated 27 March 2002 as allegedly void ab initio.[14]

Simply stated, the issues for our resolution are: (1) Is HPMC a real party-in-interest or an indispensable party? (2) Does CIAC have jurisdiction over the
dispute? and (3) Was the grant of the writs of injunction/prohibition proper?
Petitioner’s contention is that private respondent HPMC is not a party-in-interest to the case since it is a mere trustee of the construction and
development funds and would not be directly benefited or injured by the outcome of the case.

Private respondent contends that upon its incorporation and election of its Board of Trustees, it assumed ownership of the Heritage Park Project.
Further, since it is a non-stock, non-profit corporation, with the certificate holders as its members, any claim against the PEA is in reality a claim against
all the parties who pooled and contributed their resources for the project; hence, it is an indispensable party.[15]

An indispensable party is one whose interest will be affected by the court’s action in the litigation, and without whom no final determination of the case
can be had. The party’s interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties’ that his
legal presence as a party to the proceeding is an absolute necessity.[16]

Based on the Construction Agreement, PEA entered into it in its capacity as Project Manager, pursuant to the PFTA. According to the provisions of the
PFTA,[17] upon the formation of the HPMC, the PEA would turn over to the HPMC all the contracts relating to the Heritage Park. At the time of the filing
of the CIAC Case on May 31, 2001, PEA ceased to be the Project Manager of the Heritage Park Project, pursuant to Section 11 of the PFTA. Through
a Deed of Assignment,[18] PEA assigned its interests in all the existing contracts it entered into as the Project Manager for Heritage Park to HPMC. As
early as March 17, 2000, PEA officially turned over to HPMC all the documents and equipment in its possession related to the Heritage Park Project.
Petitioner was duly informed of these incidents through a letter dated March 13, 2000.[19] Apparently, as of the date of the filing of the CIAC Case, PEA
is no longer a party-in-interest. Instead, it is now private respondent HPMC, as the assignee, who stands to be benefited or injured by the judgment in
the suit. In its absence, there cannot be a resolution of the dispute of the parties before the court which is effective, complete or equitable.[20] We thus
reiterate that HPMC is an indispensable party.

Does CIAC have jurisdiction over the dispute? Section 4[21] of Executive Order No. 1008[22] is pertinent. It provides that the jurisdiction of the CIAC
over the parties is dependent on the agreement and consent of the parties to the construction contract, to submit their dispute for arbitration. Absent
such consent, the CIAC cannot validly proceed against a party for lack of jurisdiction.

In this instance, both parties agreed to submit the dispute for arbitration. However, the CIAC should have dismissed the same on the ground that the
private respondent was not impleaded, it being an indispensable party to the case.

Indispensable parties must be joined either as plaintiffs or defendants.[23] 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.[24] 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.[25]

It has come to the Court’s attention that from the inception of the case, PEA informed the CIAC that pursuant to the PFTA and the Deed of Assignment,
all its rights and obligations under the contract have already been assigned to private respondent.[26]

The responsibility of impleading all the indispensable parties rests on the plaintiff. The defendant does not have the right to compel the plaintiff to
prosecute the action against a party if he does not wish to do so, but the plaintiff will have to suffer the consequences of any error he might commit in
exercising his option.[27]

As to the third issue -- on the propriety of the writs of injunction/prohibition -- the matter has been mooted by our disquisitions above, and the issue has
become academic.

WHEREFORE, the petition is DENIED, without prejudice to the re-filing of the case against the proper party in interest. Costs against petitioner.

CASE NO. 7. UNITED OVERSEAS BANK PHILS. (formerly WESTMONT BANK) - versus - ROSEMOORE MINING & DEVELOPMENT CORP.
and DRA. LOURDES PASCUAL
G.R. Nos. 159669 & 163521
SECOND DIVISION
Tinga, J.:

We resolve these two consolidated cases, which though with distinct courts of origin, pertain to issues stemming from the same loan transaction.

The antecedent facts follow.

Respondent Rosemoor Mining and Development Corporation (Rosemoor), a Philippine mining corporation with offices at Quezon City, applied for and
was granted by petitioner Westmont Bank[1] (Bank) a credit facility in the total amount of P80 million consisting of P50,000,000.00 as long term loan and
P30,000,000.00 as revolving credit line.[2]

To secure the credit facility, a lone real estate mortgage agreement was executed by Rosemoor and Dr. Lourdes Pascual (Dr. Pascual), Rosemoor’s
president, as mortgagors in favor of the Bank as mortgagee in the City of Manila.[3] The agreement, however, covered six (6) parcels of land located in
San Miguel, Bulacan[4] (Bulacan properties), all registered under the name of Rosemoor,[5] and two (2) parcels of land[6] situated in Gapan, Nueva
Ecija (Nueva Ecija properties), owned and registered under the name of Dr. Pascual.[7]

Rosemoor subsequently opened with the Bank four (4) irrevocable Letters of Credit (LCs) totaling US$1,943,508.11.[8] To cover payments by the Bank
under the LCs, Rosemoor proceeded to draw against its credit facility and thereafter executed promissory notes amounting collectively to
P49,862,682.50.[9] Two (2) other promissory notes were also executed by Rosemoor in the amounts of P10,000,000.00 and P3,500,000.00,
respectively, to be drawn from its revolving credit line.[10]

Rosemoor defaulted in the payment of its various drawings under the LCs and promissory notes. In view of the default, the Bank caused the extra-
judicial foreclosure of the Nueva Ecija properties on 22 May 1998 and the Bulacan properties on 10 August 1998. The Bank was the highest bidder on
both occasions.[11]
 On 8 October 1999, the Bank caused the annotation of the Notarial Certificate of Sale covering the Nueva Ecija properties on the certificates of title
concerned. Later, on 16 March 2001, the Notarial Certificate of Sale covering the Bulacan properties was annotated on the certificates of title of said
properties.[12]

The foregoing facts led to Rosemoor’s filing of separate complaints against the Bank, one before the Regional Trial Court of Manila (Manila RTC) and
the other before the Regional Trial Court of Malolos, Bulacan (Malolos RTC).

The Manila Case (G.R. No. 163521)

On 5 August 1998, Rosemoor and Dr. Pascual filed a Complaint, originally captioned as one for “Damages, Accounting and Release of Balance of Loan
and Machinery and for Injunction” before the Manila RTC.[13] Impleaded as defendants were the Bank and Notary Public Jose Sineneng, whose office
was used to foreclose the mortgage.[14] The complaint was twice amended, the caption eventually reflecting an action for “Accounting, Specific
Performance and Damages.”[15] Through the amendments, Pascual was dropped as a plaintiff while several officers of the Bank were included as
defendants.[16]

The Bank moved for the dismissal of the original and amended complaints on the ground that the venue had been improperly laid.[17] The motion was
denied by the trial court through an Omnibus Resolution dated 24 January 2000.[18]

Rosemoor’s prayer in the Second Amended Complaint, which was filed in November of 1999, reads as follows:

WHEREFORE, plaintiff Rosemoor Mining & Development Corporation respectfully prays that, after trial of the issues, this court promulgate judgment –

1. Directing Westmont to render an accounting of the loan account of Rosemoor under the Long Term Loan Facility and the Revolving Credit Line
at least up to the dates of foreclosure of Rosemoor’s mortgaged properties on May 22, 1998 and August 18, 1998, showing among others (a) the sums
of money paid by Rosemoor or otherwise debited from its deposit account in payment of the loans it had obtained from Westmont to cover the cost of
the machinery to be imported under the Unpaid LCs and under LC No. 97-058 for the tiling plant, as well as for working capital, and (b) all interests,
penalties and charges imposed on the loans pertaining to the Unpaid LCs and LC No. 97-058 and for which Westmont had foreclosed Rosemoor’s and
Dra. Pascual’s real estate mortgage; (c) the amount of import and customs duties, demurrage, storage and other fees which Rosemoor had paid or
which was otherwise debited from Rosemoor’s deposit account, in connection with the importation of the tiling plant and as a consequence of the non-
release thereof by Westmont;
2. Ordering all the defendants jointly and severally to pay to Rosemoor, by way of actual damages, the dollar equivalent of the amounts in (1) (a),
(b) and (c) at the exchange rate prevailing at the time of the opening of the LCs;
3. Ordering defendants jointly and severally to pay to Rosemoor actual damages for operational losses suffered by Rosemoor due to its failure
to use the tiling plaint which Westmont had refused to release to Rosemoor, in such amount as may be proven at the trial;
4. Directing the defendants jointly and severally to pay, by way of correction for the public good, exemplary damages in the amount of P
500,000.00 each;
5. Ordering defendants jointly and severally to indemnify Rosemoor in the sum of P350,000.00, representing attorney’s fees and litigation
expenses incurred by Rosemoor for the protection and enforcement of its rights and interests.

Plaintiff prays for further and other relief as may be just and equitable under the circumstances. [19]

On 15 August 2002, the Bank filed another motion to dismiss the Second Amended Complaint on the ground of forum-shopping since, according to it,
Rosemoor had filed another petition earlier on 11 March 2002 before the Malolos RTC.[20] The Bank contended that as between the action before the
Manila RTC and the petition before the Malolos RTC, there is identity of parties, rights asserted, and reliefs prayed for, the relief being founded on the
same set of facts. The Bank further claimed that any judgment that may be rendered in either case will amount to res judicata in the other case.[21]
Still, the

Manila RTC denied the motion to dismiss.[22] It also denied the Bank’s motion for reconsideration of the order of denial.[23]

The Bank challenged the Manila RTC’s denial of the Bank’s second motion to dismiss before the Court of Appeals, through a petition for certiorari. The
appellate court dismissed the petition in a Decision dated 26 February 2004.[24] The Bank filed a motion for reconsideration which, however, was denied
through a Resolution dated 30 April 2004.[25]

In the Petition for Review on Certiorari in G.R. No. 163521, the Bank argues that the Court of Appeals erred in holding that no forum-shopping attended
the actions brought by Rosemoor.[26]

The Malolos Case (G.R. No. 159669)

After the complaint with the Manila RTC had been lodged, on 11 March 2002, Rosemoor and Dr. Pascual filed another action against the Bank, this time
before the Malolos RTC. Impleaded together with the Bank as respondent was the Register of Deeds for the Province of Bulacan in the Petition for
Injunction with Damages, with Urgent Prayer for Temporary Restraining Order and/or Preliminary Injunction.[27]

In the Malolos case, Rosemoor and Dr. Pascual alleged that the redemption period for the Bulacan properties would expire on 16 March 2002. They
claimed that the threatened consolidation of titles by the Bank is illegal, stressing that the foreclosure of the real estate mortgage by the Bank was
fraudulent and without basis,[28] as the Bank had made them sign two blank forms of Real Estate Mortgage and several promissory notes also in blank
forms. It appeared later, according to Rosemoor and Dr. Pascual, that the two Real Estate Mortgage blank forms were made as security for two loans,
one for P80 million and the other for P48 million, when the total approved loan was only for P80 million. The Bank later released only the amount of P10
million out of the P30 million revolving credit line, to the prejudice of Rosemoor, they added.[29]

The Petition’s prayer reads as follows:

WHEREFORE, premises considered, it is most respectfully prayed that this Honorable Court –

1. Issue ex-parte a temporary restraining order before the matter could be heard on notice to restrain and enjoin respondent BANK from
proceeding with its threatened consolidation of its titles over the subject properties of petitioner Rosemoor in San Miguel, Bulacan covered by TCT Nos.
42132; 42133; 42134; 42135; 42136 and RT 34569 (T-222448) on March 16, 2002 or at any time thereafter; that the respondent Register of Deeds for
the Province of Bulacan be enjoined and restrained from registering any document(s) submitted and/or to be submitted by respondent BANK
consolidating its titles over the above-named properties of petitioner Rosemoor in San Miguel, Bulacan; and likewise, that the Register of Deeds for the
province of Bulacan be restrained and enjoined from canceling the titles of Rosemoor over its properties, namely, TCT Nos. 42132; 42133; 42134;
42135; 42136 and RT 34569 (T-222448);
2. That after due notice, a writ of preliminary injunction be issued upon the posting of a bond in such amount as may be fixed by this Court;
3. That after due hearing and trial, judgment be rendered in favor of petitioners and against respondent BANK –

a. Permanently enjoining respondent BANK from proceeding with the consolidation of its titles to the subject properties of Rosemoor covered by
TCT Nos. 42132; 42133; 42134; 42135; 42136 and RT 34569 (T-222448); and permanently restraining respondent Register of Deeds for the Province of
Bulacan from registering any document(s) submitted and/or to be submitted by respondent BANK consolidating its titles over the above-named
properties of petitioner Rosemoor in San Miguel, Bulacan; and likewise, that the Register of Deeds for the province of Bulacan be restrained and
enjoined from cancelling the titles of Rosemoor over its properties, namely, TCT Nos. 42132; 42133; 42134; 42135; 42136 and RT 34569 (T-222448);
b. Declaring the foreclosures of Real Estate Mortgages on the properties of petitioners Rosemoor and Dra. Pascual to be null and void;
c. Recognizing the ownership in fee simple of the petitioners over their properties above-mentioned;
d. Awarding to petitioners the damages prayed for, including attorney’s fees and costs and expenses of litigation.

Petitioners pray for such other reliefs and remedies as may be deemed just and equitable in the premises.[30]

As it did before the Manila RTC, the Bank filed a motion to dismiss on 26 March 2002 on the ground that Rosemoor had engaged in forum-shopping,
adverting to the pending Manila case.[31] The Bank further alleged that Dr. Pascual has no cause of action since the properties registered in her name
are located in Nueva Ecija. The Malolos RTC denied the motion to dismiss in an Order dated 13 May 2002.[32] In the same Order, the Malolos RTC
directed the Bank to file its answer to the petition within five (5) days from notice.[33]

Despite receipt of the Order on 21 May 2002, the Bank opted not to file its answer as it filed instead a motion for reconsideration on 5 June 2002.[34]
Meanwhile, Rosemoor and Dr. Pascual moved to declare the Bank in default for its failure to timely file its answer.[35] On 10 September 2002, the
Malolos RTC issued an order denying the Bank’s motion for reconsideration for lack of merit and at the same time declaring the Bank in default for
failure to file its answer.[36]

Hence, the Bank filed a second petition for certiorari before the Court of Appeals, where it assailed the Orders dated 13 May 2002 and 10 September
2002 of the Malolos RTC. During the pendency of this petition for certiorari, the Malolos RTC decided the Malolos case on the merits in favor of
Rosemoor.[37] The decision in the Malolos case was also appealed to the Court of Appeals.[38] Based on these developments, the appellate court
considered the prayer for preliminary injunction as moot and academic and proceeded with the resolution of the petition, by then docketed as CA-G.R.
SP No.73358, on the merits. The appellate court dismissed the petition in a Decision dated 20 June 2003.[39] Undaunted, the Bank filed the petition in
G.R. No. 159669 before this Court.

The two petitions before this Court have been consolidated. We find one common issue in G.R. No. 159669 and G.R. No. 163521 – whether Rosemoor
committed forum-shopping in filing the two cases against the Bank. The other issues for resolution were raised in G.R. No. 159669, pertaining as they do
to the orders issued by the Malolos RTC. These issues are whether the action to invalidate the foreclosure sale was properly laid with the Malolos RTC
even as regards the Nueva Ecija properties; whether it was proper for the Malolos RTC to declare the Bank in default; and whether it was proper for the
Malolos RTC to deny the Bank’s motion to dismiss through a minute resolution.

Forum-Shopping

The central issue in these consolidated cases is whether Rosemoor committed forum-shopping in filing the Malolos case during the pendency of the
Manila case.

The essence of forum-shopping is the filing of multiple suits involving the same parties for the same cause of action, either simultaneously or
successively, for the purpose of obtaining a favorable judgment.[41] The elements of forum-shopping are: (a) identity of parties, or at least such parties
as represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and (c)
the identity with respect to the two preceding particulars in the two cases is such that any judgment rendered in the pending cases, regardless of which
party is successful, amount to res judicata in the other case.[42]

As to the existence of identity of parties, several bank officers and employees impleaded in the Amended Complaint in the Manila case were not
included in the Malolos case. These bank officers and employees were sued in Manila in their personal capacity. A finding of negligence or bad faith in
their participation in the preparation and execution of the loan agreement would render them personally liable. Dr. Pascual, on the other hand, was
included as petitioner only in the Malolos case because it involved properties registered in her name. As correctly pointed out by the Court of Appeals,
Dr. Pascual is a real party-in-interest in the Malolos case because she stood to benefit or suffer from the judgment in the suit. Dr. Pascual, however, was
not included as plaintiff in the Manila case because her interest therein was not personal but merely in her capacity as officer of Rosemoor.

As regards the identity of rights asserted and reliefs prayed for, the main contention of Rosemoor in the Manila case is that the Bank had failed to
deliver the full amount of the loan, as a consequence of which Rosemoor demanded the remittance of the unreleased portion of the loan and payment of
damages consequent thereto.[43] In contrast, the Malolos case was filed for the purpose of restraining the Bank from proceeding with the consolidation
of the titles over the foreclosed Bulacan properties because the loan secured by the mortgage had not yet become due and demandable.[44] While the
right asserted in the Manila case is to receive the proceeds of the loan, the right sought in the Malolos case is to restrain the foreclosure of the properties
mortgaged to secure a loan that was not yet due.

Moreover, the Malolos case is an action to annul the foreclosure sale that is necessarily an action affecting the title of the property sold.[45] It is
therefore a real action which should be commenced and

tried in the province where the property or part thereof lies.[46] The Manila case, on the other hand, is a personal action[47] involving as it does the
enforcement of a contract between Rosemoor, whose office is in Quezon City, and the Bank, whose principal office is in Binondo, Manila.[48] Personal
actions may be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where the defendants or any of the principal
defendants resides, at the election of the plaintiff.

It was subsequent to the filing of the Manila case that Rosemoor and Dr. Pascual saw the need to secure a writ of injunction because the consolidation
of the titles to the mortgaged properties in favor of the Bank was in the offing. But then, this action can only be commenced where the properties, or a
portion thereof, is located. Otherwise, the petition for injunction would be dismissed for improper venue. Rosemoor, therefore, was warranted in filing the
Malolos case and cannot in turn be accused of forum-shopping.

Clearly, with the foregoing premises, it cannot be said that respondents committed forum-shopping.
Action to nullify foreclosure sale of mortgaged properties in Bulacan and Nueva Ecija before the Malolos RTC

The Bank challenges the Malolos RTC’s jurisdiction over the action to nullify the foreclosure sale of the Nueva Ecija properties along with the Bulacan
properties. This question is actually a question of venue and not of jurisdiction,[50] which if improperly laid, could lead to the dismissal of the case.[51]

The rule on venue of real actions is provided in Section 1, Rule 4 of the 1997 Rules of Civil Procedure, which reads in part:

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.

The venue of the action for the nullification of the foreclosure sale is properly laid with the Malolos RTC although two of the properties together with the
Bulacan properties are situated in Nueva Ecija. Following the above-quoted provision of the Rules of Court, the venue of real actions affecting
properties found in different provinces is determined by the singularity or plurality of the transactions involving said parcels of land. Where said parcels
are the object of one and the same transaction, the venue is in the court of any of the provinces wherein a parcel of land is situated.[52]

Ironically, the Bank itself correctly summarized the applicable jurisprudential rule in one of the pleadings before the Court.[53] Yet the Bank itself has
provided the noose on which it would be hung. Resorting to deliberate misrepresentation, the Bank stated in the same pleading that “the Bulacan and
Nueva Ecija [p]roperties were not the subject of one single real estate mortgage contract.”[54]

In the present case, there is only one proceeding sought to be nullified and that is the extra-judicial mortgage foreclosure sale. And there is only one
initial transaction which served as the basis of the foreclosure sale and that is the mortgage contract. Indeed, Rosemoor, through Dr. Pascual, executed
a lone mortgage contract where it undertook to “mortgage the land/real property situated in Bulacan and Nueva Ecija,” with the list of mortgaged
properties annexed thereto revealing six (6) properties in Bulacan and two (2) properties in Nueva Ecija subject of the mortgage.

This apparent deliberate misrepresentation cannot simply pass without action. The real estate mortgage form supplied to Rosemoor is the Bank’s
standard pre-printed form. Yet the Bank perpetrated the misrepresentation. Blame must be placed on its doorstep. But as the Bank’s pleading was
obviously prepared by its counsel, the latter should also share the blame. A lawyer shall not do any falsehood, nor consent to the doing of any in court;
nor shall he mislead, or allow the Court to be misled by any artifice.[55] Both the Bank’s president and counsel should be made to explain why they
should not be sanctioned for contempt of court.

Propriety of Default Order

The Court of Appeals did not touch upon the soundness or unsoundness of the order of default although it is one of the orders assailed by the Bank.
However, the silence of the appellate court on the issue does not improve the legal situation of the Bank.

To recall, the Bank filed a motion to dismiss the Malolos case. The Malolos RTC denied the motion in an Order dated 13 May 2002.[56] In the same
Order, the Malolos RTC directed the Bank to file its answer to the petition within five (5) days from the receipt of the Order.[57] The Bank received a
copy of the Order on 21 May 2002. Instead of filing an answer, the Bank filed a motion for reconsideration but only on 5 June 2002.[58]

The motion for reconsideration[59] could not have tolled the running of the period to answer for two reasons. One, it was filed late, nine (9) days after the
due date of the answer. Two, it was a mere rehash of the motion to dismiss; hence, pro forma in nature. Thus, the Malolos RTC did not err in declaring
the Bank in default.

Deviation from the Prescribed Content of an Order Denying a Motion to Dismiss

Finally, the Bank questions the Malolos RTC’s Order dated 13 May 2002 denying its motion to dismiss on the ground that it is contrary to law and
jurisprudence because it had failed to apprise the Bank of the legal basis for the denial.

The Bank adverts to the content requirement of an order denying a motion to dismiss prescribed by Sec. 3, Rule 16 of the Rules of Court. The Court in
Lu Ym v. Nabua[60] made a thorough discussion on the matter, to quote:

Sec. 3, Rule 16 of the Rules provides:

Sec. 3. Resolution of motion.—After the hearing, the court may dismiss the action or claim, deny the motion or order the amendment of the pleading.

The court shall not defer the resolution of the motion for the reason that the ground relied upon is not indubitable.

In every case, the resolution shall state clearly and distinctly the reasons therefor.

Further, it is now specifically required that the resolution on the motion shall clearly and distinctly state the reasons therefor. This proscribes the
common practice of perfunctorily dismissing the motion for “lack of merit.” Such cavalier dispositions can often pose difficulty and
misunderstanding on the part of the aggrieved party in taking recourse therefrom and likewise on the higher court called upon to resolve the same,
usually on certiorari.[61]

The questioned order of the trial court denying the motion to dismiss with a mere statement that there are justiciable questions which require a full blown
trial falls short of the requirement of Rule 16 set forth above. Owing to the terseness of its expressed justification, the challenged order ironically suffers
from undefined breadth which is a hallmark of imprecision. With its unspecific and amorphous thrust, the issuance is inappropriate to the grounds
detailed in the motion to dismiss.

While the requirement to state clearly and distinctly the reasons for the trial court’s resolutory order under Sec. 3, Rule 16 of the Rules does call for a
liberal interpretation, especially since jurisprudence dictates that it is decisions on cases submitted for decision that are subject to the stringent
requirement of specificity of rulings under Sec. 1, Rule 36[62] of the Rules, the trial court’s order in this case leaves too much to the imagination.
(Emphasis supplied.)[63]

The assailed order disposed of the motion to dismiss in this wise:

 After a careful scrutiny of the grounds cited in the Motion to Dismiss and the arguments en contra contained in the Opposition thereto and finding the
Motion to Dismiss to be not well taken as grounds cited are not applicable to the case at bar, the Court hereby DENIES the instant Motion to Dismiss.

Clearly, the subject order falls short of the content requirement as expounded in Lu Ym v. Nabua. Despite the aberration, however, the Bank was not
misled, though it could have encountered difficulties or inconvenience because of it. Comprehending, as it did, that the Malolos RTC did not share its
position that Rosemoor had engaged in forum-shopping, it went to great lengths to impress upon the Court of

Appeals that there was indeed forum-shopping on Rosemoor’s part. But the appellate court did not likewise agree with the Bank as it soundly debunked
the forum-shopping charge. In fact, the same forum-shopping argument has been fully ventilated before the Court but we are utterly unimpressed as we
made short shrift of the argument earlier on. In the ultimate analysis, therefore, the trial court’s blunder may be overlooked as it proved to be harmless.

WHEREFORE, considering the foregoing, the Decision of the Court of Appeals in G.R. 163521 dated 26 February 2004 and in G.R No. 159669 dated
20 June 2003 are AFFIRMED. Costs against petitioner. Petitioner, United Overseas Bank, Phils. and its counsel, Siguion Reyna Montecillo & Ongsiako
Law Offices, are given ten (10) days from notice to EXPLAIN why they should not be held in contempt of court for making a misrepresentation before the
Court as adverted to in this Decision.

CASE NO. 7. CHARLES LIMBAUAN - versus - FAUSTINO ACOSTA

G.R. No. 148606 June 30, 2008
FIRST DIVISION
LEONARDO-DE CASTRO, J.:

In this petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner seeks to set aside and annul the Decision[1]
dated June 26, 2001 rendered by the Court of Appeals (CA), Thirteenth Division, in CA-G.R. SP No. 49144.

The CA decision affirmed an earlier decision[2] of the Regional Trial Court (RTC) of Caloocan City, Branch 125, dated March 12, 1998 which also
affirmed the decision[3] dated December 29, 1997 of the Metropolitan Trial Court (MTC), Caloocan City, Branch 52, ordering herein petitioner to
surrender possession of the property in question and pay the unpaid monthly rentals thereon.

The pertinent facts, as found by the CA, are quoted hereunder:

Sometime in 1938, the Government acquired the Tala Estate consisting of 808 hectares, located in Kalookan, primarily for a leprosarium. However, the
State utilized only one-fifth of the property for the purpose. More, under Republic Act 4085, it was no longer mandatory for the segregation of
hansenites. Consequently, the State needed a lesser portion of the property for the leprosarium. In the meantime, the State found it necessary to
establish new residential areas within a 20-kilometer radius from the center of the Metropolitan Manila and/or utilizing inexpensive land in order to serve
low-income families whose housing needs can only be met by the Government. On April 26, 1971, President Ferdinand E. Marcos issued Proclamation
No. 843 allocating the property to the Department of Health, the National Housing Corporation, the PHHC and Department of Social Welfare and
Development xxx.

It was also decreed that, more precise identities of the parcels of land allocated to the government will be made only after a final survey shall have been
completed. A joint PHHC-Bureau of Lands team was tasked to undertake the necessary segregation survey and inquiries on private rights within the
Estate. In the Interim, it was decreed that no transfer of title shall be made until the enactment of a law allowing the use of the site for purposes other
than that of a leprosarium.

In the meantime, Faustino Acosta took possession of a vacant portion of the Tala Estate and constructed his house thereon, bearing address No. 786,
Barrio San Roque, Barangay 187, Tala, Caloocan City. In August, 1982, Faustino Acosta, who was then a Barangay Councilman, executed a deed
styled “Registration of Property”, attested by the Barangay Captain, over another vacant portion of the Estate, west of the Barangay Hall, with an area of
150 square meters, bearing the following boundaries:

NORTH: WAITING SHED……SOUTH: JUAN DAMIAN WEST: NITA CRUZ, RESTAURANT…..EAST: BRGY. HALL…187 (at page 7, Records)

Faustino Acosta then took possession of the property, constructed a fence around the perimeter of the property and planted vegetables thereon.
However, in 1984, Paulino Calanday took possession of the said property without the consent of Faustino, constructed an edifice thereon and used the
same as a beerhouse. When Faustino remonstrated, Paulino filed two (2) criminal complaints against Faustino with the Metropolitan Trial Court, entitled
and docketed “People versus Faustino Acosta, Criminal Case Nos. 143550-51”, for “Malicious Michief” and “Unjust Vexation”. However, on September
27, 1985, the Court issued an Order dismissing the cases for failure of Paulino to comply with PD 1508.

Paulino, in the meantime, conveyed the beerhouse to Juanita Roces. The latter and Faustino entered into an oral contract of lease over the parcel of
land for a monthly rental of P60.00. About a year thereafter, Juanita suddenly stopped paying to Faustino her rentals for the property. It turned out that
Juanita conveyed the beerhouse to her nephew, Charles Limbauan, who forthwith assumed the lease from his aunt and who, thenceforth, paid the
monthly rentals for the property in the amount of P60.00 to Faustino. However, in November, 1987, Charles stopped paying rentals to Faustino claiming
that, since the property was government property, Faustino had no right to lease the same and collect the rentals therefore. However, Faustino did not
file any complaint nor unlawful detainer against Charles.

Sometime in February, 1995, Congress approved Republic Act 7999 under which the State converted a portion of the Estate, with a total area of 120
hectares, for use as a housing site for residents and employees of the Department of Health, with the National Housing Authority as the leading
implementing agency:

(a) Seventy (70) hectares of the one hundred thirty (130) hectares reserved for the leprosarium and settlement site of the hansenites and their
families under Proclamation No. 843 are hereby declared alienable and disposable for use as a housing site for the bona fide residents, hansenites and
their immediate families and for qualified employees of the Department of Health: Provided, That if the said beneficiary is an employee of the Deparment
of Health, the said employee must have been assigned in the Tala Leprosarium and must have been a resident thereat for at least five (5) years:
Provided, further, That the residential lot awarded to the beneficiaries under this Act shall not be transferred, conveyed or assigned to any other person
for a period of twenty-five (25) years, except to legal heirs by way of succession; and
(b) The fifty (50) hectares reserved for the plants, installations and pilot housing project of the National Housing Corporation, as provided in the
same proclamation, are hereby declared as alienable and disposable: Provided, That twenty-nine (29) hectares of the said fifty (50) hectares shall be
converted into a housing site exclusively for the bona fide and qualified residents of the area. (idem, supra)
After the passage by Congress of Republic Act 7999, Faustino filed a complaint against Charles with the Lupon for ejectment for failure of Charles to pay
his rentals from October, 1987. On April 15, 1995, the Lupon issued a “Certification to File Action” (at page 9, Records). Republic Act 7999 became
law on April 22, 1995, without the signature of the President.

On January 2, 1996, Faustino, through Law Interns in the office of Legal Aid of the University of the Philippines, sent a letter to Charles demanding that
the latter vacate the property within five (5) days from notice for his failure to pay the monthly rentals in the amount of P60.00 a month since October,
1987. Charles Limbauan ignored the letter and refused to vacate the property.

Faustino, forthwith, filed, on February 7, 1996, a complaint for “Unlawful Detainer” against Charles with the Metropolitan Trial Court, entitled and
docketed “Faustino Acosta versus Charles Limbauan, Civil Case No. 22521”, praying that, after due proceedings, judgment be rendered in his favor as
follows:

PRAYER

WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered in favor of plaintiff and against the defendant as follows:

1. To order the immediate restoration of the premises to plaintiff in accordance with Rule 70, Sec. 3 of the Rules of Court;
2. Ordering the defendants to pay to plaintiff the sum of P60.00 a month plus interest from November 1987 until they vacate the premises;
2.(sic) Ordering defendant to pay plaintiff the sum of P10,000.00 by way of moral damages;
3. Such other remedies as may be just and equitable under the premises. (at page 4, Records)

Upon suggestion of the Court, Faustino Acosta, through the Law Interns, sent another letter of demand to Charles Limbauan, dated March 7, 1996,
demanding that the latter vacate the property this time within fifteen (15) days from notice, otherwise, Faustino will institute the appropriate action for his
eviction from the property. Charles Limbauan received the letter, on March 13, 1996, but refused to vacate the property. Faustino forthwith filed a
“Motion to Approve Attached Amended Complaint” with the Court which was granted by the Court.

In his Answer to the Complaint, Charles alleged, inter alia that Faustino had no cause of action against him because the property on which the
beerhouse was constructed is owned by the government since the government is the owner of the property, Faustino had no right of possession over the
property and collect rentals therefore. Besides, it was unfair for Faustino, who was already in possession of the lot at No. 786 B. San Roque, Barangay
187 to still claim possession over the subject property. The Defendant interposed the defense that the Court had no jurisdiction over the action of the
Plaintiff as it was one of accion publiciana and not one for unlawful detainer.

On December 29, 1997, the Court promulgated a Decision in favor of the Plaintiff and against the Defendant, the decretal portion of which reads as
follows:

DISPOSITION BY THE COURT:

Premises considered, decision is rendered for the plaintiff, Faustino Acosta, and against the defendant, Charles Limbauan, directing the latter and all
those claiming under him to vacate the premises specifically described as the parcel of commercial land located at the west portion of the barangay hall,
barangay 187, Zone 16, B. Sto. Nino, Tala, Caloocan City, to surrender peaceful possession of the same to the former, and to pay him the following
amounts:

a. P60.00 monthly from November, 1987, as reasonable compensation for the use and occupancy of the parcel of land subject matter of this case
with legal interests from today up to the actual surrender of the same.

b. P130.00 by way of reimbursement for costs of suit as shown by the receipts on record.

Given in Chambers. (at page 79, Records)

The Court found and declared that the Plaintiff adduced evidence that the Defendant was the lessee of the Plaintiff over the property and, hence, the
latter was estopped from assailing Plaintiff’s title over the property.

The Defendant interposed an appeal from said Decision to the Regional Trial Court which, on August 28, 1998, rendered a Decision affirming the
Decision of the Court a quo.

The Petitioner forthwith filed a “Petition for Review” with this Court (Court of Appeals), under Rule 42 of the 1997 Rules of Civil Procedure, and posed,
for our resolution, the following issues: (a) whether or not the remedy of the Respondent in the Metropolitan Trial Court for unlawful detainer was proper;
(b) the subject property was government property and, hence, cannot be the lawful subject of a lease contract between the Petitioner and Respondent
and, hence, the latter had no right to have the Petitioner evicted from the property and to collect rentals from him. It was inappropriate for the trial court,
and the Regional Trial Court, to apply and rely on Section 2(b), Rule 131 of the Rules of Evidence.

On June 26, 2001, the CA dismissed the aforementioned Petition for Review and affirmed the decision of the RTC.

Hence, this petition for review which seeks the reversal of the said CA decision on the basis of the issues quoted hereunder:

a) DID THE HONORABLE COURT OF APPEALS IN RENDERING THE ASSAILED DECISION COMMIT GRAVE ABUSE OF DISCRETION
AMOUNTING TO EXCESS OF JURISDICTION?

b) WHETHER OR NOT THE CASE IS RENDERED MOOT AND ACADEMIC ON ACCOUNT OF THE DEATH OF THE RESPONDENT.[4]

In relation to the aforequoted issues, the petitioner adduces the following arguments:

(1) The right application of laws under Rule 70 and Rule 10 in relation with the law on jurisdiction over the case was ignored.
(2) The amendment under Section 2, Rule 10, Rules of Court is a futile remedy when the Court has no jurisdiction over the case.
(3) The alleged existence of lessor-lessee relationship between the parties had not been sufficiently established.
(4) The fact of death of respondent rendered the case moot and academic.[5]
 The first and second arguments advanced by petitioner are interrelated. Thus, they shall be discussed jointly. Petitioner argues that there must
be a prior demand to vacate the leased premises and pay the rent and a 15-day period from the time of demand must have lapsed before a complaint
for unlawful detainer may be commenced pursuant to Section 2, Rule 70. According to petitioner, respondent’s demand letter gave the petitioner a five-
day period only instead of fifteen (15) days within which to comply with the demand to vacate. A jurisdictional requisite, not having been complied with,
the MTC did not acquire jurisdiction over the case.

Section 2, Rule 70 of the Revised Rules of Court provides as follows:

Sec. 2. Lessor to proceed against lessee only after demand. –Unless otherwise stipulated, such action by the lessor shall be commenced only after
demand to pay or comply with the conditions of the lease and to vacate is made upon the lessee, or by serving written notice of such demand upon the
person found on the premises, or by posting such notice on the premises if no person be found thereon, and the lessee fails to comply therewith after
fifteen (15) days in the case of land or five (5) days in the case of buildings.

As contemplated in the aforecited rule, the demand to pay rent and vacate is necessary if the action for unlawful detainer is anchored on the non-
payment of rentals, as in the instant case. The same rule explicitly provides that the unlawful detainer suit must be commenced only if the lessee fails to
comply after the lapse or expiration of fifteen (15) days in case of lands and five (5) days in case of buildings, from the time the demand is made upon
the lessee. The demand required and contemplated in Section 2 of Rule 70 is a jurisdictional requirement for the purpose of bringing an unlawful
detainer suit for failure to pay rent. It partakes of an extrajudicial remedy that must be pursued before resorting to judicial action such that full compliance
with the demand would render unnecessary a court action.[6]

Hence, it is settled that for the purpose of bringing an ejectment suit, two requisites must concur, namely: (1) there must be failure to pay rent or to
comply with the conditions of the lease and (2) there must be demand both to pay or to comply and vacate within the periods specified in Section 2,
particularly, 15 days in the case of land and 5 days in the case of buildings. The first requisite refers to the existence of the cause of action for unlawful
detainer while the second refers to the jurisdictional requirement of demand in order that said cause of action may be pursued.[7]

As the subject matter of the instant case is a parcel of land, the expiration of the aforesaid fifteen-day period is a prerequisite to the filing of an action for
unlawful detainer. As to whether respondent observed this fifteen-day period, an affirmative answer can be gleaned from the evidence on record.
Respondent’s first demand letter dated January 2, 1996 gave petitioner five (5) days from receipt within which to pay the unpaid rentals and vacate the
premises. Petitioner received the demand letter on January 10, 1996 while respondent brought the action for unlawful detainer on February 7, 1996,
which was clearly more than 15 days from the time petitioner received the demand letter on January 10, 1996 and well within the one-year period set
forth by Section 1, Rule 70.[8] Thus, the fact that respondent’s demand letter granted petitioner five (5) days to pay and to vacate the subject property is
of no moment because what is important and required under Section 2 of Rule 70 is for the lessor to allow a period of fifteen (15) days to lapse before
commencing an action for unlawful detainer. Evidently, respondent actually complied with this requirement. For this reason, we find no error in the MTC
assuming jurisdiction over respondent’s complaint and in not dismissing the same.

Moreover, upon the advice of the MTC, respondent sent another demand letter dated March 7, 1996 to petitioner, this time giving the latter fifteen (15)
days within which to vacate the subject property and when petitioner still refused, respondent was compelled to file a Motion to Approve Attached
Amended Complaint. The said motion was rightly granted by the MTC in accordance with Section 2, Rule 10 of the Revised Rules of Court, to wit:

Sec. 2. Amendments as a matter of right. — A party may amend his pleading once as a matter of course 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.

Under this provision, a party has the absolute right to amend his pleading whether a new cause of action or change in theory is introduced, at any
time before the filing of any responsive pleading.[9] Undoubtedly, when respondent filed his Amended Complaint on May 16, 1996,[10] no responsive
pleading had yet been filed by petitioner, thus, the MTC validly admitted the said amended complaint.

It is well-settled that amendment of pleadings is favored and should be liberally allowed in the furtherance of justice in order to determine every case as
far as possible on its merits without regard to technicalities. This principle is generally recognized in order that the real controversies between the parties
are presented, their rights determined and the case decided on the merits without unnecessary delay to prevent circuity of action and needless expense.

Petitioner also contends that the MTC’s purpose for admitting the amended complaint was to eliminate the jurisdictional defect of the original complaint.
Petitioner cites the cases of Rosario v. Carandang[12] and Gaspar v. Dorado[13] which declared that the amendment of the complaint could not be
allowed when its purpose is to confer jurisdiction upon the court, since the court must first acquire jurisdiction over the case in order to act validly therein.
Petitioner’s contention is devoid of merit. As earlier discussed, respondent’s original complaint was free from any jurisdictional flaw and the MTC had
jurisdiction over the case to begin with. Thus, the cited cases are not applicable in the instant case. Hence, the MTC was correct in allowing the
amendment.

Furthermore, it is a well-settled rule that what determines the nature of an action as well as which court has jurisdiction over it are the allegations of the
complaint and the character of the relief sought.[14] A complaint for unlawful detainer is deemed sufficient if it alleges that the withholding of the
possession or the refusal to vacate is unlawful, without necessarily employing the terminology of the law.[15] Here, respondent alleged that he acquired
possessory rights over the subject property by virtue of a government grant. He leased the property to petitioner for a monthly rental of P60.00. When
petitioner failed to pay the rentals, respondent eventually sent two demand letters asking petitioner to pay and vacate the premises. Petitioner refused,
thereby depriving respondent of possession of the subject property. Clearly, the complaint alleges the basic elements of an unlawful detainer case,
which are sufficient for the purpose of vesting jurisdiction over it in the MTC.

Likewise, petitioner’s allegation in his petition that he received respondent’s second demand letter on May 8, 1996 was belied by the records of this
case, the truth being that, the said demand letter dated March 7, 1996 was received by petitioner on March 13, 1996.[16] The letter granted petitioner
fifteen (15) days within which to pay and vacate the subject property. Respondent’s Amended Complaint was filed on May 16, 1996 which was obviously
two (2) months from the time petitioner had notice of the demand, and again more than 15 days as required by Section 2, Rule 70.

In sum, respondent clearly satisfied the jurisdictional requirement of prior demand to vacate within the period set by the rules. The MTC validly acquired
jurisdiction over both the original complaint and the amended complaint.

Petitioner next argues that no lessor-lessee relationship existed between him and respondent. This argument clearly deals with a question of fact. In
petitions for review on certiorari under Rule 45 of the Rules of Court, only questions of law may be put in issue. Questions of fact cannot be
entertained.[17] The issue of whether or not a lessor-lessee relationship existed between the herein parties is a question of fact which we cannot pass
upon as it would entail a re-evaluation of the evidence and a review of the factual findings thereon of the courts a quo. As a rule, factual findings of the
trial court, especially those affirmed by the CA, are conclusive on this Court when supported by the evidence on record.[18] We find no cogent reason
to disturb the findings of the MTC and the RTC, which the Court of Appeals had affirmed.

Lastly, petitioner capitalizes on the failure of respondent’s counsel to inform the court of the death of his client, Faustino Acosta, who passed away on
October 22, 2000[19] while the case was pending appeal with the CA. He avers that such failure rendered the case moot and academic as no proper
substitution of a party was effected in compliance with Rule 3, Section 16 of the Rules of Court.

Section 16, Rule 3 of the Revised Rules of Court provides that:

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 first 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.
xxx.

It is well settled that the failure of counsel to comply with his duty under Section 16 to inform the court of the death of his client and no substitution of
such party is effected, will not invalidate the proceedings and the judgment thereon if the action survives the death of such party. Moreover, the decision
rendered shall bind his successor-in-interest.[20] The instant action for unlawful detainer, like any action for recovery of real property, is a real action and
as such survives the death of Faustino Acosta. His heirs have taken his place and now represent his interests in the instant petition.[21] Hence, the
present case cannot be rendered moot despite the death of respondent.

WHEREFORE, the petition for review is hereby DENIED. The assailed decision of the Court of Appeals in CA-G.R. SP No. 49144 is hereby
AFFIRMED.

CASE NO. 8. Spouses JULITA DE LA CRUZ and FELIPE DE LA CRUZ vs. PEDRO JOAQUIN
[G.R. No. 162788. July 28, 2005]
THIRD DIVISION
PANGANIBAN, J.:

The Rules require the legal representatives of a dead litigant to be substituted as parties to a litigation. This requirement is necessitated by due process.
Thus, when the rights of the legal representatives of a decedent are actually recognized and protected, noncompliance or belated formal compliance
with the Rules cannot affect the validity of the promulgated decision. After all, due process had thereby been satisfied.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the August 26, 2003 Decision[2] and the March 9, 2004 Resolution[3]
of the Court of Appeals (CA) in CA-GR CV No. 34702. The challenged Decision disposed as follows:

“WHEREFORE, the foregoing considered, the appeal is DISMISSED and the assailed decision accordingly AFFIRMED in toto. No costs.”[4]

On the other hand, the trial court’s affirmed Decision disposed as follows:

“WHEREFORE, judgment is hereby rendered:

“a) declaring the Deed of Absolute Sale (Exh. ‘D’) and ‘Kasunduan’ (Exhibit B), to be a sale with right of repurchase;
“b) ordering the plaintiff to pay the defendants the sum of P9,000.00 by way of repurchasing the land in question;
“c) ordering the defendants to execute a deed of reconveyance of said land in favor of the plaintiff after the latter has paid them the amount of
P9,000.00 to repurchase the land in question;
“d) ordering the defendants to yield possession of the subject land to the plaintiff after the latter has paid them the amount of P9,000.00 to repurchase
the property from them; and
“e) ordering the defendants to pay the plaintiff the amount of P10,000.00 as actual and compensatory damages; the amount of P5,000[.00] as
exemplary damages; the amount of P5,000.00 as expenses of litigation and the amount of P5,000.00 by way of attorney’s fees.”[5]

The Facts

The case originated from a Complaint for the recovery of possession and ownership, the cancellation of title, and damages, filed by Pedro Joaquin
against petitioners in the Regional Trial Court of Baloc, Sto. Domingo, Nueva Ecija.[6] Respondent alleged that he had obtained a loan from them in the
amount of P9,000 on June 29, 1974, payable after five (5) years; that is, on June 29, 1979. To secure the payment of the obligation, he supposedly
executed a Deed of Sale in favor of petitioners. The Deed was for a parcel of land in Pinagpanaan, Talavera, Nueva Ecija, covered by TCT No. T-
111802. The parties also executed another document entitled “Kasunduan.”

Respondent claimed that the Kasunduan showed the Deed of Sale to be actually an equitable mortgage.[8] Spouses De la Cruz contended that this
document was merely an accommodation to allow the repurchase of the property until June 29, 1979, a right that he failed to exercise.

On April 23, 1990, the RTC issued a Decision in his favor. The trial court declared that the parties had entered into a sale with a right of repurchase. It
further held that respondent had made a valid tender of payment on two separate occasions to exercise his right of repurchase. Accordingly, petitioners
were required to reconvey the property upon his payment.

Ruling of the Court of Appeals

Sustaining the trial court, the CA noted that petitioners had given respondent the right to repurchase the property within five (5) years from the date of
the sale or until June 29, 1979. Accordingly, the parties executed the Kasunduan to express the terms and conditions of their actual agreement.[13] The
appellate court also found no reason to overturn the finding that respondent had validly exercised his right to repurchase the land.[14]
In the March 9, 2004 Resolution, the CA denied reconsideration and ordered a substitution by legal representatives, in view of respondent’s death on
December 24, 1988.[15]

Hence, this Petition.[16]

The Issues

Petitioners assign the following errors for our consideration:

“I. Public Respondent Twelfth Division of the Honorable Court of Appeals seriously erred in dismissing the appeal and affirming in toto the Decision
of the trial court in Civil Case No. SD-838;

“II. Public Respondent Twelfth Division of the Honorable Court of Appeals likewise erred in denying [petitioners’] Motion for Reconsideration given
the facts and the law therein presented.”[17]

Succinctly, the issues are whether the trial court lost jurisdiction over the case upon the death of Pedro Joaquin, and whether respondent was guilty of
forum shopping.[18]

The Court’s Ruling

The Petition has no merit.

First Issue: Jurisdiction

Petitioners assert that the RTC’s Decision was invalid for lack of jurisdiction.[19] They claim that respondent died during the pendency of the case.
There being no substitution by the heirs, the trial court allegedly lacked jurisdiction over the litigation.[20]

Rule on Substitution

When a party to a pending action dies and the claim is not extinguished,[21] the Rules of Court require a substitution of the deceased. The procedure is
specifically governed by Section 16 of Rule 3, which reads thus:

“Section 16. Death of a party; duty of counsel. –Whenever a party to a pending action dies, and the claim is not thereby extinguished, it shall be the
duty of his counsel to inform the court within thirty (30) days after such death of the fact thereof, and to give the name and address of his legal
representative or representatives. Failure of counsel to comply with this duty shall be a ground for disciplinary action.

“The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of an executor or administrator and the
court may appoint a guardian ad litem for the minor heirs.

“The court shall forthwith order said legal representative or representatives to appear and be substituted within a period of thirty (30) days from notice.

