1.

Motion for Bill of Particulars (Rule 12)

Virata vs. Sandiganbayan, 221 SCRA 52 (1993)
G.R. No. 106527. April 6, 1993.
CESAR E.A. VIRATA, petitioner,
vs.
THE HONORABLE SANDIGANBAYAN and THE PEOPLE OF THE PHILIPPINES, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
The Solicitor General for respondents.
SYLLABUS

1. REMEDIAL LAW; BILL OF PARTICULARS; PURPOSE. As this Court

enunciated in Tan vs. Sandiganbayan: "It is the office or function, as well as the object or
purpose, of a bill of particulars to amplify or limit a pleading, specify more minutely and
particularly a claim or defense set up and pleaded in general terms, give information, not
contained in the pleading, to the opposite party and the court as to the precise nature,
character, scope, and extent of the cause of action or defense relied on by the pleader, and
apprise the opposite party of the case which he has to meet, to the end that the proof at
the trial may be limited to the matters specified, and in order that surprise at, and needless
preparation for, the trial may be avoided, and that the opposite party may be aided in
framing his answering pleading and preparing for trial. It has also been stated that it is the
function or purpose of a bill of particulars to define, clarify, particularize, and limit or
circumscribe the issues in the case, to expedite the trial, and assist the court. A general
function or purpose of a bill of particulars is to prevent injustice or do justice in the case
when that cannot be accomplished without the aid of such a bill. It is not the office of a
bill of particulars to supply material allegations necessary to the validity of a pleading, or
to change a cause of action or defense stated in the pleading, or to state a cause of action
or defense other than the one stated. Also it is not the office or function, or a proper
object, of a bill of particulars to set forth the pleader's theory of his cause of action or a
rule of evidence on which he intends to rely, or to furnish evidential information whether
such information consists of evidence which the pleader proposes to introduce or of facts
which constitute a defense or offset for the other party or which will enable the opposite
party to establish an affirmative defense not yet pleaded." The phrase "to enable him
properly to prepare his responsive pleading . . ." in Section 1 of Rule 12 implies not just
the opportunity to properly prepare a responsive pleading but also, and more importantly,
to prepare an intelligent answer. Thus, in Tan vs. Sandiganbayan, this Court also said:
The complaint for which a bill for a more definite statement is sought, need only inform
the defendant of the essential (or ultimate) facts to enable him, the defendant to prepare
an intelligent answer . . . ." The proper preparation of an intelligent answer requires
information as to the precise nature, character, scope and extent of the cause of action in
order that the pleader may be able to squarely meet the issues raised, thereby

circumscribing them within determined confines and, preventing surprises during the
trial, and in order that he may set forth his defenses which may not be so readily availed
of if the allegations controverted are vague, indefinite, uncertain or are mere general
conclusions. The latter task assumes added significance because defenses not pleaded
(save those excepted in Section 2, Rule 9 of the Revised Rules of Court and, whenever
appropriate, the defense of prescription) 27 in a motion to dismiss or in the answer are
deemed waived.
2. ID.; PROPRIETY OF THE MOTION FOR A BILL OF PARTICULARS UNDER
SEC. 1, RULE 12 OF THE REVISED RULES OF COURT IS BEYOND DISPUTE IN
CASE AT BAR; REASON. We have carefully, scrutinized the paragraphs of the
expanded Second Amended Complaint subject of the petitioner's motion for a bill of
particulars and find the same to be couched in general terms and wanting in definiteness
or particularity. It is precisely for this reason that We indirectly suggested in the said
decision that the petitioner's remedy is to file a motion for a bill of particulars and not a
motion to dismiss. Thus, the basis of the distinction made by the respondent
Sandiganbayan between the allegations in support of the first three (3) "actionable
wrongs" and those in support of the fourth is as imperceptible as it is insignificant in the
light of its admission that the ruling in Tantuico possesses "a semblance of relevance to
the factual setting of the instant incident." As We see it, there exists not only a semblance
but a striking similarity in the crafting of the allegations between the causes of action
against Tantuico and those against the petitioner. And, as already stated, such allegations
are general and suffer from a lack of definiteness and particularity. As a matter of fact,
paragraphs 2, 7, 9 and 17 four of the five paragraphs of the complaint in Civil Case
No. 0035 which was resolved in Tantuico are likewise involved in the instant case.
Tantuico's applicability to the instant case is thus ineluctable and the propriety of the
motion for a bill of particulars under Section 1, Rule 12 of the Revised Rules of Court is
beyond dispute. We also find the Sandiganbayan's conclusion that "the matters which
defendant-movant seeks are evidentiary in nature and, being within his intimate or
personal knowledge, may be denied of admitted by him or if deemed necessary, be the
subject of other forms of discovery," to be without basis as to the first aspect and
gratuitous as to the second. The above disquisition's indubitably reveal that the matters
sought to be averred with particularity are not evidentiary in nature. Since the issues have
not as yet been joined and no evidence has so far been adduced by the parties the
Sandiganbayan was in no position to conclude that the matters which the. petitioner seeks
are "within his intimate or personal knowledge."
DECISION
DAVIDE, JR., J p:
This petition is a sequel to Virata vs. Sandiganbayan 1 and Mapa vs. Sandiganbayan 2
which were jointly decided by this Court on 15 October 1991. 3
Petitioner is among the forty-four (44) co-defendants of Benjamin (Kokoy) Romualdez in
a complaint filed by the Republic of the Philippines with the respondent Sandiganbayan

on 31 July 1987. 4 The complaint was amended thrice, the last amendment thereto is
denominated as the Second Amended Complaint, as expanded per the Court-Approved
Manifestation/Motion dated 8 December 1987. 5
Petitioner moved to dismiss the said case, insofar as he is concerned, on various grounds
including the failure of the expanded Second Amended Complaint to state a cause of
action. The motion was denied and so was his bid to have such denial reconsidered. He
then came to this Court via a special civil action for certiorari imputing upon the
respondent Sandiganbayan the commission of grave abuse 'of discretion in, inter alia,
finding that the complaint sufficiently states a cause of action against him. In Our
aforementioned Decision of 15 October 1991, We overruled the said contention and
upheld the ruling of the Sandiganbayan. However, We stated: 6
"No doubt is left in Our minds that the questioned expanded Second Amended Complaint
is crafted to conform to a well-planned outline that forthwith focuses one's attention to
the asserted right of the State, expressly recognized and affirmed by the 1987
Constitution (Section 15, Art XI), and its corresponding duty, (Bataan Shipyard &
Engineering Co., Inc. vs. PCGG, 150 SCRA 181, 207) to recover ill-gotten wealth from
the defendants named therein; the alleged schemes and devises used and the
manipulations made by them to amass such ill-gotten wealth, which are averred first
generally and then specifically; and the extent of the reliefs demanded and prayed for.
However, as shown above, the maze of unnecessary literary embellishments may indeed
raise some doubts on the sufficiency of the statement of material operative facts to flesh
out the causes of action. Be that as it may, We are, nevertheless, convinced that the
questioned pleading has sufficiently shown viable causes of action.
xxx xxx xxx
If petitioners perceive some ambiguity or vagueness therein, the remedy is not a motion
to dismiss. An action should not be dismissed upon a mere ambiguity, indefiniteness or
uncertainty, for these are not grounds for a motion to dismiss, but rather for a bill of
particulars . . . (Amaro vs. Sumanguit, 5 SCRA 707) . . ."
Petitioner was thus compelled to go back to the Sandiganbayan. However, insisting that
he "could not prepare an intelligent and adequate pleading in view of the general and
sweeping allegations against him in the Second Amended Complaint as expanded," 7
while at the same time remaining "steadfast in his position maintaining his posture of
innocence," 8 petitioner filed on 30 January 1992 a Motion For a Bill of Particulars. 9 He
alleges therein that on the basis of the general and sweeping allegations in the Second
Amended Complaint, to wit:
"a. 'The wrongs committed by Defendants, acting singly or collectively and in unlawful
concert with one another, include the misappropriation and theft of public funds, plunder
of the nation's wealth, extortion, blackmail, bribery, embezzlement and other acts of
corruption, betrayal of public trust end brazen abuse of power, as more fully described

below, all at the expense and to the grave and irreparable damage of Plaintiff and the
Filipino people.' (par. 2, at p. 3).
b. 'The following Defendants acted as dummies, nominees or agents, by allowing
themselves to be (sic) incorporators, directors, board members and/or stockholders of
corporations beneficially held and/or controlled by Defendants Benjamin (Kokoy)
Romualdez, Ferdinand E. Marcos and Imelda R. Marcos
xxx xxx xxx'
CESAR E. A. VIRATA
xxx xxx xxx
(par 7, at pp. 5-7).
c. 'From the early years of his presidency, Defendant Ferdinand E. Marcos took undue
advantage of his powers as President. All throughout the period from September 21, 1972
to February 26, 1986, he gravely abused his powers under martial law and ruled as
Dictator under the 1973 Marcos promulgated Constitution Defendant Ferdinand E.
Marcos, together with other Defendants, acting singly or collectively, and/or in unlawful
concert with one another, in flagrant breach of public trust and of their fiduciary
obligation as public officers, with gross and scandalous abuse of right and power and in
brazen violation of the Constitution and laws of the Philippines, embarked upon a
systematic plan to accumulate ill-gotten wealth:' (par 9 (a) in the section of the Complaint
styled 'General Averments of Defendants' Illegal Acts.' at pp. 12-13).
d. 'Defendants, acting singly or collectively, and/or in unlawful concert with one another,
for the purpose of preventing disclosure and avoiding discovery of their unmitigated
plunder of the National Treasury and of their other illegal acts, and employing the
services of prominent lawyers, accountants, financial experts, businessmen and other
persons, deposited, kept and invested funds, securities and other assets estimated at
billions of US dollars in various banks, financial institutions, trust or investment
companies and with persons here and abroad.' (par. 12, in the same section 'General
Averments of Defendants' Illegal Acts' at p. 18)." 10
which were attempted to be "fully describe[d]" in that "section of the complaint, styled
'Specific Averments of the Defendant's Illegal Acts," 11 as follows:
"a. 'Defendants Benjamin (Kokoy) Romualdez and Juliette Gomez Romualdez, acting by
themselves and/or unlawful (sic) concert with Defendants Ferdinand E. Marcos and
Imelda R. Marcos, and taking undue advantage of their relationship, influence and
connection with the latter Defendant spouses, engaged in devices, schemes and strategies
to unjustly enrich themselves at the expense of Plaintiff and the Filipino people, among
others: (par. 14, at p. 19).

xxx xxx xxx

(i) Gave MERALCO undue advantage . . . (ii) with the active collaboration of Defendant
Cesar E. A. Virata be (sic) reducing the electric franchise tax from 5% to 2% of gross
receipts and the tariff duty on fuel oil imports by public utilities from 20% to 10%,
resulting in substantial savings for MERALCO but without any significant benefit to the
consumers of electric power and loss of million (sic) of pesos in much needed revenues
to the government;' (par 14(b), at pp 22 and 23)
(ii) 'Secured, in a veiled attempt to justify MERALCO's anomalous acquisition of the
electric cooperatives, with the active collaboration of Defendants Cesar E. A. Virata, . . .
and the rest of the Defendants, the approval by Defendant Ferdinand E. Marcos and his
cabinet of the so-called 'Three-Year Program for the Extension of MERALCO's Services
of Areas within the 60 kilometer Radius of Manila,' which required government capital
investment amounting to millions of pesos; (par. 14(g), at p. 25)
(iii) 'Manipulated with the support, assistance and collaboration Philguarantee officials
led by Chairman Cesar E. A. Virata and the senior managers of EMMC,/PNI Holdings,
Inc. led by Jose S. Sandejas, J. Jose M. Mantecon and Kurt S. Bachmann, Jr., among
others, the formation of Erectors Holdings, Inc., without infusing additional capital solely
for the purpose of making it assume the obligation of Erectors, Inc. with Philguarantee in
the amount of P527,387.440.71 with insufficient securities/collaterals just to enable
Erectors, Inc. to appear viable and to borrow more capitals (sic), so much so that its
obligation with Philguarantee has reached a total of more than P Billion as of June 30,
1987. (par. 14(m) p. 29)
(iv) 'The following Defendants acted as dummies, nominees and/or agents by allowing
themselves (i) to be used as instruments in accumulating ill-gotten wealth through
government concessions, orders and/or policies prejudicial to Plaintiff, or (ii) to be
incorporators, directors or members of corporations beneficially held and/or controlled by
Defendants Ferdinand E. Marcos, Imelda R. Marcos, Benjamin (Kokoy) Romualdez and
Juliette Gomez Romualdez in order to conceal and prevent recovery of assets illegally
obtained: . . . Cesar E.A. Virata . . .' (par. 17, at pp. 36-37).
b. 'The acts of Defendants, singly or collectively, and/or in unlawful concert with one
another, constitute gross abuse of official and fiduciary obligations, acquisition of
unexplained wealth, brazen abuse of right and power, unjust enrichment, violation of the
Constitution and laws of the Republic the (sic) Philippines, to the grave and irreparable
damage of Plaintiff and the, Filipino people' (par. 18, at p. 40)." 12
the plaintiff, Republic of the Philippines, asserts four (4) alleged "actionable wrongs"
against the herein petitioner, to wit:
"a. His alleged 'active collaboration' in the reduction of the electric franchise tax from 5%
to 2% of gross receipts and the tariff duty of fuel oil imports by all public utilities from

20% to 10%, which as this Honorable Court will take judicial notice of was
effected through the enactment, of Presidential Decree 551.
b. His alleged 'active collaboration' in securing the approval by defendant Marcos and his
Cabinet of the 'Three-Year Program for the Extension of MERALCO's Services to Areas
Within the 60-Kilometer Radius of Manila' which as this Honorable Court will
likewise take judicial notice of the present government continuously sanctions to date.
c. His alleged 'support, assistance and collaboration' in the formation of Erectors
Holdings, Inc.
d. His alleged acting as 'dummy, nominee, and/or agent by allowing' himself '(i) to be
used as instrument(s) (sic) in accumulating ill-gotten wealth through government
concessions, orders and/or policies prejudicial to Plaintiff' or (ii) to be an incorporator,
director, or member of corporations beneficially held and/or controlled by defendants
Ferdinand Marcos, Imelda Marcos, Benjamin Romualdez and Juliette Romualdez' in
order 'to conceal and prevent recovery of assets illegally obtained.'" 13
Petitioner claims, however, that insofar as he is concerned, the "foregoing allegations . . .
and the purported illegal acts imputed to them as well as the alleged causes of actions are
vague and ambiguous. They are not averred with sufficient definiteness or particularity as
would enable defendant Virata to properly prepare his answer or responsive pleading." 14
He therefore prays that "in accordance with Rule 12 of the Rules of Court, plaintiff be
directed to submit a more definite statement or a bill of particulars on the matters
mentioned above which are not averred with sufficient definiteness or particularity." 15
In its Comment, the plaintiff Republic of the Philippines opposed the motion. Replying to
the opposition, petitioner cited Tantuico vs. Republic 16 which this Court decided on 2
December 1991.
In its Resolution promulgated on 4 August 1992, 17 the respondent Sandiganbayan
(Second Division) partially granted the Motion for a Bill of Particulars. The dispositive
portion thereof provides:
"WHEREFORE, premises considered, the instant 'Motion For Bill of Particulars', dated
January 30, 1992, is hereby partially granted. Accordingly, plaintiff is hereby ordered to
submit to the Court and furnish defendant-movant with a bill of particulars of the facts
prayed for by the latter, pertaining to paragraph 17 (sic) and 18 of the Expanded
Complaint, within fifteen (15) days from receipt hereof. Failure of plaintiff to do so
would mean automatic deletion and/or exclusion of defendant-movant's name from the
said paragraphs of the complaint, without prejudice to the standing valid effect of the
other specific allegations against him." 18
In granting the motion with respect to paragraphs 17 and 18 of the expanded Second
Amended Complaint which it erroneously referred to as the Expanded Complaint
the Sandiganbayan stated:

"In deference to the pronouncement made by the Highest Tribunal in Tantuico. We rule
and so hold that the foregoing allegations need further amplifications and specifications
insofar as defendant-movant is concerned in order for him to be able to properly meet the
issue therein . . ." 19
However, in denying amplification as to the rest of the allegations, the Sandiganbayan
declared that:
"Albeit We are fully cognizant of the import and effect of the Supreme Court ruling in
Tantuico, Jr. vs. Republic, et al., supra, however, We are not prepared to rule that the said
case applies squarely to the case at bar to warrant an absolute ruling in defendantmovant's favor. The thrust of the ruling in said case, although possessing a semblance of
relevance to the factual setting of the instant incident, does not absolutely support
defendant-movant's stance. As implicitly admitted by defendant-movant, there are certain
specific charges against him in the Expanded Complaint which are conspicuously absent
in Tantuico, to wit: (i) his alleged 'active collaboration' in the reduction of the electric
franchise tax from 5% to 2% of gross receipts and the tariff duty on fuel oil imports by all
public utilities from 20% to 10%, which was effected through the enactment of
Presidential Decree 551; (ii) his 'alleged collaboration' in securing the approval by
defendant Marcos and his Cabinet of the 'Three-Year Program for the Extension of
Meralco's Services to Areas Within the 60-Kilometer Radius of Manila'; and (iii) his
alleged 'support, assistance and collaboration' in the formation of Erectors Holdings, Inc.
(EHI).
We are of the considered opinion that the foregoing charges in the Expanded Complaint
are clear, definite and specific enough to allow defendant-movant to prepare an intelligent
responsive pleading or to prepare for trial. Considering the tenor of the Supreme Court
ruling in Tantuico, the nature and composition of the foregoing factual allegations are, to
Us, more than enough to meet the standards set forth therein in determining the
sufficiency or relevancy of a bill of particulars. Alleging the specific nature, character,
time and extent of the phrase 'active collaboration' would be a mere surplus age and
would not serve any useful purpose, except to further delay the proceedings in the case.
Corollarily, any question as to the validity or legality of the transactions involved in the
charges against defendant-movant is irrelevant and immaterial in the resolution of the
instant incident, inasmuch as the same is a matter of defense which shall have its proper
place during the trial on the merits, and on the determination of the liability of defendantmovant after the trial proper. Furthermore, the matters which defendant-movant seeks are
evidentiary in nature and, being within his intimate or personal knowledge, may be
denied or admitted by him or if deemed necessary be the subject of other forms of
discovery." 20
In short, of the four (4) actionable wrongs enumerated in the Motion for a Bill of
Particulars, the Sandiganbayan favorably acted only with respect to the fourth. 21
Not satisfied with the partial grant of the motion, petitioner filed the instant petition under
Rule 65 of the Revised Rules of Court contending that the Sandiganbayan acted with

grave abuse of its discretion amounting to lack or excess of jurisdiction in not totally
granting his Motion for a Bill of Particulars.
After thorough deliberations on the issues raised, this Court finds the petition to be
impressed with merit. We therefore rule for the petitioner.
The Sandiganbayan's favorable application of Tantuico vs. Republic of the Philippines 22
with respect to the fourth "actionable wrong," or more particularly to paragraphs 17 and
13 of the expanded Second Amended Complaint in Civil Case No. 0035, and its refusal to
apply the same to the first three (3) "actionable wrongs" simply because it is "not
prepared to rule that the said case (Tantuico) applies squarely to the case at bar to warrant
an absolute ruling in defendant-movant's favor," is quite contrived; the ratiocination:
offered in support of the rejection defeats the very purpose of a bill of particulars.
It is to be observed that Tantuico vs. Republic of the Philippines also originated from
Civil Case No. 0035. Tantuico, herein petitioner's co-defendant in the said civil case, filed
a motion for a bill of particulars to seek the amplification of the averments in paragraphs
2, 7, 9(a), 15 and 17 of the Second Amended Complaint. The Sandiganbayan denied the
motion on the ground that the particulars sought are evidentiary in nature. 23 This Court
eventually overruled the Sandiganbayan and forthwith directed the respondents therein to
prepare and file a Bill of Particulars embodying the facts prayed for by Tantuico; this was
based on Our finding that the questioned allegations in the complaint pertaining to
Tantuico "are deficient because the averments therein are mere conclusions of law or
presumptions, unsupported by factual premises." 24
As in the earlier case of Virata vs. Sandiganbayan, We have carefully, scrutinized the
paragraphs of the expanded Second Amended Complaint subject of the petitioner's
motion for a bill of particulars and find the same to be couched in general terms and
wanting in definiteness or particularity. It is precisely for this reason that We indirectly
suggested in the said decision that the petitioner's remedy is to file a motion for a bill of
particulars and not a motion to dismiss. Thus, the basis of the distinction made by the
respondent Sandiganbayan between the allegations in support of the first three (3)
"actionable wrongs" and those in support of the fourth is as imperceptible as it is
insignificant in the light of its admission that the ruling in Tantuico possesses "a
semblance of relevance to the factual setting of the instant incident." As We see it, there
exists not only a semblance but a striking similarity in the crafting of the allegations
between the causes of action against Tantuico and those against the petitioner. And, as
already stated, such allegations are general and suffer from a lack of definiteness and
particularity. As a matter of fact, paragraphs 2, 7, 9 and 17 four of the five paragraphs
of the complaint in Civil Case No. 0035 which was resolved in Tantuico are likewise
involved in the instant case. Tantuico's applicability to the instant case is thus ineluctable
and the propriety of the motion for a bill of particulars under Section 1, Rule 12 of the
Revised Rules of Court is beyond dispute Said section reads:
"SEC. 1. Motion for bill of particulars. Before responding to a pleading or, if no
responsive pleading is permitted by these rules, within ten (10) days after service of the

pleading upon him, a party may move for a more definite statement or for a bill of
particulars of any matter which is not averred with sufficient definiteness or particularity
to enable him properly to prepare his responsive pleading or to prepare for trial. Such
motion shall point out the defects complained of and the details, desired."
As this Court enunciated in Tan vs. Sandiganbayan: 25
"It is the office or function, as well as the object or purpose, of a bill of particulars to
amplify or limit a pleading, specify more minutely and particularly a claim or defense set
up and pleaded in general terms, give information, not contained in the pleading, to the
opposite party and the court as to the precise nature, character, scope, and extent of the
cause of action or defense relied on by the pleader, and apprise the opposite party of the
case which he has to meet, to the end that the proof at the trial may be limited to the
matters specified, and in order that surprise at, and needless preparation for, the trial may
be avoided, and that the opposite party may be aided in framing his answering pleading
and preparing for trial. It has also been stated that it is the function or purpose of a bill of
particulars to define, clarify, particularize, and limit or circumscribe the issues in the case,
to expedite the trial, and assist the court. A general function or purpose of a bill of
particulars is to prevent injustice or do justice in the case when that cannot be
accomplished without the aid of such a bill.
It is not the office of a bill of particulars to supply material allegations necessary to the
validity of a pleading, or to change a cause of action or defense stated in the pleading, or
to state a cause of action or defense other than the one stated. Also it is not the office or
function, or a proper object, of a bill of particulars to set forth the pleader's theory of his
cause of action or a rule of evidence on which he intends to rely, or to furnish evidential
information whether such information consists of evidence which the pleader proposes to
introduce or of facts which constitute a defense or offset for the other party or which will
enable the opposite party to establish an affirmative defense not yet pleaded."
The phrase "to enable him properly to prepare his responsive pleading . . ." in Section 1
of Rule 12 implies not just the opportunity to properly prepare a responsive pleading but
also, and more importantly, to prepare an intelligent answer. Thus, in Tan vs.
Sandiganbayan, this Court also said:
"The complaint for which a bill for a more definite statement is sought, need only inform
the defendant of the essential (or ultimate) facts to enable him, the defendant to prepare
an intelligent answer . . ." 26 (Emphasis supplied).
The proper preparation of an intelligent answer requires information as to the precise
nature, character, scope and extent of the cause of action in order that the pleader may be
able to squarely meet the issues raised, thereby circumscribing them within determined
confines and, preventing surprises during the trial, and in order that he may set forth his
defenses which may not be so readily availed of if the allegations controverted are vague,
indefinite, uncertain or are mere general conclusions. The latter task assumes added
significance because defenses not pleaded (save those excepted in Section 2, Rule 9 of

the Revised Rules of Court and, whenever appropriate, the defense of prescription) 27 in
a motion to dismiss or in the answer are deemed waived. It was, therefore, grave error for
the Sandiganbayan to state that "[a]lleging the specific nature, character, time and extent
of the phrase 'active collaboration' would be a mere surplus age and would not serve any
useful purpose" 28 for precisely, without any amplification or particularization thereof,
the petitioner would be hard put in meeting the charges squarely and in pleading
appropriate defenses. Nor can We accept the public respondent's postulation that "any
question as to the validity or legality of the transactions involved in the charges against
defendant-movant is irrelevant and immaterial in the resolution of the instant incident,
inasmuch as the same is a matter of defense which shall have its proper place during the
trial on the merits, and on the determination of the liability of defendant-movant after the
trial proper." 29 This is absurd, for how may the petitioner set up a defense at the time of
trial if in his own answer he was not able to plead such a defense precisely because of the
vagueness or indefiniteness of the allegations in the complaint? Unless he pleads the
defense in his answer, he may be deprived of the right to present the same during the trial
because of his waiver thereof; of course, he may still do so if the adverse party fails to
object thereto or if he is permitted to amend his answer pursuant to Section 3, Rule 10 of
the Revised Rules of Court, but that is another thing.
We also find the Sandiganbayan's conclusion that "the matters which defendant-movant
seeks are evidentiary in nature and, being within his intimate or personal knowledge, may
be denied of admitted by him or if deemed necessary, be the subject of other forms of
discovery," 30 to be without basis as to the first aspect and gratuitous as to the second.
The above disquisition's indubitably reveal that the matters sought to be averred with
particularity are not evidentiary in nature. Since the issues have not as yet been joined
and no evidence has so far been adduced by the parties the Sandiganbayan was in no
position to conclude that the matters which the. petitioner seeks are "within his intimate
or personal knowledge."
WHEREFORE, the instant petition is GRANTED. The Resolution of respondent
Sandiganbayan of 4 August 1992, to the extent that it denied the motion for a bill of
particulars with respect to the so-called first three (3) "actionable wrongs," is SET ASIDE
but affirmed as to the rest. Accordingly, in addition to the specific bill of particulars
therein granted, respondent Republic of the Philippines, as plaintiff in Civil Case No.
0035 before the Sandiganbayan, is hereby ordered to submit to the defendant (herein
petitioner) in the said case, within thirty (30) days from receipt of a copy of this Decision,
a bill of particulars containing the facts prayed for by the latter insofar as the first three
(3) "actionable wrongs" are concerned.
No pronouncement as to costs.
SO ORDERED.

Saw vs. CA, 195 SCRA 740 (1991)

10

G.R. No. 90580

April 8, 1991

RUBEN SAW, DIONISIO SAW, LINA S. CHUA, LUCILA S. RUSTE AND EVELYN
SAW, petitioners,
vs.
HON. COURT OF APPEALS, HON. BERNARDO P. PARDO, Presiding Judge of Branch
43, (Regional Trial Court of Manila), FREEMAN MANAGEMENT AND DEVELOPMENT
CORPORATION, EQUITABLE BANKING CORPORATION, FREEMAN INCORPORATED,
SAW CHIAO LIAN, THE REGISTER OF DEEDS OF CALOOCAN CITY, and DEPUTY
SHERIFF ROSALIO G. SIGUA, respondents.
Benito O. Ching, Jr. for petitioners.
William R. Vetor for Equitable Banking Corp.
Pineda, Uy & Janolo for Freeman, Inc. and Saw Chiao.

CRUZ, J.:
A collection suit with preliminary attachment was filed by Equitable Banking Corporation
against Freeman, Inc. and Saw Chiao Lian, its President and General Manager. The
petitioners moved to intervene, alleging that (1) the loan transactions between Saw Chiao
Lian and Equitable Banking Corp. were not approved by the stockholders representing at
least 2/3 of corporate capital; (2) Saw Chiao Lian had no authority to contract such loans;
and (3) there was collusion between the officials of Freeman, Inc. and Equitable Banking
Corp. in securing the loans. The motion to intervene was denied, and the petitioners
appealed to the Court of Appeals.
Meanwhile, Equitable and Saw Chiao Lian entered into a compromise agreement which they
submitted to and was approved by the lower court. But because it was not complied with,
Equitable secured a writ of execution, and two lots owned by Freeman, Inc. were levied upon
and sold at public auction to Freeman Management and Development Corp.
The Court of Appeals sustained the denial of the petitioners' motion for intervention, holding
that "the compromise agreement between Freeman, Inc., through its President, and
Equitable Banking Corp. will not necessarily prejudice petitioners whose rights to corporate
assets are at most inchoate, prior to the dissolution of Freeman, Inc. . . . And intervention
under Sec. 2, Rule 12 of the Revised Rules of Court is proper only when one's right is actual,
material, direct and immediate and not simply contingent or expectant."
1

It also ruled against the petitioners' argument that because they had already filed a notice of
appeal, the trial judge had lost jurisdiction over the case and could no longer issue the writ of
execution.
The petitioners are now before this Court, contending that:
1. The Honorable Court of Appeals erred in holding that the petitioners cannot
intervene in Civil Case No. 88-44404 because their rights as stockholders of
Freeman are merely inchoate and not actual, material, direct and immediate prior to
the dissolution of the corporation;

11

2. The Honorable Court of Appeals erred in holding that the appeal of the petitioners
in said Civil Case No. 88-44404 was confined only to the order denying their motion
to intervene and did not divest the trial court of its jurisdiction over the whole case.
The petitioners base their right to intervene for the protection of their interests as
stockholders on Everett v. Asia Banking Corp. where it was held:
2

The well-known rule that shareholders cannot ordinarily sue in equity to redress
wrongs done to the corporation, but that the action must be brought by the Board of
Directors, . . . has its exceptions. (If the corporation [were] under the complete control
of the principal defendants, . . . it is obvious that a demand upon the Board of
Directors to institute action and prosecute the same effectively would have been
useless, and the law does not require litigants to perform useless acts.
Equitable demurs, contending that the collection suit against Freeman, Inc, and Saw Chiao
Lian is essentially in personam and, as an action against defendants in their personal
capacities, will not prejudice the petitioners as stockholders of the corporation. The Everett
case is not applicable because it involved an action filed by the minority stockholders where
the board of directors refused to bring an action in behalf of the corporation. In the case at
bar, it was Freeman, Inc. that was being sued by the creditor bank.
Equitable also argues that the subject matter of the intervention falls properly within the
original and exclusive jurisdiction of the Securities and Exchange Commission under P.D.
No. 902-A. In fact, at the time the motion for intervention was filed, there was pending
between Freeman, Inc. and the petitioners SEC Case No. 03577 entitled "Dissolution,
Accounting, Cancellation of Certificate of Registration with Restraining Order or Preliminary
Injunction and Appointment of Receiver." It also avers in its Comment that the intervention of
the petitioners could have only caused delay and prejudice to the principal parties.
On the second assignment of error, Equitable maintains that the petitioners' appeal could
only apply to the denial of their motion for intervention and not to the main case because
their personality as party litigants had not been recognized by the trial court.
After examining the issues and arguments of the parties, the Court finds that the respondent
court committed no reversible error in sustaining the denial by the trial court of the
petitioners' motion for intervention.
In the case of Magsaysay-Labrador v. Court of Appeals, we ruled as follows:
3

Viewed in the light of Section 2, Rule 12 of the Revised Rules of Court, this Court
affirms the respondent court's holding that petitioners herein have no legal interest in
the subject matter in litigation so as to entitle them to intervene in the proceedings
below. In the case of Batama Farmers' Cooperative Marketing Association, Inc. v.
Rosal, we held: "As clearly stated in Section 2 of Rule 12 of the Rules of Court, to be
permitted to intervene in a pending action, the party must have a legal interest in the
matter in litigation, or in the success of either of the parties or an interest against
both, or he must be so situated as to be adversely affected by a distribution or other
disposition of the property in the custody of the court or an officer thereof."
To allow intervention, [a] it must be shown that the movant has legal interest in the
matter in litigation, or otherwise qualified; and [b] consideration must be given as to
whether the adjudication of the rights of the original parties may be delayed or

12

prejudiced, or whether the intervenor's rights may be protected in a separate

proceeding or not. Both requirements must concur as the first is not more important
than the second.
The 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 the direct legal operation and effect of the
judgment. Otherwise, if persons not parties of the action could be allowed to
intervene, proceedings will become unnecessarily complicated, expensive and
interminable. And this is not the policy of the law.
The words "an interest in the subject" mean a direct interest in the cause of action as
pleaded, and which 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.
Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent,
remote, conjectural, consequential and collateral. At the very least, their interest is
purely inchoate, or in sheer expectancy of a right in the management of the
corporation and to share in the profits thereof and in the properties and assets
thereof on dissolution, after payment of the corporate debts and obligations.
While a share of stock represents a proportionate or aliquot interest in the property of
the corporation, it does not vest the owner thereof with any legal right or title to any of
the property, his interest in the corporate property being equitable or beneficial in
nature. Shareholders are in no legal sense the owners of corporate property, which is
owned by the corporation as a distinct legal person.
On the second assignment of error, the respondent court correctly noted that the notice of
appeal was filed by the petitioners on October 24, 1988, upon the denial of their motion to
intervene, and the writ of execution was issued by the lower court on January 30, 1989. The
petitioners' appeal could not have concerned the "whole" case (referring to the decision)
because the petitioners "did not appeal the decision as indeed they cannot because they are
not parties to the case despite their being stockholders of respondent Freeman, Inc." They
could only appeal the denial of their motion for intervention as they were never recognized
by the trial court as party litigants in the main case.
Intervention is "an act or proceeding by which a third person is permitted to become a party
to an action or proceeding between other persons, and which results merely in the addition
of a new party or parties to an original action, for the purpose of hearing and determining at
the same time all conflicting claims which may be made to the subject matter in litigation.
4

It is not an independent proceeding, but an ancillary and supplemental one which, in the
nature of things, unless otherwise provided for by the statute or Rules of Court, must be in
subordination to the main proceeding. It may be laid down as a general rule that an
intervenor is limited to the field of litigation open to the original parties.
5

In the case at bar, there is no more principal action to be resolved as a writ of execution had
already been issued by the lower court and the claim of Equitable had already been
satisfied. The decision of the lower court had already become final and in fact had already
been enforced. There is therefore no more principal proceeding in which the petitioners may
intervene.

13

As we held in the case of Barangay Matictic v. Elbinias:

An intervention has been regarded, as merely "collateral or accessory or ancillary to

the principal action and not an independent proceedings; and interlocutory
proceeding dependent on and subsidiary to, the case between the original parties."
(Fransisco, Rules of Court, Vol. 1, p. 721). With the final dismissal of the original
action, the complaint in intervention can no longer be acted upon. In the case of
Clareza v. Resales, 2 SCRA 455, 457-458, it was stated that:
That right of the intervenor should merely be in aid of the right of the original
party, like the plaintiffs in this case. As this right of the plaintiffs had ceased to
exist, there is nothing to aid or fight for. So the right of intervention has
ceased to exist.
Consequently, it will be illogical and of no useful purpose to grant or even consider
further herein petitioner's prayer for the issuance of a writ of mandamus to compel
the lower court to allow and admit the petitioner's complaint in intervention. The
dismissal of the expropriation case has no less the inherent effect of also dismissing
the motion for intervention which is but the unavoidable consequence.
The Court observes that even with the denial of the petitioners' motion to intervene, nothing
is really lost to them. The denial did not necessarily prejudice them as their rights are being
litigated in the case now before the Securities and Exchange Commission and may be fully
asserted and protected in that separate proceeding.
1wphi1

WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so ordered.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

2. Filing and Service of Pleadings (Rule 13)

Aberca, et al vs. Ver, G.R. No. 166216, March 14, 2012

MENDOZA, J.:
Assailed in this petition is the July 31, 2003 Decision[1] of the Court of
Appeals (CA) in CA-G.R. CV No. 43763 and its November 26, 2004
Resolution[2] reversing and setting aside the February 19, 1993 Decision[3] of
the Regional Trial Court, Branch 107, Quezon City (RTC), in Civil Case No.
37487 entitled Rogelio Aberca, et al. v. Maj. Gen. Fabian Ver, et al. for sum
of money and damages.
The Facts

14

The factual and procedural antecedents were succinctly recited by the CA as

follows:
On 25 January 1983, several suspected subversives
who were arrested and detained by the military filed a
complaint for damages with the Regional Trial Court of
Quezon City against Gen. Fabian Ver, then AFP Chief of
Staff, and the following subordinate officers: Col. Fidel
Singson, Col. Gerardo Lantoria, Col. Rolando Abadilla, Col.
Guillermo Kintanar, Lt. Col. Panfilo Lacson, Maj. Rodolfo
Aguinaldo, Capt. Danilo Pizarro, 1Lt. Pedro Tango, 1Lt.
Romeo Ricardo, 1Lt. Raul Bacalso, M/Sgt. Bienvenido
Balaba and John Does. The case was docketed as Civil Case
No. 37487 and assigned to Branch 95.
In their complaint, the plaintiff-appellees alleged that
they were arrested and detained by Task Force Makabansa,
a composite group of various intelligence units of the AFP,
on the strength of defective search warrants; that while
under detention and investigation, they were subjected to
physical and psychological harm, torture and other
brutalities to extort from them confessions and other
information that would incriminate them; and that by
reason thereof, they suffered actual and moral damages.
Defendants-appellants, through their counsel, the
then Solicitor General Estelito Mendoza, filed a motion to
dismiss on the following grounds: (1) since the privilege of
the writ of habeas corpus was then suspended, the trial
court cannot inquire into the circumstances surrounding
plaintiffs-appellees arrests; (2) the defendants-appellants
are immune from liability for the reason that they were then
performing their official duties; and (3) the complaint states
no cause of action.
In an order dated November 8, 1983, the trial court
granted defendants-appellants motion to dismiss and
ordered the case dismissed.

15

Plaintiffs-appellees filed a motion to reconsider and

set aside the order of dismissal. In an order dated May 11,
1984, the trial court declared the order of November 8,
1983 final.
Plaintiffs-appellees again filed a motion for
reconsideration of the order dated May 11, 1984. In an order
dated September 21, 1984, the trial court denied the motion
for reconsideration.
On March 15, 1985, plaintiffs-appellees went to the
Supreme Court on a petition for review on certiorari,
seeking to annul and set aside the orders of the trial court
datedNovember 8, 1983, May 11, 1984 and September 21,
1984. The case was docketed as G.R. No. 69866.
While the case was pending in the Supreme Court, the
so-called EDSA revolution took place. As a result, the
defendants-appellants lost their official positions and were
no longer in their respective office addresses as appearing in
the record. Also, in the meantime, the case was re-raffled to
Branch 107.
On April 15, 1988, the Supreme Court rendered a
decision annulling and setting aside the assailed orders and
remanded the case to the trial court for further proceedings.
However, trial could not proceed immediately because
on June 11, 1988, the record of the case was destroyed when
fire razed the City Hall of Quezon City. It was only
onOctober 9, 1989 when plaintiffs-appellees sought a
reconstitution of the record of the case. The record shows
that the petition for reconstitution was set for hearing
on October 27, 1989. However, there is nothing in the
record to show that defendants-appellants or their counsel
were notified. For lack of an opposition, the petition for
reconstitution was granted in an order dated March 12,
1990.
On August 15, 1990, plaintiffs-appellees filed a motion
praying that defendants-appellants be required to file their
answer. However, the record as reconstituted did not show
16

who are the lawyers of the defendants-appellants

considering that Estelito Mendoza, who had represented
them in his capacity as Solicitor General, was no longer
holding that position. Furthermore, defendants-appellants
were also no longer occupying the positions they held at the
time the complaint was filed. Thus, in an order datedAugust
17, 1990, plaintiffs-appellees were directed to report to the
trial court the addresses and whereabouts of defendantsappellants so that they could be properly notified.
Instead of complying with the order of August 17,
1990, plaintiffs-appellees filed a motion to declare
defendants-appellants in default. The trial court deferred
resolution of this motion and instead, it issued an order on
September 10, 1990 directing that a copy of the order dated
August 17, 1990 be furnished to new Solicitor General
Francisco Chavez to enable him to take action pursuant to
Section 18, Rule 3 of the Rules of Court, and to former
Solicitor General Estelito Mendoza to enable him to give
notice as to whether he [would] continue to represent the
defendants-appellants in his private capacity. As it said in
its order, the trial court took this action in view of the
change in government and corresponding change in the
addresses and circumstances of the defendants-appellants
who may not even be aware of the decision of the Supreme
Court in case G.R. No. L-69866 and of the reconstitution of
records in this case xxx.
On October 1, 1990, former Solicitor General
Mendoza filed a manifestation informing the trial court that
his appearance as defendants-appellants counsel terminated
when he ceased to be Solicitor General and that he was not
representing them in his private capacity. On his part,
Solicitor General Chavez finally filed on December 11,
1990 a notice of withdrawal of appearance, citing Urbano v.
Go, where the Supreme Court said that the Office of the
Solicitor General (OSG) is not authorized to represent a
public official at any stage of a criminal case or in a civil suit
for damages arising from a felony. The record does not show
that defendants-appellants were furnished a copy of this
notice of withdrawal or that they gave their conformity
thereto.
17

In an order dated December 27, 1990, the trial court

denied plaintiffs-appellees motion to declare defendantsappellants in default, emphatically pointing out that
defendants-appellants were not duly notified of the decision
of the Supreme Court. In the same order, the trial court
directed plaintiffs-appellees to comply with the order
ofAugust 17, 1990 within ten (10) days from notice, with a
warning that the case [would] be archived and eventually
dismissed if plaintiffs-appellees failed to furnish to the court
the addresses of defendants-appellants. Plaintiffs-appellees
moved to reconsider the order dated December 27, 1990 but
in an order dated February 1, 1991, the trial court denied the
motion, stating that without actual notice of the judgment of
the Supreme Court xxx the defendants-appellants herein
would not be aware that they should file a responsive
pleading and that, therefore, to consider the defendantsappellants in default would be tantamount to lack of due
process xxx.
For failure of the plaintiffs-appellees to comply with
the orders dated August 17, 1990 and December 27, 1990,
the trial court dismissed the case without prejudice in its
order dated March 7, 1991. Subsequently, however, in an
order dated June 4, 1991, the trial court set aside the order
of dismissal and reinstated the case. It also approved
plaintiffs-appellees request to serve the notice to file answer
or responsive pleading by publication.
In a compliance dated September 12, 1991, plaintiffsappellees informed the trial court that the following notice
was published in the Tagalog newspaper BALITA in its
issues of August 29, 1991 and September 5, 1991:
xxxx
No answer was filed by defendants-appellants within
the period stated in the notice. On motion of plaintiffsappellees, the trial court in its order dated December 5,
1991declared defendants-appellants in default and directed
plaintiffs-appellees to present their evidence ex-parte.[4]
18

Ruling of the RTC

On February 19, 1993, the RTC handed down a decision in favor of
the petitioners, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered, ordering the
following defendants:
1)
2)
3)
4)
5)
6)
7)
8)
9)

Maj. General Fabian Ver

Col. Fidel Singson
Col. Rolando Abadilla
Col. Gerardo Lantoria
Col. Galileo Kintanar
Lt. Col. Panfilo Lacson
Maj. Rodolfo Aguinaldo
1Lt. Pedro Tango
M/Sgt. Bienvenido Balaba

to pay jointly and severally to EACH of the following plaintiffs:

a)
b)
c)
d)
e)

Rodolfo Benosa
Manuel Mario Guzman
Joseph Olayer
Marco Palo
Rolando Salutin

the amounts of FIFTY THOUSAND PESOS (50,000.00) as

temperate or moderate damages; ONE HUNDRED FIFTY
THOUSAND PESOS (150,000.00) as moral damages; and ONE
HUNDRED FIFTY THOUSAND PESOS (150,000.00) as
exemplary damages. Likewise, they are ordered to pay jointly and
severally the sum of TWO HUNDRED THOUSAND PESOS to the
plaintiffs counsel.
The claims of the rest of the plaintiffs are denied and thereby
dismissed. Likewise, the case against the following defendants:
Capt. Danilo Pizarro, 1Lt. Romeo Ricardo and 1Lt. Raul Bacalso is
DISMISSED, and the said defendants are exonerated from any
liability.[5]

19

Subsequently, respondents Col. Fidel Singson (Col. Singson), Lt. Col.

Panfilo M. Lacson (Lt. Col. Lacson), and Col. Rolando Abadilla (Col.
Abadilla) filed their Omnibus Motion praying as follows: 1) that the order of
default dated December 5, 1991 be reversed and set aside; 2) that the
decision dated February 19, 1993 be reversed and set aside; 3) that the entire
proceedings be declared null and void; and 4) that they be given fifteen (15)
days from notice to file answer to the complaint and present their evidence.
Col. Gerardo B. Lantoria (Col. Lantoria) filed his own Motion for
Reconsideration.
On his part, respondent Maj. Rodolfo Aguinaldo (Maj.
Aguinaldo) failed to file a timely notice of appeal so he filed a Petition for
Relief from Judgment praying that the RTC set aside its decision and
proceed to try the case based on the following grounds: 1) the decision was
rendered without the benefit of notice in gross violation of his right to due
process; 2) the reconstitution of the records of the case and further
proceedings taken thereon were effected through fraud; and 3) his failure to
move for a new trial or to appeal was due to mistake or excusable
negligence.
The Omnibus Motion of Col. Singson, Lt. Col. Lacson and Col.
Abadilla; the Motion for Reconsideration of Col. Gerardo Lantoria; and the
Petition for Relief from Judgment of Maj. Aguinaldo were denied by the
RTC.[6] Aggrieved, the said respondents elevated their case to the CA.
Maj. Aguinaldo argued that he was deliberately deprived of the
opportunity to be heard and put up his defense, while Col. Singson, Lt. Col.
Lacson and Col. Abadilla presented the following assignment of errors:
I
THE TRIAL COURT ERRED IN ALLOWING THE OFFICE OF THE
SOLICITOR GENERAL (OSG) TO WITHDRAW AS COUNSEL

20

WITHOUT
THE
REQUIRED
NOTICE
CONSENT/CONFORMITY OF APPELLANTS.

TO,

AND/OR

II
THE TRIAL COURT ERRED IN NOT SETTING ASIDE THE
ORDER OF DEFAULT AND/OR THE JUDGMENT BY DEFAULT
AND GRANTING NEW TRIAL.
III
THE TRIAL COURT ERRED IN HOLDING THAT THE OSGS
MISTAKES AND NEGLIGENCE ARE BINDING ON THE
DEFENDANTS-APPELLANTS.
IV
THE TRIAL COURT ERRED IN HOLDING THE DEFENDANTSAPPELLANTS SINGSON, ABADILLA AND LACSON LIABLE FOR
THE ALLEGED DAMAGES SUSTAINED BY THE PLAINTIFFSAPPELLANTS (SIC).[7]

The Ruling of the CA

On July 31, 2003, the CA rendered a decision reversing and setting aside the
RTC decision and ordering the case remanded to the RTC for further
proceedings. The dispositive portion of the CA decision reads as follows:
WHEREFORE, premises considered, the appeal is hereby
GRANTED. The assailed decision dated February 19, 1993 is hereby
REVERSED and SET ASIDE. Let the record be REMANDED to the
trial court for further proceedings in accordance with the foregoing
disquisition.
SO ORDERED.[8]

The CA ruled, among others, that the RTC committed four (4) errors in
declaring the respondents in default and proceeding to hear the case. The
RTC committed its first errorwhen it abandoned the proper modes of service
of notices, orders, resolutions or judgments as the petitioners failed to

21

comply with its order dated August 17, 1990, directing them to report the
addresses and whereabouts of the respondents so that they could be properly
notified.
The second error was the failure of the RTC to avail of substituted service
after failing to effect personal service or service by mail. It perpetrated
its third error when it authorized service by publication after dismissing the
case for failure of the petitioners to furnish the current addresses of the
respondents. The CA reasoned out that there was nothing in the rules which
would authorize publication of a notice of hearing to file answer and for
what was authorized to be published were summons and final orders and
judgments. The fourth error was committed when the respondents were
declared in default because they were not duly notified and, therefore, were
denied due process.
The CA stated that since the RTC failed to notify the respondents of the
proceedings undertaken, the latter were denied the chance to actively
participate therein. It explained as follows:
Instead of observing the above precepts by according
defendants-appellants every opportunity to ventilate their side of
the controversy, the trial court failed not only to notify them of the
proceedings undertaken relative to the resolution of the case but the
chance as well to actively participate therein. It bears stressing that
defendants-appellants were not informed of the reinstatement of
the case against them when the High Tribunal set aside the orders
of the trial court dated May 11, 1984, September 21,
1984 and November 8, 1983 dismissing the complaint instituted by
plaintiffs-appellees. Likewise, defendants-appellants were not
apprised of the reconstitution of the records of the case which were
destroyed by the fire that razed the City Hall of Quezon City. In the
same manner, they were not notified of the withdrawal of the OSG
as their official counsel of record, much less was their consent
thereto sought. Finally and most significantly, defendantsappellants were precluded the chance to file their respective answer
or responsive pleadings to the complaint with the issuance of the
order dated December 5, 1991 declaring them in default

22

notwithstanding the defective service by publication of the courts

notice requiring them to file such answer or responsive pleading.[9]

Not satisfied, the petitioners come to this Court praying for the reversal and
setting aside of the CA decision anchored on the following arguments:
I
IN REVERSING THE TRIAL COURTS RULINGS DECLARING
DEFENDANTS IN DEFAULT AND ALLOWING PLAINTIFFS TO
PRESENT THEIR EVIDENCE EX-PARTE; AND IN NULLIFYING
THE TRIAL COURTS JUDGMENT BY DEFAULT, THE COURT A
QUO ACTED CONTRARY TO LAW AND JURISPRUDENCE AND
SO FAR DEPARTED FROM THE USUAL COURSE OF JUDICIAL
PROCEEDINGS AS TO WARRANT THE EXERCISE BY THIS
COURT OF ITS POWER OF SUPERVISION.[10]
II
IN HOLDING THAT THE TRIAL COURT ERRED IN DENYING
RESPONDENTS MOTION FOR NEW TRIAL TO SET ASIDE THE
JUDGMENT AND PETITION FOR RELIEF FROM JUDGMENT,
THE COURT A QUO ACTED CONTRARY TO LAW AND
JURISPRUDENCE, AND SO FAR DEPARTED FROM THE USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO WARRANT THE
EXERCISE BY THIS COURT OF ITS POWER OF SUPERVISION.[11]

The Petitioners Position

The petitioners claim that the RTC did not err in declaring the respondents in
default and in allowing them to present evidence ex- parte; that the
respondents were represented by the OSG from 1983 up to December 11,
1990 when the latter withdrew its appearance from the case; that after the
respondents had appeared, thru the OSG, by filing a motion to dismiss, the
petitioners were under no obligation to track down the respondents addresses
since the Rules of Court provide that once a litigant is represented by
counsel, all notices, motions and pleadings must be sent to him as counsel of
record; that it is a matter of record that the OSG was furnished copies of all
23

court orders and the petitioners pleadings for the period it remained as the
respondents counsel of record or from 1983 until the OSG withdrew on
December 11, 1990; that as counsel of record, the OSG was duty-bound to
file the respondents answer to the complaint within 15 days from notice that
it was reinstated by this Court and the case was remanded to the RTC for
further proceedings; and that despite having received copies of this Courts
decision in G.R. No. 69866 on or about April 20, 1988 and despite having
been duly notified of the finality of said decision by means of this Courts
Entry of Judgment, the OSG did not file any answer or seek an extension of
time to do so.
The petitioners further argue that as early as May 1988, when this
Courts decision became final and executory and the respondents received
notice thereof through their counsel of record, it was incumbent upon them
to have answered the complaint within the period provided by the Rules of
Court; that the RTC was not hasty in declaring the respondents in default for
they were given several chances to file their answers even after their period
to do so had already lapsed; that it was the respondents failure to exercise
ordinary prudence in monitoring the progress of this case that placed the
petitioners in a difficult situation; that the respondents in this case cannot
seize control of the proceedings or cause them to be suspended indefinitely
by the simple expedient of not filing their answers or by feigning ignorance
of the status of the proceedings; that the rule on service of summons by
means of publication applies to service of summons by publication, not to
notices to file answer by publication; that while service of summons by
publication entails acquiring jurisdiction over the person of the defendant, it
was already obtained over the respondents in this case by their voluntary
appearance through counsel and their act of filing a motion to dismiss on
substantive grounds; that substituted service was an exercise in futility
because the respondents were no longer holding the positions they were

24

holding at the time the petition was filed and, therefore, could not be reached
at the addresses indicated on the complaint; that the only remaining option
was to notify the respondents by publication; that the RTC did not err in
holding that the respondents failed to establish the fraud, accident, mistake
and/or excusable negligence that would warrant the grant of a new trial, or
the setting aside of the judgment and/or petition for relief from judgment;
that the negligence of the OSG is binding on the respondents in the same
manner that its initial success in securing the dismissal of the case was
binding on them; and that it would be highly unfair to allow the respondents,
who reaped the benefits of the initial dismissal of the case and never
complained then about the OSG, to suddenly complain that they were not
bound by their counsels handling or mishandling of the case.
The Respondents Position
The respondents counter that the CA did not commit a reversible error in
reversing and setting aside the default judgment rendered by the RTC; that
the petitioners failed to address four (4) errors committed by the RTC cited
by the CA; that the respondents were deprived of the opportunity to file their
answer or responsive pleadings to the complaint when the RTC issued a
default order against them after a defective service of notice to file answer
by publication; that the petitioners invocation of the jurisprudence that a
defaulting party has the burden of showing that he has a meritorious defense
does not apply in this case; and that what should apply is the settled rule that
once a denial or deprivation of due process is determined, the RTC is ousted
of its jurisdiction to proceed and its judgment is null and void.