“If no legal representative is named by the counsel for the deceased party, or if the one so named shall fail to appear within the specified period, the
court may order the opposing party, within a specified time, to procure the appointment of an executor or administrator for the estate of the deceased,
and the latter shall immediately appear for and on behalf of the deceased. The court charges in procuring such appointment, if defrayed by the opposing
party, may be recovered as costs.”

The rule on the substitution of parties was crafted to protect every party’s right to due process.[22] The estate of the deceased party will continue to be
properly represented in the suit through the duly appointed legal representative.[23] Moreover, no adjudication can be made against the successor of the
deceased if the fundamental right to a day in court is denied.[24]

The Court has nullified not only trial proceedings conducted without the appearance of the legal representatives of the deceased, but also the resulting
judgments. In those instances, the courts acquired no jurisdiction over the persons of the legal representatives or the heirs upon whom no judgment was
binding.

This general rule notwithstanding, a formal substitution by heirs is not necessary when they themselves voluntarily appear, participate in the case, and
present evidence in defense of the deceased. These actions negate any claim that the right to due process was violated.

The Court is not unaware of Chittick v. Court of Appeals,[28] in which the failure of the heirs to substitute for the original plaintiff upon her death led to
the nullification of the trial court’s Decision. The latter had sought to recover support in arrears and her share in the conjugal partnership. The children
who allegedly substituted for her refused to continue the case against their father and vehemently objected to their inclusion as parties.[29] Moreover,
because he died during the pendency of the case, they were bound to substitute for the defendant also. The substitution effectively merged the persons
of the plaintiff and the defendant and thus extinguished the obligation being sued upon.[30]

Clearly, the present case is not similar, much less identical, to the factual milieu of Chittick.

Strictly speaking, the rule on the substitution by heirs is not a matter of jurisdiction, but a requirement of due process. Thus, when due process is not
violated, as when the right of the representative or heir is recognized and protected, noncompliance or belated formal compliance with the Rules cannot
affect the validity of a promulgated decision.[31] Mere failure to substitute for a deceased plaintiff is not a sufficient ground to nullify a trial court’s
decision. The alleging party must prove that there was an undeniable violation of due process.

Substitution in the Instant Case

The records of the present case contain a “Motion for Substitution of Party Plaintiff” dated February 15, 2002, filed before the CA. The prayer states as
follows:

“WHEREFORE, it is respectfully prayed that the Heirs of the deceased plaintiff-appellee as represented by his daughter Lourdes dela Cruz be
substituted as party-plaintiff for the said Pedro Joaquin.
“It is further prayed that henceforth the undersigned counsel for the heirs of Pedro Joaquin be furnished with copies of notices, orders, resolutions and
other pleadings at its address below.”

Evidently, the heirs of Pedro Joaquin voluntary appeared and participated in the case. We stress that the appellate court had ordered[33] his legal
representatives to appear and substitute for him. The substitution even on appeal had been ordered correctly. In all proceedings, the legal
representatives must appear to protect the interests of the deceased. After the rendition of judgment, further proceedings may be held, such as a motion
for reconsideration or a new trial, an appeal, or an execution.

Considering the foregoing circumstances, the Motion for Substitution may be deemed to have been granted; and the heirs, to have substituted for the
deceased, Pedro Joaquin. There being no violation of due process, the issue of substitution cannot be upheld as a ground to nullify the trial court’s
Decision.

Second Issue: Forum Shopping

Petitioners also claim that respondents were guilty of forum shopping, a fact that should have compelled the trial court to dismiss the Complaint.[36]
They claim that prior to the commencement of the present suit on July 7, 1981, respondent had filed a civil case against petitioners on June 25, 1979.
Docketed as Civil Case No. SD-742 for the recovery of possession and for damages, it was allegedly dismissed by the Court of First Instance of Nueva
Ecija for lack of interest to prosecute.

Forum Shopping Defined

Forum shopping is the institution of two or more actions or proceedings involving the same parties for the same cause of action, either simultaneously or
successively, on the supposition that one or the other court would make a favorable disposition. Forum shopping may be resorted to by a party against
whom an adverse judgment or order has been issued in one forum, in an attempt to seek a favorable opinion in another, other than by an appeal or a
special civil action for certiorari.

Forum shopping trifles with the courts, abuses their processes, degrades the administration of justice, and congests court dockets.[39] Willful and
deliberate violation of the rule against it is a ground for the summary dismissal of the case; it may also constitute direct contempt of court.[40]

The test for determining the existence of forum shopping is whether the elements of litis pendentia are present, or whether a final judgment in one case
amounts to res judicata in another.[41] We note, however, petitioners’ claim that the subject matter of the present case has already been litigated and
decided. Therefore, the applicable doctrine is res judicata.

Applicability of Res Judicata

Under res judicata, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies, in
all later suits and on all points and matters determined in the previous suit.[43] The term literally means a “matter adjudged, judicially acted upon, or
settled by judgment.”[44] The principle bars a subsequent suit involving the same parties, subject matter, and cause of action. Public policy requires that
controversies must be settled with finality at a given point in time.

The elements of res judicata are as follows: (1) the former judgment or order must be final; (2) it must have been rendered on the merits of the
controversy; (3) the court that rendered it must have had jurisdiction over the subject matter and the parties; and (4) there must have been -- between
the first and the second actions -- an identity of parties, subject matter and cause of action.

Failure to Support Allegation

The onus of proving allegations rests upon the party raising them. As to the matter of forum shopping and res judicata, petitioners have failed to provide
this Court with relevant and clear specifications that would show the presence of an identity of parties, subject matter, and cause of action between the
present and the earlier suits. They have also failed to show whether the other case was decided on the merits. Instead, they have made only bare
assertions involving its existence without reference to its facts. In other words, they have alleged conclusions of law without stating any factual or legal
basis. Mere mention of other civil cases without showing the identity of rights asserted and reliefs sought is not enough basis to claim that respondent is
guilty of forum shopping, or that res judicata exists.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED. Costs against petitioners.

CASE NO. 9. JOSE R. MARTINEZ vs. REPUBLIC OF THE PHILIPPINES

G.R. No. 160895 October 30, 2006
THIRD DIVISION
TINGA, J.:

The central issue presented in this Petition for Review is whether an order of general default issued by a trial court in a land registration case bars the
Republic of the Philippines, through the Office of the Solicitor General, from interposing an appeal from the trial court’s subsequent decision in favor of
the applicant.

The antecedent facts follow.

On 24 February 1999, petitioner Jose R. Martinez (Martinez) filed a petition for the registration in his name of three (3) parcels of land included in the
Cortes, Surigao del Sur Cadastre. The lots, individually identified as Lot No. 464-A, Lot No. 464-B, and Lot No. 370, Cad No. 597, collectively comprised
around 3,700 square meters. Martinez alleged that he had purchased lots in 1952 from his uncle, whose predecessors-in-interest were traceable up to
the 1870s. It was claimed that Martinez had remained in continuous possession of the lots; that the lots had remained unencumbered; and that they
became private property through prescription pursuant to Section 48(b) of Commonwealth Act No. 141. Martinez further claimed that he had been
constrained to initiate the proceedings because the Director of the Land Management Services had failed to do so despite the completion of the
cadastral survey of Cortes, Surigao del Sur.1

The case was docketed as Land Registration Case No. N-30 and raffled to the Regional Trial Court (RTC) of Surigao del Sur, Branch 27. The Office of
the Solicitor General (OSG) was furnished a copy of the petition. The trial court set the case for hearing and directed the publication of the corresponding
Notice of Hearing in the Official Gazette. On 30 September 1999, the OSG, in behalf of the Republic of the Philippines, opposed the petition on the
grounds that appellee’s possession was not in accordance with Section 48(b) of Commonwealth Act No. 141; that his muniments of title were insufficient
to prove bona-fide acquisition and possession of the subject parcels; and that the properties formed part of the public domain and thus not susceptible to
private appropriation.2

Despite the opposition filed by the OSG, the RTC issued an order of general default, even against the Republic of the Philippines, on 29 March 2000.
This ensued when during the hearing of even date, no party appeared before the Court to oppose Martinez’s petition.3

Afterwards, the trial court proceeded to receive Martinez’s oral and documentary evidence in support of his petition. On 1 August 2000, the RTC
rendered a Decision4 concluding that Martinez and his predecessors-in-interest had been for over 100 years in possession characterized as continuous,
open, public, and in the concept of an owner. The RTC thus decreed the registration of the three (3) lots in the name of Martinez.

From this Decision, the OSG filed a Notice of Appeal dated 28 August 2000,5 which was approved by the RTC. However, after the records had been
transmitted to the Court of Appeals, the RTC received a letter dated 21 February 20016 from the Land Registration Authority (LRA) stating that only Lot
Nos. 464-A and 464-B were referred to in the Notice of Hearing published in the Official Gazette; and that Lot No. 370, Cad No. 597 had been
deliberately omitted due to the lack of an approved survey plan for that property. Accordingly, the LRA manifested that this lot should not have been
adjudicated to Martinez for lack of jurisdiction. This letter was referred by the RTC to the Court of Appeals for appropriate action.7

On 10 October 2003, the Court of Appeals promulgated the assailed Decision,8 reversing the RTC and instead ordering the dismissal of the petition for
registration. In light of the opposition filed by the OSG, the appellate court found the evidence presented by Martinez as insufficient to support the
registration of the subject lots. The Court of Appeals concluded that the oral evidence presented by Martinez merely consisted of general declarations of
ownership, without alluding to specific acts of ownership performed by him or his predecessors-in-interest. It likewise debunked the documentary
evidence presented by Martinez, adjudging the same as either inadmissible or ineffective to establish proof of ownership.

No motion for reconsideration appears to have been filed with the Court of Appeals by Martinez, who instead directly assailed its Decision before this
Court through the present petition.

We cannot help but observe that the petition, eight (8) pages in all, was apparently prepared with all deliberate effort to attain nothing more but the
perfunctory. The arguments raised center almost exclusively on the claim that the OSG no longer had personality to oppose the petition, or appeal its
allowance by the RTC, following the order of general default. Starkly put, "the [OSG] has no personality to raise any issue at all under the circumstances
pointed out hereinabove."9 Otherwise, it is content in alleging that "[Martinez] presented sufficient and persuasive proof to substantiate the fact that his
title to Lot Nos. 464-A and 464-B is worth the confirmation he seeks to be done in this registration case";10 and that the RTC had since issued a new
Order dated 1 September 2003, confirming Martinez’s title over Lot No. 370.

In its Comment dated 24 May 2004,11 the OSG raises several substantial points, including the fact that it had duly opposed Martinez’s application for
registration before the RTC; that jurisprudence and the Rules of Court acknowledge that a party in default is not precluded from appealing the
unfavorable judgment; that the RTC had no jurisdiction over Lot No. 370 since its technical description was not published in the Official Gazette; and that
as found by the Court of Appeals the evidence presented by Martinez is insufficient for registering the lots in his name.12 Despite an order from the
Court requiring him to file a Reply to the Comment, counsel for Martinez declined to do so, explaining, among others, that "he felt he would only be
taxing the collective patience of this [Court] if he merely repeats x x x what petitioner had succinctly stated x x x on pages four (4) to seven (7) of his said
petition." Counsel for petitioner was accordingly fined by the Court.13

The Court’s patience is taxed less by redundant pleadings than by insubstantial arguments. The inability of Martinez to offer an effective rebuttal to the
arguments of the OSG further debilitates what is an already weak petition.

The central question, as posed by Martinez, is whether the OSG could have still appealed the RTC decision after it had been declared in default. The
OSG argues that a party in default is not precluded from filing an appeal, citing Metropolitan Bank & Trust Co. v. Court of Appeals,14 and asserts that
"[t]he Rules of Court expressly provides that a party who has been declared in default may appeal from the judgment rendered against him."15

There is error in that latter, unequivocal averment, though one which does not deter from the ultimate correctness of the general postulate that a party
declared in default is allowed to pose an appeal. Elaboration is in order.

We note at the onset that the OSG does not impute before this Court that the RTC acted improperly in declaring public respondent in default, even
though an opposition had been filed to Martinez’s petition. Under Section 26 of Presidential Decree No. 1529, as amended, the order of default may be
issued "[i]f no person appears and answers within the time allowed." The RTC appears to have issued the order of general default simply on the premise
that no oppositor appeared before it on the hearing of 29 March 2000. But it cannot be denied that the OSG had already duly filed its Opposition to
Martinez’s petition long before the said hearing. As we held in Director of Lands v. Santiago:16

[The] opposition or answer, which is based on substantial grounds, having been formally filed, it was improper for the respondent Judge taking
cognizance of such registration case to declare the oppositor in default simply because he failed to appear on the day set for the initial healing. The
pertinent provision of law which states: "If no person appears and answers within the time allowed, the court may at once upon motion of the applicant,
no reason to the contrary appearing, order a general default to be recorded . . . ," cannot be interpreted to mean that the court can just disregard the
answer before it, which has long been filed, for such an interpretation would be nothing less than illogical, unwarranted, and unjust. Had the law intended
that failure of the oppositor to appear on the date of the initial hearing would be a ground for default despite his having filed an answer, it would have
been so stated in unmistakable terms, considering the serious consequences of an order of default. Especially in this case where the greater public
interest is involved as the land sought to be registered is alleged to be public land, the respondent Judge should have received the applicant's evidence
and set another date for the reception of the oppositor's evidence. The oppositor in the Court below and petitioner herein should have been accorded
ample opportunity to establish the government's claim.17

Strangely, the OSG did not challenge the propriety of the default order, whether in its appeal before the Court of Appeals or in its petition before this
Court. It would thus be improper for the Court to make a pronouncement on the validity of the default order since the same has not been put into issue.
Nonetheless, we can, with comfort, proceed from same apparent premise of the OSG that the default order was proper or regular.

The juridical utility of a declaration of default cannot be disputed. By forgoing the need for adversarial proceedings, it affords the opportunity for the
speedy resolution of cases even as it penalizes parties who fail to give regard or obedience to the judicial processes.

The extent to which a party in default loses standing in court has been the subject of considerable jurisprudential debate. Way back in 1920, in Velez v.
Ramas,18 we declared that the defaulting defendant "loses his standing in court, he not being entitled to the service of notices in the case, nor to appear
in the suit in any way. He cannot adduce evidence; nor can he be heard at the final hearing."19 These restrictions were controversially expanded in Lim
Toco v. Go Fay,20 decided in 1948, where a divided Court pronounced that a defendant in default had no right to appeal the judgment rendered by the
trial court, except where a motion to set aside the order of default had been filed. This, despite the point raised by Justice Perfecto in dissent that there
was no provision in the then Rules of Court or any law "depriving a defaulted defendant of the right to be heard on appeal."21

The enactment of the 1964 Rules of Court incontestably countermanded the Lim Toco ruling. Section 2, Rule 41 therein expressly stated that "[a] party
who has been declared in default may likewise appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no
petition for relief to set aside the order of default has been presented by him in accordance with Rule 38."22 By clearly specifying that the right to appeal
was available even if no petition for relief to set aside the order of default had been filed, the then fresh Rules clearly rendered the Lim Toco ruling as
moot.

Another provision in the 1964 Rules concerning the effect of an order of default acknowledged that "a party declared in default shall not be entitled to
notice of subsequent proceedings, nor to take part in the trial."23 Though it might be argued that appellate proceedings fall part of "the trial" since there
is no final termination of the case as of then, the clear intent of the 1964 Rules was to nonetheless allow the defaulted defendant to file an appeal from
the trial court decision. Indeed, jurisprudence applying the 1964 Rules was unhesitant to affirm a defaulted defendant’s right to appeal, as guaranteed
under Section 2 of Rule 41, even as Lim Toco was not explicitly abandoned.

In the 1965 case of Antonio, et al. v. Jacinto,24 the Court acknowledged that the prior necessity of a ruling setting aside the order of default "however,
was changed by the Revised Rules of Court. Under Rule 41, section 2, paragraph 3, a party who has been declared in default may likewise appeal from
the judgment rendered against him as contrary to the evidence or to the law, even if no petition for relief to set aside the order of default has been
presented by him in accordance with Rule 38."25 It was further qualified in Matute v. Court of Appeals26 that the new availability of a defaulted
defendant’s right to appeal did not preclude "a defendant who has been illegally declared in default from pursuing a more speedy and efficacious
remedy, like a petition for certiorari to have the judgment by default set aside as a nullity."27

In Tanhu v. Ramolete,28 the Court cited with approval the commentaries of Chief Justice Moran, expressing the reformulated doctrine that following Lim
Toco, a defaulted defendant "cannot adduce evidence; nor can he be heard at the final hearing, although [under Section 2, Rule 41,] he may appeal the
judgment rendered against him on the merits."29

Thus, for around thirty-odd years, there was no cause to doubt that a defaulted defendant had the right to appeal the adverse decision of the trial court
even without seeking to set aside the order of default. Then, in 1997, the Rules of Civil Procedure were amended, providing for a new Section 2, Rule
41. The new provision reads:

SECTION 1. Subject of appeal.—An appeal may be taken from a judgment or final order that completely disposes of the case, or of a particular matter
therein when declared by these Rules to be appealable.

No appeal may be taken from:

(a) An order denying a motion for new trial or reconsideration;

(b) An order denying a petition for relief or any similar motion seeking relief from judgment;
(c) An interlocutory order;
(d) An order disallowing or dismissing an appeal;
(e) An order denying a motion to set aside a judgment by consent, confession or compromise on the ground of fraud, mistake or duress, or any other
ground vitiating consent;
(f) An order of execution;
(g) A judgment or final order for or against or one or more of several parties or in separate claims, counterclaims, cross-claims and third-party
complaints, while the main case is pending, unless the court allows an appeal therefrom; and
(h) An order dismissing an action without prejudice.

In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil action under Rule
65.

Evidently, the prior warrant that a defaulted defendant had the right to appeal was removed from Section 2, Rule 41. On the other hand, Section 3 of
Rule 9 of the 1997 Rules incorporated the particular effects on the parties of an order of default:

Sec. 3. Default; declaration of.—If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party
with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to render
judgment granting the claimant such relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such
reception of evidence may be delegated to the clerk of court.

(a) Effect of order of default.—A party in default shall be entitled to notice of subsequent proceedings but shall not take part in the trial.
(b) Relief from order of default.—A party declared in default may any time after notice thereof and before judgment file a motion under oath to set aside
the order of default upon proper showing that his failure to answer was due to fraud, accident, mistake or excusable negligence and that he has a
meritorious defense. In such case, the order of default may be set aside on such terms and conditions as the judge may impose in the interest of justice.
(c) Effect of partial default.—When a pleading asserting a claim states a common cause of action against several defending parties, some of whom
answer and the others fail to do so, the court shall try the case against all upon the answers thus filed and render judgment upon the evidence
presented.
(d) Extent of relief to be awarded.—A judgment rendered against a party in default shall not exceed the amount or be different in kind from that prayed
for nor award unliquidated damages.
xxx
It cannot be escaped that the old provision expressly guaranteeing the right of a defendant declared in default to appeal the adverse decision was not
replicated in the 1997 Rules of Civil Procedure. Should this be taken as a sign that under the 1997 Rules a defaulted defendant no longer has the right
to appeal the trial court decision, or that the Lim Toco doctrine has been reinstated?

If post-1997 jurisprudence and the published commentaries to the 1997 Rules were taken as an indication, the answer should be in the negative. The
right of a defaulted defendant to appeal remains extant.

By 1997, the doctrinal rule concerning the remedies of a party declared in default had evolved into a fairly comprehensive restatement as offered in Lina
v. Court of Appeals:
a) The defendant in default may, at any time after discovery thereof and before judgment, file a motion, under oath, to set aside the order of default on
the ground that his failure to answer was due to fraud, accident, mistake or excusable neglect, and that he has meritorious defenses; (Sec 3, Rule 18)
b) If the judgment has already been rendered when the defendant discovered the default, but before the same has become final and executory, he may
file a motion for new trial under Section 1(a) of Rule 37;
c) If the defendant discovered the default after the judgment has become final and executory, he may file a petition for relief under Section 2 of Rule 38;
and
d) He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition to set aside the order of
default has been presented by him. (Sec. 2, Rule 41)

The fourth remedy, that of appeal, is anchored on Section 2, Rule 41 of the 1964 Rules. Yet even after that provision’s deletion under the 1997 Rules,
the Court did not hesitate to expressly rely again on the Lina doctrine, including the pronouncement that a defaulted defendant may appeal from the
judgment rendered against him. This can be seen in the cases of Indiana Aerospace University v. Commission on Higher Education,32 Tan v.
Dumarpa,33 and Crisologo v. Globe Telecom, Inc.34

Annotated textbooks on the 1997 Rules of Civil Procedure similarly acknowledge that even under the new rules, a defaulted defendant retains the right
to appeal as previously confirmed under the old Section 2, Rule 41. In his textbook on Civil Procedure, Justice Francisco answers the question "What
are the remedies available to a defending party in default?" with a reiteration of the Lina doctrine, including the remedy that a defaulted defendant "may
also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition to set aside the order of default has
been presented by him."35 Justice Regalado also restates the Lina rule in his textbook on Civil Procedure, opining that the remedies enumerated
therein, even if under the former Rules of Procedure, "would hold true under the present amended Rules."36 Former Court of Appeals Justice Herrerra
likewise reiterates the Lina doctrine, though with the caveat that an appeal from an order denying a petition for relief from judgment was no longer
appealable under Section 1, Rule 41 of the 1997 Rules.37 Herrera further adds:

Section 2, paragraph [2] of the former Rule 41, which allows an appeal from a denial of a petition for relief, was deleted from the present Rule, and
confined appeals to cases from a final judgment or final order that completely disposes of the case, or of a particular matter therein, when declared by
these rules to be appealable. A judgment by default may be considered as one that completely disposes of the case.38

We are hard-pressed to find a published view that the enactment of the 1997 Rules of Civil Procedure accordingly withdrew the right, previously granted
under the 1964 Rules, of a defaulted defendant to appeal the judgment by default against him. Neither is there any provision under the 1997 Rules
which expressly denies the defaulted defendant such a right. If it is perplexing why the 1997 Rules deleted the previous authorization under the old
Section 2, Rule 41 (on subject of appeal), it is perhaps worth noting that its counterpart provision in the 1997 Rules, now Section 1, Rule 41, is different
in orientation even as it also covers "subject of appeal." Unlike in the old provision, the bulk of the new provision is devoted to enumerating the various
rulings from which no appeal may be taken, and nowhere therein is a judgment by default included. A declaration therein that a defaulted defendant may
still appeal the judgment by default would have seemed out of place.

Yet even if it were to assume the doubtful proposition that this contested right of appeal finds no anchor in the 1997 Rules, the doctrine still exists,
applying the principle of stare decisis. Jurisprudence applying the 1997 Rules has continued to acknowledge the Lina doctrine which embodies this right
to appeal as among the remedies of a defendant, and no argument in this petition persuades the Court to rule otherwise.

In Rural Bank of Sta. Catalina v. Land Bank of the Philippines,39 the Court, through Justice Callejo, Sr., again provided a comprehensive restatement of
the remedies of the defending party declared in default, which we adopt for purposes of this decision:

It bears stressing that a defending party declared in default loses his standing in court and his right to adduce evidence and to present his defense. He,
however, has the right to appeal from the judgment by default and assail said judgment on the ground, inter alia, that the amount of the judgment is
excessive or is different in kind from that prayed for, or that the plaintiff failed to prove the material allegations of his complaint, or that the decision is
contrary to law. Such party declared in default is proscribed from seeking a modification or reversal of the assailed decision on the basis of the evidence
submitted by him in the Court of Appeals, for if it were otherwise, he would thereby be allowed to regain his right to adduce evidence, a right which he
lost in the trial court when he was declared in default, and which he failed to have vacated. In this case, the petitioner sought the modification of the
decision of the trial court based on the evidence submitted by it only in the Court of Appeals.40

If it cannot be made any clearer, we hold that a defendant party declared in default retains the right to appeal from the judgment by default on the ground
that the plaintiff failed to prove the material allegations of the complaint, or that the decision is contrary to law, even without need of the prior filing of a
motion to set aside the order of default. We reaffirm that the Lim Toco doctrine, denying such right to appeal unless the order of default has been set
aside, was no longer controlling in this jurisdiction upon the effectivity of the 1964 Rules of Court, and up to this day.

Turning to the other issues, we affirm the conclusion of the Court of Appeals that Martinez failed to adduce the evidence needed to secure the
registration of the subject lots in his name.

It should be noted that the OSG, in appealing the case to the Court of Appeals, did not introduce any new evidence, but simply pointed to the
insufficiency of the evidence presented by Martinez before the trial court. The Court of Appeals was careful to point out that the case against Martinez
was established not by the OSG’s evidence, but by petitioner’s own insufficient evidence. We adopt with approval the following findings arrived at by the
Court of Appeals, thus:

The burden of proof in land registration cases is incumbent on the applicant who must show that he is the real and absolute owner in fee simple of the
land applied for. Unless the applicant succeeds in showing by clear and convincing evidence that the property involved was acquired by him or his
ancestors by any of the means provided for the proper acquisition of public lands, the rule is settled that the property must be held to be a part of the
public domain. The applicant must, therefore, present competent and persuasive proof to substantiate his claim. He may not rely on general statements,
or mere conclusions of law other than factual evidence of possession and title.

Considered in the light of the opposition filed by the Office of the Solicitor General, we find the evidence adduced by appellee, on the whole, insufficient
to support the registration of the subject parcels in his name. To prove the provenance of the land, for one, all that appellee proffered by way of oral
evidence is the following cursory testimony during his direct examination, viz:

xxxx
Q You mentioned that you are the owner of these three (3) parcels of land. How did you begin the ownership of the same?
A I bought it from my uncles Julian Martinez and Juan Martinez.
xxxx
Q x x x x Who took possession of these parcels of land from then on?
A I took possession, sir
Q As owner?
A Yes, as owner.
Q Up to the present who is in possession as owner of these parcels of land?
A I took possession.
Q Before Julian Martinez and Juan Martinez sold these parcels of land before you took possession who were the owners and in possession of these?
A Hilarion Martinez, the father of my predecessors-in-interest and also my grandfather.
xxxx
Court:
Q Of your own knowledge[,] where [sic] did your grandfather Hilarion Martinez acquire these lands?
A According to my grandfather he bought that land from a certain Juan Casano in the year 1870’s[,] I think.
xxxx
Q By the way[,] when did your grandfather Hilarion Martinez die?
A Either in 1920 or 1921.
Q Since you said your immediate predecessors-in-interest Julian Martinez and Juan Martinez inherited the same from your grandfather. Can you say it
the same that your predecessors-in-interest were the owners and possessors of the same since 1921 up to the time they sold the land to you in 1952?
A Yes, sir.
xxxx

In the dreary tradition of most land registration cases, appellee has apparently taken the absence of representation for appellant at the hearing of his
petition as license to be perfunctory in the presentation of his evidence. Actual possession of land, however, consists in the manifestation of acts of
dominion over it of such a nature as a party would naturally exercise over his own property. It is not enough for an applicant to declare himself or his
predecessors-in-interest the possessors and owners of the land for which registration is sought. He must present specific acts of ownership to
substantiate the claim and cannot just offer general statements which are mere conclusions of law requiring evidentiary support and substantiation.

The record shows that appellee did not fare any better with the documentary evidence he adduced before the trial court. The October 20, 1952 Deed of
Sale by which appellee claims to have purchased the subject parcels from his uncle, Julian Martinez, was not translated from the vernacular in which it
was executed and, by said token, was inadmissible in evidence. Having submitted a white print copy of the survey plan for Lot Nos. 464-A and 464-B,
appellee also submitted the tracing cloth plan for Lot No. 370 which does not, however, appear to be approved by the Director of Lands. In much the
same manner that the submission of the original tracing cloth plan is a mandatory statutory requirement which cannot be waived, the rule is settled that a
survey plan not approved by the Director of Lands is not admissible in evidence.41

These findings of the Court of Appeals, arrived at after a sufficiently extensive evaluation of the evidence, stand in contrast to that contained in the RTC
decision, encapsulated in a one-paragraph précis of the factual allegations of Martinez concerning how he acquired possession of the subject properties.
The Court of Appeals, of course, is an appropriate trier of facts, and a comparison between the findings of fact of the Court of Appeals and that of the
RTC clearly demonstrates that it was the appellate court which reached a more thorough and considered evaluation of the evidence.

As correctly held by the Court of Appeals, the burden of proof expected of the petitioner in a land registration case has not been matched in this case.

WHEREFORE, the petition is DISMISSED. Costs against petitioner.

CASE NO. 10. SPOUSES RODOLFO CARPIO and REMEDIOS ORENDAIN vs. RURAL BANK OF STO. TOMAS (BATANGAS), INC.
G.R. No. 153171 May 4, 2006
SECOND DIVISION
SANDOVAL-GUTIERREZ, J.:

Before us for resolution is the instant Petition for Review on Certiorari1 assailing the Decision2 dated September 28, 2001 of the Court of Appeals in CA-
G.R. SP No. 58995, and its Resolution dated April 2, 2002, denying the Motion for Reconsideration.

The facts are:

On May 17, 1999, spouses Rodolfo Carpio and Remedios Orendain, petitioners, filed with the Regional Trial Court (RTC), Branch 83, Tanauan,
Batangas, a Complaint (for annulment of foreclosure sale and damages) against the Rural Bank of Sto. Tomas, Batangas, Inc., respondent, and Jaime
Ozaeta, clerk of court and ex-officio sheriff of the same court. In their Complaint, petitioners alleged that they are the absolute owners of a parcel of land
with an area of 19,405 square meters, more or less, located at Barangay San Vicente, Sto. Tomas, Batangas. On May 30, 1996, they obtained a loan
from respondent bank in the amount of P515,000.00, payable on January 27, 1996. To secure the loan, they executed on May 30, 1996 a real estate
mortgage over the same property in favor of respondent bank. On July 26, 1996, without prior demand or notice to petitioners, respondent bank filed a
Petition for Extra-Judicial Foreclosure of Mortgage. On September 26, 1996, sheriff Jaime Ozaeta conducted a public auction sale of the mortgaged
property. Respondent bank was the only bidder for P702,889.77.

Petitioners further alleged that the sale was conducted without proper publication as the sheriff’s notice of sale was published in a newspaper which is
not of general circulation. On the same day the property was sold, the sheriff issued a certificate of sale in favor of respondent bank. On February 25,
1999, respondent bank executed an affidavit of consolidation of ownership over petitioners’ property. They claimed that they were not notified of the
foreclosure sale and were not given an opportunity to redeem their property.

On August 9, 1999, respondent bank filed its Answer with Counterclaim, denying specifically the material allegations of the complaint. It alleged inter alia
that oral and written demands were made upon petitioners to pay their loan but they ignored the same; that they were properly notified of the filing of the
petition for extra-judicial foreclosure of the mortgage; that there was proper publication and notices of the scheduled sale through public auction; and that
petitioners were actually given more than two (2) years to redeem the property but they failed to do so.

By way of counterclaim, respondent bank alleged that it suffered: (a) actual damages of P100,000.00; (b) compensatory damages of P100,000.00; (c)
moral damages of P500,000.00; and (d) litigation expenses of not less than P50,000.00.

On September 8, 1999, petitioners filed a motion to dismiss the counterclaim on the ground that respondent bank’s counterclaim was not accompanied
by a certification against forum shopping.

Respondent bank filed an opposition to the motion, contending that its counterclaim, which is compulsory in nature, is not a complaint or initiatory
pleading that requires a certification against forum shopping.
On November 3, 1999, the RTC issued an Order denying the motion to dismiss the counterclaim for lack of merit, thus:

xxx
Under Section 5, Rule 7 of the Rules of Court, the same requires the plaintiff or principal party to certify under oath the complaint or other initiatory
pleading purposely to prevent forum shopping.

In the case at bar, defendant Rural Bank’s counterclaim could not be considered a complaint or initiatory pleading because the filing of the same is but a
result of plaintiffs’ complaint and, being a compulsory counterclaim, is outside the coverage of Section 5, Rule 7 of the Rules of Court.

WHEREFORE, premises considered, the instant Motion is hereby denied for lack of merit. SO ORDERED.

Petitioners filed a Motion for Reconsideration of the above Order but it was likewise denied by the RTC in its Order dated April 4, 2000.

Thereafter, petitioners filed with the Court of Appeals a Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, alleging
that the RTC acted with grave abuse of discretion in holding that respondent bank’s counterclaim need not be accompanied by a certification against
forum shopping.

In its Decision3 dated September 28, 2001, the Court of Appeals affirmed the assailed twin Orders of the RTC denying petitioners’ motion to dismiss the
counterclaim and dismissed the petition. Petitioners’ motion for reconsideration was also denied in a Resolution dated April 2, 2002.

Hence, the instant Petition for Review on Certiorari.

The petition must fail.

Section 5, Rule 74 of the 1997 Rules of Civil Procedure, as amended, provides:

Sec. 5. Certification against forum shopping. – The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting
a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or
filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is
pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn
that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his
aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be
cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification
or non-compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative
and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions. (Underscoring supplied)

The rationale of the above provisions is to curb the malpractice commonly referred to as forum shopping – "an act of a party against whom an adverse
judgment has been rendered in one forum of seeking and possibly getting a favorable opinion in another forum, other than by appeal or the special civil
action of certiorari, or the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court
would make a favorable disposition."5

Petitioners contend that the trial court and the Court of Appeals gravely abused their discretion in not dismissing respondent bank’s counterclaim for lack
of a certification against forum shopping.

Petitioners’ contention is utterly baseless. It bears stressing that the Rule distinctly provides that the required certification against forum shopping is
intended to cover an "initiatory pleading," meaning an "incipient application of a party asserting a claim for relief."6 Certainly, respondent bank’s Answer
with Counterclaim is a responsive pleading, filed merely to counter petitioners’ complaint that initiates the civil action. In other words, the rule requiring
such certification does not contemplate a defendant’s/respondent’s claim for relief that is derived only from, or is necessarily connected with, the main
action or complaint. In fact, upon failure by the plaintiff to comply with such requirement, Section 5, quoted above, directs the "dismissal of the case
without prejudice," not the dismissal of respondent’s counterclaim.

In sum, we find no reversible error committed by the Court of Appeals in issuing the challenged Decision and Resolution in CA-G.R. SP No. 58995.

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 58995 are AFFIRMED. Costs
against petitioners.

CASE NO. 11. KOREA EXCHANGE BANK, petitioner, vs. HON. ROGELIO C. GONZALES, in his capacity as Presiding Judge of Branch 50 of
the Regional Trial Court of Pampanga, PHI-HAN DEVELOPMENT, INC., LOURDES DE MESA MENDOZA, MENELEO MENDOZA, ANTUSA DE
MESA MAGNO, FRANCISCO MAGNO, TEODORO DE MESA, FIRMO DE MESA and MERCEDES DE MESA, respondents.
[G.R. Nos. 142286-87. April 15, 2005]
SECOND DIVISION
CALLEJO, SR., J.:

For review in these consolidated petitions is the Joint Decision[1] of the Court of Appeals (CA) in CA-G.R. SP Nos. 46194 and 46436, as well as its
Order[2] dated February 28, 2000 denying the motion for reconsideration thereof.

The Antecedents

The Phi-Han Development, Inc. (PHDI) is a domestic corporation organized primarily for the purpose of engaging in the real estate business.[3] Teodoro
de Mesa and his siblings, namely, Antusa de Mesa Magno and Lourdes de Mesa Mendoza, were among its original incorporators and members of its
board of directors. Jae Il Aum, a Korean national, was the president of the corporation, while Lourdes Mendoza served as its corporate secretary and
treasurer.[4]
On September 5, 1996, or barely a year after its operations began, the PHDI, together with Teodoro de Mesa, Antusa Magno and Lourdes Mendoza,
filed a complaint in the Regional Trial Court (RTC) of Guagua, Pampanga, against Jae Il Aum and the Korea Exchange Bank (KEB), a foreign banking
corporation licensed to do business in the Philippines.

The plaintiffs alleged therein that through the machination of Jae Il Aum, KEB granted a loan to the PHDI in the amount of US$500,000.00, with the
condition that the said loan be deposited with the KEB in the name of PHDI. Thereafter, the plaintiffs executed a real estate mortgage over their
properties located in Lubao, Pampanga. As security for the said loan, PHDI deposited the said amount under its name with the KEB in two accounts,
namely, Dollar Account No. 5311000486 and Peso Account No. 5311000487. Per Resolution No. 12-10-95 of the PHDI Board of Directors, the only
authorized signatories to all applications for withdrawals from the said accounts were Jae Il Aum and Lourdes Mendoza. Jae Il Aum withdrew
US$160,000.00 from the said account on February 15, 1996 by forging the signature of Lourdes Mendoza. He was again able to withdraw from the
separate accounts, leaving US$163,000.00 as the balance thereof. It was further alleged that Jae Il Aum could not have withdrawn the said deposits
without the connivance of the KEB. Moreover, the defendants’ failure to heed demands for an accounting of the said withdrawals and for the restitution
of the said amounts constituted large scale estafa for which they are liable for exemplary and moral damages.[5] The case was docketed as Civil Case
No. G-3012 and raffled to Branch 49 of the court.

On September 13, 1996, the KEB filed a Motion to Dismiss[6] the complaint on the ground,[7] among others, that the case was within the exclusive
jurisdiction of the Securities and Exchange Commission (SEC). On December 5, 1996, the trial court issued an Order denying the motion. The KEB
filed a motion for reconsideration of the court’s decision which was, however, denied.

The KEB filed a petition for certiorari and prohibition with the CA for the nullification of the orders of the RTC. The case was docketed as CA-G.R. SP
No. 43363.[8] On March 17, 1999, the CA dismissed the petition. The KEB filed a motion for reconsideration, which was denied by the appellate court
on July 22, 1999. It then filed a petition for review on certiorari in this Court, docketed as G.R. No. 139460.[9]

Meanwhile, on April 2, 1997, the KEB filed a Complaint[10] against Lourdes Mendoza, Meneleo Mendoza, Antusa Magno, Francisco Magno, Teodoro de
Mesa, Firmo de Mesa, Mercedes de Mesa Magno and the PHDI (PHDI, et al.) before the RTC of Guagua, Pampanga, for sum of money and reformation
of real estate mortgage executed by PHDI in its favor. The case was docketed as Civil Case No. G-3119 and was raffled to Branch 50 of the court.

The KEB alleged therein that on January 15, 1996, it extended a loan to the PHDI in the sum of US$500,000.00, payable within one year, with interest at
“3 months London Interbank Offering Rate (LIBOR) + 2% per annum,” evidenced by a promissory note executed by Jae Il Aum and Lourdes Mendoza,
president and treasurer, respectively, for and in behalf of the PHDI, with Antusa Magno and Teodoro de Mesa acting as witnesses. Jae Il Aum and
Lourdes Mendoza were authorized by resolution of the Board of Directors of PHDI to sign documents and other papers and mortgage corporate assets.
To secure the payment of the said loan, Lourdes Mendoza and her siblings, Antusa de Mesa Magno, Firmo de Mesa, Meneleo Mendoza and Mercedes
de Mesa, executed a real estate mortgage over 14 parcels of land they owned in common, under a Special Power of Attorney executed by them in favor
of Teodoro, Lourdes and Antusa. However, the real estate mortgage failed to express the true intent and agreement of the parties therein because the
debtors appearing therein were Lourdes de Mesa Mendoza, Antusa de Mesa Magno, Mercedes de Mesa and Firmo de Mesa, whereas the true
agreement was to bind only PHDI as the debtor. It was further alleged that PHDI, et al. had not paid the loan of US$500,000.00 and the increment
thereof despite demands therefor.

The KEB prayed that, after due proceedings, judgment be rendered in its favor, ordering the reformation of the said real estate mortgage by designating
the PHDI as the debtor; ordering PHDI, et al., jointly and severally, to pay US$500,000.00, with interest thereon at the rate of the LIBOR for a three-
month loan plus 2%, compounded monthly; 10% of the total amount due as interest as withholding tax on the interest; 20% of the total amount due as
attorney’s fees; and costs of suit. The KEB, likewise, prayed that the properties mortgaged be foreclosed and sold in case of failure to pay the said loan
and its increment within 90 days from notice of the judgment.[11] The KEB appended to its complaint a copy of the real estate mortgage and the
secretary’s certificate containing the resolution of the Board of Directors.

The PHDI, et al. filed a motion to dismiss[12] the complaint on the ground of forum shopping, asserting that the KEB should have filed its counterclaim
for the reformation of the real estate mortgage and the collection of US$500,000.00, including increment and damages in Civil Case No. G-3012. They
averred that since the KEB sought the collection of the US$500,000.00 loan which was referred to in paragraphs 2 and 3 of their complaint in Civil Case
No. G-3012, the essential elements of litis pendentia were present; hence, the trial court should dismiss the complaint.

The KEB opposed[13] the motion, contending that the complaint in Civil Case No. G-3012 involved corporate fraud; hence, the RTC had no jurisdiction
over the action in the said case, and as such, could not interpose any counterclaims therein. The KEB, likewise, averred that litis pendentia may be
involved only when the RTC had jurisdiction over the action in Civil Case No. G-3012. Moreover, the actions in Civil Case Nos. G-3012 and G-3119
were unrelated.

On July 23, 1997, the RTC issued an Order[14] denying the motion to dismiss, holding that the essential requirements of litis pendentia were not
present, and that the grounds invoked therein were not indubitable.

Thereafter, PHDI, et al. filed, in due course, their answer[15] with counterclaims in Civil Case No. G-3119 where they denied being indebted to the KEB.
By way of special and affirmative defenses, they alleged that they were deceived by Jae Il Aum, in connivance with the KEB, into agreeing to secure a
loan of US$500,000.00 from the latter with their properties as security therefor to be used for the development of their properties into a housing project;
the US$500,000.00 loan of the PHDI was deposited in Account No. 5311000487 and Account No. 5311000486 with the KEB. Jae Il Aum was able to
withdraw the amount of US$160,000.00 from the dollar account of PHDI based on an application for withdrawal bearing the forged signature of Lourdes
Mendoza. Believing that Jae Il Aum could not validly withdraw from the said account without her presence, Lourdes de Mesa Mendoza signed
applications for the withdrawals from the said accounts, authorizing Jae Il Aum to make the said withdrawals. Jae Il Aum was then able to withdraw the
rest of the deposits of the PHDI. It was thus alleged that the acts of the plaintiff and Jae Il Aum constituted large scale estafa, and that he had been
charged with large scale estafa in Criminal Case Nos. 4085 and 4092 in the RTC of Pampanga. The aforementioned unauthorized withdrawals could
not have been made possible without the indispensable cooperation of the authorized and/or responsible officer/s of the KEB.[16] Moreover, the loan of
the PHDI should be extinguished under the principle of set-off or compensation. By way of counterclaims, PHDI, et al., repleaded by reference all the
allegations in their special and affirmative defenses as part thereof, and alleged that by reason of the foregoing acts of the KEB and Jae Il Aum, they
suffered shame and humiliation.

The PHDI, et al., prayed that the complaint be dismissed and, by way of counterclaim, that the KEB be ordered to pay P500,000.00 as moral damages,
P500,000.00 as exemplary damages to deter like-minded foreigners from victimizing Filipinos, and P100,000.00 as attorney’s fees, plus the cost of
suit.[17]
On September 12, 1997, the KEB filed two motions: (1) a motion in Civil Case No. G-3119 to dismiss the counterclaims of the PHDI, et al. for their failure
to attach in their answer with counterclaims a certification of non-forum shopping as mandated by Supreme Court Administrative Circular No. 04-94 (now
Section 5, Rule 7 of the Rules of Court);[18] and (2) a motion in Civil Case No. G-3012 to dismiss the complaint for forum shopping.[19]

In its motion to dismiss the counterclaims in Civil Case No. G-3119, the KEB alleged that the causes of action of the PHDI, et al. as plaintiffs in Civil
Case No. G-3012 for the collection of US$160,000.00 and damages, and their claim in Civil Case No. G-3119 for the set-off of the said amount against
its claim of US$500,000.00 were identical; hence, their counterclaims should be dismissed for forum shopping and, consequently, their complaint in Civil
Case No. G-3012 should likewise be dismissed.

The PHDI, et al. opposed the motion to dismiss their complaint in Civil Case No. G-3012 alleging that the KEB failed to include forum shopping as a
ground in its motion to dismiss their complaint; hence, is bound by the omnibus motion rule. They further alleged that their complaint could not be
dismissed on the ground of forum shopping based on their counterclaims in their answer to the complaint, since they filed their answer and counterclaim
after filing their complaint in Civil Case No. G-3012.[20] Besides, the trial court had already denied their motion to dismiss the complaint in Civil Case No.
G-3119 on its finding that there was no litis pendentia.

The PHDI, et al. also opposed the motion to dismiss[21] their counterclaims in Civil Case No. G-3119, on the ground that the causes of action in Civil
Case No. G-3012 and their counterclaims in Civil Case No. G-3119 were unrelated. They asserted that the subject matter, causes of action and the
issues in the two cases were different.

On October 14, 1997, the trial court issued an Order[22] in Civil Case No. G-3012 denying the KEB’s motion to dismiss the complaint, on its finding that
the causes of action of the PHDI in Civil Case No. G-3012 were different from those in their counterclaim in Civil Case No. G-3119. The trial court also
denied the motion (in Civil Case No. G-3119) to dismiss the counterclaims of the PHDI, et al., on its finding that the reliefs prayed for by the latter did not
include the collection of US$160,000.00 from the KEB; hence, there was no forum shopping. The KEB’s respective motions for reconsideration of the
orders of dismissal in Civil Case Nos. G-3119 and G-3012 were denied by the trial courts, per the Orders dated October 24, 1997[23] and November 14,
1997.[24]

The KEB filed a petition for certiorari, prohibition and mandamus against the PHDI, et al., in the CA, assailing the October 13 and 24, 1997 Orders of the
trial court in Civil Case No. G-3119. The case was docketed as CA-G.R. SP No. 46194.

The KEB also filed a petition for certiorari, prohibition and mandamus with the CA on January 6, 1998, assailing the RTC’s Orders dated October 24 and
November 14, 1997 in Civil Case No. G-3012. The case was docketed as CA-G.R. SP No. 46436. The two petitions were consolidated.

Meanwhile, the KEB filed its answer to the counterclaims of the PHDI, et al., in Civil Case No. G-3119 for moral and exemplary damages.[25] It alleged,
inter alia, that only the consent of the PHDI, through its signatories, was required for any withdrawal, and that all such withdrawals were made with the
knowledge and consent of Lourdes de Mesa Mendoza, with her genuine signatures;[26] that the trial court had no jurisdiction over the counterclaims for
moral and exemplary damages since the controversy involved corporate fraud which, under Subsection (a), Section 5 of Presidential Decree No. 902-A,
was within the exclusive jurisdiction of the SEC; and that the counterclaims for moral and exemplary damages should be dismissed because of the
pendency of Civil Case No. G-3012 which involved the same parties, the same rights, the same reliefs, the same issues, and the same causes of action,
insofar as the complaint in Civil Case No. G-3012 and the counterclaim in this case were concerned. Moreover, there was no certification against forum
shopping as required by Section 3, Rule 7 of the Rules of Court. They further insisted that all the withdrawals were authorized and made on the basis of
genuine signatures; that PHDI, being a corporation and an artificial person, had no feelings, and, as such, moral damages could not be recovered from
it; that it had all along acted in good faith; and that if PHDI, et al., hired the services of counsel, the attorney’s fees should be for their own account, since
they unjustifiably refused to pay.[27]

On January 27, 2000, the CA rendered a Joint Decision[28] in CA-G.R. SP Nos. 46194 and 46436. The CA affirmed the assailed orders of the RTC in
Civil Case No. G-3012, dismissing the petition in CA-G.R. SP No. 46436 but partially giving due course to and granting the petition in CA-G.R. SP No.
46194, by dismissing the counterclaims of the respondents for moral and exemplary damages in Civil Case No. G-3119 on the ground of forum
shopping. The CA declared that the counterclaims of the PHDI, et al., for moral and exemplary damages in Civil Case No. G-3119, were merely
permissive; hence, they were mandated to append thereto a certification of non-forum shopping.

The CA anchored its decision on the rulings of this Court in Santo Tomas University Hospital v. Surla[29] and Valencia v. Court of Appeals.[30] However,
the CA did not order the dismissal of the complaint in Civil Case No. G-3012, on its finding that the RTC did not commit grave abuse of its discretion in
not ordering the dismissal of the same. Besides, the trial court had already dismissed the counterclaims of the PHDI, et al., for moral and exemplary
damages in Civil Case No. G-3119.[31]

Following the denial of its motion for reconsideration, the KEB, now the petitioner, filed with this Court, a consolidated petition for review on certiorari
against PHDI, et al., the respondents, alleging that the CA erred (a) in not ordering the dismissal of the counterclaim of the latter in Civil Case No. G-
3119 for their failure to append a certificate of non-forum shopping, and (b) in not dismissing the complaint in Civil Case No. G-3012 for forum
shopping.[32]

As the issues in this case are interrelated, the Court shall delve into and resolve them simultaneously.

The petitioner avers that the respondents are guilty of forum shopping because they sought to recover US$160,000.00 by way of set-off in their
counterclaims in Civil Case No. G-3119, pending in Branch 50 of the RTC of Guagua, Pampanga, the same amount they sought to recover in their
complaint in Civil Case No. G-3012 pending in Branch 49 of the said court. The petitioner asserts that the respondents also sought to recover
P500,000.00 in moral damages, and P500,000.00 as exemplary damages in Civil Case No. G-3012, which are the same amounts the respondents
sought to collect from the petitioner in their counterclaims in Civil Case No. G-3119. The petitioner notes that although the respondents alleged set-off of
the US$160,000.00 in their special and affirmative defenses, they, however, repleaded and incorporated, by way of reference, the said allegations in
their counterclaims for moral and exemplary damages and attorney’s fees; hence, the claim of set-off or compensation of the respondents was a
counterclaim. The respondents were, thus, mandated to append a certificate of non-forum shopping to their counterclaims as mandated by Section 5,
Rule 7 of the Rules of Court, but failed to do so. The petitioner avers that there is identity of causes of action, issues and reliefs prayed for in the
complaint of the respondents in Civil Case No. G-3012, and their counterclaims for set-off or compensation of the US$160,000.00, moral damages of
P500,000.00 and P500,000.00 as exemplary damages in Civil Case No. G-3119. As such, the petitioner insists that the respondents were guilty of
forum shopping, for which reason their complaint in Civil Case No. G-3012 should be dismissed.

The respondents, for their part, refute the contentions of the petitioner and maintain that their claim for set-off or compensation[33] in Civil Case No. G-
3119 is a counterclaim but is compulsory in nature; hence, there was no need for them to append a certificate of non-forum shopping. The respondents
also allege that the petitioner itself is guilty of forum shopping because instead of filing counterclaims against them in Civil Case No. G-3012, it filed a
complaint for reformation of the real estate mortgage and for the collection of US$500,000.00 and, in case of refusal or failure of the respondents to pay
the said amount of US$500,000.00 for the judicial foreclosure of the real estate mortgage, docketed as Civil Case No. G-3119. The respondents assert
that, by praying for the dismissal of their complaint in Civil Case No. G-3012 and their counterclaims in Civil Case No. G-3119, the petitioner could win in
both instances without due process of law.

The Court’s Ruling

A counterclaim, as now used and understood, includes both set-off and recoupment and is broader than both; it includes equitable demands and
secures to the defendant full relief which is a separate action at law and would have secured him on the same state of facts being substantially a cross-
action by the defendant against the plaintiff.[34]

A set-off (compensacion) is a money demand by the defendant against the plaintiff arising upon contract and constituting a debt independent of and
unconnected with the cause of actions set forth in the complaint, and may be used to offset a plaintiff’s claim but not to recover affirmatively. As in the
case with recoupment, set-off may be used to offset a plaintiff’s claim but not to recover affirmatively. This is similar to the English rule which was first
authorized by an English statute in 1729.

A recoupment (reconvencion) differs from a counterclaim (contrarreclamacion) in that, under a counterclaim, the defendant may have an affirmative
judgment where he is able to prove a demand in excess of the plaintiff’s demand, whereas in the case of recoupment, whatever the damages proved by
the defendant, they can go only to reduce or extinguish the claim against him. Recoupment must arise out of the contract or transaction upon which the
plaintiff’s claim is founded. Recoupment is of French origin and means the “cutting back of the plaintiff’s claim by the defendant.” It thus implies an
admission of the plaintiff’s claim.

In Lopez v. Gloria and Sheriff of Leyte,[35] the Court ruled that for set-off or recoupment to be considered as a counterclaim, the following must concur:
(1) the same be essentially a genuine action of the defendant against the plaintiff; (2) the same should have as its object to neutralize, wholly or partially,
that which the plaintiff is trying to obtain; (3) the same does not have for its object to destroy directly the action of the plaintiff; and (4) the same ought not
to pray for a positive remedy distinct from the payment of money.

The Court explained that under the first requisite, independent of any other consideration, a genuine action is constituted by the defendant which could
be employed separately against the plaintiff. On the second requisite, the Court declared that the defendant admits the facts upon which the action of
the plaintiff is based. The second requisite is absent if the defendant bases his claim on facts which directly destroy the action or cause of action of the
plaintiff. In such a case, the claim of the defendant would only be a special defense.[36] On the third requisite, set-off or recoupment may be merely a
defense and not a counterclaim if it only tends to oppose or to destroy the action of the plaintiff.

After consideration of the material allegations of the answer of the respondents in Civil Case No. G-3119, we believe that the respondents’ claim of set-
off or compensation of the US$160,000.00 against the claim of US$500,000.00 of the petitioner against the respondents is a counterclaim. The
respondents admit in their complaint in Civil Case No. G-3012 and in their answer in Civil Case No. G-3119 that they secured a loan from the petitioner
in the amount of US$500,000.00, but maintain that they are not liable for the payment of the said loan because the petitioner, in connivance with Jae Il
Aum, had withdrawn not only US$160,000.00 but the entire deposit of US$500,000.00 from the peso and dollar accounts of respondent PHDI without
the consent of the respondents. The latter did not seek to recover affirmatively from the petitioner.

However, we do not agree with the contention of the respondents that their counterclaims are compulsory in nature. Section 7, Rule 5 of the Rules of
Court reads:

Sec. 7. Compulsory counterclaim. – A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is
connected with the transaction or occurrence constituting the subject matter of the opposing party’s claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction. Such a counterclaim must be within the jurisdiction of the court both as to the
amount and the nature thereof, except that in an original action before the Regional Trial Court, the counterclaim may be considered compulsory
regardless of the amount.

As correctly held by the CA, the counterclaim of the respondents for moral and exemplary damages against the petitioner is permissive. So is the
respondents’ claim of a set-off or compensation of the US$160,000.00 which they sought in Civil Case No. G-3012 against the US$500,000.00 claimed
by the petitioner against the respondents in Civil Case No. G-3119.

As the Court held in Yulienco v. Court of Appeals:[37]

A counterclaim is defined as any claim for money or other relief which a defending party may have against an opposing party. A counterclaim is
compulsory if (a) it arises out of, or is necessarily connected with, the transaction or occurrence which is the subject matter of the opposing party’s claim;
(b) it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and (c) the court has jurisdiction to
entertain the claim. In other words, a compulsory counterclaim cannot be made the subject of a separate action but should be asserted in the same suit
involving the same transaction or occurrence giving rise to it.

The criteria or tests by which the compulsory or permissive nature of specific counterclaims can be determined are as follows:

(1) Are the issues of fact and law raised by the claim and counterclaim largely the same?
(2) Would res judicata bar a subsequent suit on defendant’s claim absent the compulsory counterclaim rule?
(3) Will substantially the same evidence support or refute plaintiff’s claim as well as defendant’s counterclaim?
(4) Is there any logical relation between the claim and the counterclaim?[38]

In the present case, the issues of fact and law raised by the petitioner in its complaint in Civil Case No. G-3119, and in the counterclaims of the
respondents for the set-off of not only the US$160,000.00 but the entirety of the deposits of the respondent PHDI of US$500,000.00, and for moral and
exemplary damages, are not identical or even largely the same. In the complaint of the petitioner in Civil Case No. G-3119, the issue is whether the loan
of US$500,000.00 was secured by respondent PHDI from the petitioner, and whether the respondents failed to pay the same and its increment despite
the petitioner’s demands. On the other hand, the issues in the respondents’ counterclaims for set-off of the amount of US$160,000.00 are the following:
whether the signature of respondent Lourdes Mendoza appearing on the said withdrawal application was forged; whether the petitioner connived with
Jae Il Aum when the latter withdrew the said amount from the accounts of respondent PHDI; whether the petitioner and Jae Il Aum are obliged to pay the
said amount to the respondent PHDI; and whether the obligations of the respondent to pay their loan of US$500,000.00 is extrajudicial pro tanto. Any
judgment of the court on the complaint of the petitioner in Civil Case No. G-3119 would not bar any suit on the respondents’ counterclaim. The evidence
of the petitioner on its claim in its complaint, and that of the respondents on their counterclaims are thus different. There is, likewise, no logical relation
between the claim of the petitioner and the counterclaim of the respondents. Hence, the counterclaim of the respondents is an initiatory pleading, which
requires the respondents to append thereto a certificate of non-forum shopping. Their failure to do so results to the dismissal of their counterclaim
without prejudice.[39]

The general rule is that compliance with the certificate of forum shopping is separate from and independent of the avoidance of the act of forum
shopping itself. Forum shopping is a ground for summary dismissal of both initiatory pleadings without prejudice to the taking of appropriate action
against the counsel or party concerned.[40]

Case law has it that there is forum shopping when, between an action pending before the court and another one, there exist:

… (a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in the other action will,
regardless of which party is successful, amount to res judicata in the action under consideration. …[41]

Otherwise stated, there is forum shopping where a litigant sues the same party against whom another action or actions for the alleged violation of the
same right and the enforcement of the same relief is/are still pending. The defense of litis pendentia in one case is a bar to the other/others; and, a final
judgment is one that would constitute res judicata and thus would cause the dismissal of the rest. Absolute identity of parties is not required. It is
enough that there is substantial identity of parties.[42] It is enough that the party against whom the estoppel is set up is actually a party to the former
case.[43] There is identity of causes of action if the same evidence will sustain the second action. The principle applies even if the relief sought in the
two cases may be different.[44] Forum shopping consists of filing multiple suits involving the same parties for the same cause of action, either
simultaneously or successively, for the purpose of obtaining a favorable judgment.[45]

What is truly important to consider, the Court ruled in Golangco v. Court of Appeals,[46] is the vexation caused the courts and parties-litigants who ask
different courts and/or administrative agencies to rule on the same or restated causes and/or grant the same or substantially the same reliefs, in the
process creating the possibility of conflicting decisions being rendered by the different courts upon the same issues. In Yupangco Cotton Mills, Inc. v.
Court of Appeals,[47] the Court ruled that for forum shopping to exist, both actions must involve the same transactions, the same circumstances; and the
actions must also raise identical causes of actions, subject matter and issues. Forum shopping is an act of malpractice that is prohibited and considered
as trifling with the court. It is an improper conduct which tends to degrade the administration of justice. But there is no forum shopping where two
different orders or questions, two different causes of action and issues are raised, and two objectives are sought.[48]

In this case, in interposing their counterclaim for set-off of the US$160,000.00 against their loan of US$500,000.00 in Civil Case No. G-3119, as well as
the counterclaims for P500,000.00 as moral damages, and P500,000.00 as exemplary damages, the respondents thereby engaged in forum shopping.
As gleaned from the material averments of their complaint in Civil Case No. G-3012, the respondents, who are the plaintiffs therein, claimed that Jae Il
Aum, who was the president of respondent PHDI, withdrew US$160,000.00 from the deposit accounts of the said respondent with the petitioner; that
such withdrawal application bore the forged signature of respondent Lourdes Mendoza; and that the authorized office/officers of the petitioner connived
with Jae Il Aum in consummating the withdrawal. The respondents prayed that the petitioner and Jae Il Aum be ordered to pay, jointly and severally, the
said amount, plus P500,000.00 as moral damages and P500,000.00 as exemplary damages based on their claim that the petitioner, a corporation
incorporated in Korea, and Jae Il Aum, a Korean national, victimized the respondents, who are Filipinos. The respondents merely restated and
repleaded the same allegations in their counterclaims in Civil Case No. G-3119, and prayed that the aforesaid amount of US$160,000.00 be set-off
against their loan of US$500,000.00 which was being claimed by the petitioner in the said case, in addition to awards for P500,000.00 as moral
damages, and P500,000.00 as exemplary damages against the petitioner for allegedly victimizing Filipinos in their country. The threshold issues
common to and decisive of the complaint in Civil Case No. G-3012 and the counterclaim for set-off in Civil Case No. G-3119 are whether the signature of
respondent Lourdes Mendoza on the application for withdrawal of US$160,000.00 was forged, and whether the petitioner connived with Jae Il Aum in
the alleged fraudulent withdrawal of the said amount. The evidence of the respondents as plaintiffs in Civil Case No. G-3012 is the same evidence that
they will have to adduce as plaintiffs on their counterclaim for set-off in Civil Case No. G-3119. Any judgment of the RTC of Guagua, Pampanga, Branch
49, in Civil Case No. G-3012 will, likewise, resolve the threshold issue in the respondents’ counterclaim for set-off in Civil Case No. G-3119. That Jae Il
Aum is not a party in Civil Case No. G-3119 is not important; that the respondents did not pray in their counterclaim that the petitioner pay to them the
US$160,000.00 withdrawn by Jae Il Aum is, likewise, not a bar to the application of the principle of litis pendentia.

It must be stressed, however, that the dismissal of the complaint of the respondents against the petitioner in Civil Case No. G-3012 is without prejudice
to the continuation of the case against Jae Il Aum.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The complaint of the respondents against the petitioner in Civil Case No. G-3012 is
DISMISSED without prejudice to the continuation thereof against the defendant Jae Il Aum. No costs.

CASE NO. 12. SANTO TOMAS UNIVERSITY HOSPITAL vs. CESAR ANTONIO Y. SURLA and EVANGELINE SURLA
G.R. No. 129718 August 17, 1998
FIRST DIVISION
VITUG, J.:

Can a compulsory counterclaim pleaded in an Answer be dismissed on the ground of a failure to accompany it with a certificate of non-forum shopping?
This question is the core issue presented for resolution in the instant petition.

First, a factual background.

On 26 December 1995, respondent spouses filed a complaint for damages against petitioner Santo Tomas University Hospital with the Regional Trial
Court of Quezon City predicated on an allegation by the spouses that their son, Emmanuel Cesar Surla, while confined at the said hospital for having
been born prematurely, had accidentally fallen from his incubator on 16 April 1995 possibly causing serious harm on the child. The case was raffled and
assigned to Branch 226 of the Regional Trial Court of Quezon City, presided over by the Hon. Leah S. Domingo-Regala, and there docketed Civil Case
No. Q-95-25977.

On 28 February 1996, petitioner hospital filed its Answer with "Compulsory Counterclaim" asserting that respondents still owed to it the amount of
P82,632.10 representing hospital bills for Emmanuel's confinement at the hospital and making a claim for moral and exemplary damages, plus attorney's
fees, by reason of the supposed unfounded and malicious suit filed against it.

On 21 March 1996, petitioner received a copy of respondents' Reply to Counterclaim, dated 12 March 1996, that sought, inter alia, the dismissal of
petitioner's counterclaim for its non-compliance with Supreme Court Administrative Circular No. 04-94 requiring that a complaint and other initiatory
pleadings, such as a counterclaim, cross-claim, third (fourth, etc.) party complaint, be accompanied with a certificate of non-forum shopping.
In its Rejoinder to respondents' Reply to Counterclaim, petitioner contended that the subject circular should be held to refer only to a permissive
counterclaim, an initiatory pleading not arising out of, nor necessarily connected with, the subject matter of the plaintiffs claim but not to a compulsory
counterclaim spawned by the filing of a complaint and so intertwined therewith and logically related thereto that it verily could not stand for independent
adjudication. Petitioner concluded that, since its counterclaim was compulsory in nature, the subject circular did not perforce apply to it. 1

In its Order of 22 March 1996, the trial court dismissed petitioner's counterclaim; it held:

Administrative Circular No. 04-94 provides; among others:

The complaint and other initiatory pleadings referred to and subject of this Circular are the original civil complaint, counterclaim, crossclaim, third (fourth,
etc.) party complaint, or complaint-in-intervention, petition or application wherein a party asserts his claim on (sic) relief.

It will be noted that the counterclaim does not distinguish whether the same should be permissive or compulsory, hence this Court finds that the
counterclaim referred to in said Circular covers both kinds.

WHEREFORE, the counterclaim of defendant is hereby DISMISSED. Let the pre-trial of this case be set on May 14, 1996 at 2:00 o'clock in the
afternoon . . . . 2

On 16 April 1996, petitioner filed before the same court an Omnibus Motion seeking a clarification of the court's Order of 14 March 1996 denying
respondents' Reply to Counterclaim and a reconsideration of the 22nd March 1996 Order dismissing the compulsory counterclaim. 3 On 22 April 1996,
petitioner received a copy of the court's Order, dated 16 April 1996, which pertinently read:

WHEREFORE, the Order dated March 14, 1996 is hereby clarified as follows:

xxx xxx xxx

The Reply to counterclaim filed by counsel for plaintiffs is hereby NOTED. SO ORDERED.

The Motion for Reconsideration of this Court's Order dated March 22, 1996 is hereby DENIED. The pre-trial conference set on May 14, 1998 will go on
as scheduled. 4

Petitioner forthwith elevated the matter to the Court of Appeals by way of a special civil action for certiorari under Rule 65, Revised Rules of Court,
asseverating grave abuse of discretion by public respondent in dismissing the compulsory counterclaim and in espousing the view that Administrative
Circular No. 04-94 should apply even to compulsory counterclaims.

The Court of Appeals, in its Decision promulgated on 12 March 1997, dismissed the petition for certiorari; it opined:

. . . the Supreme Court circular aforequoted requires without equivocation that to the original civil complaint, counterclaim, crossclaim, third (fourth, etc.)
party complaint, or complaint-in-intervention, petition, or application wherein a party asserts his claim for relief to be filed in all courts and agencies other
than the Supreme Court and the Court of Appeals must be annexed and simultaneously filed therewith the required certification under oath to avoid
forum shopping or multiple filing of petitions and complaints. Non-compliance therewith is a cause for the dismissal of the complaint, petition, application
or other initiatory pleading. Included in such initiatory pleading is the defendant's counterclaim, permissive or compulsory.

A counterclaim partakes of the nature of a complaint and/or a cause of action against the plaintiff in a case . . ., only this time it is the original defendant
who becomes the plaintiff. It stands on the same footing and is tested by the same rules as if it were an independent action. 5

In its present recourse, petitioner contends that —

The Court of Appeals (has) committed serious, evident and palpable error in ruling that:

5.1 THE SPECIAL CIVIL ACTION OF CERTIORARI UNDER RULE 65 OF THE REVISED RULES OF COURT IS UNAVAILING. THE DISMISSAL OF
THE COMPULSORY COUNTERCLAIM BEING A FINAL ORDER, THE PETITIONER SHOULD HAVE TAKEN AN APPEAL THEREFROM; AND

5.2 ADMINISTRATIVE CIRCULAR NO. 04-94 OF THIS HONORABLE COURT LIKEWISE APPLIES TO BOTH KINDS OF COUNTERCLAIMS,
PERMISSIVE AND COMPULSORY.

The petition is partly meritorious.

The appellate court ruled that the dismissal of the counterclaim, being a final order, petitioner's remedy was to appeal therefrom and, such appeal being
then available, the special civil action of certiorari had been improperly filed.

The concept of a final judgment or order, distinguished from an interlocutory issuance, is that the former decisively puts to a close, or disposes of, a case
or a disputed issue leaving nothing else to be done by the court in respect thereto. Once that judgment or order is rendered, the adjudicative task of the
court is likewise ended on the particular matter involved. 7 An order is interlocutory, upon the other hand, if its effects would only be provisional in
character and would still leave substantial proceedings to be further had by the issuing court in order to put the controversy to rest. 8

The order of the trial court dismissing petitioner's counterclaim was a final order since the dismissal, although based on a technicality, would require
nothing else to be done by the court with respect to that specific subject except only to await the possible filing during the reglementary period of a
motion for reconsideration or the taking of an appeal therefrom.

As a rule, errors of judgment, as well as of procedure, neither relating to the jurisdiction of the court nor involving grave abuse of discretion, are not
reviewable by the extraordinary remedy of certiorari. 9 As long as a court acts within its jurisdiction and does not gravely abuse its discretion in the
exercise thereof, any supposed error committed by it will amount to nothing more than an error of judgment reviewable by a timely appeal and not
assailable by a special civil action of certiorari. 10 This rule, however, is not a rigid and inflexible technicality. This Court has not too infrequently given
due course to a petition for certiorari, even when the proper remedy would have been an appeal, where valid and compelling considerations could
warrant such a recourse. 11 Certiorari has been deemed to be justified, for instance, in order to prevent irreparable damage and injury to a party where
the trial judge has capriciously and whimsically exercised his judgment, or where there may be danger of clear failure of justice, or where an ordinary
appeal would simply be inadequate to relieve a party from the injurious effects of the judgment complained of. 12

In the case at bar, an appeal from the dismissal of the counterclaim, although not totally unavailable, could have well been ineffective, if not futile, as far
as petitioner is concerned since no single piece of evidence has yet been presented by it, that opportunity having been foreclosed by the trial court, on
the dismissed counterclaim which could form part of the records to be reviewed by the appellate court. The object of procedural law is not to cause an
undue protraction of the litigation, but to facilitate the adjudication of conflicting claims and to serve, rather than to defeat, the ends of justice. 13

The opinion of this Court on the next issue persuades it to accept, tested by the foregoing disquisition, the instant petition for its consideration.

The pertinent provisions of Administrative Circular No. 04-94 provide:

1. The plaintiff, petitioner, applicant or principal party seeking relief in the complaint, petition, application or other initiatory pleading shall certify under
oath in such original pleading, or in a sworn certification annexed thereto and simultaneously filed therewith, to the truth of the following facts and
undertakings: (a) he has not theretofore commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is pending in the Supreme Court, the Court of
Appeals, or any other tribunal or agency; (c) if there is any such action or proceeding which is either pending or may have been terminated, he must
state the status thereof; and (d) if he should thereafter learn that a similar action or proceeding has been filed or is pending before the Supreme Court,
the Court of Appeals or any other tribunal or agency, he undertakes to report that fact within five (5) days therefrom to the court or agency wherein the
original pleading and sworn certification contemplated here have been filed.

The complaint and other initiatory pleadings referred to and subject of this Circular are the original civil complaint, counterclaim, cross-claim third (fourth,
etc.) — party complaint or complaint-in-intervention, petition, or application wherein a party asserts his claim for relief. (Emphasis supplied)

It bears stressing, once again, that the real office of Administrative Circular No. 04-94, made effective on 01 April 1994, is to curb the malpractice
commonly referred to also as forum-shopping. It is an act of a party against whom an adverse judgment has been rendered in one forum of seeking and
possibly getting a favorable opinion in another forum, other than by appeal or the special civil action of certiorari, or the institution of two or more actions
or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. 14 The language of the
circular distinctly suggests that it is primarily intended to cover an initiatory pleading or an incipient application of a party asserting a claim for relief. 15

It should not be too difficult, the foregoing rationale of the circular aptly taken, to sustain the view that the circular in question has not, in fact, been
contemplated to include a kind of claim which, by its very nature as being auxiliary to the proceedings in the suit and as deriving its substantive and
jurisdictional support therefrom, can only be appropriately pleaded in the answer and not remain outstanding for independent resolution except by the
court where the main case pends. Prescinding from the foregoing, the proviso in the second paragraph of Section 5, Rule 8, of the 1997 Rules of Civil
Procedure, i.e., that the violation of the anti-forum shopping rule "shall not be curable by mere amendment . . . but shall be cause for the dismissal of the
case without prejudice," being predicated on the applicability of the need for a certification against forum shopping, obviously does not include a claim
which cannot be independently set up.

Petitioner, nevertheless, is entitled to a mere partial relief. The so-called "counterclaim" of petitioner really consists of two segregative parts: (1) for
unpaid hospital bills of respondents' son, Emmanuel Surla, in the total amount of P82,032.10; and (2) for damages, moral and exemplary, plus attorney's
fees by reason of the alleged malicious and unfounded suit filed against it. 16 It is the second, not the first, claim that the Court here refers to as not
being initiatory in character and thereby not covered by the provisions of Administrative Circular No. 04-94.

WHEREFORE, the appealed decision is hereby modified in that the claim for moral, exemplary damages and attorney's fees in Civil Case No. Q-95-
25977 of petitioner is ordered reinstated. The temporary restraining order priorly issued by this Court is lifted. No costs.

CASE NO. 13. LDP MARKETING, INC. and MA. LOURDES DE LA PEÑA vs. ERLINDA DYOLDE MONTER
G.R. No. 159653 January 25, 2006
THIRD DIVISION
CARPIO MORALES, J.:

Respondent, Erlinda Dyolde Monter, a cashier at the Red Tag Convenience Store, filed a complaint for illegal dismissal and related causes of action
against petitioner LDP Marketing, Inc., owner-operator of the store, and LDP’s Vice-President-co-petitioner Ma. Lourdes Dela Peña.

By Decision1 of January 2, 2001, the Labor Arbiter ruled in favor of respondent.

On appeal, the National Labor Relations Commission (NLRC), by Resolution2 of May 24, 2002, affirmed the Labor Arbiter’s decision, modifying,
however, the amount of attorney’s fees awarded.

Petitioners’ Motion for Reconsideration having been denied by the NLRC, they filed on May 19, 2002 before the Court of Appeals a petition for certiorari
wherein the Verification/Certification of non-forum shopping was accomplished by petitioner Ma. Lourdes Dela Peña-Vice-President of its co-petitioner
corporation.

By Resolution of December 23, 2002, the appellate court, citing Digital Microwave Corp. v. Court of Appeals,3 dismissed petitioners’ Petition for
Certiorari for "failing to attach to the petition a copy of the company board resolution authorizing said Ma. Lourdes Dela Peña to sign the said
Verification/Certification of [non-]forum shopping for and in behalf of petitioner corporation."

To the appellate court’s Resolution, petitioners filed a Motion for Reconsideration4 to which they attached a January 24, 2003 Secretary’s Certificate5
quoting a Resolution adopted by the Board of Directors of petitioner corporation during a special meeting on May 19, 1999 reading:

xxxx

RESOLVED, as it is hereby resolved that Ms. Ma. Lourdes dela Peña and/or Ms. Nonita R. Dela Peña are hereby appointed, designated and authorized
to be the attorney-in-fact and representative of the Corporation, with absolute and complete authority to sign, enter into any stipulation, agreement,
settlement or compromise and act on any and all matters that may be taken up in behalf of the Corporation in all the proceedings in connection with the
case entitled "Erlinda D. Monter vs. LDP Marketing, Inc. and/or Ma. Lourdes dela Peña" with NLRC-NCR Case No. 00-03-02699-99, pending with the
National Labor Relations Commission, National Capital Region, wherein the Corporation is a respondent.
3. The above-resolution has not been revoked and is in full force and effect as of the date of this certification.6 (Underscoring supplied)

The Court of Appeals, "find[ing] no cogent reason to reverse" its Resolution of December 23, 2002, denied petitioners’ Motion for Reconsideration by
Resolution7 of August 20, 2003.

Hence, the present Petition for Review on Certiorari, petitioners advancing the following arguments:

1. The case of Digital Microwave Corp. v. Court of Appeals, 328 SCRA 286 (2000) relied upon by the Court of Appeals in dismissing the Petition for
Certiorari is not applicable in this case.

2. The more recent case of Shipside Incorporated v. Court of Appeals, 352 SCRA 334 (2001) which affirmed the validity of a verification/certification
against forum shopping despite the absence of an attached authorization confirming the authority of the person signing for and in behalf of a corporate
entity, is the leading case applicable to the present controversy.

3. Assuming for the sake of argument that there was indeed a technical defect in the Petition for Certiorari due [to] the failure of [p]etitioners to attach a
written authorization to sign the verification/certification against forum shopping, the merits of the case and the substantial interest of justice dictates that
the Petition for Certiorari should be given due course.8 (Underscoring supplied)

The petition is impressed with merit.

Under Rule 46, Section 3, paragraph 3 of the Rules of Court, petitions for certiorari must be verified and accompanied by a sworn certification of non-
forum shopping.9

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge
or based on authentic records.10

The party need not sign the verification. A party’s representative, lawyer or any person who personally knows the truth of the facts alleged in the
pleading may sign the verification.11

On the other hand, a certification of non-forum shopping is a certification under oath by the plaintiff or principal party in the complaint or other initiatory
pleading asserting a claim for relief or in a sworn certification annexed thereto and simultaneously filed therewith, (a) that he has not theretofore
commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no
such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof, and
(c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom
to the court wherein his aforesaid complaint or initiatory pleading has been filed.12

The requirement that a petitioner or principal party should sign the certificate of non-forum shopping applies even to corporations, considering that the
mandatory directives of the Rules of Court make no distinction between natural and juridical persons.13

A corporation, however, exercises its powers through its board of directors and/or its duly authorized officers and agents. Physical acts, like the signing
of documents, can be performed only by natural persons duly authorized for the purpose by corporate by-laws or by a specific act of the board of
directors. 14

In Digital Microwave Corporation15 relied upon by the appellate court in dismissing petitioners’ Petition for Certiorari, the certification of non-forum
shopping was signed by the therein petitioner corporation’s counsel, hence, the appellate court dismissed the petition for failure to comply with Revised
Supreme Court Circular No. 28-91, as amended. On the therein petitioner corporation’s Motion for Reconsideration, the appellate court denied the same
"absent any compelling reason for petitioner’s failure to comply at the first instance with [the circular] . . ." On the petitioner’s petition, this Court denied
the same in this wise:

In this case, petitioner has not adequately explained its failure to have the certification against forum shopping signed by one of its officers. Neither has it
shown any compelling reason for us to disregard strict compliance with the rules.

As we further stated in Spouses Ortiz,

Utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal construction.16 (Emphasis supplied)

In the more recent case of Shipside Incorporated v. Court of Appeals17 cited by herein petitioners, the therein petitioner Shipside Incorporated filed a
Petition for Certiorari and Prohibition with the Court of Appeals which, however, dismissed it, citing absence of proof that the one who signed the
Verification and Certification of non-forum shopping, its Manager Lorenzo Balbin, Jr., was authorized to institute the petition for and in behalf of the
petitioner. Shipside Incorporated filed a Motion for Reconsideration to which it attached a certificate issued by its board secretary stating that ten days
before the filing of the petition, its board of directors authorized Balbin to file it. The Court of Appeals just the same denied the Motion for
Reconsideration. In granting petitioner Shipside Incorporated’s Petition for Certiorari, this Court held:

It is undisputed that on October 21, 1999, the time petitioner’s Resident Manager Balbin filed the petition, there was no proof attached thereto that Balbin
was authorized to sign the verification and non-forum shopping certification therein, as a consequence of which the petition was dismissed by the Court
of Appeals. However, subsequent to such dismissal, petitioner filed a motion for reconsideration, attaching to said motion a certificate issued by its board
secretary stating that on October 11, 1999, or ten days prior to the filing of the petition, Balbin had been authorized by petitioner’s board of directors to
file said petition.

The Court has consistently held that the requirement regarding verification of a pleading is formal, not jurisdictional (Uy v. LandBank, G.R. No. 136100,
July 24, 2000, 336 SCRA 419). Such requirement is simply a condition affecting the form of the pleading, non-compliance with which does not
necessarily render the pleading fatally defective. Verification is simply intended to secure an assurance that the allegations in the pleading are true and
correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith. The court may order the correction of
the pleading if verification is lacking or act on the pleading although it is not verified, if the attending circumstances are such that strict compliance with
the rules may be dispensed with in order that the ends of justice may thereby be served.

On the other hand, the lack of certification against forum shopping is generally not curable by the submission thereof after the filing of the petition.
Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides that the failure of the petitioner to submit the required documents that should
accompany the petition, including the certification against forum shopping, shall be sufficient ground for the dismissal thereof. The same rule applies to
certifications against forum shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory is authorized
to file a petition on behalf of the corporation.

In certain exceptional circumstances, however, the Court has allowed the belated filing of the certification. In Loyola v. Court of Appeals, et al. (245
SCRA 477 [1995]), the Court considered the filing of the certification one day after the filing of an election protest as substantial compliance with the
requirement. In Roadway Express, Inc. v. Court of Appeals, et al. (264 SCRA 696 [1996]), the Court allowed the filing of the certification 14 days before
the dismissal of the petition. In Uy v. LandBank, supra, the Court had dismissed Uy’s petition for lack of verification and certification against non-forum
shopping. However, it subsequently reinstated the petition after Uy submitted a motion to admit certification and non-forum shopping certification. In all
these cases, there were special circumstances or compelling reasons that justified the relaxation of the rule requiring verification and certification on
non-forum shopping.

In the instant case, the merits of petitioner’s case should be considered special circumstances or compelling reasons that justify tempering the
requirement in regard to the certificate of non-forum shopping. Moreover, in Loyola, Roadway, and Uy, the Court excused non-compliance with the
requirement as to the certificate of non-forum shopping. With more reason should we allow the instant petition since petitioner herein did submit a
certification on non-forum shopping, failing only to show proof that the signatory was authorized to do so. That petitioner subsequently submitted a
secretary’s certificate attesting that Balbin was authorized to file an action on behalf of petitioner likewise mitigates this oversight.

It must also be kept in mind that while the requirement of the certificate of non-forum shopping is mandatory, nonetheless the requirements must not be
interpreted too literally and thus defeat the objective of preventing the undesirable practice of forum-shopping (Bernardo v. NLRC, 255 SCRA 108
[1996]). Lastly, technical rules of procedure should be used to promote, not frustrate justice. While the swift unclogging of court dockets is a laudable
objective, the granting of substantial justice is an even more urgent ideal.18 (Italics in the original; emphasis and underscoring supplied)

In the case at bar, petitioner corporation rectified its failure to submit proof of its petitioner-Vice-President Ma. Lourdes dela Peña’s authority to sign the
Verification/Certification on non-forum shopping also on its behalf when it attached the necessary document to its Motion for Reconsideration before the
appellate court. And petitioners stressed in said motion their "basic and principal argument x x x that the public respondent National Labor Relations
Commission committed grave abuse of discretion when it ruled that private respondent x x x was illegally dismissed, when the facts and circumstances
show otherwise."

WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated December 23, 2002 and August 20, 2003 are SET ASIDE.

Let the records of the case be REMANDED to the Court of Appeals which is hereby DIRECTED to take appropriate action thereon in light of the
foregoing discussion.

CASE NO. 14. PET PLANS, INC. and ADRIAN V. OCAMPO vs. COURT OF APPEALS
G.R. No. 148287 November 23, 2004
SECOND DIVISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the nullification of the resolutions of the Court of Appeals
dated February 28, 20011 and May 22, 2001,2 which dismissed CA-G.R. SP. No. 62410, a special civil action for certiorari brought to it by petitioners,
and denied petitioners' motion for reconsideration, respectively.

The factual and procedural antecedents are as follows:

Petitioner PET PLANS, Incorporated (PET PLANS for brevity) is a company engaged in the business of selling educational, pension and memorial plans
while co-petitioner Adrian V. Ocampo (Ocampo for brevity) is its President.

On January 16, 1995, petitioner PET PLANS employed Jaime M. Abad (Abad for brevity) as its Sales Operations Manager/District Manager, assigning
him to its branch office in Aparri, Cagayan. In a letter dated June 10, 1999, petitioners informed Abad that, effective June 16, 1999, he is being
reassigned as a Trust Manager, a position which is next lower in rank than the one he was then occupying. The reasons for his demotion are his failure
to comply with the sales quota for the years 1998 and 1999, to recruit manpower and to develop his agency. On August 31, 1999, Abad filed a complaint
with the National Labor Relations Commission (NLRC), Regional Arbitration Branch No. 02, Tuguegarao, Cagayan for illegal dismissal/demotion,
damages, non-payment of basic wages, 13th month pay and other monetary incentives against PET PLANS and Ocampo.3

On December 28, 1999, Executive Labor Arbiter Ricardo N. Olairez rendered a decision, the dispositive portion of which reads:

WHEREFORE, with all the foregoing considerations, judgment is hereby rendered declaring complainant illegally dismissed and ordering respondents
jointly and severally to reinstate him to his former position without loss of seniority rights with full backwages and other benefits computed at P26,533.00
basic pay including 13th month pay and allowances from June 16 to December 31, 1999, and P144, 910.35 unpaid basic wages including 13th month
pay for 1996 to 1998 plus ten percent attorney's fees. The reinstatement aspect is immediately executory even pending appeal. In case reinstatement is
no longer feasible complainant shall be paid separation pay of one month compensation pay including allowances for every year of service. All other
claims are hereby dismissed. SO ORDERED.

Petitioners appealed the decision to the NLRC. On July 25, 2000, the NLRC promulgated its decision with the following dispositive portion:

WHEREFORE, the decision appealed from is hereby MODIFIED to the extent that the award of backwages amounting to P26,533.00 is hereby SET
ASIDE. In all other aspects, the said decision is hereby AFFIRMED. SO ORDERED.

Petitioners filed a motion for reconsideration but the same was denied.

Aggrieved by the NLRC decision, herein petitioners, on January 24, 2001, filed a special civil action for certiorari with the Court of Appeals.

On February 28, 2001, the Court of Appeals issued a Resolution, to wit:

The Court resolves to DISMISS the petition for defective or insufficient certification against forum-shopping in that it is not signed by the principal party or
by petitioner himself as referred to by Section 5, Rule 7 of the 1997 Rules of Civil Procedure but was signed by a certain Rolando Espino without any
certification or attachment that he was indeed authorized to sign for and in behalf of the petitioner corporation and to bind the same. SO ORDERED.
Petitioners filed a motion for reconsideration but the same was denied in a Resolution issued by the Court of Appeals on May 22, 2001.

Hence, the present petition. Petitioners claim that:

The Honorable Court of Appeals has decided questions of substance in a way not in accord with law or with applicable decisions of this Honorable
Supreme Court;

The Honorable Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it dismissed the petition docketed
as CA G.R. SP NO. 62410 on the ground of defective or insufficient certification against forum shopping, contending that it was not signed by the
principal party or by petitioner himself as referred to by Section 5, Rule 7 of the 1997 Rules of Civil Procedure;

The Honorable Court of Appeals gravely erred or acted with grave abuse of discretion when it did not consider as substantial compliance with Section 5,
Rule 7 of the 1997 Rules of Civil Procedure, paragraph 1 of the questioned certification which categorically stated that Rolando Espino is the duly
authorized representative of the petitioners, which allegation was made under oath;

The Honorable Court of Appeals gravely erred or acted with grave abuse of discretion when it ignored the Secretary's Certificate and President's
Certification submitted by petitioners, attesting to the fact that Rolando Espino, being the first vice-president for legal affairs and corporate secretary is
authorized to represent PET PLANS INC. in all cases whether filed by or against the company.4

Before going into the main issue of the case, we deem it proper to pass upon the correctness of the mode of review availed of by petitioners in filing the
present petition.

Petitioners brought the present case to this Court through a petition for review on certiorari under Rule 45 of the Rules of Court. The present petition
seeks to set aside the Resolutions of the Court of Appeals which outrightly dismissed the special civil action for certiorari. No issue as to the merits of the
case was presented in the present petition. The only issue raised before us is the propriety of the dismissal by the Court of Appeals of the petition for
certiorari filed before it, - that is, whether or not the Court of Appeals gravely abused its discretion in dismissing the said petition. In fact, the petition filed
before us merely seeks to have the case remanded to the Court of Appeals for adjudication on the merits of the petition. Understandably, there is
nothing to appeal under Rule 455 from the questioned resolutions of the Court of Appeals as there was no judgment on the merits of the issues raised
before it. Thus, the instant petition should be considered as a special civil action for certiorari under Rule 65 of the Rules of Court.

We now come to the main issue in the present case.

Whether the Court of Appeals acted with grave abuse of discretion when it dismissed petitioners' special civil action for certiorari (CA-G.R. SP No.
62410) on the ground that petitioners failed to comply with the provisions of the Rules of Court on verification and certificate of non-forum shopping?

The applicable provision is Section 1, Rule 65 of the Rules of Court, to wit:

Section 1. Petition for certiorari. – When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or
his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and
praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law
and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents
relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the third paragraph of section 3, Rule 46.

Pertinent portions of Section 3, Rule 46 provides:

Section 3. Contents and filing of petition; effect of non-compliance with requirements. – . . .

The petitioner shall also submit together with the petition a sworn certification that he has not theretofore commenced any other action involving the
same issues in the Supreme Court, the Court of Appeals or different divisions thereof, or any other tribunal or agency; if there is such other action or
proceeding, he must state the status of the same; and if he should thereafter learn that a similar action or proceeding has been filed or is pending before
the Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the aforesaid
courts and other tribunal or agency thereof within five (5) days therefrom.

...

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition.

In CA-G.R. SP No. 62410, a certain Rolando M. Espino signed the Verification and Certification attached to the petition for certiorari, as the duly
authorized representative of petitioners. However, no proof was presented to show that Espino is indeed the authorized representative of petitioners. As
a consequence, CA-G.R. SP No. 62410 was dismissed by the Court of Appeals.

Subsequent to such dismissal, however, petitioners filed a motion for reconsideration attaching thereto a certificate issued by Espino, who is also the
corporate secretary of PET PLANS, indicating that on December 2, 2000, the Board of Directors of petitioner corporation issued a resolution authorizing
him to represent the corporation in all cases filed by or against it, "giving him full authority to enter into an amicable settlement, to submit to alternative
modes of dispute resolution, and to enter into stipulations or admissions of facts and of documents, as well as to sign, execute and deliver all pleadings,
agreements, papers and documents and do all those necessary to carry into effect the herein resolution."6 The Secretary's Certificate was accompanied
by a certification issued by herein petitioner Ocampo, the President/CEO of petitioner corporation, attesting to the fact that Espino is indeed the
Corporate Secretary of petitioner corporation, and that he is authorized to represent petitioner corporation in all cases filed by or against it, which
includes the authority to sign, execute and deliver all pleadings, agreements, papers and documents.7

We have ruled time and again that litigants should have the amplest opportunity for a proper and just disposition of their cause – free, as much as
possible, from the constraints of procedural technicalities.8 The policy of our judicial system is to encourage full adjudication of the merits of an appeal;
and this Court, in the exercise of its equity jurisdiction, may reverse the dismissal of appeals that are grounded on non-compliance with procedural or
formal requirements.9 On the other hand, equally settled is the rule that save for the most persuasive of reasons, strict compliance with procedural rules
is enjoined to facilitate the orderly administration of justice.10 The liberality in the application of rules of procedure may not be invoked if it will result in
the wanton disregard of the rules or cause needless delay in the administration of justice.11 Indeed, it cannot be gainsaid that obedience to the
requirements of procedural rule is needed if we are to expect fair results therefrom.12

In the present case, a reading of the subject resolution issued by the Board of Directors of PET PLANS, shows that it authorizes Espino to represent
only PET PLANS, not its co-petitioner, Ocampo. Nothing in the records at hand indicates that Espino is clothed with special authority to represent
Ocampo. Hence, Espino does not represent Ocampo, in the filing of CA-G.R. SP No. 62410. As such, Ocampo, being a petitioner in his own right,
should have also signed the verification and certificate of non-forum shopping attached to the petition of CA-G.R. SP No. 62410. Ordinarily, Ocampo
should have been considered a nominal party as he was merely impleaded by complainant in his capacity as the president of PET PLANS and no
specific claim or charge against him, in his personal capacity, was alleged in the complaint filed with the NLRC, Regional Arbitration Branch. However,
considering that the Labor Arbiter's decision made him jointly and solidarily liable with PET PLANS, he has become a real party-in-interest whose stake,
subsequent to the Labor Arbiter's decision, have become distinct from those of petitioner corporation. As such, it becomes inevitable for him to sign the
verification and certificate of non-forum shopping.

Section 3, Rule 46 of the Rules of Court requires that the petitioner shall sign the certificate of non-forum shopping. In the case of corporations, the
physical act of signing may be performed in behalf of the corporate entity by specifically authorized individuals for the simple reason that corporations, as
artificial persons, cannot do the task themselves.13 However, in the case of natural persons, the Rule requires the parties themselves to sign the
certificate of non-forum shopping.14 The reason for such a requirement is that the petitioner himself, or in case of a corporation, its duly authorized
representative, knows better than anyone else whether a separate case has been filed or pending which involves substantially the same issues.15

In the present case, it cannot be said with certainty that Espino knows beyond doubt that Ocampo has not filed before any court or tribunal a separate
case related to the present petition and the petition in CA-G.R. SP No. 62410. In Loquias vs. Office of the Ombudsman,16 we held that failure of one of
the petitioners to sign the verification and certificate against forum shopping constitutes a defect in the petition, which is a ground for dismissing the
same. While we have held in rulings subsequent to Loquias that this rule may be relaxed, petitioners must comply with two conditions: first, petitioners
must show justifiable cause for their failure to personally sign the certification and; second, they must also be able to prove that the outright dismissal of
the petition would seriously impair the orderly administration of justice.17 In the present case, we find that petitioners failed to prove the presence of
these conditions. The dismissal by the Court of Appeals of CA-G.R. SP No. 62410 should have put petitioners on guard as to the basic procedural
requirements in filing the petition. Notwithstanding such dismissal and their subsequent filing of a motion for reconsideration, petitioners still failed to
substantially comply with the requirements of the Rules by the failure of Ocampo to sign the certificate of non-forum shopping. In the present petition
filed before us, PET PLANS once again failed to submit proof that it has authorized Espino to file the present petition or to sign the verification and
certificate against forum shopping attached thereto. Likewise, petitioner Ocampo again failed to sign the certificate of non-forum shopping. We cannot
allow a party to gain an advantage from its flagrant disregard of the Rules.18 We find this fatal to petitioners' cause.

Thus, we find that the Court of Appeals did not gravely abuse its discretion in rendering the assailed Resolutions in CA-G.R. SP No. 62410.

WHEREFORE, the instant petition is DISMISSED. Costs against petitioners.

CASE NO. 15. ANTONIO ABACAN, JR., RUFO C. VENUS, JR., ENRIQUETO I. MAGPANTAY and MARIETA Y. PALANCA vs. NORTHWESTERN
UNIVERSITY, INC.
[G.R. No. 140777. April 8, 2005]
SECOND DIVISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari seeking the annulment of the Court of Appeals (CA’s) Decision[1] dated July 22, 1999 and the
Resolution[2] dated November 12, 1999, denying the motion for reconsideration.