The Courts Ruling

25

The basic question is whether the constitutional right to procedural

due process was properly observed or was unacceptably violated in this case
when the respondents were declared in default for failing to file their answer
within the prescribed period and when the petitioners were allowed to
present their evidence ex-parte.
Section 1, Article III of the 1987 Constitution guarantees that:
No person shall be deprived of life, liberty, or property
without due process of law nor shall any person be denied
the equal protection of the law.

Procedural due process is that which hears before it condemns, which

proceeds upon inquiry and renders judgment only after trial. It contemplates
notice and opportunity to be heard before judgment is rendered affecting
one's person or property.[12]
Moreover, pursuant to the provisions of Section 5(5) of Article VIII of
the 1987 Constitution,[13] the Court adopted and promulgated the following
rules concerning, among others, the protection and enforcement of
constitutional rights, pleading, practice and procedure in all courts:

Rule 13
SEC. 5. Modes of service.Service of pleadings,
motions, notices, orders, judgments and other papers shall
be made either personally or by mail.
SEC. 6. Personal service.Service of the papers may be
made by delivering personally a copy to the party or his
counsel, or by leaving it in his office with his clerk or with a
person having charge thereof. If no person is found in his
office, or his office is not known, or he has no office, then by
leaving the copy, between the hours of eight in the morning
26

and six in the evening, at the partys or counsels residence, if

known, with a person of sufficient age and discretion then
residing therein.
SEC. 7. Service by mail.Service by registered mail
shall be made by depositing the copy in the office, in a
sealed envelope, plainly addressed to the party or his
counsel at his office, if known, otherwise at his residence, if
known, with postage fully prepaid, and with instructions to
the postmaster to return the mail to the sender after ten (10)
days if undelivered. If no registry service is available in the
locality of either the sender or the addressee, service may be
done by ordinary mail.
SEC. 8. Substituted service.If service of pleadings,
motions, notices, resolutions, orders and other papers
cannot be made under the two preceding sections, the office
and place of residence of the party or his counsel being
unknown, service may be made by delivering the copy to the
clerk of court, with proof of failure of both personal service
and service by mail. The service is complete at the time of
such delivery.

The above rules, thus, prescribe the modes of service of pleadings,

motions, notices, orders, judgments, and other papers, namely: (1) personal
service; (2) service by mail; and (3) substituted service, in case service
cannot be effected either personally or by mail.
The Rules of Court has been laid down to insure the orderly conduct
of litigation and to protect the substantive rights of all party litigants. It is for
this reason that the basic rules on the modes of service provided under Rule
13 of the Rules of Court have been made mandatory and, hence, should be
strictly followed. In Marcelino Domingo v. Court of Appeals, [14] the Court
wrote:
Section 11, Rule 13 of the Rules of Court states:
SEC. 11. Priorities in modes of service and filing.
Whenever practicable, the service and filing of pleadings
27

and other papers shall be done personally. Except with

respect to papers emanating from the court, a resort to
other modes must be accompanied by a written explanation
why the service or filing was not done personally. A
violation of this Rule may be cause to consider the paper as
not filed.
Section
11
is mandatory.
In
Solar
Team
Entertainment, Inc. v. Judge Ricafort, the Court held that:
Pursuant x x x to Section 11 of Rule 13, service and
filing of pleadings and other papers must, whenever
practicable, be done personally; and if made through other
modes, the party concerned must provide a written
explanation as to why the service or filing was not done
personally. x x x
Personal service and filing are preferred for obvious
reasons. Plainly, such should expedite action or resolution
on a pleading, motion or other paper; and conversely,
minimize, if not eliminate, delays likely to be incurred if
service or filing is done by mail, considering the inefficiency
of postal service. Likewise, personal service will do away
with the practice of some lawyers who, wanting to appear
clever, resort to the following less than ethical practices: (1)
serving or filing pleadings by mail to catch opposing counsel
off-guard, thus leaving the latter with little or no time to
prepare, for instance, responsive pleadings or an
opposition; or (2) upon receiving notice from the post office
that the registered parcel containing the pleading of or other
paper from the adverse party may be claimed, unduly
procrastinating before claiming the parcel, or, worse, not
claiming it at all, thereby causing undue delay in the
disposition of such pleading or other papers.
If only to underscore the mandatory nature of this
innovation to our set of adjective rules requiring personal
service whenever practicable, Section 11 of Rule 13 then
gives the court the discretion to consider a pleading or paper
as not filed if the other modes of service or filing were
resorted to and no written explanation was made as to why
personal service was not done in the first place. The exercise
28

of discretion must, necessarily, consider the practicability of

personal service, for Section 11 itself begins with the clause
"whenever practicable."
We thus take this opportunity to clarify that under
Section 11, Rule 13 of the 1997 Rules of Civil Procedure,
personal service and filing is the general rule, and resort to
other modes of service and filing, the exception. Henceforth,
whenever personal service or filing is practicable, in light of
the circumstances of time, place and person, personal
service or filing is mandatory. Only when personal service or
filing is not practicable may resort to other modes be had,
which must then be accompanied by a written explanation
as to why personal service or filing was not practicable to
begin with. In adjudging the plausibility of an explanation, a
court shall likewise consider the importance of the subject
matter of the case or the issues involved therein, and the
prima facie merit of the pleading sought to be expunged for
violation of Section 11. This Court cannot rule otherwise, lest
we allow circumvention of the innovation introduced by the
1997 Rules in order to obviate delay in the administration of
justice.
xxxx
x x x [F]or the guidance of the Bench and Bar, strictest
compliance with Section 11 of Rule 13 is mandated.
[Emphasis supplied]

In the case at bench, the respondents were completely deprived of due

process when they were declared in default based on a defective mode of
service service of notice to file answer by publication. The rules on service
of pleadings, motions, notices, orders, judgments, and other papers were not
strictly followed in declaring the respondents in default. The Court agrees
with the CA that the RTC committed procedural lapses in declaring the
respondents in default and in allowing the petitioners to present evidence exparte.

29

A review of the records discloses that after the Court rendered its
April 15, 1988 Decision in G.R. No. 69866, annulling the RTC orders dated
November 8, 1983, May 11, 1984 and September 21, 1984 and ordering the
remand of the case to the RTC for further proceedings, the RTC issued an
order[15] dated August 17, 1990 directing the petitioners to report the
addresses and whereabouts of the respondents so that they would be
properly notified of the proceedings. This directive was issued by the RTC
considering that the respondents counsel of record, the OSG, could no longer
represent them and because the respondents were no longer holding official
government positions because of a change in government brought about by
the 1986 EDSA Revolution. This order was likewise made in response to the
motion[16] filed by the petitioners praying that the respondents be required to
file their answer.
Instead of complying with the RTCs directive to report the
respondents addresses and whereabouts, the petitioners filed a
motion[17] dated September 4, 1990 to declare the respondents in default. On
December 27, 1990, the RTC denied the petitioners default motion because
the respondents were not duly notified of the April 15, 1988 Decision of this
Court and the OSG no longer wanted to represent them. The RTC likewise
ordered the petitioners to comply with its August 17, 1990 Order, otherwise,
the case would be archived and eventually dismissed. On February 1, 1991,
the RTC denied the petitioners motion for reconsideration and on March 7,
1991, it issued an order dismissing the case without prejudice.
Surprisingly, on June 4, 1991, the RTC issued an order[18] setting aside
its March 7, 1991 Order and reinstating the case. It directed the petitioners,
among others, to cause the publication of a notice on the respondents to file
answer or responsive pleading. After the petitioners complied with the
publication requirements, the RTC issued the order dated December 5,
1991 declaring the respondents in default and directing the petitioners to
present evidence ex-parte.
As correctly observed by the CA, the RTCs August 17, 1990 Order
was an attempt to serve a notice to file answer on the respondents by
personal service and/or by mail. These proper and preferred modes of
30

service, however, were never resorted to because the OSG abandoned them
when the petitioners failed to comply with the August 17, 1990RTC order
requiring them to report the addresses and whereabouts of the respondents.
Nevertheless, there was still another less preferred but proper mode of
service available substituted service - which is service made by delivering
the copy to the clerk of court, with proof of failure of both personal service
and service by mail. Unfortunately, this substitute mode of service was not
resorted to by the RTC after it failed to effect personal service and service by
mail. Instead, the RTC authorized an unrecognized mode of service under
the Rules, which was service of notice to file answer by publication.
Considering the fact that the OSG could no longer represent the
respondents, the RTC should have been more patient in notifying the
respondents through personal service and/or service by mail. It should not
have simply abandoned the preferred modes of service when the petitioners
failed to comply with its August 17, 1990 order with the correct addresses of
the respondents. More so, it should not have skipped the substituted service
prescribed under the Rules and authorized a service of notice on the
respondents to file answer by publication.
In view of the peculiar circumstances surrounding the case, the RTC
should have instead directed the petitioners to exert diligent efforts to notify
the respondents either personally or by registered mail. In case the preferred
modes were impractical, the Court should have required the petitioners to at
least report in writing why efforts exerted towards personal service or
service by mail failed. In other words, a convincing proof of an impossibility
of personal service or service by mail to the respondents should have been
shown first. The RTC, thus, erred when it ruled that the publication of a
notice to file answer to the respondents substantially cured the procedural
defect equivalent to lack of due process. The RTC cannot just abandon the
basic requirement of personal service and/or service by mail.

31

At any rate, the Court is of the view that personal service to the
respondents was practicable under the circumstances considering that they
were well-known persons who used to occupy high government positions.
To stress, the only modes of service of pleadings, motions, notices,
orders, judgments and other papers allowed by the rules are personal service,
service by mail and substituted service if either personal service or service
by mail cannot be made, as stated in Sections 6, 7 and 8 of Rule 13 of the
Rules of Court. Nowhere under this rule is service of notice to file answer by
publication is mentioned, much less recognized.
Furthermore, the Court would like to point out that service by
publication only applies to service of summons stated under Rule 14 of the
Rules of Court where the methods of service of summons in civil cases are:
(1) personal service;[19] (2) substituted service;[20] and (3) service by
publication.[21] Similarly, service by publication can apply to judgments, final
orders and resolutions as provided under Section 9, Rule 13 of the Rules of
Court, as follows:
SEC. 9. Service of judgments, final orders or
resolutions. Judgments, final orders or resolutions shall be
served either personally or by registered mail. When a
partysummoned by publication has failed to appear in the
action, judgments, final orders or resolutions against him
shall be served upon him also by publication at the expense
of the prevailing party. [Emphasis supplied]
As correctly ruled by the CA:
Its third error was when it authorized service by
publication after initially dismissing the case for failure of
plaintiffs-appellees to furnish the current address of
defendants-appellants. There is, however, nothing in the
Rules that authorizes publication of a notice of hearing to
file answer. What is authorized to be published are: (1)
summons, and (2) final orders and judgments.
Xxx xxx xxx

32

The above-quoted provision cannot be used to justify

the trial courts action in authorizing service by publication.
Firstly, what was published was not a final order or
judgment but a simple order or notice to file answer.
Secondly, even granting that the notice to file answer can be
served by publication, it is explicit in the Rule that
publication is allowed only if the defendant-appellant was
summoned by publication. The record is clear that
defendants-appellants were not summoned by publication.

On this point, the petitioners argue that the publication was a valid and
justified procedure because following the ruling of the RTC, it was an extra
step to safeguard the interest of the defendants done pursuant to the inherent
power of the courts to control its proceedings to make them comfortable to
law and justice. The petitioners further argue that the defendants in a civil
case cannot seize control of the proceedings or cause them to be suspended
indefinitely by the simple expedient of not filing their answers or by
feigning ignorance of the proceedings. All these could have been avoided
had the defendants not been so inexplicably complacent and utterly lacking
in ordinary prudence.
The Court is not convinced.
As already discussed above, the basic rules on modes of service of
pleadings, motions, notices, orders, judgments, and other papers are
mandatory in nature and, therefore, must be strictly observed. The Court is
not unaware of the inherent power of courts to control its proceedings.
Nonetheless, the exercise of such inherent power must not violate basic
court procedures. More importantly, it must not disregard ones basic
constitutional right to procedural due process.

This was precisely the reason for the RTCs denial of the petitioners
default motion in its August 17, 1990 Order, and for the eventual dismissal
of the case in its December 27, 1990 Order.
33

It must be noted that as the RTC orders stated, the respondents were
not notified of the April 15, 1988 Decision of this Court, which ordered the
re-opening and remanding of this case to the RTC. They were neither
notified of the reconstitution proceedings that took place pertaining to the
burned records of the case. The RTC further stated that the respondents were
no longer holding their official government positions and that they were no
longer represented by the OSG on account of the change in government. In
other words, the respondents had no counsel of record and no notice of
subsequent proceedings. In short, due process was absent.
Next, the court records got burned during the June 11, 1988 fire that
hit the Quezon City Hall where the records were kept. On March 12, 1990,
the RTC granted the petitioners petition for reconstitution. Again, the records
do not show that the RTC initiated extra efforts to notify the respondents
about the reconstitution proceedings. The entire records of this case tend to
show that the respondents were completely out of the picture until after the
promulgation of the RTC decision.
On countless occasions, the Court ruled that, generally, judgments by
default are looked upon with disfavor and are frowned upon as contrary to
public policy. An example here would be the case of Regalado P. Samartino
v. Leonor B. Raon,[22] where the Court stated:
The trial court should not have been too rash in
declaring petitioner in default, considering it had actual
notice of valid reasons that prevented him from answering.
Well-settled is the rule that courts should be liberal in
setting aside orders of default for default judgments are
frowned upon, unless in cases where it clearly appears that
the reopening of the case is intended for delay. The issuance
of orders of default should be the exception rather than the
rule, to be allowed only in clear cases of obstinate refusal by
the defendant to comply with the orders of the trial court.
Suits should as much as possible be decided on the
merits and not on technicalities. In this regard, we have
often admonished courts to be liberal in setting aside orders
34

of default as default judgments are frowned upon and not

looked upon with favor for they may amount to a positive
and considerable injustice to the defendant and the
possibility of such serious consequences necessitates a
careful examination of the grounds upon which the
defendant asks that it be set aside. Since rules of procedure
are mere tools designed to facilitate the attainment of
justice, it is well recognized that this Court is empowered to
suspend its operation, or except a particular case from its
operation, when the rigid application thereof tends to
frustrate rather than promote the ends of justice. We are not
unmindful of the fact that during the pendency of the
instant petition, the trial court has rendered judgment
against petitioners. However, being the court of last resort,
we deem it in the best interest that liberality and relaxation
of the Rules be extended to petitioners by setting aside the
order of default issued by the trial court and the consequent
default judgment; otherwise, great injustice would result if
petitioners are not afforded an opportunity to prove their
claims.

Finally, the Court finds unacceptable the petitioners contention that 1)

the respondents were well represented by counsel from 1983 up to
December 1990 and that the respondents were properly notified of the entire
proceedings through their counsel; 2) the respondents counsel was negligent
for failing to file an answer within the prescribed period; and 3) the
negligence of the OSG binds the respondents.
The petitioners do not deny the fact that on May 15, 1985, they filed a
petition for certiorari before this Court questioning the RTC orders granting
the respondents motion to dismiss and denying their motion for
reconsideration. They do not question the fact that while their petition was
pending in this Court, the 1986 EDSA Revolution took place which resulted
in the removal of the respondents from their respective high government
offices and the replacement of then Solicitor General Estelito Mendoza (Sol.
Gen. Mendoza). There is likewise no dispute that subsequently, on April 15,
1988, this Court rendered its decision annulling the subject RTC orders and

35

remanding the case to the RTC for further proceedings. The case was then
re-raffled to another branch.
Clearly from the above circumstances, there was no longer any
lawyer-client relationship between the OSG and the respondents at the time
the decision of the Court dated April 15, 1988 was promulgated because,
admittedly, after the 1986 EDSA Revolution, the respondents were no longer
occupying their respective government positions and Sol. Gen. Mendoza,
who represented them, was no longer the Solicitor General.
In fact, in compliance with the RTCs order dated September 10, 1990,
former Solicitor General Mendoza submitted a manifestation[24] that his
legal representation for the respondents was deemed terminated when he
ceased to be the Solicitor General and that he was not representing the
respondents in his private capacity. For his part, onDecember 11, 1990, the
incumbent Solicitor General at that time, Solicitor General Francisco
Chavez (Sol. Gen. Chavez), filed a notice of withdrawal of appearance for
the respondents citing the case of Urbano v. Chavez,[25] where the Court
ruled that the OSG is not authorized to represent a public official at any
stage of a criminal case or in a civil suit for damages arising from a felony.
The records do not show any proof that the respondents were furnished a
copy of this notice of withdrawal or whether or not they gave their
conformity thereto.
[23]

Contrary to the petitioners position, while it is true that Sol. Gen.

Chavez filed a notice of withdrawal only on December 11, 1990, the
respondents were in effect no longer represented by counsel as early as April
15, 1988 when the Courts decision was rendered, or much earlier, right after
the 1986 EDSA Revolution due to the change in government. The Court
cannot subscribe to the petitioners argument that there was negligence or
mistake on the part of the OSG considering that Sol. Gen. Mendoza ceased
to hold office due to the EDSA Revolution while Sol. Gen. Chavez withdrew
his representation because of the prohibition in Urbano v.
Chavez. Definitely, Sol. Gen. Mendozas cessation from holding office and
Sol. Gen. Chavezs withdrawal of representation in the unique scenario of
this case are not equivalent to professional delinquency or ignorance,
36

incompetency or inexperience or negligence and dereliction of duty. Hence,

there is no negligence of counsel in this case. After the 1986 EDSA
Revolution, the respondents were practically left without counsel.
As a final point, this Court commiserates with the petitioners plight
and cry for justice. They should not be denied redress of their grievances.
The Court, however, finds Itself unable to grant their plea because the
fundamental law clearly provides that no person shall be deprived of life,
liberty and property without due process of law.
WHEREFORE, the petition is DENIED.
SO ORDERED.
Marinduque Mining and Industrial Corp. vs. NAPOCOR, G.R. No.
161219, October 6, 2008

MARINDUQUE MINING AND G.R. No. 161219

INDUSTRIAL CORPORATION and
INDUSTRIAL ENTERPRISES, INC.,
Petitioners,
Present:
PUNO, C.J., Chairperson,
- versus - CARPIO,
AZCUNA,
REYES,* and
LEONARDO-DE CASTRO, JJ.
COURT OF APPEALS and
NATIONAL POWER Promulgated:
CORPORATION,
Respondents. October 6, 2008
x--------------------------------------- - - - - - - - - - - -x
37

DECISION
CARPIO, J.:
The Case
This petition for review[1] seeks the reversal of the 27
February
2003 Decision[2] and 17
November
[3]
2003 Resolution of the Court of Appeals in CA-G.R. SP No.
72402. In its 27 February 2003 Decision, the Court of
Appeals set aside the 15 May 2002 [4] and 24 June
2002[5] Orders of Judge Mamindiara P. Mangotara, Presiding
Judge of the Regional Trial Court of Lanao del Norte, Branch
1, Iligan City (trial court), and ordered the trial court to give
due course to respondent National Power Corporations
(NAPOCOR) appeal.In its 17 November 2003 Resolution, the
Court of Appeals denied the motion for reconsideration of
petitioners Marinduque Mining and Industrial Corporation
and Industrial Enterprises, Inc. (petitioners).
The Facts
On 1 June 1999, NAPOCOR filed a complaint[6] for
expropriation against petitioners for the construction of the
AGUS
VI Kauswagan 69
KV
Transmission
Line
Project.NAPOCOR sought to expropriate 7,875 square meters
of petitioners property covered by Transfer Certificate of Title
Nos. T-955 and T-956.[7]
Petitioners filed their answer[8] with counterclaim and alleged
that the expropriation should cover not only 7,875 square
meters but the entire parcel of land. Petitioners claimed that
the expropriation would render the remaining portion of their
property valueless and unfit for whatever purpose.

38

In its 5 December 2001 Decision,[9] the trial court fixed the

fair market value of the 7,875-square meter lot at P115 per
square meter.[10] The trial court also directed the
commissioners to submit a report and determine the fair
market value of the dangling area, consisting of 58,484
square
meters,
affected
by
the
installation
of NAPOCORstransmission lines.
NAPOCOR filed a motion for reconsideration. In its Order
dated 4
February
2002,[11] the
trial
court
denied NAPOCORs motion.
In its 19 March 2002 Supplemental Decision,[12] the trial court
declared that the dangling area consisted of 48,848.87
square meters and fixed its fair market value at P65 per
square meter. The trial court ruled that petitioners are
entitled
to
consequential
damages
because NAPOCORs expropriation impaired the value of the
dangling area and deprived petitioners of the ordinary use of
their property.
NAPOCOR filed a motion for reconsideration. In its Order
dated 24 June 2002,[13] the trial court denied the motion for
being moot and academic because on 2 April 2002,
NAPOCOR filed a Notice of Appeal [14] of the 19 March
2002 Supplemental Decision.
On the other hand, petitioners moved for the execution of
the trial courts 5 December 2001 Decision and 19 March
2002 Supplemental Decision. In its 26 April 2002 Order, the
trial court partially granted petitioners motion and, on 2 May
2002, issued the writ of execution for the 5 December
2001 Decision.
On 29 April 2002, petitioners filed a motion to strike out or
declare as not filed the notice of appeal dated April 2, 2002;
to declare the supplemental decision as final andexecutory;
39

and to issue the corresponding writ of execution

thereon. Petitioners argued that NAPOCOR violated Section
11, Rule 13[15] of the Rules of Court because NAPOCOR filed
and served the notice of appeal by registered
mail. According to petitioners, NAPOCOR had all the vehicles
and manpower to personally serve and file the notice of
appeal.
NAPOCOR opposed petitioners motion and alleged that its
legal office is severely undermanned with only one vehicle
and one employee, acting as secretary, handling 300 active
cases in Mindanao. NAPOCOR also added that it was highly
irregular for petitioners to question its mode of service and
filing only at this stage of the proceedings because since the
inception of the case, NAPOCOR had resorted to registered
mail instead of personal service.
In its 15 May 2002 Order, the trial court granted petitioners
motion and denied NAPOCORs notice of appeal. The trial
court gave more credence to petitioners allegations and
declared that NAPOCORs explanation was a patent violation
of the Rules. The trial court considered the notice of appeal
as not filed at all and, since the period of appeal had already
expired, declared its 19 March 2002 Supplemental Decision
final and executory.
NAPOCOR filed a motion for reconsideration. [16] In its 24 June
2002 Order, the trial court denied NAPOCORs motion.
On 23 August 2002, NAPOCOR filed a special civil action for
certiorari with a prayer for a temporary restraining order
before the Court of Appeals. NAPOCOR argued that the trial
court acted without or in excess of jurisdiction and gravely
abused its discretion when it denied NAPOCORs notice of
appeal of the 19 March 2002 Supplemental Decision on the
sole ground that it was not filed and served personally.
40

The Ruling of the Court of Appeals

In its 27 February 2003 Decision, the Court of Appeals
ruled in NAPOCORs favor and set aside the trial courts 15
May 2002 and 24 June 2002 Orders. The Court of Appeals
also ordered the trial court to give due course
to NAPOCORs appeal. The Court of Appeals declared that the
trial court acted whimsically and capriciously when it denied
the notice of appeal and declared the 19 March
2002 Supplemental Decision final and executory. The Court
of Appeals noted that service by registered mail was
previously resorted to by both parties and yet, this was the
first time petitioners questioned NAPOCORs mode of
service. The Court of Appeals added that the trial court
should have given due course toNAPOCORs appeal because
of the large amount of public funds involved considering the
significant disparity between the area sought to be
expropriated and the dangling area.The Court of Appeals
also said that the Rules should be liberally construed to
effect substantial justice.
Petitioners filed a motion for reconsideration. In its 17
November 2003 Resolution, the Court of Appeals denied
petitioners motion.
Hence, this petition.
The Issues
Petitioners raise the following issues:
1. Whether the Court of Appeals erred in ruling that the
trial courts issuance of the 15 May 2002 and 24 June
2002 Orders was attended with grave abuse of
discretion amounting to lack of jurisdiction; and

41

2. Whether the Court of Appeals erred in ruling that

the 19 March 2002 Supplemental Decision is not final
and executory.
The Ruling of the Court
The petition has no merit.
On NAPOCORs failure to comply with Section 11,
Rule 13 of the Rules of Court
Petitioners maintain that the trial court had the wide latitude
of discretion to consider the notice of appeal as not filed at
all because NAPOCOR failed to comply with the Rules.
On the other hand, NAPOCOR argues that the Rules allow
resort to other modes of service and filing as long as the
pleading was accompanied by a written explanation why
service or filing was not done personally. NAPOCOR
maintains that it complied with the Rules because the notice
of appeal contained an explanation why NAPOCOR resorted
to service and filing by registered mail due to lack of
manpower to effect personal service.[17] NAPOCOR also
insists that petitioners are estopped from questioning its
mode of service and filing because since the inception of the
case, NAPOCOR had resorted to registered mail and yet,
petitioners only raised this issue when the notice of appeal
was filed.
Under Section 11, Rule 13 of the Rules, personal service of
pleadings and other papers is the general rule while resort to
the other modes of service and filing is the exception.When
recourse is made to the other modes, a written explanation
why service or filing was not done personally becomes
indispensable.[18] If no explanation is offered to justify

42

resorting to the other modes, the discretionary power of the

court to expunge the pleading comes into play. [19]
In Solar Team Entertainment, Inc. v. Ricafort,[20] we ruled:
We thus take this opportunity to clarify that under
Section 11, Rule 13 of the 1997 Rules of Civil
Procedure, personal service and filing is the general
rule, and resort to other modes of service and filing,
the exception. Henceforth, whenever personal
service or filing is practicable, in light of the
circumstances of time, place and person, personal
service or filing is mandatory. Only when personal
service or filing is not practicable may resort to
other modes be had, which must then be
accompanied by a written explanation as to why
personal service or filing was not practicable to
begin with. In adjudging the plausibility of an
explanation, a court shall likewise consider the
importance of the subject matter of the case or the
issues involved therein, and theprima facie merit of
the pleading sought to be expunged for violation of
Section 11.[21]

In
this
case,
NAPOCOR
complied
with
the
Rules. NAPOCORs notice of appeal sufficiently explained why
the notice of appeal was served and filed by registered mail
due to lack of manpower to effect personal service. This
explanation is acceptable for it satisfactorily shows why
personal service was not practicable. [22] Moreover, the Court
of Appeals correctly considered the importance of the issue
involved in the case. Therefore, the Court of Appeals did not
err when it ruled that the trial court acted with grave abuse
of discretion in the issuance of the 15 May 2002 and 24 June
2002 Orders.

43

On NAPOCORs failure to file a record on appeal

Petitioners maintain that NAPOCORs appeal should be
dismissed because NAPOCOR failed to file a record on appeal
and consequently, it failed to comply with the material data
rule.[23]
NAPOCOR argues that in this case the filing of a record on
appeal is superfluous because the trial court had nothing
else to resolve as the 19 March 2002 Supplemental Decision
finally disposed of the case. Moreover, NAPOCOR states that
petitioners only raised this issue in petitioners comment
before the Court of Appeals.
No record on appeal shall be required except in special
proceedings and other cases of multiple or separate appeals
where the law or the Rules of Court so require. [24] The reason
for multiple appeals in the same case is to enable the rest of
the case to proceed in the event that a separate and distinct
issue is resolved by the trial court and held to be final. [25]In
such a case, the filing of a record on appeal becomes
indispensable since only a particular incident of the case is
brought to the appellate court for resolution with the rest of
the proceedings remaining within the jurisdiction of the trial
court.
Jurisprudence recognizes the existence of multiple appeals in
a complaint for expropriation because there are two stages
in every action for expropriation. [26] The first stage is
concerned with the determination of the authority of the
plaintiff to exercise the power of eminent domain and the
propriety of its exercise in the context of the facts involved in
the suit.[27] The order of expropriation may be appealed
by any party by filing a record on appeal. [28] The second
stage is concerned with the determination by the court of
44

the just compensation for the property sought to be

expropriated.[29] A second and separate appeal may be taken
from this order fixing the just compensation. [30]
In this case, since the trial court fully and finally resolved all
conceivable issues in the complaint for expropriation, there
was no need for NAPOCOR to file a record on appeal. In its 5
December
2001 Decision,
the
trial
court
already
determined NAPOCORs authority to exercise the power of
eminent domain and fixed the just compensation for the
property sought to be expropriated. NAPOCOR filed a motion
for reconsideration. But after the trial court denied the
motion,
NAPOCOR
did
not
appeal
the
decision
anymore. Then, in its19 March 2002 Supplemental Decision,
the trial court fixed the just compensation for the dangling
area. NAPOCOR filed a motion for reconsideration and the
trial court denied the motion. NAPOCOR then filed a notice of
appeal. At this stage, the trial court had no more issues to
resolve and there was no reason why the original records of
the case must remain with the trial court. Therefore, there
was no need for NAPOCOR to file a record on appeal because
the original records could already be sent to the appellate
court.
Moreover, petitioners did not raise this issue in their motion
to strike out or declare as not filed the notice of appeal dated
April 2, 2002; to declare the supplemental decision as final
and executory; and to issue the corresponding writ of
execution thereon before the trial court. It is settled that an
issue not raised during the trial could not be raised for
thefirst time on appeal as to do so would be offensive to the
basic rules of fair play, justice, and due process. [31]
WHEREFORE, we DENY the petition. We AFFIRM the 27
February 2003 Decision and 17 November 2003 Resolution
of the Court of Appeals in CA-G.R. SP No. 72402.

45

SO ORDERED.

De Los Santos vs. Elizalde, G.R. Nos. 141810 & 141812, February 2,
2007 VELASCO, JR., J.:

Diligence is the mother of good fortune.

Miguel De Cervantes

Parties should not leave the entire business of litigation solely to their
counsels. Basic diligence requires that parties themselves should closely
monitor the developments in their cases. They should provide full support to
their lawyers and even work hand in hand with them to ensure the diligent
pursuit and effective prosecution of their cases.Inevitably, their failure to do
so could result in prejudicial consequences.
The Case
This Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeks to reverse and set aside the May 11, 1999 Decision [1] of the Court of
Appeals (CA), dismissing petitioners appeal based on a compromise
agreement and considering their appeal as abandoned in CA-G.R. CV No.
54136 and CA-G.R. SP No. 48475; and the January 31, 2000 Resolution [2] of
the CA, denying petitioners Motion for Reconsideration.[3] The CA appeal
stemmed from the Kalibo, Aklan Regional Trial Court (RTC), Branch VI
April 29, 1996 Decision[4] in Civil Case No. 3683, declaring intervenors
Jesus delos Santos and Rosita delos Santos-Flores as lawful owners of twothirds (2/3) of the disputed land, and Fred and Joan Elizalde as owners of the
remaining one-third (1/3) of the land.
The Facts

46

On December 15, 1986, petitioners filed a Complaint for Quieting of Title,

Damages and Attorneys Fees before the Kalibo, Aklan RTC, involving four
(4) adjoining lots designated as Lots 393-A, 393-B, 394-D, and 394-E, with
areas of 1,515 square meters (sqm), 1,010 sqm, 5,764 sqm, and 6,482 sqm,
respectively, for a total land area of 14,771 sqm, located in Boracay Island,
Malay, Aklan.[5] An amended complaint was thereafter filed on May 8, 1991.
Petitioners claimed the aforementioned lots as their inheritance from
the late Mariano delos Santos, their common ascendant, either by their own
right or by right of representation. Petitioners alleged that the late Mariano
delos Santos was the original owner of the lots. On the other hand,
respondents spouses Fred and Joan Elizalde, the first set of intervenors
before the trial court, claimed that they purchased the lots on June 18,
1974 from the heirs of Leonardo delos Santos, he being the rightful and
exclusive owner of the said lots. Respondents Gloria Martin, Domingo
Casimero, Sergio Casimero, Abundio Casimero, and Teodoro Casimero, the
second set of intervenors before the trial court, claimed ownership over Lots
393-B and 394-E, as heirs of Tomasa Prado, who also allegedly owned said
lots. Respondents Rosita delos Santos-Flores and Jesus delos Santos, the
third set of intervenors and two of the three legitimate children of the late
Leonardo delos Santos, claimed 2/3 of the disputed lots as their rightful
inheritance. Respondents delosSantos alleged that they did not sell nor
assign their share in the property to anyone, including respondent Fred
Elizalde.
After due hearing of the case, the trial court issued the April 29,
1996 Decision, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing considerations,
judgment is hereby rendered as follows:
(1.) Dismissing the complaint filed by the plaintiffs as well
as the complaint in intervention filed by the second set of
intervenors Casimeros, et al. for lack of merit;

47

(2.) Declaring the two deeds of sale (Exhibits 29 and 30) as

null and void insofar as they affect the two-thirds (2/3) share
of intervenors Jesus and Rosita;
(3.) Declaring intervenors Jesus delos Santos and Rosita
delos Santos Flores as the lawful owners of the two-thirds
portion of the land in question or 9,915 square meters on the
northwest portion, representing as their shares in the intestate
estate of Leonardo delos Santos;
(4.) Declaring defendant Fred Elizalde as the rightful owner
of one-third of the land in question or 4,957 square meters
on the southeast portion, segregated by a boundary line
running from the seashore to the inland or from the
southwest to northeast;
(5.) Ordering the cancellation or revision of Tax Declaration
No. 4422 in the name of Fred Elizalde (Exhibit 26) and all
tax declarations issued subsequent thereto to conform to
paragraphs 3 and 4 hereof as well as the issuance of a new
tax declaration to intervenors Jesus delos Santos and Rosita
Flores covering their two-thirds (2/3) share;
(6.) Ordering the plaintiffs or any persons claiming interest
therein to deliver complete possession of the land to
defendants and first set intervenors.
No pronouncement as to costs.
SO ORDERED.[6]

Thus, petitioners and respondent Fred Elizalde filed their separate Notices of
Appeal dated June 6, 1996[7] and May 16, 1996,[8] respectively. The cases
were docketed as CA-G.R. SP No. 48475 for respondent Elizalde and CAG.R. CV No. 54136 for petitioners. Subsequently, the CA issued the June 2,
1998 Notice to File Brief,[9] requiring petitioners and respondent Elizalde to
file their briefs within forty-five (45) days from receipt of said notice.
On July 27, 1998, petitioners filed by registered mail a July 27, 1998 Motion
for Extension of Time to File Brief for Plaintiffs-Appellants. [10] In their
48

motion, petitioners admitted having received a copy of the Notice to File

Brief on June 15, 1998; thus, they had until July 30, 1998 to file their brief,
and prayed for an extension of forty-five (45) days from July 30,
1998 to September 13, 1998. On September 10, 1998, petitioners filed
another motion for extension,[11] seeking another forty five (45)-day
extension, or untilOctober 27, 1998, within which to file their brief.
In the meantime, respondents Fred Elizalde, Jesus delos Santos, and Rosita
delos Santos-Flores filed an October 6, 1998 Joint Manifestation and
Motion,[12] whereby respondent Elizalde abandoned his appeal by virtue of
an amicable settlement between the parties through the May 27, 1997
Agreement.[13] They agreed to swap and re-adjust the areas adjudged by the
trial court in their favor, without prejudice to a final judgment by the CA. In
addition, Elizalde moved that his appeal be considered as withdrawn and
that he be excused from filing an appellants brief.
On October 27, 1998, petitioners filed an Ex-Parte Motion for Final
Extension of Period to File Brief for Plaintiffs-Appellants, [14] seeking an
extension of thirty (30) days, or until November 27, 1998, within which to
file their brief. On November 27, 1998, petitioners filed another motion for
extension,[15] asking for another thirty (30)-day extension.And yet again,
on December 28, 1998, petitioners filed another motion for extension,
[16]
asking for another thirty (30)-day extension to file their brief, such that
the period sought to file appellants brief would be until January 27, 1999. In
sum, petitioners had a total extension of one hundred eighty (180) days
from July 27, 1998, when they filed a motion for extension before the CA
for the first time.
Respondents delos Santos opposed the foregoing motions for extension and
moved for the dismissal of the appeal for petitioners failure to file the
required appellants brief.
However, on April 8, 1999, petitioners, through their former counsel Atty.
Napoleon M. Victoriano, filed an Ex-Parte Motion to Withdraw Appeal.
[17]
Said motion sought the withdrawal of the appeal on the ground that
petitioners and respondents delos Santos entered into an amicable
49

settlement, denominated as an Undertaking executed on September 19,

1998,[18] whereby petitioners would be paid the amount of Four Million
Pesos (PhP 4,000,000.00), in consideration of their leaving the disputed lots
peacefully. Notably, the Undertaking was signed by 39 of the 46 petitioners,
[19]
and notarized by Atty. Edgar S. Calizo. More so, it was alleged in said
motion that the counsel for respondents delosSantos, Atty. Romeo R.
Robiso, executed a promissory note on October 15, 1998[20] on behalf of
petitioners, for the amount of Four Million Pesos (PhP 4,000,000.00).
On May 11, 1999, the CA issued the assailed Decision dismissing CA-G.R.
CV No. 54136 and SP No. 48475 and considering them withdrawn. It
justified its Decision in this wise: For failure to file their respective
appellants briefs, and in accordance with the prayer in the Joint
Manifestation and Motion, and in the Ex-Parte Motion to Withdraw Appeal,
the appeal should be dismissed, and considered as withdrawn.[21]
Thereafter, an Entry of Appearance[22] was filed on June 17, 1999 by Atty.
Cesar T. Verano, allegedly in representation of petitioners. The entry
contained the solitary conformity of petitioner Vicente delos Santos. On the
same day, petitioners filed a Motion for Reconsideration of Decision with
Prayer for Reinstatement of Appeal,[23] which was verified solely by
petitioner Vicente delos Santos. In their Motion for Reconsideration,
petitioners alleged that: (1) they did not have any knowledge of the
promulgation of the assailed Decision of the CA; (2) they never entered into
any amicable settlement with respondents delos Santos; (3) their alleged
signatures in the May 27, 1997 Agreement were forged; and (4) they never
authorized their former counsel, Atty. Victoriano, to withdraw their appeal.
Thus, petitioners prayed that: (1) their Motion for Reconsideration be
considered as filed on time; (2) the said Agreement allegedly entered into by
petitioners and respondents delos Santos be considered as invalid; (3) the
portion of the assailed Decision dismissing their appeal be reconsidered; (4)
their appeal be reinstated; and (5) they be granted a period of ninety (90)
days within which to file their appellants brief.
On July 16, 1999, respondents delos Santos then filed an Opposition to
Motion for Reconsideration.[24] The opposition was based on the
following: (1) that petitioners motion should be considered as mere scrap of
50

paper for not containing any notice of hearing; (2) that the appeal was
validly dismissed for petitioners failure to file their appellants brief; and (3)
that the Agreement was valid.
Petitioners subsequently filed a Reply (To Opposition) on July 30, 1999,
[25]
refuting the allegations made by respondents delos Santos; and attached
to the reply a handwritten note in Filipino, [26] stating that: (1) the signatories
did not sign the alleged Agreement; (2) they did not receive a single centavo
of the money alleged in the Agreement; (3) they did not authorize Atty.
Victoriano to withdraw their appeal; and (4) Atty. Victoriano did not furnish
them a copy of the Decision of the CA. The note was purportedly signed by
Vicente delos Santos, Constancia delos Santos, Terry Ann S. Carnacete,
Greta delos Santos, Daisy delos Santos, Jose delos Santos, Herminigildo
delos Santos, Peter delos Santos, Vivar delos Santos, Ibarra delos Santos,
Rosemarie Tuazon, Natividad Prado, Lito Prado, Felisa Casidsid, Ricardo
Fernando, Jesus Fernando, Rogelio Lacandula, Mergie C. Nieves, Anita C.
Baltazar, and Claire S. Lacandula. Of the signatories, only eight (8) are
among the forty-six (46) petitioners before the appellate court.
On January 31, 2000, the CA issued the assailed Resolution, wherein it was
ruled that:
The Motion for Reconsideration With Prayer for the
Reinstatement of Appeal filed on June 17, 1999 by the said
new counsel for plaintiffs-appellants, to which an Opposition
has been filed by the first set of intervenors-appellees, is
DENIED admission for being late by nine (9) days. The
records show that plaintiffs-appellants counsel of record,
Atty. Napoleon M. Victoriano, who has not filed any notice
of withdrawal as counsel as per report of the Judicial
Records Division, received copy of the Courts Decision
dated May 11, 1998, on May 24, 1999. Thus, appellants had
only until June 8, 1999 to file their Motion for
Reconsideration.[27]

Hence, this petition is before us.

51

The Issues
Petitioners raise the following issues:
I.
THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED IN DENYING ADMISSION TO PETITIONERS
MOTION FOR RECONSIDERATION WITH PRAYER
FOR THE REINSTATEMENT OF APPEAL FILED BY
THEIR NEW COUNSEL FOR HAVING BEEN FILED
NINE (9) DAYS LATE, OVERLOOKING AND
DISREGARDING THE FACT:
A. THAT PETITIONERS LEARNED OF THE DECISION
OF THE COURT OF APPEALS DATED MAY 11, 1999
ONLY ON JUNE 2, 1999, AND ON JUNE 17, 1999, OR
WITHIN THE FIFTEEN (15)-DAY REGLEMENTARY
PERIOD THEY FILED THEIR AFORESAID MOTION
FOR RECONSIDERATION;
B. THAT PETITIONERS FORMER COUNSEL, ATTY.
NAPOLEON M. VICTORIANO, DID NOT FILE A
MOTION FOR RECONSIDERATION WITHIN THE
FIFTEEN [15]-DAY REGLEMENTARY PERIOD FROM
HIS RECEIPT OF A COPY OF THE COURT OF APPEALS
DECISION ON MAY 24, 1999, SAID COUNSEL WAS
CLEARLY AT FAULT AND/OR GROSSLY NEGLIGENT
IN THE PERFORMANCE OF HIS DUTIES TO HIS
CLIENTS. MOREOVER, THE COUNTING OF THE 15DAY
PERIOD
TO
FILE
MOTION
FOR
RECONSIDERATION SHOULD BE COUNTED FROM
PETITIONERS KNOWLEDGE OF THE DECISION ON
JUNE 2, 1999, AND NOT ON ATTY. VICTORIANOS
RECEIPT OF A COPY THEREOF; AND
C. THAT THE NON-ADMISSION OF PETITIONERS
MOTION FOR RECONSIDERATION FOR HAVING
BEEN FILED NINE (9) DAYS LATE IS MANIFESTLY
UNJUST AND INEQUITABLE BECAUSE IT GIVES

52

PREMIUM TO TECHNICALITIES
SUBSTANTIAL JUSTICE.

RATHER

ON

II.
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN DISMISSING PETITIONERS APPEAL FROM
THE TRIAL COURTS DECISION AND CONSIDERING
THE APPEAL WITHDRAWN AS PRAYED FOR BY
COUNSEL FOR PETITIONERS CONSIDERING THAT
THE
ALLEGED
AGREEMENT
BETWEEN
PETITIONERS AND FIRST SET [OF] INTERVENORS
THROUGH THEIR COUNSEL IS NULL AND VOID AND
WITHOUT FORCE AND EFFECT BECAUSE THEIR
ALLEGED SIGNATURES THEREIN WERE FORGED,
[AND BESIDES,] THEY NEVER RECEIVED A SINGLE
CENTAVO OF THE ALLEGED CONSIDERATION OF
THE AGREEMENT. MOREOVER, PETITIONERS
APPEAL FROM THE TRIAL COURTS DECISION IS
MERITORIOUS AS THEIR CLAIM THAT THEY ARE
OWNERS OF THE DISPUTED PROPERTIES ARE
SUPPORTED BY SUSBTANTIAL AND COMPETENT
EVIDENCE.[28]

The Ruling of the Court

The petition must be denied.
Petitioners argue that their Motion for Reconsideration was filed on time as
the reglementary period for the filing of it should be counted from the time
when petitioners themselves obtained a copy of the assailed Decision of the
CA on June 2, 1999, and not from the time that their former counsel, Atty.
Victoriano, received a copy of said Decision on May 24, 1999.
However, petitioners allegation is incorrect.

53

Reglementary period for filing a Motion for Reconsideration

Section 1 of Rule 37, in conjunction with Section 3 of Rule 41 of the Rules
of Court, provides for the period within which a Motion for Reconsideration
may be filed, to wit:
Section 1. Grounds of and period for filing motion for new
trial or reconsideration.Within the period for taking an
appeal, the aggrieved party may move the trial court to set
aside the judgment or final order and grant a new trial for
one or more of the following causes materially affecting the
substantial rights of said party:
xxxx
Within the same period, the aggrieved party may also
move for reconsideration upon the grounds that the
damages awarded are excessive, that the evidence is
insufficient to justify the decision or final order, or that
the decision or final order is contrary to law.
Section 3. Period of ordinary appeal.The appeal shall be
taken within fifteen (15) days from notice of the
judgment or final order appealed from. Where a record on
appeal is required, the appellant shall file a notice of appeal
and a record on appeal within thirty (30) days from notice of
the judgment or final order.
The period of appeal shall be interrupted by a timely motion
for new trial or reconsideration. No motion for extension of
time to file a motion for new trial or reconsideration shall be
allowed. (Emphasis supplied.)

The abovementioned fifteen (15)-day period begins to run upon receipt of

notice of the decision or final order appealed from. Such period has been
considered to begin upon receipt of notice by the counsel of record, which is
considered notice to the parties.[29] Service of judgment on the party is
prohibited and is not considered the official receipt of the judgment.[30]

54

Thus, the fifteen (15)-day period should run from May 24, 1999, when Atty.
Victoriano received a copy of the assailed Decision of the CA, and not
from June 2, 1999, when petitioners claimed to have been informed of the
CA decision.[31]
To reiterate, service upon the parties counsels of record is tantamount to
service upon the parties themselves, but service upon the parties themselves
is not considered service upon their lawyers. The reason is simplethe parties,
generally, have no formal education or knowledge of the rules of procedure,
specifically, the mechanics of an appeal or availment of legal remedies; thus,
they may also be unaware of the rights and duties of a litigant relative to the
receipt of a decision. More importantly, it is best for the courts to deal only
with one person in the interest of orderly procedureeither the lawyer retained
by the party or the party him/herself if s/he does not intend to hire a lawyer.
Even assuming that petitioners had replaced Atty. Victoriano prior to his
receipt of the assailed Decision, the reglementary period for filing a Motion
for Reconsideration would still be reckoned from his receipt of the Decision.
Section 26 of Rule 138 of the Rules of Court requires that [i]n case of
substitution, the name of the attorney newly employed shall be entered on
the docket of the court in place of the former one, and written notice of the
change shall be given to the adverse party.
In GCP-Manny Transport Services, Inc. v. Principe, the Court ruled that
unless the change of attorneys is carried out properly, the counsel of record
shall still be considered as the partys counsel, and the notice sent to such
counsel shall be considered as notice to the party represented.[32]
In the present case, the assailed CA Decision was rendered on May 11, 1999,
and the notice of it was received by Atty. Victoriano on May 24,
1999. Petitioners current counsel, Atty. Verano, filed his appearance only
on June 17, 1999, with the sole conformity of Vicente delos Santos. The CA
correctly served a copy of the Decision on Atty. Victoriano, which is
considered notice to petitioners themselves. Therefore, May 24, 1999 is the
55

correct reckoning point for the reglementary period of filing a Motion for
Reconsideration to the assailed Decision which ended on June 8,
1999. Hence, petitioners Motion for Reconsideration filed on June 17,
1999 was belatedly filed and correctly rejected by the CA.
Liberal application of the period for filing a Motion for Reconsideration
Even assuming that, indeed, their Motion for Reconsideration was
filed out of time, petitioners further allege that a delay of nine (9) days in the
filing of their Motion for Reconsideration cannot justify why the CA did not
admit it. In support of such contention, petitioners cite Republic v. Court of
Appeals,[33] and Ramos v. Bagasao,[34] where this Court allowed the filing of
an appeal six (6) and four (4) days beyond the reglementary period,
respectively.
In Neypes v. Court of Appeals, the Court stressed that [s]eldom have we
condoned late filing of notices of appeal, and only in very exceptional
instances to better serve the ends of justice; and also emphasized that the
liberal application of the rules is confined to situations where technicalities
were dispensed with, our decisions were not meant to undermine the force
and effectivity of the periods set by law. But we hasten to add that in those
rare cases where procedural rules were not stringently applied, there always
existed a clear need to prevent the commission of a grave injustice
(emphasis supplied).[35]
In Republic,[36] cited by petitioners, We ruled that the CA should have
admitted the Motion for Reconsideration filed by petitioners to prevent gross
miscarriage of justice, as the government stood to lose close to three hundred
(300) hectares of prime sugar land already titled in its name and devoted to
educational purposes; while in Ramos, it was enunciated that a four (4)-day
delay in filing a notice of appeal and a motion of extension of time to file a
record on appeal can be excused on the basis of equity and considering that
the record on appeal is now with the respondent judge.[37]
In the instant case, there is no exceptional circumstance to justify the
disregard of the reglementary period for filing a motion for reconsideration.
Hence, petitioners position is devoid of merit.
56

Furthermore, petitioners contend that despite their Motion for

Reconsideration had been filed out of time, this should have been admitted
on the ground of equity. However, equitable grounds cannot be sought when
the party is guilty of negligence. Thus, We ruled in Mesina v. Meer that this
Court will not allow petitioners, in guise of equity, to benefit from their own
negligence.[38]
Petitioners are guilty of inexcusable negligence

Petitioners attribute the dismissal of their appeal and their failure to file a
motion for reconsideration within the reglementary period to their former
counsels negligence, Atty. Victoriano. Thus, petitioners seek the liberal
application of the rules, citing Ginete v. Court of Appeals, wherein the
counsel of record did not file an appellants brief within the prescribed period
and continued with the case for fear of reprisal from respondents who were
judges. In said case, We ruled that the negligence of the clients counsel does
not bind them. The departure from the rule was explained, thus:
[T]he lawyers negligence without any participatory
negligence on the part of petitioners is a sufficient reason
to set aside the resolutions of the Court of Appeals. Aside
from matters of life, liberty, honor or property which would
warrant the suspension of the rules of the most mandatory
character and an examination and review by the appellate
court of the lower courts findings of fact, the other elements
that should be considered are the following: (1) the existence
of special or compelling circumstances, (2) the merits of the
case, (3) a cause not entirely attributable to the fault or
negligence of the party favored by the suspension of the
rules, (4) a lack of any showing that the review sought is
merely frivolous and dilatory, (5) the other party will not be
unjustly prejudiced thereby.[39] (Emphasis supplied.)