The facts are as follows:

Two opposing factions within respondent Northwestern University, Inc. (NUI), the “Castro” and the “Nicolas” factions, seek control as the legitimate
board thereof.[3] These two factions are parties to Securities and Exchange Commission (SEC) Case No. 12-96-5469[4] which is an action filed by the
“Nicolas faction” to nullify the election of the directors of NUI belonging to the “Castro faction” and SEC Case No. 12-96-5511[5] which is a counter-suit
initiated by the “Castro faction” seeking the nullification of several board resolutions passed by the “Nicolas faction.”[6] On December 19, 1996, SEC
Hearing Officer Rolando G. Andaya, Jr., pursuant to SEC Case No. 12-96-5511, issued an Order authorizing the “Castro faction” and the Metropolitan
Bank (Metrobank) Laoag City branch to withdraw the amount of P2,555,274.99 from the account of NUI with said bank.[7] Metrobank complied and
released P1.4 M[8] in favor of the “Castro faction.” The “Nicolas faction” then initiated a criminal complaint for estafa against the “Castro faction” as well
as the petitioners herein who are officers of Metrobank, to wit: Antonio Abacan, Jr., President; Rufo C. Venus, Jr. and Enriqueto I. Magpantay, legal
officers; and Marieta Y. Palanca, assistant branch manager of its Laoag City branch. The criminal case was later dismissed insofar as petitioners are
concerned.[9]

On July 16, 1997, NUI, through Roy A. Nicolas of the “Nicolas faction,” filed a complaint, docketed as Civil Case No. 11296-14, before the Regional Trial
Court (RTC) of Laoag, for damages with application for attachment against petitioners together with the employees of NUI belonging to the “Castro
faction,” namely: Jose G. Castro, Ernesto B. Asuncion, Gervacio A. Velasco, Mariel S. Hernando and Virginio C. Rasos as well as their counsel, Edgar
S. Asuncion, and SEC Hearing Officer Rolando G. Andaya, Jr. NUI claims that between December 16 and December 20, 1996, defendants from the
“Castro faction,” acting together, and helping one another, with herein petitioners taking undue and unlawful advantage of their respective positions in
Metrobank, withdrew and released to themselves, for their own personal gain and benefit, corporate funds of NUI deposited with said bank in the sum of
P1.4 M without the knowledge, consent or approval of NUI to the grave and serious damage and prejudice of the latter. NUI also claims that defendants
have not accounted for the said amount despite several demands for them to do so.[10]

On September 15, 1997, defendant, herein petitioner, Marieta Y. Palanca filed a motion to dismiss alleging that: (1) the complaint fails to state a cause
of action against her since she is not a real party in interest; (2) plaintiff has no legal capacity to sue; and (3) the complaint is dismissible under Section
5, Rule 7 of the New Rules of Civil Procedure on the certification against forum shopping.[11] She likewise pointed out that SEC Case No. 12-96-5469
must take precedence over the civil case since it is a logical antecedent to the issue of standing in said case.[12]

On April 28, 1998, the RTC issued an Order, denying Palanca’s motion and ordering her and her co-defendants to file their respective answers.[13]
Pertinent portions of the Order read as follows:
At first impression, the controversy commenced by the complaint appears to be one involving an intra-corporate dispute. A closer scrutiny of the
allegations in the complaint, however, shows otherwise. Considering the doctrine that a motion to dismiss hypothetically admits the allegations in the
complaint, what is admitted is that the action is one for a sum of money. The Court examined Exhibit “C” of movant and found out that it refers to a case
in the Securities and Exchange Commission docketed as Sec. Case No. 12-96-5511 where the petitioners in said SEC case (some are defendants in
the instant case) were “authorized to withdraw from Metrobank (Laoag City Branch) the amount of P2,555,274.99 from the Bank account of
Northwestern University, Inc. . . .” On the other hand, the herein complaint avers that plaintiff Northwestern University, Inc. seeks recovery of the amount
of P1,600,000.00[14] allegedly withdrawn by the herein defendants during the period from December 16 to December 20, 1996 from the corporate funds
of plaintiff deposited with Metrobank Laoag City Branch under Current Account No. 7-140-525096 and Savings Account No. 3-140-52509. The SEC
Order (Exhibit “C”) was issued December 19, 1996. There is, therefore, an inference that the withdrawal referred to in the complaint as having been
effected between December 16 to 20, 1996, could possibly be the withdrawal in consequence of the SEC Order of December 19, 1996. However, the
inference remains as such and cannot ripen to a legal conclusion because the evidence on hand does not sufficiently preponderate to warrant such a
conclusion. In the first place, there is no evidence adduced that the purported withdrawal, if ever made, was drawn against the current/savings accounts
mentioned in the complaint. In the second place, the amount authorized to be withdrawn was P2,555,274.99 while the amount sought to be recovered is
P1,600,000.00.[15] The Court cannot rely on inference or speculation to cogently resolve a matter. While it appears that movants are invoking the issue
of forum-shopping, they cannot overcome the issues raised in the complaint, which as earlier stated, have been hypothetically admitted, and which
issues have to be joined by the filing of the answer by the defendants. The Court notes that in the instant case, plaintiff is a corporation and is not a
respondent in SEC Case No. 12-96-5511. Moreover, the issues raised therein and in the instant case are entirely different. There is also no showing
that there is legal basis to pierce the veil of corporate fiction. In the other case (SEC Case No. 12-96-5469), while it appears that Northwestern
University, Inc. is one of the plaintiffs therein, the complaint refers to a declaration of nullity of the special stockholders meeting of 3 October 1996 of the
election of directors and of the October 3, 1996 amended by-laws, and is essentially an action for damages. The complaint in this case, for a sum of
money, is also far removed from the nature of the action in the said SEC Case. Thus, it is clear that there are genuine issues to be tried in this case,
which calls for a trial on the merits. The motion to dismiss must, perforce, be denied. (Emphasis supplied)

As above shown, the alleged fraud is stated in generalities. In this jurisdiction, fraud is never presumed (Benitez vs. IAC, 154 SCRA 41).

Instead of filing their answers or a motion for reconsideration of the said Order, herein petitioners Abacan, Magpantay, Venus and Palanca went to the
CA on a petition for certiorari and prohibition raising the same issues.

On July 22, 1999, the CA rendered the herein assailed decision which dismissed the petition explaining thus:

A careful review and consideration of the records of the case, reveal that petitioner failed to comply with a condition sine qua non for the filing of the
Petition, which is to file a motion for reconsideration. In Tan vs. CA, 275 SCRA 568 the Supreme Court specifically ruled that: The special civil action of
certiorari will not lie unless a motion for reconsideration is first filed before the respondent court to allow it an opportunity to correct its errors.

In filing this instant petition before Us, petitioners in its petition, while admitting failure to file a Motion for Reconsideration, justified the same, when it
alleged thus:

13.01 Under the circumstances, the filing of a motion for reconsideration may be dispensed with. All issues are essentially legal and have been squarely
raised and passed upon by the lower court. [Klaveness Maritime Agency, Inc. vs. Palmos, 232 SCRA 448.]

Regrettably, however, the case relied upon by petitioner, a 1994 decision, is the exception to the rule, and not applicable to the case at Bench. In the
said case the Supreme Court said and We quote “a prior Motion for Reconsideration is not indispensable for commencement of certiorari proceedings if
the errors sought to be corrected in said proceedings had been duly heard and passed upon or were similar to the issue/s resolved by the tribunal or
agency below.” (underlining for emphasis) A reading of the Order of public respondent clearly shows that no hearing on the issues was had. The
penultimate paragraph of the Order of public respondent judge states:

WHEREFORE, in view of the foregoing, the Court hereby denies:

1. The motion to dismiss;

2. The application for a writ of preliminary attachment; and
3. The appointment of a special sheriff.

Defendant Jose G. Castro is hereby given eleven (11) days from receipt of a copy of this denial within which to file his answer; defendant Marietta [sic]
Young Palanca and the other defendants who have not filed their answer are given five (5) days from receipt of the Order to file their respective
answers. SO ORDERED.

As it was, the only thing resolved by the court a quo was in relation to the motion to dismiss the application for a writ of preliminary attachment and the
appointment of a special sheriff. Petitioner has not filed any answer which would outline the issues that he would want the court a quo to resolve.

Under such situation, therefore, since no proceedings were done to hear and pass upon the issues to be raised by petitioner, then the general rule that a
motion for reconsideration must first be filed before a petition under Sec. 1 of Rule 65 must be applied. Having failed to do so, petitioners’ petition must
be, as it is hereby DENIED.

A motion for reconsideration was thereafter filed by petitioners but was denied by the CA on November 12, 1999.[18]

Hence the present petition.

Petitioners argue that: (1) following the case of Klaveness Maritime Agency, Inc. vs. Palmos,[19] prior resort to a motion for reconsideration before the
filing of a petition for certiorari or prohibition is not a mandatory rule and may be dispensed with in this case since the issues involved herein are purely
legal and have already been passed upon; (2) it is contrary to the policy against judicial delay and multiplicity of suits for a higher court to remand the
case to the trial court when the former is in a position to resolve the dispute based on the records before it; (3) the impleaded bank officers are not real
parties-in-interest since they are not privy to the contract of deposit between NUI and Metrobank, and they merely complied with the SEC Order
authorizing the release of funds from the account of NUI with Metrobank; (4) the “Nicolas faction” has no legal capacity to sue in behalf of NUI not being
the de jure board of trustees; and (5) intra-corporate case No. 12-96-5469, lodged before the SEC, must take precedence over the damage suit pending
before the trial court.[20]

Petitioners then prayed for the dismissal of the complaint in Civil Case No. 11296-14 against them, or in the alternative, to hold in abeyance the
proceedings therein until after the final determination of SEC Case No. 12-96-5469.[21]
NUI in its Comment contends that: the Klaveness case does not apply in the case at bar since the issues raised herein are dependent upon facts the
proof of which have neither been entered into the records of the case nor admitted by the parties; petitioners cannot, on their bare and self-serving
representation that reconsideration is unnecessary, unilaterally disregard what the law requires and deny the trial court its right to review its
pronouncements before being hailed to a higher court to account therefor; and contrary to petitioners’ assertion, no hearing for the presentation of
evidence was had before the trial court on the factual matters raised in petitioners’ motion to dismiss.[22]

NUI further argues: it did not fail to state a cause of action; the complaint alleged that petitioners acted in connivance with their co-defendants and as
joint tortfeasors, are solidarily liable with their principal for the wrongful act; as officers and employees of the bank, they are also considered agents
thereof who are liable for fraud and negligence; the complaint charged the perpetration of the unlawful and unjust deprivation by the petitioners of NUI’s
right to its property for which petitioners may be held liable for damages making them real parties-in-interest; petitioners, as officers and employees of
Metrobank had an obligation to protect the funds of NUI and it was the petitioners’ act of conniving to unlawfully withdraw NUI’s funds which violated
NUI’s legal right, thus entitling the latter to sue for such tortuous act; it is also not true that petitioners could not be held liable for damages since they
merely complied with the order of the SEC; as pointed out in the Order dated April 28, 1998, the amount allegedly authorized to be withdrawn was
P2,555,274.99 while the amount sought to be recovered in the complaint was P1.6 M; it cannot be inferred conclusively therefore that the amount
subject of the complaint refers to the same amount authorized by the SEC to be withdrawn; in any case, such argument is more a subject of defense
rather than a proper ground for a motion to dismiss.[23]

NUI disagrees with the contention of petitioners that it has no legal capacity to sue, stating that NUI had already conducted subsequent elections
wherein Roy A. Nicolas was elected as member of the board of directors and concurrently the administrator of NUI.[24]

NUI further avers that: there is no merit to the claim of petitioners that there exists a prejudicial question which should prompt the trial court to suspend
its proceedings; the rule on prejudicial question finds no application between the civil complaint below and the case before the SEC as the rule
presupposes the pendency of a civil action and a criminal action; and even assuming arguendo that the issues pending before the SEC bear a similarity
to the cause of action below, the complaint of NUI can stand and proceed separately from the SEC case inasmuch as there is no identity in the reliefs
prayed for.[25]

Evaluating the issues raised, it is clear that the only questions that need to be answered in order to resolve the present petition are the following: (1)
Whether the complaint states a cause of action; (2) Whether a motion for reconsideration of the order of the RTC dismissing a motion to dismiss prior to
the filing of a petition for certiorari before the CA is dispensable; and (3) Whether the proceedings in Civil Case No. 11296-14 must be held in abeyance
pending resolution of SEC Case No. 12-96-5469.

First issue. Whether the complaint states a cause of action against petitioners. We rule in the affirmative.

It is settled that the existence of a cause of action is determined by the allegations in the complaint. In resolving a motion to dismiss based on the failure
to state a cause of action, only the facts alleged in the complaint must be considered. The test is whether the court can render a valid judgment on the
complaint based on the facts alleged and the prayer asked for.[26] Indeed, the elementary test for failure to state a cause of action is whether the
complaint alleges facts which if true would justify the relief demanded. Only ultimate facts and not legal conclusions or evidentiary facts, which should
not be alleged in the complaint in the first place, are considered for purposes of applying the test. [27]

In this case the complaint alleges that:

10. Between December 16 and December 20, 1996, the defendants, acting together and helping one another, with defendants Andaya, Abacan,
Magpantay, Venus and Palanca taking undue and unlawful advantage of their respective positions, withdrew and released to themselves, for their own
personal gain and benefit, the corporate funds of plaintiff deposited with Metrobank Laoag City Branch under Current Account No. 7-140-525096 and
Savings Account No. 3 140 52509 in the sum of P1,400,000.00 without the knowledge, consent or approval of plaintiff to the grave and serious damage
and prejudice of the latter.[28]

From this statement alone, it is clear that a cause of action is present in the complaint filed a quo. NUI has specifically alleged an act, that is, the undue
withdrawal of funds from its account with Metrobank, which the petitioners and the other defendants committed, to the prejudice of NUI’s rights.

Petitioners argue that as mere officers and employees of Metrobank, they are not privy to the contract of deposit between their bank and NUI, thus they
cannot be held liable for any erroneous withdrawal made in NUI’s account with their bank. They also do not stand to be benefited or injured by the
judgment, i.e., they are not real parties-in-interest, thus the complaint a quo is dismissible on the ground of failure to state a cause of action.

We are not persuaded.

As aptly explained by respondent NUI in its comment, petitioners are being sued and held liable for their alleged participation in the wrongdoing of the
other defendants. The complaint is not based on the contract of deposit between Metrobank and NUI but on the alleged tortuous act of defendants of
wrongfully withdrawing NUI’s funds. As contracts are not the only sources of obligations, petitioners cannot escape responsibility on the bare assertion
that the have no contract with NUI.

Second issue. Whether a motion for reconsideration is dispensable in the case at bar. We rule in the affirmative.

Indeed, it is settled that the filing of a motion for reconsideration is a prerequisite to the filing of a special civil action for certiorari. This is to give the
lower court the opportunity to correct itself.[29] It is also the rule that since an order denying a motion to dismiss is only interlocutory, which is neither
appealable until final judgment nor could it generally be assailed on certiorari, the remedy of the aggrieved party is to file an answer and interpose as
defenses the objections raised in his motion to dismiss.[30]

However, the following have been recognized as exceptions to the general rule:

(a) where the order is a patent nullity, as where the court a quo has no jurisdiction;
(b) where the questions raised in the certiorari proceedings have been duly raised and passed upon by the lower court, or are the same as those
raised and passed upon in the lower court;
(c) where there is an urgent necessity for the resolution of the question and any further delay would prejudice the interests of the Government or of the
petitioner or the subject matter of the action is perishable;
(d) where, under the circumstances, a motion for reconsideration would be useless;
(e) where petitioner was deprived of due process and there is extreme urgency for relief;
(f) where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial court is improbable;
(g) where the proceedings in the lower court are a nullity for lack of due process;
(h) where the proceeding was ex parte or in which the petitioner had no opportunity to object; and
(i) where the issue raised is one purely of law or where public interest is involved.[31] (Emphasis supplied)

Circumstances (b) and (d) above are present in this case.

In Klaveness Maritime Agency, Inc. vs. Palmos,[32] which is being invoked by petitioners, we held that:

…A prior motion for reconsideration is not indispensable for commencement of certiorari proceedings if the errors sought to be corrected in such
proceedings had been duly heard and passed upon, or were similar to the issues already resolved by the tribunal or agency below. Accordingly, the
Court has excused the non-filing of a motion for reconsideration when such a motion would be basically pro forma in nature and content, and where, as
in the present Petition, the questions raised are essentially legal in nature.[33]

We agree with the argument of petitioners that a motion for reconsideration of the order of the trial court, prior to the filing of their petition for certiorari
before the CA, was dispensable since the questions involved are essentially legal in nature and the errors sought to be corrected had already been
heard and passed upon. One of the errors sought to be corrected is the ruling of the trial court that there exists a cause of action against petitioners.
This issue that was raised in the motion to dismiss has been heard and passed upon by the trial court.

The other crucial issue that has been raised in the motion to dismiss and duly passed upon by the trial court is the question whether the case before the
trial court should be held in abeyance until resolution of SEC Case No. 12-96-5469. Palanca pointed out in her motion that said SEC case, which is an
action to nullify the election of the directors of NUI belonging to the “Castro faction,” must take precedence over Civil Case No. 11296-14 before the trial
court since it is determinative of whether or not Roy Nicolas has the legal standing to file the suit in behalf of NUI. The trial court ruled in the negative
and held that the civil and the SEC cases can proceed independently of each other since they involve different parties and issues. Thus, inasmuch as
this issue has already been raised and passed upon in the trial court, we agree with petitioners that motion for reconsideration in this instance may be
dispensed with.

Third issue. Whether the proceedings in Civil Case No. 11296-14 must be held in abeyance pending resolution of SEC Case No. 12-96-5469. We rule
in the affirmative.

Petitioners argue that SEC Case No. 12-96-5469, which is an action to nullify the election of the directors of NUI belonging to the “Castro faction,” is a
necessary and logical antecedent of the issue of whether the withdrawal of P1.4 M or P1.6 M, as the case may be, as well as the institution of this suit
for the recovery thereof was authorized by the NUI.

Technically, there would be no prejudicial question to speak of in this case, if we are to consider the general rule that a prejudicial question comes into
play in a situation where a civil action and a criminal action are both pending and there exists in the former an issue which must be preemptively
resolved before the criminal action may proceed, because howsoever the issue in the civil action is resolved would be determinative juris et de jure of
the guilt or innocence of the accused in the criminal case.[34] However, considering the rationale behind the principle of prejudicial question, being to
avoid two conflicting decisions,[35] prudence dictates that we apply the principle underlying the doctrine to the case at bar.

A prejudicial question is that which arises in a case, the resolution of which is a logical antecedent of the issue involved therein and the cognizance of
which pertains to another tribunal.[36] The prejudicial question must be determinative of the case before the court but the jurisdiction to try and resolve it
must be lodged in another court or tribunal.[37]

In the present case, the question of which between the Castro and the Nicolas factions are the de jure board of directors of NUI is lodged before the
SEC. The complaint before the RTC of Laoag meanwhile alleges that petitioners, together with their co-defendants, comprised of the “Castro faction,”
wrongfully withdrew the amount of P1.4 M from the account of NUI with Metrobank. Moreover, whether or not Roy Nicolas of the “Nicolas faction” is a
duly elected member of the Board of NUI and thus with capacity to institute the herein complaint in behalf of the NUI depends on the findings of the SEC
in the case pending before it. It would finally determine whether Castro, et al. legally withdrew the subject amount from the bank and whether Nicolas
lawfully initiated the complaint in behalf of herein respondent NUI. It is petitioners’ claim, and we agree, that the presence or absence of their liability for
allowing the withdrawal of P1.4 M from the account of NUI with Metrobank in favor of the “Castro faction” is reliant on the findings of the SEC as to which
of the two factions is the de jure board. Since the determination of the SEC as to which of the two factions is the de jure board of NUI is crucial to the
resolution of the case before the RTC, we find that the trial court should suspend its proceedings until the SEC comes out with its findings.

We apply by analogy our pronouncement in Quiambao vs. Osorio,[38] to wit:

Faced with these distinct possibilities, the more prudent course for the trial court to have taken is to hold the ejectment proceedings in abeyance until
after a determination of the administrative case. Indeed, logic and pragmatism, if not jurisprudence, dictate such move. To allow the parties to undergo
trial notwithstanding the possibility of petitioner’s right of possession being upheld in the pending administrative case is to needlessly require not only the
parties but the court as well to expend time, effort and money in what may turn out to be a sheer exercise in futility. Thus, 1 Am Jur 2d tells us:

The court in which an action is pending may, in the exercise of a sound discretion, upon proper application for a stay of that action, hold the action in
abeyance to abide the outcome of another pending in another court, especially where the parties and the issues are the same, for there is power
inherent in every court to control the disposition of causes on its dockets with economy of time and effort for itself, for counsel, and for litigants. Where
the rights of parties to the second action cannot be properly determined until the questions raised in the first action are settled the second action should
be stayed.

While this rule is properly applicable to instances involving two [2] court actions, the existence in the instant case of the same considerations of identities
of parties and issues, economy of time and effort for the court, the counsels and the parties as well as the need to resolve the parties’ right of possession
before the ejectment case may be properly determined, justifies the rule’s analogous application to the case at bar.[39]

WHEREFORE, the petition is GRANTED. The Court of Appeals Decision dated July 22, 1999 and Resolution dated November 12, 1999 are SET
ASIDE. The RTC of Laoag City, Branch 14, is hereby DIRECTED to suspend further proceedings in Civil Case No. 11296-14 until after a final
determination is made in SEC Case No. 12-96-5469.
No costs.

CASE NO. 16. PHILIPPINE AIRLINES, INC., MANOLO AQUINO, JORGE MA. CUI, JR. and PATRICIA CHIONG vs. FLIGHT ATTENDANTS AND
STEWARDS ASSOCIATION OF THE PHILIPPINES (FASAP) and LEONARDO BHAGWANI, Respondents.
 G.R. No. 143088 January 24, 2006
SECOND DIVISION
AZCUNA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court presents a recurring question regarding the Court’s requirement of a certification
of non-forum shopping.

Petitioners Philippine Airlines, Inc. (PAL) and Manolo Aquino, Jorge Ma. Cui, Jr. and Patricia Chiong, in their capacity as Executive Vice-President
Administration and Services, Manager International Cabin Crew and Assistant Vice-President Cabin Services, respectively, are before the Court seeking
the reversal of the resolution of the Court of Appeals in C.A. G.R. No. SP-56850, dated January 31, 2000, dismissing their appeal and the resolution of
May 11, 2000, denying the motion for reconsideration.

The facts on the conflict between PAL and respondents Flight Attendants and Stewards Association of the Philippines (FASAP) and Leonardo Bhagwani
are not necessary for the Court’s resolution of the petition. It is enough to state that on May 14, 1997 FASAP and Leonardo Bhagwani filed a complaint
for unfair labor practice, illegal suspension and illegal dismissal against petitioners before the Labor Arbiter of the National Labor Relations Commission
(NLRC). The Labor Arbiter rendered a decision holding that PAL committed unfair labor practice and illegal dismissal of Bhagwani and, consequently,
ordered the payment of damages. The NLRC later modified the decision by setting aside the finding that PAL was guilty of unfair labor practice, but
affirming the rest of the decision.

What is relevant to the case is the subsequent appeal to the Court of Appeals. When petitioners filed a petition for certiorari against the decision with the
Court of Appeals, it was accompanied by a Certification of Non-Forum Shopping executed by Cesar R. Lamberte and Susan Del Carmen, Vice-
President Human Resources and Assistant Vice-President Cabin Services of PAL, respectively, who are not parties to the case. The certification,
however, was without proof that the two affiants had authority to sign in behalf of petitioners. As a result, the Court of Appeals dismissed the case for
failure to show the authority of affiants to sign for PAL and for failure of the other petitioners to join in the execution of the certification. A motion for
reconsideration was filed with a Secretary’s Certificate attached evidencing that affiants Cesar R. Lamberte and Susan Del Carmen have been
authorized by Board Resolution No. 00-02-03 to initiate and/or cause to be filed on behalf of PAL petitions and pleadings in all labor-related cases. As to
the other petitioners, it was argued that they are mere nominal parties so that their failure to execute the certification does not justify dismissal of the
petition. Despite this submission, the Court of Appeals denied the motion for reconsideration. Hence, the case is now before this Court.

The petition is without merit.

The necessity for a certification of non-forum shopping in filing petitions for certiorari is found in Rule 65, Section 1, in relation to Rule 46, Section 3 of
the Rules of Court. These provisions require it to be executed by the corresponding petitioner or petitioners. As no distinction is made as to which party
must execute the certificate, this requirement is made to apply to both natural and juridical entities.1 When the petitioner is a corporation, the certification
should be executed by a natural person. Furthermore, not just any person can be called upon to execute the certification, although such a person may
have personal knowledge of the facts to be attested to.2

This Court has explained that a corporation has no power except those conferred on it by the Corporation Code and those that are implied or incidental
to its existence. The exercise of these powers is done through the board of directors and/or duly authorized officers and agents. Given these corporate
features, the power of a corporation to sue in any court is generally lodged with the board of directors. The board, in turn, can delegate the physical acts
needed to sue, which may be performed only by natural persons, to its attorneys-in-fact by a board resolution, if not already authorized under the
corporate by-laws.3

Thus, only individuals vested with authority by a valid board resolution may sign the certificate of non-forum shopping in behalf of a corporation. In
addition, the Court has required that proof of said authority must be attached. Failure to provide a certificate of non-forum shopping is sufficient ground to
dismiss the petition. Likewise, the petition is subject to dismissal if a certification was submitted unaccompanied by proof of the signatory’s authority.4

The petition filed with the Court of Appeals had a certification of non-forum shopping executed by Cesar R. Lamberte and Susan Del Carmen. The
certification, however, was without proof of authority to sign. When a motion for reconsideration was filed, a Secretary’s Certificate was submitted as
proof that the board of directors of PAL had authorized the two to execute the certificate. Nonetheless, the Court finds that this belated submission is an
insufficient compliance with the certification requirement.

This Court has allowed the reinstatement of petitions that were dismissed due to lack of proof of authority to sign the certification upon its subsequent
submission, saying that this amounted to

substantial compliance. The rationale was that the signatories, at the time of execution of the certification, were in fact authorized to sign, although proof
of their authority was lacking.5

This is not what happened in this case. A perusal of the Secretary’s Certificate submitted reveals that the authority to cause the filing of the petition was
granted on February 15, 2000.6 The petition, on the other hand, was filed on January 24, 2000 and was dismissed by the Court of Appeals on January
31, 2000. This means that at the time the certification was signed, Cesar R. Lamberte and Susan Del Carmen were not duly authorized by the Board of
Directors of PAL and, consequently, their signing and attestations were not in representation of PAL. This effectively translates to a petition that was filed
without a certification at all as none was issued by PAL, the principal party to the case.

The required certification of non-forum shopping must be valid at the time of filing of the petition. An invalid certificate cannot be remedied by the
subsequent submission of a Secretary’s Certificate that vests authority only after the petition had been filed.

WHEREFORE, the petition is DENIED. No costs.

CASE NO. 17. SPOUSES VICENTE YU AND DEMETRIA LEE-YU vs. PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Respondent.
G.R. No. 147902 March 17, 2006
FIRST DIVISION
AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari of the Decision1 dated November 14, 2000 of the Court of Appeals (CA) in CA-G.R. SP No. 58982
and the CA Resolution dated April 26, 2001, which denied petitioner’s Motion for Reconsideration.
The factual background of the case is as follows:

Under a Real Estate Mortgage dated August 15, 19942 and Amendments of Real Estate Mortgage dated April 4, 19953 and December 4, 1995,4
spouses Vicente Yu and Demetria Lee-Yu (petitioners) and spouses Ramon T. Yu and Virginia A. Tiu, or Yu Tian Hock aka Victorino/Vicente Yu,
mortgaged their title, interest, and participation over several parcels of land located in Dagupan City and Quezon City, in favor of the Philippine
Commercial International Bank (respondent) as security for the payment of a loan in the amount of P9,000,000.00.5

As the petitioners failed to pay the loan, the interest, and the penalties due thereon, respondent filed on July 21, 1998 with the Office of the Clerk of
Court and Ex-Officio Sheriff of the Regional Trial Court of Dagupan City a Petition for Extra-Judicial Foreclosure of Real Estate Mortgage on the
Dagupan City properties.6 On August 3, 1998, the City Sheriff issued a Notice of Extra-Judicial Sale scheduling the auction sale on September 10, 1998
at 10:00 o’clock in the morning or soon thereafter in front of the Justice Hall, Bonuan, Tondaligan, Dagupan City.7

At the auction sale on September 10, 1998, respondent emerged as the highest bidder.8 On September 14, 1998, a Certificate of Sale was issued in
favor of respondent.9 On October 1, 1998, the sale was registered with the Registry of Deeds of Dagupan City.

About two months before the expiration of the redemption period, or on August 20, 1999, respondent filed an Ex-Parte Petition for Writ of Possession
before the Regional Trial Court of Dagupan City, docketed as Special Proceeding No. 99-00988-D and raffled to Branch 43 (RTC Branch 43).10 Hearing
was conducted on September 14, 1999 and respondent presented its evidence ex-parte.11 The testimony of Rodante Manuel was admitted ex-parte
and thereafter the petition was deemed submitted for resolution.

On September 30, 1999, petitioners filed a Motion to Dismiss and to Strike Out Testimony of Rodante Manuel stating that the Certificate of Sale dated
September 14, 1998 is void because respondent violated Article 2089 of the Civil Code on the indivisibility of the mortgaged by conducting two separate
foreclosure proceedings on the mortgage properties in Dagupan City and Quezon City and indicating in the two notices of extra-judicial sale that
petitioners’ obligation is P10,437,015.2012 as of March 31, 1998, when petitioners are not indebted for the total amount of P20,874,031.56.13

In the meantime, petitioners filed a complaint for Annulment of Certificate of Sale before the Regional Trial Court of Dagupan City, docketed as Civil
Case No. 99-03169-D and raffled to Branch 44 (RTC Branch 44).

On February 14, 2000, RTC Branch 43 denied petitioners’ Motion to Dismiss and to Strike Out Testimony of Rodante Manuel, ruling that the filing of a
motion to dismiss is not allowed in petitions for issuance of writ of possession under Section 7 of Act No. 3135.14

On February 24, 2000, petitioners filed a Motion for Reconsideration, further arguing that the pendency of Civil Case No. 99-03169-D in RTC Branch 44
is a prejudicial issue to Spec. Proc. No. 99-00988-D in RTC Branch 43, the resolution of which is determinative on the propriety of the issuance of a writ
of possession.15

On May 8, 2000, RTC Branch 43 denied petitioners’ Motion for Reconsideration, holding that the principle of prejudicial question is not applicable
because the case pending before RTC Branch 44 is also a civil case and not a criminal case.16

On June 1, 2000, petitioners filed a Petition for Certiorari with the CA.17 On November 14, 2000, the CA dismissed petitioners’ Petition for Certiorari on
the grounds that petitioners violated Section 8 of Act No. 3135 and disregarded the rule against multiplicity of suits in filing Civil Case No. 99-03169-D in
RTC Branch 44 despite full knowledge of the pendency of Spec. Proc. No. 99-00988-D in RTC Branch 43; that since the one-year period of redemption
has already lapsed, the issuance of a writ of possession in favor of respondent becomes a ministerial duty of the trial court; that the issues in Civil Case
No. 99-03169-D are not prejudicial questions to Spec. Proc. No. 99-00988-D because: (a) the special proceeding is already fait accompli, (b) Civil Case
No. 99-03169-D is deemed not filed for being contrary to Section 8 of Act No. 3135, (c) the filing of Civil Case No. 99-03169-D is an afterthought and
dilatory in nature, and (d) legally speaking what seems to exist is litis pendentia and not prejudicial question.18

Petitioners filed a Motion for Reconsideration19 but it was denied by the CA on April 26, 2001.20

Hence, the present Petition for Review on Certiorari.

Petitioners pose two issues for resolution, to wit:

A. Whether or not a real estate mortgage over several properties located in different locality [sic] can be separately foreclosed in different places.

B. Whether or not the pendency of a prejudicial issue renders the issues in Special Proceedings No. 99-00988-D as [sic] moot and academic.21

Anent the first issue, petitioners contend that since a real estate mortgage is indivisible, the mortgaged properties in Dagupan City and Quezon City
cannot be separately foreclosed. Petitioners further point out that two notices of extra-judicial sale indicated that petitioners’ obligation is
P10,437,015.2022 each as of March 31, 1998 or a total of P20,874,030.40,23 yet their own computation yields only P9,957,508.90 as of February 27,
1998.

As to the second issue, petitioners posit that the pendency of Civil Case No. 99-03169-D is a prejudicial issue, the resolution of which will render the
issues in Spec. Proc. No. 99-00988-D moot and academic. Petitioners further aver that they did not violate Section 8 of Act No. 3135 in filing a separate
case to annul the certificate of sale since the use of the word "may" in said provision indicates that they have the option to seek relief of filing a petition to
annul the certificate of sale in the proceeding involving the application for a writ of possession or in a separate proceeding.

Respondent contends24 that, with respect to the first issue, the filing of two separate foreclosure proceedings did not violate Article 2089 of the Civil
Code on the indivisibility of a real estate mortgage since Section 2 of Act No. 3135 expressly provides that extra-judicial foreclosure may only be made in
the province or municipality where the property is situated. Respondent further submits that the filing of separate applications for extra-judicial
foreclosure of mortgage involving several properties in different locations is allowed by A.M. No. 99-10-05-0, the Procedure on Extra-Judicial
Foreclosure of Mortgage, as further amended on August 7, 2001.

As to the second issue, respondent maintains that there is no prejudicial question between Civil Case No. 99-03169-D and Spec. Proc. No. 99-00988-D
since the pendency of a civil action questioning the validity of the mortgage and the extra-judicial foreclosure thereof does not bar the issuance of a writ
of possession. Respondent also insists that petitioners should have filed their Petition to Annul the Certificate of Sale in the same case where
possession is being sought, that is, in Spec. Proc. No. 99-00988-D, and not in a separate proceeding (Civil Case No. 99-01369-D) because the venue of
the action to question the validity of the foreclosure is not discretionary since the use of the word "may" in Section 8 of Act No. 3135 refers to the filing of
the petition or action itself and not to the venue. Respondent further argues that even if petitioners filed the Petition to Annul the Certificate of Sale in
Spec. Proc. No. 99-00988-D, the writ of possession must still be issued because issuance of the writ in favor of the purchaser is a ministerial act of the
trial court and the one-year period of redemption has already lapsed.

Anent the first issue, the Court finds that petitioners have a mistaken notion that the indivisibility of a real estate mortgage relates to the venue of extra-
judicial foreclosure proceedings. The rule on indivisibility of a real estate mortgage is provided for in Article 2089 of the Civil Code, which provides:

Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided among the successors in interest of the debtor or of the creditor.

Therefore, the debtor’s heir who has paid a part of the debt cannot ask for the proportionate extinguishment of the pledge or mortgage as the debt is not
completely satisfied.

Neither can the creditor’s heir who received his share of the debt return the pledge or cancel the mortgage, to the prejudice of the other heirs who have
not been paid.

From these provisions is excepted the case in which, there being several things given in mortgage or pledge, each one of them guarantees only a
determinate portion of the credit.

The debtor, in this case, shall have a right to the extinguishment of the pledge or mortgage as the portion of the debt for which each thing is specially
answerable is satisfied.

This rule presupposes several heirs of the debtor or creditor25 and therefore not applicable to the present case. Furthermore, what the law proscribes is
the foreclosure of only a portion of the property or a number of the several properties mortgaged corresponding to the unpaid portion of the debt where,
before foreclosure proceedings, partial payment was made by the debtor on his total outstanding loan or obligation. This also means that the debtor
cannot ask for the release of any portion of the mortgaged property or of one or some of the several lots mortgaged unless and until the loan thus
secured has been fully paid, notwithstanding the fact that there has been partial fulfillment of the obligation. Hence, it is provided that the debtor who has
paid a part of the debt cannot ask for the proportionate extinguishment of the mortgage as long as the debt is not completely satisfied.26 In essence,
indivisibility means that the mortgage obligation cannot be divided among the different lots,27 that is, each and every parcel under mortgage answers for
the totality of the debt.28

On the other hand, the venue of the extra-judicial foreclosure proceedings is the place where each of the mortgaged property is located, as prescribed
by Section 2 of Act No. 3135,29 to wit:

SECTION 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 subject to 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.

A.M. No. 99-10-05-0,30 the Procedure on Extra-Judicial Foreclosure of Mortgage, lays down the guidelines for extra-judicial foreclosure proceedings on
mortgaged properties located in different provinces. It provides that the venue of the extra-judicial foreclosure proceedings is the place where each of the
mortgaged property is located. Relevant portion thereof provides:

Where the application concerns the extrajudicial foreclosure of mortgages of real estates and/or chattels in different locations covering one
indebtedness, only one filing fee corresponding to such indebtedness shall be collected. The collecting Clerk of Court shall, apart from the official receipt
of the fees, issue a certificate of payment indicating the amount of indebtedness, the filing fees collected, the mortgages sought to be foreclosed, the real
estates and/or chattels mortgaged and their respective locations, which certificate shall serve the purpose of having the application docketed with the
Clerks of Court of the places where the other properties are located and of allowing the extrajudicial foreclosures to proceed thereat. (Emphasis
supplied)

The indivisibility of the real estate mortgage is not violated by conducting two separate foreclosure proceedings on mortgaged properties located in
different provinces as long as each parcel of land is answerable for the entire debt. Petitioners’ assumption that their total obligation is P20,874,030.40
because the two notices of extra-judicial sale indicated that petitioners’ obligation is P10,437,015.2031 each, is therefore flawed. Considering the
indivisibility of a real estate mortgage, the mortgaged properties in Dagupan City and Quezon City are made to answer for the entire debt of
P10,437,015.29.32

As to the second issue, that is, whether a civil case for annulment of a certificate of sale is a prejudicial question to a petition for issuance of a writ of
possession, this issue is far from novel and, in fact, not without precedence. In Pahang v. Vestil,33 the Court said:

A prejudicial question is one that arises in a case the resolution of which is a logical antecedent of the issue involved therein, and the cognizance of
which pertains to another tribunal. It generally comes into play in a situation where a civil action and a criminal action are both pending and there exists
in the former an issue that must be preemptively resolved before the criminal action may proceed, because howsoever the issue raised in the civil action
is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case. The rationale behind the principle of
prejudicial question is to avoid two conflicting decisions. 1avvph!l.net

In the present case, the complaint of the petitioners for Annulment of Extrajudicial Sale is a civil action and the respondent’s petition for the issuance of a
writ of possession of Lot No. 3-A, Block 1, Psd-07-021410, TCT No. 44668 is but an incident in the land registration case and, therefore, no prejudicial
question can arise from the existence of the two actions. A similar issue was raised in Manalo v. Court of Appeals, where we held that:

At any rate, it taxes our imagination why the questions raised in Case No. 98-0868 must be considered determinative of Case No. 9011. The basic issue
in the former is whether the respondent, as the purchaser in the extrajudicial foreclosure proceedings, may be compelled to have the property
repurchased or resold to a mortgagor’s successor-in-interest (petitioner); while that in the latter is merely whether the respondent, as the purchaser in
the extrajudicial foreclosure proceedings, is entitled to a writ of possession after the statutory period for redemption has expired. The two cases,
assuming both are pending, can proceed separately and take their own direction independent of each other.34

In the present case, Civil Case No. 99-01369-D and Spec. Proc. No. 99-00988-D are both civil in nature. The issue in Civil Case No. 99-01369-D is
whether the extra-judicial foreclosure of the real estate mortgage executed by the petitioners in favor of the respondent and the sale of their properties at
public auction are null and void, whereas, the issue in Spec. Proc. No. 99-00988-D is whether the respondent is entitled to a writ of possession of the
foreclosed properties. Clearly, no prejudicial question can arise from the existence of the two actions. The two cases can proceed separately and take
their own direction independently of each other.
Nevertheless, there is a need to correct the CA’s view that petitioners violated Section 8 of Act No. 3135 and disregarded the proscription on multiplicity
of suits by instituting a separate civil suit for annulment of the certificate of sale while there is a pending petition for issuance of the writ of possession in
a special proceeding.

Section 8 of Act No. 3135 provides:

Sec. 8. Setting aside of sale and writ of possession. – The debtor may, in the proceedings in which possession was requested, but not later than thirty
days after the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the damages suffered
by him, because the mortgage was not violated or the sale was not made in accordance with the provisions hereof, and the court shall take cognizance
of this petition in accordance with the summary procedure provided for in section one hundred and twelve of Act Numbered Four hundred and ninety-six;
and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the person who obtained possession.
Either of the parties may appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred and ninety-six; but the
order of possession shall continue in effect during the pendency of the appeal. (Emphasis supplied)

Under the provision above cited, the mortgagor may file a petition to set aside the sale and for the cancellation of a writ of possession with the trial court
which issued the writ of possession within 30 days after the purchaser mortgagee was given possession. It provides the plain, speedy, and adequate
remedy in opposing the issuance of a writ of possession.35 Thus, this provision presupposes that the trial court already issued a writ of possession. In
Sps. Ong v. Court of Appeals,36 the Court elucidated:

The law is clear that the purchaser must first be placed in possession of the mortgaged property pending proceedings assailing the issuance of the writ
of possession. If the trial court later finds merit in the petition to set aside the writ of possession, it shall dispose in favor of the mortgagor the bond
furnished by the purchaser. Thereafter, either party may appeal from the order of the judge in accordance with Section 14 of Act 496, which provides
that "every order, decision, and decree of the Court of Land Registration may be reviewed…in the same manner as an order, decision, decree or
judgment of a Court of First Instance (RTC) might be reviewed." The rationale for the mandate is to allow the purchaser to have possession of the
foreclosed property without delay, such possession being founded on his right of ownership.37

Accordingly, Section 8 of Act No. 3135 is not applicable to the present case since at the time of the filing of the separate civil suit for annulment of the
certificate of sale in RTC Branch 44, no writ of possession was yet issued by RTC Branch 43.

Similarly, the Court rejects the CA’s application of the principle of litis pendentia to Civil Case No. 99-03169-D in relation to Spec. Proc. No. 99-00988-D.
Litis pendentia refers to that situation wherein another action is pending between the same parties for the same cause of actions and that the second
action becomes unnecessary and vexatious. For litis pendentia to be invoked, the concurrence of the following requisites is necessary: (a) identity of
parties or at least such as represent the same interest in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being founded on
the same facts; and, (c) the identity in the two cases should be such that the judgment that may be rendered in one would, regardless of which party is
successful, amount to res judicata in the other.38

Applying the foregoing criteria in the instant case, litis pendentia does not obtain in this case because of the absence of the second and third requisites.
The issuance of the writ of possession being a ministerial function, and summary in nature, it cannot be said to be a judgment on the merits, but simply
an incident in the transfer of title. Hence, a separate case for annulment of mortgage and foreclosure sale cannot be barred by litis pendentia or res
judicata.39 Thus, insofar as Spec. Proc. No. 99-00988-D and Civil Case No. 99-03169-D pending before different branches of RTC Dagupan City are
concerned, there is no litis pendentia.

To sum up, the Court holds that the rule on indivisibility of the real estate mortgage cannot be equated with the venue of foreclosure proceedings on
mortgaged properties located in different provinces since these are two unrelated concepts. Also, no prejudicial question can arise from the existence of
a civil case for annulment of a certificate of sale and a petition for the issuance of a writ of possession in a special proceeding since the two cases are
both civil in nature which can proceed separately and take their own direction independently of each other.

Furthermore, since the one-year period to redeem the foreclosed properties lapsed on October 1, 1999, title to the foreclosed properties had already
been consolidated under the name of the respondent. As the owner of the properties, respondent is entitled to its possession as a matter of right.40 The
issuance of a writ of possession over the properties by the trial court is merely a ministerial function. As such, the trial court neither exercises its official
discretion nor judgment.41 Any question regarding the validity of the mortgage or its foreclosure cannot be a legal ground for refusing the issuance of a
writ of possession.42 Regardless of the pending suit for annulment of the certificate of sale, respondent is entitled to a writ of possession, without
prejudice of course to the eventual outcome of said case.

WHEREFORE, the petition is DENIED.

CASE NO. 18. REV. LUIS AO-AS, REV. JOSE LAKING, EUSQUICIO GALANG, REV. ISABELO MONONGGIT, REV. EDWINO MERCADO, REV.
DANIEL PONDEVIDA, REV. TEODORICO TARAN and DR. BENJAMIN GALAPIA vs. HON. COURT OF APPEALS, THOMAS P. BATONG,
JUANITO BASALONG, AUGUSTO CATANGI, PAUL GARCIA, QUIDO RIVERA, VICTORIO Y. SAQUILAYAN and DANILO ZAMORA
G.R. No. 128464 June 20, 2006
FIRST DIVISION
CHICO-NAZARIO, J.:

This is a Petition for Certiorari under Rule 45 of the Rules of Court to seek the reversal of the Court of Appeals’ Decision1 dated 10 October 1996 in
favor of respondents [hereinafter referred to as the Batong group] and Resolution2 dated 3 March 1997 denying the Motion for Reconsideration of the
herein petitioners [hereinafter referred to as the Ao-As group].

The Court of Appeals found the facts to be as follows:

The Lutheran Church in the Philippines (hereinafter referred to as the LCP) is a religious organization duly registered with the Securities and Exchange
Commission on May 8, 1967. Its members are comprised of the Lutheran clergymen and the local Lutheran congregations in the Philippines which, at
the time of its incorporation, was divided into three districts, namely: the North Luzon District (hereinafter referred to as the NLD); the South Luzon
District (hereinafter referred to as the SLD); [and] the Mindanao district (hereinafter referred to as the MDD).

The governing body of the LCP is its national board of directors (hereinafter referred to as the LCP Board) which was originally composed of seven (7)
members serving a term of two years. Six members of the LCP Board are elected separately in district conferences held in each district, with two
members representing each district – the elected district president becomes the clergy representative to the LCP Board and the other is a lay
representative to the LCP Board. The seventh member of the Board is the National President of the LCP who is elected at large in a national convention
held in October of every even-numbered year.

During the 1976 LCP national convention, a resolution was passed dividing the North Luzon district (NLD) into two districts: the NLD Highland District
(NLHD) and the NLD Lowland District (NLLD) -- thereby increasing the number of directors from seven (7) to nine (9). Again in the 1984 LCP national
convention, a resolution was passed creating another district, namely, the Visayan Islands District (VID) thereby increasing further the number of
directors to eleven (11). Both resolutions were passed pursuant to Section 2 of Article 7 of the LCP By-Laws which provides that: "LCP in convention
may form additional districts as it sees fit".

Since the addition of two or more districts, an eleven (11) member board of directors representing the five (5) districts managed the LCP without any
challenge from the membership until several years later when certain controversies arose involving the resolutions of the Board terminating the services
of the LCP business manager and corporate treasurer since 1979, Mr. Eclesio Hipe.

The termination of Mr. Hipe sparked a series of intracorporate complaints lodged before the Securities and Exchange Commission (SEC). For the first
time, the legality of the eleven (11) member Board was put in issue as being in excess of the number of directors provided in the Articles of Incorporation
since no amendments were made thereto to reflect the increase.

Aside from the present case, SEC-SICD Case no. 3556 entitled "Excelsio Hipe, et. al. vs. Thomas Batong, et. al." and SEC-SICD Case No. 3524,
"Domingo Shambu, et. al. vs. Thomas Batong, et. al." respectively, sought to declare null and void Board Resolution Nos. LCP-BD-6-89 and LCP-BD-7-
89; and SEC-SICD Case No. 3550 entitled "The Lutheran Church in the Philippines vs. Exclesio Hipe" which sought to recover the corporate records still
in the possession of Mr. Hipe.

[The members of the Batong group] are the duly elected board of directors of the LCP at the time of the filing of SEC-SICD Case No. 3857. On the other
hand, [the Ao-As group] have served in various capacities as directors or officers of the LCP.

On August 17, 1990, [the Ao-As group] filed SEC-SICD Case No. 3857 for accounting and damages with prayer for preliminary injunction and
appointment of a management committee asserting the following causes of action:

"First, the alleged non-liquidation and/or non-accounting of a part of the proceeds of the La Trinidad land transaction in the amount of P64,000.00 by
petitioner Thomas Batong;
Second, the alleged non-liquidation and/or unaccounting of cash advances in the aggregate amount of P323,750.00 by petitioner Thomas Batong;

Third, the alleged dissipation and/or unaccounting of the LCP general fund in the amount of 4.8 million;
Fourth, the non-registration of the Leyte land purchased with LCP funds by petitioner Victorio Saquilayan;
Fifth, severance of church-partnership relationship with Lutheran Church-Missouri Synod (LCMS); and
Sixth, the transfer of LCP corporate books from the Sta. Mesa office to the Caloocan office."

During the hearings on the application for creation of a management committee, [the Batong group] filed an Urgent Motion to Suspend the Proceedings
of the Case in view of an amicable settlement agreed upon by the parties entitled "A FORMULA FOR CONCORD". However, notwithstanding the
FORMULA FOR CONCORD, the SEC-SICD denied [the Batong group’s] motion to suspend proceedings.

On January 23, 1992, petitioners filed a Motion to Dismiss alleging again the FORMULA OF CONCORD. Again, the SEC-SICD denied [the Batong
group’s] motion.