However, the Ginete case is not a precedent to the case at bar because in said
case, the party had no participatory negligence, while in the case at bar,
57

petitioners were negligent in not monitoring the developments in their

case. Petitioners acts are considered inexcusable negligence in line with our
ruling in Bernardo v. Court of Appeals (Special Sixth Division), where we
explicated the vital participation of the parties in the effective handling of
the case by their lawyers, thus:
Worth mentioning is the fact that petitioner was likewise not
entirely blameless in his alleged deprivation of his day in
court. In a recent case, this Court enunciated:
Litigants, represented by counsel, should not
expect that all they need to do is sit back, relax
and await the outcome of their case. They
should give the necessary assistance to their
counsel for what is at stake is their interest in
the case.
In
his
concurring
opinion
in Republic
vs.
Sandiganbayan, Mr. Justice Teodoro R. Padilla emphasized
the value and significance of the partys presence and
diligence in the advancement of his cause, thus:
x x x An almost lifetime of experience in
litigation is the best witness to the
indispensability of partys presence (aside from
his lawyer, in case he has the assistance of
counsel) in order to litigate with any reasonable
opportunity of success. x x x especially during
the cross-examination of adverse partys
witnesseswhere
the
truth
must
be
determinedevery counsel worth his salt must
have the assistance and presence of his client
on the spot, for the client invariably knows the
facts far better than his counsel.In short, even
in civil cases, the presence of party (as
distinguished from his lawyer alone) is
essential to due process.
True enough, the party-litigant should not rely totally on his
counsel to litigate his case even if the latter expressly assures
that the formers presence in court will no longer be
needed. No prudent party will leave the fate of his case
58

entirely to his lawyer. Absence in one or two hearings may

be negligible but want of inquiry or update on the status of
his case for several months (four, in this case) is
inexcusable. It is the duty of a party-litigant to be in contact
with his counsel from time to time in order to be informed of
the progress of his case. Petitioner simply claims that he was
busy with his gravel and sand and trading businesses which
involved frequent traveling from Manila to outlying
provinces. But this was not a justifiable excuse for him to
fail to ask about the developments in his case or to ask
somebody to make the query for him. Petitioner failed to act
with prudence and diligence; hence, his plea that he was not
accorded the right to due process cannot elicit this Courts
approval or even sympathy.[40] (Emphasis supplied.)

Concurrently, petitioners did not even know that Atty. Victoriano failed to
file an appellants brief on their behalf during the more than one hundred
eighty (180)-day extension that he sought from the CA, aside from their
failure to learn of the Decision of the appellate court. Ordinary prudence
would dictate that petitioners must give utmost importance to the case
considering that it involves their residences, presumably their most valued
material possession, and considering further that they had already lost at the
trial court.Petitioners failure to apprise themselves of the status of the case
from the time that Atty. Victoriano received a copy of the notice to file brief
on June 15, 1998 up to June 2, 1999, when petitioners allegedly obtained a
copy of the assailed Decision from the CA, is unjustified. Petitioners cannot
be shielded from the repercussions of their counsels and their own
negligence. Petitioners themselves are as much to blame in losing their
appeal.
The Supreme Court is not a trier of facts
Finally, petitioners claim that the Undertaking or Agreement allegedly
entered into by them and respondents delos Santos is invalid considering
that their purported signatures in it were forged. They argue that the motion
to withdraw is likewise invalid; therefore, there is no basis for the

59

withdrawal of the appeal. In other words, petitioners question the

authenticity of said documents, raising a question of fact.
There is a question of fact when the doubt or controversy arises as to the
truth or falsity of the alleged facts. [41] This is distinguished from a question
of law when the doubt or difference arises as to what the law is on a certain
state of facts, and which does not call for an examination of the probative
value of the evidence presented by the parties-litigants.
Furthermore, in Sampayan v. Court of Appeals, this Court ruled, thus:
[S]ettled is the rule that this Court is not a trier of facts and
does not normally embark on a re-examination of the
evidence adduced by the parties during trial. Of course, the
rule admits of exceptions. So it is that in Insular Life
Assurance Company, Ltd. vs. CA, we wrote:
[i]t is a settled rule that in the exercise of the
Supreme Court's power of review, the Court is
not a trier of facts and does not normally
undertake the re-examination of the evidence
presented by the contending parties' during the
trial of the case considering that the findings of
facts of the CA are conclusive and binding on
the Court. However, the Court had recognized
several exceptions to this rule, to wit: (1) when
the findings are grounded entirely on
speculation, surmises or conjectures; (2) when
the inference made is manifestly mistaken,
absurd or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when
the findings of facts are conflicting; (6) when in
making its findings the Court of Appeals went
beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant
and the appellee; (7) when the findings are
contrary to the trial court; (8) when the findings
are conclusions without citation of specific
evidence on which they are based; (9) when the
facts set forth in the petition as well as in the
60

petitioner's main and reply briefs are not

disputed by the respondent; (10) when the
findings of fact are premised on the supposed
absence of evidence and contradicted by the
evidence on record; and (11) when the Court of
Appeals manifestly overlooked certain relevant
facts not disputed by the parties, which, if
properly considered, would justify a different
conclusion.[42]

A perusal of the exceptions enumerated above reveals that the instant case
does not fall under any of them. Thus, this Court cannot entertain the factual
issues raised in the petition, which include the issue of authenticity of the
Undertaking or Agreement, as well as the issue of non-payment of the
amount mentioned, particularly, in the Undertaking.
Failure to file appellants brief
Assuming arguendo that the withdrawal of the appeal was groundless, the
CA still did not commit a reversible error in dismissing the appeal for
petitioners failure to file an appellants brief.
Contrary to petitioners allegation, the assailed Decision did not dismiss the
case solely on the basis of the motion to withdraw filed by their former
counsel. To reiterate, the Decision stated that [f]or failure to file their
respective appellants briefs, and in accordance with the prayer in the Joint
Manifestation and Motion, and in the Ex-Parte Motion to Withdraw Appeal,
the appeal should be dismissed, and considered as withdrawn (emphasis
supplied).[43]
Section 7 of Rule 44 of the Rules of Court provides forty-five (45) days
from receipt of notice within which to file an appellants brief, while Section
12 declares that an extension of time for filing of briefs shall not be allowed
except for a good and sufficient cause.
The general rule is that motions for extension of time to file an appellants
brief shall not be granted except for a good cause. No such justification is
present in this case.Petitioners failure to apprise themselves of the status of
61

their case during its pendency before the CA is inexcusable. Moreover, their
former counsels failure or neglect to file the required appellants brief shall
bind them.
No meritorious cause
With the loss of their right of appeal to the CA, we see no need to resolve the
issue of ownership. Such issue should have been first resolved by the CA,
but it was not able to do so because of the dismissal of the appeal. Thus, the
claim of ownership is a non-issue before this Court.
WHEREFORE, We DENY the petition and AFFIRM the May 11,
1999 Decision and the January 31, 2000 Resolution of the CA in CA-G.R.
CV No. 54136 and SP No. 48475, with no costs.
SO ORDERED.

United Pulp and Paper co. Inc. vs. United Pulp and Paper ChapterFederation of Free Workers, G.R. No. 141117, March 25, 2004

[G.R. No. 141117. March 25, 2004]

UNITED PULP AND PAPER CO., INC., petitioner, vs. UNITED

PULP AND PAPER CHAPTER-FEDERATION OF FREE
WORKERS, respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant petition for review on certiorari under
Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the
Resolutions dated October 12, 1999 and December 10, 1999 of the
Court of Appeals in CA-G.R. SP No. 55245, entitled United Pulp and
Paper Co., Inc. vs. United Pulp and Paper Chapter-Federation of Free
Workers.
[1]

[2]

62

The antecedent facts giving rise to the controversy at bar are as

follows:
Sometime in July 1991, United Pulp and Paper Co., Inc., petitioner,
implemented a Promotions Policy that recognizes the excellent and
meritorious work performance of deserving employees during the last
twelve (12) months. The Promotions Policy sets forth the following
guidelines:
[3]

VI. ADMINISTRATIVE GUIDELINES

1. Except in abnormal situations (subject to approval by the
General Manager), promotions shall be made only if a
vacancy in the next higher position occurs and
Management has decided to fill-up such vacancy through
approval of the Personnel Requisition form.
xxx
9. In case of union employees, the promotional increase shall be
5% compounded for every pay class jump. However, the
resulting effect of 5% promotional increase shall not cause
the promoted employees salary to exceed that of the lowest
paid incumbent within first, the section, second,
department, and third, division. If this constraint will result
to a promotional increase of lower than 3% over his
previous salary, the employee will receive an increase of
3%.
x x x.

[4]

On April 1, 1998, Teodorico Simbulan was promoted from Welder I

to Welder II with the corresponding pay class (PC) movement from PC
V to PC VIII.
For and in behalf of Simbulan, United Pulp and Paper ChapterFederation of Free Workers, respondent, questioned the regularity or
correctness of the salary increase granted by petitioner. Invoking
Section 1, Article XVII of the collective bargaining agreement (CBA),
respondent maintains that Simbulan is entitled to a 5% salary increase
(for every pay class movement) because such salary increase does not
exceed the salary rates of other incumbents. Respondent also contends
[5]

63

that petitioner is guilty of discrimination against Simbulan since other

employees, like Enrique Cruz and Joselito de Castro who were
previously promoted, enjoy the 5% salary increase for their pay class
movements.
The controversy was submitted to the grievance machinery, but the
parties failed to reach an acceptable settlement.
Thus, the matter was elevated to a panel of Voluntary Arbitrators of
the National Conciliation and Mediation Board (NCMB), Regional
Branch No. III at San Fernando, Pampanga, docketed as NCMB-AC583-RB3-10-024-98.
On July 1, 1999, the Voluntary
Decision partly reproduced as follows:

Arbitrators

rendered

[6]

In light of all the foregoing, this Panel holds that the promotional increase in
the case of union employees is 5% compounded for every pay class jump
unless the effect of such increase will be such as to cause the promoted
employees salary to exceed that of the lowest paid incumbent in the same
position as that to which the employee is being promoted, in which case the
promotional increase shall be limited to not less than 3%.
Consequently, in the case of the subject employee, Teodorico Simbulan, since
there is no showing that, for the second and third jumps in his promotion on 1
April 1998, his salary would have exceeded that of the lowest paid incumbent
in the pertinent position if granted a 5% promotional increase, he is entitled to a
salary increase of 5%+5%+5%, compounded for each pay class, effective as of
the said date.
WHEREFORE, respondent United Pulp and Paper Co., Inc. is hereby ordered
to pay Teodorico Simbulan the difference between the promotional increase of
5%+5%+5%, compounded for each pay class, and the salary increase be
actually received as a result of his promotion, effective as of 1 April 1998.
The respondent is also directed to continue implementing the promotions
policy, in appropriate cases, in the manner stated in this Decision.
SO ORDERED.
Petitioner filed a motion for reconsideration but was denied by the
Voluntary Arbitrators in a Resolution dated September 3, 1999.
[7]

64

On October 6, 1999, petitioner filed with the Court of Appeals a

petition for review under Rule 43 of the 1997 Rules of Civil Procedure,
as amended, assailing the Decision and Resolution of the Voluntary
Arbitrators.
In a Resolution dated October 12, 1999, the Appellate Court
dismissed the petition outright for being insufficient in form, thus:
"1. The verification and certification of non-forum shopping was signed
only by counsel for the petitioner corporation, rather than by a
duly-authorized officer thereof;
2. The affidavit of service is inadequate, as the registry receipts
evidencing mailing of copies of the petition to the respondent
were not attached;
3. Absence of the mandatory written explanation required under Sec.
11, Rule 13, 1997 Rules of Civil Procedure to explain why
personal service upon the respondents of copies of the petition
was not resorted to.
The foregoing defects warrant an outright dismissal of the instant petition.
IN VIEW THEREOF, the Petition is hereby DENIED DUE COURSE and
DISMISSED.
SO ORDERED.
On October 29, 1999, petitioner filed a motion for reconsideration
but was denied by the Appellate Court in a Resolution dated December
10, 1999.
Hence, this petition for review on certiorari alleging that the Court of
Appeals seriously erred in dismissing its petition for review on mere
technicalities.
We agree with the Court of Appeals. Section 5, Rule 7 of the same
Rules provides that it is the plaintiff or principal party who shall certify
under oath in the complaint or other initiatory pleading that he has not
commenced any action involving the same issues in any court, tribunal
or quasi-judicial agency.
[8]

65

Here, only petitioners counsel signed the certification against forumshopping. There is no showing that he was authorized by the petitioner
company to represent the latter and to sign the certification.
In Sy Chin vs. Court of Appeals, we held that the petition is flawed
as the certificate of non-forum shopping was signed only by counsel and
not by the party. The rule requires that it should be the plaintiff or
principal party who should sign the certification, otherwise, this
requirement would easily be circumvented by the signature of every
counsel representing corporate parties.
[9]

[10]

Moreover, petitioners failure to attach with the petition a written

explanation why the service or filing was not done personally violates
Section 11, Rule 13 of the same Rules. We have ruled that where no
explanation is offered to justify the service of pleadings by other modes,
the discretionary power of the court to expunge the pleading becomes
mandatory. Thus, the Court of Appeals correctly considered the
petition as not having been filed, in view of petitioners failure to present
a written explanation why it failed to effect personal service of its petition
for review.
[11]

[12]

In Kowloon House/Willy Ng vs. Hon. Court of Appeals, we held that

(r)ules of procedure exist for a purpose, and to disregard such rules in
the guise of liberal construction would be to defeat such
purpose. Procedural rules are not to be disdained as mere
technicalities. They may not be ignored to suit the convenience of a
party. Adjective law ensures the effective enforcement of substantive
rights through the orderly and speedy administration of justice. Rules
are not intended to hamper litigants or complicate litigation. But they
help provide for a vital system of justice where suitors may be heard in
the correct form and manner, at the prescribed time in a peaceful
though adversarial confrontation before a judge whose authority litigants
acknowledge. Public order and our system of justice are well served by
a conscientious observance of the rules of procedure, particularly by
government officials and agencies.
[13]

WHEREFORE, the petition is DENIED. Costs against the petitioner.

SO ORDERED.
Corona, and Carpio-Morales, JJ., concur.

66

Vitug, (Chairman), J., on official leave.

3. Summons (Rule 14)

E.B. Villarosa & Partner Co., Ltd. vs. Benito, 312 SCRA 65 (1999)
Northwest Orient Airlines, Inc. vs. CA, 241 SCRA 192 (1995)
Robinson vs. Miralles, G.R. No. 163584, December 12, 2006)
Valmonte vs. CA, 252 SCRA 92 (1996)
Perkin Elmer Singapore Pte Ltd. vs. Dakila Trading Corporation,
G.R. No. 172242, August 14, 2007
NM Rothschild & Sons vs. Lepanto Consolidated Mining Company,
G.R. No. 175799, November 28, 2011
Orion Security Corporation vs. Kalfam Enterprises, Inc., G.R. No.
163287, April 27, 2007
Santos vs. PNOC Exploration
September 23, 2008

Corporation,

G.R.

No.

170943,

PCIB vs. Spouses Wilson Dy Hong Pi et al, G.R. No. 171137, June 5,
2009

4. Motions (Rule 15)

Vlason Enterprises Corp. vs. CA, 330 SCRA 26 (1999)
Vette Industrial Sales, Co., Inc. vs. Cheng, G.R.No. 170232-170301,
December 5, 2006

67

Boiser vs. Aguirre, Jr., 458 SCRA 430

Sarmiento vs. Zaratan, 514 SCRA 246

5. Motion to Dismiss (Rule 16)

Halimao vs. Villanueva, 253 SCRA 1 (1996)

[A.C. No. 3825. February 1, 1996]

REYNALDO
HALIMAO, complainant,
VILLANUEVA and INOCENCIO
JR., respondents.

vs. ATTYS.
DANIEL
PEFIANCO FERRER,

DECISION
MENDOZA, J.:

This is a complaint for disbarment against Attorneys Daniel

Villanueva and Inocencio Ferrer, Jr., for serious misconduct.
The complaint originated from a letter dated April 14, 1992 which
complainant Reynaldo Halimao wrote to the Chief Justice, alleging that
respondents, without lawful authority and armed with armalites and
handguns, forcibly entered the Oo Kian Tiok Compound in Cainta, Rizal,
of which complainant was caretaker, on April 4, 1992 at 11:00 A.M.
Complainant prayed that an investigation be conducted and
respondents disbarred. To the complaint were attached the affidavits of
alleged witnesses, including that of Danilo Hemandez, a security guard
at the compound, who had also filed a similar complaint against herein
respondents.
In its resolution dated July 1, 1992, the Court required respondents
to comment.
On August 14, 1992, respondents filed a comment in which they
claimed that the complaint is a mere duplication of the complaint filed by
Danilo Hernandez in Administrative Case No. 3835, which this Court
had already dismissed on August 5, 1992 for lack of merit. They pointed
68

out that both complaints arose from the same incident and the same
acts complained of and that Danilo Hernandez, who filed the prior case,
is the same person whose affidavit is attached to the complaint in this
case.
Respondent Ferrer claimed that he was nowhere near the
compound when the incident took place. He submitted affidavits
attesting to the fact that he had spent the whole day of April 4,
1992 in Makati with his family.
Additionally, Ferrer claimed that the two complaints were filed for the
purpose of harassing him because he was the principal lawyer of Atty.
Daniel Villanueva in two cases before the Securities and Exchange
Commission. The cases involved the ownership and control of Filipinas
Textile Mills (Filtex), which is owned by Villanuevas family and whose
premises are the Oo Kian Tiok compound.
This case was thereafter referred to the Integrated Bar of
the Philippines for investigation, report and recommendation.
In its Resolution No. XI-94-017 dated January 22, 1994, the Board
of Governors of the IBP dismissed the case against respondents. It
acted on the basis of the report and recommendation of Atty. Victor C.
Fernandez, Investigating Commissioner, who found that the complaint is
barred by the decision in Administrative Case No. 3835 which involved
the same incident. Atty. Fernandez noted that in fact the complaints in
the two cases were similarly worded.
The Investigating Commissioner held that although the complaint in
the prior case was initiated by a security guard (Danilo Hernandez) of
the compound while the present case was filed by the caretaker,
nevertheless the complainants had substantially the same interest. The
Investigating Commissioner observed:
Furthermore, Danilo Hernandez is not a stranger to complainant
herein. Both represent the same interest as co-workers in the Oo Kian
Tiok Compound. In his letter-complaint, complainant mentions Danilo
Hernandez as an employee and his co-worker at the Oo Kian Tiok
Compound. Complainant even attached to his complaint the affidavit of
Danilo Hernandez that was submitted to the Municipal Trial Court of
Cainta, Rizal in support of the criminal complaints (Criminal Cases Nos.
MTC-4700 and 4701 (92) filed against respondents herein. In said
affidavit (Magkakalakip na Sinumpaang Salaysay) dated April 4, 1992,
Danilo Hernandez also mentions the name of complainant as a

69

caretaker of the Oo Kian Tiok Compound. Clearly, the complainant and

Danilo Hernandez not only represent the same interest in filing their
respective complaints, but have the same complaint against
respondents.
[1]

The Commissioner held that for res judicata to apply, absolute

identity of parties is not required, it being sufficient that there is identity
of interests of the parties. In this case, both complainants were present
at the compound when the incident allegedly happened, and the acts
they were complaining against and the relief they were seeking were the
same.
On March 28, 1994, complainant filed a motion for reconsideration
of the resolution of the IBP Board of Governors. His motion was referred
to the Court in view of the fact that the records of the case had earlier
been forwarded to the Court on March 11, 1994.
In his aforesaid motion, complainant contends that by filing a motion
to dismiss the complaint in this case, private respondents must be
deemed to have hypothetically admitted the material allegations in the
complaint and, therefore, private respondents must be deemed to have
confessed to the charge of serious misconduct. Hence, it was error for
the IBP to dismiss his complaint.
Complainant also contends that by invoking the resolution of this
Court in Administrative Case No. 3835, respondents are evading the
issues and that Ferrers defense of alibi is weak and cannot prevail
against the direct and positive identification by him and his
witnesses. He contends that the resolution in Administrative Case No.
3835 has no bearing upon the present case and that the Investigating
Commissioner should have resolved the issues of fact before him.
Respondents filed an Opposition to the motion for
reconsideration. As a preliminary matter, they argue that the motion for
reconsideration is a mere scrap of paper, because it is not provided for
in Rule 139-B of the Rules of Court, and that what complainant should
instead have done was to appeal to this Court.
Rule 139-B states in pertinent part:
12. Review and decision by the Board of Governors.
xxx xxx xxx

70

c) If the respondent is exonerated by the Board or the disciplinary sanction

imposed by it is less than suspension or disbarment [such as admonition,
reprimand, or fine] it shall issue a decision exonerating respondent or imposing
such sanction. The case shall be deemed terminated unless upon petition of the
complainant or other interested party filed with the Supreme Court within
fifteen (15) days from notice of the Boards resolution, the Supreme Court
orders otherwise.
Although Rule 139-B, 12(c) makes no mention of a motion for
reconsideration, nothing in its text or in its history suggests that such
motion is prohibited. It may therefore be filed within 15 days from notice
to a party. Indeed, the filing of such motion should be encouraged
before resort is made to this Court as a matter of exhaustion of
administrative remedies, to afford the agency rendering the judgment an
opportunity to correct any error it may have committed through a
misapprehension of facts or misappreciation of the evidence.
[2]

Considering, however, that complainants motion for reconsideration

was filed after the IBP had forwarded the records of this case to this
Court, it would be more expedient to treat it as complainants petition for
review within the contemplation of Rule 139-B, 12(c).
Now with regard to complainants argument that it was error for the
Investigating Commissioner to dismiss the complaint against
respondents because, by filing a motion to dismiss, respondents are
deemed to have admitted the allegations of the complaint against them,
suffice it to say that the rule that a motion to dismiss is to be considered
as a hypothetical admission of the facts alleged in the complaint applies
more particularly to cases in which the ground for dismissal is the failure
of the complaint to state a cause of action. When it appears on the face
of the complaint that the plaintiff is not entitled to any relief under the
facts alleged, the defendant may file a motion to dismiss hypothetically
admitting the facts alleged in the complaint. By filing such a motion, the
defendant in effect says that even assuming the facts to be as alleged
by the plaintiff, the latter has failed to prove that he has a right which the
former has violated.
[3]

[4]

The rule does not unqualifiedly apply to a case where the defendant
files a motion to dismiss based on lack of jurisdiction of the court or
tribunal over the person of the defendant or over the subject matter or
over the nature of the action; or on improper venue; or on lack of
capacity to sue of the plaintiff or on litis pendentia, res judicata,
prescription, unenforceability, or on the allegation that the suit is
71

between members of the same family and no earnest efforts towards a

compromise have been made. In such cases, the hypothetical
admission is limited to the facts alleged in the complaint which relate to
and are necessary for the resolution of these grounds as preliminary
matters involving substantive or procedural laws, but not to the other
facts of the case.
On the other hand, when a motion to dismiss is based on payment,
waiver, abandonment, release, compromise, or other form of
extinguishment, the motion to dismiss does not hypothetically, but
actually, admits the facts alleged in the complaint, i.e., the existence of
the obligation or debt, only that the plaintiff claims that the obligation has
been satisfied. So that when a motion to dismiss on these grounds is
denied, what is left to be proven in the trial is no longer the existence of
the debt but the fact vel non of payment by the defendant.
The Investigating Commissioner properly dismissed the complaint in
this case on the ground of res judicata, it appearing that it involves the
same incident and the same cause of action as Administrative Case No.
3825. Indeed, it appears that on August 5, 1995, the First Division of the
Court dismissed a similar complaint filed in Administrative Case No.
3835. The resolution reads:
Adm. Case No. 3835 (Danilo Hernandez v. Attys. Daniel Villanueva and
Inocencio Pefianco Ferrer, Jr.). - This administrative complaint against
Attorneys Daniel Villanueva and Inocencio P. Ferrer, Jr. is the offshoot of a
family feud involving the ownership and possession of the Filipinas Textile
Mills (Filtex). The contest between Bernardino Villanueva and Daniel
Villanueva (probably relatives) for the control of the corporation has escalated
into a three-cornered fight when Oo Kian Tiok joined the fray, claiming
ownership of the same property by purchase from the Equitable Banking
Corporation, mortgage creditor and highest bidder thereof at the mortgage
foreclosure sale.
Respondent Daniel Villanueva believes that Bernardino Villanueva is the evil
genius behind this complaint for his disbarment filed by a certain Daniel
Hernandez. On the other hand, Hernandez claims to be one of several security
guards placed by Oo Kian Tiok on the Filtex property. His allegation that the
respondents drove him and the other security guards out of the Filtex premises
at gun point was denied by the respondents and is not substantiated by
independent evidence.

72

For want of a prima facie showing of professional misconduct on the part of the
respondents, the complaint must be dismissed. The three-cornered dispute
among respondent Daniel Villanueva, Bernardino Villanueva and Oo Kian Tok
[sic] over the possession and ownership of the Filtex property should be
litigated and determined in an appropriate judicial action, not in administrative
proceedings to disbar Attorney Daniel Villanueva and his counsel, Attorney
Inocencio P. Ferrer, Jr.
WHEREFORE, the complaint against respondents Attys. Daniel Villanueva and
Inocencio P. Ferrer, Jr. is DISMISSED for lack of merit.
Two motions for reconsideration of this resolution were filed by the
complainant therein, both of which were denied, the first one on
September 23, 1992 and the second one on November 9, 1992.
While the complainant (Danilo Hernandez) in Administrative Case
No. 3835 is different from the complainant in the present case, the fact
is that they have an identity of interest, as the Investigating
Commissioner ruled. Both complainants were employed at the Oo Kian
Tiok Compound at the time of the alleged incident. Both complain of the
same act allegedly committed by respondents. The resolution of this
Court in Administrative Case No. 3835 is thus conclusive in this case, it
appearing that the complaint in this case is nothing but a duplication of
the complaint of Danilo Hernandez in the prior case. In dismissing the
complaint brought by Danilo Hernandez in the prior case, this Court
categorically found want of a prima facie showing of professional
misconduct on the part of the respondents [Attorneys Daniel Villanueva
and Inocencio Ferrer, Jr.].
WHEREFORE, the resolution of the Board of Governors of the
Integrated Bar of the Philippines, approving and adopting the report and
recommendation of the Investigating Commissioner, is AFFIRMED and
the complaint against respondents is DISMISSED.
SO ORDERED.
Regalado (Chairman), Romero and Puno, JJ., concur.

Tan vs. CA, 295 SCRA 247 (1998)

[G.R. No. 125861. September 9, 1998]

73

ROSITA G. TAN, EUSEBIO V. TAN, REMIGIO V. TAN, JR.,

EUFROSINA V. TAN, VIRGILIO V. TAN and EDUARDO V.
TAN, petitioners, vs. COURT OF APPEALS and FERNANDO
TAN KIAT, respondent.
DECISION
MARTINEZ, J.:

This petition assails the Decision of public respondent Court of Appeals dated May
28, 1996[1] reversing the Order of the Manila Regional Trial Court, Branch 2, dated
December 15, 1993,[2] dismissing the complaint for recovery of property filed by private
respondent Fernando Tan Kiat against petitioners.
The controversy centers on two (2) parcels of land (hereafter, subject properties)
situated at 970 M.H. del Pilar Street, Malate, Manila previouslyowned by one Alejandro
Tan Keh and which were then covered by Transfer Certificate of Title No. 35656 of the
Registry of Deeds of Manila.
Private respondent, in his complaint filed on October 18, 1993,[3] claimed that he
bought the subject properties from Mr. Tan Keh in 1954 forP98,065.35, built his house
thereon, but was unable to effect immediate transfer of title in his favor in view of his
foreign nationality at the time of the sale. Nonetheless, as an assurance in good faith of
the sales agreement, Mr. Tan Keh turned over to private respondent the owners duplicate
copy of TCT No. 35656 and, in addition, executed a lease contract in favor of private
respondent for a duration of forty (40) years. However, in 1958, Mr. Tan Keh sold the
subject properties to Remigio Tan, his brother and father of petitioners, with the
understanding that the subject properties are to be held in trust by Remigio for the benefit
of private respondent and that Remigio would execute the proper documents of transfer
in favor of private respondent should the latter at anytime demand recovery of the subject
properties. TCT No. 35656 was thus cancelled and in lieu thereof TCT No. 53284 was
issued in the name of Remigio. Another contract of lease was executed by Mr. Tan Keh
and Remigio in favor of private respondent to further safeguard the latters interest on the
subject properties, but private respondent never paid any rental and no demand
whatsoever for the payment thereof had been made on him. Remigio was killed in 1968.
At his wake, petitioners were reminded of private respondents ownership of the subject
properties and they promised to transfer the subject properties to private respondent who
by then had already acquired Filipino citizenship by naturalization. Petitioners, however,
never made good their promise to convey the subject properties despite repeated demands
by private respondent. In fact, petitioners had the subject properties fraudulently
transferred to their names under TCT No. 117898. Thus, the filing of the complaint for
recovery of property.
On November 10, 1993, petitioners filed a Motion To Dismiss[4] the complaint,
claiming that: (1) the complaint stated no cause of action; (2) the cause of action has long
prescribed; (3) the cause of action has long been barred by a prior judgment; and, (4) the
claim has been waived, abandoned and/or extinguished by laches and estoppel. An
Opposition to Motion To Dismiss with Memorandum[5] was filed by private respondent on
74

November 29, 1993. In turn, petitioners on December 1, 1993 filed their Memorandum of
Authorities.[6]
Thereafter, the trial court on December 15, 1993 issued an order dismissing private
respondents complaint, acceding to all the grounds set forth by petitioners in their motion
to dismiss. Dissatisfied, private respondent appealed to public respondent CA which set
aside the dismissal and ordered the remand of the case for further proceedings. Petitioners
motion for reconsideration was denied by respondent CA in its Resolution dated July 31,
1996.[7]
Now before us via this petition for review, petitioners insist on the propriety of the
trial courts order of dismissal, and reiterate, by way of assignment of errors, the same
grounds contained in their motion to dismiss, to wit:
I.

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE

COMPLAINT FAILS TO STATE A CAUSE OF ACTION.
II.

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT

RESPONDENTS CAUSE OF ACTION HAS PRESCRIBED.
III.

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT

RESPONDENTS CAUSE OF ACTION IS BARRED BY PRIOR JUDGMENT.
IV.

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT

RESPONDENTS CLAIM HAS BEEN WAIVED, ABANDONED OR
OTHERWISE EXTINGUISHED.

There is merit in the petition.

There are three (3) reasons which warrant the reversal of the assailed decision of
respondent court.
Respondent courts reading of the complaint is that it stated a cause of action, saying
that:
xxxxxxxxx

The legal right of the appellant as stated in his complaint, is his right to demand
transfer of title to him the property which is held in trust for him by the
appellees. The correlative obligation of the appellees, on the other hand, is to
deliver title over the property to the appellant which they are holding in trust
for the former, upon the termination of the trust relationship, that is, when the
appellant finally demanded that the title of the property be transferred in his
name. The act or omission on the part of the appellees which constitutes the
violation of the appellants right to secure title to the properties he owns and

75

possesses, is their refusal to transfer the title of the property in the appellants
name. All these averments the appellees hypothetically admit when they filed a
motion to dismiss on the ground that the complaint does not state a cause of
action. The trial court could have rendered a valid judgment upon these
hypothetically admitted averments in accordance with the prayer in the
complaint which is to have the title to the property held in trust by the appellee
transferred in the appellants name.
The flaw in this conclusion is that, while conveniently echoing the general rule that
averments in the complaint are deemed hypothetically admitted upon the filing of a
motion to dismiss grounded on the failure to state a cause of action, it did not take into
account the equally established limitations to such rule, i.e., that a motion to dismiss does
not admit the truth of mere epithets of fraud; nor allegations of legal conclusions; nor an
erroneous statement of law; nor mere inferences or conclusions from facts not stated; nor
mere conclusions of law; nor allegations of fact the falsity of which is subject to judicial
notice; nor matters of evidence; nor surplusage and irrelevant matter; nor scandalous
matter inserted merely to insert the opposing party; nor to legally impossible facts; nor to
facts which appear unfounded by a record incorporated in the pleading, or by a document
referred to; and, nor to general averments contradicted by more specific averments. [8] A
more judicious resolution of a motion to dismiss, therefore, necessitates that the court be
not restricted to the consideration of the facts alleged in the complaint and inferences
fairly deducible therefrom. Courts may consider other facts within the range of judicial
notice as well as relevant laws and jurisprudence which the courts are bound to take into
account,[9] and they are also fairly entitled to examine records/documents duly
incorporated into the complaint by the pleader himself in ruling on the demurrer to the
complaint.[10]
Guided by these crucial limitations on hypothetical admissions, the trust theory being
espoused by private respondent in his complaint, and upon which his claim over the
subject properties is principally anchored, cannot hold water for the following reasons:
First: The execution of a lease contract between Remigio Tan as lessor and private
respondent as lessee over the subject properties, the existence of which is established not
only by a copy thereof attached to petitioners motion to dismiss as Annex 1 [11] but by
private respondents own admission reflected in paragraph 6 of the complaint, already
belies private respondents claim of ownership. This is so because Article 1436 of the
Civil Code,[12]Section 2, Rule 131 of the Rules of Court [13] and settled
jurisprudence[14] consistently instruct that a lessee is estopped or prevented from disputing
the title of his landlord.
Second: In the Memorandum of Encumbrances found at the back of TCT No. 53284
issued in the name of Remigio Tan in 1958 attached as Annex B [15] to the complaint, there
appears a mortgage constituted by Remigio Tan over the subject properties in favor of
Philippine Commercial and Industrial Bank in 1963 to guarantee a principal obligation in
the sum of P245,000.00. Remigio could not have mortgaged the subject properties had he
not been the true owner thereof, inasmuch as under Article 2085 of the New Civil Code,
one of the essential requisites for the validity of a mortgage contract is that the mortgagor
76

be the absolute owner of the thing mortgaged. There is thus no denying that Remigio
Tans successful acquisition of a transfer certificate of title (TCT No. 53284) over the
subject properties in his name after having his brothers (Alejandro Tan Keh) title thereto
cancelled, and execution of a mortgage over the same properties in favor of Philippine
Commercial and Industrial Bank, undoubtedly, are acts of strict dominion which are
anathema to the concept of a continuing and subsisting trust [16] private respondent relies
upon.
Third: There being no trust, express or implied, established in favor of private
respondent, the only transaction that can be gleaned from the allegations in the complaint
is a double sale, the controlling provision for which is Article 1544 of the Civil Code, to
wit:

Article 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in
good faith was first in the possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.
Private respondent alleged that he bought the subject properties from Alejandro Tan
Keh in 1954 but nonetheless failed to present any document evidencing the same, while
Remigio Tan, as the other buyer, had in his name TCT No. 53284 duly registered in the
Registry of Deeds of Manila on October 13, 1958. [17] Remigio Tan, beyond doubt, was the
buyer entitled to the subject properties since the prevailing rule is that in the double sale
of real property, the buyer who is in possession of a Torrens title and had the deed of sale
registered must prevail.[18]
Fourth: Petitioners are in possession of TCT No. 117898 which evidences their
ownership of the subject properties. On the other hand, private respondent relies simply
on the allegation that he is entitled to the properties by virtue of a sale between him and
Alejandro Tan Keh who is now dead.Obviously, private respondent will rely on parol
evidence which, under the circumstances obtaining, cannot be allowed without violating
the Dead Mans Statute found in Section 23, Rule 130 of the Rules of Court, viz:

Sec. 23. Disqualification by reason of death or insanity of adverse party. Parties

or assignors of parties to a case, or persons in whose behalf a case is
prosecuted, against an executor or administrator or other representative of a
deceased person, or against a person of unsound mind, upon a claim or demand
against the estate of such deceased person or against such person of unsound

77

mind, cannot testify as to any matter of fact occurring before the death of such
deceased person or before such person became of unsound mind.
The object and purpose of the rule is to guard against the temptation to give false
testimony in regard of the transaction in question on the part of the surviving party, and
further to put the two parties to a suit upon terms of equality in regard to the opportunity
to giving testimony. If one party to the alleged transaction is precluded from testifying by
death, insanity, or other mental disabilities, the other party is not entitled to the undue
advantage of giving his own uncontradicted and unexplained account of the transaction.[19]
Clearly then, from a reading of the complaint itself, the annexes attached thereto and
relevant laws and jurisprudence, the complaint indeed does not spell out any cause of
action.
We agree with the petitioners submission that private respondents cause of action has
prescribed. TCT No. 53284 in the name of Remigio Tan was registered on October 13,
1958, while TCT No. 117898 in the name of his heirs, herein petitioners, was issued on
April 21, 1975. Private respondent filed his complaint on October 18, 1993. Respondent
court held that the ten (10)-year prescriptive period for the reconveyance of property
based on an implied trust cannot apply in this case since private respondent was in actual
possession of the subject properties, citing as authority the case of Heirs of Jose Olviga v.
CA, et al.[20] Thus:

"It is true that the prescriptive period within which to file an action for
reconveyance of property based on an implied trust is 10 years from the date of
issuance of a certificate of title thereon in accordance with Article 1144 of the
New Civil Code and jurisprudence (see Heirs of Jose Olviga v. Court of
Appeals, 227 SCRA 330 citing the case of Vda. de Portugal v. IAC, 159 SCRA
1780). But this rule applies only when the plaintiff (the appellant) is not in
possession of the property, since if a person claiming to be the owner thereof is
in actual possession of the property, the right to seek reconveyance, which in
effect seeks to quiet title to the property, does not prescribe (Heirs of Jose
Olviga v. Court of Appeals, supra; underscoring supplied; see also Sapto v.
Fabiana, 103 Phil. 683 and Faja v. Court of Appeals, 75 SCRA 441 cited in the
decision).
"The Court notes that, as alleged in the complaint, the appellant has been in
continuous and uninterrupted possession of the property in the concept of an
owner since 1954; which allegation, by the appellees' motion to dismiss, has
been hypothetically admitted. Therefore, the appellant's cause of action is, by
jurisprudence, even imprescriptible."
Reliance on the Olviga case is misplaced. Private respondents in Olviga were
actually occupying the subject land fraudulently registered in the name of Jose Olviga in
a cadastral proceeding as owners. The rightful application of the doctrine highlighted in
78

Olviga the right to seek reconveyance of property actually in possession of the plaintiffs
is imprescriptible would only cover a situation where the possession is in the concept of
an owner. This is bolstered not only by Article 1118 of the Civil Code, falling under the
chapter Prescription of Ownership and other Real Rights, which provides that:

"Article 1118. Possession has to be in the concept of an owner, public,

peaceful and uninterrupted." (emphasis ours),
but by a further reading of Olviga which emphasized that "x x x if a person claiming to
be the owner thereof is in actual possession of the property, the right to seek
reconveyance, which in effect seeks to quiet title to the property, does not prescribe."[21]
In this case, however, private respondent's occupation of the subject properties was
never in the concept of an owner since he was a mere lessee who, as hereinbefore
discussed, is estopped from denying the title of Remigio Tan as owner-lessor. At best,
private respondent's stay on the properties as lessee was by "license or by mere tolerance"
which, under Article 1119 of the Civil Code, "shall not be available for the purposes of
possession."[22]
It thus becomes evident that the filing of private respondent's complaint in 1993 thirty five (35) years after TCT No. 53284 in the name of Remigio Tan was registered
and eighteen (18) years after the issuance of TCT No. 117898 in the names of petitioners
- was way beyond the ten (10)-year time limit within which reconveyance of property
based on an implied trust should be instituted. Private respondent's cause of action,
assuming that it exists, has clearly prescribed.
Finally, private respondent is guilty of laches. In negating the onset of laches,
respondent CA held:

"But the presumption of abandonment in asserting a right or declining to do so

does not apply to appellant. For the appellant has been and still is in actual,
peaceful and continuous physical possession of the property. Being in actual,
peaceful and continuous physical possession of the property cannot certainly be
said as non-assertion of a right to the property. Moreover, the appellee had
acknowledged the trust character of possession of the title, and the appellant
must certainly be granted the right to trust in that express assurance. The very
fact that the appellant asserts his rights vis--vis the appellees show that he has
not abandoned to secure the title to a very substantial property located in the
heart of Manila."
Private respondent's possession of the subject properties cannot be made the basis to
deflect the effects of laches because he is a mere lessee who, to repeat, cannot assert any
adverse claim of ownership over the subject properties against the lessor-owner. What
ought to be in focus is that, as alleged by private respondent in his complaint, he was not
able to effect the transfer of title over the subject properties in his favor upon his purchase
thereof from Alejandro Tan Keh in 1954 because he was still a foreigner at that time. But

79

private respondent later on claimed that he was already a Filipino national when he
reminded petitioners of his ownership of the subject properties during Remigio Tans
wake sometime in 1968. It may be reasonably deduced from these allegations that private
respondent acquired Filipino citizenship by naturalization, thus entitling him to own
properties in the 1960s, more or less.His mistake, if it is one, is that he tarried for thirty
(30) years before formally laying claim to the subject properties before the
court. Considerable delay in asserting ones right before a court of justice is strongly
persuasive of the lack of merit of his claim, since it is human nature for a person to
enforce his right when the same is threatened or invaded. Thus, private respondent is
estopped by laches from questioning the ownership of the subject properties.[23]
WHEREFORE, in view of the foregoing, the assailed decision of respondent Court
of Appeals dated May 28, 1996 and its Resolution of July 31, 1996 denying the motion
for reconsideration thereof, are hereby SET ASIDE, and a new one is rendered
DISMISSING private respondent Fernando Tan Kiats complaint.
SO ORDERED.
Melo, Puno, and Mendoza, JJ., concur.
Regalado, J., (Chairman), on leave.
Asia Production Co., Inc. vs. Pano, 205 SCRA 458 (1992)
G.R. No. L-51058 January 27, 1992
ASIA PRODUCTION CO., INC., WANG TA PENG and WINSTON WANG, petitioners,
vs.
HON. ERNANI CRUZ PAO, as Judge of the Court of First Instance of Rizal (Quezon
City, Branch XVIII), LOLITA LEE LE HUA and ALBERTO DY, respondents.
Ismael J. Andres for petitioner Asia Production Co., Inc.
Burgos, Sarte, Rebueno & Sarte for petitioners.
Roman Careaga for Alberto Dy.

DAVIDE, JR. J.:

The simple issue in this case is whether or not an action for the refund of partial payments of
the purchase price of a building covered by an oral agreement to sell it with an oral promise
to assign the contract of lease on the lot where the building is constructed is barred by the
Statute of Frauds.
Sometime in March 1976, private respondents, who claimed to be the owners of a building
constructed on a lot leased from Lucio San Andres and located in Valenzuela, Bulacan,
offered to sell the building to the petitioners for P170,000.00. Petitioners agreed because of
private respondents' assurance that they will also assign to the petitioners the contract of
lease over the land. The above agreement and promise were not reduced to writing. Private

80

respondents undertook to deliver to the petitioners the deed of conveyance over the building
and the deed of assignment of the contract of lease within sixty (60) days from the date of
payment of the downpayment of P20,000.00. The balance was to be paid in monthly
installments. On 20 March 1976, petitioners paid the downpayment and issued eight (8)
postdated checks drawn against the Equitable Banking Corporation for the payment of the
eight (8) monthly installments, as follows:
Check No. Amount Due Date
10112253 P10,000.00 June 30, 1976
10112254 20,000.00 July 30, 1976
10112255 20,000.00 August 30, 1976
10112256 20,000.00 September 30, 1976
10112257 20,000.00 October 30, 1976
10112258 20,000.00 November 30, 1976
10112259 20,000.00 December 30, 1976
10112260 20,000.00 January 31, 1977
Relying on the good faith of private respondents, petitioners constructed in May 1976 a
weaving factory on the leased lot. Unfortunately, private respondents, despite extensions
granted, failed to comply with their undertaking to execute the deed to sale and to assign the
contract despite the fact that they were able to encash the checks dated 30 June and 30 July
1976 in the total amount of P30,000.00. Worse, the lot owner made it plain to petitioners that
he was unwilling to give consent to the assignment of the lease unless petitioners agreed to
certain onerous terms, such as an increase in rental, or the purchase of the land at a very
unconscionable price.
Petitioners were thus compelled to request for a stop payment order of the six (6) remaining
checks. Succeeding negotiations to save the transaction proved futile by reason of the
continued failure of private respondents to execute the deed of sale of the building and the
deed of assignment of the contract of lease.
So, on or about 29 December 1976, upon prior agreement with private respondents,
petitioners removed all their property, machinery and equipment from the building, vacated
the same and returned its possession to private respondents. Petitioners demanded from the
latter the return of their partial payment for the purchase price of the building in the total sum
of P50,000.00. Private respondents refused to return it. Hence, petitioners, filed against
private respondents a complaint 1 for its recovery and for actual, moral and exemplary damages
and attorney's fees with the then Court of First Instance (now Regional Trial Court) of Quezon
City, which was docketed as Civil Case No. Q-23593. The case was raffled to Branch XVIII of the
court which was then presided over by herein respondent Judge.
Private respondent Lolita Lee Le Hua did not file an Answer; hence, she was declared in
default.
Upon the other hand, private respondent Alberto Dy filed a motion
to dismiss the complaint on the ground that the claim on which the action is based an
alleged purchase of a building which is not evidenced by any writing cannot be proved by
parol evidence since Article 1356 in relation to Article 1358 of the Civil Code requires that it
should be in writing. 2 In their
opposition 3 to said motion, petitioners argue that their complaint is essentially for collection of a
sum of money; it does not seek to enforce the sale, but aims to compel private respondents to

81

refund a sum of money which was paid to them as purchase price in a sale which did not
materialize by reason of their bad faith. Furthermore, the execution of the document was an
undertaking of the private respondents, which they refused to comply with. Hence, they cannot
now be heard to complain against something which they themselves brought about.

In his Order 4 of 18 April 1979, respondent Judge granted the motion to dismiss on the ground
that the complaint is barred by the Statute of Frauds. He says:
It cannot be disputed that the contract in this case is condemned by the
Statutes of Fraud (sic) it involves not merely the sale of real property (the
building), it also includes an alleged lease agreement that must certainly be
for more than one year (See Art. 1403, No. 2, subparagraph e, New Civil
Code).
Plaintiffs cannot avoid the Statutes of Fraud (sic) by saying that this is merely
an action for the collection of a sum of money. To be entitled to the sum of
P50,000.00, it is necessary to show that such contract was executed and the
same was violated but plaintiffs are prevented from proving this alleged
agreement by parol evidence.
Neither may plaintiffs claim that by the payment of the sum of P50,000.00 the
contract was removed from the Statutes of Fraud (sic). This is so because
plaintiffs have not fully complied with their obligation to pay P170,000.00. If
there had been full payment of P170,000.00, the situation would have been
different.
Plaintiffs knew or should have known that their contract (as described by
them in their complaint) was unenforceable; they had thereby voluntarily
assumed the risks attendant to such contract. Moreover, the primordial aim of
the Statutes of Fraud (sic) is to prevent fraud and perjury in the enforcement
of obligations depending upon the unassisted memory of witnesses
(Shoemaker vs. La Tondea, 68 Phil. 24). The Court would find it difficult to
determine whether the sum of P50,000.00 was paid because of the
unenforceable contract or for some other transactions.
Their motion for reconsideration 5 having been denied by respondent Judge in his Order 6 of 21
June 1979 for the reason that the oral contract in this case was not removed from the operation of
the Statute of Frauds because there was no full or complete performance by the petitioners of the
contract as required in Paterno vs. Jao Yan 7 and Babao vs. Perez, 8petitioners filed this petition 9 on 16
July 1979, alleging therein as ground therefor grave abuse of discretion on the part of respondent
Judge in issuing the orders of 18 April 1979 and 21 June 1979.
After private respondent Alberto Dy filed his Comment 10 to the petition in compliance with the
resolution 11 of 23 July 1979 and petitioners filed their Reply 12 to said comment on 2 April 1980,
this Court gave due course 13 to the petition. Private respondent Lolita Lee Le Hua was
considered to have waived her right to file her comment to the petition. 14
Petitioners were subsequently required to file their Brief, which they complied with on 13
October 1981; 15 they make the following assignment of errors:
I

82

The lower court erred in holding that for a contract of purchase and sale to be
removed from the operation of the Statute of Frauds, there must be full and
complete payment of the purchase price.
II
The lower court erred in failing to appreciate the nature of petitioners' cause
of action.
III
The lower court erred in not finding that this case is not covered by the
Statute of Frauds.
IV
The lower court erred in not following the procedure prescribed by this
Honorable Court in cases when partial performance is alleged.
V
The lower court erred in dismissing the case.
Private respondents did not file their Brief.
We find merit in the petition. Respondent Judge committed grave abuse of discretion in
dismissing the complaint on the ground that the claim is barred by the Statute of Frauds.
Article 1403 of the Civil Code declares the following contracts, among others,
as unenforceable, unless they are ratified:
xxx xxx xxx
(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the writing,
or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed
within a year from the making thereof;
(b) A special promise to answer for the debt, default, or
miscarriage of another;
(c) An agreement made in consideration of marriage, other
than a mutual promise to marry;

83

(d) An agreement for the sale of goods, chattels or things in

action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or
the evidences, or some of them, of such things in action, or
pay at the time some part of the purchase money; but when a
sale is made by auction and entry is made by the auctioneer
in his sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is made, it
is a sufficient memorandum;
(e) An agreement for the leasing for a longer period than one
year, or for the sale of real property or of an interest therein;
(f) A representation to the credit of a third person.
xxx xxx xxx
The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations
depending for their evidence on the unassisted memory of witnesses by requiring certain
enumerated contracts and transactions to be evidenced by a writing signed by the party to
be charged. 16 It was not designed to further or perpetuate fraud. Accordingly, its application is
limited. It makes only ineffective actions for specific performance of the contracts covered by it; it
does not declare them absolutely void and of no effect. As explicitly provided for in the abovequoted paragraph (2), Article 1403 of the Civil Code, the contracts concerned are simply
"unenforceable" and the requirement that they or some note or memorandum thereof be in
writing refers only to the manner they are to be proved. It goes without saying then, as held in the
early case of Almirol, et al. vs. Monserrat, 17 that the statute will apply only to executory rather
than executed contracts. Partial execution is even enough to bar the application of the statute.
In Carbonnel vs. Poncio, et al., 18 this Court held:
. . . It is well-settled in this jurisdiction that the Statute of Frauds is applicable
only to executory contracts (Facturan vs. Sabanal, 81 Phil. 512), not to
contracts that are totally or partially performed (Almirol, et al. vs. Monserrat,
48 Phil. 67, 70; Robles vs. Lizarraga Hermanos, 50 Phil. 387; Diana vs.
Macalibo, 74 Phil. 70).
Subject to a rule to the contrary followed in a few jurisdictions,
it is the accepted view that part performance of a parol
contract for the sale of real estate has the effect, subject to
certain conditions concerning the nature and extent of the
acts constituting performance and the right to equitable relief
generally, of taking such contract from the operation of the
statute of frauds, so that chancery may decree its specific
performance or grant other equitable relief. It is well settled in
Great Britain and in this country, with the exception of a few
states, that a sufficient part performance by the purchaser
under a parol contract for the sale of real estate removes the
contract form the operation of the statute of frauds (49 Am.
Jur. 722-723).