Subsequently, on September 3, 1992, the SEC-SICD Hearing Officer after the presentation of the parties respective evidence, issued an Order creating
a management committee. Said Order reads, in part:

" x x x All board resolutions and/or management actions or decisions passed and approved by them are deemed null and void ab initio for they were
passed, and approved by an illegally constituted Board of Directors. . . And worse, several resolutions or Board’s actions are not only (deemed) null and
void but have caused irreparable damage to the corporation such as the termination of all LCP staff and employee (LCP-BD-29-90); dissolution of LCP
Business Office (LCP-BD-37-90); termination of the partner-church relationship between the LCP and the Lutheran Church Missouri Synod which is the
major benefactor and source of funds of LCP (LCP-BD-28-90); forcible taking of almost all official records and equipment of LCP by respondent Thomas
B. Batong and transferring the (same) from the LCP business office; acquisition of some lands using the corporate funds were in the name of some
person other than the LCP; and various cash advances of corporate funds by the respondents are not liquidated up to the present.

WHEREFORE, premises considered, A MANAGEMENT COMMITTEE is hereby created to undertake the management of the Lutheran Church in the
Philippines until such time that new members of the LCP Board of Directors shall have been elected and qualified in the election to be called and
conducted by the Management Committee in accordance with the LCP’s Articles of Incorporation and By-Laws preferably in October 1992."

On September 14, 1992, [the Batong group] filed their Motion for Reconsideration which was subsequently denied in an Order dated September 23,
1992.

On September 23, 1992, [the Batong group] filed with the SEC En Banc a Petition for Certiorari with prayer for a temporary restraining order alleging that
the SEC-SIDC acted with grave abuse of discretion in creating the management committee.

Shortly thereafter, on September 29, 1992, the following were appointed to the management committee: Atty. Puno as Chairman; and private
respondents Jose Laking, Eduardo Ladlad, Romeo Celiz as members. However, Atty. Puno later resigned and was replaced by Atty. Oscar Almazan
who was appointed as Chairman. After the death of Romeo Celiz, he was replaced by private respondent Luis Ao-As.

On October 6, 1992, [the Ao-As group] filed a motion for issuance of a writ of preliminary injunction seeking to enjoin [the Batong group] not only from
continuing to act as LCP board of directors but also from calling a national convention to elect new set of officers and members of the Board as provided
in the LCP Constitution and By-Laws.

On October 16, 1992, the SEC-SIDC ordered the issuance of a writ of preliminary injunction prohibiting [the Batong group] from "acting as a board of
directors or officers of Lutheran Church in the Philippines, Inc. (LCP) and from holding any convention or general or special membership meeting as well
as election of the members of the LCP board of directors, until further orders".
The [the Batong group] allege that the SEC-SIDC management committee used the Order dated October 16, 1992 to carry out ultra vires acts, more
specifically: (i) to take control of and closing down church buildings; (ii) to evict LCP clergymen from their church parsonages; (iii) to ordain and appoint
new clergymen to replace incumbent members of the church hierarchy. In at least one case which has reached this Court, CA-G.R. No. 34504, it was
found that:

"On August 13, 1993, [members of the Ao-As group] Oscar Almazan, James Cerdenola, Edgar Balunsat and Edwino Mercado, together with armed
security guards, acting in behalf of LCP, forcibly took possession of the houses occupied by [the Batong group]. In view of the latter’s refusal to leave the
premises, they permanently padlocked the main gate of the compound confining [the Batong group] and their families therein and prevented the ingress
and egress thereto. Later the [Batong group] left their houses due to the alleged intimidation and threats employed by the [Ao-As group]. Thereafter, the
latter entered the dwelling and took possession of the same."

However, even before the creation of the management committee, the LCP national convention had already been called in a Board meeting held on
September 26, 1991 at the Lutheran Hospice, Quezon City. Hence, by the time the writ of preliminary injunction was issued, all notices had already been
received by all local congregations and convention delegates had likewise already been chosen to attend the national convention.

Thus, the 17th LCP National Convention was held on October 26 to 30, 1992 as earlier scheduled at the Immanuel Lutheran Church and School,
Tugatong, Malabon, Metro-Manila. The list of official delegates to the Convention is shown in pages 32 to 33 of the Convention Records.

During the 17th LCP National Convention, the delegates representing the majority of the members which comprised the three districts (North Luzon,
South Luzon and Mindanao) issued a "Manifesto" to initiate by themselves the election for a new set of church leaders because the incumbent directors
were enjoined to act as a board. In the election, the following were elected as LCP officers, namely:

President -- Rev. Victorino Saquilayan

Vice-President -- Rev. Juanito Basalong
Secretary -- Rev. Charlito Mercado
Treasurer -- Rev. Benjamin Lasegan

Similarly, prior to the issuance of the writ of preliminary injunction and the appointment of the management committee, the SLD (South Luzon District) of
LCP already held its district conference on august 26 to 28, 1992 which elected, among other of its officers, the SLD Lay Representative pursuant to the
LCP Constitution and By Laws. The following were elected:

SLD President and Clergy Representative : Rev. Elmer Banes SLD Lay Representative: Roman Moscoso

The district conference for NLD was likewise held before the issuance of the writ of preliminary injunction on October 7 to 9, 1992. In said convention,
the local congregations and clergymen executed a manifesto expressing their own opposition to the appointment of a management committee.

[The Batong group] then filed with the SEC En Banc a Supplemental Petition dated November 13, 1992 alleging the supervening events in the case
which took place after the filing of the original petition on September 23, 1992.

Subsequent to the 17th LCP national convention of October 1992, a special convention was called by the SEC Management Committee on January 25
to 29, 1993 at Cagayan de Oro City to elect a different set of officers for LCP. [The Batong group] allege that the required notices were not sent to
several local congregations and even fewer LCP members were permitted by [the Ao-As group] to attend the special convention as evidenced by the list
of official delegates contained in the minutes of the special convention.

On July 21, 1993, [the Batong Group] filed a Second Supplement to its petition for certiorari in the SEC En Banc alleging the supervening events and
seeking the review of an Order of the Hearing Officer dated June 9, 1993 which enlisted the aid of the Secretary of the Department of Interior and Local
Government and the PNP Director General to enforce the writ of preliminary injunction.

Pending the resolution of the above-mentioned petitions, the management committee took control of several church properties, replaced clergymen from
their parsonages and froze all bank accounts in the name of LCP.

[The Batong group] then filed a Petition for Mandamus and Damages with Prayer for Preliminary Mandatory Injunction on August 19, 1993 seeking to
unfreeze the bank accounts and recover the seized buildings.

All of the aforementioned petitioners (sic) were denied by the SEC En Banc. A motion for reconsideration was filed but the same was likewise denied.3

The Batong group then filed a Petition for Review with the Court of Appeals seeking to annul the Decision of the Securities and Exchange Commission
En Banc. In said Petition, the Batong group alleged that the Ao-As group persisted in carrying out ultra vires and illegal acts, to wit:

(a) Private respondent Luis L. Ao-As, purportedly on the strength of a board action held at Baguio on February 22-24, 1994 and of the assailed Order
dated October 16, 1992, closed the premises of the Gloria Dei School after school year 1993-1994 in an attempt to take-over the management and
operations of the said school. The closure of the Gloria Dei School is the subject of SEC Case No. 05-93-4463.

(b) On February 1, 1994, Rev. Eduardo Ladlad, acting as President of the LCP, executed a Contract to Sell with Solid Gold Realty Corporation whereby
he agreed to sell a portion of LCP’s property in Cavite with an area of 7,218 square meters at a price of P1,000 per square meter or a total of
P7,218,000 with a down payment of P1,000,000.

(c) Upon application of the [Ao-As group], the SEC-SIDC issued an Order dated June 1, 1994 ex parte and on June 14, 1994 at around 7 p.m., a certain
Rev. Laking, using the Order of the SEC-SIDC dated June 1, 1994 and October 16, 1992 writ of preliminary injunction, entered the premises of the
Abatan Hospital located in Baguias, Benguet Province, took over the management and control of the Abatan Hospital and forced the pastor previously
assigned therein – Pastor Laapniten – to leave his post simply because Pastor Lapniten is identified with the Saquilayan Group.4

On 30 June 1994, the Batong group filed with the Court of Appeals a motion for the issuance of a Temporary Restraining Order and/or Preliminary
Injunction. On 12 July 1994, the Court of Appeals issued a Temporary Restraining Order to enjoin the Ao-As group "from implementing the contract to
sell between the Lutheran church in the Philippines (LCP) and Solid Gold Realty Corporation and from selling, transferring, assigning and/or disposing of
any other property of the LCP; to enjoin the Ao-As group and/or those officers elected in their convention from enforcing or implementing the Order
dated October 16, 1992 and the writ of preliminary injunction issued in SEC Case 3857."
On 22 September 1994, the Batong group filed a Motion/ Manifestation to cite Eduardo Ladlad, Harry Roa, James Cerdenola and Luis Ao-As in
contempt of court, alleging that the latter, on 15 September 1994, entered the Olongapo Lutheran Church with six armed men and there and then
padlocked the main gate of the church. Consequently, Rev. Elmer Bañes, the assigned overseer at said church, was barred from entering the premises
on 17 September 1994.

On 10 October 1996, the Court of Appeals ruled in favor of the Batong group, disposing the petition as follows:

WHEREFORE, the petition is hereby granted. The Decision dated August 25, 1993 of the SEC En Banc is hereby RECONSIDERED and SET-ASIDE
and the Orders of the SEC-SIDC dated September 3, 1992 and October 16, 1992 are hereby ANNULLED and SET ASIDE. The SEC is hereby directed
to conduct a new election of the directors of the LCP consistent with the provisions of the Corporation Code.5

Hence, this petition, where the Ao-As group brings forth the following issues to be resolved by this Court:

I. Whether or not the Court of Appeals gravely erred in utterly ignoring and disregarding all the evidence adduced by [the Ao-As group], and in
making findings of facts contradicted by the evidence on record and not supported by any evidence whatsoever.

II. Whether or not the Court of Appeals reversibly erred in ruling that SEC-SICD Case No. 3857 is a case of forum shopping.

III. Whether or not the Court of Appeals committed reversible error in declaring as invalid the manner of elections of the Board of Directors of
the Lutheran Church in the Philippines as provided for in its By-Laws.

IV. Whether or not the Court of Appeals committed reversible error in ruling that the SEC-SICD had no jurisdiction to call for a special election
of the Board of Directors of the Lutheran Church in the Philippines.6

In addition to the prayer to reverse the 10 October 1996 Decision and 3 March 1997 Resolution of the Court of Appeals, and the revival of Resolution of
the SEC En Banc in SEC-EB Case No. 330 and the Order of the SEC-SIDC in Case No. 3857, the Ao-As group prays for the following:

1. x x x x

2. Declaring the Board of Directors elected at the National Convention called by the Management Committee on January 25-27, 1993 in Cagayan de
Oro as the legitimate members of the Board of LCP;
3. Declaring all acts and resolutions passed by the Batong group invalid and of no legal effect; and
4. Ordering the Batong group to return all the properties seized from the LCP and to refrain from the representing the LCP.7

The Ao-As group did not commit willful and deliberate forum shopping in the filing of SEC-SIDC Case No. 3857.

Since a ruling upholding the Court of Appeals on the issue of forum shopping would render all the other issues in this petition moot, we resolve to pass
upon the same at the onset.

The Ao-As group claims that the Court of Appeals reversibly erred in ruling that SEC-SICD Case No. 3857 is a case of forum shopping. The Court of
Appeals had ruled:

Finally, SEC-SICD Case No. 3857 is a clear case of forum shopping. The acts of [the Batong group], as embodied in several board resolutions, have
already been raised and passed upon in other cases pending at the time the [Ao-As group] instituted the present controversy.

The board resolutions denominated as LCP-BD-29-90 and LCP-BD-37-90 – authorizing the dissolution of the LCP business office and termination of the
employees connected therewith – was the subject of NLRC CASE NOS. 03-01935-90 and 04-01979-90 pending before the National Labor Relations
Commission.

The board resolution denominated as LCP-BD-28-90 authorizing the transfer of the LCP corporate records from the Sta. Mesa Office to the Caloocan
Office – was the subject of Civil Case No. 133394-CV and 131879-CV pending before the Metropolitan Trial Court of Manila, Branches 20 and 21 and
subsequently dismissed in view of the FORMULA OF CONCORD entered into between the parties.

On the other hand, the legality of the composition of the eleven-member LCP Board was already the subject matter of SICD Case No. 3524 which was
appealed to the SEC En Banc and docketed as SEC Case No. 352.

SEC Case No. 3857 is not the first case where the [Ao-As group], or those with similar interests, have asked for the appointment of a management
committee. In SEC Case 3556 entitled "Exclesio Hipe and Lutheran Church of the Philippines v. Thomas Batong, et al.", in a motion dated June 18,
1991, private respondent Exclesio Hipe prayed for the appointment of a management committee for LCP. In an Order dated August 15, 1991, the SEC-
SICD ruled that the Motion for the Appointment of a Management Committee and Accounting filed by the petitioners cannot be given due course
considering that the same is one of the incidents in SEC Case No. 3857 entitled Rev. Luis Ao-As, et al. vs. Thomas Batong now pending in the sala of
Hon. Elpidio Salgado". Petitioners knew that similar petitions have been previously commenced because Atty. Oscar Almazan who is also a co-counsel
in the case was the counsel of record in SEC Case No. 3556 and the other cases.

Clearly, the act of the [Ao-as group] in filing multiple petitions involving the same issues constitutes forum shopping and should be sanctioned with
dismissal. x x x8

SEC-SICD Case No. 3857 is a petition for accounting with prayer for the appointment of a management committee and the issuance of a writ of
injunction. The Ao-As group claims that the issue involved in the case is whether the Ao-As group is entitled to an accounting and to the creation of a
management committee due to the Batong group’s alleged dissipation and waste of the assets of the LCP, and the subject matter is the act of
dissipation and waste committed by the Batong group. On the other hand:

1. NLRC Cases No. 03-01935-90 and 04-01979-90 pending before the National Labor Relations Commission, is a case for illegal termination, which
allegedly "obviously involves a different cause of action";
2. The cases pending before Branches 20 and 21 of the Municipal Trial Court of Manila, docketed as Civil Cases No. 133394-CV and 131879-CV,
respectively, are actions for forcible entry and unlawful detainer; and
3. SEC-SICD Case No. 3556 puts in issue the validity of LCP Board resolutions LCP-BD-6-89 and LCP-BD-7-89, where what are involved are the
incidents resulting from the issuance of the resolutions – the unjust termination of Mr. Exclesio Hipe as LCP Business Manager and treasurer and the
illegal appointment of one Hildelberto Espejo in his place. SEC-SIDC Case No. 3524 puts in issue the legality of the composition of the eleven-member
LCP Board. These are allegedly different issues from that of SEC-SIDC Case No. 3857 where the acts of respondents are claimed to the basis of a
prayer for accounting and appointment of a management committee.

As elucidated above, the causes of action under SEC-SIDC Case No. 3857 are the following:

First, the alleged non-liquidation and/or non-accounting of a part of the proceeds of the La Trinidad land transaction in the amount of P64,000.00 by
petitioner Thomas Batong;

Second, the alleged non-liquidation and/or unaccounting of cash advances in the aggregate amount of P323,750.00 by petitioner Thomas Batong;

Third, the alleged dissipation and/or unaccounting of the LCP general fund in the amount of 4.8 million;

Fourth, the non-registration of the Leyte land purchased with LCP funds by petitioner Victorio Saquilayan;

Fifth, severance of church-partnership relationship with Lutheran Church-Missouri Synod (LCMS); and

Sixth, the transfer of LCP corporate books from the Sta. Mesa office to the Caloocan office.

The elements of forum shopping are: (a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights
asserted and the relief prayed for, the relief being founded on the same facts; and (c) the identity of the two preceding particulars, such that any
judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration.9

Otherwise stated, there is forum shopping where a litigant sues the same party against whom another action or actions for the alleged violation of the
same right and the enforcement of the same relief is/are still pending. The defense of litis pendentia in one case is a bar to the other/others; and, a final
judgment is one that would constitute res judicata and thus would cause the dismissal of the rest. Absolute identity of the parties is not required. It is
enough that there is substantial identity of the parties. It is enough that the party against whom the estoppel is set up is actually a party to the former
case. There is identity of causes of action if the same evidence will sustain the second action. The principle applies even if the relief sought in the two
cases may be different. Forum shopping consists of filing multiple suits involving the same parties for the same cause of action, either simultaneously or
successively, for the purpose of obtaining a favorable judgment.10

As the present jurisprudence now stands, forum shopping can be committed in three ways: (1) filing multiple cases based on the same cause of action
and with the same prayer, the previous case not having been resolved yet (litis pendentia); (2) filing multiple cases based on the same cause of action
and the same prayer, the previous case having been finally resolved (res judicata); and (3) filing multiple cases based on the same cause of action but
with different prayers (splitting of causes of action, where the ground for dismissal is also either litis pendentia or res judicata11 ). If the forum shopping
is not considered willful and deliberate, the subsequent cases shall be dismissed without prejudice on one of the two grounds mentioned above.
However, if the forum shopping is willful and deliberate, both (or all, if there are more than two) actions shall be dismissed with prejudice.12lavvphi1.net

The six grounds originally relied upon by the Ao-As group in SEC-SICD Case No. 3857 are entirely different from the causes of action in NLRC Cases
No. 03-01935-90 and 04-01979-90, Civil Cases No. 133394-CV and 131879-CV, and SEC-SICD Cases No. 3556 and 3524. It is true that the causes of
action in the latter cases were included as additional grounds in SEC-SICD Case No. 3857 for the appointment of the management committee and for
accounting "of all funds, properties and assets of LCP which may have come into their possession during their incumbency as officers and/or directors of
LCP."13 However, the creation of a management committee and the prayer for accounting could not have been asked for in the labor (NLRC Cases No.
03-01935-90 and 04-01979-90) and forcible entry (Civil Cases No. 133394-CV and 131879-CV) cases.

As regards the other SEC Cases, though, the Ao-As group could have indeed prayed for the creation of the management committee and the accounting
of the funds of the LCP. In fact, as stated by the Court of Appeals, the petitioner in SEC-SICD Case No. 3556 had prayed for the appointment of a
management committee in a motion dated 18 June 1991. This motion, however, was subsequent to the filing of SEC-SICD Case No. 3857 on 17 August
1990, for which reason the SEC-SICD ruled that such motion cannot be given due course considering that it was one of the incidents of SEC-SIDC Case
No. 3857. In effect, the SEC-SIDC had denied the subsequent motion on the ground of litis pendentia. But should SEC-SICD Case No. 3857, which
contains the earlier prayer to create a management committee, be likewise dismissed? Following the rules set forth in the preceding paragraphs, it would
depend on whether the different SEC cases constitute willful and deliberate forum shopping on the part of Ao-As group.

We hold that this is not a case of willful and deliberate forum shopping and, hence, the SEC-SICD Case No. 3857, which contains the earlier prayer to
create a management committee, should not be dismissed. The reason for this is the strict evidentiary requirement needed to grant a prayer to create a
management committee. The power of the SEC14 to create a management committee is found in Section 6(d) of Presidential Decree No. 902-A, as
amended, which provides:

Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:

d) To create and appoint a management committee, board or body upon petition or motu propio to undertake the management of corporations,
partnerships or other associations not supervised or regulated by other government agencies in appropriate cases when there is imminent danger of
dissipation, loss, wastage or destruction of assets or other properties or paralization of business operations of such corporations or entities which may
be prejudicial to the interest of the minority stockholders, parties-litigants or the general public.

Evidently, it should be difficult to deduce the "imminent danger of dissipation, loss, wastage or destruction of assets or other properties" from an
allegation of a single act of previous misappropriation or dissipation on the part of the Batong group. It is often only when the previous misappropriations
and dissipations have become extensive and out of control that it can be candidly said that there is an imminent danger of further dissipation. The Ao-As
group cannot be faulted therefore for not praying for the creation of a management committee in the first couple of cases it filed with the SEC, and
neither can they be faulted for using the causes of action in previously filed cases to prove their allegation of imminent dissipation. We cannot rule out
the possibility that the danger of imminent dissipation of the corporate assets became apparent only in the acts of the respondents subsequent to the
filing of the first two SEC cases.

The creation of a management committee is not warranted by the facts of the case.

The Ao-As group claims that the Court of Appeals "unceremoniously disregarded all the undisputed testimonial and documentary evidence presented
before the SEC,"15 and strongly pointed to their evidence which "clearly show the dissipation, wastage and loss of LCP funds and assets."16 These
pieces of evidence supposedly proved the following:
1. The alleged anomaly concerning the sale of the land and the purchase of another land, both located in La Trinidad. The La Trinidad Land Transaction,
the proceeds whereof were allegedly unliquidated, was testified to by petitioner Ao-As and Mr. Excelsio Hipe before the SEC-SICD in a hearing
conducted on 11 September 1990.

2. Unliquidated cash advances and unaccounted funds. Petitioners presented evidence to prove the failure of respondent Batong to liquidate cash
advances and account for P4,000,000 of LCP funds.

3. Purchase of Leyte Land in the name of respondent Saquilayan with LCP funds. Respondent LCP Vice-President Victorio Y. Saquilayan allegedly
purchased a parcel of land in Albuera, Leyte in his name, using LCP funds. Respondent Saquilayan subsequently donated to the LCP, and explained
that the purchase in his name was upon advice of LCP’s lawyers to comply with the rulings in Republic of the Philippines v. Hon. Arsenio M. Gonong17
and Republic of the Philippines v. Iglesia Ni Cristo.18

4. Severance of partner-church relationship between the LCP and the LCMS. Respondents issued LCP Board Resolution No. LCP-BD-28-90 severing
all relations with the Lutheran Church-Missouri Synod (LCMS), allegedly in violation of LCP Board Resolution No. LCP-BD-33-70 which stated that "all
actions taken by LCP in convention can only be amended, modified and changed by LCP in convention."

5. Taking of LCP Books of Account. Respondent Batong, accompanied by members of the LCP Board and about 15 armed security guards allegedly
barged into the premises of the LCP in Old Sta. Mesa, Manila, and removed all of the official records and documents of the LCP (including the books of
account, official receipts, check and journal vouchers, official papers and titles to property) and had the same relocated to his residence in Caloocan City
and to the offices of Immanuel Lutheran Church in Malabon.

The Court of Appeals had ruled:

Nothing in [Ao-As group’s] evidence presented in support for their application for a management committee showed an impending or imminent danger of
dissipation of funds. In the assailed SEC-SICD Order dated September 3, 1992, the appointment of a management committee was justified because of
"acquisition of some lands using the corporate funds . . . in the name of some person other than the LCP, and various cash advances of corporate funds
by the respondents not liquidated up to the present".

The SEC-SICD Order refers to the La Trinidad and Leyte land transactions and the alleged non-liquidation or unaccountability of cash advances and
other funds – which constitutes the four causes of action alleged in the petition.

[The Ao-As group] admit[s] that the La Trinidad Land transactions [were] consummated in 1984 while the Leyte transaction was made in 1989. Both
occurred prior to the Commencement (sic) of the present petition in 1990. Similarly, the alleged unliquidated cash advances referred to accumulated
funds long withdrawn in the past by Dr. Thomas Batong "(in varying amounts) for personal, travel and other miscellaneous purposes, all in the aggregate
amount of not less than P 323,750.00". And the alleged unaccounted funds referred to the "trial balance of LCP as of September 15, 1989".

Notably, the remaining two causes of action in the aforementioned petition do not involve dissipation of funds, namely: (i) the severance of partner-
church relationship between LCP and Lutheran Church-Missouri Synod; and (ii) the transfer of corporate books from the Sta. Mesa Office to Caloocan
City.

All of the grounds relied upon by [the Ao-As group] pertain to past delinquencies for which there are other available remedies such as accounting and
reconveyance. The [Ao-As group] did not allege, much less prove, any present or imminent loss or destruction of LCP properties and assets. At best, it
expresses merely a general apprehension for possible mismanagement by respondent on the basis of the aforementioned past transactions.

It must be stressed that the appointment of a management committee inevitably results in the drastic summary removal of all directors and officers of
LCP. Clearly, the appointment of a management committee is not justified due to the failure of only two (2) of the LCP Board members to liquidate past
cash advances and other transactions involving corporate property and funds.

Where the corporation is solvent, a receiver will not be appointed because of past misconduct and a subsequent mere apprehension of a future
misdoing, where the present situation and the prospects for the future are not such as to warrant a receivership. x x x"

Significantly, the SEC En Banc even pointed out that: "the question of whether or not the [Batong group] have to account for all funds, properties and
assets of LCP which may come into their possession as directors and/or officers of LCP is still to be resolved by the hearing officer after trial on the
merits."

Under prevailing law, the SEC-SICD should have refused the appointment of a management committee.

"It is the general rule that a receiver (or a management committee) will not be appointed unless it appears that the appointment is necessary either to
prevent fraud, or to save the property from fraud or threatened destruction, or at least in case of solvent corporation x x x. The burden of proof is a heavy
one which requires a clear showing that an emergency exists.

"x x x Similarly, a receiver (or a management committee) should not be appointed in an action by a minority stockholder against corporate officers for an
accounting where the corporation is solvent and going concern and a receiver is not necessary to preserve the corporate property pending the
accounting".

Furthermore, a management committee should not be created when there was an adequate remedy available to private respondents for the liquidation
of unaccounted funds.19

The Court of Appeals went on to rule that the members of the Ao-As group "have not positively shown that the said funds are unaccounted for,"20 and
analyzed the evidence presented by the Ao-As group to illustrate that the unaccounted funds were only P1,572.43, "which may be attributable to
adjustment errors but certainly not a case of misappropriation or misuse."21

The Ao-As group maintains that the unaccounted funds amount to around P4.8 million, and claim that if the Court of Appeals "had only given the [the
Ao-As group] a chance to prove their allegations (concerning acts committed by respondents subsequent to the creation of the management committee),
then it would have confirmed the earlier determination made by the SEC-SICD regarding the necessity for the creation of the management
committee."22 It further asseverates:
20. The acts constituting [the Ao-As group’s] six causes of action in the petition filed with the SEC-SICD (the La Trinidad land transaction, the
unliquidated cash advances, the unaccounted funds amounting to P4.8 million, the Leyte land transaction, the severance of the sister-church
relationship and forcible removal of the LCP books of account) could not be characterized merely as "past delinquencies". The six causes of action and
the subsequent acts of the [Batong group], after the filing of the petition with the SEC-SICD, clearly show a continuing and deliberate scheme of the
dissipation and wastage of LCP properties and assets, which if unrestricted would cause further destruction of LCP assets and paralyzation of its
operations, as it had already done. The creation of the Management Committee was, therefore, perfectly legal and justified. And the ruling of respondent
Court of Appeals that these acts do not justify its appointment is, [the Ao-As group] humbly submit, reversible error.

21. In addition, the CA Decision also declared that "in any event, the past anomalies were only done by some of the Batong group." This is erroneous.
Under the By-Laws of the LCP, the Board of Directors is in charge of the disbursement of funds. Sections 1 and 2 of Article 6 of the LCP By-Laws state:

"Section 1. The President of the LCP shall be given the following executive powers and supervisory duties:

xxx xxx xxx

b. The President together with two other members of the LCP Board of Directors, may authorize the release of surplus funds in emergencies or in cases
of sudden need.
xxx xxx xxx
Section 2. The Board of Directors of the LCP
xxx xxx xxx
c. The Board of Directors shall prepare the annual budget of the LCP.
d. The Board of Directors shall be responsible for the annual auditing of all the LCP Properties and may initiate special auditing at any time."

22. From the foregoing, it is clear that respondent Batong did not act alone, but in concert with the other members of the LCP Board. The creation of the
management committee was therefore justified.

23. The CA Decision also noted that since there were other remedies available to the petitioners to correct these anomalies, the creation of the
management committee was unjustified. [The Ao-As group] again humbly submit again (sic) that respondent Court of Appeals erred when it made this
statement. The LCP management committee was created precisely because of the extreme urgency that [mere] caused by the continued dissipation,
loss and wastage of LCP funds and assets by the Batong group. If [the Ao-As group] were to avail of these so-called available remedies then by the time
a decision is to be rendered in these "available remedies" the assets and funds of the LCP would have indubitably been lost forever since the
dissipation, loss and wastage were then, and still is, an on going process. Consequently, it is clearly unreasonable for respondent Court of Appeals to
declare that the [Ao-As group] should have first availed of these so-called remedies.23

Even without delving into the analysis of the prosecution evidence concerning the six causes of action and the alleged acts subsequent to these six
causes of action, it is already appropriate for us to rule that the facts as they appear to us now do not warrant the creation of a management committee.

Refusal to allow stockholders (or members of a non-stock corporation) to examine books of the company is not a ground for appointing a receiver (or
creating a management committee) since there are other adequate remedies, such as a writ of mandamus.24 Misconduct of corporate directors or other
officers is not a ground for the appointment of a receiver where there are one or more adequate legal action against the officers, where they are solvent,
or other remedies.25

The appointment of a receiver for a going corporation is a last resort remedy, and should not be employed when another remedy is available. Relief by
receivership is an extraordinary remedy and is never exercised if there is an adequate remedy at law or if the harm can be prevented by an injunction or
a restraining order. Bad judgment by directors, or even unauthorized use and misapplication of the company’s funds, will not justify the appointment of a
receiver for the corporation if appropriate relief can otherwise be had.26

The fact that the President of the LCP needs the concurrence of only two other directors to authorize the release of surplus funds plainly contradicts the
conclusion of conspiracy among the presently 11-man board. Neither does the fact that the Board of Directors of the LCP prepares the annual budget
and the annual auditing of properties of the LCP justify the conclusion that the alleged acts of respondent Batong was done in concert with the other
directors. There should have been evidence that such dissipation took place with the knowledge and express or implied consent of most or the entire
board. Good faith is always presumed.27 As it is the obligation of one who alleges bad faith to prove it, so should he prove that such bad faith was
shared by all persons to whom he attributes the same. The last resort remedy of replacing the entire board, therefore, with a management committee, is
uncalled for.

The Court of Appeals erred in declaring as invalid the manner of elections of the Board of Directors of the LCP as provided in its By-Laws.

The Ao-As group stresses that the Court of Appeals committed reversible error in declaring as invalid the manner of elections of the Board of Directors
of the Lutheran Church in the Philippines as provided in its By-Laws. The Court of Appeals ruled:

The Court notes that the LCP By-Laws provide for a special procedure for the election of its directors. This was the procedure followed by both the
[Batong group] and the [Ao-As group].

"Section 2. Composition of the Board of Directors of LCP.

a. The Board of Directors shall be composed of the President of LCP and the President and lay representative of each District.

b. Newly elected members of the LCP Board of Directors shall assume their positions immediately after LCP conventions or the October LCP Board of
Directors’ meeting in the year in which they are elected."

However, Section 24 of the Corporation Code provides that "[a]t all elections of directors or trustees, there must be present, either in person or by
representative to act by written proxy, x x x if there be no capital stock, a majority of the members entitled to vote."

It is clear from Section 24 that in the election of the trustees of a non-stock corporation, it is necessary that at least "a majority of the members entitled to
vote" must be present at the meeting held for the purpose. It follows that trustees cannot be elected by zones or regions, each zone or region electing
independently and separately a member of the board of trustees of the corporation, such method being violative of Section 24. (SEC Opinions, Jan. 30,
1969, April 1, 1981). The election of the directors by district or regions as provided in the LCP By-Laws where a majority of the members are not present
is inconsistent with the Corporation [Code] and must be struck down as invalid. Consequently, the directors elected by district cannot be considered as
bona fide directors. Even the election of LCP officers in the SEC-SICD sponsored national convention of the LCP must be considered as invalid.28
As argued by the Ao-As group, however, the validity of the LCP By-Laws providing for a special procedure in the election of the LCP Board of Directors
was never put in issue, either by the Ao-As group or the Batong group. The Court of Appeals, therefore, should have refrained from passing upon such
issue, motu propio. According to Rule 51, Section 8 of the Rules of Court, which pertains to matters which may be decided on appeal:

Sec. 8. Questions that may be decided. – No error which does not affect the jurisdiction over the subject matter or the validity of the judgment appealed
from or the proceedings therein will be considered unless stated in the assignment of errors, or closely related to or dependent on an assigned error and
properly argued in the brief, save as the court may pass upon plain errors and clerical errors.

The ruling of the SEC En Banc setting aside the SEC-SICD determination that LCP Board of Directors was illegally constituted has therefore become
final and executory, subject to the determination by the SEC-SICD of the seven members that should comprise the Board, as likewise provided in said
Decision.29

Even the Batong group agrees with the Ao-As group on the validity of the by-laws provision concerning the election of the directors by districts:

[The Batong group] respectfully submit[s] that the matter of how the directors or other leaders of a church shall be chosen is a matter of ecclesiastical
law or custom which is outside the jurisdiction of civil courts. Hence, even assuming arguendo, that the mode of election of the LCP is not strictly in
accordance with the Corporation Code, it was improper for the Securities and Exchange Commission to apply the provisions of the said Code to the
LCP.30

In any case, the stipulation in the By-Laws is not contrary to the Corporation Code. Section 89 of the Corporation Code pertaining to non-stock
corporations provides that "(t)he right of the members of any class or classes (of a non-stock corporation) to vote may be limited, broadened or denied to
the extent specified in the articles of incorporation or the by-laws."31 This is an exception to Section 6 of the same code where it is provided that "no
share may be deprived of voting rights except those classified and issued as ‘preferred’ or ‘redeemable’ shares, unless otherwise provided in this
Code."32 The stipulation in the By-Laws providing for the election of the Board of Directors by districts is a form of limitation on the voting rights of the
members of a non-stock corporation as recognized under the aforesaid Section 89. Section 24, which requires the presence of a majority of the
members entitled to vote in the election of the board of directors, applies only when the directors are elected by the members at large, such as is always
the case in stock corporations by virtue of Section 6.

WHEREFORE, the Decision of the Court of Appeals annulling and setting aside the order to create a management committee is thereby AFFIRMED,
with the MODIFICATION that every subsequent election of the directors of Lutheran Church in the Philippines shall henceforth be in accordance with the
By-Laws and Articles of Incorporation of the same. Costs against petitioners.

CASE NO. 19. REMELITA M. ROBINSON - versus - CELITA B. MIRALLES,

G.R. No. 163584; December 12, 2006
SECOND DIVISION
SANDOVAL-GUTIERREZ, J.:

Before us is the instant petition for review on certiorari assailing the Resolutions dated February 11[1] and May 11, 2004[2] of the Regional Trial
Court (RTC), Branch 274, Parañaque City, in Civil Case No. 00-0372.

On August 25, 2000, Celita Miralles, respondent, filed with the said court a complaint for sum of money against Remelita Robinson, petitioner,
docketed as Civil Case No. 00-0372. Respondent alleged that petitioner borrowed from her US$20,054.00 as shown by a Memorandum of Agreement
they both executed on January 12, 2000.

Summons was served on petitioner at her given address. However, per return of service of Sheriff Maximo Potente dated March 5, 2001,
petitioner no longer resides at such address.

On July 20, 2001, the trial court issued an alias summons to be served at No. 19 Baguio St., Alabang Hills, Muntinlupa City, petitioner’s new
address.

Again, the summons could not be served on petitioner. Sheriff Potente explained that:

The Security Guard assigned at the gate of Alabang Hills refused to let me go inside the subdivision so that I could effect the service of the
summons to the defendant in this case. The security guard alleged that the defendant had given them instructions not to let anybody proceed to her
house if she is not around. I explained to the Security Guard that I am a sheriff serving the summons to the defendant, and if the defendant is not
around, summons can be received by any person of suitable age and discretion living in the same house. Despite of all the explanation, the security
guard by the name of A.H. Geroche still refused to let me go inside the subdivision and served (sic) the summons to the defendant. The same thing
happened when I attempted to serve the summons previously.

Therefore, the summons was served by leaving a copy thereof together with the copy of the complaint to the security guard by the name of A.H.
Geroche, who refused to affix his signature on the original copy thereof, so he will be the one to give the same to the defendant.

Eventually, respondent filed a motion to declare petitioner in default for her failure to file an answer seasonably despite service of summons.

On February 28, 2003, the trial court granted respondent’s motion declaring petitioner in default and allowing respondent to present her evidence
ex parte.

On June 20, 2003, the trial court issued an Order, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against defendant ordering the defendant to pay the plaintiff as follows:

1. The sum of US$20,054.00 as the unpaid obligation, plus the stipulated interest of 3% a month from May 2000 (date of default) until fully paid;
2. Php100,000.00 for moral damages;
3. Php50,000.00 plus Php1,500.00 per appearance as attorney’s fees;
4. Costs of suit.
 SO ORDERED.

A copy of the Order was sent to petitioner by registered mail at her new address.

Upon respondent’s motion, the trial court, on September 8, 2003, issued a writ of execution.

On September 26, 2003, petitioner filed with the trial court a petition for relief from the judgment by default. She claimed that summons was improperly
served upon her, thus, the trial court never acquired jurisdiction over her and that all its proceedings are void.

On February 11, 2004, the trial court issued a Resolution denying the petition for relief. Petitioner filed a motion for reconsideration, but it was denied
by the trial court in a Resolution dated May 11, 2004.

Hence, the instant recourse.

The sole issue for our resolution is whether the trial court correctly ruled that a substituted service of summons upon petitioner has been validly effected.

Summons is a writ by which the defendant is notified of the action brought against him or her.[3] In a civil action, service of summons is the means by
which the court acquires jurisdiction over the person of the defendant.[4] Any judgment without such service, in the absence of a valid waiver, is null and
void.[5] Where the action is in personam and the defendant is in the Philippines, the service of summons may be made through personal or substituted
service in the manner provided for in Sections 6 and 7, Rule 14 of the 1997 Rules of Procedure, as amended,[6] thus:

SEC. 6. Service in person on defendant. – Whenever practicable, the summons shall be served by handing a copy thereof to the defendant in person,
or if he refuses to receive and sign for it, by tendering it to him.

SEC. 7. Substituted service. – If, for justifiable causes, the defendant cannot be served within a reasonable time as provided in the preceding section,
service may be effected (a) by leaving copies of the summons at the defendant’s residence with some person of suitable age and discretion then
residing therein; or (b) by leaving the copies at the defendant’s office or regular place of business with some competent person in charge thereof.

Under our procedural rules, personal service is generally preferred over substituted service, the latter mode of service being a method extraordinary in
character.[7] For substituted service to be justified, the following circumstances must be clearly established: (a) personal service of summons within a
reasonable time was impossible; (b) efforts were exerted to locate the party; and (c) the summons was served upon a person of sufficient age and
discretion residing at the party’s residence or upon a competent person in charge of the party’s office or place of business.[8] Failure to do so would
invalidate all subsequent proceedings on jurisdictional grounds.[9]

Petitioner contends that the service of summons upon the subdivision security guard is not in compliance with Section 7, Rule 14 since he is not related
to her or staying at her residence. Moreover, he is not duly authorized to receive summons for the residents of the village. Hence, the substituted
service of summons is not valid and that the trial court never acquired jurisdiction over her person.

We have ruled that the statutory requirements of substituted service must be followed strictly, faithfully, and fully and any substituted service other than
that authorized by the Rules is considered ineffective.[10] However, we frown upon an overly strict application of the Rules. It is the spirit, rather than
the letter of the procedural rules, that governs.

In his Return, Sheriff Potente declared that he was refused entry by the security guard in Alabang Hills twice. The latter informed him that petitioner
prohibits him from allowing anybody to proceed to her residence whenever she is out. Obviously, it was impossible for the sheriff to effect personal or
substituted service of summons upon petitioner. We note that she failed to controvert the sheriff’s declaration. Nor did she deny having received the
summons through the security guard.

Considering her strict instruction to the security guard, she must bear its consequences. Thus, we agree with the trial court that summons has been
properly served upon petitioner and that it has acquired jurisdiction over her.

WHEREFORE, we DENY the petition and we AFFIRM the assailed Orders of the RTC, Branch 274, Parañaque City, in Civil Case No. 00-0372. Costs
against petitioner.

CASE NO 20. PERKIN ELMER SINGAPORE PTE LTD., - versus - DAKILA TRADING CORPORATION,
G.R. No. 172242; August 14, 2007
THIRD DIVISION
CHICO-NAZARIO, J.:

The case before this Court is a Petition for Review[1] on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set
aside the Decision,[2] dated 4 April 2006, of the Court of Appeals in CA-G.R. SP No. 78981, which affirmed the Orders, dated 4 November 2002[3] and
20 June 2003,[4] of the Mandaluyong City Regional Trial Court (RTC), Branch 212, in Civil Case No. MC99-605, which, in turn, denied the Motion to
Dismiss and subsequent Motion for Reconsideration of herein petitioner Perkin Elmer Singapore Pte Ltd.

Petitioner is a corporation duly organized and existing under the laws of Singapore. It is not considered as a foreign corporation “doing business” in the
Philippines. Herein respondent Dakila Trading Corporation is a corporation organized and existing under Philippine laws, and engaged in the business
of selling and leasing out laboratory instrumentation and process control instrumentation, and trading of laboratory chemicals and supplies.

The antecedents of the present case are as follows:

Respondent entered into a Distribution Agreement[5] on 1 June 1990 with Perkin-Elmer Instruments Asia Pte Ltd. (PEIA), a corporation duly organized
and existing under the laws of Singapore and engaged in the business of manufacturing, producing, selling or distributing various laboratory/analytical
instruments. By virtue of the said agreement, PEIA appointed the respondent as the sole distributor of its products in the Philippines. The respondent
was likewise granted the right to purchase and sell the products of PEIA subject to the terms and conditions set forth in the Distribution Agreement.
PEIA, on the other hand, shall give respondent a commission for the sale of its products in the Philippines.

Under the same Distribution Agreement, respondent shall order the products of PEIA, which it shall sell in the Philippines, either from PEIA itself or from
Perkin-Elmer Instruments (Philippines) Corporation (PEIP), an affiliate of PEIA. PEIP is a corporation duly organized and existing under Philippine laws,
and involved in the business of wholesale trading of all kinds of scientific, biotechnological, and analytical instruments and appliances. PEIA allegedly
owned 99% of the shares of PEIP.

On 2 August 1997, however, PEIA unilaterally terminated the Distribution Agreement, prompting respondent to file before the RTC of Mandaluyong City,
Branch 212, a Complaint[6] for Collection of Sum of Money and Damages with Prayer for Issuance of a Writ of Attachment against PEIA and PEIP,
docketed as Civil Case No. MC99-605.

The RTC issued an Order,[7] dated 26 March 1999, denying respondent’s prayer for the issuance of a writ of attachment. The respondent moved for
the reconsideration of the said Order but it was denied in another Order, dated 11 January 2000.[8]

Respondent then filed Ex-Parte Motions for Issuance of Summons and for Leave of Court to Deputize Respondent’s General Manager, Richard A. Tee,
to Serve Summons Outside of the Philippines,[9] which the RTC granted in its Order, dated 27 April 2000.[10] Thus, an Alias Summons, dated 4
September 2000, was issued by the RTC to PEIA. But the said Alias Summons was served on 28 September 2000 and received by Perkinelmer Asia, a
Singaporean based sole proprietorship, owned by the petitioner and, allegedly, a separate and distinct entity from PEIA.

PEIP moved to dismiss[11] the Complaint filed by respondent on the ground that it states no cause of action. Perkinelmer Asia, on the other hand,
through its counsel, sent letters, dated 12 October 2000[12] and 15 November 2000,[13] to the respondent and to the RTC, respectively, to inform them
of the wrongful service of summons upon Perkinelmer Asia.

Accordingly, respondent filed an Ex-Parte Motion to Admit Amended Complaint, together with the Amended Complaint claiming that PEIA had become
a sole proprietorship[14] owned by the petitioner, and subsequently changed its name to Perkinelmer Asia. Being a sole proprietorship of the petitioner,
a change in PEIA’s name and juridical status did not detract from the fact that all its due and outstanding obligations to third parties were assumed by
the petitioner. Hence, in its Amended Complaint[15] respondent sought to change the name of PEIA to that of the petitioner. In an Order, dated 24 July
2001,[16] the RTC admitted the Amended Complaint filed by the respondent. Respondent then filed another Motion[17] for the Issuance of Summons
and for Leave of Court to Deputize Respondent’s General Manager, Richard A. Tee, to Serve Summons Outside the Philippines. In another Order,
dated 4 March 2002,[18] the RTC deputized respondent’s General Manager to serve summons on petitioner in Singapore. The RTC thus issued
summons[19] to the petitioner. Acting on the said Order, respondent’s General Manager went to Singapore and served summons on the petitioner.

Meanwhile, in an Order, dated 10 October 2001, the RTC denied the Motion to Dismiss filed by PEIP, compelling the latter to file its Answer to the
Amended Complaint.

Petitioner subsequently filed with the RTC a Special Appearance and Motion to Dismiss[20] respondent’s Amended Complaint on 30 May 2002 based
on the following grounds: (1) the RTC did not acquire jurisdiction over the person of the petitioner; (2) the respondent failed to state a cause of action
against the petitioner because it is not the real party-in-interest; (3) even assuming arguendo that the respondent correctly filed the case against the
petitioner, the Distribution Agreement which was the basis of its claim grants PEIA the right to terminate the contract at any time; and (4) the venue was
improperly laid. The RTC in its Order, dated 4 November 2002, denied petitioner’s Motion to Dismiss, ratiocinating as follows:

Prescinding from the above arguments of both parties, the [RTC] is inclined to DENY the Motion to Dismiss.

A careful scrutiny on (sic) the allegation in the (Amended) Complaint would show that [herein respondent] alleges ownership by the [herein
petitioner] of shares of stocks in the [PEIP]. Such allegation of ownership of shares of stocks by the [petitioner] would reveal that there is an allegation of
personal property in the Philippines. Shares of stocks represent personal property of the shareholder. Thus, it follows that even though the Amended
Complaint is primarily for damages, it does relate to a property of the [petitioner], to which the latter has a claim interest (sic), or an actual or contingent
lien, which will make it fall under one of the requisite (sic) for extraterritorial service under Section 15, Rule 14, of the Rules of Court. Thus, it could be
gainfully said that the summons had been validly served for [RTC] to acquire jurisdiction over the [petitioner].

The [petitioner] hinges its dismissal on the failure of the [respondent] to state a cause of action. The [RTC] would like to emphasize that in a
Motion to Dismiss, it hypothetically admits the truth of the facts alleged in a complaint.

When the ground for dismissal is that the complaint states no cause of action, such fact can be determined only from the facts alleged in the
complaint x x x and from no other x x x and the Court cannot consider other matters aliunde x x x. This implies that the issue must be passed upon on
the basis of the allegations and declare them to be false, otherwise it would be a procedural error and a denial of due process to the [respondent] x x x.

The three (3) essential elements of a cause of action are the following:

a) The plaintiff’s legal rights;

b) A correlative obligation of the defendant;
c) The omission of the defendant in violation of the legal rights.

A cursory reading of the Amended Complaint would reveal that all of the essential elements of a cause of action are attendant in the Amended
Complaint.

As for the contention that venue was improperly laid, x x x, the [RTC] in its ultimate desire that the ends of justice could be served in its fullest,
cannot rule that venue was improperly laid.

The stipulation as to the venue of a prospective action does not preclude the filing of the suit in the residence of the [respondent] under Section
2, Rule 4, Rules of Court, especially where the venue stipulation was imposed by the [petitioner] for its own benefits.

The [RTC] further believes that it is imperative that in order to ferret out the truth, a full-blown trial is necessary for parties to be able to prove or
disprove their allegations.[21]

Petitioner moved for the reconsideration of the aforesaid Order but, it was denied by the RTC in its Order, dated 20 June 2003.

Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the 1997 Revised Rules of Civil Procedure with application for temporary
restraining order and/or preliminary injunction before the Court of Appeals alleging that the RTC committed grave abuse of discretion amounting to lack
or excess of jurisdiction in refusing to dismiss the Amended Complaint. The Court of Appeals never issued any temporary restraining order or writ of
injunction. On 4 April 2006, the Court of Appeals rendered a Decision affirming the RTC Orders of 4 November 2002 and 20 June 2003.
This brings us to the present Petition before this Court wherein petitioner raised the following issues.

I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT RULING THAT THE SERVICE OF SUMMONS ON
PETITIONER WAS DEFECTIVE AND THAT THE TRIAL COURT THUS FAILED TO ACQUIRE JURISDICTION OVER THE PERSON OF THE
PETITIONER.

II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT THE “SOLE ISSUE” IN THE PETITION
FOR CERTIORARI FILED BEFORE IT IS THE QUESTION OF WHETHER THE TRIAL COURT ACQUIRED JURISDICTION OVER THE PERSON OF
THE PETITIONER THROUGH THE EXTRATERRITORIAL SERVICE OF SUMMONS.

A.WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVE GRANTED THE PETITION FOR CERTIORARI AND REVERSED THE RTC
ORDERS ON THE GROUND THAT THE AMENDED COMPLAINT FAILED TO STATE A CAUSE OF ACTION AGAINST PETITIONER.

1. BASED ON THE ALLEGATIONS IN THE EX-PARTE MOTION TO ADMIT AMENDED COMPLAINT, AMENDED COMPLAINT, AND ALL
DOCUMENTS ATTACHED AND/OR RELATED THERETO, PETITIONER IS NOT THE REAL PARTY-IN-INTEREST DEFENDANT IN THE CASE
BELOW.

2. ASSUMING ARGUENDO THAT RESPONDENT DAKILA FILED THIS CASE AGAINST THE CORRECT [PARTY], INASMUCH AS THE
DISTRIBUTION AGREEMENT DATED 1 JUNE 1990 GRANTS [PEIA] THE RIGHT TO TERMINATE THE CONTRACT AT ANY TIME, RESPONDENT
DAKILA FAILS TO STATE A CAUSE OF ACTION IN THE CASE BELOW.

B.WHETHER OR NOT THE COURT OF APPEALS SHOULD HAVE GRANTED THE PETITION FOR CERTIORARI AND REVERSED THE RTC
ORDERS ON THE GROUND OF IMPROPER VENUE.

III. WHETHER OR NOT PETITIONER IS ENTITLED TO A TEMPORARY RESTRAINING ORDER AND/OR WRIT OF INJUNCTION.

The foregoing issues raised by petitioner essentially requires this Court to make a determination of the (1) proper service of summons and acquisition of
jurisdiction by the RTC over the person of the petitioner; (2) existence of a cause of action against petitioner in respondent’s Amended Complaint; and
(3) proper venue for respondent’s civil case against petitioner.

Petitioner contends that Civil Case No. MC99-605 involves an action for collection of sum of money and damages arising from the alleged breach of the
Distribution Agreement. The action is one in personam, or an action against a person based on his personal liability; and for the court a quo to acquire
jurisdiction over the person of the petitioner, personal service of summons, and not extraterritorial service of summons, must be made within the state
even if the petitioner is a non-resident. Petitioner avers that extraterritorial service of summons stated under Section 15, Rule 14 of the 1997 Revised
Rules of Civil Procedure, is only proper in in rem and quasi in rem cases; thus, resort to an extraterritorial service of summons in the case at bar was
erroneous. Petitioner asseverates that the allegations in the respondent’s Amended Complaint that the petitioner has personal properties within the
Philippines does not make the present case one that relates to, or the subject of which is, property within the Philippines warranting the extraterritorial
service of summons under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure. Petitioner states that for an action to be considered as
one that relates to, or the subject of which is, property within the Philippines, the main subject matter of the action must be the property within the
Philippines itself, and such was not the situation in this case. Likewise, the prayer in respondent’s Amended Complaint for the issuance of a writ of
attachment over the personal property of PEIP, which is 99% owned by petitioner (as the supposed successor of PEIA), did not convert the action from
one in personam to one that is quasi in rem. Also, the petitioner points out that since the respondent’s prayer for the issuance of a writ of attachment
was denied by the RTC in its Order, dated 26 March 1999, then the nature of Civil Case No. MC99-605 remains in personam, contrary to the ruling of
the Court of Appeals that by the attachment of the petitioner’s interest in PEIP the action in personam was converted to an action quasi in rem.
Resultantly, the extraterritorial service of summons on the petitioner was not validly effected, and did not give the RTC jurisdiction over the petitioner.

Petitioner further argues that the appellate court should have granted its Petition for Certiorari on the ground that the RTC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in refusing to dismiss respondent’s Amended Complaint for failure to state a cause of action against
petitioner which was not the real party-in-interest in Civil Case No. MC99-605. Petitioner claims that it had never used the name PEIA as its corporate
name, and neither did it change its name from that of PEIA. Petitioner stresses that PEIA is an entirely different corporate entity that is not connected in
whatever manner to the petitioner. Even assuming arguendo that petitioner is the real party-in-interest in Civil Case No. MC99-605 or that petitioner and
PEIA are one and the same entity, petitioner still avows that the respondent failed to state a cause of action against it because the Distribution
Agreement expressly grants PEIA the right to terminate the said contract at any time.

Lastly, it is the contention of the petitioner that the appellate court should have granted its Petition for Certiorari because the RTC committed grave
abuse of discretion amounting to lack or excess of jurisdiction in refusing to dismiss Civil Case No. MC99-605 for having been filed in an improper
venue. Petitioner asserts that in the Distribution Agreement entered into between the respondent and PEIA, both had mutually agreed to the exclusive
jurisdiction of the courts of Singapore or of the Philippines as elected by PEIA. Absent any waiver by PEIA of its right to choose the venue of the
dispute, the Complaint filed by the respondent before the RTC in the Philippines should have been dismissed on the ground of improper venue.

The Petition is meritorious.

Jurisdiction is the power with which courts are invested for administering justice; that is, for hearing and deciding cases. In order for the court to have
authority to dispose of the case on the merits, it must acquire jurisdiction over the subject matter and the parties.[22]

Jurisdiction of the court over the subject matter is conferred only by the Constitution or by law. It is determinable on the basis of allegations in the
complaint.[23]

Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint, while jurisdiction over the defendants in a civil case is acquired either
through the service of summons upon them in the manner required by law or through their voluntary appearance in court and their submission to its
authority. If the defendants have not been summoned, unless they voluntarily appear in court, the court acquires no jurisdiction over their persons and a
judgment rendered against them is null and void. To be bound by a decision, a party should first be subjected to the court’s jurisdiction.[24]

Thus, one of the modes of acquiring jurisdiction over the person of the defendant or respondent in a civil case is through service of summons. It is
intended to give notice to the defendant or respondent that a civil action has been commenced against him. The defendant or respondent is thus put on
guard as to the demands of the plaintiff or the petitioner.[25]
The proper service of summons differs depending on the nature of the civil case instituted by the plaintiff or petitioner: whether it is in personam, in rem,
or quasi in rem. Actions in personam, are those actions brought against a person on the basis of his personal liability; actions in rem are actions against
the thing itself instead of against the person; and actions are quasi in rem, where an individual is named as defendant and the purpose of the proceeding
is to subject his or her interest in a property to the obligation or loan burdening the property.[26]

Under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, there are only four instances wherein a defendant who is a non-resident and is
not found in the country may be served with summons by extraterritorial service, to wit: (1) when the action affects the personal status of the plaintiff; (2)
when the action relates to, or the subject of which is property, within the Philippines, in which the defendant claims a lien or an interest, actual or
contingent; (3) when the relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the
Philippines; and (4) when the defendant non-resident’s property has been attached within the Philippines. In these instances, service of summons may
be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other manner the court may
deem sufficient.[27]

Undoubtedly, extraterritorial service of summons applies only where the action is in rem or quasi in rem, but not if an action is in personam.

When the case instituted is an action in rem or quasi in rem, Philippine courts already have jurisdiction to hear and decide the case because, in actions
in rem and quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court, provided that the court
acquires jurisdiction over the res.[28] Thus, in such instance, extraterritorial service of summons can be made upon the defendant. The said
extraterritorial service of summons is not for the purpose of vesting the court with jurisdiction, but for complying with the requirements of fair play or due
process, so that the defendant will be informed of the pendency of the action against him and the possibility that property in the Philippines belonging to
him or in which he has an interest may be subjected to a judgment in favor of the plaintiff, and he can thereby take steps to protect his interest if he is so
minded.[29] On the other hand, when the defendant or respondent does not reside and is not found in the Philippines,[30] and the action involved is in
personam, Philippine courts cannot try any case against him because of the impossibility of acquiring jurisdiction over his person unless he voluntarily
appears in court.[31]

In the case at bar, this Court sustains the contention of the petitioner that there can never be a valid extraterritorial service of summons upon it, because
the case before the court a quo involving collection of a sum of money and damages is, indeed, an action in personam, as it deals with the personal
liability of the petitioner to the respondent by reason of the alleged unilateral termination by the former of the Distribution Agreement. Even the Court of
Appeals, in its Decision dated 4 April 2004, upheld the nature of the instant case as an action in personam. In the said Decision the appellate court ruled
that:

In the instant petition, [respondent’s] cause of action in Civil Case No. MC99-605 is anchored on the claim that petitioner unilaterally terminated the
Distribution Agreement. Thus, [respondent] prays in its [C]omplaint that “Upon the filing of the Complaint, issue an Order fixing the amount of the bond
and issue a writ of attachment requiring the sheriff to attach the properties of [Perkin-Elmer Philippines], which are not exempt from execution, and as
much as may be sufficient to satisfy [respondent’s] demands.”

The action instituted by [respondent] affects the parties alone, not the whole world. Hence, it is an action in personam, i.e., any judgment therein is
binding only upon the parties properly impleaded.

The objective sought in [respondent’s] [C]omplaint was to establish a claim against petitioner for its alleged unilateral termination of [D]istribution
[A]greement. Hence, to repeat, Civil Case No. MC99-605 is an action in personam because it is an action against persons, namely, herein petitioner, on
the basis of its personal liability. As such, personal service of summons upon the [petitioner] is essential in order for the court to acquire of (sic)
jurisdiction over [its person].[32] (Emphasis supplied.)

Thus, being an action in personam, personal service of summons within the Philippines is necessary in order for the RTC to validly acquire jurisdiction
over the person of the petitioner, and this is not possible in the present case because the petitioner is a non-resident and is not found within the
Philippines. Respondent’s allegation in its Amended Complaint that petitioner had personal property within the Philippines in the form of shares of stock
in PEIP did not make Civil Case No. MC99-605 fall under any of the four instances mentioned in Section 15, Rule 14 of the Rules of Court, as to convert
the action in personam to an action in rem or quasi in rem and, subsequently, make the extraterritorial service of summons upon the petitioner valid.

It is incorrect for the RTC to have ruled that the allegations made by the respondent in its Amended Complaint, which is primarily for collection of a sum
of money and damages, that the petitioner owns shares of stock within the Philippines to which the petitioner claims interest, or an actual or contingent
lien, would make the case fall under one of the aforesaid instances wherein extraterritorial service of summons under Section 15, Rule 14 of the 1997
Revised Rules of Civil Procedure, would be valid. The RTC in arriving at such conclusions relied on the second instance, mentioned under Section 15,
Rule 14 of the 1997 Revised Rules of Civil Procedure (i.e., when the action relates to, or the subject of which is property, within the Philippines, in which
the defendant claims a lien or interest, actual or contingent), where extraterritorial service of summons can be properly made. However, the aforesaid
second instance has no application in the case before this Court. Primarily, the Amended Complaint filed by the respondent against the petitioner was
for the collection of sum of money and damages. The said case was neither related nor connected to any property of the petitioner to which it claims a
lien or interest. The action for collection of a sum of money and damages was purely based on the personal liability of the petitioner towards the
respondent. The petitioner is correct in saying that “mere allegations of personal property within the Philippines does not necessarily make the action as
one that relates to or the subject of which is, property within the Philippines as to warrant the extraterritorial service of summons. For the action to be
considered one that relates to, or the subject of which, is the property within the Philippines, the main subject matter of the action must be the property
itself of the petitioner in the Philippines.” By analogy, an action involving title to or possession of real or personal property -- such as the foreclosure of
real estate or chattel mortgage where the mortgagor does not reside or is not found in the Philippines -- can be considered as an action which relates to,
or the subject of which is, property within the Philippines, in which the defendant claims a lien or interest, actual or contingent; and in such instance,
judgment will be limited to the res.[33]

Moreover, the allegations made by the respondent that the petitioner has property within the Philippines were in support of its application for the
issuance of a writ of attachment, which was denied by the RTC. Hence, it is clear from the foregoing that the Complaint filed by the respondent against
the petitioner does not really relate to, or the subject of which is, property within the Philippines of the petitioner.

This Court also finds error in the Decision of the Court of Appeals. It is provided for in the said Decision, thus:

However, let it be emphasized that in the [C]omplaint filed before the trial court, [respondent] prayed that “Upon the filing of the Complaint, issue an
Order fixing the amount of the bond and issue a writ of attachment requiring the sheriff to attach the properties of [Perkin-Elmer Philippines], which are
not exempt from execution, and as much as may be sufficient to satisfy [respondent’s] demands.
In other words, although the [C]omplaint before the trial court does not involve the personal status of the [respondent], nevertheless, the case involves
property within the Philippines in which the [petitioner] has or claim an interest, or which the [respondent] has attached, which is one of the instances
where extraterritorial service of summons is proper.

Hence, it is submitted that one of the instances when exterritorial service of summons under Section 15, Rule 14 of the Rules of Court is proper may be
considered to have been met. This is because the [C]omplaint for collection of sum of money which is an action in personam was converted into an
action quasi in rem by the attachment of [petitioner’s] interest in [Perkin-Elmer Philippines].[34] (Emphasis supplied.)

Respondent’s allegation in its Amended Complaint that petitioner had personal property within the Philippines in the form of shares of stock in PEIP does
not convert Civil Case No. MC99-605 from an action in personam to one quasi in rem, so as to qualify said case under the fourth instance mentioned in
Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure (i.e., when the non-resident defendant’s property has been attached within the
Philippines), wherein extraterritorial service of summons upon the petitioner would have been valid. It is worthy to note that what is required under the
aforesaid provision of the Revised Rules of Civil Procedure is not a mere allegation of the existence of personal property belonging to the non-resident
defendant within the Philippines but, more precisely, that the non-resident defendant’s personal property located within the Philippines must have been
actually attached. This Court in the case of Venturanza v. Court of Appeals[35] ruled that when the attachment was void from the beginning, the action
in personam which required personal service of summons was never converted into an action in rem where service by publication would have been
valid. Hence, the appellate court erred in declaring that the present case, which is an action in personam, was converted to an action quasi in rem
because of respondent’s allegations in its Amended Complaint that petitioner had personal property within the Philippines.

Glaringly, respondent’s prayer in its Amended Complaint for the issuance of a writ of attachment over petitioner’s purported shares of stock in PEIP
located within the Philippines was denied by the court a quo in its Order dated 26 March 1999. Respondent’s Motion for Reconsideration of the said
Order was likewise denied by the RTC in its subsequent Order, dated 11 January 2000. Evidently, petitioner’s alleged personal property within the
Philippines, in the form of shares of stock in PEIP, had not been attached; hence, Civil Case No. MC99-605, for collection of sum of money and
damages, remains an action in personam. As a result, the extraterritorial service of summons was not validly effected by the RTC against the petitioner,
and the RTC thus failed to acquire jurisdiction over the person of the petitioner. The RTC is therefore bereft of any authority to act upon the Complaint
filed before it by the respondent insofar as the petitioner is concerned.

If there was no valid summons served upon petitioner, could RTC have acquired jurisdiction over the person of the petitioner by the latter’s voluntary
appearance? As a rule, even if the service of summons upon the defendant or respondent in a civil case is defective, the court can still acquire
jurisdiction over his person when he voluntary appears in court or submits himself to its authority. Nonetheless, voluntary appearance, as a mode of
acquiring jurisdiction over the person of the defendant, is likewise inapplicable in this case.

It is settled that a party who makes a special appearance in court for the purpose of challenging the jurisdiction of said court, based on the invalidity of
the service of summons, cannot be considered to have voluntarily submitted himself to the jurisdiction of the court.[36] In the present case, petitioner
has been consistent in all its pleadings in assailing the service of summons upon it and the jurisdiction of the RTC over its person. Thus, the petitioner
cannot be declared in estoppel when it filed an Answer ad cautelam with compulsory counterclaim before the RTC while the instant Petition was still
pending before this Court. The petitioner was in a situation wherein it had no other choice but to file an Answer; otherwise, the RTC would have already
declared that petitioner had waived its right to file responsive pleadings.[37] Neither can the compulsory counterclaim contained in petitioner’s Answer
ad cautelam be considered as voluntary appearance of petitioner before the RTC. Petitioner seeks to recover damages and attorney’s fees as a
consequence of the unfounded suit filed by respondent against it. Thus, petitioner’s compulsory counterclaim is only consistent with its position that the
respondent wrongfully filed a case against it and the RTC erroneously exercised jurisdiction over its person.

Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of the RTC over respondent’s complaint and over petitioner’s counterclaim --
while it may have no jurisdiction over the former, it may exercise jurisdiction over the latter. The compulsory counterclaim attached to petitioner’s
Answer ad cautelam can be treated as a separate action, wherein petitioner is the plaintiff while respondent is the defendant.[38] Petitioner could have
instituted a separate action for the very same claims but, for the sake of expediency and to avoid multiplicity of suits, it chose to demand the same in
Civil Case No. MC99-605.[39] Jurisdiction of the RTC over the subject matter and the parties in the counterclaim must thus be determined separately
and independently from the jurisdiction of the same court in the same case over the subject matter and the parties in respondent’s complaint.

Moreover, even though the petitioner raised other grounds in its Motion to Dismiss aside from lack of jurisdiction over its person, the same is not
tantamount to its voluntary appearance or submission to the authority of the court a quo. While in De Midgely v. Ferandos,[40] it was held that, in a
Motion to Dismiss, the allegation of grounds other than lack of jurisdiction over the person of the defendant, including a prayer "for such other reliefs as"
may be deemed "appropriate and proper" amounted to voluntary appearance, such ruling must be deemed superseded by the declaration of this Court
in La Naval Drug Corporation v. Court of Appeals[41] that estoppel by jurisdiction must be unequivocal and intentional. It would be absurd to hold that
petitioner unequivocally and intentionally submitted itself to the jurisdiction of the court by seeking other reliefs to which it might be entitled when the only
relief that it could properly ask from the trial court is the dismissal of the complaint against it.[42] Thus, the allegation of grounds other than lack of
jurisdiction with a prayer “for such other reliefs” as may be deemed “appropriate and proper” cannot be considered as unequivocal and intentional
estoppel. Most telling is Section 20, Rule 14 of the Rules of Court, which expressly provides:

SEC. 20. Voluntary appearance. - The defendant’s voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a
motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance.[43]
(Emphasis supplied.)

In sum, this Court finds that the petitioner did not submit itself voluntarily to the authority of the court a quo; and in the absence of valid service of
summons, the RTC utterly failed to acquire jurisdiction over the person of the petitioner.

Anent the existence of a cause of action against petitioner and the proper venue of the case, this Court upholds the findings of the RTC on these issues.

Dismissal of a Complaint for failure to state a cause of action is provided for by the Rules of Court.[44] When a Motion to Dismiss is grounded on the
failure to state a cause of action, a ruling thereon should be based only on the facts alleged in the complaint. The court must pass upon this issue based
solely on such allegations, assuming them to be true. For it to do otherwise would be a procedural error and a denial of plaintiff’s right to due
process.[45] While, truly, there are well-recognized exceptions[46] to the rule that the allegations are hypothetically admitted as true and inquiry is
confined to the face of the complaint,[47] none of the exceptions apply in this case. Hence, the general rule applies. The defense of the petitioner that it
is not the real party-in-interest is evidentiary in nature which must be proven in trial. The appellate court, then, cannot be faulted for not granting
petitioner’s Motion to Dismiss on the ground of failure to state a cause of action.

In the same way, the appellate court did not err in denying petitioner’s Motion to Dismiss Civil Case No. MC99-605 on the ground of improper venue.
In arriving at such conclusion, this Court quotes with approval the following ratiocination of the RTC:
As for the contention that venue was improperly laid, x x x, the [trial court] in its ultimate desire that the ends of justice could be served in its fullest,
cannot rule that venue was improperly laid.

The stipulation as to the venue of a prospective action does not preclude the filing of the suit in the residence of the [respondent] under Section
2, Rule 4, Rules of Court, especially where the venue stipulation was imposed by the [petitioner] for its own benefits.[48] (Emphasis supplied.)

Despite the venue stipulation found in the Distribution Agreement stipulating that the exclusive jurisdiction over disputes arising from the same
shall lie in the courts of Singapore or of the Territory (referring to the Philippines), whichever is elected by PEIA (or petitioner, as PEIA’s alleged
successor), the RTC of the Philippines cannot be considered as an improper venue. Truly, the venue stipulation used the word “exclusive,” however, a
closer look on the Distribution Agreement would reveal that the venue stipulation was really in the alternative i.e., courts of Singapore or of the Territory,
meaning, the Philippines; thus, the court a quo is not an improper venue for the present case.

Nonetheless, it bears to emphasize that despite our findings that based on the allegations in respondent’s Complaint in Civil Case No. MC99-605,
respondent appears to have a cause of action against the petitioner and that the RTC is the proper venue for the said case, Civil Case No. MC99-605 is
still dismissible, for the RTC never acquired jurisdiction over the person of the petitioner. The extraterritorial service of summons upon the petitioner
produces no effect because it can only be done if the action is in rem or quasi in rem. The case for collection of sum of money and damages filed by the
respondent against the petitioner being an action in personam, then personal service of summons upon the petitioner within the Philippines is essential
for the RTC to validly acquire jurisdiction over the person of the petitioner. Having failed to do so, the RTC can never subject petitioner to its jurisdiction.
The mere allegation made by the respondent that the petitioner had shares of stock within the Philippines was not enough to convert the action from one
in personam to one that was quasi in rem, for petitioner’s purported personal property was never attached; thus, the extraterritorial service of summons
upon the petitioner remains invalid. In light of the foregoing findings, this Court concludes that the RTC has no power to hear and decide the case
against the petitioner, because the extraterritorial service of summons was not validly effected upon the petitioner and the RTC never acquired
jurisdiction over its person.

Finally, as regards the petitioner’s counterclaim, which is purely for damages and attorney’s fees by reason of the unfounded suit filed by the
respondent against it, it has long been settled that the same truly falls under the classification of compulsory counterclaim and it must be pleaded in the
same action, otherwise, it is barred.[49] In the case at bar, this Court orders the dismissal of the Complaint filed by the respondent against the petitioner
because the court a quo failed to acquire jurisdiction over the person of the latter. Since the Complaint of the respondent was dismissed, what will
happen then to the counterclaim of the petitioner? Does the dismissal of the complaint carry with it the dismissal of the counterclaim?

In the cases of Metal Engineering Resources Corp. v. Court of Appeals,[50] International Container Terminal Services, Inc. v. Court of Appeals,[51] and
BA Finance Corporation v. Co.,[52] the Court ruled that if the court does not have jurisdiction to entertain the main action of the case and dismisses the
same, then the compulsory counterclaim, being ancillary to the principal controversy, must likewise be dismissed since no jurisdiction remained for any
grant of relief under the counterclaim.[53] If we follow the aforesaid pronouncement of the Court in the cases mentioned above, the counterclaim of the
herein petitioner being compulsory in nature must also be dismissed together with the Complaint. However, in the case of Pinga vs. Heirs of German
Santiago,[54] the Court explicitly expressed that:

Similarly, Justice Feria notes that “the present rule reaffirms the right of the defendant to move for the dismissal of the complaint and to prosecute his
counterclaim, as stated in the separate opinion [of Justice Regalado in BA Finance]. Retired Court of Appeals Justice Hererra pronounces that the
amendment to Section 3, Rule 17 [of the 1997 Revised Rules of Civil Procedure] settles that “nagging question “whether the dismissal of the complaint
carries with it the dismissal of the counterclaim, and opines that by reason of the amendments, the rulings in Metals Engineering, International
Container, and BA Finance “may be deemed abandoned.” x x x.

x x x, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended Rule 17, those previous jural doctrines that were
inconsistent with the new rules incorporated in the 1997 Rules of Civil Procedure were implicitly abandoned insofar as incidents arising after the
effectivity of the new procedural rules on 1 July 1997. BA Finance, or even the doctrine that a counterclaim may be necessarily dismissed along with the
complaint, clearly conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA Finance as doctrine extends as far back as 1997, when the
Court adopted the new Rules of Civil Procedure. If, since then, abandonment has not been affirmed in jurisprudence, it is only because no proper case
has arisen that would warrant express confirmation of the new rule. That opportunity is here and now, and we thus rule that the dismissal of a complaint
due to fault of the plaintiff is without prejudice to the right of the defendant to prosecute any pending counterclaims of whatever nature in the same or
separate action. We confirm that BA Finance and all previous rulings of the Court that are inconsistent with this present holding are now abandoned.[55]
[Emphasis supplied].

It is true that the aforesaid declaration of the Court refers to instances covered by Section 3, Rule 17 of the 1997 Revised Rules of Civil Procedure[56]
on dismissal of the complaint due to the fault of the plaintiff. Nonetheless, it does not also preclude the application of the same to the instant case just
because the dismissal of respondent’s Complaint was upon the instance of the petitioner who correctly argued lack of jurisdiction over its person.

Also in the case of Pinga v. Heirs of German Santiago, the Court discussed the situation wherein the very filing of the complaint by the plaintiff against
the defendant caused the violation of the latter’s rights. As to whether the dismissal of such a complaint should also include the dismissal of the
counterclaim, the Court acknowledged that said matter is still debatable, viz:

Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint; namely a cause (or causes) of action constituting an
act or omission by which a party violates the right of another. The main difference lies in that the cause of action in the counterclaim is maintained by
the defendant against the plaintiff, while the converse holds true with the complaint. Yet, as with a complaint, a counterclaim without a cause of action
cannot survive.

x x x if the dismissal of the complaint somehow eliminates the cause(s) of the counterclaim, then the counterclaim cannot survive. Yet that hardly is the
case, especially as a general rule. More often than not, the allegations that form the counterclaim are rooted in an act or omission of the plaintiff other
than the plaintiff’s very act of filing the complaint. Moreover, such acts or omissions imputed to the plaintiff are often claimed to have occurred prior to
the filing of the complaint itself. The only apparent exception to this circumstance is if it is alleged in the counterclaim that the very act of the plaintiff in
filing the complaint precisely causes the violation of the defendant’s rights. Yet even in such an instance, it remains debatable whether the dismissal or
withdrawal of the complaint is sufficient to obviate the pending cause of action maintained by the defendant against the plaintiff.[57]

Based on the aforequoted ruling of the Court, if the dismissal of the complaint somehow eliminates the cause of the counterclaim, then the counterclaim
cannot survive. Conversely, if the counterclaim itself states sufficient cause of action then it should stand independently of and survive the dismissal of
the complaint. Now, having been directly confronted with the problem of whether the compulsory counterclaim by reason of the unfounded suit may
prosper even if the main complaint had been dismissed, we rule in the affirmative.
It bears to emphasize that petitioner’s counterclaim against respondent is for damages and attorney’s fees arising from the unfounded suit. While
respondent’s Complaint against petitioner is already dismissed, petitioner may have very well already incurred damages and litigation expenses such as
attorney’s fees since it was forced to engage legal representation in the Philippines to protect its rights and to assert lack of jurisdiction of the courts over
its person by virtue of the improper service of summons upon it. Hence, the cause of action of petitioner’s counterclaim is not eliminated by the mere
dismissal of respondent’s complaint.

It may also do well to remember that it is this Court which mandated that claims for damages and attorney’s fees based on unfounded suit constitute
compulsory counterclaim which must be pleaded in the same action or, otherwise, it shall be barred. It will then be iniquitous and the height of injustice
to require the petitioner to make the counterclaim in the present action, under threat of losing his right to claim the same ever again in any other court,
yet make his right totally dependent on the fate of the respondent’s complaint.
If indeed the Court dismisses petitioner’s counterclaim solely on the basis of the dismissal of respondent’s Complaint, then what remedy is left for the
petitioner? It can be said that he can still file a separate action to recover the damages and attorney’s fees based on the unfounded suit for he cannot be
barred from doing so since he did file the compulsory counterclaim in the present action, only that it was dismissed when respondent’s Complaint was
dismissed. However, this reasoning is highly flawed and irrational considering that petitioner, already burdened by the damages and attorney’s fees it
may have incurred in the present case, must again incur more damages and attorney’s fees in pursuing a separate action, when, in the first place, it
should not have been involved in any case at all.

Since petitioner’s counterclaim is compulsory in nature and its cause of action survives that of the dismissal of respondent’s complaint, then it should be
resolved based on its own merits and evidentiary support.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision of the Court of Appeals, dated 4 April 2006, in CA-G.R.
SP No. 78981, affirming the Orders, dated 4 November 2002 and 20 June 2003, of the Regional Trial Court of Mandaluyong City, Branch 212, in Civil
Case No. MC99-605, is hereby REVERSED AND SET ASIDE. Respondent’s Amended Complaint in Civil Case No. MC99-605 as against the petitioner
is hereby ordered DISMISSED, and all the proceedings against petitioner in the court a quo by virtue thereof are hereby DECLARED NULL AND VOID.
The Regional Trial Court of Mandaluyong City, Branch 212, is DIRECTED to proceed without further delay with the resolution of respondent’s Complaint
in Civil Case No. MC99-605 as to defendant PEIP, as well as petitioner’s counterclaim. No costs.

CASE. 21. VIRGILIO P. CEZAR VS, HON. HELEN RICAFORT-BAUTISTA in her capacity as Presiding Judge of RTC, Branch 260, City of
Parañaque and SPECIFIED MATERIALS, CO.,
G.R. No. 136415, October 31, 2006
FIRST DIVISION
CHICO-NAZARIO, J.:

This Petition for Certiorari seeks the annulment of the Decision dated 9 September 1997[1] of respondent Honorable Helen Ricafort-Bautista of
the Regional Trial Court (RTC) of Parañaque City, in Civil Case No. 96-0473 entitled, “Specified Materials Corporation v. Virgilio P. Cezar doing
business under the name and style `Virosell Construction and Supply.’” The dispositive portion of the assailed decision provides:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff, ordering defendant to pay plaintiff, as follows:

1. P2,005,000.00 representing the total amount that remain unpaid; plus,

2. A penalty of three (3%) percent per month on the value of each delivery receipt and sales invoice computed from the time the obligation fell
due until the same is fully paid;
3. P401,000.00 as attorney’s fees.[2]

On 11 November 1996, private respondent Specified Materials Corporation filed a Complaint[3] for collection of sum of money against petitioner arising
from the latter’s failure to pay the construction materials it purportedly purchased under a credit line extended by private respondent. At the time of the
institution of the action, petitioner’s obligation stood at P1,860,000.00, and under the terms of the credit arrangement, materials sold to petitioner was
supposed to be paid within thirty days from date of delivery, subject to an interest charge of 3% per month for delayed payments.

As petitioner failed to pay for the construction materials, private respondent sent two letters[4] to petitioner and his brother, Perfecto, reminding them of
their obligation. In response, petitioner sent three letters all dated 12 August 1996.[5] In the first letter, petitioner manifested his willingness to settle his
account with private respondent as long as his obligation conforms with the submitted list of materials he actually used. In the second letter, petitioner
requested that any intended legal action on the part of private respondent be suspended until such time that all deliveries and payments made in his
account are verified.[6] Finally, in the third letter, petitioner requested that an inventory be undertaken of the construction materials delivered by private
respondent as well as those actually withdrawn and used by petitioner.[7]

On 3 September 1996, private respondent’s representatives met with petitioner in order to reconcile their conflicting records. During said meeting,
petitioner allegedly admitted that he failed to take into account some deliveries made in 1995 amounting to around P648,750.00. Petitioner then
requested that they meet again after two days so that he could verify his documents but he failed to show up for the subsequent meetings. Thereafter,
private respondent sent a final demand letter to petitioner.[8]

After the filing of the complaint, summons[9] was issued to petitioner and this was served by Sheriff Juan C. Marquez with the pertinent portion of the
return stating:

SHERIFF’S RETURN

I HEREBY CERTIFY that:

I HAVE SERVED a copy/ies of the summons, complaint and annexes issued in Civil Case No. 96-0473, entitled Specified Materials Corp. versus
Virgilio P. Cezar. x x x

PERSONS SERVED DATE OF SERVICE HOW SERVED

Virgilio P. Cezar January 9, 1997 served thru Mr. Arsenio Robles, an employee of defendant who [is] authorized to transact
business, as per his signature appearing below summons.

As petitioner failed to file his answer to the complaint, private respondent moved that he be declared in default.[10] This motion was favorably
acted upon by public respondent through the Order dated 14 March 1997,[11] and private respondent was able to present its evidence.

On 15 May 1997, private respondent filed a Motion to Admit Amended Complaint alleging that it erroneously computed petitioner’s obligation to be
P1,860,000.00, when it should have amounted to P2,005,000.00. A copy of the motion and the Amended Complaint were personally received by
petitioner as evidenced by his signatures thereon.[12] The Amended Complaint was ordered admitted on 16 May 1997.[13] On 9 September 1997,
public respondent issued its now assailed decision.

On 3 November 1997, petitioner, by way of special appearance, filed a Motion to Set Aside Decision arguing that the trial court did not acquire
jurisdiction over his person.[14] This motion was denied through public respondent’s order dated 7 November 1997.[15]

Following the denial of its Motion to Set Aside Decision, petitioner filed before the Court of Appeals a Petition for Annulment of Judgment,
Preliminary Injunction with Prayer for Temporary Restraining Order.[16] This petition was dismissed for “failure to attach an affidavit of merit alleging the
facts supporting the good and substantial defense, as well as the affidavits of witnesses or document supporting the defense.”[17]

Petitioner then filed a motion for reconsideration but this was denied by the Court of Appeals in its Resolution dated 20 March 1998.[18] According to
the Court of Appeals –

Under Section 1, Rule 47 of the 1997 Rules of Civil Procedure, the annulment of a judgment or final order or resolution in civil actions of the
Regional Trial Courts may be availed of only when the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no
longer available through no fault of the petitioner. The instant petition for annulment was filed before this Court on November 24, 1997. Clearly,
petitioner had other remedies available when he filed the instant petition for annulment.

Following this set-back, petitioner filed before this Court a Petition for Review on Certiorari[19] of the resolutions of the Court of Appeals but we
denied the same on 15 June 1998 for failure to comply with procedural requirements.[20] Our resolution became final and executory on
7 September 1998.[21]

On 10 November 1998, private respondent filed a Motion for Execution before the trial court.[22] The scheduled hearing of this motion on 13 November
1998 was ordered reset to 19 November 1998 after petitioner filed an Urgent Ex-Parte Motion to Re-Set Hearing.[23] The records also disclose that the
19 November 1998 hearing did not push through and in fact, it was rescheduled a couple of more times per agreement of the parties.[24] Finally, on 18
December 1998, public respondent granted private respondent’s Motion for Execution.[25]

Hence, the present petition raising the sole issue:

1. WHETHER OR NOT THE COURT A QUO ACQUIRED JURISDICTION OVER THE PERSON OF THE PETITIONER BY VIRTUE OF THE
SUBSTITUTED SERVICE OF SUMMONS EFFECTED BY SHERIFF JUAN C. MARQUEZ.[26]

The petition is unmeritorious.

Petitioner argues that since the trial court never acquired jurisdiction over his person, its Decision of 9 September 1997 is null and void. He claims that
the person who allegedly received the summons on his behalf, and who was identified in the sheriff’s return as Arsenio Robles, was not his employee.
He adds that when he conducted an inquiry, he found out that Robles was a native of Batangas and was merely peddling mango seedlings within the
vicinity of his office when the summons was served. He also maintains that had he been given the opportunity to present his defense, he would have
shown that his obligation to private respondent is less than the amount as established by the trial court.

Private respondent retorts that petitioner’s insistence that the court a quo did not acquire jurisdiction over him is belied by the fact that petitioner had
actual knowledge of all the proceedings since he was furnished with all the copies of the pleadings and court orders. Private respondent points out that
the Motion to Admit Amended Complaint and the Amended Complaint were personally served on petitioner himself as shown by his signatures
appearing thereon. Moreover, private respondent is of the view that the sheriff who served the summons upon petitioner enjoys the presumption of
regularity in the performance of duty – a presumption which petitioner was unable to overcome.

On 16 June 1999, this Court issued a temporary restraining order enjoining the enforcement of the court a quo’s decision dated 9 September 1997 and
resolution dated 28 November 1997.[27]

It is fundamental that courts acquire jurisdiction over the plaintiff once the complaint is filed. On the other hand, there are two ways through which
jurisdiction over the defendant or respondent is acquired – either through the service of summons upon them or through their voluntary appearance in
court. In the case of Avon Insurance PLC v. Court of Appeals,[28] we discussed the function of summons in court actions, to be –

Fundamentally, the service of summons is intended to give official notice to the defendant or respondent that an action had been commenced against it.
The defendant or respondent is thus put [on] guard as to the demands of the plaintiff as stated in the complaint. The service of summons upon the
defendant becomes an important element in the operation of a court’s jurisdiction upon a party to a suit, as service of summons upon the defendant is
the means by which the court acquires jurisdiction over his person. Without service of summons, or when summons are improperly made, both the trial
and the judgment, being in violation of due process, are null and void, unless the defendant waives the service of summons by voluntarily appearing and
answering the suit. [29]

Elsewhere, we declared that jurisdiction of the court over the person of the defendant or respondent cannot be acquired notwithstanding his knowledge
of the pendency of a case against him unless he was validly served with summons.[30] Such is the important role a valid service of summons plays in
court actions.

The Rules of Court[31] requires that, whenever practicable, summons must be served by handing a copy thereof to the defendant in person. In case
the defendant refuses to receive and sign for it, by tendering the summons to him or her.

However, in the event that summons cannot be served within a reasonable time, the Rules permit that substituted service may be resorted to, thus:
Sec. 7. Substituted service. - If, for justifiable causes, the defendant cannot be served within a reasonable time as provided in the preceding section,
service may be effected (a) by leaving copies of the summons at the defendant’s residence with some person of suitable age and discretion then
residing therein, or (b) by leaving the copies at defendant’s office or regular place of business with some competent person in charge thereof.

In this case, the sheriff employed the substituted service of summons. The defect, however, in the manner in which he implemented this mode of
service of summons is readily apparent on the face of the return. It must be emphasized that laws providing for modes other than the personal service
of summons must be strictly followed in order for the court to acquire jurisdiction over the person of respondent or defendant. Compliance therewith
should appear affirmatively on the return.[32] The essence of this requirement was enunciated in the case of Keister v. Navarro[33] to be –

The summons must be served to the defendant in person. It is only when the defendant cannot be served personally within a reasonable time that a
substituted service may be made. Impossibility of prompt service should be shown by stating the efforts made to find the defendant personally and the
fact that such efforts failed. This statement should be made in the proof of service. This is necessary because substituted service is in derogation of the
usual method of service. It has been held that this method of service is “in derogation of the common law; it is a method extraordinary in character, and
hence may be used only as prescribed and in the circumstances authorized by statute.” Thus, under the controlling decisions, the statutory
requirements of substituted service must be followed strictly, faithfully and fully, and any substituted service other than that authorized by the statute is
considered ineffective.[34] (Emphases supplied.)

As the sheriff’s return in the present case does not contain any statement with regard to the impossibility of personal service the same is patently
defective and so the presumption of regularity in the performance of official functions will not lie.[35]

Nevertheless, we still hold that jurisdiction was validly acquired by the trial court. Although the substituted service upon him of summons was defective,
said defect was cured by his voluntary appearance.[36]

As the records of this case disclose, after private respondent moved for the execution of the trial court’s decision, petitioner filed a motion for a re-setting
of the court’s hearing thereon. In Flores v. Zurbito,[37] we held that an appearance in whatever form without expressly objecting to the jurisdiction of the
court over the person, is a submission to the jurisdiction of the court over the person of the defendant or respondent, thus:

A voluntary appearance is a waiver of the necessity of a formal notice. An appearance in whatever form, without expressly objecting to the
jurisdiction of the court over the person, is a submission to the jurisdiction of the court over the person. While the formal method of entering an
appearance in a cause pending in the courts is to deliver to the clerk a written direction ordering him to enter the appearance of the person who
subscribes it, an appearance may be made by simply filing a formal motion, or plea or answer. This formal method of appearance is not necessary. He
may appear without such formal appearance and thus submit himself to the jurisdiction of the court. He may appear by presenting a motion, for
example, and unless by such appearance he specifically objects to the jurisdiction of the court, he thereby gives his assent to the jurisdiction of the court
over his person.[38]

Hence, in this case, petitioner’s filing of a Motion for Re-setting of the Hearing effectively cured the defect of the substituted service of summons.
Petitioner’s insistence of lack of jurisdiction over his person is utterly lacking in any legal basis.

WHEREFORE, premises considered, the present Petition is DISMISSED. The Decision dated 9 September 1997 rendered by the Regional Trial Court
of Parañaque City in Civil Case No. 96-0473 is hereby AFFIRMED and the Temporary Restraining Order issued by this Court on 16 June 1999 is hereby
LIFTED. With costs.

CASE NO. 22. JESUS ANGELES, GLORIA MALANA, ANSELMO NAVALES, FELICIANO VILLAMAYOR, DEVELOPMENT BANK OF THE
PHILIPPINES and the REGISTER OF DEEDS OF LAGUNA vs.
REPUBLIC OF THE PHILIPPINES, Represented by the DIRECTOR OF LANDS
G.R. No. 166281 October 27, 2006
FIRST DIVISION
CALLEJO, SR., J.:

Before the Court is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 45645, and its resolution denying
the motion for reconsideration thereof.

Sometime in 1940, Juan Sanga acquired from his father, Damaso Sanga, a parcel of land located in Mayondon, Los Baños, Laguna. The property is
bounded on the east and south side by the University of the Philippines, Los Baños. Sanga declared the lot in his name under Tax Declaration No. 5841
and paid the realty taxes thereon. He planted fruit bearing trees on the property and later executed a real estate mortgage in favor of the Rural Bank of
Los Baños as security for a loan.2

In January 1960, Jesus Angeles, Feliciano Villamayor, the spouses Montano Malana and Gloria Malana, and Anselmo Navales, gained entry into the
property. They occupied portions thereof and constructed huts and duck sheds. When Sanga demanded that they vacate the property, they pleaded to
be allowed to remain therein and executed an undertaking, promising to vacate the property as soon as their applications with the Bureau of Lands for
revocable permits to occupy other lots had been processed and approved. Sanga allowed them to stay.

On May 22, 1972, Sanga had the property surveyed by Geodetic Engineer Nestor Falcotelo, who then prepared a Consolidation Plan Psu-134538 and
Psu-232665.3 Sanga again demanded that Angeles, Navales and Malana vacate the property. When they refused, Sanga filed a complaint (accion
reinvindicatoria) with the Regional Trial Court (RTC) of Laguna against Angeles, the spouses Malana and Villamayor. He alleged that he was the owner
of the lot in question, having acquired the same from his father; despite his demands, defendants refused to vacate the property. He prayed that
judgment be rendered in his favor ordering the defendants and their successors-in-interest to vacate the property and to pay damages. The case was
docketed as Civil Case No. B-541. The Director of Lands intervened in the case.4

Sanga filed a separate complaint for unlawful detainer against Navales with the Municipal Trial Court (MTC), docketed as Civil Case No. 170. However,
on motion of the defendant, the proceedings were suspended pending the final outcome of Civil Case No. B-541.5

Unknown to Sanga, the defendants had managed to have portions of the property surveyed by Geodetic Engineer Rolando Bagues while Civil Case No.
B-541 was pending. A survey plan was prepared, under which the portions of the property occupied by the defendants were identified as Lot Nos.
11684, 11687, 11728, and 11729. Separate petitions for the issuance of free or sales patents were then filed by Angeles, Malana, Navales and
Villamayor with the Bureau of Lands, which were granted by District Lands Officer Braulio C. Darum. On July 20, 1978, the Register of Deeds issued
Original Certificates of Title (OCT) to the patentees, thus:

Patentee Patent No. Original Certificate of Title No.

Jesus Angeles 16637 P-19446

Gloria Malana 16644 P-19467
Anselmo NavaleS 16684 P-19648
Feliciano Villamayor 16685 P-19659

Malana, Navales and Angeles thereafter secured separate loans from the Development Bank of the Philippines (DBP) and executed real estate
mortgages over the lots respectively titled to them. The mortgagor and the amount of loan secured by each of them are as follows:

Mortgagor Amount of Loan

1. Montano Malana P17,450.00

2. Anselmo Navales P19,600.00
3. Jesus Angeles P53,978.00

Meanwhile, on May 25, 1982, the RTC rendered judgment in Civil Case No. B-541 in favor of plaintiff. The fallo of the decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and the defendants and any and all persons acting under them and in their behalf
are hereby ordered to vacate the parcel of land described as:

"A parcel of land located at Mayondon, Los Baños, Laguna, bounded on the North by Damaso Sanga (or his heirs), on the East by the Municipality of
Los Baños (now University of the Philippines) on the Southeast by the Municipality of Los Baños (now University of the Philippines) and on the West by
the Laguna Lake; consisting of an area of 2,913 square meters, more or less, assessed at P70.00 under Tax Declaration No. 5841 in the name of Juan
C. Sanga."

and surrender the possession of the same to the plaintiffs.10

The decision became final and executory as the defendants and the Director of Lands failed to appeal.11

When Sanga sought to have defendants evicted from the property based on the trial court's decision, the latter claimed that they had titles over the
property based on the free (sales) patents granted to them by the State, hence, had the right to possess such lots. The court rejected their claims. They
sought relief from the CA, but the appellate court dismissed their petition.12

On October 12, 1983, Sanga filed a protest with the Bureau of Lands, claiming that, as early as May 25, 1982, the RTC of Laguna had rendered
judgment in his favor in Civil Case No. B-541, and that such decision was already final and executory. He prayed that the free patents as well as the
titles based thereon, issued by the Registry of Deeds be cancelled, thus:

WHEREFORE, premises considered, it is most respectfully prayed that after due hearing and investigation, the following Free Patents issued with their
respective names of patentee-respondents be revoked and/or cancelled:

Jesus Angeles - Free Patent No. (IV-3) 16637 or OCT P-1944

Gloria Malana - Free Patent No. (IV-3) 16644 or OCT P-1946
Anselmo Navales - Free Patent No. (IV-3) 16684 or OCT P-1964
Feliciano Villamayor - Free Patent No. (IV-3) 16685 or OCT P-1965

and after cancellation thereof has been effected, that proper title be issued to herein claimant-protestant.13

When apprised of the protest,14 the Chief of the Legal Division of the Bureau of Lands issued a letter15 dated November 18, 1983 requesting the
District Lands Officer to conduct an immediate investigation of the matter and to submit a report thereon as soon as possible. The matter was referred to
Atty. Nicasio M. Rino, Jr., who then issued the following report:

1. That the lots in question is situated in Brgy. Mayondon, Los Baños, Laguna, and found to be within the Psu-232665 of Juan Sanga, et al., which has
been the subject of a civil case filed before the Court of First Instance of Laguna, Branch 1, Biñan, Laguna and docketed as Civil Case No. B-541
wherein a decision rendered is favorable to the herein protestants;
2. That during the first hearing which was held in this Office on January 5, 1984, counsels for the respondents agreed to submit/file within fifteen (15)
days their motion to dismiss protest, however despite the lapse of time accorded them they were not able to do so;
3. That all the free patent titles issued to the above-named patentees was ascertained to be within or along the foreshore of the Laguna de Bay and has
no approved survey tending to show that it was issued irregularly;
4. That it is also of significant to mention that this Office been ordered to submit a summary investigation of those free patent titles irregularly issued
within or along the foreshore of the Laguna de Bay as per 1st Indorsement dated 4 April 1983 of the Regional Director, Regional Land Office No. IV,
Quezon City.