84

In the words of former Chief Justice Moran: "The reason is simple. In

executory contracts there is a wide field for fraud because unless they be in
writing there is no palpable evidence of the intention of the contracting
parties. The statute has precisely been enacted to prevent fraud."
(Comments on the Rules of Court, by Moran, Vol. III [1957 ed.] p. 178).
However, if a contract has been totally or partially performed, the exclusion of
parol evidence would promote fraud or bad faith, for it would enable the
defendant to keep the benefits already derived by him form the transaction in
litigation, and, at the same time, evade the obligations, responsibilities or
liabilities assumed or contracted by him thereby.
It follows then that the statute applies only to executory contracts and in actions for
their specific performance. It does not apply to actions which are neither for violation
of a contract nor for the performance thereof. 19
There can be no dispute that the instant case is not for specific performance of the
agreement to sell the building and to assign the leasehold right. Petitioners merely seek to
recover their partial payment for the agreed purchase price of the building, which was to be
paid on installments, with the private respondents promising to execute the corresponding
deed of conveyance, together with the assignment of the leasehold rights, within two (2)
months from the payment of the agreed downpayment of P20,000.00. By their motion to
dismiss, private respondents theoretically or hypothetically admitted the truth of the
allegations of fact in the complaint. 20 Among the allegations therein are:
(1) that the P50,000.00 sought to be recovered represents the downpayment of P20,000.00 and
two (2) monthly installments of the purchase price, and (2) that petitioners decided, in effect, to
withdraw from the agreement by ordering the stop payment of the remaining six (6) checks and to
return the possession of the building to private respondents because of the latter's failure to
comply with their agreement. The action is definitely not one for specific performance, hence the
Statute of Frauds does not apply. And even if it were for specific performance, partial execution
thereof by petitioners effectively bars the private respondents from invoking it. Since it is for
refund of what petitioners had paid under the agreement, originally unenforceable under the
statute, because petitioners had withdrawn therefrom due to the "bad faith" of the private
respondents, the latter cannot be allowed to take shelter under the statute and keep the
P50,000.00 for themselves. If this were the case, the statute would only become a shield for
fraud, allowing private respondents not only to escape performance of their obligations, but also
to keep what they had received from petitioners, thereby unjustly enriching themselves.
Besides, even if the action were for specific performance, it was premature for the
respondent Judge to dismiss the complaint by reason of the Statute of Frauds despite the
explicit allegations of partial payment. As this Court stated in Carbonnel vs. Poncio, et al.: 21
For obvious reasons, it is not enough for a party to allege partial performance
in order to hold that there has been such performance and
to render a decision declaring that the Statute of Frauds is inapplicable. But
neither is such party required to establish such partial performance
by documentaryproof before he could have the opportunity to introduce oral
testimony on the transaction. Indeed, such oral testimony would usually be
unnecessary if there were documents proving partial performance. Thus, the
rejection of any and all testimonial evidence on partial performance, would
nullify the rule that the Statute of Frauds is inapplicable to contracts which
have been partly executed, and lead to the very evils that the statute seeks
to prevent.

85

xxx xxx xxx

When the party concerned has pleaded partial performance, such party is
entitled to a reasonable chance to establish by parol evidence the truth of this
allegation, as well as the contract itself. "The recognition of the exceptional
effect of part performance in taking an oral contract out of the statute of
frauds involves the principle that oral evidence is admissible in such cases to
prove both the contract and the part performance of the contract" (49 Am.
Jur. 927).
We thus rule that an action by a withdrawing party to recover his partial payment of the
consideration of a contract, which is otherwise unenforceable under the Statute of Frauds, by
reason of the failure of the other contracting party to comply with his obligation, is not
covered by the Statute of Frauds.
WHEREFORE, the petition is hereby GRANTED. The challenged Orders of 18 April 1979
and 21 June 1979 in Civil Case No. Q-23593 of the court below are hereby ANNULLED and
SET ASIDE, and the complaint in said case is hereby ordered REINSTATED. The default
order against private respondent Lolita Lee Le Hua shall stand and private respondent
Alberto Dy is ordered to file his Answer to the complaint with the court below within ten (10)
days from receipt of this decision. This decision shall be immediately executory.
Costs against private respondents.
IT IS SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Romero, JJ., concur.

Sunville Timber Products, Inc. vs. Abad, 206 SCRA 482 (1992)
G.R. No. 85502 February 24, 1992
SUNVILLE TIMBER PRODUCTS, INC., petitioner,
vs.
HON. ALFONSO G. ABAD, as Judge RTC, Br. 22 of Pagadian City, COURT OF
APPEALS, ISIDRO GILBOLINGO AND ROBUSTIANO BUGTAI, respondents.
Manuel V. Trinida for petitioner.
Adolf Leo P. Boncavil for private respondents.

CRUZ, J.:
The Court will focus its attention only on one of the issues raised in this petition the
correct application of the doctrine of exhaustion of administrative remedies.

86

The petitioner was granted a Timber License Agreement (TLA), authorizing it to cut, remove
and utilize timber within the concession area covering 29,500 hectares of forest land in
Zamboanga del Sur, for a period of ten years expiring on September 31, 1992.
On July 31, 1987, the herein private respondents filed a petition with the Department of
Environment and Natural Resources for the cancellation of the TLA on the ground of serious
violations of its conditions and the provisions of forestry laws and regulations.
The same charges were subsequently made, also by the herein private respondents, in a
complaint for injunction with damages against the petitioner, which was docketed as Civil
Case No. 2732 in the Regional Trial Court of Pagadian City.
The petitioner moved to dismiss this case on three grounds, to wit: 1) the court had no
jurisdiction over the complaint; 2) the plaintiffs had not yet exhausted administrative
remedies; and 3) the injunction sought was expressly prohibited by section 1 of PD 605.
Judge Alfonso G. Abad denied the motion to dismiss on December 11, 1987, 1 and the motion
for reconsideration on February 15, 1988. 2 The petitioner then elevated the matter to the
respondent Court of Appeals, which sustained the trial court in a decision dated July 4,
1988, 3 and in its resolution of September 27, 1988, denying the motion for reconsideration. 4
The Court of Appeals held that the doctrine of exhaustion of administrative remedies was not
without exception and pointed to the several instances approved by this Court where it could
be dispensed with. The respondent court found that in the case before it, the applicable
exception was the urgent need for judicial intervention, which it explained thus:
The lower court found out that sometime on July 1981, the City Council of
Pagadian in its Resolution No. 111 requested the Bureau of Forest
Development to reserve 1,000 hectares in Lison Valley. This request
remained unacted upon. Instead in 1982, a TLA covering 29,500 hectares,
including the area requested, was given to petitioner.
Then the fear expressed by the City Council of Pagadian in its resolution
became reality.
"As averred in the complaint, the erosion caused by the
logging operations of the defendant has caused heavy
siltation not only in the Labangan River (as predicted by the
City Council of Pagadian City in 1981) but also in the Tukuran
River, Salug River, Sindangan River, and Sibuguey River. In
other words, the adverse effects of the logging operations of
the defendant have already covered a wider area than that
feared to be adversely affected by the City Council of
Pagadian City.
Floods are unknown phenomena in heavily forested areas
years back, particularly in the Island of Mindanao. When the
grant of logging concessions started, so was the denudation
of forests. . . . It is common knowledge that heavy floods have
occurred in areas/places adjoining logging concessions.
(Resolution dated December 11, 1987, p. 5).

87

Thus, it is urgent that indiscriminate logging be stopped. Irreparable damage

would ensue unless the court intervenes. Reliance on the DENR may not be
enough, judging from its inaction on the council's request seven years back.
The respondent court cited in support of this conclusion the case of De Lara
v. Cloribel, 5 where "irreparable damage and injury" was allowed as an exceptional ground,
and Arrow Transportation Corporation v. Board of Transportation, 6 where the doctrine was
waived because of "the strong public interest in having the matter settled" as soon as possible.
The decision also declared invalid Section 1 of PD 605, which provides:
Sec. 1. No court of the Philippines shall have jurisdiction to issue any
restraining order, preliminary injunction or preliminary mandatory injunction in
any case involving or growing out of the issuance, approval or disapproval,
revocation or suspension of, or any action whatsoever by the proper
administrative official or body on concessions, licenses, permits, patents, or
public grants of any kind in connection with the disposition, exploitation,
utilization, exploration and/or development of the natural resources of the
Philippines.
This was held to be an encroachment on the judicial power vested in the Supreme Court and
the lower courts by Article VIII, Section 1, of the Constitution. The respondent court
cited Export Processing Zone Authority v. Dulay, 7where several presidential decrees were
declared unconstitutional for divesting the courts of the judicial power to determine just
compensation in expropriation cases.
The petitioner is now before the Court, contending that the doctrine of exhaustion of
administrative remedies was not correctly applied and that the declaration of the
unconstitutionality of Section 1 of PD 605 was improper.
The doctrine of exhaustion of administrative remedies calls for resort first to the appropriate
administrative authorities in the resolution of a controversy falling under their jurisdiction
before the same may be elevated to the courts of justice for review. Non-observance of the
doctrine results in lack of a cause of action, 8 which is one of the grounds allowed in the Rules of Court for the
dismissal of the complaint. The deficiency is not jurisdictional. Failure to invoke it operates as a waiver of the objection as a
ground for a motion to dismiss and the court may then proceed with the case as if the doctrine had been observed.

One of the reasons for the doctrine of exhaustion is the separation of powers, which enjoins
upon the Judiciary a becoming policy of non-interference with matters coming primarily
(albeit not exclusively) within the competence of the other departments. The theory is that
the administrative authorities are in a better position to resolve questions addressed to their
particular expertise and that errors committed by subordinates in their resolution may be
rectified by their superiors if given a chance to do so. A no less important consideration is
that administrative decisions are usually questioned in the special civil actions of certiorari,
prohibition and mandamus, which are allowed only when there is no other plain, speedy and
adequate remedy available to the petitioner. It may be added that strict enforcement of the
rule could also relieve the courts of a considerable number of avoidable cases which
otherwise would burden their heavily loaded dockets. 9
As correctly suggested by he respondent court, however, there are a number of instances
when the doctrine may be dispensed with and judicial action validly resorted to immediately.
Among these exceptional cases are: 1) when the question raised is purely legal; 10 2) when
the administrative body is in estoppel; 11 3) when the act complained of is patently illegal; 12 4)

88

when there is urgent need for judicial intervention; 13 5) when the claim involved is small; 14 6)
when irreparable damage will be suffered; 15 7) when there is no other plain, speedy and
adequate remedy; 16 8) when strong public interest is involved; 17 9) when the subject of the
controversy is private land; 18 and 10) in quo warranto proceedings.19

The private respondents now submit that their complaint comes under the exceptions
because forestry laws do not require observance of the doctrine as a condition precedent to
judicial action; the question they are raising is purely legal; application of the doctrine will
cause great and irreparable damage; and public interest is involved.
We rule for the petitioner.
Even if it be assumed that the forestry laws do not expressly require prior resort to
administrative remedies, the reasons for the doctrine above given, if nothing else, would
suffice to still require its observance. Even if such reasons were disregarded, there would still
be the explicit language of pertinent laws vesting in the DENR the power and function "to
regulate the development, disposition, extraction, exploration and use of the country's
forests" and "to exercise exclusive jurisdiction" in the "management and disposition of all
lands of the public domain," 20 and in the Forest Management Bureau (formerly the Bureau of
Forest Development) the responsibility for the enforcement of the forestry laws aid
regulations 21 here claimed to have been violated. This comprehensive conferment
clearly implies at the very least that the DENR should be allowed to rule in the first instance on
any controversy coming under its express powers before the courts of justice may intervene.
The argument that the questions raised in the petition are purely legal is also not acceptable.
The private respondents have charged, both in the administrative case before the DENR and
in the civil case before the Regional Trial Court of Pagadian City, that the petitioner has
violated the terms and conditions of the TLA and the provisions of forestry laws and
regulations. The charge involves factual issues calling for the presentation of supporting
evidence. Such evidence is best evaluated first by the administrative authorities, employing
their specialized knowledge of the agreement and the rules allegedly violated, before the
courts may step in to exercise their powers of review.
As for the alleged urgent necessity for judicial action and the claimed adverse impact of the
case on the national interest, the record does not show that the petitioners have satisfactorily
established these extraordinary circumstances to justify deviation from the doctrine by
exhaustion of administrative remedies and immediate resort to the courts of justice. In fact,
this particular submission must fall flat against the petitioner's uncontested contention that it
has since 1988 stopped its operations under the TLA in compliance with the order of the
DENR.
In the Petition for prohibition filed with the respondent court, the petitioner alleged that its
logging operations had been suspended pursuant to a telegram 22 received on February 23,
1988, by the District Forester from the Regional Executive Director of the DENR, Zamboanga
City; reading as follows:
DISTRICT FORESTER
PAGADIAN CITY
QUOTED HEREUNDER IS RADIO MESSAGE DATED FEBRUARY 22, 1988
FROM SECRETARY FULGENCIO S. FACTORAN, JR. QUOTE EFFECTIVE
IMMEDIATELY CMA SUSPEND ALL LOGGING OPERATIONS OF

89

SUNVILLE IN VIEW OF SERIOUS VIOLATIONS OF FOREST

PROTECTION AND REFORESTATION UNQUOTE SUBMIT REPORT ASAP.
R
E
D
B
A
T
C
A
G
A
N
The petition now before us contains the allegations that the "petition for cancellation of
petitioner's TLA is still pending up to this date and that petitioner's logging operations (were)
ordered suspended by the Secretary of the DENR pending further investigation." 23
In the memorandum filed by the petitioner with this Court, it is informed that "the Secretary of
the DENR suspended petitioner's logging operations until further investigation. The
suspension is still in force up to this date after the lapse of almost 3 years." 24
These statements have not been disputed by the private respondents in their pleadings
before the respondent court and this Court and are therefore deemed admitted.
There in no question that Civil Case No. 2732 comes within the jurisdiction of the respondent
court. Nevertheless, as the wrong alleged in the complaint was supposedly committed as a
result of the unlawful logging activities of the petitioner, it will be necessary first to determine
whether or not the TLA and the forestry laws and regulations had indeed been violated. To
repeat for emphasis, determination of this question is the primary responsibility of the Forest
Management Bureau of the DENR. The application of the expertise of the administrative
agency in the resolution of the issue raised is a condition precedent for the eventual
examination, if still necessary, of the same question by a court of justice.
In view of the above observations, we find that there was no need for the respondent court to
declare the unconstitutionality of Section 1 of PD 605. The rule is that a question of
constitutionality must be avoided where the case can be decided on some other available
ground, 25 as we have done in the case before us. The resolution of this same question must
await another case, where all the indispensable requisites of a judicial inquiry into a constitutional
question are satisfactorily established. In such an event, it will be time for the Court "to make the
hammer fall, and heavily," in the words of Justice Laurel, if such action is warranted.
WHEREFORE, the petition is GRANTED. The decision of the respondent court dated July 4,
1988, and its resolution dated September 27, 1988, as well as the resolutions of the trial
court dated December 11, 1987 and February 15, 1988, are all REVERSED and SET ASIDE.
Civil Case No. 2732 in the Regional Trial Court of Pagadian City is hereby DISMISSED.
SO ORDERED.
Narvasa, C.J., Grio-Aquino and Medialdea, JJ., concur.

90

Municipality of Binan vs. CA, 219 SCRA 69 (1993)

G.R. No. 94733 February 17, 1993
MUNICIPALITY OF BIAN, LAGUNA, represented by Hon. Bayani Alonte, Municipal
Mayor of Bian, Laguna, petitioner,
vs.
HON. COURT OF APPEALS and JESUS M. GARCIA, respondents.
Neol Cangco Zarate for private respondents.

REGALADO, J.:
This is an appeal via certiorari from the judgment of respondent Court of Appeals
promulgated on May 31, 1990 in CA-G.R. SP No. 19582 1 wherein it set aside the order
granting a writ of execution pending appeal issued on December 14, 1989 by Branch 24 of the
Regional Trial Court at Bian, Laguna in Civil Case No. B-3201 thereof; and further annulled the
judgment rendered by the Municipal Trial Court of Bian, Laguna in an ejectment case, docketed
as Civil Case No. 2473, and which case is pending on appeal in the aforestated Civil Case No. B3201. Respondent court having denied the reconsideration in its resolution of August 9,
1990, 2 petitioners have taken this recourse to us against the backdrop of the antecedents
hereunder chronologically detailed.
On September 27, 1989, petitioner filed Civil Case No. 2473 for unlawful detainer, with a
prayer for a writ of preliminary mandatory injunction, against private respondent in the
Municipal Trial Court of Bian, Laguna alleging that it was no longer amenable to the
renewal of its 25-year lease contract with private respondent over the premises involved
because of its pressing need to use the same for national and provincial offices therein.
On October 5, 1989, private respondent filed his answer to the complaint contending that the
contract of lease for the original period of 25 years had not yet expired and, assuming that it
had expired, he has exercised his option to stay in the premises for another 25 years as
expressly provided in the said contract. On October 9, 1989, petitioner filed its reply to
private respondent's answer.
On October 16, 1989, private respondent filed this time a "Motion for Preliminary Hearing as
if a Motion to Dismiss Has Been Filed" on the ground that the complaint states no cause of
action, reiterating its argument that the original term of 25 years stipulated in the contract of
lease had not yet expired and that, at any rate, under said contract he has the exclusive
option to renew the same for another 25 years.
After some further exchanges consisting of petitioner's opposition to private respondent's
aforesaid motion for preliminary hearing, the latter's reply thereto, and the parties' respective

91

position papers, the municipal trial court rendered judgment on October 26, 1989 ordering
private respondent to vacate the premises subject of the ejectment case. 3
On November 8, 1989, private respondent filed a "Manifestation/Motion" before said trial
court praying that the issues raised in the motion for preliminary hearing, apparently because
it was in the nature of a motion to dismiss, be first resolved instead of rendering judgment on
the pleadings. Thereafter, on November 10, 1989, private respondent received a copy of the
decision of the trial court, hence he filed a notice of appeal to the Regional Trial Court of
Laguna on November 20, 1989, which was assigned to Branch 24 thereof at Bian, Laguna.
On December 5, 1989, petitioner filed before said court a motion for execution pending
appeal and on December 14, 1989, Hon. Jose Mar. Garcia, presiding judge of said branch of
the regional trial court granted petitioner's aforesaid motion for discretionary execution. 4 The
following day, December 15, 1989, a writ of execution was issued directing the deputy sheriff or
his duly authorized representative to enforce the terms of the judgment of the court a quo. 5
On December 29, 1989, private respondent filed with the Court of Appeals a petition
for certiorari, with a prayer for the issuance of a writ of preliminary injunction, assailing the
aforesaid order of execution pending appeal on the ground that petitioner failed to furnish
private respondent with a copy of the motion therefor filed by it in the aforementioned Civil
Case No. B-3201, contrary to Section 6, Rule 15 of the Rules of Court, hence the invalidity of
the lower court's order of December 14, 1989 which granted the writ of execution. Petitioner
seasonably filed its comment and/or opposition to said petition.
Resolving this issue posed by the pleadings, respondent court rendered judgment on May
31, 1990 setting aside the questioned order for being violative of the requirement in Section
6, Rule 15 of the Rules of Court which provides that no motion shall be acted upon by the
court without proof of prior notice thereof to the adverse party. Aside from annulling the
controversial order, however, respondent court likewise annulled the judgment of the court a
quo in Civil Case No. 2473, which judgment is pending on appeal in Civil Case No. B-3201
of the aforesaid regional trial court. Respondent court granted the second additional relief on
the ground that the decision is contrary to the agreement of the parties which should be
considered the law between them. 6
The assailed judgment and ratiocinations of respondent court are best reproduced for
convenient reference:
FIRSTLY, the respondent Municipality filed a Motion For Execution pending
appeal. Petitioner contends that said motion did not comply with Section 4,
Rule 15 and the ruling of Azajar vs. Court of Appeals (145 SCRA 333). Under
Section 6, Rule 15 of the Rules of Court, no motion shall be acted upon by
the Court without proof of such motion. The respondent Court by doing so
acted with serious abuse of discretion which is tantamount to lack of or in
excess of jurisdiction to issue a writ of execution pending appeal.
SECONDLY, petitioner assails the decision of the lower court on the ground
that it failed to consider that the judgment proceeded from an inferior court
which was improvidently and irregularly rendered when it failed to resolve
first the issue raised in the motion to dismiss. This refers to a situation where
the lease contract shall be for twenty five (25) years, renewable for another
twenty five (25) years at the option of the lessee or his heirs. . . .

92

WHEREFORE, in view of the foregoing and considering the evidence and the
highest consideration of law and applicable jurisprudence, the petition
for certiorari is hereby granted. The order dated December 14, 1989 in Civil
Case No. B-3201, issued without notice to petitioner together with the writ of
execution pending appeal, being null and void, is therefore ordered set aside,
being contrary to Section 6, Rule 15 of the Rules of Court. The judgment of
the inferior court in Civil Case No. 2475 (sic, 2473) is likewise ordered
annulled, being contrary to the agreement of the parties which is considered
the law between them. 7
Petitioner duly filed a motion for reconsideration of said judgment on the ground that the
Court of Appeals should have confined itself to the questioned order of the respondent
regional trial court dated December 14, 1989 and subject of private respondent's petition
for certiorari with preliminary injunction in CA-G.R. SP No. 19582.
As earlier stated, respondent court denied said motion, hence, the instant petition wherein
the petitioner contends that the Court of Appeals overstepped the bounds of its authority in
annulling the decision of the municipal trial court even if said decision was not an issue
raised by private respondent in CA-G.R. SP No. 19582 and which decision is in fact pending
on appeal with the regional trial court. 8
In his comment, private respondent refutes petitioner's contention and claims that the issue
of the merits of the judgment of the municipal trial court was sufficiently raised and
controverted, hence, respondent court was not in error when it passed judgment on the
same. Moreover, private respondent makes the riposte that it is a cherished rule in
procedural law that a controversy should be settled in one single proceeding in order to
avoid multiplicity of suits.
We are favorably impressed with the merits of the instant petition.
Respondent Court of Appeals has no jurisdiction in a certiorari proceeding involving an
incident in a case to rule on the merits of the main case itself which was not on appeal
before it. The validity of the order of the regional trial court, dated December 14, 1989,
authorizing the issuance of a writ of execution during the pendency of the appeal therein was
the sole issue raised in the petition for certiorari filed in respondent Court of Appeals. 9 The
allegation that the decision of the municipal trial court was improvidently and irregularly issued
was raised by private respondent only as an additional or alternative argument to buttress his
theory that the issuance of a discretionary writ of execution was not in order, as can be gleaned
from the text of said petition itself, to wit:
V. ERRORS/ISSUES
xxx xxx xxx
Besides, when the respondent Judge issued the writ, it (sic) failed to consider
that the judgment rendered by the inferior court was improvidently and
irregularly issued, when said court failed to resolve first the pending Motion
To Dismiss, a procedural process before any judgment on the merit(s) may
be had. 10
Further, even assuming that the said issue was squarely raised and sufficiently controverted,
the same cannot be considered a proper subject of a special civil action for certiorari under

93

Rule 65 which is limited only to challenges against errors of jurisdiction. The jurisdiction of
the municipal trial court over the ejectment case filed by the petitioner against private
respondent is not disputed. Thus, assuming that the said lower court committed a mistake on
the merits of the case, it was nonetheless in the due exercise of its jurisdiction. The error, if
any was committed by the trial court, was at most one of judgment or procedure correctible
by ordinary appeal.
Neither can it be said that the lower court committed a grave abuse of discretion or
exceeded its jurisdiction when it failed to conduct a preliminary hearing, as prayed for in
private respondent's "Motion for Preliminary Hearing as if a Motion to Dismiss Has Been
Filed," before summarily rendering judgment on the merits of the case. The said motion of
private respondent is anchored on the ground that the complaint allegedly states no cause of
action since the original term of 25 years stipulated in the contract of lease had not yet
expired and assuming that it had expired, private respondent had made known to petitioner
his exclusive option to renew it for another 25 years. 11
Section 5, Rule of the Rules of Court pertinently provides:
Sec. 5. Pleading grounds as affirmative defenses. Any of the grounds for
dismissal provides for in this Rule, except improper venue, preliminary
hearing may be had thereon as if a motion to dismiss had been filed.
The aforequoted provision allows the grounds for a motion to dismiss to be set up as
affirmative defenses in the answer if no motion to dismiss has been filed.
However, contrary to the claim of private respondent, the preliminary hearing permitted
under the said provision is not mandatory even when the same is prayed for. It rests largely
on the sound discretion of the trial court. The use of the word "may" in said provision shows
that such a hearing is not a matter of right demandable from the trial court. Where the
provision reads "may," this word shows that it is not mandatory but discretional. It is an
auxiliary verb indicating liberty, opportunity, permission and possibility. 12
Moreover, a preliminary hearing on an affirmative defense for failure to state a cause of
action is not necessary. As we have ruled in Heirs of Juliana Clavano vs. Genato, et al.: 13
. . . respondent Judge committed an error in conducting a preliminary hearing
on the private respondent's affirmative defenses. It is a well-settled rule that
in a motion to dismiss based on the ground that the complaint fails to state a
cause of action, the question submitted to the court for determination is the
sufficiency of the allegations in the complaint itself. Whether those allegations
are true or not is beside the point, for their truth is hypothetically admitted by
the motion. The issue rather is: admitting them to be true, may the court
render a valid judgment in accordance with the prayer of the complaint?
Stated otherwise, the sufficiency of the cause of action must appear on the
face of the complaint in order to sustain a dismissal on this ground. No
extraneous matter may be considered nor facts not alleged, which would
require evidence and therefore, must be raised as defenses and await the
trial. In other words, to determine sufficiency of the cause of action, only the
facts alleged in the complaint, and no other should be considered.

94

The respondent Judge departed from this rule in conducting a hearing and in
receiving evidence in support of private respondent's affirmative defense, that
is, lack of cause of action.
It is a familiar doctrine in this jurisdiction that certiorari will issue only to correct errors of
jurisdiction and that no error or mistake committed by a court will be corrected
by certiorari unless said court had acted in the premises without jurisdiction or in excess
thereof or with such grave abuse of discretion as would amount to lack of jurisdiction. It is
available only for these purposes and not to correct errors of procedure or mistake in the
judge's finding or conclusions. 14
If a judgment of a municipal trial court is sought to be reviewed, the remedy is an appeal to
the regional trial court, not the filing of a special civil action of certiorari. Appeal, whether from
an interior court or a regional trial court, is antithetical to a special civil action
of certiorari. 15 When the remedy of appeal is available, the extraordinary remedy
ofcertiorari cannot be resorted to because the availability of appeal proscribes recourse to the
special civil action of certiorari.16
Indeed, the respondent Court of Appeals went beyond the realm of its authority and its
pronouncements on the judgment rendered by the municipal trial court on the ejectment
case were ultra jurisdictio. That judgment was on appeal before the regional trial court.
Respondent court's authority was, therefore, limited to ruling upon the issue of whether or
not the regional trial court committed grave abuse of discretion in issuing the order directing
the issuance of a discretionary writ of execution against private respondent. Whether or not
the municipal trial court committed a mistake in arriving at its decision is an issue that is
beyond the authority of respondent court to decide. It is lodged in another and appropriate
forum with appellate powers the exercise of which should not be usurped or preemted by
respondent Court of Appeals.
WHEREFORE, the petition at bar is GRANTED. The decision of respondent Court Appeals
dated May 31, 1990, insofar as it annulled the decision of the Municipal Trial Court of Bian,
Laguna in Civil Case No. 2473, and its resolution of August 9, 1990 are hereby REVERSED
and SET ASIDE. Let this case be REMANDED to the Regional Trial Court of Bian, Laguna
for further appropriate proceedings.
SO ORDERED.
Narvasa, C.J., Feliciano, Nocon and Campos, Jr., JJ., concur.

NPC vs. CA, 185 SCRA 169 (1990)

G.R. No. 84695 May 8, 1990
NATIONAL POWER CORPORATION and FINE CHEMICALS (PHILS.), INC., petitioners,
vs.
THE COURT OF APPEALS and THE MANILA ELECTRIC COMPANY, respondents.

95

PARAS, J.:
This is a petition for review on certiorari, with prayer for the issuance of temporary restraining
order, of the August 11, 1988 decision * of the Court of Appeals in CA-G.R. SP No. 12939 dismissing the petition
for certiorari, prohibition and mandamus.

Herein petitioner FINE Chemicals (Phils.) Inc. (FINE for short) is a corporation registered
with the Board of Investments (BOI for short) and engaged in the manufacture of plastics for
export. Sometime in September, 1986, it filed an application for direct power connection with
herein co-petitioner National Power Corporation (NPC for short). NPC, acting on the same,
wrote a letter to herein private respondent Manila Electric Company (MERALCO for short),
dated November 18, 1986 (Rollo, p. 54), wherein it stated that as per Memorandum of
Understanding between NPC and BOI, the NPC is authorized to connect directly to its
system qualified industrial consumers. However, due to its policy not to compete directly with
its customers, NPC requests that it be informed whatever definite decision MERALCO is
contemplating on the requests of FINE and of Rizal Cement for such direct connection.
MERALCO, in a letter dated December 3, 1986 (Ibid., p. 55), advised NPC that they are not
in a position to grant the request since to allow large consumers to tap directly to NPC will
mean foregoing the share of the subsidy burden which will ultimately be borne by the other
remaining large consumers, and that it will also mean costly duplication of facilities.
MERALCO, in a letter dated February 27, 1987 (Ibid., p. 56) further stated, among others,
that the direct connection of industries under BOI-NPC memorandum of understanding dated
January 12, 1981, presupposes the inability of the utility/cooperatives to meet certain
standard of financial and technical capability, both of which are not true in the case of
MERALCO. NPC, in a letter dated March 16, 1987 (Ibid., p. 57), informed MERALCO that in
the absence of a clear- cut policy that will inhibit NPC from acceding to the said request,
NPC is now preparing and will put up the necessary facilities to supply power to FINE; and
that they are now negotiating the terms and conditions of the supply. MERALCO, in a letter
dated March 20, 1987 (Ibid., pp. 58-59), registered its strong objection; reiterated its
assurance that it is financially and technically capable of serving the power requirements of
FINE; and with the statement that a draft executive order creating the Energy Regulatory
Board has been prepared and may be issued momentarily, urged NPC to hold off any further
action towards serving applicant directly, lest it will pre-empt that Board from implementing
government prescription on this issue. But on July 12, 1987, NPC started to supply the
electric requirements of FINE by direct power supply connection.
Hence, on July 22, 1987, MERALCO filed with the Regional Trial Court of Pasig, presided
over by Judge Eutropio Migrino a petition for Prohibition, mandamus and Damages with
Preliminary Injunction against petitioners NPC and FINE Chemicals (Phil.) Inc., docketed
therein as Civil Case No. 54733 (Ibid., pp. 23-53).
On August 4, 1987, FINE filed its opposition to MERALCO's application for preliminary
injunction, maintaining that the application for injunctive relief had become moot and
academic since, prior to the filing of the petition, the direct power service had already been
consummated and the requisite power lines and facilities of NPC had long been installed and
fully operational.
Accordingly, MERALCO amended its petition by incorporating therein an application for a writ
of preliminary mandatory injunction.

96

On August 11, 1987, FINE moved to dismiss the amended petition on the ground of
insufficiency of the allegations in the petition to plead a cause of action (Ibid., pp. 60-70).
NPC adopted FINE's motion to dismiss.
Meanwhile, trial judge allowed reception of MERALCO's evidence in support of its
application for a writ of preliminary mandatory injunction, over FINE's objection.
On August 25, 1987, MERALCO was granted leave to file its second amended petition so as
to incorporate this time an allegation of grave and irreparable injury.
With the admission of MERALCO's second amended petition, FINE filed a manifestation
adopting its motion to dismiss dated August 10, 1987 as its motion to dismiss the second
amended petition. On the other hand, MERALCO filed its opposition thereto on September
11, 1987.
Respondent Judge, in an order dated September 16, 1987, denied the motion to dismiss
(Ibid., p. 79), the pertinent portion of which, reads:
The Motion to Dismiss is anchored on the ground of lack of cause of action.
Well settled rule is that when the motion to dismiss is anchored on lack of
cause of action, the facts alleged in the complaint are assumed and no other
fact can be considered in resolving said motion.
After going carefully over the complaint, the Court believes, and so holds,
that if not properly traversed it can render a valid judgment thereon.
WHEREFORE, respondent Fine Chemicals (Phils.), Inc.'s said motion to
dismiss is hereby denied.
FINE, without filing a motion for reconsideration, on October 1, 1987, filed with respondent
Court of Appeals a Petition for Certiorari, Prohibition and mandamus (Ibid., pp. 80-98). NPC,
on the other hand, on October 13, 1987, filed a Petition for Leave to File Intervention to
Adopt Petition and Motion for Extension of Time to File Supplemental Petition (Ibid., pp. 93103) which was filed on October 28,1987 (Ibid., pp. 6-7).
Respondent Court of Appeals, in a decision promulgated on August 11, 1988, dismissed the
petition for certiorari,prohibition and mandamus (Ibid., pp. 149-154). Hence, the instant
petition.
The Second Division of this Court, after the filing of the required pleadings, in a resolution
dated March 8, 1989 (Ibid., p. 199), resolved to give due course to the petition, and to
require the parties to submit simultaneously their respective memoranda. In compliance
therewith, petitioners filed their memorandum on June 30, 1989 (Ibid., pp. 221-233) while
MERALCO filed its memorandum on July 3, 1989 (Ibid., pp. 240-253).
The instant petition is impressed with merit.
The main issue in this case is whether or not MERALCO's petition in the lower court should
be dismissed.

97

The answer is in the affirmative.

It is significant that this case is elevated to the Court of Appeals and now to this Court
because of the denial of petitioner's Motion to Dismiss the amended petition of MERALCO.
Unquestionably, it is but an incident to the main case and the ordinary procedure would have
been to file an answer, go to trial and if the decision is adverse, reiterate the issue on appeal
(Newsweek, Inc. vs. IAC, 142 SCRA 177 [1986]). But this general rule is subject to certain
exceptions, among which are, if the court in denying the motion to dismiss acts without or in
excess of jurisdiction or with grave abuse of discretion. The reason is, it would be unfair to
require the defendant to undergo the ordeal and expense of trial under such circumstances
as the remedy of appeal would not be plain and adequate. More importantly, petitioner's
motion to dismiss is based on the ground that the complaint states no cause of action, so
that there is no need for a full blown trial (Newsweek, Inc. vs. IAC Ibid).
In addition, applying the rule enunciated in Gayos v. Gayos (67 SCRA 146 [1975]) and
reiterated in Alger Electric, Inc. v. Court of Appeals, 135 SCRA, 43 [1985]), that it is a
cherished rule of procedure for this Court to always strive to settle the entire controversy in a
single proceeding leaving no root or branch to bear the seeds of future litigation, it appears
that the disposition of the incident as well as the main issue in the case at bar is in
consonance with an efficient administration of justice, now that the facts are before this
Court.
MERALCO's claim in its petition for Prohibition and mandamus before the Regional Trial
Court is anchored on its standing as a holder of a franchise for the sale and distribution of
electric power in various areas of the country including Calamba, Laguna. MERALCO
asserts that it has the right to be heard on any application for direct power connection and to
defeat such application by showing its ability or willingness to match the rates of NPC (Rollo,
pp. 222-223). As earlier stated, it also expressed the fear that to allow large consumers to
tap directly to NPC will mean foregoing the share of the subsidy burden which will ultimately
be borne by the other consumers.
As consistently ruled by this Court pursuant to P.D. No. 380 as amended by P.D. No. 395,
NPC is statutorily empowered to directly service all the requirements of a BOI registered
enterprise provided that, first, any affected private franchise holder is afforded an opportunity
to be heard on the application therefor and second, from such a healing, it is established that
said private franchise holder is incapable or unwilling to match the reliability and rates of
NPC for directly serving the latter (National Power Corporation v. Jacinto, 134 SCRA 435
[1985]; National Power Corporation v. Canares 140 SCRA 336 [1985]; National Power
Corporation v. Court of Appeals, 161 SCRA 103 [1988]).
While initially, MERALCO may have been deprived of the right to be heard in an
administrative proceeding, but in subsequent proceedings before the courts, it had been
given ample opportunity to show that it is capable and wining to match NPC rates but failed.
On the contrary, in a hearing before the trial court on August 12, 1987, for the issuance of
preliminary mandatory injunction, MERALCO thru its witness V.C. Flordeliza, admitted on
cross examination that it cannot charge the same rate NPC is charging because MERALCO
has to make a profit on its investment.
Flordeliza testified as follows:

98

Q. By the way, are you also aware of the power rates that
Meralco is charging Fine Chemicals, Inc. for the supply of
electric power?
A. Per kilowatt-hour, it is about P2.00 sir.
Q. And, are you also aware of the charges of NPC to Meralco
for the supply of power of electricity that Meralco supplies to
its customers of any nature?
A. Approximately the rate is P1.00 per kilowatt-hour, sir.
Q. Would you say that it is the same rate NPC charging its all
direct customers, the rates NPC is charging Meralco, the rate
Meralco is charging its customers?
A. I am not sure of that, sir.
xxx xxx xxx
Q. You said a while ago that the rate Meralco is charging its
customers, the same rate NPC charges its customers also?
A. Of course Meralco would have to make some profit on its
investment. Meralco charges P 2.00 per kilowatt-hour to its
customers. Naturally, it would make some profit as allowed by
the Board of Energy, sir.
Q. But, the rate NPC is charging Meralco is just a minimal
rate?
A. No, because NPC is the wholesaler and Meralco is only a
retailer. WE NATURALLY CANNOT SELL TO OUR
CUSTOMERS THE SAME RATE NPC IS CHARGING US. AS
I HAVE SAID, WE HAVE TO MAKE A PROFIT ON OUR
INVESTMENT, SIR." (Cont of Cross Examination of Witness
V.C. Flordeliza, 12 August 1987, p. 41, t.s.n.). (Rollo, pp. 2021)
In this Court, MERALCO never committed itself by categorically stating that it can match
NPC rates. Instead it confined itself to the statement that it is financially and technically
capable of meeting FINE's power requirements while in its Memorandum it avers that "At this
point in time, it would be highly improper to ask Meralco whether it can match the rate of
NPC." Verily, the intent to evade the issue and to avail of technicalities to annul the contract
between FINE and NPC are clearly evident so that no useful purpose will be served to
remand this case to the trial court only to have the latter's decision raised again to the Court
of Appeals and then to this Court.
Moreover, there is no denial of due process to speak of. As ruled by this Court, the heart of
procedural due process is the need for notice and an opportunity to be heard (Planters
Products, Inc. vs. National Labor Relations Commission, G.R. No. 78524, January 20, 1989).

99

What due process abhors is not lack of previous notice but absolute lack of opportunity to be
heard (Relucio III v. Macaraig, G.R. No. 82007, May 10, 1989).
Ultimately the issue of exclusivity has already been laid to rest by this Court with the
established principle that the exclusive nature of any public franchise is not favored and that
in all grants by the government to private corporations, the interpretation of rights, privileges
or franchises is taken against the grantee. More specifically, this Court ruled:
. . . Exclusivity is given by law with the understanding that the company enjoying it is selfsufficient and capable of supplying the needed service or product at moderate or reasonable
prices. It would be against public interest where the firm granted a monopoly is merely an
unnecessary conduit of electric power, jacking up prices as a superfluous middleman or an
inefficient producer which cannot supply cheap electricity to power intensive industries. It is
in the public interest when industries dependent on the heavy use of electricity are given
reliable and direct power at the lowest costs thus enabling the sale of nationally marketed
products at prices within the reach of the masses. . . . (Alger Electric, Inc. v. Court of
Appeals, 135 SCRA 45-46 [1985]).
PREMISES CONSIDERED, MERALCO's petition in the lower court is hereby DISMISSED.
SO ORDERED.
Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.

Pacsports Phils., Inc. vs. Niccolo Sports, G.R. No. 141602, November
22, 2001

PACSPORTS PHILS.,
INC., respondent.

INC., petitioner, vs. NICCOLO

SPORTS,

DECISION
SANDOVAL-GUTIERREZ, J.:

Petition for review on certiorari of the Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 52666, "Niccolo Sports, Inc. vs. Hon. Manuel D. Victorino
and Pacsports Phils., Inc." promulgated on December 6, 1999 and January 17, 2000.
Pacsports Phils., Inc. (PPI), petitioner, is the exclusive distributor in the Philippines
of sports products manufactured by Bridgestone Sports Company of Japan and Cross
Creek International of the United States.
On April 28, 1998, petitioner PPI and Niccolo Sports, Inc. (NSI), respondent, entered
into two (2) separate Exclusive Retail Agreements by virtue of which petitioner supplied
respondent, on consignment basis, assorted Bridgestone and Cross Creek golf products to
100

be sold by the latter in its outlet situated at the Second Level, Shangri-La Plaza Shopping
Mall, Edsa corner Shaw Boulevard, Mandaluyong City.The agreements contain, among
others, the following similarly worded stipulations:

8. PAYMENTS
a) NSI shall remit full payment, in Cash or Check, the Outlet's Gross
Sales for the Month less NSI's margin on or before fifteen (15) days
of the following month. Late Payments shall have the prior approval
of PPI;
b) The supply of all the products in the Retail Outlet is on a Consignment basis.
xxx
"11. TERM
This Agreement shall take effect from the Commencement Date and
shall continue to be enforced for a period of three (3) years and shall be
automatically renewed by mutual written agreement.
xxx
12. TERMINATION
a) PPI shall have the right at any time to terminate this Agreement and
repossess unpaid stock and display materials forthwith upon the
occurrence of any of the following:
If NSI is in material breach of the terms and conditions of this
Agreement and shall have failed to remedy such breach within sixty
(60) days after being requested to do so by PPI; or
xxx
b) NSI shall have the right at any time to terminate this Agreement and
shall be entitled to the reimbursement of all expenses during the
operations of the Retail Outlet, including construction and/or renovation
forthwith upon the occurrence of any of the following:
If PPI is in material breach of any of the terms and conditions of this
Agreement and shall have failed to remedy such breach within (60)
days after being requested to do so by NSI; or
101

x x x"
Petitioner PPI claims that after months of operation, respondent's obligations to it
amounted to about P1.5 Million. Despite demand, respondent failed to pay and
eventually, it pre-terminated the contracts.This prompted petitioner to file, on January 28,
1999, with the Regional Trial Court, Branch 141, Makati City, Civil Case No. 99-221 for
damages with application for a writ of replevin against respondent alleging, inter alia:

"4.04. On 26 January 1999, without any legal nor contractual basis, NSI
unilaterally terminated the Agreements (Annexes 'B' and 'C') effective
immediately. Hereto attached and made integral part hereof as Annex "D" is a
copy of NSI notice of termination.
"4.05. As a lame excuse for such unilateral termination, NSI cited supposed
contractual violations committed by Pacsports - which, even if hypothetically
admitted, do not constitute the 'material breach' contemplated in the
Agreements (Annexes 'B' and 'C').
"4.06. Worse, despite actual knowledge that the subject properties are merely
on consignment basis, NSI unjustly detained them and refused to allow
Pacsports to retrieve the unsold inventory unless Pacsports pays the amount of
P12,442,500.00 - a condition which cannot be read in any of the provision of
the Agreements (Annexes 'B' and 'C') nor in any statutory or case law.
"4.07. To insure that Pacsports will not be able to retrieve its unsold inventory,
NSI instructed the Shangri-La management not to allow the removal of any of
merchandize from the mall premises without its written authorization. A
security guard was likewise deployed by NSI for such purpose. In this regard,
attached hereto as Annex 'E' is a copy of NSI letter-instruction."
On the same day, the Makati RTC issued an order granting petitioner's application
for a writ of replevin. However, petitioner did not pursue the implementation of this writ
because respondent concealed the golf equipment to be seized. Instead, on February 26,
1999, petitioner applied for the issuance of a writ of preliminary injunction to compel
respondent to turn over to petitioner the golf equipment and sales proceeds amounting to
P1,186,468.65.
For its part, respondent NSI, on February 16, 1999, filed with the Regional Trial
Court, Branch 91, Quezon City, Civil Case No. Q-99-36797 for "Breach and
Confirmation of Termination of Contracts and Damages" against petitioner. The
complaint alleges, among others, that:
xxx

102

"9. In flagrant breach, however, of the agreements and with incipient deceit and
evident bad faith, defendant, on four (4) occasions, knowingly, deliberately and
wantonly intercepted potential customers of plaintiff for some of the products,
thereafter surreptitiously pursued them and closed for itself the sales for the
particular products sought. In three (3) of these four (4) incidents defendants
brazenly resorted to underselling to plaintiff's undue damage and prejudice;
xxx
"10. The fourth incident being the last straw as it were, plaintiff forthwith sent
defendant a second letter dated 25 January 1999 which defendant received
again through its General Manager, Mr. Rafael Mapua recalling the abovenarrated incidents of blatant usurpation of potential customers of plaintiff and
fraudulently underselling it in material breach of the agreements; giving notice
of the termination of the agreements effective immediately, conformably to
paragraph 12 (b) thereof; as well as offering three (3) options to defendant for
the amicable settlement of the matter. A copy of this letter-complaint cum
notice of termination is attached hereto as Annex 'E'.
"14. Hence, plaintiff was constrained as it was to bring the instant
complaint. During the interim, plaintiff will continue to retain in pledge and
withhold the remittance to defendant of its portion of the proceeds of the sales
for the period December 01, 1998 to February 14, 1999 in the amount of
P1,305,865.94 and the return of the remaining inventory of the products
defendants had consigned to it, plaintiff being authorized to do so as
defendant's commission agent under and by virtue of Articles 1912, 1913 and
1914 of the Civil Code."
On January 29, 1999, respondent NSI, citing the pendency of the Quezon City case,
filed with the Makati RTC a motion to dismiss or suspend the proceedings in Civil Case
No. 99-221.
Thereupon, petitioner PPI also filed with the Quezon City RTC a motion to dismiss
Civil Case No. Q-99-36797 on the ground of pendency of the Makati City case.
On April 20, 1999, the Makati RTC issued an order denying respondent's motion to
dismiss. In the same order, the Makati Court granted petitioner's application for a writ of
preliminary mandatory injunction. Respondent filed a motion for reconsideration but was
denied on May 6, 1999.
Meanwhile, the Quezon City RTC has not resolved petitioner's motion to dismiss.
Then, in a petition for certiorari and prohibition, respondent NSI questioned the
orders of the Makati RTC dated April 20, 1999 and May 6, 1999 before the Court of
Appeals in CA-G.R. SP No. 52666.

103

On December 6, 1999, the Court of Appeals promulgated a Decision, the dispositive

portion of which reads:

"WHEREFORE, the petition is hereby GRANTED. The impugned Orders

dated January 29, 1999 and May 6, 1999 of the respondent Judge are
REVERSED and SET ASIDE. Respondent Judge is hereby directed to dismiss
Civil Case No. 99-221, entitled: "Pacsports Phils., Inc. vs. Niccolo Sports,
Inc. without prejudice to private respondent interposing its claim before the
Quezon City case.
"SO ORDERED."
On January 17, 2000, the Court of Appeals denied petitioner's motion for
reconsideration.
Hence, this petition.
The petition involves two (2) basic issues, to wit:

1) Which of the two cases should be dismissed by reason of litis pendentia - the
Makati City case which was filed earlier or the Quezon City case which was
filed later; and
2) Whether the order of the Makati RTC dated April 20, 1999 granting
petitioners application for a writ of preliminary mandatory injunction was
issued with grave abuse of discretion.
As to the first issue, the parties concede that the Makati City case and the Quezon
City case involve the same parties, rights asserted and reliefs prayed for, being founded
on the same facts; and that judgment in one would constitute res judicata on the
other. Because of the concurrence of these similarities, petitioner and respondent sought
the abatement of each other's suit on the ground of litis pendentia.
The firmly established rule is that one of two actions will be dismissed on ground
of litis pendentia if the following requisites concur: (a) identity of parties, or at least such
as representing the same interest in both actions; (b) identity of rights asserted and relief
prayed for, the relief being founded on the same facts; and (c) the identity in the two (2)
cases should be such that judgment in one would amount to res judicata in the other.
[1]

Undisputably, the parties in the Makati case and the Quezon City case are the
same. Petitioner is the plaintiff in the Makati case and the defendant in the Quezon City
case; and respondent is the defendant in the Makati case and the plaintiff in the Quezon
City case.
The rights asserted and the reliefs prayed for by petitioner in the Makati City case
and the rights asserted and the reliefs prayed for by respondent in the Quezon City

104

case are all based on the validity of the pre-termination of the Exclusive Retail
Agreements.
In view of those similarities in the two actions, a final judgment on the merits in one
would be a bar against the other on the ground of res judicata.
This Court held in several cases that when the elements of litis pendentia exist, the
action filed later should be abated to avoid multiplicity of suits. This is based on
the maxim Qui prior est tempore, potior est jure (He who is before in time is the better in
right). This is the general rule.
[2]

In ordering the dismissal of the Makati City case filed earlier than the Quezon City
case, the Court of Appeals deviated from the said general rule.
The Court of Appeals gave the following reasons why it ruled that the Quezon City
RTC is in a better position to hear the case before it.

1. Both actions arose from the two (2) Exclusive Retail Agreements entered
into by the parties, and the asserted rights are founded on an identical set of
facts;
2. There is a claim of breach of the said Agreements by one of the parties
against the other; and
3. The Quezon City case involves a broader scope of inquiry as it goes to the
pith of the controversy, which is the pre-termination of the agreement.
The Court of Appeals correctly observed that: (1) both actions arose from the two (2)
Exclusive Retail Agreements entered into by the parties, and the asserted rights are
founded on an identical set of facts; and (2) there is a claim of breach of the said
Agreements by one of the parties against the other. However, we can not go along with
the Court of Appeals in concluding that the Quezon City case "involves a broader scope
of inquiry" than the Makati case. The Appellate Court did not explain why the Quezon
City case is broader in scope than the Makati case. In fact, it did not point out the issues
in the Quezon City case that are not involved in the Makati case. It bears stressing that
the only basic issue between the parties in both cases is whether the pre-termination of
the agreements is valid as claimed by respondent or invalid as claimed by petitioner. As
crafted, the complaints differ from each other in some details but such details are mere
incidents to the basic issue of the validity of the pre-termination of the exclusive retail
agreements. Clearly, the Quezon City RTC's deviation from the general rule can not be
sustained on the ground that the case before it involves a broader scope of inquiry.
Neither should the Makati City case be dismissed on the ground that it is anticipatory
as maintained by respondent, in its comment, citing Teodoro, Jr. vs. Mirasol.
Respondent's invocation of this case is misplaced. Here, the basis for dismissing the
first action for declaratory relief is not because it was filed in anticipation of the
ejectment case but because the first action was improper and there was no cause of action
against the defendant. In fact, it was an unmeritorious and vexatious action. Upon the
[3]

105

other hand, the second action for unlawful detainer is decidedly the more appropriate
action.
We thus hold that the Makati City case must be reinstated and that the Quezon City
case must be dismissed.
There is another reason why the Quezon City case should be the one abated. The
Makati RTC has commenced proceedings in the case by issuing a writ of replevin and
later, an order granting, after hearing, petitioner's application for a writ of preliminary
mandatory injunction.
We now proceed to the next issue: whether the Makati RTC acted with grave abuse
of discretion in issuing the order of April 20, 1999.
It is a long settled rule that for a writ of preliminary mandatory injunction to issue,
the following requisites must be present: (1) that the complainant has a clear legal right;
(2) that his right has been violated and the invasion is material and substantial; and (3)
there is an urgent and permanent necessity for the writ to prevent serious
damage. Equally settled is that, as a rule, injunction will not be granted to take property
out of the possession or control of one party and place it into that of another whose title
has not clearly been established by law.
[4]

[5]

The Makati RTC granted petitioner's application for a writ of preliminary mandatory
injunction on the basis of its findings, enumerated hereunder, which are not disputed:

1. The exclusive retail agreements between the parties was pre-terminated by

the respondent unilaterally on January 25, 1999;
2. Respondent is withholding petitioner's golf equipment, accessories and
apparel worth P12,377,525.00, as of January 25, 1999, and proceeds from sale
in the amount of P1,288,499.84; and
3. The market value of the golf equipment, accessories and apparel being
withheld by respondent depreciates easily due to rapid changes in style or
model.
The Makati RTC required petitioner to post a bond for the issuance of the writ of
preliminary mandatory injunction in the amount of P13,980,090.00 to answer for any
damage that respondent may suffer by virtue of the writ should the court finally adjudge
that petitioner is not entitled thereto.
There is no question that petitioner, as owner of the items being withheld by
respondent, is entitled to possession thereof. Respondent's refusal to deliver them to
petitioner is a breach of that right. Its claim for reimbursement and retention of the items
in pledge under Articles 1912, 1913 and 1914 of the Civil Code are being disputed by
petitioner. Actually, respondent's claims are not clearly established but yet to be
resolved. Secondly, in light of the bond posted by petitioner which would guaranty
payment of respondent's claims if found meritorious, respondent has lost its basis for
[6]

106

withholding the disputed items and money as security. Finally, by their nature, the golf
equipment, accessories and apparel may not be kept in storage indefinitely or until the
dispute between the parties is finally resolved without impairing their market value which
would prejudice the petitioner as owner.
We thus rule that the Court of Appeals erred in finding that the Makati RTC, in
denying respondent's motion to dismiss the complaint in Civil Case No. 99-221 and in
issuing the writ of preliminary mandatory injunction, acted with grave abuse of
discretion.
WHEREFORE, the petition is hereby GRANTED. The assailed Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 52666 are REVERSED. The order
dated April 20, 1999 of the Regional Trial Court of Makati, Branch 141, in Civil Case
No. 99-221 denying respondent's motion to dismiss the complaint and order dated May 6,
1999 granting the writ of preliminary injunction are AFFIRMED. Civil Case No. Q-9936797 of the Regional Trial Court, Branch 91, Quezon City, is ordered dismissed, without
prejudice to respondent Niccolo Sports, Inc. pursuing its claims before the Makati RTC,
Branch 141 in Civil Case No. 99-221. Costs against respondent.
Melo, (Chairman), Vitug, Panganiban, and Carpio, JJ., concur.

Hacienda Bigaa, Inc. vs. Chavez, G.R. No. 174160, April 20, 2010

Republic of the Philippines

Supreme Court
Baguio City

SECOND DIVISION

107

HACIENDA BIGAA, INC.,

Petitioner,
-

versus -

G.R. No. 174160

Present:
CARPIO, J., Chairperson,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

EPIFANIO V. CHAVEZ
(deceased), substituted
Promulgated:
by SANTIAGO V. CHAVEZ,
April 20, 2010
Respondent. -- x---------------------------------------------------------------------------------------x
DECISION
BRION, J.:
This petition for review on certiorari[1] challenges the
Court of Appeals (CA) decision of May 31, 2001[2] and
resolution of August 2, 2006[3] in CA-G.R. SP No. 46176,
affirming in toto the judgments of both the Municipal Trial
Court (MTC) of Calatagan and the Regional Trial Court (RTC)
of Batangas dismissing the complaint for forcible entry in
Civil Case No. 129.

THE FACTS
We summarize below the factual antecedents of the
present case based on the records before us.

108

On June 5, 1996, petitioner Hacienda Bigaa, Inc.

(Hacienda Bigaa) filed with the Municipal Trial Court (MTC) of
Calatagan, Batangas a complaint[4] for ejectment (forcible
entry) and damages with application for writ of preliminary
injunction against respondent Epifanio V. Chavez (Chavez),
docketed as Civil Case No. 129. The complaint alleged that
Chavez, by force, strategy and/or stealth, entered on April
29, 1996 the premises of Hacienda Bigaa's properties
covered by Transfer Certificate of Title (TCT) Nos. 44695 and
56120 by cutting through a section of the barbed wire fence
surrounding the properties and destroying the lock of one of
its gates, subsequently building a house on the property, and
occupying the lots without the prior consent and against the
will of Hacienda Bigaa.
The records show that the lots were originally covered
by TCT No. 722 owned by Ayala y Cia[5] and/or Alfonso,
Jacobo and Enrique Zobel, with an area of 9,652.583
hectares, known as Hacienda Calatagan. Ayala and/or the
Zobels expanded TCT No. 722 to cover an additional 2,000
hectares of land consisting, among others, of beach,
foreshore and bay areas, and navigable waters (excess
areas), making it appear that these excess areas are part of
Hacienda Calatagan's TCT No. 722. The Ayalas and/or the
Zobels
later
ordered
the
subdivision
of
the hacienda, including these excess areas, and sold the
subdivided lots to third parties.[6]
Among the buyers or transferees of the expanded and
subdivided areas was Hacienda Bigaa which caused the
issuance of titles TCT Nos. 44695 and 56120 under its name
covering the purchased subdivided areas. Thus, in his
answer before the MTC of Calatagan, then defendant (now
respondent) Epifanio V. Chavez alleged that then plaintiff
(now petitioner) Hacienda Bigaa is the successor-ininterest of Ayala y Cia, Hacienda Calatagan, Alfonso Zobel,
109

Jacobo Zobel and Enrique Zobel the original titular owners of

TCT No. 722.
Portions of the same lands foreshore lands were leased
out by the Republic, through the Bureau of Fisheries, to
qualified applicants in whose favor fishpond permits were
issued. The government-issued fishpond permits pertaining
to lands covered by titles derived from TCT No. 722 of
Ayala y Cia and/or the Zobels, gave rise to ownership and/or
possessory disputes between the owners of Hacienda
Calatagan and their privies and/or successors-in-interest, on
the one hand, and the Republic or its lessees or fishpond
permittees, on the other.
Suits were filed in various courts in Batangas for the
recovery of the areas in excess of the area originally covered
by TCT No. 722, which suits ultimately reached the Supreme
Court. In
the
Court's
1965
decisions
in Dizon
v.
[7]
Rodriguez (for quieting of title) and Republic v. Ayala y Cia
and/or Hacienda Calatagan, et al. [8] (for annulment of titles),
the excess areas of TCT No. 722 were categorically declared
as unregisterable lands of the public domain such that
any title covering these excess areas are necessarily null and
void. In these cases, the Ayalas and the Zobels were found to
be mere usurpers of public domain areas, and all
subdivision titles issued to them or their privies and covering
these areas were invalidated; the wrongfully registered
public domain areas reverted to the Republic. In Dizon,
the Court declared as void the Zobels' TCT No. 2739 and its
derivative titles covering subdivision Lots 1 and 49 areas
sold to the Dizons as areas in excess of TCT No. 722 and are
properly part of the public domain. In Ayala y Cia,the Court
invalidated TCT No. 9550 and all other subdivision
titles issued in favor of Ayala y Cia and/or the Zobels of
Hacienda Calatagan over the areas outside its private land

110

covered by TCT No. 722. These areas, including the lots

covered by TCT No. 9550, reverted to public dominion. [9]
The pronouncement in the above cases led to the
Court's 1988 decision in Republic v. De los Angeles,[10] a case
covering the same excess areas under a reinvindicatory
claim of the Republic aimed at recovering lands usurped by
the Ayalas and the Zobels and at placing the Republics
lessees and fishpond permittees in possession. The Court
effectively held that as owner of the excess lands, the
Republic has the right to place its lessees and fishpond
permittees among them Zoila de Chavez, predecessor-ininterest of Chavez in possession. The Court invalidated TCT
Nos. 3699 and 9262 for being among the other subdivision
titles declared void and ordered reverted to public dominion.
To return to the forcible entry case, then defendant
(now respondent) Chavez alleged in his answer before the
MTC of Calatagan that his mother, Zoila de Chavez (who died
intestate on September 14, 1979) was a fishpond
permittee/lessee under Fishpond Permit Nos. F-4572-0 and F24735 issued by the Bureau of Fisheries on April 21, 1959
and June 3, 1966, respectively; that the areas covered by the
permits are the same parcels of land which he presently
occupies as Zoila's successor-in-interest and which Hacienda
Bigaa also claims.
Chavez likewise asserted that Hacienda Bigaa is the
successor-in-interest of Ayala y Cia, Hacienda Calatagan,
Alfonso Zobel, Jacobo Zobel and Enrique Zobel who owned
land with an area of 9,652.583 hectares, covered by TCT No.
722 in the Registry of Deeds of Batangas; that Ayala y Cia,
the Zobels, or Hacienda Calatagan, illegally expanded the
original area of TCT No. 722 by 2,000 hectares; that suits
were filed to recover the expanded area; that these suits
reached the Supreme Court which declared that these
111

excess areas are part of the public domain and ordered their
reversion to the Republic; that the Supreme Court likewise
declared certain TCTs covering the subdivision lots outside
the area of TCT No. 722 and issued to transferees as null and
void; therefore, Hacienda Bigaa's titles TCT Nos. 44695 and
56120 carry no probative value as they are of dubious
origins and have been nullified by the Supreme Court.[11]
Chavez further argued that the suit is barred by prior
judgment in two prior cases (1) Civil Case No. 78, a suit for
unlawful detainer filed by the Zobels against Chavezs
predecessor-in-interest, Zoila de Chavez, before the then
Justice of the Peace Court (now Municipal Trial Court) of
Calatagan, Batangas; and (2) Civil Case No. 653, a case
ofaccion
reinvindicatoria with
prayer
for
preliminary
mandatory injunction filed by the Republic, Zoila de Chavez,
and other lessees or fishpond permittees of the Republic,
against Enrique Zobel (Hacienda Bigaa's predecessor-ininterest) before the then Court of First Instance of
Batangas. This case reached this Court as G.R. No. L-30240
entitled Republic of the Philippines v. De los Angeles,
Enrique Zobel, et al.[12] and was decided in 1988. Chavez
asserts that the subject matter and the issues involved in
these cases are squarely similar and/or identical to the
subject matter and issues involved in the present forcible
entry suit; the rulings in these two cases, therefore
constitute res judicata with respect to the present case.
The MTC held a preliminary conference where the
parties stipulated and identified the issues in the forcible
entry case, viz: (1) who between the parties has a better
right of possession over the premises in question; (2)
whether there is res judicata; and (3) whether the parties
are entitled to damages.[13] These are essentially the same
basic issues that are before us in the present petition.
The MTC, the RTC and the CAs Decision
112

The MTC rendered a decision [14] dismissing Hacienda

Bigaa's complaint, holding that the disputed lots form part of
the areas illegally expanded and made to appear to be
covered by TCT No. 722 of Hacienda Bigaa's predecessors-ininterest (Ayala y Cia and/or the Zobels of Hacienda
Calatagan); hence, the Hacienda's title are null and void. In
so ruling, the MTC applied this Court's pronouncements in
the antecedent cases of Dizon v. Rodriguez,[15] Republic v.
Ayala y Cia and/or Hacienda Calatagan, Zobel, et al.,
[16]
and Republic v. De los Angeles.[17]
The MTC added that since Hacienda Bigaa did not
present proof to counter Chavez's claim that the disputed
lots form part of the illegally expanded areas of Hacienda
Calatagan, these lots are deemed to be the same lots
litigated in the previous cases. The MTC also found prior
possession in favor of Chavez, as revealed by the antecedent
cases particularly, De los Angeles where Chavezs mother,
Zoila de Chavez, had been ousted by the Zobels from the
fishpond lots she occupied. The MTC reasoned out that Zoila
could not have been ousted from the premises had she not
been in prior possession. Since Epifanio succeeded Zoila in
the possession of the property, he inherited the latters prior
possession and cannot now be ousted by Hacienda Bigaa.
The MTC likewise rejected Hacienda Bigaa's contention
that the subdivision titles covering the disputed lots TCT Nos.
44695 and 56120 which were not specifically canceled by
the previous decisions of the Court should be given
probative value. The MTC ruled that the subsequent issuance
of a certificate of title in favor of the plaintiff does not vest
title on it as the lands belong to the public domain and
cannot be registered.[18] The MTC stressed that the titles of
Hacienda Bigaa were among the other subdivision titles
declared void in the case of Ayala y Cia as areas not
113

legitimately covered by TCT No. 722 and which are therefore

part of the public domain. As ordered in the three
antecedent cases of Dizon,[19] Ayala y Cia,[20] and De los
Angeles,[21] they should revert to the Republic. The MTC
opined that Hacienda Bigaa has the burden of proving that
the subject lots are not part of the illegally expanded areas;
Hacienda Bigaa failed to discharge this duty when it did not
present proof to controvert Chavez's allegation that the lots
covered by Haciendas TCTs are among the lots litigated in
the cited cases. The MTC reiterated the following ruling of
the Court in Republic v. De los Angeles:
x x x [F]or almost 23 years now execution of
the 1965 final judgment in G.R. No. L-20950,
ordering the cancellation of the subdivision titles
covering the expanded areas outside the private
lands of Hacienda Calatagan, is being frustrated by
respondent Zobel, the Ayala and/or Hacienda
Calatagan. As a consequence, the mass usurpation
of lands of public domain consisting of portions of
the territorial sea, the foreshore, beach and
navigable
water
bordering
the Balayan Bay, Pagaspas Bay and the China Sea,
still remain unabated. The efforts of Ayala and Zobel
to prevent execution of said final judgment are
evident from the heretofore-mentioned technical
maneuvers they have resorted to.
Clearly, the burden of proof lies on respondent Zobel
and other transferees to show that his subdivision
titles are not among the unlawful expanded
subdivision titles declared null and void by the said
1965 judgment. Respondent Zobel not only did
not controvert the Republic's assertion that
his titles are embraced within the phrase
other subdivision titles ordered canceled but
failed to show that the subdivision titles in his
name cover lands within the original area
covered by Ayala's TCT No. 722 (derived from
114

OCT No. 20) and not part of the beach,

foreshore and territorial sea belonging and
ordered reverted to public dominion in the
aforesaid 1965 judgment.[22] x x x (Emphasis
supplied.)

Based on the above disquisition and taking into account

the consistent efforts of Hacienda Bigaa's predecessors-ininterest in thwarting the execution of the Court's decision in
the antecedent cases, the MTC declared that the Chavezes,
as the Republics lessees/permittees, should have been in
possession long ago. The MTC held:
Thus, the court holds that the land now in litigation
forms part of the public dominion which properly
belongs to the State. Suffice it to say that when the
defendant [Epifanio V. Chavez] entered and
occupied the same on April 29, 1996, it was in
representation of the State being the
successor-in-interest of Zoila de Chavez, a
government
fishpond
permittee
and/or
lessee. It should be recounted that Zoila de Chavez
was in actual physical possession of the land until
she was ousted by Enrique Zobel by bulldozing and
flattening the area.
The recovery of this public land in favor of the State
is long overdue. Zoila de Chavez or her
successor-in-interest should have been in
actual
and
adequate
possession
and
occupation thereof long time ago by virtue of
the Supreme Court decisions anent the matter
in 1965 which were reiterated in 1988 had not
the plaintiff and its predecessors-in-interest
succeeded in defeating the enforcement of the
said decisions. To allow the plaintiff to retain
possession of these usurped public lands by ousting
the government's fishpond permittees and/or
lessees such as the defendant is to further frustrate

115

the decisions of the Supreme Court on the matter.

(Emphasis supplied.)

The MTC finally ruled that the elements of res

judicata are present. The forcible entry case before it shared
an identity of parties with Civil Case No. 78 for unlawful
detainer and Civil Case No. 653 (the Delos Angeles case)
of accion reinvindicatoria because all of these cases involve
the predecessors-in-interest of the present parties. In Civil
Case No. 78, the plaintiff was Enrique Zobel, predecessor of
Hacienda Bigaa, and the defendant was Zoila de Chavez,
mother and predecessor of Epifanio V. Chavez. In Civil Case
No. 653 which reached and was decided by this Court in
1988 as Republic vs. De los Angeles, Zoila de Chavez was
one of the plaintiffs and Enrique Zobel was one of the
defendants.[23] The MTC also found identity of subject
matter because the forcible entry case shared with the
previous cases the same subject matter, i.e., the same lands
adjudged by the Supreme Court as part of the public domain
usurped by the Zobels, et al. through their illegally expanded
titles.[24] As to identity of causes of action, the MTC held
that although the previous cases were for unlawful detainer
and accion reinvindicatoria while the case before it was for
forcible entry, an identity of issues existed because all
these cases involved conflicting claims of ownership,
occupation and possession of the property which have long
been settled by the Supreme Court. It recognized that under
the
concept
of
conclusiveness
of
judgment, res
judicata merely requires an identity of issue, not an absolute
identity of causes of action.[25]
On October 1, 1996, Hacienda Bigaa appealed the
MTC's decision to the Regional Trial Court (RTC) of
Batangas[26] which affirmed in toto the appealed decision.

116

On February 16, 1998, Hacienda Bigaa filed its petition

for review[27] with the Court of Appeals (CA), docketed as CAG.R. SP No. 46716. The CA in its decision of June 1, 2001
dismissed the petition for review, totally affirming the RTC
and MTC decisions.[28] Hacienda Bigaa timely filed a motion
for reconsideration. However, while the motion was pending,
Associate Justice Salvador J. Valdez, Jr., the ponente of the
decision sought to be reconsidered, retired from the
Judiciary. As a result, the motion slipped into hibernation for
five years.[29]
The CA, on August 2, 2006, this time through Associate
Justice Juan Q. Enriquez, Jr., rendered its resolution on the
motion for reconsideration.[30] It denied reconsideration on
the reasoning that the grounds and arguments raised were
mere iterations of those already raised in the petition for
review.
THE PETITION
Hacienda Bigaa is now before us via a petition for
review under Rule 45 of the Rules of Court to assail the CA
ruling. Among other things, it argues that the CA's Resolution
is patently erroneous because the grounds and arguments
raised in its motion for reconsideration were not mere
reiterations; it claims, as one of the grounds in its motion for
reconsideration, that the final determination of the scope
and extent of the area allegedly in excess of that covered by
TCT No. 722 of Ayala y Cia was made only after the petition
for review was filed on February 16, 1998.
In its petition, Hacienda Bigaa raises the following
issues of law:
I. WHETHER THE REGISTERED OWNER OF LAND
IN POSSESSION OF A TORRENS CERTIFICATE
117

OF TITLE MUST ENJOY THE OWNERSHIP AND

POSSESSION, AMONG OTHERS, OF THE LAND
COVERED THEREBY, WHERE THE SAID TITLE
HAS NOT BEEN DECLARED NULL AND VOID,
SUCH THAT THE TITLE MUST BE GIVEN
PROBATIVE VALUE.
II. WHETHER IT IS PETITIONER HACIENDA BIGAA
OR ZOILA DE CHAVEZ (OR HER SUCCESSOR,
RESPONDENT EPIFANIO V. CHAVEZ) WHO HAS
A BETTER RIGHT OF POSSESSION OVER THE
SUBJECT LOTS.
THE COURT'S RULING
We find the petition unmeritorious.
We note at the outset that the objection on the delineation of
the scope and extent of the excess areas of TCT No. 722
came too late in the day; it is an issue that the Hacienda
admits to have raised for the first time when it sought
reconsideration of the CA decision. We significantly note, too,
that this issue involves a question of fact whose
determination is improper in a Rule 45 proceeding before
this Court.
Thus, to our mind, the only real questions appropriate
for resolution at this stage of the case are: (1) Do the TCTs of
Hacienda Bigaa have probative value in determining the
issues of ownership and possession of the disputed lots?
(2) Is Chavez as successor-in-interest of government lessee
or fishpond permittee Zoila de Chavez entitled to possession
of these lots? In these lights, the resolution of this case
hinges on the question of better title who, between the
petitioner and the respondent, has the better right of
possession of the disputed lots.
118

Are these issues misplaced in a forcible entry case?

To answer this, we hark back to the origins of the
present case a complaint for forcible entry that the MTC of
Calatagan, Batangas dismissed. Both the RTC and the CA
subsequently affirmed this dismissal. As a forcible entry suit,
the threshold question presented is: was the prior possession
of the then plaintiff (now petitioner) Hacienda Bigaa over the
disputed lots sufficiently established to give it cause for the
ejectment of then defendant (now respondent) Epifanio
Chavez?

We recall in this regard that the MTC issued a pre-trial

order identifying the issues of (1) who has the better right of
possession; and (2) res judicata.[31] On the issue of
possession, the MTC found the need to determine the
question of title or ownership in passing upon the question of
possession after Chavez raised the issue of ownership at that
level. As a general rule in forcible entry cases, ownership or
title is inconsequential; the primordial issue is possession de
facto and not possession de jure. The court, however, may
tackle the issue of ownership or title, if raised, if this issue is
indispensable in resolving the issue of possession. [32] Since
Chavez raised the question of ownership or title in his
answer, the issue of ownership became a material
consideration in the lower court's inquiry into the character,
nature and extent of the parties claimed possession.

The MTC tackled the issue of prior possession by taking

judicial notice of our factual determination in De los
Angeles that Zobel of Hacienda Calatagan Hacienda Bigaa's
119

predecessor-in-interest
had ousted Zoila
de
Chavez
Chavez's predecessor-in-interest from the lots she occupied
as a holder of government-issued fishpond permits. The MTC
in this regard held
[T]he court holds that the land now in litigation
forms part of the public dominion which properly
belongs to the State. Suffice it to say that when
[respondent Chavez] entered and occupied the
[premises]

on

representation

April
of

29,
the

1996,
State

it

was in

being

the

successor-in-interest of Zoila de Chavez, a

government fishpond permittee and/or lessee. It
should be recounted that Zoila de Chavez was in
actual physical possession of the land until
she was ousted by Enrique Zobel by bulldozing
and flattening the area. (Emphasis supplied.)

Zoila de Chavez's ouster from the premises became the

basis of the MTCs conclusion that she had prior possession
as she could not have been ousted from the premises had
she not been in prior possession. This point was reiterated in
the present petition by Chavez who died pending the
resolution of this case and has been substituted by his
brother, Santiago V. Chavez.[33] The respondents comment
before us states:[34]

120

Of note, as hereafter shown, [in the case

of Republic vs. De los Angeles, G.R. No. L-30240,
March 25, 1988], the Supreme Court explicitly
recognized

the

priority

of

possession

of

the

respondent [Chavez] over the subject lots:

[Respondent therein] Zobel had

ousted

Zoila

government

de

Chavez,

fishpond

permittee,

from a portion of subject fishpond

lot described as Lot 33 of Plan Swo-30999
(also

known

as

Lots

55

and

56

of

subdivision TCT No. 3699) by bulldozing

the same, and [threatening] to eject
fishpond permittees Zoila de Chavez,
Guillermo Mercado, Deogracias Mercado,
and Rosendo Ibaez from their respective
fishpond lots described as Lots 4, 5, 6,
and 7, and Lots 55 and 56, of Plan Swo30999, embraced in the void subdivision
titles TCT No. 6399 and TCT No. 9262
claimed by said respondent. Thus, on
August 2, 1967, the Republic filed an
Amended

Complaint

Reinvindicatoria

captioned

with

Accion

Preliminary

121

Injunction against respondent Zobel and

the

Register

of

Deeds

of

Batangas,

docketed as Civil Case No. 653, for

cancellation of Zobel's void subdivision
titles TCT No. 3699 and TCT No. 9262 and
the reconveyance of the same to the
government;
fishpond

to

place

permittees

in

aforenamed
peaceful

and

adequate possession thereof; to require

respondent Zobel to pay back rentals to
the

Republic,

and

to

enjoin

said

respondent from usurping and exercising

further acts of dominion and ownership
over the subject land of public domain.
[35]

(Emphasis supplied.)

This argument on the direct issue of prior possession is

separate from the issue of ownership that Chavez raised as
an issue determinative of possession. The issue of ownership
shifts our determination to who, between the parties, has
title and the concomitant right of possession to the disputed
lots.
The issue of possession,
as it relates with the
ownership of the disputed
property,
has
been
conclusively resolved in
the antecedent cases.

122

As framed above, the case before us inevitably brings to

memory the antecedent decided cases touching on the
ownership of the vast tract of land in Calatagan, Batangas,
covered by Transfer Certificate of Title (TCT) No. 722 in
the name/s of Ayala y Cia, Alfonso Zobel, Jacobo Zobel and
Enrique Zobel and/or Hacienda Calatagan the predecessorsin-interest of petitioner Hacienda Bigaa. We ruled in the
antecedent cases of Dizon,[36] Ayala y Cia,[37] and De los
Angeles,[38] that: (1) all expanded subdivision titles issued in
the name of Ayala y Cia, the Zobels and/or Hacienda
Calatagan covering areas beyond the true extent of TCT No.
722 are null and void because they cover areas belonging
to the public domain; (2) Ayala y Cia and the Zobels of
Hacienda Calatagan are mere usurpers of these public
domain areas; and that (3) these areas must revert to
the Republic.Significantly, we declared in De los
Angeles that the Republic, as the rightful owner of
the expanded areas portions of the public domain has
the right to place its lessees and permittees (among
them Zoila de Chavez) in possession of the fishpond
lots whose ownership and possession were in issue in
the case.
These antecedent cases lay to rest the issues of
ownership and of possession as an attribute thereof, which
we both ruled to be in favor of the Republic and its lessees
or permittees.
The present case is a stark repetition of scenarios in these
cases. The protagonists remain virtually the same with
petitioner Hacienda Bigaa taking the place of its
predecessors-in-interest Ayala y Cia and/or the Zobels of
Hacienda Calatagan, and respondent Epifanio V. Chavez
taking the place of his predecessor-in-interest Zoila de
Chavez whose possession was under bona fide authority
from the Republic. Considering that in this case the disputed
123

lots are among those litigated in the antecedent cases and

the issues of ownership and possession are again in issue,
the principle of res judicata inevitably must be considered
and applied, if warranted.
The doctrine of res judicata is set forth in Section 47 of
Rule 39 of the Rules of Court, which in its relevant part
reads:
Sec. 47. Effect of judgments or final orders.
The effect of a judgment or final order rendered by a
court of the Philippines, having jurisdiction to
pronounce the judgment or final order, may be as
follows:

xxxx

(b) In other cases, the judgment or final order

is, with respect to the matter directly adjudged or as
to any other matter that could have been raised in
relation thereto, conclusive between the parties and
their successors in interest by title subsequent to
the commencement of the action or special
proceeding, litigating for the same thing and under
the same title and in the same capacity; and

(c) In any other litigation between the same

parties or their successors in interest, that only is
deemed to have been adjudged in a former

124

judgment or final order which appears upon its face

to have been so adjudged, or which was actually and
necessarily included therein or necessary thereto.

This provision comprehends two distinct concepts

of res judicata:
(1) bar
by
former
judgment and
(2) conclusiveness of judgment.
Under
the
first
concept, res judicata absolutely bars any subsequent action
when the following requisites concur: (a) the former
judgment or order was final; (b) it adjudged the pertinent
issue or issues on their merits; (c) it was rendered by a court
that had jurisdiction over the subject matter and the parties;
and (d) between the first and the second actions, there was
identity of parties, of subject matter, and of causes of action.
[39]

Where no identity of causes of action but only identity of

issues exists, res judicata comes under the second concept
i.e.,
under conclusiveness of judgment.
Under
this
concept, the rule bars the re-litigation of particular facts or
issues involving the same parties even if raised
under different claims
or
causes
of
action.
[40]
Conclusiveness of judgment finds application when a fact
or question has been squarely put in issue, judicially passed
upon, and adjudged in a former suit by a court of competent
jurisdiction. The fact or question settled by final judgment or
order binds the parties to that action (and persons in privity
with them or their successors-in-interest), and continues to
bind them while the judgment or order remains standing and
unreversed by proper authority on a timely motion or
petition; the conclusively settled fact or question
furthermore cannot again be litigated in any future or other
125

action between the same parties or their privies and

successors-in-interest, in the same or in any other court of
concurrent jurisdiction, either for the same or for a different
cause of action. Thus, only the identities of parties and
issues are required for the operation of the principle
of conclusiveness of judgment.[41]
While conclusiveness of judgment does not have the same
barring effect as that of a bar by former judgment that
proscribes subsequent actions, the former nonetheless
estops the parties from raising in a later case the issues or
points that were raised and controverted, and were
determinative of the ruling in the earlier case. [42] In other
words, the dictum laid down in the earlier final judgment or
order becomes conclusive and continues to be binding
between the same parties, their privies and successors-ininterest, as long as the facts on which that judgment was
predicated continue to be the facts of the case or incident
before the court in a later case; the binding effect and
enforceability of that earlier dictum can no longer be relitigated in a later case since the issue has already been
resolved and finally laid to rest in the earlier case. [43]

a. Identity of Parties

As already stated above, the parties to the present case

are virtually the same as those in the antecedent
cases. Specifically in De los Angeles, the parties were
Enrique Zobel, the predecessor-in-interest of petitioner
Hacienda Bigaa, and Zoila de Chavez, the mother and
predecessor-in-interest of Chavez.

126

b. Identity of Subject Matter

Hacienda Bigaa and Chavez are litigating the same

properties subject of the antecedent cases inasmuch as they
claim better right of possession to parcels of land covered by
subdivision titles derived from Hacienda Calatagan's TCT No.
722 and by government-issued fishpond permits. Specifically
in De los Angeles, the Zobels and Zoila de Chavez litigated
the disputed lots covered by subdivision titles in Zobels
name and by fishpond permits the Republic issued in favor of
de Chavez.

In ruling that the subject lots are the same lots litigated in
the previously decided cases, the courts below based their
findings on De los Angeles that in turn was guided by our
rulings in Dizon and Ayala y Cia. For emphasis, we reiterate
our ruling in De los Angeles: all areas the Ayalas and/or
the Zobels made to appear to be covered by TCT No.
722 are owned by the Republic because they form
part of the public domain; specifically, portions of the
navigable water or of the foreshores of the bay
converted into fishponds are parts of the public
domain that cannot be sold by the Ayalas and/or the
Zobels to third parties.
In his answer before the MTC, Chavez asserted that the
areas covered by the fishpond permits of Zoila de Chavez
are the same parcels of land that he now occupies as Zoila's
successor-in-interest. Given the rulings in the antecedent
cases that Chavez invoked, Hacienda Bigaa never bothered
to object to or to rebut this allegation to show that the
presently disputed lots are not part of the expanded areas
that, apart from the specifically described titles, Ayala y
127

Cia described
as other
subdivision
titles
covering
unregisterable lands of the public domain that must revert to
the Republic.[44] Hacienda Bigaa should have objected as
we held in De los Angeles that the onus is on Ayala
and the Zobels Hacienda Bigaas predecessors-ininterest to show that their titles do not cover the
expanded areas whose titles were declared null and
void.[45] We find no cogent reason to depart from our past
rulings in the antecedent cases, and from the ruling of the
courts below in this case that the lots claimed by Hacienda
Bigaa are the same lots covered by our rulings in the
antecedent cases.

c. Identity of Issues

This case and the antecedent cases all involve the issue
of ownership or better right of possession. In Ayala y
Cia, we affirmed an RTC decision that decreed:
WHEREFORE, judgment is hereby rendered as
follows:
(a) Declaring as null and void Transfer
Certificate of Title No. T-9550 (or Exhibit 24) of the
Register of Deeds of the Province of Batangas
and other subdivision titles issued in favor of
Ayala y Cia and;or Hacienda de Calatagan over the
areas outside its private land covered by TCT No.
722, which, including the lots in T-9550 (lots 360,
362, 363 and 182) are hereby reverted to public
dominion.[46] (Emphasis supplied, italics in the
original.)

Consequently, lots and their titles derived from the Ayalas

and the Zobels TCT No. 722 not shown to be within the
128

original coverage of this title are conclusively public domain

areas and their titles will be struck down as nullities.
Thus, De los
Angeles[47] effectively
annulled
the
subdivision titles disputed in the case for being among the
other subdivision titles declared void for covering public
domain areas, and ordered their reversion to the
Republic. De los Angeles recognized, too, the right of the
Republic's lessees and public fishpond permittees
(among them Zoila de Chavez, mother and
predecessor-in-interest of Chavez) to possess the
fishpond lots in question because they derive their
right of possession from the Republic the rightful
owner of these lots.
We reject, based on these discussions, Hacienda
Bigaa's position that there could be no res judicata in this
case because the present suit is for forcible entry while the
antecedent cases adverted were based on different causes
of action i.e., quieting of title, annulment of titles and accion
reinvindicatoria. For, res judicata, under the concept of
conclusiveness of judgment, operates even if no absolute
identity of causes of action exists. Res judicata, in its
conclusiveness of judgment concept, merely requires
identity of issues. We thus agree with the uniform view of the
lower courts the MTC, RTC and the CA on the application
of res judicata to the present case.

Hacienda Bigaa's Titles

Carry No Probative Value

129

Hacienda Bigaa contends that the rulings in the antecedent

cases on the nullity of its subdivision titles should not apply
to the present case because the titles TCT Nos. 44695 and
56120 have not been specifically declared void by court
order and must be given probative value. It likewise posits
that Chavez failed to introduce evidence before the MTC that
the land subject matter of the suit is the same land covered
by the decision of the Supreme Court in the antecedent
cases.

We reject this contention in light of our holding in the Ayala y

Cia and De los Angeles cases that apart from those expressly
litigated and annulled, all other subdivision titles over the
excess areas of Hacienda Calatagan must be nullified for
covering unregisterable lands of the public domain that must
revert to the Republic.[48] To reiterate, lots and their
titles derived from the Ayalas and the Zobels TCT No.
722 not shown to be within the original coverage of
this title are conclusively public domain areas and
their titles will be struck down as nullities. What could
have saved Hacienda Bigaa, as successor-in-interest of the
Ayalas and the Zobels, is competent evidence that the
subdivision titles in its possession do not fall within the
excess areas of TCT No. 722 that are null and void because
they are lands of the public domain. Hacienda Bigaa
however failed to discharge this burden.

Therefore, the Court of Appeals, citing Ayala y Cia and De los

Angeles, correctly held that

130

x x x [S]uffice it to state that as heretofore shown,

the Supreme Court took cognizance of the fact that
Zoila de Chavez's fishpond permit is within the
land covered by the cited decision.Moreover,
the Supreme Court has shifted the burden of proof in
this regard to Zobel or Ayala y Cia when it declared
that, Clearly,

the

burden

of

proof

lies

on

respondent Zobel and other transferees to

show that his subdivision titles are not among
the

unlawful

expanded

subdivision

titles

declared null and void by the said 1965

judgment.[49] (Emphasis supplied.)

In any event, Hacienda Bigaa can never have a better

right of possession over the subject lots above that of the
Republic because the lots pertain to the public domain. All
lands of the public domain are owned by the State the
Republic. Thus, all attributes of ownership, including the
right to possess and use these lands, accrue to the
Republic.Granting Hacienda Bigaa the right to possess the
subject premises would be equivalent to condoning an illegal
act by allowing it to perpetuate an affront and an offense
against the State i.e., occupying and claiming as its own
lands of public dominion that are not susceptible of private
ownership and appropriation.[50] Hacienda Bigaa like its
predecessors-in-interests, the Ayalas and the Zobels is a
mere usurper in these public lands. The registration in
Hacienda Bigaa's name of the disputed lots does not give it a
131

better right than what it had prior to the registration; [51] the
issuance of the titles in its favor does not redeem it from the
status of a usurper. We so held in Ayala y Cia and we
reiterated this elementary principle of law in De los Angeles.
[52]
The registration of lands of the public domain under
the Torrens system, by itself, cannot convert public lands
into private lands.[53]

As our last word, we find it particularly relevant to state

here that we issued on October 6, 2008 a Resolution in
relation with the execution of our decision in the antecedent
cases of Ayala y Cia and De los Angeles.[54] In this Resolution,
we emphasized that the decision we consistently affirmed
ordered the following: (1) the nullification of all
subdivision titles that were issued in favor of Ayala y
Cia and/or Hacienda Calatagan (and their successorsin-interest) over the areas outside its private land
covered by TCT No. 722; and (2) the declaration that
all lands or areas covered by these nullified titles are
reverted to the public domain. This should write finis to
Hacienda Bigaas claim that its titles are beyond the reach of
our decision in the antecedent cases.

In sum, we find no reversible errors of law in the appealed

decision of the Court of Appeals.

WHEREFORE, we DENY the present petition and AFFIRM the Court of

Appeals decision of May 31, 2001 and resolution of August 2, 2006. We
accordingly DISMISS WITH FINALITY the complaint for forcible entry
in Civil Case No. 129 before the Municipal Trial Court of Calatagan.
132

SO ORDERED.

Fels Energy Inc. vs. Province of Batangas, G.R. No. 168557,

February 19, 2007

FELS ENERGY, INC., G.R. No. 168557

Petitioner,
-versus-

THE PROVINCE OF BATANGAS and

THE OFFICE OF THE PROVINCIAL
ASSESSOR OF BATANGAS,
Respondents.
x----------------------------------------------------x
NATIONAL POWER CORPORATION, G.R. No. 170628
Petitioner,
Present:
YNARES-SANTIAGO, J.,
- versus - Chairperson,
AUSTRIA-MARTINEZ,
CALLEJO, SR. and
LOCAL BOARD OF ASSESSMENT CHICO-NAZARIO, JJ.
APPEALS OF BATANGAS, LAURO C.
ANDAYA, in his capacity as the Assessor
of the Province of Batangas, and the Promulgated:
PROVINCE OF BATANGAS represented
by its Provincial Assessor, February 16, 2007
Respondents.
x-------------------------------------------------------------------------------------------x
DECISION

133

CALLEJO, SR., J.:

Before us are two consolidated cases docketed as G.R. No.

168557 and G.R. No. 170628, which were filed by petitioners
FELS Energy, Inc. (FELS) and National Power Corporation
(NPC), respectively. The first is a petition for review
on certiorari assailing the August 25, 2004 Decision [1] of the
Court of Appeals (CA) in CA-G.R. SP No. 67490 and its
Resolution[2] dated June 20, 2005; the second, also a petition
for review on certiorari, challenges the February 9, 2005
Decision[3] and November 23, 2005 Resolution[4]of the CA in
CA-G.R. SP No. 67491. Both petitions were dismissed on the
ground of prescription.

The pertinent facts are as follows:

On January 18, 1993, NPC entered into a lease contract with

Polar Energy, Inc. over 3x30 MW diesel engine power barges
moored at Balayan Bay in Calaca, Batangas. The contract,
denominated
as
an
Energy
Conversion
Agreement[5] (Agreement), was for a period of five
years. Article 10 reads:

10.1
RESPONSIBILITY. NAPOCOR shall be responsible
for the payment of (a) all taxes, import duties, fees,
134

charges and other levies imposed by the National

Government of the Republic of the Philippines or any
agency or instrumentality thereof to which POLAR may be
or become subject to or in relation to the performance of
their obligations under this agreement (other than (i) taxes
imposed or calculated on the basis of the net income
of POLAR and Personal Income Taxes of its employees and
(ii) construction permit fees, environmental permit fees
and other similar fees and charges) and (b) all real estate
taxes and assessments, rates and other charges in respect
of the Power Barges.[6]

Subsequently, Polar Energy, Inc. assigned its rights

under the Agreement to FELS. The NPC initially opposed the
assignment of rights, citing paragraph 17.2 of Article 17 of
the Agreement.

On August 7, 1995, FELS received an assessment of

real property taxes on the power barges from Provincial
Assessor Lauro C. Andaya of Batangas City. The assessed
tax, which likewise covered those due for 1994, amounted
to P56,184,088.40 per annum. FELS referred the matter to
NPC, reminding it of its obligation under the Agreement to
pay all real estate taxes. It then gave NPC the full power and
authority to represent it in any conference regarding the real
property assessment of the Provincial Assessor.

135

In a letter[7] dated September 7, 1995, NPC sought

reconsideration of the Provincial Assessors decision to assess
real property taxes on the power barges. However, the
motion was denied on September 22, 1995, and the
Provincial Assessor advised NPC to pay the assessment.
[8]
This prompted NPC to file a petition with the Local Board of
Assessment Appeals (LBAA) for the setting aside of the
assessment and the declaration of the barges as non-taxable
items; it also prayed that should LBAA find the barges to be
taxable, the Provincial Assessor be directed to make the
necessary corrections.[9]

In its Answer to the petition, the Provincial Assessor averred

that the barges were real property for purposes of taxation
under Section 199(c) of Republic Act (R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a
Manifestation, informing the LBAA that the Department of
Finance (DOF) had rendered an opinion[10] dated May 20,
1996, where it is clearly stated that power barges are not
real property subject to real property assessment.
On August
26,
1996,
the
LBAA
rendered
Resolution[11] denying the petition. The fallo reads:

WHEREFORE, the Petition is DENIED. FELS is hereby

ordered to pay the real estate tax in the amount
of P56,184,088.40, for the year 1994.

136

SO ORDERED.[12]

The LBAA ruled that the power plant facilities, while they
may be classified as movable or personal property, are
nevertheless considered real property for taxation purposes
because they are installed at a specific location with a
character of permanency. The LBAA also pointed out that the
owner of the bargesFELS, a private corporationis the one
being taxed, not NPC. A mere agreement making NPC
responsible for the payment of all real estate taxes and
assessments will not justify the exemption of FELS; such a
privilege can only be granted to NPC and cannot be
extended to FELS. Finally, the LBAA also ruled that the
petition was filed out of time.

Aggrieved, FELS appealed the LBAAs ruling to the Central

Board of Assessment Appeals (CBAA).

On August
28,
1996,
the
Provincial
Treasurer
of Batangas City issued a Notice of Levy and Warrant by
Distraint[13] over the power barges, seeking to collect real
property taxes amounting to P232,602,125.91 as of July 31,
1996. The notice and warrant was officially served to FELS
on November 8, 1996. It then filed a Motion to Lift Levy
datedNovember 14, 1996, praying that the Provincial
Assessor be further restrained by the CBAA from enforcing
the disputed assessment during the pendency of the appeal.
137

On November 15, 1996, the CBAA issued an Order [14] lifting

the levy and distraint on the properties of FELS in order not
to preempt and render ineffectual, nugatory and illusory any
resolution or judgment which the Board would issue.

Meantime,
the
NPC
filed
a
Motion
for
Intervention[15] dated August 7, 1998 in the proceedings
before the CBAA. This was approved by the CBAA in an
Order[16] datedSeptember 22, 1998.

During the pendency of the case, both FELS and NPC filed
several motions to admit bond to guarantee the payment of
real property taxes assessed by the Provincial Assessor (in
the event that the judgment be unfavorable to them). The
bonds were duly approved by the CBAA.

On April 6, 2000, the CBAA rendered a Decision [17] finding the

power barges exempt from real property tax. The dispositive
portion reads:

WHEREFORE, the Resolution of the Local Board of

Assessment Appeals of the Province of Batangas is hereby
reversed. Respondent-appellee Provincial Assessor of
the Province of Batangasis hereby ordered to drop subject
property under ARP/Tax Declaration No. 018-00958 from
138

the List of Taxable Properties in the Assessment Roll. The

Provincial Treasurer of Batangas is hereby directed to act
accordingly.

SO ORDERED.[18]

Ruling in favor of FELS and NPC, the CBAA reasoned that the
power barges belong to NPC; since they are actually, directly
and exclusively used by it, the power barges are covered by
the exemptions under Section 234(c) of R.A. No. 7160. [19] As
to the other jurisdictional issue, the CBAA ruled that
prescription did not preclude the NPC from pursuing its claim
for tax exemption in accordance with Section 206 of R.A. No.
7160. The Provincial Assessor filed a motion for
reconsideration, which was opposed by FELS and NPC.

In a complete volte face, the CBAA issued a

Resolution[20] on July 31, 2001 reversing its earlier decision.
The fallo of the resolution reads:

WHEREFORE, premises
resolution of this Board that:

(a)

considered,

it

is

the

The decision of the Board dated 6 April 2000 is

hereby reversed.

139

(b)

The petition of FELS, as well as the intervention of

NPC, is dismissed.

(c)

The resolution of the Local Board of Assessment

Appeals of Batangas is hereby affirmed,

(d)

The real property tax assessment on FELS by the

Provincial Assessor of Batangas is likewise hereby
affirmed.

SO ORDERED.[21]

FELS
and
NPC
filed
separate
motions
for
reconsideration, which were timely opposed by the Provincial
Assessor. The CBAA denied the said motions in a
Resolution[22]dated October 19, 2001.

Dissatisfied, FELS filed a petition for review before the

CA docketed as CA-G.R. SP No. 67490. Meanwhile, NPC filed
a separate petition, docketed as CA-G.R. SP No. 67491.

140

On January 17, 2002, NPC filed a Manifestation/Motion

for Consolidation in CA-G.R. SP No. 67490 praying for the
consolidation of its petition with CA-G.R. SP No. 67491. In a
Resolution[23] dated February 12, 2002, the appellate court
directed NPC to re-file its motion for consolidation with CAG.R. SP No. 67491, since it is the ponente of the latter
petition who should resolve the request for reconsideration.

NPC failed to comply with the aforesaid resolution.

On August 25, 2004, the Twelfth Division of the appellate
court rendered judgment in CA-G.R. SP No. 67490 denying
the petition on the ground of prescription. The decretal
portion of the decision reads:

WHEREFORE, the petition for review is DENIED for

lack of merit and the assailed Resolutions dated July 31,
2001 and October 19, 2001 of the Central Board of
Assessment Appeals are AFFIRMED.

SO ORDERED.[24]

On September 20, 2004, FELS timely filed a motion for

reconsideration seeking the reversal of the appellate courts
decision in CA-G.R. SP No. 67490.

141

Thereafter, NPC filed a petition for review dated October 19,

2004 before this Court, docketed as G.R. No. 165113,
assailing the appellate courts decision in CA-G.R. SP No.
67490. The petition was, however, denied in this Courts
Resolution[25] of November 8, 2004, for NPCs failure to
sufficiently show that the CA committed any reversible error
in the challenged decision. NPC filed a motion for
reconsideration, which the Court denied with finality in a
Resolution[26] dated January 19, 2005.

Meantime, the appellate court dismissed the petition in CAG.R. SP No. 67491. It held that the right to question the
assessment of the Provincial Assessor had already
prescribed upon the failure of FELS to appeal the disputed
assessment to the LBAA within the period prescribed by law.
Since FELS had lost the right to question the assessment, the
right of the Provincial Government to collect the tax was
already absolute.

NPC filed a motion for reconsideration dated March 8, 2005,

seeking reconsideration of the February 5, 2005 ruling of the
CA in CA-G.R. SP No. 67491. The motion was denied in a
Resolution[27] dated November 23, 2005.

142

The motion for reconsideration filed by FELS in CA-G.R.

SP No. 67490 had been earlier denied for lack of merit in a
Resolution[28] dated June 20, 2005.

On August 3, 2005, FELS filed the petition docketed as

G.R. No. 168557 before this Court, raising the following
issues:

A.
Whether power barges, which are floating and movable,
are personal properties and therefore, not subject to real
property tax.

B.
Assuming that the subject power barges are real
properties, whether they are exempt from real estate tax
under Section 234 of the Local Government Code (LGC).

C.
Assuming arguendo that the subject power barges are
subject to real estate tax, whether or not it should be NPC
which should be made to pay the same under the law.

D.

143

Assuming arguendo that the subject power barges are real

properties, whether or not the same is subject to
depreciation just like any other personal properties.

E.
Whether the right of the petitioner to question the patently
null and void real property tax assessment on the
petitioners personal properties is imprescriptible.[29]

On January 13, 2006, NPC filed its own petition for

review before this Court (G.R. No. 170628), indicating the
following errors committed by the CA:

I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
THE APPEAL TO THE LBAA WAS FILED OUT OF TIME.

II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING
THAT THE POWER BARGES ARE NOT SUBJECT TO REAL
PROPERTY TAXES.

144

III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING
THAT THE ASSESSMENT ON THE POWER BARGES WAS NOT
MADE IN ACCORDANCE WITH LAW.[30]

Considering that the factual antecedents of both cases are

similar, the Court ordered the consolidation of the two cases
in a Resolution[31] dated March 8, 2006.

In an earlier Resolution dated February 1, 2006, the Court

had required the parties to submit their respective
Memoranda within 30 days from notice. Almost a year
passed but the parties had not submitted their respective
memoranda. Considering that taxesthe lifeblood of our
economyare involved in the present controversy, the Court
was prompted to dispense with the said pleadings, with the
end view of advancing the interests of justice and avoiding
further delay.

In both petitions, FELS and NPC maintain that the appeal

before the LBAA was not time-barred. FELS argues that when
NPC moved to have the assessment reconsidered
onSeptember 7, 1995, the running of the period to file an
appeal with the LBAA was tolled. For its part, NPC posits that
the 60-day period for appealing to the LBAA should be
145

reckoned from its receipt of the denial of its motion for

reconsideration.

Petitioners contentions are bereft of merit.

Section 226 of R.A. No. 7160, otherwise known as the

Local Government Code of 1991, provides:

SECTION 226. Local Board of Assessment

Appeals. Any owner or person having legal interest in the
property who is not satisfied with the action of the
provincial, city or municipal assessor in the assessment of
his property may, within sixty (60) days from the date of
receipt of the written notice of assessment, appeal to the
Board of Assessment Appeals of the province or city by
filing a petition under oath in the form prescribed for the
purpose, together with copies of the tax declarations and
such affidavits or documents submitted in support of the
appeal.

We note that the notice of assessment which the Provincial

Assessor sent to FELS on August 7, 1995, contained the
following statement:

If you are not satisfied with this assessment, you

may, within sixty (60) days from the date of receipt hereof,
appeal to the Board of Assessment Appeals of the province
146

by filing a petition under oath on the form prescribed for

the purpose, together with copies of ARP/Tax Declaration
and such affidavits or documents submitted in support of
the appeal.[32]

Instead of appealing to the Board of Assessment

Appeals (as stated in the notice), NPC opted to file a motion
for reconsideration of the Provincial Assessors decision, a
remedy not sanctioned by law.

The remedy of appeal to the LBAA is available from an

adverse ruling or action of the provincial, city or municipal
assessor in the assessment of the property. It follows then
that the determination made by the respondent Provincial
Assessor with regard to the taxability of the subject real
properties falls within its power to assess properties for
taxation purposes subject to appeal before the LBAA. [33]

We fully agree with the rationalization of the CA in both

CA-G.R. SP No. 67490 and CA-G.R. SP No. 67491. The two
divisions of the appellate court cited the case ofCallanta v.
Office of the Ombudsman,[34] where we ruled that under
Section 226 of R.A. No 7160,[35] the last action of the local
assessor on a particular assessment shall be the notice of

147

assessment; it is this last action which gives the owner of the

property the right to appeal to the LBAA. The procedure
likewise does not permit the property owner the remedy of
filing a motion for reconsideration before the local assessor.
The pertinent holding of the Court in Callanta is as follows:

x x x [T]he same Code is equally clear that the

aggrieved owners should have brought their appeals
before the LBAA. Unfortunately, despite the advice to this
effect contained in their respective notices of assessment,
the owners chose to bring their requests for a
review/readjustment before the city assessor, a remedy not
sanctioned by the law. To allow this procedure would
indeed invite corruption in the system of appraisal and
assessment. It conveniently courts a graft-prone situation
where values of real property may be initially set
unreasonably high, and then subsequently reduced upon
the request of a property owner. In the latter instance,
allusions of a possible covert, illicit trade-off cannot be
avoided, and in fact can conveniently take place. Such
occasion for mischief must be prevented and excised from
our system.[36]

For its part, the appellate court declared in CA-G.R. SP

No. 67491:

x x x. The Court announces: Henceforth, whenever

the local assessor sends a notice to the owner or lawful

148

possessor of real property of its revised assessed value,

the former shall no longer have any jurisdiction to
entertain any request for a review or readjustment. The
appropriate forum where the aggrieved party may bring
his appeal is the LBAA as provided by law. It follows
ineluctably that the 60-day period for making the appeal to
the LBAA runs without interruption. This is what We held in
SP 67490 and reaffirm today in SP 67491.[37]

To reiterate, if the taxpayer fails to appeal in due

course,
the
right
of
the local government to collect the taxes due with respect to
the taxpayers property becomes absolute upon the
expiration of the period to appeal. [38] It also bears stressing
that the taxpayers failure to question the assessment in the
LBAA renders the assessment of the local assessor final,
executory and demandable, thus, precluding the taxpayer
from questioning the correctness of the assessment, or from
invoking any defense that would reopen the question of its
liability on the merits.[39]

In fine, the LBAA acted correctly when it dismissed the

petitioners appeal for having been filed out of time; the
CBAA and the appellate court were likewise correct in
affirming the dismissal. Elementary is the rule that the
perfection of an appeal within the period therefor is both
mandatory and jurisdictional, and failure in this regard
renders the decision final and executory. [40]

149

In the Comment filed by the Provincial Assessor, it is

asserted that the instant petition is barred by res
judicata; that the final and executory judgment in G.R. No.
165113 (where there was a final determination on the issue
of prescription), effectively precludes the claims herein; and
that the filing of the instant petition after an adverse
judgment in G.R. No. 165113 constitutes forum shopping.

FELS maintains that the argument of the Provincial

Assessor is completely misplaced since it was not a party to
the erroneous petition which the NPC filed in G.R. No.
165113. It avers that it did not participate in the aforesaid
proceeding, and the Supreme Court never acquired
jurisdiction over it. As to the issue of forum shopping,
petitioner claims that no forum shopping could have been
committed since the elements of litis pendentia or res
judicata are not present.

We do not agree.