Atty. Rino made the following recommendation:

In view of all the foregoing, it is respectfully recommended that an order be issued ordering the F.P.A. No. (IV-3) 11687 with Patent No. (IV-3) 16637 with
O.C.T. P-1944 issued to Jesus Angeles, F.P.A. No. (IV-3) 11694 which has been issued Patent No. (IV-3) 16644 with O.C.T. No. P-1946 to Gloria
Malana, F,.P.A. No. (IV-3) 11728 with Patent No. (IV-3) 16684 with O.C.T. No. P-1964 to Anselmo Navales and F.P.A. No. (IV-3) 11729 which has been
issued Patent No. (IV-3) 16685 with O.C.T. No. P-1965 in the name of Feliciano Villamayor be cancelled for having been issued irregularly.17

On July 8, 1984, the Chief, Legal Division of the Bureau of Lands, requested the Director of the Registry Land Division to issue a certification or report as
to the status of the said survey plans.18 Eleuterio R. Paz, the Chief, Survey Division, Registry Land Officer IV, issued a certification stating that
"according to [their] records, the above-noted survey plans situated in the Barrio of Mayondon, Municipality of Los Baños, Province of Laguna, does not
appear to have been submitted for verification and approval by this Office."19
On April 28, 1986, the Chief, Legal Division of the Bureau of Lands, prepared and signed an Office Memorandum to the Deputy Minister and Officer-In-
Charge, Ministry of Natural Resources, stating that Sanga had filed an action for recovery of ownership or accion-reinvindicatoria against the patentees
(with the exception of Anselmo Navales who was sued for ejectment) before the RTC of Laguna, Calamba Branch, docketed as Civil Case No. B-541,
and that the decision dated May 25, 1982 in the said case ordered the defendants to vacate the area in question; that despite the pendency of the
aforementioned civil case, respondents were able to secure free patents from the District Land Officer and corresponding titles; the lots in question form
part of a bigger land covered by Plan Psu-232665 in the name of Juan Sanga, and said LOT is within the foreshore area of Laguna de Bay. Verification
with the Regional Land Office No. IV and District Land Office No. IV-A likewise showed that there were no approved survey plans over the patented and
titled lots, and that the records of the applications in question could not be found in the District Land Office in Laguna where the same were supposed to
be filed. From the foregoing facts and circumstances, it is obvious that fraud, misrepresentation and other irregularity attended the issuance of the
patents and titles of respondents.20 It was recommended that appropriate steps be taken in court for the cancellation of the certificates of title in the
names of the patentees and the reversion of the said property to the State.21

The Director of the Bureau of Lands and the Minister of Natural Resources concurred with the recommendation. On February 4, 1987, the Republic of
the Philippines, represented by the Director of Lands, through Atty. Manuel Tacorda filed separate but similarly-worded complaints for cancellation of
free patents and the corresponding OCTs issued, and for the reversion of the subject lots to the public domain. The defendants were Malana, Navales,
Angeles, Villamayor, and the Development Bank of the Philippines (DBP) with the RTC of Laguna. The complaints were docketed as Civil Case Nos.
1064-87-C, 1065-87-C, 1066-87-C, and 1067-87-C, respectively. Plaintiff prayed that judgment be rendered in its favor, thus:

WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered.

1. Declaring Free Patent No. (IV-3) 16644 and Original Certificate of Title No. P-1946 issued in the name of defendant Gloria Malana, and derivative
titles, if any, emanating therefrom, null and void ab initio;
2. Ordering defendant DBP to surrender Original Certificate of Title No. P-1946 to defendant Register of Deeds of Laguna;
3. Ordering defendant Register of Deeds of Laguna to cancel said patent and title and derivative titles, if any;
4. Ordering the reversion of the subject lot to the mass of the public domain.

In its Answer to the Complaint, DBP averred that it was an innocent mortgagee in good faith and for value, it being unaware of any defect or flaw in the
titles of the lots in question. Defendant interposed cross-claims against its co-defendants.

Meantime, Juan Sanga died intestate. When apprised of the cases filed by the Republic of the Philippines, his heirs, Clarita Sanga-Santos, Isadora
Sanga-Francisco, Felipa Sanga-Lojo, Lolita Sanga-Santillan, Elpidio Sanga and Virgilio Sanga filed a Motion for Leave to Intervene as Plaintiffs,
appending thereto their Complaint in Intervention for quieting of title and damages.23 They alleged, inter alia, that they had been declared the lawful
owners of the property in the decision of the Laguna RTC in Civil Case No. B-541. They prayed that, after due proceedings, judgment be rendered in
their favor as follows:

WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that judgment be rendered as follows:

1. Ordering and declaring Free Patent No. (IV-3) 16637 OCT P-1944 in the name of Jesus Angeles and any title derived therefrom void ab initio;
2. Ordering and declaring Free Patent No. 16644 OCT-1946 in the name of Gloria Malana and any title derived therefrom void ab initio;
3. Ordering and declaring Free Patent No. 16684 OCT P-1964 in the name of Anselmo Navales and any title derived therefrom void ab initio;
4. Ordering and declaring Free Patent No. 16685 OCT P-1965 in the name of Feliciano Villamayor and any title derived therefrom void ab initio;
5. Ordering all defendants to surrender their Certificates of Title P-1944, P-1946, P-1964 and P-1965 to defendant Register of Deeds;
6. Ordering defendant Register of Deeds to cancel said patent and title and any title derived therefrom;
7. Declaring the subject parcel of land in full ownership to herein Intervenors in accordance with Civil Case No. B-541;
8. Ordering the defendant Development Bank of the Philippines to pay herein intervenors damages in an amount to be determined by this Honorable
Court;

For such further and other relief as this Honorable Court may deem just and equitable; and for costs.24

On October 2, 1987, the court issued an order granting the motion to intervene and admitted the complaint in intervention.

Defendants-in-intervention interposed the following defenses in their respective answers:

Gloria Malana alleged that she procured the free patent after complying with the required rules and regulations and that she is the lawful owner of the
property. Her title to the property had become indefeasible and incontrovertible more than one year having elapsed from its issuance on July 17, 1978.
She further alleged that the plaintiffs-in-intervention failed to exhaust all administrative remedies before filing the complaint; their cause of action has
prescribed and was barred by laches and estoppel.

For his part, Anselmo Navales averred in his answer that the Bureau of Lands issued the Free Patent in his favor after complying with all the rules and
regulations therefor; and that there has been no fraud, misrepresentation or any illegal whatsoever in his procurement of the title to the property.

Jesus Angeles likewise alleged that the plaintiff had no cause of action against him; its cause of action, if any, has already prescribed, and that his title to
the property had become incontrovertible. He insisted that plaintiffs-in-intervention were guilty of laches and estoppel.

Defendant Feliciano Villamayor, in his answer to the complaint, averred that he is the lawful and absolute owner of the property covered by the said
patent and title; his property is not the subject matter of Civil Case No. B-541.

Upon review of the records, the Bureau of Lands discovered that the decision of the CFI in Civil Case No. B-541 declaring the plaintiffs-in-intervention as
the lawful owners of the property had become final and executory, and consequently, the State had no cause of action against the defendants for the
reversion of the property. It then recommended that the complaint be amended to delete its prayer for the reversion of the property to the State. The
Office of the Solicitor General (OSG), acting for the Republic of the Philippines, agreed with the Bureau of Lands. Upon prior leave of court, plaintiff,
through Atty. Tacorda, filed an amended complaint, deleting the prayer for reversion of the property to the State. It prayed that judgment be rendered in
its favor, thus:

WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered:

1. Declaring Free Patent No. (IV-3) 16644 and Original Certificate of Title No. P-1946 issued in the name of defendant Gloria Malana, and all derivative
titles, if any, emanating therefrom, null and void ab initio;
2. Ordering defendants Gloria Malana and/or the Development Bank of the Philippines to surrender Original Certificate of Title No. P-1946 to defendant
Register of Deeds of Laguna; and,

3. Ordering defendant Register of Deeds of Laguna to cancel said patent and title and all derivative titles, if any.

Plaintiff prays for other reliefs as may be deemed just and equitable in the premises.25

Plaintiff presented Atty. Manuel Tacorda as sole witness, who identified and testified on the records of the Bureau of Lands relative to the property.

The Case for the Defendants

Anselmo Navales, a carpenter,26 testified and declared that in 1953, he occupied a 385 sq m parcel of land identified as Lot No. 7 (IV-3) 11728-D. He
applied for a revocable permit with the Bureau of Lands to occupy the property,27 but later grew tired of making follow-ups for its processing and
approval. He had the property fenced, and constructed a house and a duck pen thereon. In 1970, he constructed a house of strong materials. He
declared the property for taxation purposes as residential under his name in 1974. In 1978, he and Villamayor went to the Bureau of Lands to secure a
title for the lots they occupied. They talked to a person at the office who told them that, for a fee of P2,000.00, they would be issued titles for the lots.
They filed applications and paid P2,000.00.28 The property was surveyed sometime in June 1978, and he received a copy of the Order dated July 27,
1978 which granted his application for issuance of patent. The Order issued by the District Land Officer stated that the property has been occupied and
cultivated by the applicant himself and/or through his predecessors-in-interest since June 12, 1945, and that there was no adverse claim involving the
property pending determination of said application.29 On the same date, District Lands Officer Braulio C. Darum approved Free Patent No. (IV-3) 16684,
and OCT No. P-1964 was issued in his name.

On cross-examination, Navales declared that the lot he occupied in 1953 was about 400 meters away from Lot 11728-D.30 The property occupied by
Juan Sanga was 100 meters away from the lot he occupied.31 The property was under water during the rainy season.32 The survey of the property was
conducted about a week after he filed his application.33 He had no copy of his application for a free patent. He paid P1,000.00 as downpayment for the
title and an additional P1,000.00 after the title was given to him34 a week after the survey was conducted.35

Villamayor did not testify and instead offered in evidence OCT No. P-1965 issued in his name on July 28, 1978, and Free Patent No. (IV-3) 16685-D
signed by Braulio C. Darum on July 27, 1978.
Angeles testified that he finished grade V and was a duck raiser by profession.37 He occupied the lot sometime in 1948. The property was under water
during rainy season. In 1959, Juan Sanga, his neighbor, accompanied him to the Bureau of Lands to file an application for a revocable permit.38
However, the application was not approved. In February 1978, he and Barangay Captain Benito Villamaria inquired from the Bureau of Lands how to
secure a title over the land he was occupying. He was told that he had to file an application for a free patent, which he did. Persons who identified
themselves as personnel from the Bureau of Lands inspected the property a week after he filed four copies of his application in Sta. Cruz, Laguna. He
was instructed to pay P7,000.00 to the four persons who conducted a survey of the property on April 2, 1978. He was not given a receipt for the
P7,000.00 he paid to the personnel of the Bureau of Lands. On July 17, 1978, he received a letter from the Register of Deeds informing him that a title
over the property had been issued to him. He was not required to execute a Joint Affidavit of two witnesses relative to his application for a free patent.
The property covered by his application for a revocable permit is the same as that covered by his application for a free patent. He declared in his
application that the property was residential and would be used for duck raising. He filed his application for a free patent without the knowledge of Sanga
and despite the pendency of Civil Case No. B-541 because no one asked him. He did not present his title in Civil Case No. B-541 because he did not
think of it. He secured a loan in 1979 of P99,500.00 from the DBP and mortgaged the property as security therefor.

After due proceedings, the trial court rendered judgment on May 31, 1993 in favor of the plaintiff. The fallo of the Decision reads:

WHEREFORE, Original Certificate of Title No. P-1946 in the name of Gloria Malana; Original Certificate of Title No. P-1944 in the name of Jesus
Angeles; Original Certificate of Title No. P-1964 in the name of Anselmo Navales and Original Certificate of Title No. P-1965 in the name of Feliciano
Villamayor are hereby declared NULL and VOID.

Defendant DBP's cross claim is hereby ordered DISMISSED and said defendant bank, who appears to be in custody of the questioned titles is hereby
ordered within fifteen (15) days from the date of receipt of this decision to surrender OCT Nos. P-1944, P-1964, P1946 and P-1965 to the Register of
Deeds of Calamba, Laguna, who is hereby ordered to cancel both the original and owner's duplicate certificate of title.

Failure on the part of the defendant Development Bank of the Philippines to surrender the aforesaid owner's copies of Certificate of Titles Nos. P-1946,
P-1944, P-1964, and P-1965 within the period specified, authorizes the Register of Deeds, Calamba, Laguna to consider said owner's copies null and
void and of no further force and effect.

With costs against the defendants. SO ORDERED.

Defendants appealed the decision to the CA. The appellate court dismissed the appeals of Navales and Villamayor and the DBP. Entry of partial
judgment was made of record. As synthesized by the CA, the issues raised by the remaining appellants, Angeles and Malana, are as follows:

I. Whether or not the State has the personality to file the present case;

II. Whether or not the spouses Sanga can intervene in the present case;

III. Whether or not the lots covered by appellants Angeles' and Malana's titles are the same lots involved in Civil Case No. B-541;

IV. Whether or not appellants Malana's and Angeles' titles are valid.40

On July 21, 2004, the CA rendered judgment affirming the decision of the RTC and dismissed the appeals of the remaining appellants. The fallo of the
decision reads:

WHEREFORE, premises considered, the appeals are DENIED for lack of merit. The May 31, 1993 decision of the RTC, Branch 34, Calamba, Laguna, in
Civil Cases No. 1064-87-C and 1066-87-C is AFFIRMED on the ground that the patented lots are private and are beyond the authority of the
government to award to appellants.

SO ORDERED.41
The CA ruled that the Director of Lands, through the Office of the Solicitor General may file an action for the cancellation of a free patent and title or for
the reversion of the land to the public domain. The State has sufficient interest in the maintenance of the integrity of the land registration law to have
standing in the case as plaintiff. The appellate court cited Section 91 of Act 141 and the ruling of this Court in Gamao v. Calamba,42 to support its ruling.

The appellate court declared that the intervention of the heirs of Juan Sanga, as plaintiffs, rather than as defendants is proper because the lands are
non-patentable lands which the court declared in Civil Case No. B-541 to be owned by the intervenors. It was upon their instance that the Bureau of
Lands conducted an investigation of the disputed patents and titles. After the plaintiff dropped its claim for the reversion of the property to the public
domain, the said heirs became the real parties-in-interest as plaintiffs-in-intervention. As borne by the evidence on record, the title subject of Free Patent
No. 16637 is the same lot subject of Juan Sanga's complaint in Civil Case No. B-541. The lot subject of Angeles' application for a revocable permit in
1959 which he filed in the Bureau of Lands is different from the lot covered by the free patent issued to him.

The CA further held that the property subject matter of the complaint was private land and that, therefore, the Director of Lands had no authority to grant
free patents to the appellants over portions of the property. The fact that the plaintiffs-in-intervention did not bring their land under the Torrens System
does not affect the private character of the property.

Relative to the intervention of the heirs of spouses Juan Sanga in the complaint for cancellation of patentee's titles and reversion of the land to the State,
the CA justified their intervention by citing Rule 19, Section 1 of the Rules of Court. The court declared that the State, through the OSG, and the spouses
Juan Sanga, represented different interests that had to be protected - the spouses owned the subject property, while the State had to maintain the
integrity of the land registration system.

The appellate court held that the trial judge correctly ruled that spouses Juan Sanga may participate, as plaintiffs-intervenors, in the case since their
claim was clearly against the defendants therein, including Jesus Angeles, and not against the State. As to the nature of the lots in question, the report
of hearing officer Atty. Nicasio Rino, Jr. categorically established that the said lots actually formed part of a bigger tract of land covered by Plan PSU-
232665 in the name of Juan Sanga and had already become private in nature. That Atty. Rino, Jr. and the other officials of the Bureau of Lands did not
testify on said report, did not taint its admissibility. The report, after all, is an official document made by a public officer in the performance of his duty,
hence, admissible in evidence. Its contents are worthy of consideration and are prima facie evidence of the facts stated therein.

All the appellants filed a Petition for Review on Certiorari43 in this Court for the nullification of the Decision of the CA alleging that:

I. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT SUSTAINED THE TRIAL COURT IN PRACTICALLY ALLOWING THE OSG
TO LAWYER FOR PLAINTIFF-INTERVENOR IN CIVIL CASE NO. 1066-87-C.

II. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT MADE A FINDING THAT THE PROPERTY INVOLVED HEREIN WAS
ALREADY PRIVATE IN NATURE WHEN PETITIONER ACQUIRED A PATENT THEREFOR IN ORDER TO SUSTAIN THE TRIAL
COURT'S DECISION NULLIFYING PETITIONER'S TITLE.44

Petitioners assert that the trial court erred in allowing plaintiffs-in-intervention to intervene as plaintiffs and not as defendants-in-intervention. They aver
that the OSG practically lawyered for plaintiffs-in-intervention because instead of reiterating its prayer for the reversion of the property to the State, it
deleted in its amended complaint the prayer for the reversion of the property to the State. During pre-trial, the OSG asserted that the property was public
land and no reversion can be made on the properties of the public domain. Respondents even presented no less than Atty. Manuel Tacorda of the
Bureau of Lands as its own witness.

Petitioners posit that respondents failed to prove the invalidity of the patents and titles issued to them. The documents adduced in evidence by
respondent to prove its cause of action are hearsay, hence, inadmissible in evidence. Respondent should have presented a representative of the Bureau
of Lands to testify on the documentary evidence of respondents. Petitioners maintain that even assuming that the free patents and certificates of title
issued to them are void, the properties remained of the public domain and should thus be reverted to the State.

For its part, the OSG asserts that public respondent Bureau of Lands was under obligation to amend its original complaint for cancellation of titles and
reversion by dropping the prayer for the reversion of the properties to the State and limiting itself to the cancellation of the patentee's title. It was clearly
established upon a thorough and exhaustive examination by the Bureau of Lands that the property had already ceased to be part of the public domain
and actually forms part of a bigger land covered by Plan PSU-232665 in the name of plaintiffs-intervenors spouses Juan Sanga. Deleting the prayer for
reversion of the subject land to the State was the most logical thing to do. Nonetheless, public respondent continued to possess the personality to
proceed with the institution of the action for cancellation of the patentees's titles, as expressly provided in Section 91 of the Public Land Act. The State
was duty-bound to ensure that the integrity of the land registration process is always kept intact.

The threshold issues are: (1) whether petitioners Anselmo Navales, Feliciano Villamayor, and DBP, are estopped from assailing the decision of the RTC;
(b) whether the heirs of Juan Sanga should be impleaded as parties-respondents; (c) whether the decision of the CA affirming on appeal the decision of
the RTC is in accord with the evidence and the law.

On the first issue, petitioners Navales, Villamayor and the DBP are estopped from assailing the decision of the RTC and the CA in this Court on appeal.
It bears stressing that the CA had already resolved to dismiss their appeal on March 20, 2001.45 On February 12, 2003, the appellate court resolved to
dismiss the appeal of the DBP.46 Entry of partial judgment was made of record on August 10, 2001; consequently, the decision of the RTC had become
final and executory as against said petitioners and beyond the jurisdiction of the CA to modify or reverse.47

The heirs of Juan Sanga were the plaintiffs-in-intervenors in the RTC. However, petitioners failed to implead them as respondents in the present case.
Unless and until impleaded as parties-respondents, the decision of this Court in the present case will not bind them. It is settled that only the parties to a
case or their privies or successors are bound by the decision of this Court.48

Even on the merits of the petition, petitioners Angeles and Malana failed to establish that the appellate court committed any reversible error. The trial
court acted in accord with Section 3, Rule 19 of the Rules of Court when it granted leave to the heirs of Juan Sanga to appear as plaintiffs-in-
intervention. The provision reads:

SEC. 3. Pleadings-in-intervention.— The intervenor shall file a complaint-in-intervention if he asserts a claim against either or all of the original parties, or
an answer-in-intervention if he unites with the defending party in resisting a claim against the latter.

As gleaned from the material averments of their complaint-in-intervention, the plaintiffs-in-intervention asserted claims against the plaintiff and the
defendants, alleging therein that the free patents and titles issued to the defendants are fraudulent, hence, void. Plaintiffs-intervenors claimed that they
were the owners of the property and that their ownership was confirmed by the RTC in its final and executory ruling in Civil Case No. B-541. Plaintiffs-in-
intervention prayed that said patents and titles issued to the defendants be nullified and that they (plaintiffs-intervenors) be declared the owners of the
property as ruled by the RTC in Civil Case No. B-541.

In the present case, the trial court admitted the complaint-in-intervention of the heirs of Juan Sanga on their claim that they are the owners of the
property subject of the complaint, as ruled by the RTC in Civil Case No. B-541. Being the owners of the property, said heirs should be accorded the right
to intervene. Their rights will be directly and substantially affected by the direct legal operation and effect of the decision of the trial court. It was
imperative for them to safeguard their interests over the property.49 The allowance or disallowance of a motion for leave to intervene and the admission
of a complaint-in-intervention is addressed to the sound discretion of the trial court. The discretion of the court, once exercised, cannot be reviewed by
certiorari save in instances where such discretion has been exercised in an arbitrary or capricious manner.

The heirs of Juan Sanga are proper parties as plaintiffs -in-intervention

We agree with the ruling of the CA that the Heirs of Juan Sanga had a cause of action against petitioners for quieting of title and nullification of the
Free/Sale Patents issued to them by District Lands Officer Braulio C. Darum and the OCTs issued by the Register of Deeds. A cause of action consists
of these elements: (1) the existence of a legal right with the plaintiff; (2) a correlative legal duty of the defendant to respect the right of the plaintiff; and
(3) an act or omission of the defendant violative of plaintiff's right.50 In the present case, the spouses Juan Sanga were the owners of the property
subject of the complaint below. Petitioners were aware of the claim of ownership of the property by the spouses Juan Sanga because they were the
defendants in Civil Case No. B-541 before the RTC and Civil Case No. 170 in the MTC. Despite the pendency of said civil cases, and without the
knowledge of Juan Sanga, petitioners were able to secure patents, through actual fraud and trickery, and apparently in connivance with personnel from
the Bureau of Lands. The said spouses had a pre-existing right of ownership over the property even before the grant of the patents in favor of
petitioners.51 A free patent which purports to convey land to which the government no longer has title at the time of its issuance does not vest title with
the patentee as against the lawful owner. Private property cannot be a subject of a free patent. Such lands are beyond the jurisdiction of the Bureau of
Lands. Such patents are null and void and have no legal effects whatsoever.

The spouses Juan Sanga and their heirs had a cause of action for the quieting of title which is imprescriptible.52 As such owners, they had the right to
have the patents and titles declared as void on the ground of actual fraud perpetrated by petitioners.53

Public respondent has a cause of action against petitioners for the nullification of the free sales patents and torrens titles

Indeed, petitioners managed to secure the free patents through District Land Officer Braulio Darum, acting for the Director of Lands and the Republic of
the Philippines. They were likewise issued titles over the lots subject of the complaint despite the fact that, by operation of law, spouses Juan Sanga
were already its owners. The Republic of the Philippines, through the Bureau of Lands, is obliged to undo what has been perpetrated by petitioners in
violation of law. It behooved the Republic, through the Director of the Bureau of Lands, to institute the proper action for the nullification of the patents and
titles. Public respondent is not proscribed from filing the amended complaint merely because the Heirs of Juan Sanga had a cause of action for the
cancellation of said patents and titles. We quote, with approval, the ruling of the CA on the matter:

That the State has the personality to file a case for the cancellation of issued land titles is supported by Section 91 of the Public Land Act (CA 141, as
amended) which provides:

"Section 91. The statements made in the application shall be considered as essential conditions and parts of any concession, title, or permit issued on
the basis of such application, and any false statements therein or omission of facts altering, changing, or modifying the consideration of the facts set
forth in such statements and any subsequent modification, alteration or change of the material facts set forth in the application shall ipso facto produce
the cancellation of the concession, title, or permit granted. It shall be the duty of the Director of Lands, from time to time and whenever he may deem it
advisable, to make the necessary investigations for the purpose of ascertaining whether the material facts set out in the application are true, or whether
they continue to exist and are maintained and preserved in good faith and for the purposes of such investigation, the Director of Lands is hereby
empowered to issue subpoenas and subpoenas duces tecum and if necessary to obtain compulsory process from the courts. x x x"

Under this provision which speaks, inter alia, of the "cancellation of the concession, title or permit granted" the State's authority to cancel an issued title
is expressly given. The authority to investigate vests in the Director of Lands. The State must of course act through its appropriate agencies – i.e., the
Office of the Solicitor General and the courts – to secure the actual cancellation after observance of due process. The Honorable Supreme Court
confirmed this authority when it held in Gamao vs. Calamba that –

"The mere fact that a patent and title have already been issued to defendant Calamba does not preclude administrative investigation by the Director of
Lands, who, if he finds that there was fraud in obtaining the same, may himself or in representation of the Republic of the Philippines file an appropriate
action for the cancellation of the patent and title or for the reversion of the land to the public domain, as the case may be."

Based on these premises, the amendment of government's complaints to drop the reversion aspect did not divest the State of the authority and
personality to proceed with its complaints for the cancellation of the patentee's titles despite the State's admission that the lands covered by the disputed
patents and titles are private in character. The State maintained sufficient interests in terms of the maintenance of the integrity of the land registration
process to have standing in these cases.54

Public respondent cannot be faulted for presenting Atty. Tacorda, a lawyer in the Office of the Chief, Legal Services of the Bureau of Lands, under
whose direction the investigation of the protest of the spouses Juan Sanga was conducted. The lawyer merely testified on the records of the Bureau of
Lands relative to said investigation.

The amendment of the

complaint was proper

Rule 10, Section 3 of the Rules of Court, as amended, reads:

SEC. 3. Amendments by leave of court.— Except as provided in the next preceding section, substantial amendments may be made only upon leave of
court. But such leave may be refused if it appears to the court that the motion was made with intent to delay. Orders of the court upon the matters
provided in this section shall be made upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.

Under its original complaint, the respondent, as plaintiff, sought the cancellation of the free patents granted to the petitioners and the torrens titles issued
on the basis thereof; and the reversion of the property to the mass of the property of the public domain.
At the outset, the Bureau of Lands was of the erroneous belief that the decision of the RTC in Civil Case No. B-541 had not yet become final and
executory; hence, it recommended the filing of a complaint for reversion of to the OSG. However, when the Bureau of Lands realized that the decision of
the RTC in Civil Case No. B-541 had become final and executory even before the original complaint was filed, it amended its complaint and deleted the
prayer for reversion but retained its action for the nullification of the free patents and titles issued to the petitioners. The amendment under the amended
complaint was not substantial; nor was it intended to delay.

Public respondent no longer

has a cause of action for reversion;
neither are petitioners entitled to
claim ownership over the property

The well-entrenched rule is that when property has ceased to be public because it has been acquired by a private individual by operation of law, the
Director of Lands loses jurisdiction over the said property and the State has no more title over the property.55 In this case, public respondent no longer
has a cause of action for reversion of the property against the heirs of Juan Sanga and petitioners.

The RTC had already ruled in Civil Case No. B-541 that the spouses Juan Sanga were the lawful owners of the property. Considering that petitioners
and the Bureau of Lands failed to appeal the decision, the decision of the court had become final and executory. The decision of the RTC declaring the
spouses Sanga the lawful owners of the property is conclusive on the petitioners and respondent Republic of the Philippines.56 Thus, petitioners are
barred from claiming ownership over the property.

IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED. Costs against the petitioners.

CASE NO. 23. ELMAR O. PEREZ vs. COURT OF APPEALS, Fifth Division, TRISTAN A. CATINDIG and LILY GOMEZ-CATINDIG,
G.R. No. 162580 January 27, 2006
FIRST DIVISION
YNARES-SANTIAGO, J.:

This petition for certiorari and prohibition under Rule 65 of the Rules of Court assails the July 25, 2003 Decision1 of the Court of Appeals in CA-G.R. SP
No. 74456 which set aside and declared as null and void the September 30, 2002 Order2 of the Regional Trial Court of Quezon City, Branch 84,
granting petitioner’s motion for leave to file intervention and admitting the Complaint-in-Intervention3 in Civil Case No. Q-01-44847; and its January 23,
2004 Resolution4 denying the motion for reconsideration.

Private respondent Tristan A. Catindig married Lily Gomez Catindig5 twice on May 16, 1968. The first marriage ceremony was celebrated at the Central
Methodist Church at T.M. Kalaw Street, Ermita, Manila while the second took place at the Lourdes Catholic Church in La Loma, Quezon City. The
marriage produced four children.

Several years later, the couple encountered marital problems that they decided to separate from each other. Upon advice of a mutual friend, they
decided to obtain a divorce from the Dominican Republic. Thus, on April 27, 1984, Tristan and Lily executed a Special Power of Attorney addressed to
the Judge of the First Civil Court of San Cristobal, Dominican Republic, appointing an attorney-in-fact to institute a divorce action under its laws.6

Thereafter, on April 30, 1984, the private respondents filed a joint petition for dissolution of conjugal partnership with the Regional Trial Court of Makati.
On June 12, 1984, the civil court in the Dominican Republic ratified the divorce by mutual consent of Tristan and Lily. Subsequently, on June 23, 1984,
the Regional Trial Court of Makati City, Branch 133, ordered the complete separation of properties between Tristan and Lily.

On July 14, 1984, Tristan married petitioner Elmar O. Perez in the State of Virginia in the United States7 and both lived as husband and wife until
October 2001. Their union produced one offspring.8

During their cohabitation, petitioner learned that the divorce decree issued by the court in the Dominican Republic which "dissolved" the marriage
between Tristan and Lily was not recognized in the Philippines and that her marriage to Tristan was deemed void under Philippine law. When she
confronted Tristan about this, the latter assured her that he would legalize their union after he obtains an annulment of his marriage with Lily. Tristan
further promised the petitioner that he would adopt their son so that he would be entitled to an equal share in his estate as that of each of his children
with Lily.9

On August 13, 2001, Tristan filed a petition for the declaration of nullity of his marriage to Lily with the Regional Trial Court of Quezon City, docketed as
Case No. Q-01-44847.

Subsequently, petitioner filed a Motion for Leave to File Intervention10 claiming that she has a legal interest in the matter in litigation because she knows
certain information which might aid the trial court at a truthful, fair and just adjudication of the annulment case, which the trial court granted on
September 30, 2002. Petitioner’s complaint-in-intervention was also ordered admitted.

Tristan filed a petition for certiorari and prohibition with the Court of Appeals seeking to annul the order dated September 30, 2002 of the trial court. The
Court of Appeals granted the petition and declared as null and void the September 30, 2002 Order of the trial court granting the motion for leave to file
intervention and admitting the complaint-in-intervention.

Petitioner’s motion for reconsideration was denied, hence this petition for certiorari and prohibition filed under Rule 65 of the Rules of Court. Petitioner
contends that the Court of Appeals gravely abused its discretion in disregarding her legal interest in the annulment case between Tristan and Lily.

The petition lacks merit.

Ordinarily, the proper recourse of an aggrieved party from a decision of the Court of Appeals is a petition for review on certiorari under Rule 45 of the
Rules of Court. However, if the error subject of the recourse is one of jurisdiction, or the act complained of was granted by a court with grave abuse of
discretion amounting to lack or excess of jurisdiction, as alleged in this case, the proper remedy is a petition for certiorari under Rule 65 of the said
Rules.11 This is based on the premise that in issuing the assailed decision and resolution, the Court of Appeals acted with grave abuse of discretion,
amounting to excess of lack of jurisdiction and there is no plain, speedy and adequate remedy in the ordinary course of law. A remedy is considered
plain, speedy, and adequate if it will promptly relieve the petitioner from the injurious effect of the judgment and the acts of the lower court.12
It is therefore incumbent upon the petitioner to establish that the Court of Appeals acted with grave abuse of discretion amounting to excess or lack of
jurisdiction when it promulgated the assailed decision and resolution.

We have previously ruled that grave abuse of discretion may arise when a lower court or tribunal violates or contravenes the Constitution, the law or
existing jurisprudence. By grave abuse of discretion is meant, such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction.
The abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility and
must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law.13 The word "capricious," usually used in tandem with the term "arbitrary," conveys the notion of willful and unreasoning action.
Thus, when seeking the corrective hand of certiorari, a clear showing of caprice and arbitrariness in the exercise of discretion is imperative.14

The Rules of Court laid down the parameters before a person, not a party to a case can intervene, thus:

Who may intervene. — A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both,
or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with
leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the
adjudication of the rights of the original parties, and whether or not the intervenor’s rights may be fully protected in a separate proceeding.15

The requirements for intervention are: [a] legal interest in the matter in litigation; and [b] consideration must be given as to whether the adjudication of
the original parties may be delayed or prejudiced, or whether the intervenor’s rights may be protected in a separate proceeding or not.16

Legal interest, which entitles a person to intervene, must be in the matter in litigation and of such direct and immediate character that the intervenor will
either gain or lose by direct legal operation and effect of the judgment.17 Such interest must be actual, direct and material, and not simply contingent
and expectant.18

Petitioner claims that her status as the wife and companion of Tristan for 17 years vests her with the requisite legal interest required of a would-be
intervenor under the Rules of Court.

Petitioner’s claim lacks merit. Under the law, petitioner was never the legal wife of Tristan, hence her claim of legal interest has no basis.

When petitioner and Tristan married on July 14, 1984, Tristan was still lawfully married to Lily. The divorce decree that Tristan and Lily obtained from the
Dominican Republic never dissolved the marriage bond between them. It is basic that laws relating to family rights and duties, or to the status, condition
and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad.19 Regardless of where a citizen of the Philippines
might be, he or she will be governed by Philippine laws with respect to his or her family rights and duties, or to his or her status, condition and legal
capacity. Hence, if a Filipino regardless of whether he or she was married here or abroad, initiates a petition abroad to obtain an absolute divorce from
spouse and eventually becomes successful in getting an absolute divorce decree, the Philippines will not recognize such absolute divorce.20

When Tristan and Lily married on May 18, 1968, their marriage was governed by the provisions of the Civil Code21 which took effect on August 30,
1950. In the case of Tenchavez v. Escano22 we held:

(1) That a foreign divorce between Filipino citizens, sought and decreed after the effectivity of the present Civil Code (Rep. Act No. 386), is not entitled to
recognition as valid in this jurisdiction; and neither is the marriage contracted with another party by the divorced consort, subsequently to the foreign
decree of divorce, entitled to validity in the country. (Emphasis added)

Thus, petitioner’s claim that she is the wife of Tristan even if their marriage was celebrated abroad lacks merit. Thus, petitioner never acquired the legal
interest as a wife upon which her motion for intervention is based.

Since petitioner’s motion for leave to file intervention was bereft of the indispensable requirement of legal interest, the issuance by the trial court of the
order granting the same and admitting the complaint-in-intervention was attended with grave abuse of discretion. Consequently, the Court of Appeals
correctly set aside and declared as null and void the said order.

WHEREFORE, the petition is DISMISSED. The assailed Decision dated July 25, 2003 and Resolution dated January 23, 2004 of the Court of Appeals in
CA-G.R. SP No. 74456 are AFFIRMED.

No pronouncement as to costs.

CASE NO. 23. JOSHUA S. ALFELOR and MARIA KATRINA S. ALFELOR, Petitioners, vs. JOSEFINA M. HALASAN, and THE COURT OF
APPEALS, Respondents.
G.R. No. 165987 March 31, 2006
FIRST DIVISION
CALLEJO, SR., J.:

This is a Petition for Review on Certiorari seeking to nullify the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 74757, as well as the
Resolution2 dated June 28, 2004 denying the motion for reconsideration thereof.

On January 30, 1998, the children and heirs of the late spouses Telesforo and Cecilia Alfelor filed a Complaint for Partition3 before the Regional Trial
Court (RTC) of Davao City. Among the plaintiffs were Teresita Sorongon and her two children, Joshua and Maria Katrina, who claimed to be the
surviving spouse of Jose Alfelor, one of the children of the deceased Alfelor Spouses. The case, docketed as Civil Case No. 26,047-98, was raffled to
Branch 17 of said court.

On October 20, 1998, respondent Josefina H. Halasan filed a Motion for Intervention,4 alleging as follows:

1. That she has legal interest in the matter of litigation in the above-entitled case for partition between plaintiffs and defendants;

2. That she is the surviving spouse and primary compulsory heir of Jose K. Alfelor, one of the children and compulsory heirs of Telesforo I. Alfelor whose
intestate estate is subject to herein special proceedings for partition;
3. That herein intervenor had not received even a single centavo from the share of her late husband Jose K. Alfelor to the intestate estate of Telesforo K.
Alfelor.

WHEREFORE, movant prays that she be allowed to intervene in this case and to submit attached Answer in Intervention.5

Josefina attached to said motion her Answer in Intervention,6 claiming that she was the surviving spouse of Jose. Thus, the alleged second marriage to
Teresita was void ab initio for having been contracted during the subsistence of a previous marriage. Josefina further alleged that Joshua and Maria
Katrina were not her husband’s children. Josefina prayed, among others, for the appointment of a special administrator to take charge of the estate.
Josefina attached to her pleading a copy of the marriage contract7 which indicated that she and Jose were married on February 1, 1956.

Since petitioners opposed the motion, the judge set the motion for hearing. Josefina presented the marriage contract as well as the Reply-in-
Intervention8 filed by the heirs of the deceased, where Teresita declared that she knew "of the previous marriage of the late Jose K. Alfelor with that of
the herein intervenor" on February 1, 1956.9 However, Josefina did not appear in court.

Teresita testified before the RTC on February 13, 2002.10 She narrated that she and the deceased were married in civil rites at Tagum City, Davao
Province on February 12, 1966, and that they were subsequently married in religious rites at the Assumption Church on April 30, 1966. Among those
listed as secondary sponsors were Josefina’s own relatives–Atty. Margarito Halasan, her brother, and Valentino Halasan, her father.11 While she did not
know Josefina personally, she knew that her husband had been previously married to Josefina and that the two did not live together as husband and
wife. She knew that Josefina left Jose in 1959. Jose’s relatives consented to her (Teresita’s) marriage with Jose because there had been no news of
Josefina for almost ten years. In fact, a few months after the marriage, Josefina disappeared, and Jose even looked for her in Cebu, Bohol, and Manila.
Despite his efforts, Jose failed to locate Josefina and her whereabouts remained unknown.

Teresita further revealed that Jose told her that he did not have his marriage to Josefina annulled because he believed in good faith that he had the right
to remarry, not having seen her for more than seven years. This opinion was shared by Jose’s sister who was a judge. Teresita also declared that she
met Josefina in 2001, and that the latter narrated that she had been married three times, was now happily married to an Englishman and residing in the
United States.

On September 13, 2002, Judge Renato A. Fuentes issued an Order12 denying the motion and dismissed her complaint, ruling that respondent was not
able to prove her claim. The trial court pointed out that the intervenor failed to appear to testify in court to substantiate her claim. Moreover, no witness
was presented to identify the marriage contract as to the existence of an original copy of the document or any public officer who had custody thereof.
According to the court, the determinative factor in this case was the good faith of Teresita in contracting the second marriage with the late Jose Alfelor,
as she had no knowledge that Jose had been previously married. Thus, the evidence of the intervenor did not satisfy the quantum of proof required to
allow the intervention. Citing Sarmiento v. Court of Appeals,13 the RTC ruled that while Josefina submitted a machine copy of the marriage contract, the
lack of its identification and the accompanying testimony on its execution and ceremonial manifestation or formalities required by law could not be
equated to proof of its validity and legality.

The trial court likewise declared that Teresita and her children, Joshua and Maria Katrina, were the legal and legitimate heirs of the late Jose K. Alfelor,
considering that the latter referred to them as his children in his Statement of Assets and Liabilities, among others. Moreover, the oppositor did not
present evidence to dispute the same. The dispositive portion of the Order reads:

WHEREFORE, finding the evidence of intervenor, Josephina (sic) Halasan through counsel, not sufficient to prove a preponderance of evidence and
compliance with the basic rules of evidence to proved (sic) the competent and relevant issues of the complaint-in-intervention, as legal heir of the
deceased Jose K. Alfelor, the complaint (sic) of intervention is ordered dismiss (sic) with cost[s] de oficio.

On the other hand, finding the evidence by Teresita Sorongon Aleflor, oppositor through counsel sufficient to proved (sic) the requirement of the Rules of
Evidence, in accordance with duly supporting and prevailing jurisprudence, oppositor, Teresita Sorongon Alfelor and her children, Joshua S. Alfelor and
Maria Katrina S. Alfelor, are declared legal and legitimate Heirs of the late Jose K. Alfelor, for all purposes, to entitled (sic) them, in the intestate estate of
the latter in accordance to (sic) law, of all properties in his name and/or maybe entitled to any testate or intestate proceedings of his predecessor-[in]-
interest, and to receive such inheritance, they are legally entitled, along with the other heirs, as the case maybe (sic).13

Josefina filed a Motion for Reconsideration,15 insisting that under Section 4, Rule 129 of the Revised Rules of Court, an admission need not be proved.
She pointed out that Teresita admitted in her Reply in Intervention dated February 22, 1999 that she (Teresita) knew of Jose’s previous marriage to her.
Teresita also admitted in her testimony that she knew of the previous marriage.16 Since the existence of the first marriage was proven in accordance
with the basic rules of evidence, pursuant to paragraph 4, Article 80 of the New Civil Code, the second marriage was void from the beginning. Moreover,
contrary to the ruling of the trial court, Article 83 of the Civil Code provides that the person entitled to claim good faith is the "spouse present" (thus, the
deceased Jose and not Teresita). Josefina concluded that if the validity of the second marriage were to be upheld, and at the same time admit the
existence of the second marriage, an absurd situation would arise: the late Jose Alfelor would then be survived by two legitimate spouses.

The trial court denied the motion in its Order17 dated October 30, 2002.

Aggrieved, Josefina filed a Petition for Certiorari under Rule 65 before the CA, alleging that the RTC acted with grave abuse of discretion amounting to
lack or in excess of jurisdiction in declaring that she failed to prove the fact of her marriage to Jose, in considering the bigamous marriage valid and
declaring the second wife as legal heir of the deceased. Josefina also stressed that Articles 80 and 83 of the New Civil Code provide for a presumption
of law that any subsequent marriage is null and void. She insisted that no evidence was presented to prove that she had been absent for seven
consecutive years before the second marriage.

In their comment, Teresita and her children countered that anyone who claims to be the legal wife must show proof thereof. They pointed out that
Josefina failed to present any of the following to prove the fact of the previous marriage: the testimony of a witness to the matrimony, the couple’s public
and open cohabitation as husband and wife after the alleged wedding; the birth and the baptismal certificates of children during such union, and other
subsequent documents mentioning such union. Regarding Teresita’s alleged admission of the first marriage in her Reply in Intervention dated February
22, 1999, petitioners claim that it was mere hearsay, without probative value, as she heard of the alleged prior marriage of decedent Jose Alfelor to
Josefina only from other persons, not based on her own personal knowledge. They also pointed out that Josefina did not dispute the fact of having left
and abandoned Jose after their alleged marriage in 1956, and only appeared for the first time in 1988 during the filing of the case for partition of the
latter’s share in his parents’ estate. They further pointed out that Josefina does not even use the surname of the deceased Alfelor. Contrary to the
allegations of Josefina, paragraph 2, Article 83 of the Civil Code, now Article 41 of the Family Code, is applicable. Moreover, her inaction all this time
brought to question her claim that she had not been heard of for more than seven years.
In its Decision dated November 5, 2003, the CA reversed the ruling of the trial court. It held that Teresita had already admitted (both verbally and in
writing) that Josefina had been married to the deceased, and under Section 4, Rule 129 of the Revised Rules of Evidence, a judicial admission no longer
requires proof. Consequently, there was no need to prove and establish the fact that Josefa was married to the decedent. Citing Santiago v. De los
Santos,18 the appellate court ruled that an admission made in a pleading cannot be controverted by the party making such admission, and is conclusive
as to such party; and all contrary or inconsistent proofs submitted by the party who made the admission should be ignored whether objection is
interposed by the other party or not. The CA concluded that the trial court thus gravely abused its discretion in ordering the dismissal of Josefina’s
Complaint-in-Intervention. The dispositive portion of the decision reads:

WHEREFORE, foregoing premises considered, the assailed orders, having been issued with grave abuse of discretion are hereby ANNULLED and SET
ASIDE. Resultantly, the Regional Trial Court, Branch 17, Davao City, is ordered to admit petitioner’s complaint in intervention and to forthwith conduct
the proper proceeding with dispatch. No costs.

SO ORDERED.19

Thus, Joshua and Maria Katrina Alfelor filed the instant petition, assailing the ruling of the appellate court.

Petitioners limit the issue to the determination of whether or not the CA erred in ordering the admission of private respondent’s intervention in S.P. Civil
Case No. 26,047-98. They insist that in setting aside the Orders of the trial court, dated September 13, 2002 and October 30, 2002, the CA completely
disregarded the hearsay rule. They aver that while Section 4 of Rule 129 of the Revised Rules of Evidence provides that an admission does not require
proof, such admission may be contradicted by showing that it was made through palpable mistake. Moreover, Teresita’s statement in the Reply-in-
Intervention dated February 22, 1999, admitting knowledge of the alleged first marriage, is without probative value for being hearsay.

Private respondent, for her part, reiterates that the matters involved in this case fall under Section 4, Rule 129 of the Revised Rules of Evidence, and
thus qualify as a judicial admission which does not require proof. Consequently, the CA did not commit any palpable error when it ruled in her favor.

Petitioners counter that while Teresita initially admitted knowledge of Jose’s previous marriage to private respondent in the said Reply-in- Intervention,
Teresita also testified during the hearing, for the purpose, that the matter was merely "told" to her by the latter, and thus should be considered hearsay.
They also point out that private respondent failed to appear and substantiate her Complaint-in-Intervention before the RTC, and only submitted a
machine copy of a purported marriage contract with the deceased Jose Alfelor.

The issue in this case is whether or not the first wife of a decedent, a fact admitted by the other party who claims to be the second wife, should be
allowed to intervene in an action for partition involving the share of the deceased "husband" in the estate of his parents.

The petition is dismissed.

The fact of the matter is that Teresita Alfelor and her co-heirs, petitioners herein, admitted the existence of the first marriage in their Reply- in-
Intervention filed in the RTC, to wit:

1.1. Plaintiff Teresita S. Alfelor admits knowledge of the previous marriage of the late Jose K. Alfelor, with that of the herein intervenor were married on
February 1, 1956;20

Likewise, when called to testify, Teresita admitted several times that she knew that her late husband had been previously married to another. To the
Court’s mind, this admission constitutes a "deliberate, clear and unequivocal" statement; made as it was in the course of judicial proceedings, such
statement qualifies as a judicial admission.21 A party who judicially admits a fact cannot later challenge that fact as judicial admissions are a waiver of
proof;22 production of evidence is dispensed with.23 A judicial admission also removes an admitted fact from the field of controversy.24 Consequently,
an admission made in the pleadings cannot be controverted by the party making such admission and are conclusive as to such party, and all proofs to
the contrary or inconsistent therewith should be ignored, whether objection is interposed by the party or not.25 The allegations, statements or
admissions contained in a pleading are conclusive as against the pleader. A party cannot subsequently take a position contrary of or inconsistent with
what was pleaded.26

On the matter of the propriety of allowing her motion for intervention, the pertinent provision of the Revised Rules of Court is Section 1, Rule 19, which
provides:

SEC. 1. Who may intervene. – A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against
both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may,
with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the
adjudication of the rights of the original parties, and whether or not the intervenor’s rights may be fully protected in a separate proceeding.

Under this Rule, intervention shall be allowed when a person has (1) a legal interest in the matter in litigation; (2) or in the success of any of the parties;
(3) or an interest against the parties; (4) or when he is so situated as to be adversely affected by a distribution or disposition of property in the custody of
the court or an officer thereof.27 Intervention is "a proceeding in a suit or action by which a third person is permitted by the court to make himself a party,
either joining plaintiff in claiming what is sought by the complaint, or uniting with defendant in resisting the claims of plaintiff, or demanding something
adversely to both of them; the act or proceeding by which a third person becomes a party in a suit pending between others; the admission, by leave of
court, of a person not an original party to pending legal proceedings, by which such person becomes a party thereto for the protection of some right of
interest alleged by him to be affected by such proceedings."28

Considering this admission of Teresita, petitioners’ mother, the Court rules that respondent Josefina Halasan sufficiently established her right to
intervene in the partition case. She has shown that she has legal interest in the matter in litigation. As the Court ruled in Nordic Asia Ltd. v. Court of
Appeals:29

x x x [T]he interest which entitles a person to intervene in a suit between other parties must be in the matter in litigation and of such direct and immediate
character that the intervenor will either gain or lose by direct legal operation and effect of the judgment. Otherwise, if persons not parties to the action
were allowed to intervene, proceedings would become unnecessarily complicated, expensive and interminable. And this would be against the policy of
the law. The words "an interest in the subject" means a direct interest in the cause of action as pleaded, one that would put the intervenor in a legal
position to litigate a fact alleged in the complaint without the establishment of which plaintiff could not recover.30

In Uy v. Court of Appeals,31 the Court allowed petitioners (who claimed to be the surviving legal spouse and the legitimate child of the decedent) to
intervene in the intestate proceedings even after the parties had already submitted a compromise agreement involving the properties of the decedent,
upon which the intestate court had issued a writ of execution. In setting aside the compromise agreement, the Court held that petitioners were
indispensable parties and that "in the interest of adjudicating the whole controversy, petitioners’ inclusion in the action for partition, given the
circumstances, not only is preferable but rightly essential in the proper disposition of the case."32

Contrary to petitioners’ argument, the case of Sarmiento v. Court of Appeals33 is not in point, as the Court therein did not discuss the propriety of
allowing a motion for intervention, but resolved the validity of a marriage. In relying on the merits of the complaint for partition, the Court ultimately
determined the legitimacy of one of the petitioners therein and her entitlement to a share in the subject properties.