Res judicata pervades every organized system of

jurisprudence and is founded upon two grounds embodied in
various maxims of common law, namely: (1) public policy
and necessity, which makes it to the interest of the

150

State that there should be an end to litigation republicae ut

sit litium; and (2) the hardship on the individual of being
vexed twice for the same cause nemo debet bis vexari et
eadem causa. A conflicting doctrine would subject the public
peace and quiet to the will and dereliction of individuals and
prefer the regalement of the litigious disposition on the part
of suitors to the preservation of the public tranquility and
happiness.[41] As we ruled in Heirs of Trinidad De Leon Vda.
de Roxas v. Court of Appeals:[42]

x x x An existing final judgment or decree

rendered upon the merits, without fraud or
collusion, by a court of competent jurisdiction
acting upon a matter within its authority is
conclusive on the rights of the parties and their
privies. This ruling holds in all other actions or
suits, in the same or any other judicial tribunal
of concurrent jurisdiction, touching on the
points or matters in issue in the first suit.

xxx

Courts will simply refuse to reopen what has been

decided. They will not allow the same parties or their
privies to litigate anew a question once it has been
considered and decided with finality. Litigations must end
and terminate sometime and somewhere. The effective
and efficient administration of justice requires that once a
judgment has become final, the prevailing party should not
be deprived of the fruits of the verdict by subsequent suits
on the same issues filed by the same parties.
151

This is in accordance with the doctrine of res

judicata which has the following elements: (1) the former
judgment must be final; (2) the court which rendered it had
jurisdiction over the subject matter and the parties; (3) the
judgment must be on the merits; and (4) there must be
between the first and the second actions, identity of
parties, subject matter and causes of action. The
application of the doctrine of res judicata does not
require absolute identity of parties but merely
substantial identity of parties. There is substantial
identity of parties when there is community of
interest or privity of interest between a party in the
first and a party in the second case even if the first
case did not implead the latter.[43]

To recall, FELS gave NPC the full power and authority to

represent it in any proceeding regarding real property
assessment. Therefore, when petitioner NPC filed its petition
for review docketed as G.R. No. 165113, it did so not only on
its behalf but also on behalf of FELS. Moreover, the assailed
decision in the earlier petition for review filed in this Court
was the decision of the appellate court in CA-G.R. SP No.
67490, in which FELS was the petitioner. Thus, the decision
in G.R. No. 165116 is binding on petitioner FELS under the
principle of privity of interest. In fine, FELS and NPC
are substantially identical parties as to warrant the
application of res judicata. FELSs argument that it is not
bound by the erroneous petition filed by NPC is thus
unavailing.
152

On the issue of forum shopping, we rule for the

Provincial Assessor. Forum shopping exists when, as a result
of an adverse judgment in one forum, a party seeks another
and possibly favorable judgment in another forum other than
by appeal or special civil action or certiorari. There is also
forum shopping when a party institutes two or more actions
or proceedings grounded on the same cause, on the gamble
that one or the other court would make a favorable
disposition.[44]

Petitioner FELS alleges that there is no forum shopping

since the elements of res judicata are not present in the
cases at bar; however, as already discussed, res judicatamay
be properly applied herein. Petitioners engaged in forum
shopping when they filed G.R. Nos. 168557 and 170628 after
the petition for review in G.R. No. 165116. Indeed,
petitioners went from one court to another trying to get a
favorable decision from one of the tribunals which allowed
them to pursue their cases.

It must be stressed that an important factor in

determining the existence of forum shopping is the vexation
caused to the courts and the parties-litigants by the filing of
similar cases to claim substantially the same reliefs. [45] The
rationale against forum shopping is that a party should not
be allowed to pursue simultaneous remedies in two
153

different fora. Filing multiple petitions or complaints

constitutes abuse of court processes, which tends to degrade
the administration of justice, wreaks havoc upon orderly
judicial procedure, and adds to the congestion of the heavily
burdened dockets of the courts.[46]

Thus, there is forum shopping when 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 pending case,
regardless of which party is successful, would amount to res
judicata in the other.[47]
Having found that the elements of res judicata and
forum shopping are present in the consolidated cases, a
discussion of the other issues is no longer necessary.
Nevertheless, for the peace and contentment of petitioners,
we shall shed light on the merits of the case.
As found by the appellate court, the CBAA and LBAA
power barges are real property and are thus subject to real
property tax. This is also the inevitable conclusion,
considering that G.R. No. 165113 was dismissed for failure to
sufficiently show any reversible error. Tax assessments by
tax examiners are presumed correct and made in good faith,
with the taxpayer having the burden of proving otherwise.
[48]
Besides, factual findings of administrative bodies, which
154

have acquired expertise in their field, are generally binding

and conclusive upon the Court; we will not assume to
interfere with the sensible exercise of the judgment of men
especially trained in appraising property. Where the judicial
mind is left in doubt, it is a sound policy to leave the
assessment undisturbed.[49] We find no reason to depart from
this rule in this case.
In Consolidated Edison Company of New York, Inc., et
al. v. The City of New York, et al.,[50] a power company
brought an action to review property tax assessment. On the
citys motion to dismiss, the Supreme Court of New
York held that the barges on which were mounted gas
turbine power plants designated to generate electrical
power, the fuel oil barges which supplied fuel oil to the
power plant barges, and the accessory equipment mounted
on the barges were subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides
that [d]ocks and structures which, though floating, are
intended by their nature and object to remain at a fixed
place on a river, lake, or coast are considered immovable
property. Thus, power barges are categorized as immovable
property by destination, being in the nature of machinery
and other implements intended by the owner for an industry
or work which may be carried on in a building or on a piece
of land and which tend directly to meet the needs of said
industry or work.[51]

155

Petitioners maintain nevertheless that the power barges

are exempt from real estate tax under Section 234 (c) of R.A.
No. 7160 because they are actually, directly and exclusively
used by petitioner NPC, a government- owned and controlled
corporation engaged in the supply, generation, and
transmission of electric power.
We affirm the findings of the LBAA and CBAA that the
owner of the taxable properties is petitioner FELS, which in
fine, is the entity being taxed by the local government.As
stipulated under Section 2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall
own the Power Barges and all the fixtures, fittings,
machinery and equipment on the Site used in connection
with the Power Barges which have been supplied by it at its
own cost. POLAR shall operate, manage and maintain the
Power Barges for the purpose of converting Fuel of
NAPOCOR into electricity.[52]

It follows then that FELS cannot escape liability from

the payment of realty taxes by invoking its exemption in
Section 234 (c) of R.A. No. 7160, which reads:
SECTION 234. Exemptions from Real Property
Tax. The following are exempted from payment of the real
property tax:
xxx
(c) All machineries and equipment that are actually,
directly and exclusively used by local water districts
and government-owned or controlled corporations
engaged in the supply and distribution of water
156

and/or generation
power; x x x

and

transmission

of

electric

Indeed, the law states that the machinery must be

actually, directly and exclusively used by the government
owned or controlled corporation; nevertheless, petitioner
FELS still cannot find solace in this provision because Section
5.5, Article 5 of the Agreement provides:
OPERATION. POLAR undertakes that until the end of
the Lease Period, subject to the supply of the necessary
Fuel pursuant to Article 6 and to the other provisions
hereof, it will operate the Power Barges to convert
such Fuel into electricity in accordance with Part A of
Article 7.[53]

It is a basic rule that obligations arising from a contract

have the force of law between the parties. Not being
contrary to law, morals, good customs, public order or public
policy, the parties to the contract are bound by its terms and
conditions.[54]
Time and again, the Supreme Court has stated that
taxation is the rule and exemption is the exception. [55] The
law does not look with favor on tax exemptions and the
entity that would seek to be thus privileged must justify it by
words too plain to be mistaken and too categorical to be
misinterpreted.[56] Thus,
applying
the
rule
of
strict
construction of laws granting tax exemptions, and the rule
that doubts should be resolved in favor of provincial
corporations, we hold that FELS is considered a taxable
entity.

157

The mere undertaking of petitioner NPC under Section

10.1 of the Agreement, that it shall be responsible for the
payment of all real estate taxes and assessments, does not
justify the exemption. The privilege granted to petitioner
NPC cannot be extended to FELS. The covenant is between
FELS and NPC and does not bind a third person not privy
thereto, in this case, the Province of Batangas.
It must be pointed out that the protracted and
circuitous litigation has seriously resulted in the local
governments deprivation of revenues. The power to tax is an
incident of sovereignty and is unlimited in its magnitude,
acknowledging in its very nature no perimeter so that
security against its abuse is to be found only in the
responsibility of the legislature which imposes the tax on the
constituency who are to pay for it. [57] The right of local
government units to collect taxes due must always be
upheld to avoid severe tax erosion. This consideration is
consistent with the State policy to guarantee the autonomy
of local governments[58] and the objective of the Local
Government Code that they enjoy genuine and meaningful
local autonomy to empower them to achieve their fullest
development as self-reliant communities and make them
effective partners in the attainment of national goals. [59]
In conclusion, we reiterate that the power to tax is the
most potent instrument to raise the needed revenues to
finance and support myriad activities of the local
government units for the delivery of basic services essential

158

to the promotion of the general welfare and the

enhancement of peace, progress, and prosperity of the
people.[60]
WHEREFORE, the Petitions are DENIED and
assailed Decisions and Resolutions AFFIRMED.

the

SO ORDERED.

Yuvienco vs. Dacuycuy, 104 SCRA 668

G.R. No. L-55048 May 27, 1981
SUGA SOTTO YUVIENCO, BRITANIA SOTTO, and MARCELINO SOTTO, petitioners,
vs.
HON. AUXENCIO C. DACUYCUY, Judge of the CFI of Leyte, DELY RODRIGUEZ, FELIPE
ANG CRUZ, CONSTANCIA NOGAR, MANUEL GO, INOCENTES DIME, WILLY JULIO,
JAIME YU, OSCAR DY, DY CHIU SENG, BENITO YOUNG, FERNANDO YU, SEBASTIAN
YU, CARLOS UY, HOC CHUAN and MANUEL DY,respondents.

BARREDO, J.:

1wph1.t

Petition for certiorari and prohibition to declare void for being in grave abuse of discretion the
orders of respondent judge dated November 2, 1978 and August 29, 1980, in Civil Case No.
5759 of the Court of First Instance of Leyte, which denied the motion filed by petitioners to
dismiss the complaint of private respondents for specific performance of an alleged
agreement of sale of real property, the said motion being based on the grounds that the
respondents' complaint states no cause of action and/or that the claim alleged therein is
unenforceable under the Statute of Frauds.
Finding initially prima facie merit in the petition, We required respondents to answer and We
issued a temporary restraining order on October 7, 1980 enjoining the execution of the
questioned orders.
In essence, the theory of petitioners is that while it is true that they did express willingness to
sell to private respondents the subject property for P6,500,000 provided the latter made
known their own decision to buy it not later than July 31, 1978, the respondents' reply that
they were agreeable was not absolute, so much so that when ultimately petitioners'
representative went to Cebu City with a prepared and duly signed contract for the purpose of
perfecting and consummating the transaction, respondents and said representative found
variance between the terms of payment stipulated in the prepared document and what

159

respondents had in mind, hence the bankdraft which respondents were delivering to petit
loners' representative was returned and the document remained unsigned by respondents.
Hence the action below for specific performance.
To be more specific, the parties do not dispute that on July 12, 1978, petitioners, thru a
certain Pedro C. Gamboa, sent to respondents the following letter:
Mr. Yao King Ong
Life Bakery
Tacloban City
Dear Mr. Yao:

1wph1.t

This refers to the Sotto property (land and building) situated at Tacloban City.
My clients are willing to sell them at a total price of P6,500,000.00.
While there are other parties who are interested to buy the property, I am
giving you and the other occupants the preference, but such priority has to be
exercised within a given number of days as I do not want to lose the
opportunity if you are not interested. I am therefore gluing you and the rest of
the occupants until July 31, 1978 within it which to decide whether you want
to buy the property. If I do not hear from you by July 31, I will offer or close
the deal with the other interested buyer.
Thank you so much for the hospitality extended to me during my last trip to
Tacloban, and I hope to hear from you very soon.
1wph1.t

Very truly
yours,
Pedro C.
Gamboa 1
(Page 9, Record.)
Reacting to the foregoing letter, the following telegram was sent by "Yao King
Ong & tenants" to Atty. Pedro Gamboa in Cebu City:
Atty. Pedro Gamboa
Room 314, Maria Cristina Bldg.
Osmea Boulevard, Cebu City
Reurlet dated July 12 inform Dra. Yuvienco we agree to buy property proceed
Tacloban to negotiate details
1wph1.t

160

Yao King Ong

& tenants
(Page 10, Record.)
Likewise uncontroverted is the fact that under date of July 27, 1978, Atty.
Gamboa wired Yao King Ong in Tacloban City as follows:
NLT
YAO KING ONG
LIFE BAKERY
TACLOBAN CITY
PROPOSAL ACCEPTED ARRIVING TUESDAY MORNING WITH
CONTRACT PREPARE PAYMENT BANK DRAFT
1wph1.t

ATTY.
GAMBOA
(Page 10, Id.)
Now, Paragraph 10 of the complaint below of respondents alleges:

1wph1.t

10. That on August 1, 1978, defendant Pedro Gamboa arrived Tacloban

City bringing with him the prepared contract to purchase and to sell referred
to in his telegram dated July 27, 1978 (Annex 'D' hereof) for the purpose of
closing the transactions referred to in paragraphs 8 and 9 hereof, however, to
the complete surprise of plaintiffs, the defendant (except def. Tacloban City
Ice Plant, Inc.) without giving notice to plaintiffs, changed the mode of
payment with respect to the balance of P4,500,000.00 by imposing upon
plaintiffs to pay same amount within thirty (30) days from execution of the
contract instead of the former term of ninety (90) days as stated in paragraph
8 hereof. (Pp. 10-11, Record.)
Additionally and to reenforce their position, respondents alleged further in their complaint:

1wph1.t

8. That on July 12, 1978, defendants (except defendant Tacloban City Ice
Plant, Inc.) finally sent a telegram letter to plaintiffs- tenants, through same
Mr. Yao King Ong, notifying them that defendants are willing to sell the
properties (lands and building) at a total price of P6,500,000.00, which herein
plaintiffs-tenants have agreed to buy the said properties for said price; a copy
of which letter is hereto attached as integral part hereof and marked as
Annex 'C', and plaintiffs accepted the offer through a telegram dated July 25,
1978, sent to defendants (through defendant Pedro C. Gamboa), a copy of
which telegram is hereto attached as integral part hereof and marked as
Annex C-1 and as a consequence hereof. plaintiffs except plaintiff Tacloban merchants' Realty Development Corporation) and defendants (except

161

defendant Tacloban City Ice Plant. Inc.) agreed to the following terms and
conditions respecting the payment of said purchase price, to wit:
1wph1.t

P2,000,000.00 to be paid in full on the date of the execution

of the contract; and the balance of P4,500,000.00 shall be
fully paid within ninety (90) days thereafter;
9. That on July 27, 1978, defendants sent a telegram to plaintiff- tenants,
through the latter's representative Mr. Yao King Ong, reiterating their
acceptance to the agreement referred to in the next preceding paragraph
hereof and notifying plaintiffs-tenants to prepare payment by bank drafts;
which the latter readily complied with; a copy of which telegram is hereto
attached as integral part hereof and marked as Annex "D"; (Pp 49-50,
Record.)
It was on the basis of the foregoing facts and allegations that herein petitioners filed their
motion to dismiss alleging as main grounds:
1wph1.t

I. That plaintiff, TACLOBAN MERCHANTS' REALTY DEVELOPMENT

CORPORATION, amended complaint, does not state a cause of action and
the claim on which the action is founded is likewise unenforceable under the
provisions of the Statute of Frauds.
II. That as to the rest of the plaintiffs, their amended complaint does not state
a cause of action and the claim on which the action is founded is likewise
unenforceable under the provisions of the Statute of Frauds. (Page 81,
Record.)
With commendable knowledgeability and industry, respondent judge ruled negatively on the
motion to dismiss, discoursing at length on the personality as real party-in-interest of
respondent corporation, while passing lightly, however, on what to Us are the more
substantial and decisive issues of whether or not the complaint sufficiently states a cause of
action and whether or not the claim alleged therein is unenforceable under the Statute of
Frauds, by holding thus:
1wph1.t

The second ground of the motion to dismiss is that plaintiffs' claim is

unenforceable under the Statute of Frauds. The defendants argued against
this motion and asked the court to reject the objection for the simple reason
that the contract of sale sued upon in this case is supported by letters and
telegrams annexed to the complaint and other papers which will be
presented during the trial. This contention of the defendants is not well taken.
The plaintiffs having alleged that the contract is backed up by letters and
telegrams, and the same being a sufficient memorandum, the complaint
states a cause of action and they should be given a day in court and allowed
to substantiate their allegations (Paredes vs. Espino, 22 SCRA 1000).
To take a contract for the sale of land out of the Statute of Frauds a mere
note or memorandum in writing subscribed by the vendor or his agent
containing the name of the parties and a summary statement of the terms of
the sale either expressly or by reference to something else is all that is
required. The statute does not require a formal contract drawn up with
technical exactness for the language of Par. 2 of Art. 1403 of the Philippine

162

Civil Code is' ... an agreement ... or some note or memorandum thereof,' thus
recognizing a difference between the contract itself and the written evidence
which the statute requires (Berg vs. Magdalena Estate, Inc., 92 Phil. 110; Ill
Moran, Comments on the Rules of Court, 1952 ed. p. 187). See also
Bautista's Monograph on the Statute of Frauds in 21 SCRA p. 250. (Pp. 110111, Record)
Our first task then is to dwell on the issue of whether or not in the light of the foregoing
circumstances, the complaint in controversy states sufficiently a cause of action. This issue
necessarily entails the determination of whether or not the plaintiffs have alleged facts
adequately showing the existence of a perfected contract of sale between herein petitioners
and the occupant represented by respondent Yao King Ong.
In this respect, the governing legal provision is, of course, Article 1319 of the Civil Code
which provides:
1wph1.t

ART. 1319. Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are constitute the contract.
The offer must be certain the acceptance absolute. A qualified acceptance
constitute a counter-offer.
Acceptance made by letter or telegram does not bind offerer except from the
time it came to his knowledge. The contract, in a case, is presumed to have
been entered into in the place where the offer was made.
In the instant case, We can lay aside, for the moment, petitioners' contention that the letter of
July 12, 1978 of Atty. Pedro C. Gamboa to respondents Yao King Ong and his companions
constitute an offer that is "certain", although the petitioners claim that it was a mere
expression of willingness to sell the subject property and not a direct offer of sale to said
respondents. What We consider as more important and truly decisive is what is the correct
juridical significance of the telegram of respondents instructing Atty. Gamboa to "proceed to
Tacloban tonegotiate details." We underline the word "negotiate" advisedly because to Our
mind it is the key word that negates and makes it legally impossible for Us to hold that
respondents' acceptance of petitioners' offer, assuming that it was a "certain" offer indeed,
was the "absolute" one that Article 1319 above-quoted requires.
Dictionally, the implication of "to negotiate" is practically the opposite of the Idea that an
agreement has been reached. Webster's Third International Dictionary, Vol. II (G. & C.
Merriam Co., 1971 Philippine copyright) gives the meaning of negotiate as "to communicate
or confer with another so as to arrive at the settlement of some matter; meet with another so
as to arrive through discussion at some kind of agreement or compromise about something;
to arrange for or bring about through conference or discussion; work at or arrive at or
settle upon by meetings and agreements or compromises ". Importantly, it must be borne
in mind that Yao King Ong's telegram simply says "we agree to buy property". It does not
necessarily connote acceptance of the price but instead suggests that the details were to be
subject of negotiation.
Respondents now maintain that what the telegram refers to as "details" to be "negotiated"
are mere "accidental elements", not the essential elements of the contract. They even invite
attention to the fact that they have alleged in their complaint (Par. 6) that it was as early as
"in the month of October, 1977 (that) negotiations between plaintiffs and defendants for the
purchase and sale (in question) were made, thus resulting to offers of same defendants

163

and counter-offer of plaintiffs". But to Our mind such alleged facts precisely indicate the
failure of any meeting of the minds of the parties, and it is only from the letter and telegrams
above-quoted that one can determine whether or not such meeting of the minds did
materialize. As We see it, what such allegations bring out in bold relief is that it was precisely
because of their past failure to arrive at an agreement that petitioners had to put an end to
the uncertainty by writing the letter of July 12, 1978. On the other hand, that respondents
were all the time agreeable to buy the property may be conceded, but what impresses Us is
that instead of "absolutely" accepting the "certain" offer if there was one of the
petitioners, they still insisted on further negotiation of details. For anyone to read in the
telegram of Yao that they accepted the price of P6,500,000.00 would be an inference not
necessarily warranted by the words "we agree to buy" and "proceed Tacloban to negotiate
details". If indeed the details being left by them for further negotiations were merely
accidental or formal ones, what need was there to say in the telegram that they had still "to
negotiate (such) details", when, being unessential per their contention, they could have been
just easily clarified and agreed upon when Atty. Gamboa would reach Tacloban?
Anent the telegram of Atty. Gamboa of July 27, 1978, also quoted earlier above, We gather
that it was in answer to the telegram of Yao. Considering that Yao was in Tacloban then while
Atty. Gamboa was in Cebu, it is difficult to surmise that there was any communication of any
kind between them during the intervening period, and none such is alleged anyway by
respondents. Accordingly, the claim of respondents in paragraph 8 of their complaint below
that there was an agreement of a down payment of P2 M, with the balance of P4.5M to be
paid within 90 days afterwards is rather improbable to imagine to have actually happened.
Respondents maintain that under existing jurisprudence relative to a motion to dismiss on
the ground of failure of the complaint to state a cause of action, the movant-defendant is
deemed to admit the factual allegations of the complaint, hence, petitioners cannot deny, for
purposes of their motion, that such terms of payment had indeed been agreed upon.
While such is the rule, those allegations do not detract from the fact that under Article 1319
of the Civil Code above-quoted, and judged in the light of the telegram-reply of Yao to Atty.
Gamboa's letter of July 12, 1978, there was not an absolute acceptance, hence from that
point of view, petitioners' contention that the complaint of respondents state no cause of
action is correct.
Nonetheless, the alleged subsequent agreement about the P2 M down and P4.5 M in 90
days may at best be deemed as a distinct cause of action. And placed against the insistence
of petitioners, as demonstrated in the two deeds of sale taken by Atty. Gamboa to Tacloban,
Annexes 9 and 10 of the answer of herein respondents, that there was no agreement about
90 days, an issue of fact arose, which could warrant a trial in order for the trial court to
determine whether or not there was such an agreement about the balance being payable in
90 days instead of the 30 days stipulated in Annexes 9 and 10 above-referred to. Our
conclusion, therefore, is that although there was no perfected contract of sale in the light of
the letter of Atty. Gamboa of July 12, 1978 and the letter-reply thereto of Yao; it being
doubtful whether or not, under Article 1319 of the Civil Code, the said letter may be deemed
as an offer to sell that is "certain", and more, the Yao telegram is far from being an "absolute"
acceptance under said article, still there appears to be a cause of action alleged in
Paragraphs 8 to 12 of the respondents' complaint, considering it is alleged therein that
subsequent to the telegram of Yao, it was agreed that the petitioners would sell the property
to respondents for P6.5 M, by paving P2 M down and the balance in 90 days and which
agreement was allegedly violated when in the deeds prepared by Atty. Gamboa and taken to
Tacloban, only 30 days were given to respondents.

164

But the foregoing conclusion is not enough to carry the day for respondents. It only brings Us
to the question of whether or not the claim for specific performance of respondents is
enforceable under the Statute of Frauds. In this respect, We man, view the situation at hand
from two angles, namely, (1) that the allegations contained in paragraphs 8 to 12 of
respondents' complaint should be taken together with the documents already
aforementioned and (2) that the said allegations constitute a separate and distinct cause of
action. We hold that either way We view the situation, the conclusion is inescapable e that
the claim of respondents that petitioners have unjustifiably refused to proceed with the sale
to them of the property v in question is unenforceable under the Statute of Frauds.
It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there is any writing or
memorandum, much less a duly signed agreement to the effect that the price of P6,500,000
fixed by petitioners for the real property herein involved was agreed to be paid not in cash
but in installments as alleged by respondents. The only documented indication of the nonwholly-cash payment extant in the record is that stipulated in Annexes 9 and 10 abovereferred to, the deeds already signed by the petitioners and taken to Tacloban by Atty.
Gamboa for the signatures of the respondents. In other words, the 90-day term for the
balance of P4.5 M insisted upon by respondents choices not appear in any note, writing or
memorandum signed by either the petitioners or any of them, not even by Atty. Gamboa.
Hence, looking at the pose of respondents that there was a perfected agreement of
purchase and sale between them and petitioners under which they would pay in installments
of P2 M down and P4.5 M within ninety 90) days afterwards it is evident that such oral
contract involving the "sale of real property" comes squarely under the Statute of Frauds
(Article 1403, No. 2(e), Civil Code.)
On the other score of considering the supposed agreement of paying installments as partly
supported by the letter and t telegram earlier quoted herein, His Honor declared with well
studied ratiocination, albeit legally inaccurate, that:
1wph1.t

The next issue relate to the State of Frauds. It is contended that plaintiffs'
action for specific performance to compel the defendants to execute a good
and sufficient conveyance of the property in question (Sotto land and
building) is unenforceable because there is no other note memorandum or
writing except annexes "C", "C-l" and "D", which by themselves did not give
birth to a contract to sell. The argument is not well founded. The rules of
pleading limit the statement of the cause of action only to such operative
facts as give rise to the right of action of the plaintiff to obtain relief against
the wrongdoer. The details of probative matter or particulars of evidence,
statements of law, inferences and arguments need not be stated. Thus, Sec.
1 of Rule 8 provides that 'every pleading shall contain in a methodical and
logical form, a plain concise and direct statement of the ultimate facts on
which the party pleading relies for his claim or defense, as the case may be,
omitting the statement of mere evidentiary facts.' Exhibits need not be
attached. The contract of sale sued upon in this case is supported by letters
and telegrams annexed to the complaint and plaintiffs have announced that
they will present additional evidences during the trial to prove their cause of
action. The plaintiffs having alleged that the contract is backed up by letters
and telegrams, and the same being sufficient memorandum, the complaint
states a cause of action and they should be given their day in court and
allowed to substantiate their allegations (Parades vs. Espino, 22 SCRA
1000). (Pp 165-166, Record.)

165

The foregoing disquisition of respondent judge misses at least two (2) juridical substantive
aspects of the Statute of Frauds insofar as sale of real property is concerned. First, His
Honor assumed that the requirement of perfection of such kind of contract under Article 1475
of the Civil Code which provides that "(t)he contract of sale is perfected at the moment there
is a meeting of the minds upon the thing which is the object of the contract and upon the
price", the Statute would no longer apply as long as the total price or consideration is
mentioned in some note or memorandum and there is no need of any indication of the
manner in which such total price is to be paid.
We cannot agree. In the reality of the economic world and the exacting demands of business
interests monetary in character, payment on installments or staggered payment of the total
price is entirely a different matter from cash payment, considering the unpredictable trends in
the sudden fluctuation of the rate of interest. In other words, it is indisputable that the value
of money - varies from day to day, hence the indispensability of providing in any sale of the
terms of payment when not expressly or impliedly intended to be in cash.
Thus, We hold that in any sale of real property on installments, the Statute of Frauds read
together with the perfection requirements of Article 1475 of the Civil Code must be
understood and applied in the sense that the idea of payment on installments must be in the
requisite of a note or memorandum therein contemplated. Stated otherwise, the inessential
elements" mentioned in the case of Parades vs. Espino, 22 SCRA 1000, relied upon by
respondent judge must be deemed to include the requirement just discussed when it comes
to installment sales. There is nothing in the monograph re the Statute of Frauds appearing
in 21 SCRA 250 also cited by His Honor indicative of any contrary view to this ruling of Ours,
for the essence and thrust of the said monograph refers only to the form of the note or
memorandum which would comply with the Statute, and no doubt, while such note or
memorandum need not be in one single document or writing and it can be in just sufficiently
implicit tenor, imperatively the separate notes must, when put together', contain all the
requisites of a perfected contract of sale. To put it the other way, under the Statute of Frauds,
the contents of the note or memorandum, whether in one writing or in separate ones merely
indicative for an adequate understanding of all the essential elements of the entire
agreement, may be said to be the contract itself, except as to the form.
Secondly, We are of the considered opinion that under the rules on proper pleading, the
ruling of the trial court that, even if the allegation of the existence of a sale of real property in
a complaint is challenged as barred from enforceability by the Statute of Frauds, the plaintiff
may simply say there are documents, notes or memoranda without either quoting them in or
annexing them to the complaint, as if holding an ace in the sleeves is not correct. To go
directly to the point, for Us to sanction such a procedure is to tolerate and even encourage
undue delay in litigation, for the simple reason that to await the stage of trial for the showing
or presentation of the requisite documentary proof when it already exists and is asked to be
produced by the adverse party would amount to unnecessarily postponing, with the
concomitant waste of time and the prolongation of the proceedings, something that can
immediately be evidenced and thereby determinable with decisiveness and precision by the
court without further delay.
In this connection, Moran observes that unlike when the ground of dismissal alleged is failure
of the complaint to state a cause of action, a motion to dismiss invoking the Statute of
Frauds may be filed even if the absence of compliance does not appear an the face of the
complaint. Such absence may be the subject of proof in the motion stage of the proceedings.
(Moran, Comment on the Rules of Court, Vol. 1, p. 494, 1979 ed.) It follows then that when
such a motion is filed and all the documents available to movant are before the court, and

166

they are insufficient to comply with the Statute, it becomes incumbent upon the plaintiff, for
the reasons of policy We have just' indicated regarding speedy administration of justice, to
bring out what note or memorandum still exists in his possession in order to enable the court
to expeditiously determine then and there the need for further proceedings. In other words, it
would be inimical to the public interests in speedy justice for plaintiff to play hide and seek at
his own convenience, particularly, when, as is quite apparent as in the instant case that
chances are that there are no more writings, notes or memoranda of the installment
agreement alleged by respondents. We cannot divine any reason why any such document
would be withheld if they existed, except the unpermissible desire of the respondents to force
the petitioners to undergo the ordeals, time, effort and expenses of a futile trial.
In the foregoing premises, We find no alternative than to render judgment in favor of
petitioners in this certiorari and prohibition case. If at all, appeal could be available if the
petitioners subjected themselves to the trial ruled to be held by the trial court. We foresee
even at this point, on the basis of what is both extant and implicit in the records, that no
different result can be probable. We consider it as sufficiently a grave abuse of discretion
warranting the special civil actions herein the failure of respondent judge to properly apply
the laws on perfection of contracts in relation to the Statute of Frauds and the pertinent rules
of pleading and practice, as We have discussed above.
ACCORDINGLY, the impugned orders of respondent judge of November 2, 1978 and August
29, 1980 are hereby set aside and private respondents' amended complaint, Annex A of the
petition, is hereby ordered dismissed and the restraining order heretofore issued by this
Court on October 7, 1980 is declared permanent. Costs against respondents.

Bank of America vs. CA, 400 SCRA 156

[G.R. No. 120135. March 31, 2003]

BANK
OF
AMERICA NT&SA,
BANK
OF
AMERICA
INTERNATIONAL,
LTD., petitioners,
vs. COURT
OF
APPEALS,
HON.
MANUEL PADOLINA,
EDUARDO
LITONJUA,
SR.,
and
AURELIO
K.
LITONJUA,
JR., respondents.
DECISION
AUSTRIA-MARTINEZ, J.:

This is a petition for review on certiorari under Rule 45 of the Rules

of Court assailing the November 29, 1994 decision of the Court of
Appeals and the April 28, 1995 resolution denying petitioners motion
for reconsideration.
[1]

The factual background of the case is as follows:

167

On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua

(Litonjuas, for brevity) filed a Complaint before the Regional Trial Court
of Pasig against the Bank of America NT&SA and Bank of America
International, Ltd. (defendant banks for brevity) alleging that: they were
engaged in the shipping business; they owned two vessels: Don Aurelio
and El Champion, through their wholly-owned corporations; they
deposited their revenues from said business together with other funds
with the branches of said banks in the United Kingdom and Hongkong
up to 1979; with their business doing well, the defendant banks induced
them to increase the number of their ships in operation, offering them
easy loans to acquire said vessels; thereafter, the defendant banks
acquired, through their (Litonjuas) corporations as the borrowers: (a) El
Carrier ; (b) El General ; (c) El Challenger ; and (d) El Conqueror ; the
vessels were registered in the names of their corporations; the
operation and the funds derived therefrom were placed under the
complete and exclusive control and disposition of the petitioners; and
the possession the vessels was also placed by defendant banks in the
hands of persons selected and designated by them (defendant banks).
[2]

[3]

[4]

[5]

[6]

[7]

[8]

[9]

The Litonjuas claimed that defendant banks as trustees did not fully
render an account of all the income derived from the operation of the
vessels as well as of the proceeds of the subsequent foreclosure sale;
because of the breach of their fiduciary duties and/or negligence of
the petitioners and/or the persons designated by them in the operation
of private respondents six vessels, the revenues derived from the
operation of all the vessels declined drastically; the loans acquired for
the purchase of the four additional vessels then matured and remained
unpaid, prompting defendant banks to have all the six vessels, including
the two vessels originally owned by the private respondents, foreclosed
and sold at public auction to answer for the obligations incurred for and
in behalf of the operation of the vessels; they (Litonjuas) lost sizeable
amounts of their own personal funds equivalent to ten percent (10%) of
the acquisition cost of the four vessels and were left with the unpaid
balance of their loans with defendant banks. The Litonjuas prayed for
the accounting of the revenues derived in the operation of the six
vessels and of the proceeds of the sale thereof at the foreclosure
proceedings instituted by petitioners; damages for breach of trust;
exemplary damages and attorneys fees.
[10]

[11]

[12]

Defendant banks filed a Motion to Dismiss on grounds of forum non

conveniens and lack of cause of action against them.
[13]

168

On December 3, 1993, the trial court issued an Order denying the

Motion to Dismiss, thus:
WHEREFORE, and in view of the foregoing consideration, the Motion to
Dismiss is hereby DENIED. The defendant is therefore, given a period of ten
(10) days to file its Answer to the complaint.
SO ORDERED.

[14]

Instead of filing an answer the defendant banks went to the Court of

Appeals on a Petition for Review on Certiorari which was aptly treated
by the appellate court as a petition for certiorari. They assailed the
above-quoted order as well as the subsequent denial of their Motion for
Reconsideration. The appellate court dismissed the petition and
denied petitioners Motion for Reconsideration.
[15]

[16]

[17]

Hence, herein petition anchored on the following grounds:

1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE
FACT THAT THE SEPARATE PERSONALITIES OF THE PRIVATE
RESPONDENTS (MERE STOCKHOLDERS) AND THE FOREIGN
CORPORATIONS (THE REAL BORROWERS) CLEARLY SUPPORT,
BEYOND ANY DOUBT, THE PROPOSITION THAT THE PRIVATE
RESPONDENTS HAVE NO PERSONALITIES TO SUE.
2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT
WHILE THE PRINCIPLE OF FORUM NON CONVENIENS IS NOT
MANDATORY, THERE ARE, HOWEVER, SOME GUIDELINES TO
FOLLOW IN DETERMINING WHETHER THE CHOICE OF FORUM
SHOULD BE DISTURBED. UNDER THE CIRCUMSTANCES
SURROUNDING THE INSTANT CASE, DISMISSAL OF THE
COMPLAINT ON THE GROUND OF FORUM NON-CONVENIENS IS
MORE APPROPRIATE AND PROPER.
3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL
JUDGMENT IN THE PHILIPPINES. IN FACT, THE PENDENCY OF
FOREIGN ACTION MAY BE THE LEGAL BASIS FOR THE DISMISSAL
OF THE COMPLAINT FILED BY THE PRIVATE
RESPONDENT. COROLLARY TO THIS, THE RESPONDENT COURT OF
APPEALS FAILED TO CONSIDER THE FACT THAT PRIVATE
RESPONDENTS ARE GUILTY OF FORUM SHOPPING.
[18]

169

As to the first assigned error: Petitioners argue that the borrowers

and the registered owners of the vessels are the foreign corporations
and not private respondents Litonjuas who are mere stockholders; and
that the revenues derived from the operations of all the vessels are
deposited in the accounts of the corporations. Hence, petitioners
maintain that these foreign corporations are the legal entities that have
the personalities to sue and not herein private respondents; that private
respondents, being mere shareholders, have no claim on the vessels as
owners since they merely have an inchoate right to whatever may
remain upon the dissolution of the said foreign corporations and after all
creditors have been fully paid and satisfied; and that while private
respondents may have allegedly spent amounts equal to 10% of the
acquisition costs of the vessels in question, their 10% however
represents their investments as stockholders in the foreign corporations.
[19]

[20]

Anent the second assigned error, petitioners posit that while the
application of the principle of forum non conveniens is discretionary on
the part of the Court, said discretion is limited by the guidelines
pertaining to the private as well as public interest factors in determining
whether plaintiffs choice of forum should be disturbed, as elucidated
in Gulf Oil Corp. vs. Gilbert and Piper Aircraft Co. vs. Reyno, to wit:
[21]

[22]

Private interest factors include: (a) the relative ease of access to sources of
proof; (b) the availability of compulsory process for the attendance of unwilling
witnesses; (c) the cost of obtaining attendance of willing witnesses; or (d) all
other practical problems that make trial of a case easy, expeditious and
inexpensive. Public interest factors include: (a) the administrative difficulties
flowing from court congestion; (b) the local interest in having localized
controversies decided at home; (c) the avoidance of unnecessary problems in
conflict of laws or in the application of foreign law; or (d) the unfairness of
burdening citizens in an unrelated forum with jury duty.
[23]

In support of their claim that the local court is not the proper forum,
petitioners allege the following:
i) The Bank of America Branches involved, as clearly mentioned in the
Complaint, are based in Hongkong and England. As such, the evidence and the
witnesses are not readily available in the Philippines;
ii) The loan transactions were obtained, perfected, performed, consummated
and partially paid outside the Philippines;
170

iii) The monies were advanced outside the Philippines. Furthermore, the
mortgaged vessels were part of an offshore fleet, not based in the Philippines;
iv) All the loans involved were granted to the Private Respondents
foreign CORPORATIONS;
v) The Restructuring Agreements were ALL governed by the laws of England;
vi) The subsequent sales of the mortgaged vessels and the application of the
sales proceeds occurred and transpired outside the Philippines, and the
deliveries of the sold mortgaged vessels were likewise made outside the
Philippines;
vii) The revenues of the vessels and the proceeds of the sales of these vessels
were ALL deposited to the Accounts of the foreign CORPORATIONS abroad;
and
viii) Bank of America International Ltd. is not licensed nor engaged in trade or
business in the Philippines.
[24]

Petitioners argue further that the loan agreements, security

documentation and all subsequent restructuring agreements uniformly,
unconditionally and expressly provided that they will be governed by the
laws of England; that Philippine Courts would then have to apply
English law in resolving whatever issues may be presented to it in the
event it recognizes and accepts herein case; that it would then be
imposing a significant and unnecessary expense and burden not only
upon the parties to the transaction but also to the local court. Petitioners
insist that the inconvenience and difficulty of applying English law with
respect to a wholly foreign transaction in a case pending in the
Philippines may be avoided by its dismissal on the ground of forum non
conveniens.
[25]

[26]

Finally, petitioners claim that private respondents have already

waived their alleged causes of action in the case at bar for their refusal
to contest the foreign civil cases earlier filed by the petitioners against
them in Hongkong and England, to wit:
1.) Civil action in England in its High Court of Justice, Queens Bench Division
Commercial Court (1992-Folio No. 2098) against (a) LIBERIAN
TRANSPORT NAVIGATION. SA.; (b) ESHLEY COMPANIA NAVIERA SA.,
(c) EL CHALLENGER SA; (d) ESPRIONA SHIPPING CO. SA; (e) PACIFIC
171

NAVIGATOS CORP. SA; (f) EDDIE NAVIGATION CORP. SA; (g)

EDUARDO K. LITONJUA & (h) AURELIO K. LITONJUA.
2.) Civil action in England in its High Court of Justice, Queens Bench Division,
Commercial Court (1992-Folio No. 2245) against (a) EL CHALLENGER S.A.,
(b) ESPRIONA SHIPPING COMPANY S.A., (c) EDUARDO KATIPUNAN
LITONJUA and (d) AURELIO KATIPUNAN LITONJUA.
3.) Civil action in the Supreme Court of Hongkong High Court (Action No.
4039 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL
CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d)
PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION
CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC.,
(g) AURELIO KATIPUNAN LITONJUA, JR., and (h) EDUARDO
KATIPUNAN LITONJUA.
4.) A civil action in the Supreme Court of Hong Kong High Court (Action No.
4040 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL
CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d)
PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION
CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC.,
(g) AURELIO KATIPUNAN LITONJUA, RJ., and (h) EDUARDO
KATIPUNAN LITONJUA.
and that private respondents alleged cause of action is already barred
by the pendency of another action or by litis pendentia as shown above.
[27]

On the other hand, private respondents contend that certain material

facts and pleadings are omitted and/or misrepresented in the present
petition for certiorari; that the prefatory statement failed to state that part
of the security of the foreign loans were mortgages on a 39-hectare
piece of real estate located in the Philippines; that while the complaint
was filed only by the stockholders of the corporate borrowers, the latter
are wholly-owned by the private respondents who are Filipinos and
therefore under Philippine laws, aside from the said corporate borrowers
being but their alter-egos, they have interests of their own in the
vessels. Private respondents also argue that the dismissal by the
Court of Appeals of the petition for certiorari was justified because there
was neither allegation nor any showing whatsoever by the petitioners
that they had no appeal, nor any plain, speedy, and adequate remedy in
the ordinary course of law from the Order of the trial judge denying their
[28]

[29]

172

Motion to Dismiss; that the remedy available to the petitioners after their
Motion to Dismiss was denied was to file an Answer to the complaint;
that as upheld by the Court of Appeals, the decision of the trial court in
not applying the principle of forum non conveniens is in the lawful
exercise of its discretion. Finally, private respondents aver that the
statement of petitioners that the doctrine of res judicata also applies to
foreign judgment is merely an opinion advanced by them and not based
on a categorical ruling of this Court; and that herein private
respondents did not actually participate in the proceedings in the foreign
courts.
[30]

[31]

[32]

[33]

We deny the petition for lack of merit.

It is a well-settled rule that the order denying the motion to dismiss
cannot be the subject of petition for certiorari. Petitioners should have
filed an answer to the complaint, proceed to trial and await judgment
before making an appeal. As repeatedly held by this Court:
An order denying a motion to dismiss is interlocutory and cannot be the subject
of the extraordinary petition for certiorari or mandamus. The remedy of the
aggrieved party is to file an answer and to interpose as defenses the objections
raised in his motion to dismiss, proceed to trial, and in case of an adverse
decision, to elevate the entire case by appeal in due course. xxx Under certain
situations, recourse to certiorari or mandamus is considered appropriate, i.e.,
(a) when the trial court issued the order without or in excess of jurisdiction; (b)
where there is patent grave abuse of discretion by the trial court; or (c) appeal
would not prove to be a speedy and adequate remedy as when an appeal would
not promptly relieve a defendant from the injurious effects of the patently
mistaken order maintaining the plaintiffs baseless action and compelling the
defendant needlessly to go through a protracted trial and clogging the court
dockets by another futile case.
[34]

Records show that the trial court acted within its jurisdiction when it
issued the assailed Order denying petitioners motion to dismiss. Does
the denial of the motion to dismiss constitute a patent grave abuse of
discretion? Would appeal, under the circumstances, not prove to be a
speedy and adequate remedy? We will resolve said questions in
conjunction with the issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in
refusing to dismiss the complaint on the ground that plaintiffs have no
cause of action against defendants since plaintiffs are merely
173

stockholders of the corporations which are the registered owners of the

vessels and the borrowers of petitioners?
No. Petitioners argument that private respondents, being mere
stockholders of the foreign corporations, have no personalities to sue,
and therefore, the complaint should be dismissed, is untenable. A case
is dismissible for lack of personality to sue upon proof that the plaintiff is
not the real party-in-interest. Lack of personality to sue 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 San
Lorenzo Village Association, Inc. vs. Court of Appeals, this Court
clarified that a complaint states a cause of action where it contains three
essential elements of a cause of action, namely: (1) the legal right of the
plaintiff, (2) the correlative obligation of the defendant, and (3) the act or
omission of the defendant in violation of said legal right. If these
elements are absent, the complaint becomes vulnerable to a motion to
dismiss on the ground of failure to state a cause of action. To
emphasize, it is not the lack or absence of cause of action that is a
ground for dismissal of the complaint but rather the fact that the
complaint states no cause of action. Failure to state a cause of
action refers to the insufficiency of allegation in the pleading, unlike lack
of cause of action which refers to the insufficiency of factual basis for
the action. Failure to state a cause of action may be raised at the
earliest stages of an action through a motion to dismiss the complaint,
while lack of cause of action may be raised any time after the questions
of fact have been resolved on the basis of stipulations, admissions or
evidence presented.
[35]

[36]

[37]

[38]

[39]

In the case at bar, the complaint contains the three elements of a

cause of action. It alleges that: (1) plaintiffs, herein private respondents,
have the right to demand for an accounting from defendants (herein
petitioners), as trustees by reason of the fiduciary relationship that was
created between the parties involving the vessels in question; (2)
petitioners have the obligation, as trustees, to render such an
accounting; and (3) petitioners failed to do the same.
Petitioners insist that they do not have any obligation to the private
respondents as they are mere stockholders of the corporation; that the
corporate entities have juridical personalities separate and distinct from
those of the private respondents. Private respondents maintain that the
corporations are wholly owned by them and prior to the incorporation of

174

such entities, they were clients of petitioners which induced them to

acquire loans from said petitioners to invest on the additional ships.
We agree with private respondents. As held in the San Lorenzo
case,
[40]

xxx assuming that the allegation of facts constituting plaintiffs cause of action
is not as clear and categorical as would otherwise be desired, any uncertainty
thereby arising should be so resolved as to enable a full inquiry into the merits
of the action.
As this Court has explained in the San Lorenzo case, such a course,
would preclude multiplicity of suits which the law abhors, and conduce
to the definitive determination and termination of the dispute. To do
otherwise, that is, to abort the action on account of the alleged fatal
flaws of the complaint would obviously be indecisive and would not end
the controversy, since the institution of another action upon a revised
complaint would not be foreclosed.
[41]

Second Issue. Should the complaint be dismissed on the ground

of forum non-conveniens?
No. The doctrine of forum non-conveniens, literally meaning the
forum is inconvenient, emerged in private international law to deter the
practice of global forum shopping, that is to prevent non-resident
litigants from choosing the forum or place wherein to bring their suit for
malicious reasons, such as to secure procedural advantages,
to annoy and harass thedefendant, to avoid overcrowded dockets, or to
select a more friendly venue. Under this doctrine, a court, in conflicts of
law cases, may refuse impositions on its jurisdiction where it is not the
most convenient or available forum and the parties are not precluded
from seeking remedies elsewhere.
[42]

[43]

Whether a suit should be entertained or dismissed on the basis of

said doctrine depends largely upon the facts of the particular case and
is addressed to the sound discretion of the trial court. In the case
of Communication Materials and Design, Inc. vs. Court of Appeals, this
Court held that xxx [a] Philippine Court may assume jurisdiction over the
case if it chooses to do so; provided, that the following requisites are
met: (1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and, (3) that the
[44]

[45]

175

Philippine Court has or is likely to have power to enforce its decision.

Evidently, all these requisites are present in the instant case.
[46]

Moreover, this Court enunciated in Philsec. Investment Corporation

vs. Court of Appeals, that the doctrine of forum non conveniens should
not be used as a ground for a motion to dismiss because Sec. 1, Rule
16 of the Rules of Court does not include said doctrine as a
ground. This Court further ruled that while it is within the discretion of
the trial court to abstain from assuming jurisdiction on this ground, it
should do so only after vital facts are established, to determine whether
special circumstances require the courts desistance; and that the
propriety of dismissing a case based on this principle of forum non
conveniens requires a factual determination, hence it is more properly
considered a matter of defense.
[47]

[48]

Third issue. Are private respondents guilty of forum shopping

because of the pendency of foreign action?
No. Forum shopping exists where the elements of litis pendentia are
present and where a final judgment in one case will amount to res
judicata in the other. Parenthetically, for litis pendentia to be a ground
for the dismissal of an action there must be: (a) identity of the parties or
at least such as to represent the same interest in both actions; (b)
identity of rights asserted and relief prayed for, the relief being founded
on the same acts; and (c) the identity in the two cases should be such
that the judgment which may be rendered in one would, regardless of
which party is successful, amount to res judicata in the other.
[49]

[50]

In case at bar, not all the requirements for litis pendentia are
present. While there may be identity of parties, notwithstanding the
presence of other respondents, as well as the reversal in positions of
plaintiffs and defendants , still the other requirements necessary for litis
pendentia were not shown by petitioner. It merely mentioned that civil
cases were filed in Hongkong and England without however showing
the identity of rights asserted and the reliefs sought for as well as the
presence of the elements of res judicata should one of the cases be
adjudged.
[51]

[52]

As the Court of Appeals aptly observed:

xxx [T]he petitioners, by simply enumerating the civil actions instituted abroad
involving the parties herein xxx, failed to provide this Court with relevant and
176

clear specifications that would show the presence of the above-quoted elements
or requisites for res judicata. While it is true that the petitioners in their motion
for reconsideration (CA Rollo, p. 72), after enumerating the various civil
actions instituted abroad, did aver that Copies of the foreign judgments are
hereto attached and made integral parts hereof as Annexes B, C, D and E, they
failed, wittingly or inadvertently, to include a single foreign judgment in their
pleadings submitted to this Court as annexes to their petition. How then could
We have been expected to rule on this issue even if We were to hold that
foreign judgments could be the basis for the application of the aforementioned
principle of res judicata?
[53]

Consequently, both courts correctly denied the dismissal of herein

subject complaint.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioners.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing and Callejo, Sr., JJ.,
concur.

Associated Bank vs. Spouses Montano, 604 SCRA 134

ASSOCIATED BANK,*
Petitioner,

G.R. No. 166383

Present:

- versus -

SPOUSES JUSTINIANO S.
MONTANO, SR., AND LIGAYA
MONTANO and TRES CRUCES
AGRO-INDUSTRIAL
CORPORATION,
Respondents.

CARPIO MORALES, J.,**

CHICO-NAZARIO,***
Acting Chairperson,
NACHURA,
PERALTA, and
ABAD,**** JJ.
Promulgated:
October 16, 2009

177

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

Petitioner filed this Rule 45 petition seeking the review of the

October 27, 2003 Decision[1] of the Court of Appeals (CA), as
well as its December 13, 2004 Resolution, [2] in CA-G.R. CV
No. 61383. The CA, in its assailed decision and resolution,
set aside the April 14, 1997 Order[3] of the Regional Trial
Court (RTC) dismissing the complaint filed by herein
respondents for reconveyance of title over three parcels of
land situated in Cavite.
Below are the facts.
In 1964, spouses Justiniano and Ligaya Montano (the
Montanos) owned three (3) parcels of land situated in Tanza,
Cavite with an aggregate area of 590,558 square meters,
more or less,[4] utilized as an integrated farm and as a stud
farm used for raising horses. [5] Justiniano was then serving as
congressman for the lone district of Cavite and as minority
floor leader. In 1972, when then President Ferdinand Marcos
placed the country under martial law, Justiniano went on selfexile to the United States of America (USA) to avoid the
harassment and threats made against him by the dictator.
Sometime in 1975, while still in the USA, the Montanos
transferred the said properties to Tres Cruces Agro-Industrial
Corporation (TCAIC) in exchange for shares of stock in the
company,[6] allowing the Montanos to control 98% of the
178

stockholdings of TCAIC.[7] Thus, on February 17, 1975, the

certificates of title registered in the name of the Montanos
were cancelled and were replaced with transfer certificates
of title (TCTs) in TCAICs name.[8]
A year later, in October 1976, TCAIC sold the properties to
International Country Club, Inc. (ICCI) for P6,000,000.00.
[9]
The sale resulted in the cancellation of the titles of TCAIC,
and in their transfer to ICCI on May 27, 1977. [10]
After the transfer, ICCI immediately mortgaged the parcels of
land to Citizens Bank and Trust Co. (later renamed as
Associated Bank) for P2,000,000.00.[11] The loan matured but
remained unpaid, prompting Associated Bank to foreclose
the mortgage on May 31, 1984.[12] The properties were then
put on public auction and were sold forP5,700,000.00 to
Associated Bank, the sole and highest bidder.[13] Ownership
over the said properties was consolidated by Associated
Bank and, on May 19, 1987, new TCTs were issued in its
name.[14]
Meanwhile, in 1986, following the ouster of Marcos, the
Montanos returned to the country. After discovering the
transfer of the properties, the Montanos immediately took
physical possession of the same and began cultivating the
land.[15] On September 15, 1989, the Montanos filed an
action for reconveyance of title against herein petitioner,
praying, in sum, that the transfer of the properties from
TCAIC to ICCI, and from ICCI to Associated Bank, be declared
null and void.[16]
In their complaint, respondents averred that the transfer of
the parcels of land to TCAIC was done only to avoid the
confiscatory acts being applied by the dictator against the
Montanos properties, in retaliation for the latters open
opposition to Marcos.[17] They claimed that TCAIC was only
179

forced to sell the properties to ICCI after the latter

intimidated and threatened the relatives of the Montanos
who were left in the country. [18] They also argued that the
mortgage by ICCI to Associated Bank was made to generate
money for the latters corporate officers as evidenced by the
lack of any effort on the part of ICCI to service the loan. [19]
On October 11, 1989, Associated Bank filed an
Answer[20] setting forth affirmative defenses. Among its
several pleas in avoidance were the arguments that the
complaint did not state a cause of action; that the allegation
of threat and intimidation was not averred with particularity;
that the bank was an innocent purchaser for value; and that,
even if the complaint stated a cause of action, the same had
already prescribed or had been barred by estoppel and
laches.[21]
On February 17, 1997, eight (8) years after Associated Bank
filed its answer and while the case was still on its pretrial
stage, the bank filed a Motion for Preliminary Hearing on the
Affirmative Defenses and/or Motion to Dismiss [22] focused on
two crucial points, namely: that the complaint stated no
cause of action; and that the case was already barred by the
statute of limitations.[23] Respondents prayed for and were
given an additional 10 days within which to file an omnibus
opposition to petitioners motion.[24] Respondents, however,
failed to meet the trial courts deadline. [25]
On April 4, 1997, the trial court issued an Order[26] dismissing
the complaint. In disposing of the case, the RTC explained:
Now, assuming gratia arguendo the truth of the
allegations of the instant complaint, the question
that arises is whether or not this court could render
a valid judgment in accordance with the prayer of
the complaint. Surely, in the absence of

180

controverting evidence when the allegations of the

complaint by reason of the motion to dismiss based
on the ground that the complaint states no cause of
action become the gospel truth. Apropos, there is no
room for doubt that this Court could render a valid
judgment pursuant to the complaints prayer.
Needless to say, the motion to dismiss based on the
ground that the complaint states no cause of action
must necessarily crumble like a house of cards.
Anent the second ground that the institution of the
instant case is barred by the statute of limitations,
this Court finds the same to be meritorious.
An action for reconveyance of real property resulting
from fraud may be barred by the statute of
limitations, which requires that the action shall be
filed within four (4) years from the discovery of the
fraud (Balbin versus Medalla, 108 SCRA 666; Alarcon
versus Hon. Abdulwahid Bidin, et al., 120 SCRA 390).
Under the circumstances of this case, such discovery
must be deemed to have taken place when Transfer
Certificate of Title Nos. T-76107, [T-]76108 and
[T-]76109 were issued in the name of Tres Cruces in
1975 and TCT No[s]. T-90654, T-90655 and TCT No.
T-90656 to the properties in the name of
International Country Club, Inc., in 1977, because
the registration of the deeds of sale is considered a
constructive notice to the whole world of its
contents, and all interests, legal and equitable,
included therein (Ramos versus Court of Appeals, et
al., 112 SCRA 542). Here, plaintiffs waited for a
period of around fourteen (14) years or at least
around twelve (12) years from the date of the
issuance of the certificates of title before filing the
instant complaint in 1989.
Besides, it is very clear from Section 35 of the Land
Registration Act that although an original owner of a
registered land may seek the annulment of a
transfer thereof on the ground of fraud, such a
181

remedy, however, is without prejudice to the rights

of any innocent value of the certification of title[]
(Medina, et al. versus Hon. Francisco M. Chanco, et
al., 117 SCRA 201).
xxxx
The bottom line is that this Court finds merit in the
Motion to Dismiss filed by defendant Westmont,
anchored on the second ground. The cause of action
filed by plaintiffs Spouses Montano for reconveyance
of title of the three (3) parcels of land is a collateral
attack on the indefeasible title of Westmont. x x x.
Parenthetically, this Court, it will not be amiss, to
state, finds that the allegations of threats,
intimidation, harassment made by plaintiffs are
couched in general terms contrary to Section 5, Rule
8 of the Rules of Court which states that in (sic) all
averments of fraud, or mistake, the circumstances
constituting fraud or mistake must be stated with
particularity.
This Court is not unmindful of the fact that in the
various transactions of plaintiffs and defendants, all
were for valuable considerations. The property for
stocks arrangement in 1975 between plaintiffs and
Tres Cruces was for the Montanos taking control of
98% of the stocks of Tres Cruces. The sale in 1977
from Tres Cruces to International Country Club was
for six (6) Million Pesos (P6,000,000.00). The
foreclosure of mortgage and consolidation of title in
1987 was due to non-payment of a loan obtained by
International Country Club from the Associated Bank
(now Westmont) for which the three (3) parcels of
land stood as security.
xxxx
WHEREFORE, premises considered, the Motion to
Dismiss is hereby GRANTED and the instant case is
DISMISSED.

182

Apropos,
the
Register
of
Deeds
for
the Province of Cavite is thereby directed to cancel
the notice of lis pendens annotated in the subject
certificates of title.
SO ORDERED.[27]

Respondents moved for reconsideration, but the trial

court denied the same. Upon appeal, the CA, on October 27,
2003, reversed the RTCs ruling and reinstated the case for
further proceedings. The appellate court ratiocinated:
The trial court discusses the issue as if it is an
established fact that the bank was a buyer in good
faith and without prior notice of the adverse
interests of the plaintiffs in the properties. We really
do not know this until trial is held and evidence
presented. That is why it is necessary that the
parties be heard. The court fails to follow the basic
and simple rule that in resolving a motion to dismiss
based on insufficiency of the complaint, it must
hypothetically admit the facts alleged. Perpetual
Savings Bank vs. Fajardo 223 SCRA 720, State
Investment House vs. Court of Appeals 206 SCRA
348. At this stage, the subject of determination is
the sufficiency of the allegations of the complaint to
test which it (sic) is only necessary to ask whether,
assuming they are true, the facts alleged are
sufficient to grant relief. Calalang vs. Intermediate
Appellate Court, 194 SCRA 514, Madrona vs. Rosal
204 SCRA 1. If the bank had actually conspired with
others to manipulate procedures to put the title out
of reach of the plaintiffs, as alleged in the complaint,
it is beyond peradventure that the court can render
valid judgment in accordance with the prayer
therein. It is not only a right but becomes the duty of
the court to proceed to hear and adjudicate the case
on its merits.

183

IN VIEW OF THE FOREGOING, the order of the

trial court dismissing the case is SET ASIDE. The
case is returned to the court of origin for further
proceedings.
SO ORDERED.[28]

Associated Bank moved for reconsideration, [29] arguing

that the cause of action of the Montanos, if there had been
any, had already prescribed. It also pointed out that the
failure of the Montanos to file a comment on or an objection
to the motion to dismiss despite opportunity to do so should
be construed as a waiver in contesting the allegations and
affirmative defenses raised by Associated Bank. The CA,
however, in its Resolution[30] dated December 13, 2004,
denied the motion for reconsideration.
Petitioner now comes to this Court raising, in essence,
two issues: first, whether it is proper to file a motion to
dismiss after an answer has already been filed; and second,
whether the complaint should be dismissed on the grounds
set forth therein.
We find in favor of respondents.

I.

On the propriety of the motion to dismiss

Section 6, Rule 16 of the Rules of Court provides:
SEC. 6. Pleading grounds as affirmative defenses. If
no motion to dismiss has been filed, any of the
grounds for dismissal provided for in this Rule may
be pleaded as an affirmative defense in the answer
and, in the discretion of the court, a preliminary

184

hearing may be had thereon as if a motion to

dismiss had been filed.
The dismissal of the complaint under this section
shall be without prejudice to the prosecution in the
same or separate action of a counterclaim pleaded
in the answer.

The rule is based on practicality. Both the parties and

the court can conveniently save time and expenses
necessarily involved in a case preparation and in a trial at
large, when the issues involved in a particular case can
otherwise be disposed of in a preliminary hearing. [31]
Since the rule provides that the preliminary hearing
may be had thereon as if a motion to dismiss had been filed,
such hearing shall therefore be conducted in the manner
provided in Section 2, Rule 16 of the Rules of Court, [32] which
reads:
SEC. 2. Hearing of motion. At the hearing of the
motion, the parties shall submit their arguments on
the question of law and their evidence on the
questions of fact involved except those not available
at that time. Should the case go to trial, the
evidence presented during the hearing shall
automatically be part of the evidence of the party
presenting the same.

It is, therefore, inconsequential that petitioner had

already filed an answer to the complaint prior to its filing of a
motion to dismiss. The option of whether to set the case for
preliminary hearing after the filing of an answer which raises
affirmative defenses, or to file a motion to dismiss raising
any of the grounds set forth in Section 1, Rule 16 of the

185

Rules are procedural options which are not mutually

exclusive of each other.
Moreover, as petitioner correctly pointed out,
respondents failed to oppose the motion to dismiss despite
having been given the opportunity to do so by the RTC.
Therefore, any right to contest the same was already waived
by them.
II. On whether the complaint for reconveyance should
be dismissed
We agree with the RTCs and the CAs rulings that
petitioners argument on the failure of the complaint to state
a cause of action is unavailing. 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 and from no other, and the court cannot
consider other matters aliunde.[33] The test, therefore, is
whether, assuming the allegations of fact in the complaint to
be true, a valid judgment could be rendered in accordance
with the prayer stated therein. Where the allegations are
sufficient but the veracity of the facts is assailed, the motion
to dismiss should be denied.[34]
In their complaint for reconveyance, respondents
alleged that the transfer of the three parcels of land from
TCAIC to ICCI was facilitated through threat, duress and
intimidation employed by certain individuals. On its face, the
complaint clearly states a cause of action and raises issues
of fact that can be properly settled only after a full-blown
trial. On this ground, petitioners motion to dismiss must,
perforce, be denied.
We do not, however, subscribe to the RTCs ruling that
the action has already prescribed.
186

It is true that an action for reconveyance of real

property resulting from fraud may be barred by the statute
of limitations, which requires that the action shall be filed
within four (4) years from the discovery of the fraud. [35] The
RTC, however, seemed to have overlooked the fact that the
basis of respondents complaint for reconveyance is not fraud
but threat, duress and intimidation, allegedly employed by
Marcos cronies upon the relatives of the Montanos while the
latter were on self-exile.[36] In fact, fraud was neither
specifically alleged nor remotely implied in the complaint.
Article 1391 of the Civil Code provides:
Art. 1391. An action for annulment shall be brought within four years.

This period shall begin: In case of intimidation, violence or undue

influence, from the time the defect of the consent ceases.

In case of mistake or fraud, from the time of the discovery of the same.

And when the action refers to contracts entered into

by minors or other incapacitated persons, from the
time the guardianship ceases.

In the circumstances prevailing in this case, the threat

or intimidation upon respondents is deemed to have ceased
only upon the ouster of then President Marcos from power on
February 21, 1986. The four-year prescriptive period must,
therefore, be reckoned from the said date. Thus, when
respondents filed their complaint for reconveyance on
September 15, 1989, the period provided for by law had not
187

yet prescribed. Therefore, petitioners motion to dismiss

should be denied.
WHEREFORE, premises considered, the instant petition
is DENIED for lack of merit. The Regional Trial Court is
ordered to proceed with the trial of the case with
dispatch. Costs against petitioner.
SO ORDERED.
Lu Ym vs. Gertrudes Nabua, 452 SCRA 298

[G.R. No. 161309. February 23, 2005]

DOUGLAS LU YM, petitioner, vs. GERTRUDES NABUA, GEORGE

N. LU, ALEX N. LU, CAYETANO N. LU, JR., JULIETA N. LU
AND BERNADITA N. LU,respondents.
DECISION
TINGA, J.:

One of the innovations introduced by the 1997 Rules of Civil

Procedure is that the resolution of a motion to dismiss shall state clearly
and distinctly the reasons therefor. In the case at bar, the Court is
provided with the opportunity and task to elucidate on the meaning and
application of the new requirement.
Before us is a Petition for Review on Certiorari dated February 11,
2004 filed by Douglas Lu Ym assailing the Court of
Appeals Decision and Resolution respectively dated August 20, 2003
and December 16, 2003. The questioned Decision dismissed
petitioners Petition and affirmed the trial courts orders dated
September 16, 2002 and October 16, 2002 which respectively denied
petitioners Omnibus
Motion
to
Dismiss
the Amended
Complaint and Motion for Reconsideration.
[1]

[2]

[3]

[4]

[5]

[7]

[6]

[8]

188

The facts as succinctly summarized by the Court of Appeals are as

follows:
[9]

The instant petition stemmed from an Amended Complaint filed by the private
respondents against the petitioner, for Accounting with TRO and Injunction, on
May 15, 2002.
On August 16, 2002, the petitioner filed an Omnibus Motion to Dismiss the
Amended Complaint based on the following grounds:
A. Plaintiffs claims are barred by a prior judgment or by the statute
of limitations {Rule 16, Sec. 1 (f)}.
B. Plaintiffs have no legal capacity to sue and/or do not have a
cause of action {Rule 16, Sec. 1(d) and/or 1(g)}.
C. Fraud and equity.
D. Docket fees not deemed paid, therefore, a condition precedent
for filing the claim has not been complied with {Rule 16, Sec.
1(j)}.
On August 29, 2002, the private respondents filed their Opposition to the
Omnibus Motion to Dismiss Amended Complaint alleging the following:
1. Plaintiffs claims are not barred by prior judgment nor by statute
of limitations;
2. Plaintiffs have the legal capacity to sue and have valid cause of
action;
3. Docket fees have been paid by plaintiffs.
After the filing of petitioners Reply to the Opposition to the Motion to Dismiss
Amended Complaint, the incident was submitted for resolution pursuant to the
August 30, 2002 Order of the court a quo.
In resolving the Omnibus Motion to Dismiss the Amended Complaint, the
lower court ruled as follows:
There are justiciable questions raised in the pleadings of the herein parties
which are proper subject of a full blown trial. The Omnibus Motion to Dismiss
Amended Complaint is hereby denied.
189

SO ORDERED.
The Motion for Reconsideration filed by the petitioner was resolved by the trial
court in this wise:
An attempt to discuss on the merit of the case might be interpreted as
prejudgment. It is the better part of discretion, for the Court to deny the Motion
Reconsideration of the order denying the Motion to Dismiss.
WHEREFORE, the Motion for Reconsideration is hereby denied.
SO ORDERED.
Petitioner filed a Petition for Certiorari and Prohibition Under Rule 65
With Prayer for the Issuance of Temporary Restraining Order and/or
Writ of Preliminary Injunction, contending that the trial court committed
grave abuse of discretion in denying his motion to dismiss. The
appellate court dismissed the petition holding that the assailed orders
may only be reviewed in the ordinary course of law by an appeal from
the judgment after trial. Thus, the proper recourse was for petitioner to
have filed an answer and proceeded to trial since the issues raised in
his motion to dismiss require presentation of evidence aliunde. An
exception is when the trial court acts with grave abuse of discretion in
denying the motion to dismiss, in which case a petition
for certiorari under Rule 65 may be proper. This, the trial court did not
commit. Moreover, the Court of Appeals declared that although the
assailed orders were briefly phrased, the trial court complied with the
requirements set forth under Rule 16 of the 1997 Rules of Civil
Procedure (Rules) on the resolution of motions to dismiss.
With the denial of his Motion for Reconsideration, petitioner is now
before this Court seeking
a review of the appellate
courts Decision and Resolution claiming that the denial of his motion to
dismiss was a disguised deferment of the resolution of the said motion
and that the trial court failed to discuss and address each of the grounds
cited therein contrary to the express mandate of Section 3, Rule 16 of
the Rules. Petitioner further argues that the trial court committed grave
abuse of discretion in refusing to address his grounds to dismiss and
thereby postponing their proper ventilation until trial. According to him,
Section 2 of the Rules provides that all available evidence on the
question of fact involved in the motion to dismiss may be presented
including evidence aliunde. Thus, the grounds for dismissal raised in his

190

motion to dismiss could have been resolved in a hearing prior to a fullblown trial.
Even assuming that the presentation of evidence aliunde is not
allowed, petitioner contends that the trial court and the Court of Appeals
both erred in refusing to rule on the other grounds to dismiss which do
not require presentation of evidence aliunde such as failure of
the Amended Complaint to state a cause of action/the application of the
clean hands doctrine, and the trial courts lack of jurisdiction for failure of
the respondents to pay the proper filing and docket fees.
Petitioner also avers that there are other grounds to dismiss the
case such as res judicata, respondents lack of capacity to sue/waiver
and prescription, all of which are allegedly supported by evidence on
record. It is petitioners theory that the Amended Complaint is a collateral
attack on the duly probated and fully implemented Last Will and
Testament of Cayetano Ludo. According to petitioner, Cayetano Ludos
estate had been distributed by virtue of a Project of Partition approved
by the estate court in its Order dated January 18, 1984 in Sp. Proc.
No. 167-CEB. There are, between the estate case and Civil Case No.
27717, identity of parties, subject matter and cause of action. Hence,
any further issue regarding the recovery of respondents supposed
shares in Mr. Ludos estate through Civil Case No. 27717 is precluded
by the estate courts final and fully executed orders.
[10]

[11]

[12]

Petitioner moreover contends that respondents George, Alex,

Cayetano, Jr., Julieta and Bernadita Lu have lost standing to sue as a
result of the document entitled Assignment of Rights and Interests to
the Inheritance from Don Cayetano Ludo by which they supposedly
conveyed their interest to their inheritance to Ludo and Lu Ym
Corporation. As regards respondent Gertrudes Nabua, petitioner alleges
that the Amended Complaint fails to plead his actual contribution to the
properties acquired by Mr. Ludo as required by Article 148 of the Family
Code. Hence, she too lacks capacity to sue.
[13]

Finally, petitioner claims that the case is already barred by

prescription and laches. Petitioner asserts that nearly 20 years had
passed since (i) Mr. Ludo passed away on April 14, 1983; (ii) petitioner
and respondents George, Alex, Cayetano, Jr., Julieta and Bernadita Lu
executed the Project of Partition dated November 25, 1983; (iii)
respondents George, Alex, Cayetano, Jr., Julieta and Bernadita Lu
executed the Assignment of Rights and Interests to the Inheritance from
Don Cayetano Ludo dated February 22, 1984; and (iv) the estate court

191

issued its (a) July 6, 1983 Order admitting Mr. Ludos Will to probate;
(b) January 18, 1984 Order approving the Project of Partition and
terminating the estate case; and (c) May 18, 1984 Order discharging
petitioner and Silvano Ludo from all their duties, liabilities and
responsibilities as executors of Mr. Ludos estate.
[14]

[15]

[16]

In their Comment dated May 28, 2004, respondents contend that

the trial court did not defer the resolution of petitioners motion to
dismiss. On the contrary, the trial court denied the motion considering
that there are justiciable questions raised in the pleadings of the parties
which require a full-blown trial. According to respondents, the appellate
court properly considered this a sufficient disposition of the motion
because the Rules do not require courts at all times to cite the law and
the facts upon which a resolution is based, it being sufficient, in case of
resolutions that do not finally dispose of a case such as the denial of a
motion to dismiss, to cite the legal basis therefor.
[17]

Moreover, the estate proceedings allegedly do not bar the instant

case. Having hypothetically admitted that Mr. Ludos Will was simulated,
respondents contend that petitioner cannot invoke the finality of the
probate proceedings as a shield against the instant case because the
simulation and fraud attendant in the execution of the Will are personal
to petitioner. Besides, the properties included in Mr. Ludos Will are not
the same properties sought to be accounted in the instant case.
Allegedly, the properties subject of this case are those which petitioner
excluded from Mr. Ludos Will during the probate proceedings, whose
titles and evidence of ownership were earlier transferred to petitioner for
him to hold in trust for respondents.
Respondents contend that the issue as to respondent Gertrudes
Nabuas shares in Mr. Ludos properties as the latters common law wife,
raised as a specific allegation in the Amended Complaint, has been
joined by petitioners denial. Hence, a hearing on this matter is
necessary.
Moreover, respondents insist that the trial court correctly declared
that there are justiciable questions necessitating trial on the merits
because the Assignment of Rights and Interests to the Inheritance from
Don Cayetano Ludo dated February 22, 1984, by which respondents
George, Alex, Cayetano, Jr., Julieta and Bernadita Lu allegedly
transferred their interest in Mr. Ludos estate to Ludo and Lu Ym
Corporation, was allegedly not offered and admitted in evidence. Hence,
any conclusion drawn from this document would be unwarranted.

192

Finally, respondents contend that petitioner never raised the issues

of prescription and laches in his motion to dismiss.
In his Reply dated September 30, 2004, petitioner reiterates his
submissions.
[18]

At issue is whether the Court of Appeals erred in dismissing the

petition for certiorari and in holding that the trial court did not commit
grave abuse of discretion in denying petitioners motion to dismiss.
An order denying a motion to dismiss is an interlocutory order which
neither terminates nor finally disposes of a case, as it leaves something
to be done by the court before the case is finally decided on the merits.
As such, the general rule is that the denial of a motion to dismiss cannot
be questioned in a special civil action for certiorari which is a remedy
designed to correct errors of jurisdiction and not errors of judgment.
Neither can a denial of a motion to dismiss be the subject of an appeal
unless and until a final judgment or order is rendered. In order to justify
the grant of the extraordinary remedy of certiorari, the denial of the
motion to dismiss must have been tainted with grave abuse of discretion
amounting to lack or excess of jurisdiction.
[19]

At the core of the present petition is the question of whether the trial
courts denial of petitioners motion to dismiss on the ground that [T]here
are justiciable questions raised in the pleadings of the herein parties
which are proper subject of a full blown trial contravenes Sec. 3, Rule
16 of the Rules and constitutes grave abuse of discretion on the part of
the trial court.
[20]

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.
Under
trial court
deny, or
resolution

this provision, there are three (3) courses of action which the
may take in resolving a motion to dismiss, i.e., to grant, to
to allow amendment of the pleading. Deferment of the
of a motion to dismiss if the ground relied upon is not

193

indubitable is now disallowed in view of the provision requiring

presentation of all available arguments and evidence. Thus, there is no
longer any need to defer action until the trial as the evidence presented,
and such additional evidence as the trial court may require, would
already enable the trial court to rule upon the dubitability of the ground
alleged.
[21]

[22]

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.
[23]

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 courts 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 of the Rules, the trial courts order in this case leaves too much to
the imagination.
[24]

It should be noted that petitioner raised several grounds in his

motion to dismiss, i.e., bar by prior judgment or by the statute of
limitations, lack of capacity to sue, lack of cause of action, and nonpayment of docket fees.
Specifically, petitioner sought the dismissal of the complaint, arguing
as follows:
A. Plaintiffs claims are barred by a prior judgment or by the statute of
limitations (Rule 16, Sec. 1(f))
.

194

5. Plaintiffs now raise the issue that Cayetano Ludo, allegedly then in failing
health was unduly influenced by the defendant to execute a simulated will to
cheat the government of enormous amounts of estate and inheritance taxes.
6. Plaintiffs may no longer do so, for, subject to the right to appeal, the
allowance of a will is conclusive as to its due execution, Rule 75, Sec. 1. Due
execution settles the extrinsic validity of the will, i.e., whether the
testator, being of sound mind freely executed the will in accordance with the
formalities by law.
7. It was conclusively established by the allowance of the will, which plaintiffs
did not appeal, that the following circumstances were not present:
Rule 76, Sec. 9
(b) the testator was insane, or otherwise mentally incapable to make a will, at
the time of its execution;
(c) (the will) was executed under duress, or the influence of fear, or threats;
(d) (the will) was procured by undue and improper pressure and influence, on
the part of the beneficiary, or of some other person for his benefit;
8. The foregoing are the precise sort of questions and issues plaintiffs Nabua
and her children are illicitly seeking to try by independent action in a different
sala. Why are they doing this? Because the time for them to bring their claims
in the probate court has prescribed. The judicial decree of distribution vests title
in the distributees and any objections thereto should be raised in a seasonable
appeal, otherwise it will have binding effect like any other judgment in rem.
....
B. Plaintiffs have no legal capacity to sue and/or do not have a cause of action
(Rule 16, Secs. 1(d) and/or 1(g))
12. The following documents reveal that the plaintiff Nabua could never have
been the common-law wife that she claims to be, because Cayetano Ludo was
married to someone else:
(a) Petition for Naturalization by Cayetano Ludo filed in 1946, wherein he
declares in paragraph FIFTH that he is married to Uy Ching Gee (ANNEX J);

195

(b) Order of the Court of First Instance dated June 7, 1949, wherein it is stated
that Cayetano Ludo has established in open court that he is married to Uy
Ching Gee, a native of Amoy, China, who likewise lived with him in the
Philippines and that they have three legitimate children born 1937, 1939 and
1942 (ANNEX K);
(c) Identification Certificate No. 5697 issued by the Bureau of Immigration to
Liong Cheng on November 18, 1957, also known as Visitacion Uy Ching Gui,
recognizing her as a citizen of the Philippines being the lawful wife of
Cayetano Ludo (ANNEX L);
(d) Death Certificate of Visitacion Uy dated August 7, 1969, wherein it is
indicated that her civil status is married and the surviving spouse is Cayetano
Ludo (ANNEX M);
(e) Death Certificate of Cayetano Ludo dated July 16, 1986, wherein it is
indicated that his surviving spouse is Florame delos Reyes Ludo (ANNEX B).
13. Plaintiffs-children of Nabua do not have legal capacity or cause of action
because they are not the real parties in interest.
13. [sic] Their distributive share in the estate of Cayetano Ludo having been
assigned to Ludo and LuYm Corporation (ANNEX G), plaintiffs-children of
Nabua are not real parties in interest; Ludo & LuYm Corp. is . Every
action must be prosecuted or defended in the name of the real party in interest.
....
C. Fraud and Equity
14. The fraud (confused by plaintiffs to mean undue influence) of imposing a
stimulated will on Cayetano Ludo has been conclusively negated by the
allowance of the will, as provided in Rule 75, Sec. 1, above discussed.
15. Furthermore, an action for fraud prescribes 4 years from the execution of
the fraudulent or simulated will, which was long ago in this case.
16. But more important than any of the foregoing is that plaintiffs who
participated in the probate proceedings and signed the settlement are precluded
by dirty hands from claiming relief.

196

17. By their own admission (to which they are bound by Rule 130, Sec. 26),
plaintiffs were parties to a settlement pursuant to a fraudulent simulated will
which they portrayed as a massive scheme to defraud the government of estate
and inheritance taxes.
. . . . (Emphases in the original.)
[25]

Having raised substantial grounds for dismissal, the trial court

should have, at the very least, specified which of these grounds require
a full-blown trial. This would have enabled the defendant to determine
the errors that should be the subject of his motion for reconsideration or
petition for certiorari, and given the appellate court sufficient basis for
determining the propriety of the denial of the motion to dismiss.
In this regard, judges should be reminded to take pains in crafting
their orders, stating therein clearly and comprehensively the reasons for
their issuance, which are necessary for the full understanding of the
action taken.
[26]

Accordingly, considering that the order of the trial court is a patent

nullity for failure to comply with a mandatory provision of the Rules,
petitioner was correct in directly assailing the order on certiorari before
the Court of Appeals.
However, while it was error for the appellate court to rule that the
trial court did not commit grave abuse of discretion in denying
petitioners motion to dismiss, it does not necessarily follow that the
motion to dismiss should have been granted. The instant petition raises
significant factual questions as regards petitioners claim that
the Amended Complaint should have been dismissed which are
properly addressed to the trial court. Moreover, it cannot be gainsaid
that the trial court should be given the opportunity to correct itself by
evaluating the evidence, applying the law and making an appropriate
ruling. A remand of the case to the trial court for further proceedings is,
therefore, in order.
[27]

WHEREFORE, the petition is GRANTED in part. The Decision of the

Court of Appeals dated August 20, 2003 sustaining the trial courts denial
of petitioners motion to dismiss, as well as its Resolution dated
December 16, 2003 denying reconsideration, is REVERSED and SET
ASIDE. The case is REMANDED to the Regional Trial Court of Cebu
City for further proceedings to resolve anew with deliberate dispatch the
motion to dismiss in accordance with Section 3, Rule 16 of the 1997
Rules of Civil Procedure as elucidated in this Decision.
197

SO ORDERED.
6. Dismissal of Actions (Rule 17)
O.B. Jovenir Construction and Development Corp. vs.
Macamir Realty and CA, G.R. No. 135803, March 26, 2006

O.B. JOVENIR CONSTRUCTION G.R. No. 135803

AND DEVELOPMENT CORPORATION,
OSCAR B. JOVENIR and GREGORIO
LIONGSON, Present:
Petitioners,
QUISUMBING, J.* Chairperson,
- versus - CARPIO,
CARPIO MORALES, and
TINGA, JJ.
MACAMIR REALTY AND
DEVELOPMENT CORPORATION,
SPOUSES ROSAURO and GLORIA Promulgated:
MIRANDA and the HONORABLE
COURT OF APPEALS,
Respondents. March 28, 2006
x----------------------------------------------------------------------------x

DECISION
TINGA, J.:
In denying the present petition, the Court affirms the
right of a plaintiff to cause the dismissal of the complaint
at any time before service of the answer without need of
affirmative action on the part of the trial court. It must be
qualified though that the incidents for adjudication
occurred a few months before the effectivity of the 1997
198

Rules of Civil Procedure[1] which now requires that upon

the filing of such notice, the court issue an order
confirming the dismissal.[2] The precedental value of this
decision is thus qualified to instances occurring prior to
the 1997 Rules of Civil Procedure.
On 3 February 1997,[3] a complaint was filed before the
Regional Trial Court (RTC) of Makati City, with private
respondents Macamir Realty and Development Corp.
(Macamir Realty)
and
spouses Rosauro and
Gloria
Miranda
as
plaintiffs,
and
petitioners
O.B. Jovenir Construction
and
Development
Corp.
(JovenirConstruction),
Oscar
B. Jovenir,
and
Gregorio Liongson being among the defendants. The
complaint, docketed as Civil Case No. 97-256, sought the
annulment of certain agreements between private
respondents and petitioners, as well as damages. [4] It was
alleged that Jovenir Construction was contracted to
complete
the
construction
of
private respondents condominium
project.
Private
respondents subsequently sought the termination of their
agreements with petitioners after it was discovered
that Jovenir Construction had misrepresented itself as a
legitimate
contractor.
[5]
Respondents likewise prayed for the issuance of a writ
of
preliminary injunction. A hearing on the prayer appears
to have been conducted on 6 February 1997.[6]

199

It was also alleged in the complaint that Gloria Miranda

was
the
principal
stockholder
and
President
of Macamir Realty while her husband Rosauro was the
owner of the real properties on which the condominium
project was being constructed.[7]
Almost immediately, two of the impleaded defendants
filed
their
respective
motions
to
dismiss.
Defendant Salud Madeja filed her motion on 6 February
1997,
while
Cesar Mangrobang,
Sr.
and
Cesar Mangrobang, Jr. followed suit with their motion
dated 13 February 1997. Madeja pertinently alleged that
while the spouses Miranda had initiated the complaint on
behalf of Macamir Realty, the real party-in-interest, they
failed to attach any Board Resolution authorizing them to
file suit on behalf of the corporation. Oddly
enough, Madeja was a member of the Board of Directors
of Macamir Realty, and she averred as a fact that said
Board of Directors had not authorized the spouses
Miranda to initiate the complaint against Jovenir Realty.[8]
On 13 February 1997, or 10 days after the filing of the
complaint, private respondents filed a Motion to
Withdraw Complaint, alleging that during the initial
hearing on the prayer for preliminary injunction on 6
February 1997, counsel for plaintiffs discovered a
supposed
technical
defect
in
the complaint x x x that x x x may be a ground for the
dismissal of this case.[9] Thus, private respondents prayed
that the plaintiffs be allowed to withdraw the complaint
without prejudice.
200

Petitioners filed an opposition to the Motion to Withdraw

Complaint
on 18
February
1997,
wherein
they
adopted Madejas arguments as to the lack of authority
on the part of the spouses Miranda to sue on behalf
of Macamir Realty. However, just one day earlier, or
on 17 February 1997, private respondents filed another
complaint against the same defendants save for Madeja,
and seeking the same reliefs as the first complaint. This
time,
a
Board
Resolution
dated 10
February
1997 authorizing the spouses Miranda to file the
Complaint on behalf of Macamir Realty was attached
to the complaint. This second complaint was also filed
with the Makati RTC and docketed as Civil Case No. 97379. The Verification and Certification [of] Non-Forum
Shopping in the second complaint was accomplished
by Rosauro Miranda, who averred as follows:
3. That other than Civil Case No. 97-256 filed on
February 3, 1997 before the Regional Trial Court
of Makati City which was withdrawn on February 13,
1997, I further certify that we have not commenced
any other action or proceedings involving the same
issue in the Supreme Court, or Court of Appeals or any
other tribunal or agency; x x x[10]

On 24 February 1997, 11 days after the filing of the

Motion to Withdraw Complaint and seven days after the
filing of the second Complaint, the Makati RTC, Branch
149, acting in Civil Case No. 97-256, granted the Motion
to Withdraw Complaint. The RTC noted in its Order[11] that

201

an action may be dismissed by the plaintiffs even without

Order of the Court by filing a notice of dismissal at
anytime before the service of the answer under Rule 17,
Section 1 of the Rules of Court, and accordingly
considered the complaint withdrawn without prejudice. [12]
The battle then shifted to Civil Case No. 97-379, which
had been raffled to Branch 136 of the Makati RTC. On 4
March 1997, petitioners filed a Motion to Dismiss the
second complaint on the ground of forum-shopping. They
pointed out that at the time of the filing of the second
complaint on 17 February 1997, the first complaint was
still pending. The Makati RTC denied the Motion to
Dismiss in an Order[13] dated 23 May 1997, observing that
at the time the Motion to Withdraw Complaint was filed,
none of the defendants had filed any answer or any
responsive
pleading. Thus,
it
was
then
within
respondents right to cause the dismissal of the complaint
without having to await action of the court
on their motion.[14] This Order was affirmed by the Court
of Appeals
Special Sixth Division in its Decision[15] dated 23 June
1998 after petitioners had assailed the RTCs order via a
special civil action for certiorari filed with the appellate
court.[16] Hence, the present petition.
Petitioners now argue that under Section 1 of Rule 17 of
the Rules of Civil Procedure in effect at the time of these
antecedents, the plaintiff may obtain the dismissal of his
202

own complaint before a responsive pleading has been

filed through the filing of a notice of dismissal. However,
respondents in this case did not file a notice of dismissal,
but instead lodged a Motion to Withdraw Complaint, a
motion which requires affirmative action from the court
before the complaint may be deemed dismissed. Since
the Makati RTC had granted the motion only on 24
February 1997, the first complaint had not yet been
withdrawn as of 17 February 1997, when the second
complaint was filed. It is thus posited that the
Certification of Non-Forum Shopping attached to the
second complaint was false, in that it averred that the
first complaint was withdrawn on February 13,
1997 when in fact the motion to withdraw complaint was
granted only 11 days after. In sum, respondents had
violated the procedural rules against forum-shopping,
which at that time were incorporated in Administrative
Circular No. 04-94 of the Supreme Court.
We find no error on the part of the lower courts since
the denial of the motion to dismiss is wholly in accord
with the Rules of Civil Procedure.
Section 1, Rule 17 of the 1964 Rules of Civil Procedure
stated:
Dismissal by the plaintiff An action may be
dismissed by the plaintiff without order of court
by filing a notice of dismissal at any time before
service of the answer or of a motion for
summary judgment. Unless otherwise stated in
the
notice,
the
dismissal
is
without
prejudice, except that a notice operates as an
203

adjudication upon the merits when filed by a plaintiff

who has once dismissed in a competent court an
action based on or including the same claim. A class
suit shall not be dismissed or compromised without
the approval of the court.[17]

Indubitably, the provision ordained the dismissal of the

complaint by the plaintiff as a matter of right at any time
before service of the answer.[18] The plaintiff was
accorded the right to dismiss the complaint without the
necessity of alleging in the notice of dismissal any
ground nor of making any reservation.[19]
In Go v. Cruz,[20] the Court, through Chief Justice Narvasa,
has recognized that where the dismissal of an action
rests exclusively on the will of a plaintiff or claimant, to
prevent which the defending party and even the court
itself is powerless, requiring in fact no action whatever on
the part of the court except the acceptance and
recording of the causative document. [21] The facts in that
case are well worth considering. Therein, the notice of
dismissal was filed by the plaintiff on 12 November
1981. Respondent filed his answer three days earlier, or
on 9 November, but plaintiff was served a copy of the
answer
by
registered
mail
only
on
16
November.Notwithstanding the fact that the answer was
filed with the trial court three days prior to the filing of
the notice of dismissal, the Court still affirmed the
dismissal sought by the plaintiff. The Court declared that
the right of the plaintiff to cause the dismissal of the
complaint by mere notice is lost not by the filing of the

204

answer with the trial court, but upon the actual service to
the plaintiff of the answer.[22]
The Court further ruled that [plaintiffs] notice ipso
facto brought about the dismissal of the action then
pending in the Manila Court, without need of any order or
other action by the Presiding Judge. The dismissal was
effected without regard to whatever reasons or motives
[plaintiff] might have had for bringing it about, and was,
as the same Section 1, Rule 17 points out, without
prejudice, the contrary not being otherwise stated in the
notice and it being the first time the action was being so
dismissed.[23]
It is quite clear that under Section 1, Rule 17 of the old
Rules, the dismissal contemplated therein could be
accomplished by the plaintiff through mere notice of
dismissal, and not through motion subject to approval by
the Court. Dismissal is ipso facto upon notice, and
without prejudice unless otherwise stated in the notice. It
is due to these considerations that the petition should be
denied.
Evidently, respondents had the right to dismiss their
complaint by mere notice on 13 February 1997, since as
of even date, petitioners had not yet served their answer
on respondents. The Motion to Withdraw Complaint
makes clear respondents desire to withdraw the
complaint without prejudice. That respondents resorted
to a motion to effect what they could have instead by
mere notice may be indicative of a certain degree of
205

ignorance of procedural rules on the part of respondents

counsel.Yet such error, if it could be called as such,
should hardly be of fatal consequence. Petitioners posit
that the remedy of filing a notice of dismissal is not
exclusive, respondents having the option of securing the
courts approval to the dismissal.[24] On the contrary, the
trial court has no discretion or option to deny the
motion, since dismissal by the plaintiff under
Section 1, Rule 17 is guaranteed as a matter of
right to the plaintiffs. Even if the motion cites the
most ridiculous of grounds for dismissal, the trial
court has no choice but to consider the complaint
as dismissed, since the plaintiff may opt for such
dismissal as a matter of right, regardless of
ground.
We are in accord with the Court of Appeals when it
pronounced:
While [the Motion to Withdraw Complaint] is styled as
a motion and contains a prayer, these are innocuous
errors and superfluities that do not detract from its
being a notice of dismissal made under said Section 1
of Rule 17 and which ipso facto dismissed the case. It
is a hornbook rule that it is not the caption of a
pleading but the allegations thereat that determines
its nature.[[25]] The court order of dismissal is a
mere surplusage under
the
circumstances
and
emphasized by the court a quo itself when it granted
the motion [x x x]considering that an action may be
dismissed by the plaintiffs even without Order of the
Court[x x x][26]

206

Thus, the complaint could be properly considered as

having been dismissed or withdrawn as of 13 February
1997. Accordingly, when respondents filed their new
complaint relating to the same cause of action on 17
February 1997, the old complaint was no longer
pending. The
certification
against
forum-shopping
attached to the new complaint correctly asseverated that
the old complaint was withdrawn on February 13, 1997.
[27]

Petitioners are unable to propose any convincing legal

argument or any jurisprudence that would sway the
Court to their point of view. At the same time, our
present ruling must be distinguished from Ortigas &
Company Limited Partnership v. Velasco,[28] wherein it
was advanced that theoretically every final disposition of
an action does not attain finality until after fifteen (15)
days therefrom, x x x the plaintiff may move to withdraw
and set aside his notice of dismissal and revive his
action, before that period lapses. [29] That statement was
made in the context of ruling that a plaintiff may move
for the revival of the complaint dismissed on his instance
under Section 1 of Rule 17 only within 15 days upon
notice; otherwise the remedy of the plaintiff would be to
file a new complaint. This observation inOrtigas does not
detract from the fact that under Section 1, Rule 17 of the
previous
Rules,
the
complaint
is
deemed ipso
facto dismissed on the day of the filing of the notice. This
again is because dismissal at the instance of the plaintiff
under Section 1, Rule 17 is a matter of right, and under

207

the 1964 Rules of Civil Procedure, effective without need

of any affirmative action on the part of the trial court.
As noted at the onset, the 1997 Rules of Civil Procedure
now requires that upon the filing of such notice, the court
issue an order confirming the dismissal.[30] The new
requirement is intended to qualify the right of a party to
dismiss
the
action
before
the
adverse
party
files an answer or asks for summary judgment. [31] Still,
there is no cause to apply the 1997 Rules retroactively to
this case. A plaintiffs right to cause the dismissal of his
complaint under the old rules was unqualified. Procedural
rules may not be given retroactive effect if vested rights
would be disturbed,[32] or if their
application would not be feasible or would work injustice.
[33]
Since
respondents possessed an unqualified right to cause the
dismissal of their complaint without need of confirmation
by the trial court, as enunciated in the 1964 Rules, they
did not err in asserting that their first complaint was
withdrawn on the day of the filing of their motion to
withdraw, and the lower courts were correct in agreeing
with respondents on this point.
WHEREFORE,
petitioners.

the

Petition

is

DENIED. Costs

against

SO ORDERED.

208

Cruz. vs. CA, G.R. No. 164797, February 13, 2006

G.R. No. 164797

February 13, 2006

JOSEFINA M. CRUZ and ERNESTINA M. CONCEPCION, Petitioners,

vs.
THE HON. COURT OF APPEALS, SECOND DIVISION, MARIANO "BOY" BUNAG and
ROLANDO BUNAG,Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Certiorari under Rule 65 of the Rules of Court which seeks to
reverse and set aside the decision1 of public respondent Court of Appeals dated 19 March
2004 which dismissed the petition for certiorari asking for the nullity of the 13 May 2003
Order of the Regional Trial Court of Gapan, Nueva Ecija, Branch 35, in Civil Case No. 258302, and its Resolution2 dated 29 June 2004 denying petitioners' motion for reconsideration.
The antecedents are substantially stated by the Court of Appeals as follows:
There are four (4) cases involved in this controversy. The first case that was filed between
the parties is Civil Case No. 4365 for Unlawful Detainer litigated before the Municipal Trial
Court of Gapan, Nueva Ecija entitled "Josefina M. Cruz and Ernestina M. Concepcion,
plaintiffs, vs. Mariano `Boy' Bunag, Rolando Bunag, Remedios Bunag, et al., Defendants."
This case was decided on 6 November 1998 by the Municipal Trial Court in favor of herein
petitioner Josefina M. Cruz and Ernestina M. Concepcion.
The second case is Civil Case No. 1600 for Quieting of Title, filed before the Regional Trial
Court of Gapan, Nueva Ecija, Branch 36 with "Carlos L. Bunag, Elias Bunag Natividad,
Mariano Bunag, Salud Bunag Clanaoc and Juliana Bunag Arevalo, as Plaintiffs and Josefina
M. Cruz and Ernestina M. Concepcion as Heirs of Sps. Carlos Maniquis and Marina Bunag,
as Defendants." This case was dismissed for failure to prosecute as evidenced by the
Regional Trial Court Order dated 10 March 2000.
The third case is Civil Case No. 2573-02 for Injunction, with "Mariano `Boy' Bunag and
Rolando Bunag as Petitioners against Carlos Bunag, Elias Bunag Natividad, Mariano Bunag,
Salud Bunag Clanaoc and Juliana Bunag Arevalo as Defendants." This case, which was filed
before the Regional Trial Court of Gapan City, Branch 35, was dismissed on ground of res
judicata. The 6 November 2002 Order, in effect, ruled that there is a substantial identity of
parties in this case and in Civil Case No. 1600, a Petition for Quieting of Title.
The fourth case is the instant controversy for Annulment of Title With Damages. Docketed as
Civil Case No. 2583-02, it was lodged by herein private respondents Mariano "Bo[y]" Bunag
and Rolando Bunag against herein petitioners Josefina M. Cruz and Ernestina M.
Concepcion before the sala of Branch 35, Regional Trial Court of Gapan City.
It appears that herein petitioners interposed a Motion for Outright Dismissal of Civil Case No.
2583 which was granted by the Court a quo as evidenced by an Order dated 18 February
2003, ratiocinating:
xxx

xxx

xxx

209

After a careful study of the arguments of both parties, the Court has found that herein case
(2583) involve the same parties, subject matter and issue as that in Civil Case No. 1600
which has become final and executory and Civil Case No. 2573-02 which was already
dismissed by this Court on the ground of res judicata. In all three cases, Mariano Bunag was
included as party-plaintiff and Ernestina Concepcion as party-defendant. The subject matter
involves a parcel of land located in San Nicolas, Gapan City with an area of 1,160 square
meters, more or less, and the issue is who between the two parties has the lawful title over
the same. Clearly, not only res judicata but also accion pendente lite is present in herein
case which the plaintiffs and their counsel should have revealed in the Certificate/Verification
of their complaint. The allegation that it is only now that they have learned of the existence of
Civil Case No. 1600 is without merit considering that in the Motion for the Outright Dismissal
of Civil Case No. 2573, dated September 19, 2002, its existence was already disclosed and
even became the ground for the dismissal of Civil Case No. 2573 on the ground of res
judicata.
Moreover, the Certification against forum shopping does not only refer to final and executory
actions but also to pending controversies. Considering that plaintiffs have been represented
by the same counsel in Civil Case No. 2573 and herein case (Civil Case No. 2583-02), it is
very clear that plaintiffs counsel is appraised (sic) of the existence of Civil Case No. 1600
and Civil Case No. 2573.
WHEREFORE, premises considered, the Motion for Outright Dismissal is granted by reason
of res judicata and accion pendente lite and the plaintiffs and their counsel are declared
guilty of indirect Contempt of Court by reason of non-disclosure of Civil Case No. 1600 and
Civil Case No. 2573 as required by Section 5, Rule 7 of the Revised Rules of Court and
ordered them to pay a fine of P1,000.00 each.
SO ORDERED. (Rollo, p. 36)
xxx

xxx

xxx

However, when herein private respondents interposed their Motion for Reconsideration, the
court a quo reversed itself and reinstated the present case, the fallo of the herein assailed
Order reads:
xxx

xxx

xxx

In the light of the foregoing, the Order dated February 18, 2003 of this Court, granting
defendants' Motion for the Outright Dismissal of this case and citing plaintiffs and counsel for
contempt of court is hereby reconsidered and set aside. Accordingly, the instant case is
reinstated and the defendants are directed to file their answer/responsive pleading within
fifteen (15) days from receipt of this order.
SO ORDERED. (Rollo, pp. 11-13)3
Via petition for review, petitioners went to the Court of Appeals. The latter dismissed the
petition for lack of merit. It ruled that one of the elements of res judicata, i.e., that there must
be, between the first and the second actions, identity of parties, of subject matter and of
cause of action, is lacking. It explained:

210

First. The issue in the Injunction case is the propriety of the demolition order; while in the
present action (Petition for Annulment of Title With Damages), the pivot of inquiry is the
ownership of the controversial estate.
Second. Private respondent Mariano Bunag denied that he authorized Carlos Bunag to sign
the Verified Complaint in his behalf. Because of this, Mariano Bunag cannot be considered
as a party litigant in the Injunction case. Concomitantly, there is no identity of parties
between the present case and in Civil Case No. 2573-02 (Injunction). As correctly ruled by
the trial court, thus:
xxx

xxx

xxx

While it is true that this Court has earlier made a declaration in Civil Case No. 2573 that
Carlos Bunag was authorized by his co-plaintiffs to file Civil Case No. 1600 including herein
plaintiff Mariano Bunag, against herein defendants, such declaration was based on the
verified complain[t] signed by Carlos Bunag. In the absence of any evidence to the contrary,
the Court has to assume that indeed Carlos Bunag was authorized by his co-plaintiff Mariano
Bunag to file Civil Case No. 1600. However, with the submission of the affidavit of Mariano
Bunag on April 14, 2003, wherein he claimed that Civil Case No. 1600 for quieting of title
was filed without his knowledge by Carlos Bunag for and in behalf of the other plaintiffs
including himself, the verified complaint of Carlos Bunag is now disputed.
The categorical denial of Mariano Bunag that he was not aware that Carlos included him as
one of the plaintiffs in Civil Case No. 1600 for quieting of title has disputed the verified
complaint of Carlos Bunag. What is more, Rolando Bunag, one of the herein plaintiffs was
never made a party in the said Civil Case No. 1600 for quieting of title. Since Mariano Bunag
did not authorize nor give his consent to Carlos Bunag to include him as one of the plaintiffs
in Civil Case No. 1600 and that herein plaintiffs Rolando Bunag is not a party to the said
case, the dismissal of Civil Case No. 1600 will not bind them. Hence, the dismissal of Civil
Case No. 1600 will not bar the filing of the instant complaint as one of the requisites of res
judicata is absent. There is no identity of parties between Civil Case No. 1600 and the instant
case for the simple reason that herein plaintiffs were not parties in Civil Case No. 1600 as
discussed above. Consequently, plaintiffs and their counsel can not be said to have violated
the rule against forum shopping. Plaintiffs and their counsel did not file Civil Case No. 1600
and therefore they are not obligated to inform this Court that they have filed a similar action
involving the same issue with other court.
x x x"
Third. As the court of justice abhors the disposition of the case based on technicalities, this
Court further concurs with the trial court's disquisition, to quote:
xxx

xxx

xxx

Moreover, substantial justice demands that technicalities should not be allowed to prevail
over the substantive rights of a party-litigant. If the subject property is really owned by the
plaintiffs, then it would be the height of injustice if they are not allowed to prove their cause of
action because of mere technicality. It would amount to deprivation of their property without
due process.4
Petitioners filed a motion for reconsideration5 which was denied in a resolution dated 29 June
2004.6

211

Dissatisfied, petitioners are now before us charging that the Court of Appeals committed
grave abuse of discretion amounting to lack or excess of jurisdiction in rendering the
assailed decision and resolution.7
Petitioners contend that all the elements of res judicata are present in the instant case. They
argue that the shuffling of parties should not prevent the application of res judicata
considering that three prior cases (Civil Case No. 4365 for Unlawful Detainer, Civil Case No.
1600 for Quieting of Title and Civil Case No. 2573 for Injunction) against substantially the
same parties over the same subject matter and cause of action have all been decided in
their favor. They point out that private respondent Mariano "Boy" Bunag was one of the
parties in the Ejectment and Quieting of Title cases (and Injunction), and that his allegation in
his affidavit that he neither authorized Carlos Bunag to include him in the Quieting of Title
case nor was he (Mariano) informed thereof, leaves too much to be desired and that same
was merely intended for delay. As regards the non-inclusion of private respondent Rolando
Bunag in the case for Quieting of Title but who was a party in the Ejectment case (as well as
in the Injunction case), they claim that same was in preparation for this stage of the
proceedings. They added that insofar as identity of causes of action is concerned, it cannot
be denied that the ownership and its concomitant right of possession are the issues in the
cases for Quieting of Title, Injunction and Annulment of Title.
In their comment,8 private respondents Rolando Bunag and Monina Luzong Vda. de
Bunag9 maintain that the public respondent did not err when it held that there was no res
judicata in the instant case and that the disposition of the case should not be based on
technicalities.
The question to be resolved is: Does res judicata apply in the case at bar?
Under the rule of res judicata, also known as "bar by prior judgment," a final judgment or
order on the merits, rendered by a Court having jurisdiction of the subject matter and of the
parties, is conclusive in a subsequent case between the same parties and their successor-ininterest by title subsequent to the commencement of the action or special proceeding,
litigating for the same thing and under the same title and in the same capacity. The requisites
essential for the application of the principle are: (1) there must be a final judgment or order;
(2) said judgment or order must be on the merits; (3) the Court rendering the same must
have jurisdiction on the subject matter and the parties; and (4) there must be between the
two cases identity of parties, identity of subject matter, and identity of causes of action. 10
Petitioners claim res judicata applies in this case because all the elements thereof are
present. On the other hand, private respondents argue the contrary alleging that the second
and fourth elements are lacking.
There being no dispute as to the presence of the first and third elements, we now determine
if the second and fourth elements are attendant in the case.
On the second element, private respondents argue that the dismissal of Civil Case No. 1600
(for Quieting of Title) was not a dismissal on the merits. The dismissal of this case, they
claim, will not bar the filing of the instant case (Civil Case No. 2583-02 for Annulment of Title)
because there was neither litigious consideration of the evidence nor any stipulations
submitted by the parties at the trial. In fact, there was no pre-trial conference and that after
four years of court inactivity, the case was dismissed for failure to prosecute. 11