CONSIDERING THE FOREGOING, the Decision of the Court of Appeals in CA-G.R. SP No. 74757 is AFFIRMED. The Regional Trial Court, Branch 17,
Davao City, is ORDERED to admit respondent Josefina Halasan’s Complaint-in-Intervention and forthwith conduct the proper proceedings with dispatch.

CASE NO. 24. EDGARDO PINGA, Petitioner, vs. THE HEIRS OF GERMAN, SANTIAGO represented by FERNANDO SANTIAGO, Respondents.
G.R. No. 170354 June 30, 2006
THIRD DIVISION
TINGA, J.:

The constitutional faculty of the Court to promulgate rules of practice and procedure1 necessarily carries the power to overturn judicial precedents on
points of remedial law through the amendment of the Rules of Court. One of the notable changes introduced in the 1997 Rules of Civil Procedure is the
explicit proviso that if a complaint is dismissed due to fault of the plaintiff, such dismissal is "without prejudice to the right of the defendant to prosecute
his counterclaim in the same or in a separate action."2 The innovation was instituted in spite of previous jurisprudence holding that the fact of the
dismissal of the complaint was sufficient to justify the dismissal as well of the compulsory counterclaim.3

In granting this petition, the Court recognizes that the former jurisprudential rule can no longer stand in light of Section 3, Rule 17 of the 1997 Rules of
Civil Procedure.

The relevant facts are simple enough. Petitioner Eduardo Pinga was named as one of two defendants in a complaint for injunction4 filed with Branch 29
of the Regional Trial Court (RTC)5 of San Miguel, Zamboanga del Sur, by respondent Heirs of German Santiago, represented by Fernando Santiago.
The Complaint6 dated 28 May 1998 alleged in essence that petitioner and co-defendant Vicente Saavedra had been unlawfully entering the coco lands
of the respondent, cutting wood and bamboos and harvesting the fruits of the coconut trees therein. Respondents prayed that petitioner and Saavedra
be enjoined from committing "acts of depredation" on their properties, and ordered to pay damages.

In their Amended Answer with Counterclaim,7 petitioner and his co-defendant disputed respondents’ ownership of the properties in question, asserting
that petitioner’s father, Edmundo Pinga, from whom defendants derived their interest in the properties, had been in possession thereof since the 1930s.8
They alleged that as far back as 1968, respondents had already been ordered ejected from the properties after a complaint for forcible entry was filed by
the heirs of Edmundo Pinga. It was further claimed that respondents’ application for free patent over the properties was rejected by the Office of the
President in 1971. Defendants in turn prayed that owing to respondents’ forcible re-entry in the properties and the irresponsible and reckless filing of the
case, they be awarded various types of damages instead in amounts totaling P2,100,000 plus costs of suit.9

By July of 2005, the trial of the case had not yet been completed. Moreover, respondents, as plaintiffs, had failed to present their evidence. It appears
that on 25 October 2004, the RTC already ordered the dismissal of the complaint after respondents’ counsel had sought the postponement of the
hearing scheduled then.10 However, the order of dismissal was subsequently reconsidered by the RTC in an Order dated 9 June 2005, which took into
account the assurance of respondents’ counsel that he would give priority to that case.11

At the hearing of 27 July 2005, plaintiffs’ counsel on record failed to appear, sending in his stead a representative who sought the postponement of the
hearing. Counsel for defendants (who include herein petitioner) opposed the move for postponement and moved instead for the dismissal of the case.
The RTC noted that it was obvious that respondents had failed to prosecute the case for an unreasonable length of time, in fact not having presented
their evidence yet. On that ground, the complaint was dismissed. At the same time, the RTC allowed defendants "to present their evidence ex-parte."12

Respondents filed a Motion for Reconsideration13 of the order issued in open court on 27 July 2005, opting however not to seek that their complaint be
reinstated, but praying instead that the entire action be dismissed and petitioner be disallowed from presenting evidence ex-parte. Respondents claimed
that the order of the RTC allowing petitioner to present evidence ex-parte was not in accord with established jurisprudence. They cited cases, particularly
City of Manila v. Ruymann14 and Domingo v. Santos,15 which noted those instances in which a counterclaim could not remain pending for independent
adjudication.

On 9 August 2005, the RTC promulgated an order granting respondents’ Motion for Reconsideration and dismissing the counterclaim, citing as the only
ground therefor that "there is no opposition to the Motion for Reconsideration of the [respondents]."16 Petitioner filed a Motion for Reconsideration, but
the same was denied by the RTC in an Order dated 10 October 2005.17 Notably, respondents filed an Opposition to Defendants’ Urgent Motion for
Reconsideration, wherein they argued that the prevailing jurisprudential rule18 is that "compulsory counterclaims cannot be adjudicated independently of
plaintiff’s cause of action," and "a conversu, the dismissal of the complaint carries with it the dismissal of the compulsory counterclaims."19

The matter was elevated to this Court directly by way of a Petition for Review under Rule 45 on a pure question of law, the most relevant being whether
the dismissal of the complaint necessarily carries the dismissal of the compulsory counterclaim.

We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Procedure, the dismissal of the complaint due to the fault of plaintiff does not
necessarily carry with it the dismissal of the counterclaim, compulsory or otherwise. In fact, the dismissal of the complaint is without prejudice to the right
of defendants to prosecute the counterclaim.

On a prefatory note, the RTC, in dismissing the counterclaim, did not expressly adopt respondents’ argument that the dismissal of their complaint
extended as well to the counterclaim. Instead, the RTC justified the dismissal of the counterclaim on the ground that "there is no opposition to [plaintiff’s]
Motion for Reconsideration [seeking the dismissal of the counterclaim]."20 This explanation is hollow, considering that there is no mandatory rule
requiring that an opposition be filed to a motion for reconsideration without need for a court order to that effect; and, as posited by petitioner, the "failure
to file an opposition to the Plaintiff’s Motion for Reconsideration is definitely not one among the established grounds for dismissal [of the
counterclaim]."21 Still, the dismissal of the counterclaim by the RTC betrays at very least a tacit recognition of respondents’ argument that the
counterclaim did not survive the dismissal of the complaint. At most, the dismissal of the counterclaim over the objection of the defendant (herein
petitioner) on grounds other than the merits of the counterclaim, despite the provisions under Rule 17 of the 1997 Rules of Civil Procedure, constitutes a
debatable question of law, presently meriting justiciability through the instant action. Indeed, in reviewing the assailed orders of the RTC, it is inevitable
that the Court consider whether the dismissal of the complaint, upon motion of the defendant, on the ground of the failure to prosecute on plaintiff’s part
precipitates or carries with it the dismissal of the pending counterclaims.

Our core discussion begins with Section 3, Rule 17 of the 1997 Rules of Civil Procedure, which states:

SEC. 3. Dismissal due to fault of plaintiff.—If, for no justifiable cause, the plaintiff fails to appear on the date of the presentation of his evidence in chief
on the complaint, or to prosecute his action for an unreasonable length of time, or to comply with these Rules or any order of the court, the complaint
may be dismissed upon motion of defendant or upon the court's own motion, without prejudice to the right of the defendant to prosecute his counterclaim
in the same or in a separate action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise declared by the court.

The express qualification in the provision that the dismissal of the complaint due to the plaintiff’s fault, as in the case for failure to prosecute, is without
prejudice to the right of the defendant to prosecute his counterclaim in the same or separate action. This stands in marked contrast to the provisions
under Rule 17 of the 1964 Rules of Court which were superseded by the 1997 amendments. In the 1964 Rules, dismissals due to failure to prosecute
were governed by Section 3, Rule 17, to wit:

SEC. 3. Failure to prosecute. — If plaintiff fails to appear at the time of the trial, or to prosecute his action for an unreasonable length of time, or to
comply with these rules or any order of the court, the action may be dismissed upon motion of the defendant or upon the court’s own motion. This
dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by court.

Evidently, the old rule was silent on the effect of such dismissal due to failure to prosecute on the pending counterclaims. As a result, there arose what
one authority on remedial law characterized as "the nagging question of whether or not the dismissal of the complaint carries with it the dismissal of the
counterclaim."22 Jurisprudence construing the previous Rules was hardly silent on the matter.

In their arguments before the RTC on the dismissal of the counterclaim, respondents cited in support City of Manila v.

Ruymann,23 Domingo v. Santos,24 Belleza v. Huntington,25 and Froilan v. Pan Oriental Shipping Co.,26 all of which were decided more than five
decades ago. Notably though, none of the complaints in these four cases were dismissed either due to the fault of the plaintiff or upon the instance of the
defendant.27

The distinction is relevant, for under the previous and current incarnations of the Rules of Civil Procedure, it is Section 3, Rule 17 that governs the
dismissals due to the failure of the plaintiff to prosecute the complaint, as had happened in the case at bar. Otherwise, it is Section 2, Rule 17, which
then, and still is now, covered dismissals ordered by the trial court upon the instance of the plaintiff.28 Yet, as will be seen in the foregoing discussion, a
discussion of Section 2 cannot be avoided as the postulate behind that provision was eventually extended as well in cases that should have properly
been governed by Section 3.

Even though the cases cited by respondents involved different factual antecedents, there exists more appropriate precedents which they could have
cited in support of their claim that the counterclaim should have been dismissed even if the dismissal of the complaint was upon the defendants’ motion
and was predicated on the plaintiff’s fault. BA Finance Corp. v. Co29 particularly stands out in that regard, although that ruling is itself grounded on other
precedents as well. Elucidation of these cases is in order.

On the general effect of the dismissal of a complaint, regardless of cause, on the pending counterclaims, previous jurisprudence laid emphasis on
whether the counterclaim was compulsory or permissive in character. The necessity of such distinction was provided in the 1964 Rules itself, particularly
Section 2, Rule 17, which stated that in instances wherein the plaintiff seeks the dismissal of the complaint, "if a counterclaim has been pleaded by a
defendant prior to the service upon him of the plaintiff’s motion to dismiss, the action shall not be dismissed against the defendant’s objection unless the
counterclaim can remain pending for independent adjudication by the court."30 The

vaunted commentaries of Chief Justice Moran, remarking on Section 2, Rule 17, noted that "[t]here are instances in which a counterclaim cannot remain
pending for independent adjudication, as, where it arises out of, or is necessarily connected with, the transaction or occurrence which is the subject
matter of the opposing party’s claim."31

This view expressed in Moran’s Commentaries was adopted by the Court in cases where the application of Section 2, Rule 17 of the 1964 Rules of
Court was called for, such as in Lim Tanhu v. Ramolete,32 and Dalman v. City Court of Dipolog City.33 The latter case warrants brief elaboration.
Therein, the plaintiff in a civil case for damages moved for the withdrawal of her own case on the ground that the dispute had not been referred to the
barangay council as required by law. Over the objection of the defendant, who feared that her own counterclaim would be prejudiced by the dismissal,
plaintiff’s motion was granted, the complaint and the counterclaim accordingly dismissed by the trial court. The Court refused to reinstate the
counterclaim, opining without elaboration, "[i]f the civil case is dismissed, so also is the counterclaim filed therein."34 The broad nature of that statement
gave rise to the notion that the mandatory

dismissal of the counterclaim upon dismissal of the complaint applied regardless of the cause of the complaint’s dismissal.35

Notably, the qualification concerning compulsory counterclaims was provided in Section 2, Rule 17 of the 1964 Rules, the provision governing dismissals
by order of the court, and not Section 3, Rule 17. As stated earlier, Section 3, which covered dismissals for failure to prosecute upon motion of the
defendant or upon motu proprio action of the trial court, was silent on the effect on the counterclaim of dismissals of such nature.

Spouses Sta. Maria, Jr. v. Court of Appeals,36 decided in 1972, ostensibly supplied the gap on the effect on the counterclaim of complaints dismissed
under Section 3. The defendants therein successfully moved before the trial court for the dismissal of the complaint without prejudice and their
declaration in default on the counterclaim after plaintiffs therein failed to attend the pre-trial. After favorable judgment was rendered on the counterclaim,
plaintiffs interposed an appeal, citing among other grounds, that the counterclaim could no longer have been heard after the dismissal of the complaint.
While the Court noted that the adjudication of the counterclaim in question "does not depend upon the adjudication of the claims made in the complaint
since they were virtually abandoned by the non-appearance of the plaintiffs themselves," it was also added that "[t]he doctrine invoked is not available to
plaintiffs like the petitioners, who prevent or delay the hearing of their own claims and allegations."37 The Court, through Justice JBL Reyes, noted:

The doctrine that the complaint may not be dismissed if the counterclaim cannot be independently adjudicated is not available to, and was not intended
for the benefit of, a plaintiff who prevents or delays the prosecution of his own complaint. Otherwise, the trial of counterclaims would be made to depend
upon the maneuvers of the plaintiff, and the rule would offer a premium to vexing or delaying tactics to the prejudice of the counterclaimants. It is in the
same spirit that we have ruled that a complaint may not be withdrawn over the opposition of the defendant where the counterclaim is one that arises
from, or is necessarily connected with, the plaintiff’s action and cannot remain pending for independent adjudication.38
There is no doubt that under the 1964 Rules, the dismissal of a complaint due to the failure of the plaintiff to appear during pre-trial, as what had
happened in Sta. Maria, fell within the coverage of Section 3, Rule 17. On the other hand, Section 2 was clearly limited in scope to those dismissals
sustained at the instance of the plaintiff.39 Nonetheless, by the early 1990s, jurisprudence was settling on a rule that compulsory counterclaims were
necessarily terminated upon the dismissal of the complaint not only if such dismissal was upon motion of the plaintiff, but at the instance of the
defendant as well. Two decisions from that period stand out in this regard, Metals Engineering Resources Corp. v. Court of Appeals40 and International
Container Terminal Services v. Court of Appeals.41

In Metals, the complaint was expunged from the record after the defendant had filed a motion for reconsideration of a trial court order allowing the filing
of an amended complaint that corrected a jurisdictional error in the original complaint pertaining to the specification of the amount of damages sought.
When the defendant was nonetheless allowed to present evidence on the counterclaim, the plaintiff assailed such allowance on the ground that the
counterclaim was compulsory and could no longer remain pending for independent adjudication. The Court, in finding for the plaintiff, noted that the
counterclaim was indeed compulsory in nature, and as such, was auxiliary to the proceeding in the original suit and derived its jurisdictional support
therefrom.42 It was further explained that the doctrine was in consonance with the primary objective of a counterclaim, which was to avoid and prevent
circuitry of action by allowing the entire controversy between the parties to be litigated and finally determined in one action, and to discourage multiplicity
of suits.43 Also, the Court noted that since the complaint was dismissed for lack of jurisdiction, it was as if no claim was filed against the defendant, and
there was thus no more leg for the complaint to stand on.44

In International Container, the defendant filed a motion to dismiss which was granted by the trial court. The defendant’s counterclaim was dismissed as
well. The Court summarized the key question as "what is the effect of the dismissal of a complaint ordered at the instance of the defendant upon a
compulsory counterclaim duly raised in its answer."45 Then it ruled that the counterclaim did not survive such dismissal. After classifying the
counterclaim therein as compulsory, the Court noted that "[i]t is obvious from the very nature of the counterclaim that it could not remain pending for
independent adjudication, that is, without adjudication by the court of the complaint itself on which the counterclaim was based."46

Then in 1993, a divided Court ruled in BA Finance that the dismissal of the complaint for nonappearance of plaintiff at the pre-trial, upon motion of the
defendants, carried with it the dismissal of their compulsory counterclaim.47 The Court reiterated the rule that "a compulsory counterclaim cannot remain
pending for independent adjudication by the court… as it is auxiliary to the proceeding in the original suit and merely derives its jurisdictional support
therefrom."48 Express reliance was made on Metals, International Container, and even Dalman in support of the majority’s thesis. BA Finance likewise
advised that the proper remedy for defendants desirous that their counterclaims not be dismissed along with the main complaint was for them to move to
declare the plaintiffs to be "non-suited" on their complaint and "as in default" on their compulsory counterclaim, instead of moving for the dismissal of the
complaint.49

Justice Regalado, joined by Chief Justice Narvasa, registered a strong objection to the theory of the majority. They agreed that the trial court could no
longer hear the counterclaim, but only on the ground that defendant’s motion to be allowed to present evidence on the counterclaim was filed after the
order dismissing the complaint had already become final. They disagreed however that the compulsory counterclaim was necessarily dismissed along
with the main complaint, pointing out that a situation wherein the dismissal of the complaint was occasioned by plaintiff’s failure to appear during pre-trial
was governed under Section 3, Rule 17, and not Section 2 of the same rule. Justice Regalado, who ironically penned the decision in Metals cited by the
majority, explained:

Turning back to Rule 17, it is readily apparent that Sections 2 and 3 thereof envisage different factual and adjective situations. The dismissal of the
complaint under Section 2 is at the instance of plaintiff, for whatever reason he is minded to move for such dismissal, and, as a matter of procedure, is
without prejudice unless otherwise stated in the order of the court or, for that matter, in plaintiff's motion to dismiss his own complaint. By reason thereof,
to curb any dubious or frivolous strategy of plaintiff for his benefit or to obviate possible prejudice to defendant, the former may not dismiss his complaint
over the defendant's objection if the latter has a compulsory counterclaim since said counterclaim would necessarily be divested of juridical basis and
defendant would be deprived of possible recovery thereon in that same judicial proceeding.

Section 3, on the other hand, contemplates a dismissal not procured by plaintiff, albeit justified by causes imputable to him and which, in the present
case, was petitioner's failure to appear at the pre-trial. This situation is also covered by Section 3, as extended by judicial interpretation, and is ordered
upon motion of defendant or motu proprio by the court. Here, the issue of whether defendant has a pending counterclaim, permissive or compulsory, is
not of determinative significance. The dismissal of plaintiff's complaint is evidently a confirmation of the failure of evidence to prove his cause of action
outlined therein, hence the dismissal is considered, as a matter of evidence, an adjudication on the merits. This does not, however, mean that there is
likewise such absence of evidence to prove defendant's counterclaim although the same arises out of the subject matter of the complaint which was
merely terminated for lack of proof. To hold otherwise would not only work injustice to defendant but would be reading a further provision into Section 3
and wresting a meaning therefrom although neither exists even by mere implication. Thus understood, the complaint can accordingly be dismissed, but
relief can nevertheless be granted as a matter of course to defendant on his counterclaim as alleged and proved, with or without any reservation therefor
on his part, unless from his conduct, express or implied, he has virtually consented to the concomitant dismissal of his counterclaim.50

Justice Regalado also adverted to Sta. Maria and noted that the objections raised and rejected by the Court therein were the same as those now relied
upon by the plaintiff. He pointed out that Dalman and International Container, both relied upon by the majority, involved the application of Section 2, Rule
17 and not Section 3, which he insisted as the applicable provision in the case at bar.51

The partial dissent of Justice Regalado in BA Finance proved opportune, as he happened then to be a member of the Rules of Court Revision
Committee tasked with the revision of the 1964 Rules of Court. Just a few months after BA Finance was decided, Justice Regalado proposed before the
Committee an amendment to Section 3, Rule 17 that would explicitly provide that the dismissal of the complaint due to the fault of the plaintiff shall be
"without prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate action." The amendment, which was approved
by the Committee, is reflected in the minutes of the meeting of the Committee held on 12 October 1993:

[Justice Regalado] then proposed that after the words "upon the court’s own motion" in the 6th line of the draft in Sec. 3 of Rule 17, the following
provision be inserted: "without prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate action." The Committee
agreed with the proposed amendment of Justice Regalado.

Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not the action that is dismissed but the complaint. He asked whether there is any
distinction between "complaint" and "action." Justice Regalado opined that the action of the plaintiff is initiated by his complaint.

Justice Feria then suggested that the dismissal be limited to the complaint[.] Thus, in the 1st line of Sec. 1, the words "An action" will be changed to "a
complaint"; in the 2nd line of Sec. 2, the words "an action" will be changed to "a complaint" and in Sec. 3, the word "action" on the 5th line of the draft will
be changed to "complaint." The Committee agreed with Justice Feria’s suggested amendments.
CA Paño believed that there is a need to clarify the counterclaim that the defendant will prosecute, whether it is permissive or compulsory or all kinds of
counterclaims.

Justice Regalado opined that there is no need of making a clarification because it is already understood that it covers both counterclaims.52

It is apparent from these minutes that the survival of the counterclaim despite the dismissal of the complaint under Section 3 stood irrespective of
whether the counterclaim was permissive or compulsory. Moreover, when the Court itself approved the revisions now contained in the 1997 Rules of
Civil Procedure, not only did Justice Regalado’s amendment to Section 3, Rule 17 remain intact, but the final version likewise eliminated the qualification
formerly offered under Section 2 on "counterclaims that can remain pending for independent adjudication by the court."53 At present, even Section 2,
concerning dismissals on motion of the plaintiff, now recognizes the right of the defendant to prosecute the counterclaim either in the same or separate
action notwithstanding the dismissal of the complaint, and without regard as to the permissive or compulsory nature of the counterclaim.

In his commentaries on the 1997 Rules of Civil Procedure, Justice Regalado expounds on the effects of the amendments to Section 2 and 3 of Rule 17:

2. Under this revised section [2], where the plaintiff moves for the dismissal of his complaint to which a counterclaim has been interposed, the dismissal
shall be limited to the complaint. Such dismissal shall be without prejudice to the right of the defendant to either prosecute his counterclaim in a separate
action or to have the same resolved in the same action. Should he opt for the first alternative, the court should render the corresponding order granting
and reserving his right to prosecute his claim in a separate complaint. Should he choose to have his counterclaim disposed of in the same action
wherein the complaint had been dismissed, he must manifest such preference to the trial court within 15 days from notice to him of plaintiff’s motion to
dismiss. These alternative remedies of the defendant are available to him regardless of whether his counterclaim is compulsory or permissive. A similar
alternative procedure, with the same underlying reason therefor, is adopted in Sec. 6, Rule 16 and Sec. 3 of this Rule, wherein the complaint is
dismissed on the motion of the defendant or, in the latter instance, also by the court motu proprio.

xxxx

2. The second substantial amendment to [Section 3] is with respect to the disposition of the defendant’s counterclaim in the event the plaintiff’s complaint
is dismissed. As already observed, he is here granted the choice to prosecute that counterclaim in either the same or a separate action. x x x x

3. With the aforestated amendments in Secs. 2 and 3 laying down specific rules on the disposition of counterclaims involved in the dismissal actions, the
controversial doctrine in BA Finance Corporation vs. Co, et al., (G.R. No. 105751, June 30, 1993) has been abandoned, together with the apparent
confusion on the proper application of said Secs. 2 and 3. Said sections were distinguished and discussed in the author’s separate opinion in that case,
even before they were clarified by the present amendments x x x.54

Similarly, Justice Feria notes that "the present rule reaffirms the right of the defendant to move for the dismissal of the complaint and to prosecute his
counterclaim, as stated in the separate opinion [of Justice Regalado in BA Finance.]"55 Retired Court of Appeals Justice Herrera pronounces that the
amendment to Section 3, Rule 17 settles that "nagging question" whether the dismissal of the complaint carries with it the dismissal of the counterclaim,
and opines that by reason of the amendments, the rulings in Metals Engineering, International Container, and BA Finance "may be deemed
abandoned."56 On the effect of amendment to Section 3, Rule 17, the commentators are in general agreement,57 although there is less unanimity of
views insofar as Section 2, Rule 17 is concerned.58

To be certain, when the Court promulgated the 1997 Rules of Civil Procedure, including the amended Rule 17, those previous jural doctrines that were
inconsistent with the new rules incorporated in the 1997 Rules of Civil Procedure were implicitly abandoned insofar as incidents arising after the
effectivity of the new procedural rules on 1 July 1997. BA Finance, or even the doctrine that a counterclaim may be necessarily dismissed along with the
complaint, clearly conflicts with the 1997 Rules of Civil Procedure. The abandonment of BA Finance as doctrine extends as far back as 1997, when the
Court adopted the new Rules of Civil Procedure. If, since then, such abandonment has not been affirmed in jurisprudence, it is only because no proper
case has arisen that would warrant express confirmation of the new rule. That opportunity is here and now, and we thus rule that the dismissal of a
complaint due to fault of the plaintiff is without prejudice to the right of the defendant to prosecute any pending counterclaims of whatever nature in the
same or separate action. We confirm that BA Finance and all previous rulings of the Court that are inconsistent with this present holding are now
abandoned.

Accordingly, the RTC clearly erred when it ordered the dismissal of the counterclaim, since Section 3, Rule 17 mandates that the dismissal of the
complaint is without prejudice to the right of the defendant to prosecute the counterclaim in the same or separate action. If the RTC were to dismiss the
counterclaim, it should be on the merits of such counterclaim. Reversal of the RTC is in order, and a remand is necessary for trial on the merits of the
counterclaim.

It would be perfectly satisfactory for the Court to leave this matter at that. Still, an explanation of the reason behind the new rule is called for, considering
that the rationale behind the previous rule was frequently elaborated upon.

Under Act No. 190, or the Code of Procedure in Civil Actions promulgated in 1901, it was recognized in Section 127(1) that the plaintiff had the right to
seek the dismissal of the complaint at any time before trial, "provided a counterclaim has not been made, or affirmative relief sought by the cross-
complaint or answer of the defendant."59 Note that no qualification was made then as to the nature of the counterclaim, whether it be compulsory or
permissive. The protection of the defendant’s right to prosecute the counterclaim was indeed unqualified. In City of Manila, decided in 1918, the Court
explained:

By paragraph 1 [of Section 127], it will be seen that, where the defendant has interposed a counterclaim, or is seeking affirmative relief by a cross-
complaint, that then, and in that case, the plaintiff cannot dismiss the action so as to affect the right of the defendant in his counterclaim or prayer for
affirmative relief. The reason for that exception is clear. When the answer sets up an independent action against the plaintiff, it then becomes an action
by the defendant against the plaintiff, and, of course, the plaintiff has no right to ask for a dismissal of the defendant’s action.60

Nonetheless, a new rule was introduced when Act No. 190 was replaced by the 1940 Rules of Court. Section 2, Rule 30 of the 1940 Rules specified that
if a counterclaim is pleaded by a defendant prior to the service of the plaintiff’s motion to dismiss, the action shall not be dismissed against the
defendant’s objection unless the counterclaim can remain pending for independent adjudication by the court. This qualification remained intact when the
1964 Rules of Court was introduced.61 The rule referred only to compulsory counterclaims, or counterclaims which arise out of or are necessarily
connected with the transaction or occurrence that is the subject matter of the plaintiff’s claim, since the rights of the parties arising out of the same
transaction should be settled at the same time.62 As was evident in Metals, International Container and BA Finance, the rule was eventually extended to
instances wherein it was the defendant with the pending counterclaim, and not the plaintiff, that moved for the dismissal of the complaint.
We should not ignore the theoretical bases of the rule distinguishing compulsory counterclaims from permissive counterclaims insofar as the dismissal of
the action is concerned. There is a particular school of thought that informs the broad proposition in Dalman that "if the civil case is dismissed, so also is
the counterclaim filed therein,"63 or the more nuanced discussions offered in Metals, International Container, and BA Finance. The most potent
statement of the theory may be found in Metals,64 which proceeds from the following fundamental premises—a compulsory counterclaim must be set up
in the same proceeding or would otherwise be abated or barred in a separate or subsequent litigation on the ground of auter action pendant, litis
pendentia or res judicata; a compulsory counterclaim is auxiliary to the main suit and derives its jurisdictional support therefrom as it arises out of or is
necessarily connected with the transaction or occurrence that is the subject matter of the complaint;65 and that if the court dismisses the complaint on
the ground of lack of jurisdiction, the compulsory counterclaim must also be dismissed as it is merely ancilliary to the main action and no jurisdiction
remained for any grant of relief under the counterclaim.

The first point is derived from Section 4, Rule 9, of the 1964 Rules of Court, while the two latter points are sourced from American jurisprudence. There
is no disputing the theoretical viability of these three points. In fact, the requirement that the compulsory counterclaim must be set up in the same
proceeding remains extant under the 1997 Rules of Civil Procedure.66 At the same time, other considerations rooted in actual practice provide a
counterbalance to the above-cited rationales.

Whatever the nature of the counterclaim, it bears the same integral characteristics as a complaint; namely a cause (or causes) of action constituting an
act or omission by which a party violates the right of another. The main difference lies in that the cause of action in the counterclaim is maintained by the
defendant against the plaintiff, while the converse holds true with the complaint. Yet, as with a complaint, a counterclaim without a cause of action
cannot survive.

It would then seemingly follow that if the dismissal of the complaint somehow eliminates the cause(s) of the counterclaim, then the counterclaim cannot
survive. Yet that hardly is the case, especially as a general rule. More often than not, the allegations that form the counterclaim are rooted in an act or
omission of the plaintiff other than the plaintiff’s very act of filing the complaint. Moreover, such acts or omissions imputed to the plaintiff are often
claimed to have occurred prior to the filing of the complaint itself. The only apparent exception to this circumstance is if it is alleged in the counterclaim
that the very act of the plaintiff in filing the complaint precisely causes the violation of the defendant’s rights. Yet even in such an instance, it remains
debatable whether the dismissal or withdrawal of the complaint is sufficient to obviate the pending cause of action maintained by the defendant against
the plaintiff.67

These considerations persist whether the counterclaim in question is permissive or compulsory. A compulsory counterclaim arises out of or is connected
with the transaction or occurrence constituting the subject matter of the opposing party’s claim, does not require for its adjudication the presence of third
parties, and stands within the jurisdiction of the court both as to the amount involved and the nature of the claim.68 The fact that the culpable acts on
which the counterclaim is based are founded within the same transaction or occurrence as the complaint, is insufficient causation to negate the
counterclaim together with the complaint. The dismissal or withdrawal of the complaint does not traverse the boundaries of time to undo the act or
omission of the plaintiff against the defendant, or vice versa. While such dismissal or withdrawal precludes the pursuit of litigation

by the plaintiff, either through his/her own initiative or fault, it would be iniquitous to similarly encumber the defendant who maintained no such initiative
or fault. If the defendant similarly moves for the dismissal of the counterclaim or neglects to timely pursue such action, let the dismissal of the
counterclaim be premised on those grounds imputable to the defendant, and not on the actuations of the plaintiff.

The other considerations supplied in Metals are anchored on the premise that the jurisdictional foundation of the counterclaim is the complaint itself. The
theory is correct, but there are other facets to this subject that should be taken into account as well. On the established premise that a counterclaim
involves separate causes of action than the complaint even if derived from the same transaction or series of transactions, the counterclaim could have
very well been lodged as a complaint had the defendant filed the action ahead of the complainant.69 The terms "ancillary" or "auxiliary" may mislead in
signifying that a complaint innately possesses more credence than a counterclaim, yet there are many instances wherein the complaint is trivial but the
counterclaim is meritorious. In truth, the notion that a counterclaim is, or better still, appears to be merely "ancillary" or "auxiliary" is chiefly the offshoot of
an accident of chronology, more than anything else.

The formalistic distinction between a complaint and a counterclaim does not detract from the fact that both of them embody causes of action that have in
their end the vindication of rights. While the distinction is necessary as a means to facilitate order and clarity in the rules of procedure, it should be
remembered that the primordial purpose of procedural rules is to provide the means for the vindication of rights. A party with a valid cause of action
against another party cannot be denied the right to relief simply because the opposing side had the good fortune of filing the case first. Yet this in effect
was what had happened under the previous procedural rule and correspondent doctrine, which under their final permutation, prescribed the automatic
dismissal of the compulsory counterclaim upon the dismissal of the complaint, whether upon the initiative of the plaintiff or of the defendant.

Thus, the present rule embodied in Sections 2 and 3 of Rule 17 ordains a more equitable disposition of the counterclaims by ensuring that any judgment
thereon is based on the merit of the counterclaim itself and not on the survival of the main complaint. Certainly, if the counterclaim is palpably without
merit or suffers jurisdictional flaws which stand independent of the complaint, the trial court is not precluded from dismissing it under the amended rules,
provided that the judgment or order dismissing the counterclaim is premised on those defects. At the same time, if the counterclaim is justified, the
amended rules now unequivocally protect such counterclaim from peremptory dismissal by reason of the dismissal of the complaint.

WHEREFORE, the petition is GRANTED. The Orders dated 9 August 2005 and 10 October 2005 of Branch 29, Regional Trial Court of San Miguel,
Zamboanga del Sur in Civil Case No. 98-012 are SET ASIDE. Petitioner’s counterclaim as defendant in Civil Case. No. 98-012 is REINSTATED. The
Regional Trial Court is ORDERED to hear and decide the counterclaim with deliberate dispatch.

CASE NO. 26. LULLETE S. KO and ARLETTE SIMPLICIANO BASILIO, Petitioners, vs. PHILIPPINE NATIONAL BANK, Laoag Branch, and the
REGISTER OF DEEDS OF ILOCOS NORTE, Respondents.
G.R. Nos. 169131-32 January 20, 2006
FIRST DIVISION
YNARES-SANTIAGO, J.:

This is a petition for review on certiorari assailing the April 27, 2005 Order1 of the Regional Trial Court of Laoag City, Branch 14, in Civil Case No.
12523-14 dismissing petitioners’ complaint, and the July 28, 2005 Resolution2 denying petitioners’ motion for reconsideration.

The case stemmed from an action filed by petitioners in the trial court for Annulment of Mortgage, Extra-judicial Foreclosure Sale, Annulment of Transfer
Certificate of Title Nos. T-21064 and T-21065 and Deed of Sale with a Prayer for Preliminary Injunction and Restraining Order. The complaint alleged
that the assailed mortgage and the foreclosure proceedings were null and void since the written consent of petitioners, as beneficiaries of the mortgaged
property, were not secured. Respondent bank denied the claim and alleged that in the execution of the mortgage, petitioners in fact gave their consent.

During the course of the proceedings, petitioners and their counsel failed to attend a scheduled trial. Upon motion of respondent bank, the complaint was
dismissed. In its order dated April 27, 2005, the trial court stated:

When the case was called, Atty. Lorenzo Castillo, counsel for the plaintiffs did not appear despite proper notice. No plaintiff appeared. Atty. Eduardo
Alcantara, counsel for defendant bank appeared.

Atty. Alcantara manifested that there were numerous occasions in the past when plaintiffs and counsel did not attend. He pointed out that there is an
apparent lack of interest on the part of plaintiff to prosecute the action. He moved to dismiss the case on that legal ground.

WHEREFORE, in view of the above premises, the above-entitled case is hereby ordered dismissed. SO ORDERED.

Petitioners filed a motion for reconsideration claiming that they have been continuously pursuing negotiations with respondent bank to purchase back the
property and have gained positive results. Respondent bank countered that from the time the complaint was filed, a period of three years had elapsed
but petitioners failed to prosecute their case, showing lack of interest in the early resolution thereof. The trial court denied the motion for reconsideration.

Hence, the instant petition for review on the following grounds:

I. THE TRIAL COURT ERRED IN LAW IN DISMISSING PETITIONERS COMPLAINT ON THE GROUND OF THEIR FAILURE TO
APPEAR AT THE SCHEDULED HEARING DESPITE THAT DEFENDANT PNB HAS BEEN EQUALLY GUILTY LIKEWISE.

II. THE TRIAL COURT ERRED IN LAW IN DISMISING THE CASE DESPITE THAT THE CASE INVOLVES A PROPERTY OF
SIGNIFICANT IMPORTANCE AND VALUE TO THE LIFE AND DIGNITY OF THE PETITIONERS THIS (sic) CALLING FOR THE
OVERRIDING CONSIDERATION OF A JUDGMENT BASED ON THE MERITS OVER THE PRIMORDIAL INTEREST OF PROCEDURE
AND TECHNICALITIES.4

The petition lacks merit.

On the procedural aspect, we find that petitioners erred in filing a petition for review on certiorari under Rule 45 of the Rules of Court instead of filing an
appeal with the Court of Appeals. Section 3, Rule 17 of the Rules of Court provides:

SEC. 3. Dismissal due to fault of plaintiff.­­—If, for no justifiable cause, the plaintiff fails to appear on the date of the presentation of his evidence in chief
on the complaint, or to prosecute his action for an unreasonable length of time, or to comply with these Rules or any order of the court, the complaint
may be dismissed upon the motion of the defendant or upon the court’s own motion, without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise declared by
the court. (Emphasis supplied)

Upon the order of dismissal, petitioners’ counsel filed a timely motion for reconsideration which was denied by the trial court. Considering that an order of
dismissal for failure to prosecute has the effect of an adjudication on the merits, petitioners’ counsel should have filed a notice of appeal with the
appellate court within the reglementary period.5 Instead of filing a petition under Rule 45 of the Rules of Court, the proper recourse was an ordinary
appeal with the Court of Appeals under Rule 41, which provides:

Sec. 2. Modes of Appeal.—

(a) Ordinary appeal. – The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its original jurisdiction shall be
taken by filing a notice of appeal with the court which rendered the judgment or final order appealed from and serving a copy thereof upon the adverse
party x x x. (Emphasis supplied)

The rule is clear. In order to perfect an appeal all that is required is a pro forma notice of appeal. Perhaps due to failure to file a notice of appeal within
the remaining two days of the appeal period, petitioners’ counsel instead filed the instant petition. The rules of procedure, however, do not exist for the
convenience of the litigants. These rules are established to provide order to and enhance the efficiency of our judicial system. They are not to be trifled
with lightly or overlooked by mere expedience of invoking "substantial justice." In Balindong v. Court of Appeals6 we stated:

Hence, rules of procedure must be faithfully followed except only when for persuasive reasons, they may be relaxed to relieve a litigant of an injustice
not commensurate with his failure to comply with the prescribed procedure. Concomitant to a liberal application of the rules of procedure should be an
effort on the part of the party invoking liberality to explain its failure to comply with the rules. Procedural law has its own rationale in the orderly
administration of justice, namely, to ensure the effective enforcement of substantive rights by providing for a system that obviates arbitrariness, caprice,
despotism or whimsicality in the settlement of disputes. The enforcement of procedural rules is not antithetical to the substantive rights of the litigants.
The policy of the courts is to give effect to both procedural and substantive laws, as complementing each other, in the just and speedy resolution of the
dispute between the parties. (Emphasis supplied)

Even on the merits, petitioners’ cause must still fail. The trial court dismissed the complaint due to petitioners and counsel’s apparent lack of interest to
prosecute the case. Petitioners’ counsel argued that their repeated failure to attend the hearing was caused by conflicts in his schedule and by his lack
of knowledge of the trial dates. He also contended that respondent bank and counsel have been similarly guilty thereof, and that petitioners have
informed the court of ongoing negotiations for the re-purchase of the foreclosed property. Hence, petitioners invoke liberality and the primordial interest
of substantial justice over the strict enforcement of the rules of technicality.

We are not persuaded. In every action, the plaintiff is duty-bound to prosecute the same with utmost diligence and with reasonable dispatch to enable
him to obtain the relief prayed for and, at the same time, minimize the clogging of the court dockets. The expeditious disposition of cases is as much the
duty of the plaintiff as the court. It must be remembered that a defendant in a case likewise has the right to the speedy disposition of the action filed
against him7 considering that any delay in the proceedings entail prolonged anxiety and valuable time wasted.

In the case at bar, three years have since lapsed from the filing of the complaint on May 3, 2002 and the order of dismissal on April 27, 2005. Petitioners’
failure to prosecute their case and proceed with the trial during the span of three years leads to no other conclusion than that petitioners have no interest
in seeing their case terminated at the earliest possible time; or that petitioners’ case is unmeritorious from inception. Whichever the case may be, the
dismissal order of the trial court stand and is now immutable.
Petitioners cannot claim that they were deprived of due process. True, the right to due process safeguards the opportunity to be heard and to submit any
evidence one may have in support of his claim or defense.8 Nonetheless, we have time and again held that where the opportunity to be heard, either
through verbal arguments or pleadings, is accorded, and the party can "present its side" or defend its "interest in due course," there is no denial of due
process.9 What the law proscribes is the lack of opportunity to be heard.10

Petitioners had the opportunity to present their case and claim the relief they seek. But their inadvertence and lack of circumspect renders the trial
court’s order dismissing their case final and executory.

WHEREFORE, the petition is DENIED. The assailed April 27, 2005 Order of the Regional Trial Court of Laoag City, Branch 14 and its July 28, 2005
Resolution in Civil Case No. 12523-14 are AFFIRMED.

CASE NO. 27. UNITED COCONUT PLANTERS BANK, petitioner, vs. MIGUEL "MIKE" MAGPAYO, respondent.
G.R. No. 149908 May 27, 2004
SECOND DIVISION
QUISUMBING, J.:

This petition for review on certiorari seeks to reverse the decision1 of the Court Appeals dated September 7, 2001, in CA-G.R. CV No. 59532, which
overturned the Order of Dismissal2 of the Regional Trial Court (RTC) of Parañaque, Branch 257, in Civil Case No. 97-06.

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

On January 9, 1997, respondent filed a complaint against petitioner with the RTC, Branch 257, for reimbursement of a sum of money and consequent
damages. After petitioner’s answer was filed, pre-trial was set on September 26, 1997 at 1:30 p.m. When the case was called, only the respondent’s
counsel was present. Asked if he had a special power of attorney, counsel replied that he had, but he left it in the office. Hence, the petitioner moved to
declare the respondent non-suited, pursuant to Rule 18, Sec. 5,3 of the 1997 Rules of Civil Procedure. Accordingly, the trial court issued an Order of
Dismissal for failure to prosecute.4

On October 22, 1997, respondent filed an omnibus motion,5 stating therein that he arrived at the court at around 2:00 p.m. and that he did not intend to
be late for the pre-trial, but the traffic at the South Superhighway was heavy due to construction work. He attached copies of two powers of attorney
which were dated May 20, 1997 and September 24, 19976 respectively as proof that there indeed was a special power of attorney executed but that
respondent’s counsel forgot to bring it to the pre-trial. Respondent prayed that the dismissal order be reversed and the trial court inhibit itself from
hearing the case.7 Respondent added that he and his counsel’s omissions were excusable; that he has a valid cause of action against petitioner; and
the ends of justice would be served if the trial court’s order be reconsidered.8

The trial court found respondent’s plea unmeritorious and affirmed its order of dismissal.9 The matter was then elevated to the Court of Appeals, as CA-
G.R. CV No. 59532.

The appellate court found merit in the appeal saying that the Rules of Civil Procedure are not cast in stone.10 It held that this case did not show either
an evident scheme to delay the disposition of the case, nor a wanton failure to observe the mandatory requirements of the rules. It found that respondent
had appeared in court, only that he arrived at around 2:20 p.m. rather than 1:30 p.m., so that it was already after the case had been called and an order
had already been issued. The appellate court gave credence to the manifestation of respondent’s counsel that he had a special power of attorney from
his client, which was attached to the appeal. Hence the order of dismissal by the trial court was reversed.11

Before us now, petitioner sets forth as sole issue:

WHETHER THE COURT OF APPEALS’ REVERSAL OF THE TRIAL COURT’S DISMISSAL OF THE COMPLAINT FOR RESPONDENT’S FAILURE
TO APPEAR DURING PRE-TRIAL AND HIS COUNSEL’S FAILURE TO PRODUCE A SPECIAL POWER [OF] ATTORNEY WAS IN ACCORD WITH
THE RULES OF COURT AND APPLICABLE JURISPRUDENCE.12

Petitioner argues that it is mandatory for both the party and his counsel to be present at the pre-trial. The severity of the consequence for its non-
compliance is evident as the Rules of Court states that it shall be a cause for dismissal of the action with prejudice unless otherwise ordered by the
court.13 Petitioner contends that the respondent failed to appear for no valid cause. According to petitioner, respondent knew that road construction had
commenced months before and was still ongoing at the South Superhighway. Respondent had the whole morning to travel to Parañaque to make it to
court by 1:30 p.m. but failed to leave earlier than he did, so that according to petitioner there was inexcusable negligence on respondent’s part. Thus,
there was no valid cause under Section 4, Rule 18, of the Rules of Court, as cited by the Court of Appeals,14 for reversing the trial court’s order of
dismissal.

In addition, the petitioner argues that the feeble excuse given by respondent’s counsel that his power of attorney was left at home was just too trite to be
accepted. The authority to appear cannot be established after failing to appear fully authorized in writing during the pre-trial conference,15 said the
petitioner. Since the respondent’s excuse was invalid and respondent’s counsel failed to produce a special power of attorney during the pre-trial, the
petitioner concluded that the trial court acted in accordance with law and the rules when it dismissed respondent’s complaint.16

Respondent counters that the Court of Appeals did not disregard Section 4, Rule 18,17 of the Rules of Civil Procedure. What it declared is that the
mandatory nature of the provision is not absolute, "not cast in stone," and that the respondent had presented a lawful excuse as a valid cause under said
Rule.18 Respondent contends that the rules should be liberally construed in order to promote their object and purpose. According to respondent,
petitioner had failed to establish sufficiently special and important reasons to justify the review of the assailed CA decision.19

Heavy traffic as a reason for tardiness cannot be accepted as a valid cause to warrant the relaxation of Section 4, Rule 18 of the Rules of Civil
Procedure. In a previous case, Victory Liner, Inc. v. Court of Appeals,20 we said:

In this case under scrutiny, petitioner did not come forward with the most persuasive of reasons for the relaxation of the aforestated rules in point. We
agree with the trial court that a heavy traffic was an unacceptable basis for the lifting of the challenged order of default. A contrary rule would result in a
"heavy traffic" or clogging of cases which this Court, as the ultimate dispenser of justice, abhors.
Moreover, the heavy traffic referred to was not sudden or unexpected. It was caused by the construction of the skyway along the South Superhighway.
The respondent is a resident of Parañaque and conducts his business in Calamba, Laguna.21 It may be easily assumed that he had prior knowledge of
recurrent traffic buildup at the South Superhighway, as he most surely would have been frequently traversing the same. As such, respondent’s omission
is one that falls short of being either due to excusable negligence or a valid cause.

That respondent’s counsel was equipped with a special power of attorney, which he allegedly forgot to bring at the pre-trial, deserves hardly any
consideration. Section 4, Rule 18, of the Rules of Civil Procedure is clear and unambiguous. Respondent’s counsel, as representative, must have
appeared in respondent’s behalf fully authorized in writing.22

Prior to the 1997 Rules of Court, a representative was allowed to establish the authority needed by showing either a written special power of attorney or
by competent evidence other than the self-serving assertions of the representative.23 Noteworthy is the fact that Section 4, Rule 18 of the 1997 Rules of
Court is a new provision; and requires nothing less than that the representative should appear in a party’s behalf fully authorized in writing to enter into
an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations of facts and of documents.

To uphold respondent’s position would be a setback to the improvement of the old rules which the new provision wishes to make. It defeats the purpose
of the new provision, and is no better than the situation where the counsel appeared at the pre-trial alone and assured the court that he had authority
verbally given by the party.24 The rules now require the special power of attorney be in writing because the courts can neither second-guess the specific
powers given to the representative, nor can the courts assume that all the powers specified in Section 4 of Rule 18 are granted by the party to his
representative.

With this case, we reiterate the importance of the pre-trial. It cannot be taken for granted. It is not a mere technicality in court proceedings. For it serves
a vital objective: the simplification, abbreviation and expedition of the trial, if not indeed its dispensation.25

WHEREFORE, the decision of the Court of Appeals in CA-GR CV No. 59532 is REVERSED and SET ASIDE. The decision of the Regional Trial Court,
Branch 257, Parañaque City in Civil Case No. 97-06 is REINSTATED.