212

Their argument does not hold water. Section 3 of Rule 17 of the 1997 Rules of Civil
Procedure provides:
Section 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 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. 12
The rule enumerates the instances where the complaint may be dismissed due to plaintiff's
fault: (1) if he fails to appear on the date for the presentation of his evidence in chief; (2) if he
fails to prosecute his action for an unreasonable length of time; or (3) if he fails to comply
with the rules or any order of the court. Once a case is dismissed for failure to prosecute, this
has the effect of an adjudication on the merits and is understood to be with prejudice to the
filing of another action unless otherwise provided in the order of dismissal. In other words,
unless there be a qualification in the order of dismissal that it is without prejudice, the
dismissal should be regarded as an adjudication on the merits and is with prejudice. 13 The
order dismissing Civil Case No. 1600 reads:
For failure of the plaintiffs as well as counsel to appear on several settings despite due
notices, precisely for the reception of plaintiffs' evidence, upon motion of the defendant
through Atty. Mark Arcilla, this case is dismissed for failure to prosecute.14
It is clear from the afore-mentioned order that said case was dismissed, upon petitioners'
motion, for failure of private respondents and their counsel to attend several scheduled
hearings for the presentation of their evidence. Since the order did not contain a qualification
whether same is with or without prejudice, following Section 3, it is deemed to be with
prejudice and shall have the effect of an adjudication on the merits. A ruling based on a
motion to dismiss, without any trial on the merits or formal presentation of evidence, can still
be a judgment on the merits.15
We now go to the fourth element - identity of parties, subject matter and cause of action.
Petitioners, citing jurisprudence, argue that res judicata is not defeated by a minor difference
of parties, as it does not require absolute but only substantial identity of parties 16 in light of
the fact that three prior cases before the instant case have been decided in their favor
against substantially the same parties over the same subject matter and cause of action.
lavvphil.e+

Public respondent ruled there was no identity of parties for two reasons: (1) Private
respondent Mariano Bunag was not a party litigant in the Quieting of Title17 case because he
denied in an affidavit that he authorized Carlos Bunag to sign the Verified Complaint and to
make him a party thereof; (2) Private respondent Rolando Bunag was not made a party in
the Quieting of Title case.
Private respondent Mariano "Boy" Bunag's claim that the Quieting of Title case was filed
without his knowledge does not inspire belief. In the decision of the trial court in Civil Case
No. 4365 (for Unlawful Detainer), it is very clear that the defendants in said case that
included both private respondents, have knowledge of the pendency of the Quieting of Title
case. A portion of the decision18 reads:

213

Defendants claim of ownership of the property involved in this case which is now pending
with the Regional Trial Court of Gapan, Nueva Ecija (paragraph 3, Pre-Trial brief of
defendants) where the issue of ownership is the subject of the proceedings x x x.
It was the defendants, through their trial brief, that informed the court hearing the ejectment
case that a case (Civil Case No. 1600 for Quieting of Title) is pending where the issue of
ownership is the subject of the proceedings. Thus, as early as the pendency of the Ejectment
case, private respondents had known of the case for Quieting of Title. If he really did not
authorize Carlos Bunag to include him as one of the plaintiffs in the Quieting of Title case, he
could have easily questioned his inclusion therein at an earlier time. This, he did not do. He
executed his affidavit only on 14 April 2003 or more that three years after the case for
Quieting of Title has been dismissed, and after the Injunction case which he and private
respondent Rolando Bunag filed, was dismissed. It is evident that his affidavit is a mere
afterthought executed after his Motion for Reconsideration in the injunction case was denied
because the court gave no weight on his counsel's allegation that he (Mariano Bunag) was
unaware of the complaint signed and filed by Carlos Bunag. It is too late in the day for him to
claim lack of knowledge. It is very clear that the execution of the affidavit is to make it appear
that there is no identity of parties in the instant case and in the case for Quieting of Title.
Private respondents add that since Rolando Bunag was not a party in the Quieting of Title
case, the dismissal of said case will not bind him and thus not bar the filing of the instant
case.
We do not agree. The principle of res judicata may not be evaded by the mere expedient of
including an additional party to the first and second action. Only substantial identity is
necessary to warrant the application ofres judicata. The addition or elimination of some
parties does not alter the situation. There is substantial identity of parties when there is a
community of interest between a party in the first case and a party in the second case albeit
the latter was not impleaded in the first case.19
In the case at bar, it is apparent that from the face of the complaint for Quieting of Title,
private respondent Rolando Bunag was not a party therein as his name does not appear in
the title. This, notwithstanding, his claim and that of the plaintiffs therein, which included
private respondent Mariano Bunag, are the same - to be declared the true owners of the
parcel of land covered by Original Certificate of Title (OCT) No. 22262 and Transfer
Certificate of Title (TCT) No. 67161 of the Registry of Deeds of Nueva Ecija. Private
respondent Rolando Bunag and the plaintiffs are all heirs of the alleged owners of the parcel
of land covered by OCT No. 22262. Private respondent Rolando Bunag, though not a party
therein, shared an identity of interest from which flowed an identity of relief sought, namely,
to declare them the true owners of the parcel of land covered by OCT No. 22262 and TCT
No. 67161. Such identity of interest is sufficient to make them privy-in-law, thereby satisfying
the requisite of substantial identity of parties.
As regards the identity of subject matter, we find that there is. In both Civil Case No. 1600
(for Quieting of Title) and Civil Case No. 2583 (for Annulment of Title), what is involved is one
and the same parcel of land covered by TCT No. 67161.
We likewise rule that there is identity of causes of action. Hornbook is the rule that identity of
causes of action does not mean absolute identity. Otherwise, a party could easily escape the
operation of res judicata by changing the form of the action or the relief sought. The test to
determine whether the causes of action are identical is to ascertain whether the same
evidence will sustain both actions, or whether there is an identity in the facts essential to the

214

maintenance of the two actions. If the same facts or evidence would sustain both, the two
actions are considered the same, and a judgment in the first case is a bar to the subsequent
action.20 In Stilianopulos v. The City of Legaspi,21 this Court had this to say:
The underlying objectives or reliefs sought in both the quieting-of-title and the annulment-oftitle cases are essentially the same -- adjudication of the ownership of the disputed lot and
nullification of one of the two certificates of title. Thus, it becomes readily apparent that the
same evidence or set of facts as those considered in the quieting-of-title case would also be
used in this Petition.
The difference in form and nature of the two actions is immaterial and is not a reason to
exempt petitioner from the effects of res judicata. The philosophy behind this rule prohibits
the parties from litigating the same issue more than once. When a right or fact has been
judicially tried and determined by a court of competent jurisdiction or an opportunity for such
trial has been given, the judgment of the court, as long as it remains unreversed, should be
conclusive upon the parties and those in privity with them. Verily, there should be an end to
litigation by the same parties and their privies over a subject, once it is fully and fairly
adjudicated.
Civil Case No. 1600 was for Quieting of Title, while Civil Case No. 2583 is for Annulment of
Title with Damages. The two cases are different only in the form of action but an examination
of the allegations in the second case would reveal that the issue raised - ownership of the
land -- and the relief sought - be declared as owner and TCTs be issued in their names -- are
substantially the same. The evidence required to substantiate their claims are likewise the
same. The proceedings in the instant case, if permitted to continue, would entail the
presentation of evidence which should have been adduced in the case for Quieting of Title.
The case for Annulment of Title is simply a second cycle of review involving a subject matter
that has already been decided with finality in the Quieting of Title case.
Finally, private respondents ask that the instant case be not decided based on technicalities,
for substantial justice demands that technicalities should not be allowed to prevail over the
substantive right of a party litigant.
lavvphil.e+

We find no reason not to adhere to the doctrine of res judicata. A case for Quieting of Title
had been filed for the purpose of determining the ownership of the subject land, but same
was dismissed because the plaintiffs therein failed to attend the scheduled hearings for the
presentation of their evidence. As above discussed, the dismissal was an adjudication on the
merits. They had all the opportunity to present all the evidence for their cause but they failed
to do so. It is undeniable that there was no denial of due process in this case.
lavvphil.e+

The doctrine of res judicata is a rule which pervades every well-regulated system of
jurisprudence and is founded upon two grounds embodied in various maxims of the common
law, namely: (1) public policy and necessity, which makes it to the interest of the State that
there should be an end to litigation - republicae ut sit litium, and (2) the hardship on the
individual that he should be vexed twice for the same cause - nemo debet bis vexari et
eadem causa. A contrary doctrine would subject the public peace and quiet to the will and
neglect of individuals and prefer the gratification of the litigious disposition on the part of
suitors to the preservation of the public tranquility and happiness. 22
lavvphil.e+

WHEREFORE, premises considered, the petition is GRANTED. The decision of the Court of
Appeals dated 19 March 2004 and its resolution dated 29 June 2004 are REVERSED and
SET ASIDE. Civil Case No. 2583-02 for Annulment of Title with Damages, pending before

215

Branch 35 of the Regional Trial Court of Gapan City, Nueva Ecija, is herby ordered
DISMISSED. With costs.
SO ORDERED.

Ko vs. PNB, 479 SCRA 298, January 28, 2006

LULLETE S. KO and ARLETTE G.R. Nos. 169131-32

SIMPLICIANO BASILIO,
Petitioners, Present:

Panganiban, C.J. (Chairman),

- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
PHILIPPINE NATIONAL BANK,
Laoag Branch, and the REGISTER Promulgated:
OF DEEDS OF ILOCOS NORTE,
Respondents. January 20, 2006
x
--------------------------------------------------------------------------------------- x

DECISION
YNARES-SANTIAGO, J.:

This is a petition for review on certiorari assailing the April

27, 2005 Order[1] of the Regional Trial Court of Laoag City,
216

Branch 14, in Civil Case No. 12523-14 dismissing petitioners

complaint, and the July 28, 2005 Resolution [2] 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.

217

WHEREFORE, in view of the above premises, the

above-entitled case is hereby ordered dismissed.
SO ORDERED.[3]

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]

218

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 courts 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
219

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 Appeals[6] 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
counsels apparent lack of interest to prosecute the case.

220

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 dutybound 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 him [7] 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.

221

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 courts 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.
SO ORDERED.
Ramnani vs. CA, 221 SCRA 582 (1993)
G.R. No. 101789. April 28, 1993.
BHAGWAN RAMNANI, petitioner,
vs.
COURT OF APPEALS, HON. BUENAVENTURA J. GUERRERO, as Regional Trial Court
Judge of Makati, Metro Manila, Branch 133, SPOUSES CENON G. DIZON and JULIETTE B.
DIZON, respondents.
Bernardo D. Calderon for petitioner.

222

Zosimo Cuasay for private respondent.

SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; PRE-TRIAL; FAILURE TO APPEAR AT PRETRIAL CONFERENCE; REMEDIES AVAILABLE. The basic rule is found in Section 2,
Rule 20, viz: "A party who fails to appear at a pre-trial conference may be non-suited or
considered as in default." As held in Lina v. Court of Appeals, the remedies available to a
defendant in the regional trial court who has been declared in default are: 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 a meritorious defense; (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.
2. ID.; ID.; DEFAULTS; RELIEF FROM ORDER OF DEFAULT; REQUIREMENTS; NOT
SATISFIED IN CASE AT BAR. A satisfactory showing by the movant of the existence of
fraud, accident, mistake or excusable neglect is an indispensable requirement for the setting
aside of a judgment of default or the order of default. After going over the pleadings of the
parties and the decision of the respondent court, we find that the motion to lift the order of
default was properly denied for non-compliance with this requirement. The defendants were
less than conscientious in defending themselves and protecting their rights before the trial
court. They did not pay proper attention and respect to its directive. The petitioner has not
shown that his and his wife's failure to attend the pre-trial hearing as required was due to
excusable neglect, much less to fraud, accident or mistake. A meritorious defense is only one
of the two conditions. Even if it be assumed for the sake of argument that the private
respondents did owe Josephine Ramnani P900,000, as alleged in the counterclaim, that
circumstance alone is not sufficient to justify the lifting of the order of default and the default
judgment. The obvious reason is that a meritorious defense must concur with the satisfactory
reason for the non-appearance of the defaulted party. There is no such reason in this case.
3. ID.; ID.; ORDINARY APPEAL; APPROPRIATE REMEDY IN CASE AT BAR; CASE OF
PISC VS. HONTANOSAS, NOT APPLICABLE. The appropriate remedy is an ordinary
appeal under Section 2 of Rule 41 of the Rules of Court providing in part as follows: 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. In questioning the
dismissal of its petition by the respondent court, the petitioner invokes the case of Pioneer
Insurance and Surety Corporation v. Hontanosas, (78 SCRA 447) where the Court sustained
the challenge to an order of default in a petition for certiorari rather than in an ordinary
appeal, which was held as not an adequate remedy. That case is not applicable to the
present petition. Certiorari was allowed in that case because the petitioner was illegally
declared in default. The Court held that, first, the petitioner could not be compelled to attend
an unnecessary second pre-trial after it had indicated at the earlier pre-trial that there was no
possibility of an amicable settlement; second, the pre-trial was premature because the last
pleading had not yet been filed at the time; and third, there was insufficient notice of the pre-

223

trial to the petitioner. In the case at bar, no such irregularities in the pre-trial have been
alleged by the petitioner.
4. ID.; SPECIAL CIVIL ACTION; CERTIORARI; WHEN APPROPRIATE; RATIONALE. As
we held in Pure Foods Corporation v. NLRC (171 SCRA 415): It must emphatically be
reiterated, since so often is it overlooked, that the special civil action for certiorari is a remedy
designed for the correction of errors of jurisdiction and not errors of judgment. The reason for
the rule is simple. When a court exercises its jurisdiction, an error committed while so
engaged does not deprive it of the jurisdiction being exercised when the error is committed.
If it did, every error committed by a court would deprive it of its jurisdiction and every
erroneous judgment would be a void judgment. This cannot be allowed. The administration
of justice would not survive such a rule. Consequently, an error of judgment that the court
may commit in the exercise of its jurisdiction is not correctible through the original civil action
of certiorari.
5. ID.; ID.; ID.; NOT PROPER ABSENT SHOWING OF GRAVE ABUSE OF DISCRETION.
Even on the supposition that certiorari was an appropriate remedy, the petition would still
fail because it has not been clearly shown that the trial court committed grave abuse of
discretion in refusing to set aside the default order and the default judgment. We have held in
many cases, including Pahilanga v. Luna, (164 SCRA 725) that: It is within the sound
discretion of the court to set aside an order of default and to permit a defendant to file his
answer and to be heard on the merits even after the reglementary period for the filing of the
answer has expired, but it is not error, or an abuse of discretion, on the part of the court to
refuse to set aside its order of default and to refuse to accept the answer where it finds no
justifiable reason for the delay in the filing of the answer. In motions for reconsideration of an
order of default, the moving party has the burden of showing such diligence as would justify
his being excused from not filing the answer within the reglementary period as provided by
the Rules of Court, otherwise, these guidelines for an orderly and expeditious procedure
would be rendered meaningless. Unless it is shown clearly that a party has justifiable reason
for the delay the court will not ordinarily exercise its discretion in his favor. The above
doctrine is applicable to the inexcusable neglect of the herein petitioner and his wife to
appear at the pre-trial hearing duly scheduled and of which they were properly notified.
DECISION
CRUZ, J p:
On March 13, 1990, the spouses Juliette Dizon and Cenen Dizon filed a complaint in the
Regional Trial Court of Makati against the spouses Josephine Anne Ramnani and Bhagwan
Ramnani for the collection of a sum of money representing the alleged unremitted value of
jewelry received by Josephine from Juliette on consignment basis.
Josephine Ramnani submitted an answer with counterclaim 2 in which she alleged inter alia:
(a) That although she did receive pieces of jewelry worth P934,347.00 from Dizon, the latter
had likewise received from her jewelries worth P1,671,842,00, including cash and unpaid
checks in the amount of P159,742.50;
(b) That she paid Dizon P50,000; and
(c) That Dizon still owes her P787,495.00;

224

The trial court set the case for pre-trial on August 14, 1990, 3 but the Ramnanis did not
appear. Consequently, they were declared in default. 4 On September 12, 1990, they filed a
motion to lift the order of default, but this was denied on November 20, 1990.
On October 26, 1990, conformably to the default order, evidence of the Dizon spouses was
received ex parte. On January 28, 1991, Judge Buenaventura J. Guerrero rendered
judgment against the Ramnanis, holding them liable to the plaintiffs in the amounts of
P884,347.00, representing the principal obligation plus legal interest thereon from March 13,
1990, until fully paid; P100,000.00 as moral damages; and P20,000.00 as exemplary
damages. They were also required to pay P50,000.00 as attorney's fees, and the costs of
the suit.
The Ramnanis filed a motion for reconsideration on the ground that a "personal obligation
contracted by the wife without the consent of the husband (was) being made enforceable
against the spouses' conjugal partnership despite absence of any allegation and proof that
the same redounded to the benefit of the family as required by Article 121 of the Family
Code." 7 The motion was denied on April 11, 1991.
On April 29, 1991, Bhagwan Ramnani filed a petition for certiorari before the respondent
Court of Appeals imputing error to the trial court:
(1) in denying the motion to lift order declaring petitioner as in default despite a clear
showing of a meritorious defense;
(2) in not considering petitioner's reason for failure to attend pre-trial as excusable neglect.
In a decision dated May 10, 1991, the Court of Appeals dismissed the petition, holding that
certiorari was not the proper remedy. 9
The respondent court said:
Petitioners alleged that the respondent court erred and committed grave abuse of discretion
and/or acted in excess of jurisdiction in assigning its Branch Clerk of Court as the hearing
commissioner for the purpose of the ex parte reception of plaintiffs' evidence (par. 19,
Petition); that the questioned Decision failed to specify whether defendants are solidarily or
only jointly liable (par. 20, Petition); and that petitioner had a valid and meritorious defense
(par. 21, Petition). These are matters that could very well be ventilated in an ordinary appeal.
It should be stressed that the writ of certiorari issues for the correction of errors of jurisdiction
only or grave abuse of discretion amounting to lack or excess of jurisdiction. It cannot be
legally used for any other purpose (Silverio vs. Court of Appeals, 141 SCRA 527). Mere error
of judgment cannot be a proper subject of the special civil action for certiorari (Zapata vs.
NLRC, 175 SCRA 56). Further, it is a settled rule that certiorari cannot be made a substitute
for an perform the function of an appeal (People vs. Cuaresma, 172 SCRA 415).
The petitioner has come to this Court to challenge that decision. He avers that the Court of
Appeals erred in upholding the refusal of the trial court to set aside the order of default and
the default judgment thereafter issued.
The basic rule is found in Section 2, Rule 20, viz: "A party who fails to appear at a pre-trial
conference may be non-suited or considered as in default."

225

As held in Lina v. Court of Appeals, 10 the remedies available to a defendant in the regional
trial court who has been declared in default are:
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 a meritorious
defense; (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 first remedy was adopted by the petitioner but his motion to lift the order of default was
denied. According to the trial court:
Defendants' non-appearance is inexcusable. It is unbelievable their former lawyer did not
explain to them the mandatory character of their appearance. Their invocation of the
deteriorating health of defendant Josephine necessitating her trip abroad for appropriate
medical treatment, is unavailing. There is no medical certificate to attest such illness.
Besides, at the time of the hearing of the motion on October 19, 1990, counsel for the
defendants admitted that Josephine had not yet arrived from the States, despite their
averment in their motion she would "only be back late September or early October of this
year." This only indicates her light regard of her duty to appear in court. Moreover, the other
defendant Bhagwan Ramnani did not submit any other plausible explanation for his absence
in the pre-trial.
A satisfactory showing by the movant of the existence of fraud, accident, mistake or
excusable neglect is an indispensable requirement for the setting aside of a judgment of
default or the order of default. After going over the pleadings of the parties and the decision
of the respondent court, we find that the motion to lift the order of default was properly
denied for non-compliance with this requirement.
The defendants were less than conscientious in defending themselves and protecting their
rights before the trial court. They did not pay proper attention and respect to its directive. The
petitioner has not shown that his and his wife's failure to attend the pre-trial hearing as
required was due to excusable neglect, much less to fraud, accident or mistake.
The petitioner insists, however, that they had a meritorious defense which the trial court
should not have disregarded. A meritorious defense is only one of the two conditions. Even if
it be assumed for the sake of argument that the private respondents did owe Josephine
Ramnani P900,000, as alleged in the counterclaim, that circumstance alone is not sufficient
to justify the lifting of the order of default and the default judgment. The obvious reason is
that a meritorious defense must concur with the satisfactory reason for the non-appearance
of the defaulted party. There is no such reason in this case.

226

The appropriate remedy is an ordinary appeal under Section 2 of Rule 41 of the Rules of
Court providing in part as follows:
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.
In questioning the dismissal of its petition by the respondent court, the petitioner invokes the
case of Pioneer Insurance and Surety Corporation v. Hontanosas, 11 where the Court
sustained the challenge to an order of default in a petition for certiorari rather than in an
ordinary appeal, which was held as not an adequate remedy.
That case is not applicable to the present petition. Certiorari was allowed in that case
because the petitioner was illegally declared in default. The Court held that, first, the
petitioner could not be compelled to attend an unnecessary second pre-trial after it had
indicated at the earlier pre-trial that there was no possibility of an amicable settlement;
second, the pre-trial was premature because the last pleading had not yet been filed at the
time; and third, there was insufficient notice of the pre-trial to the petitioner. In the case at
bar, no such irregularities in the pre-trial have been alleged by the petitioner.
As we held in Pure Foods Corporation v. NLRC:
It must emphatically be reiterated, since so often is it overlooked, that the special civil action
for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of
judgment. The reason for the rule is simple. When a court exercises its jurisdiction, an error
committed while so engaged does not deprive it of the jurisdiction being exercised when the
error is committed. If it did, every error committed by a court would deprive it of its jurisdiction
and every erroneous judgment would be a void judgment. This cannot be allowed. The
administration of justice would not survive such a rule. Consequently, an error of judgment
that the court may commit in the exercise of its jurisdiction is not correctible through the
original civil action of certiorari.
Even on the supposition that certiorari was an appropriate remedy, the petition would still fail
because it has not been clearly shown that the trial court committed grave abuse of
discretion in refusing to set aside the default order and the default judgment. We have held in
many cases, including Pahilanga v. Luna, 13 that:
It is within the sound discretion of the court to set aside an order of default and to permit a
defendant to file his answer and to be heard on the merits even after the reglementary period
for the filing of the answer has expired, but it is not error, or an abuse of discretion, on the
part of the court to refuse to set aside its order of default and to refuse to accept the answer
where it finds no justifiable reason for the delay in the filing of the answer. In motions for
reconsideration of an order of default, the moving party has the burden of showing such
diligence as would justify his being excused from not filing the answer within the
reglementary period as provided by the Rules of Court, otherwise, these guidelines for an
orderly and expeditious procedure would be rendered meaningless. Unless it is shown
clearly that a party has justifiable reason for the delay the court will not ordinarily exercise its
discretion in his favor.
The above doctrine is applicable to the inexcusable neglect of the herein petitioner and his
wife to appear at the pre-trial hearing duly scheduled and of which they were properly
notified.

227

We must, however, moderate the award of damages by the trial court as we feel it is rather
harsh upon the petitioner. In the exercise of our discretion, we hereby reduce the moral
damages to P20,000.00 and the attorney's fees to P10,000.00, and disallow the exemplary
damages. The rest of the award is approved.
WHEREFORE, the challenged decision is AFFIRMED as above modified, with costs against
the petitioner. It is so ordered.

Martinez vs. Republic, G.R. No. 160895, October 30, 2006

JOSE R. MARTINEZ, G. R. No. 160895

Petitioner,
Present:
QUISUMBING,
- versus - Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
REPUBLIC OF THE PHILIPPINES, VELASCO, JR., JJ.
Respondents.
Promulgated:
October 30, 2006
x---------------------------------------------------------------------------------x

DECISION
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 thePhilippines, through the Office of the Solicitor General,
from interposing an appeal from the trial courts subsequent decision in favor
of the applicant.
The antecedent facts follow.

228

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. Martinezalleged 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 appellees 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 Martinezs petition.[3]
Afterwards, the trial court proceeded to receive Martinezs oral and
documentary evidence in support of his petition. On 1 August 2000, the RTC
rendered a Decision[4]concluding that Martinez and his predecessors-in229

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, 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 2001[6] 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]
[5]

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
230

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 Martinezs 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 Martinezs
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 Courts 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

231

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 Martinezs 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 Martinezs 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
232

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
233

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 defendants 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 inMatute v. Court of Appeals[26] that the new availability of
a defaulted defendants 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:

234

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, crossclaims 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

235

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.

236

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:[30]
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)[31]

237

The fourth remedy, that of appeal, is anchored on Section 2, Rule 41

of the 1964 Rules. Yet even after that provisions 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

238

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 ofstare 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

239

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 OSGs evidence, but by
petitioners 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.

240

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?

241

A According to my grandfather he bought that land from a certain

Juan Casano in the year 1870s[,] 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

242

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 prcis 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.
SO ORDERED.
Indiana Aerospace University vs. CHED, 356 SCRA 367 (2001)

[G.R. No. 139371. April 4, 2001]

INDIANA AEROSPACE UNIVERSITY, petitioner, vs. COMMISSION

ON HIGHER EDUCATION (CHED), respondent.
DECISION
PANGANIBAN, J.:

243

When the delayed filing of an answer causes no prejudice to the plaintiff,

default orders should be avoided. Inasmuch as herein respondent was
improvidently declared in default, its Petition for Certiorari to annul its default
may be given due course. The act of the Commission on Higher Education
enjoining petitioner from using the word university in it corporate name and
ordering it to revert to its authorized name does not violate its proprietary rights
or constitute irreparable damage to the school. Indeed, petitioner has no vested
right to misrepresent itself to the public. An injunction is a remedy in equity
and should not be used to perpetuate a falsehood.
The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules

of Court, challenging the July 21, 1999 Decision [1] of the Court of Appeals (CA)
in CA-GR SP No. 51346. The appellate court directed the Regional Trial Court
(RTC) of Makati City, Branch 136, to cease and desist from proceeding with
Civil Case No. 98-811 and to dismiss the Complaint for Damages filed by the
Indiana Aerospace University against the Commission on Higher Education
(CHED). The dispositive portion of the CA Decision reads as follows:
WHEREFORE, in the light of the foregoing consideration, and pursuant to
pertinent existing laws and jurisprudence on the matter, [the trial court] is
hereby DIRECTED to cease and desist from proceeding with Civil case No.
98-811 and to order the dismissal of [petitioners] Petition dated March 31, 1999
in Civil Case No. 98-911 for lack of merit and valid cause of action. [2]
The Facts

The facts of this case we are summarized by the CA, as follows:

Sometime in October 1996, Dr. Reynaldo B. Vera, Chairman, Technical Panel
for Engineering, Architecture, and Maritime Education (TPRAM) of [CHED],
received a letter dated October 18, 1998 (Annex C) from Douglas R. Macias,
Chairman, Board of Aeronautical Engineering, Professional Regulat[ory]
Commission (PRC) and Chairman, Technical Committee for Aeronautical
Engineering (TPRAME) inquiring whether [petitioner] had already acquired
[u]niversity status in view of the latters advertisement in [the] Manila Bulletin.

244

In a letter dated October 24, 1996, Dr. Vera formally referred the aforesaid
letter to Chairman Alcala with a request that the concerned Regional Office of
[CHED] be directed to conduct appropriate investigation on the alleged
misrepresentation by [petitioner]. Thereafter, [CHED] referred the matter to its
Regional Director in Cebu City, requesting said office to conduct an
investigation and submit its report. The [R]eport submitted in January 1997,
stated in substance:
xxx xxx xxx
To recall it was in the month of May 1996, [that] Director Ma. Lilia Gaduyon
met the school [p]resident in the regional office and verbally talked[with] and
advised them not to use University when it first came out in an advertisement
column of a local daily newspaper in Cebu City. It was explained that there was
a violation [committed by] his institution [when it used] the term university
unless the school ha[d] complied [with] the basic requirement of being a
university as prescribed in CHED Memorandum Order No. 48, s. 1996.
x x x x x x x x x.
As a consequence of said Report, [respondents] Legal Affairs Service was
requested to take legal action against [petitioner]. Subsequently, on February 3,
1997, [respondent] directed [petitioner] to desist from using the term
University, including the use of the same in any of its alleged branches. In the
course of it investigation, [respondent] was able to verify from the Securities
and Exchange Commission (SEC) that [petitioner had] filed a proposal to
amend its corporate name from Indiana School of Aeronautics to Indiana
Aerospace University, which was supposedly favorably recommended by the
Department of Education, Culture and Sports (DECS) per its Indorsement dated
17 July 1995, and on [that] basis, SEC issued to [petitioner] Certificate of
Registration No. AS-083-002689 dated August 7, 1995. Surprisingly, however,
it ought to be noted, that SEC Chairman Perfecto R. Yasay, Jr. wrote the
following letter to the [c]hairman of [respondent]:
Hon. Angel C. Alcala
Chairman
Commission on Higher Education
DAP Bldg., San Miguel Avenue
Ortigas Center, Pasig City
Dear Chairman Alcala:

245

This refers to your letter dated September 18, 1997 requesting this Commission
to make appropriate changes in the Articles of Incorporation of Indiana School
of aeronautics, Inc. due to its unauthorized use of the term University in its
corporate name.
Relative thereto, please be informed that our records show that the abovementioned corporation has not filed any amended articles of incorporation that
changed its corporate name to include the term University.
In the case the corporation submit[s] an application for change of name, your
Cease and Desist Order shall be considered accordingly.
Very truly yours,
(SGD.) PERFECTO R. YASAY, JR.
Chairman
In reaction to [respondents] order for [petitioner] to desist from using the word
University, Jovenal Toring, [c]hairman and [f]ounder of [petitioner] wrote a
letter dated February 24, 1997 (Annex G) appealing for reconsideration of
[respondents] Order, with a promise to follow the provisions of CMO No. 48,
pertinent portions of which have been quoted in the Petition, to wit:
On 07 August 1995, in line with the call of the government to go for global
competitiveness and our vision to help in the development of aerospace
technology, the Board of Directors applied with the SEC for the amendment of
Article I of the Articles of Incorporation to read as Indiana Aerospace
University instead of Indiana School of Aeronautics, Inc.
xxxxxxxxx
In view thereof, we would like to appeal to you Fr. Delagoza to please
reconsider your order of February 3, 1997, otherwise the school will encounter
financial difficulties and suffer damages which will eventually result in the
mass dislocation of xxx thousand[s] of students. The undersigned, being the
[c]hairman and [f]ounder, will try our very best to follow the provisions of
CHED MEMO No. 48, series of 1996 that took effect last June 18, 1996.
xxxxxxxxx
Thank you very much for giving me a copy of said CHED MEMO order No.
48. More power and God Bless You.

246

x x x x x x x x x.
The appeal of [petitioner] was however rejected by [respondent] in its decision
dated July 30, 1998 and the [the latter] ordered the former to cease and desist
from using the word University. However, prior to said date, on April 2, 1998,
[petitioner] filed a Complaint for Damages with prayer for Writ of preliminary
and Mandatory Injunction and Temporary Restraining Order against
[respondent], docketed as Civil Case No. 98-811 before public respondent
judge.
On April 7, 1998, [respondent] filed a Special Appearance with Motion to
Dismiss, based on 1) improper venue; 2) lack of authority of the person
instituting the action; and 3) lack of cause of action. On April 17, 1998,
[petitioner] filed its Opposition to the Motion to Dismiss [on] grounds stated
therein, to which [respondent] filed a Reply on April 21, 1998, reiterating the
same arguments in its Motion to Dismiss.After due hearing, [petitioner]
formally offered its evidence on July 23, 1998 while [respondent] made a
formal offer of evidence on July 28, 1998 to which [petitioner] filed its
Comments/Objections and finally, [respondent] submitted its Memorandum
relative thereto on October 1, 1998.
Public respondent judge, in an Order dated August 14, 1998, denied
[respondents] Motion to Dismiss and at the same time, issued a Writ of
preliminary Injunction in favor of [petitioner]. [Respondent], in the same Order,
was directed to file its Answer within fifteen (15)days from receipt of said
Order, which was August 15, 1998.
xxxxxxxxx
WHEREFORE, and in consideration of all the foregoing [respondents] Motion
to Dismiss is hereby denied, and the [respondent] is directed to file its [A]nswer
to the [C]omplaint within fifteen (15) days from receipt of this Order.
In the meantime, [respondent], its officials, employees and all parties acting
under its authority are hereby enjoined to observe the following during the
pendency of this case.
1. Not to publish or circulate any announcement in the newspaper, radio or
television regarding its Cease and Desist Order against xxx [petitioner];
2. Not to enforce the Cease and Desist Order issued against xxx [petitioner];

247

3. To maintain the status quo by not withholding the issuance of yearly school
permits and special order to all graduates.
Let a writ of preliminary Injunction to that effect issue upon posting by
[petitioner] of an injunction bond in the amount of One Hundred Thousand
Pesos (P100,000.00), and subject to the approval of the Court.
SO ORDERED.
On September 22, 1998, [petitioner] filed before public respondent a Motion To
Declare [Respondent] in [D]efault pursuant to Section 3, Rule 9 in relation to
Section 4, Rule 16 of the Rules of Court, as amended, and at the same time
praying [for] the Motion to [S]et for [H]earing on October 30, 1998 at 8:30
a.m. On the same date, [respondent] filed a Motion For Extension of Time to
File its Answer, x x x until November 18, 1998. On November 17, 1998,
[respondent] filed its [A]nswer.
[Petitioner], on November 11, 1998 filed its Opposition to the Motion for
Extension of Time to File [Respondents] Answer and on November 9, 1998, a
Motion to Expunge [Respondents] answer and at the same time praying that its
[M]otion be heard on November 27, 1998 at 9:00 a.m. On even date, public
respondent judge issued an Order directing the Office of the Solicitor General
to file within a period of ten (10) days from date its written Opposition to the
Motion to Expunge [Respondents] answer and within the same period to file a
written [N]otice of [A]ppearance in the case. Unable to file their written
Opposition to the Motion to Expunge within the period given by public
respondent, the OSG filed a Motion to Admit Written Opposition stating the
reasons for the same, attaching thereto the Opposition with [F]ormal [E]ntry of
[A]ppearance.
In an Order dated December 9, 1998, (Annex A), public respondent judge ruled
on [Petitioners ] Motion to Declare [Respondent in Default], to wit:
WHEREFORE, and in view of all the foregoing, the present motion is
granted. [Petitioner] is hereby directed to present its evidence ex-parte before
the [b]ranch [c]lerk of [c]ourt, who is designated as [c]ommissioner for the
purpose, within ten (10) days from receipt of this [O]rder, and for the latter to
submit his report within twenty (20) days from the date the case is submitted
for decision.
SO ORDERED.[3]

248

On February 23, 1999, respondent filed with the CA a Petition for

certiorari, arguing that the RTC had committed grave abuse of discretion (a) in
denying the formers Motion to Dismiss, (b) in issuing a Writ of Preliminary
Injunction, and (c) in declaring respondent in default despite its filing an
Answer.
Ruling of the Court of Appeals

The CA ruled that petitioner had no cause of action against

respondent. Petitioner failed to show any evidence that it had been granted
university status by respondent as required under existing law and CHED rules
and regulations. A certificate of incorporation under an Unauthorized name
does not confer upon petitioner the right to use the word university in its
name. The evidence submitted by respondent showed that the Securities and
Exchange Commission (SEC) had denied that petitioner had ever amended its
Articles of Incorporation to include university in its corporate name. For its
part, the Department of Education, Culture and Sports (DECS) denied having
issued the alleged Certification dated May 18, 1998, indorsing the change in
petitioners corporate name. Besides, neither the Corporation Code nor the SEC
Charter vests the latter with the authority to confer university status on a
corporation that it regulates.
For the same reason, the appellate court also ruled that the Writ of
Preliminary Injunction had improvidently been issued. The doubtful right
claimed by petitioner is subordinate to the public interest to protect
unsuspecting students and their parents from the unauthorized operation and
misrepresentation of an educational institution.
Respondent should not have been declared in default, because its answer
had been filed long before the RTC ruled upon petitioners Motion to declare
respondent in default. Thus, respondent had not obstinately refused to file an
Answer; on the contrary, its failure to do so on time was due to excusable
negligence. Declaring it in default did not serve the ends of justice, but only
prevented it from pursuing the merits of its case.
Hence, this Petition.[4]
Issues

249

Petitioner alleges that the appellate court committed the following

reversible errors:
A. In giving due course to respondent CHEDs Petition for Certiorari filed way beyond
the 60-day reglementary period prescribed by Section 4, Rule 65 of the Rules of
Court;
B. In not requiring Respondent CHED to first file a motion to Set Aside the Order of
Default dated December 9, 1998; and
C. In ordering the dismissal of Civil Case No. 98-811.[5]

In its Memorandum, petitioner adds that the CA erred in dissolving the Writ
of Preliminary Injunction issued by the RTC. We shall take up these issues in
the following order: (1) timeliness of the certiorari petition, (2) validity of the
default order, (3) validity of the preliminary injunction, and (4) dismissal of the
Complaint.
This Courts Ruling

The Petition is partly meritorious.

First Issue: Timeliness of Certiorari

Petitioner claims that the Petition for certiorari of respondent should have
been dismissed by the CA, because it was filed out of time and was not
preceded by a motion for reconsideration in the RTC.The copy of the Order of
August 14, 1998 had been served at respondents office on August 15, 1998, but
its Answer was filed only after 180 days which, according to petitioner, could
not be considered a reasonable period. On the other hand, the Office of the
Solicitor General (OSG) argues that the Order is null and void and, hence, may
be assailed at any time.
We hold that respondents Petition for Certiorari was seasonably filed. In
computing its timeliness, what should have been considered was not the Order
of August 14, 1998, but the date when respondent received the December 9,
1998 Order declaring it in default. Since it received this Order only on January
13, 1999, and filed its Petition for Certiorari on February 23, 1999, it obviously
complied with the sixty-day reglementary period stated in Section 4, Rule 65 of
the 1997 Rules of Court. Moreover, the August 14, 1998 Order was not a
proper subject of certiorari or appeal, since it was merely an interlocutory order.

250

Exhaustion of Available Remedies

Petitioner also contends that certiorari cannot prosper in this case, because
respondent did not file a motion for reconsideration before filing its Petition for
Certiorari with the CA. Respondent counters that reconsideration should be
dispensed with, because the December 9, 1998 Order is a patent nullity.
The general rule is that, in order to give the lower court the opportunity to
correct itself, a motion for reconsideration is a prerequisite to certiorari. It also
basic that petitioner must exhaust all other available remedies before resorting
to certiorari. This rule, however, is subject to certain exceptions such as any of
the following: (1) the issues raised are purely legal in nature, (2) public interest
is involved, (3) extreme urgency is obvious or (4) special circumstances
warrant immediate or more direct action. [6] It is patently clear that the regulation
or administration of educational institutions, especially on the tertiary level, is
invested with public interest. Hence, the haste with which the solicitor general
raised these issues before the appellate court is understandable. For the reason
mentioned, we rule that respondents Petition for Certiorari did not require prior
resort to a motion for reconsideration.
Second Issue: Validity of the Default Order

Petitioner avers the RTC was justified in declaring respondent in default,

because the August 14, 1998 Order directing the filing of an answer had been
served on August 25, 1998. And as late as October 30, 1998, respondent could
only file a Motion for Extension of Time, which the trial court denied because
of the expiry of the fifteen-day period. Petitioner adds that respondents proper
remedy would have been a Motion to Set Aside the Order of Default, pursuant
to Section 3(b), Rule 9 of the Rules of Court.
Respondent, in turn, avers that certiorari was the only plain, speedy and
adequate remedy in the ordinary course of law, because the default Order had
improvidently been issued.
We agree with respondent. Lina v. Court of Appeals[7] discussed the
remedies available to a defendant declared in default, as follows: (1) a motion
to set aside the order of default under Section 3(b), Rule 9 of the Rules of
Court, if the default was discovered before judgment could be rendered; (2) a
motion for new trial under Section 1(a) of Rule 37, if the default was
discovered after judgment but while appeal is still available; (3) a petition for
relief under Rule 38, if judgment has become final and executory; and (4) an

251

appeal from the judgment under Section 1, Rule 41, even if no petition to set
aside the order of default has been resorted to.
These remedies, however, are available only to a defendant who has been
validly declared in default. Such defendant irreparably loses the right to
participate in the trial. On the other hand, a defendant improvidently declared in
default may retain and exercise such right after the order of default and the
subsequent judgment by default are annulled, and the case remanded to the
court of origin. The former is limited to the remedy set forth in section 2,
paragraph 3 of Rule 41 of the pre 1997 Rules of Court, and can therefore
contest only the judgment by default on the designated ground that it is
contrary to evidence or law. The latter, however, has the following options: to
resort to this same remedy; to interpose a petition for certiorari seeking the
nullification of the order of default, even before the promulgation of a
judgment by default; or in the event that judgment has been rendered, to have
such order and judgment declared void.
In prohibiting appeals from interlocutory orders, the law does not intend to
accord executory force to such writs, particularly when the effect would be to
cause irreparable damage. If in the course of trial, a judge proceeds without or
in excess of jurisdiction, this rule prohibiting an appeal does not leave the
aggrieved party without any remedy.[8] In a case like this, a special civil action
of certiorari is the plain, speedy and adequate remedy.
Herein respondent controverts the judgment by default, not on the ground
that it is unsubstantiated by evidence or that it is contrary to law, but on the
ground that it is intrinsically void for having been rendered pursuant to a
patently invalid order of default.[9]
Grave Abuse of Discretion

Petitioner claims that in issuing the default Order, the RTC did not act with
grave abuse of discretion, because respondent had failed to file its answer
within fifteen days after receiving the August 14, 1998 Order.
We disagree. Quite the contrary, the trial court gravely abused its discretion
when it declared respondent in default despite the latters filing of an Answer.
[10]
Placing respondent in default thereafter served no practical purpose.
Petitioner was lax in calling the attention of the Court to the fifteen-day
period for filing an answer. It moved to declare respondent in default only on
September 20, 1998, when the filing period had expired on August 30,
1998. The only conclusion in this case is that petitioner has not been prejudiced
252

by the delay. The same leniency can also be accorded to the RTC, which
declared respondent in default only on December 9, 1998, or twenty-two days
after the latter had filed its Answer on November 17, 1998. Defendants Answer
should be admitted, because it had been filed before it was declared in default,
and no prejudice was caused to plaintiff. The hornbook rule is that default
judgments are generally disfavored.[11]
While there are instances when a party may be properly declared in default,
these cases should be deemed exceptions to the rule and should be resorted to
only in clear cases of obstinate refusal or inordinate neglect in complying with
the orders of the court.[12] In the present case, however, no such refusal or
neglect can be attributed to respondent.
It appears that respondent failed to file its Answer because of excusable
negligence. Atty. Joel Voltaire Mayo, director of the Legal Affairs Services of
CHED, had to relinquish his position in accordance with the Memorandum
dated July 7, 1998, requiring all non-CESO eligibles holding non-career
positions to vacate their respective offices. It was only on September 25, 1998,
after CHED Special Order No. 63 had been issued, when he resumed his
former position. Respondent also presented a meritorious defense in its Answer
-- that it was duty-bound to pursue that state policy of protecting, fostering and
promoting the right of all citizens to affordable quality education at all
levels. In stark contrast, petitioner neither qualified for nor was ever conferred
university status by respondent.
Judges, as a rule, should avoid issuing default orders that deny litigants the
chance to be heard. Instead, the former should give the latter every opportunity
to present their conflicting claims on the merits of the controversy, as much as
possible avoiding any resort to procedural technicalities. [13]
Third Issue: Preliminary Injunction

Petitioner contends that the RTC validly issued the Writ of Preliminary
Injunction. According to the trial court, respondents actions adversely affected
petitioners interests, faculty and students. In fact, the very existence of
petitioner as a business concern would have been jeopardized had its
proprietary rights not been protected.
We disagree. We concur with the CA that the trial court acted with grave
abuse of discretion in issuing the Writ of Preliminary Injunction against
respondent. Petitioner failed to establish a clear right to continue representing
itself to the public as a university. Indeed, it has no vested right to misrepresent
253

itself. Before an injunction can be issued, it is essential that (1) there must be a
right in esse to be protected, and (2) the act against which the injunction is to be
directed must have violated such right. [14] The establishment and the operation
of schools are subject to prior authorization from the government.No school
may claim to be a university unless it has first complied with the prerequisites
provided in Section 34 of the Manual of Regulations for Private
Schools. Section 3, Rule 58 of the Rules of Court, limits the grant of
preliminary injunction to cases in which the plaintiff is clearly entitled to the
relief prayed for.
We also agree with the finding of the CA that the act sought to be enjoined
by petitioner is not violative of the latters rights. Respondents Cease and Desist
Order of July 30, 1997 merely restrained petitioner from using the term
university in its name. It was not ordered to close, but merely to revert to its
authorized name; hence, its proprietary rights were not violated.
Fourth Issue: Dismissal of the Complaint

Petitioner claims that the CA went beyond its limited jurisdiction under
Rule 65 when it reversed the trial court and dismissed the Complaint on the
ground that petitioner had failed to state a cause of action. The RTC had yet to
conduct trial, but the CA already determined the factual issue regarding
petitioners acquisition of university status, a determination that is not permitted
in certiorari proceedings.
The CA ruled that the trial court gravely abused its discretion in denying
respondents Motion to dismiss on the ground of lack of cause of action because
of petitioners lack of legal authority or right to use the word university. Said
appellate court:
x x x. No matter how we interpret the Corporation Code and the law granting
the Securities and Exchange Commission its powers and duties, there is nothing
there which grants it the power or authority to confer University Status to an
educational institution. Fundamental is the rule that when there is no power
granted, none exist[s], not even implied ones for there is none from where to
infer. The mere fact of securing an alleged Certificate of Incorporation under an
unauthorized name does not confer the right to use such name.
But what makes the conclusion of [the trial court] even anomalous, to say the
least, is that no less than the Chairman of the SEC in his letter to the
[respondent] (Exh. J) expressly said that [petitioner] never filed any Amended

254

Articles of Incorporation so as to have a change of corporate name to include

the term university. Worse, the records officer of DECS issued a Certification
dated May 18, 1998 (Annex AA) to the effect that there was no Indorsement
made by that office addressed to the SEC or the Proposed Amended Article of
Incorporation of Indiana Aeronautics. x x x.
Under such clear pattern of deceitful maneuvering to circumvent the
requirement for acquiring University Status, it is [a] patently reversible error
for [the trial court] to hold that [petitioner] has a right to use the word
University which must be protected. Dismissal of [petitioners] Complaint for
lack of a valid cause of action should have been the proper action taken by [the
trial court] judge.[15]
An order denying a motion to dismiss is interlocutory, and so the proper
remedy in such a case is to appeal after a decision has been rendered. A writ of
certiorari is not intended to correct every controversial interlocutory ruling; it is
resorted to only to correct a grave abuse of discretion or a whimsical exercise
of judgment equivalent to lack of jurisdiction. Its function is limited to keeping
an inferior court within its jurisdiction and to relieve persons from arbitrary acts
-- acts which courts or judges have no power or authority in law to perform. It
is not designed to correct erroneous findings and conclusions made by the
court.[16]
In the case at bar, we find no grave abuse of discretion in the RTCs denial
of the Motion to Dismiss, as contained in the August 14, 1998 Order. The CA
erred in ruling other wise. The trial court stated in its Decision that petitioner
was an educational institution, originally registered with the Securities and
Exchange Commission as the Indiana School of Aeronautics, Inc. That name
was subsequently changed to Indiana Aerospace University after the
Department of Education, Culture and Sports had interposed no objection to
such change.[17]
Respondent issued a formal Cease and Desist Order directing petitioner to
stop using the word university in its corporate name. The former also published
an announcement in the March 21, 1998 issue ofFreeman, a local newspaper in
Cebu City, that there was no institution of learning by that name. The counsel
of respondent was quoted as saying in the March 28, 1998 issue of the
newspaper Today that petitioner had been ordered closed by the respondent for
illegal advertisement, fraud and misrepresentation of itself as a university. Such
acts, according to the RTC undermined the publics confidence in petitioner as
an educational institution.[18] This was a clear statement of a sufficient cause of
action.

255

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.[19] 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 plaintiffs right to due process. [20]
WHEREFORE, the Petition is hereby GRANTED IN PART, and the
assailed Decision MODIFIED. The trial court is DIRECTED to SET ASIDE the
Order of default of December 9, 1998; to ADMIT the Answer dated November
5, 1998; to LIFT the preliminary injunction; and to CONTINUE, with all
deliberate speed, the proceedings in Civil Case No. 98-811.
SO ORDERED.
Melo, (Chairman),
JJ., concur.

Vitug,

Gonzaga-Reyes, and Sandoval-Gutierrez,

7. Pre Trial (Rule 18)

LCK Industries Inc. vs. Planters Development Bank, G.R. No.
170606, November 23, 2007

LCK INDUSTRIES INC., CHIKO

LIM and ELIZABETH T. LIM,
Petitioners,

G.R. No. 170606

Present:

YNARES-SANTIAGO, J.,
- versus -

PLANTERS
BANK,
Respondent.

DEVELOPMENT

Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
November 23, 2007

256

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

DECISION

CHICO-NAZARIO, J.:
Before
this
Court
is
the
Petition
for
Review
on Certiorari under Rule 45 of the Revised Rules of Court
filed by petitioners LCK Industries Inc. (LCK), Chiko Lim and
Elizabeth Lim, seeking the reversal and the setting aside of
the Decision[1] dated 1 April 2005 and the Resolution [2] dated
29 November 2005 of the Court of Appeals in CA-G.R. CV No.
73944. The appellate court, in its assailed Decision and
Resolution, reversed the Decision [3] of the Regional Trial
Court (RTC) of Quezon City, Branch 81, dated 3 September
2001, in Civil Case No. Q-98-33835, which found respondent
Planters Development Bank (respondent bank) liable for the
amount of P1,856,416.67, representing overpayment.
Petitioner LCK is a domestic corporation duly organized
and existing as such under Philippine laws. [4]
Respondent bank is a banking institution duly
authorized to engage in banking business under Philippine
laws.[5]
On 1 September 1995, petitioner LCK obtained a loan from
the respondent bank in the amount of P3,000,000.00 as
evidenced by two promissory notes.[6]
As a security for the loan obligation, petitioners-spouses
Chiko and Elizabeth Lim executed a Real Estate Mortgage

257

over a parcel of land covered by Transfer Certificate of Title

(TCT) No. T-138623, registered under their names and
located at Quezon City, with an area of 68 square meters
(Quezon City property).[7] Later on, to secure the same
obligation, another Real Estate Mortgage was executed over
another parcel of land covered by TCT No. T-62773, also
registered under the names of the petitioner-spouses, with
an area of 71 square meters located at Baguio City (Baguio
City property).[8]
Subsequently, petitioner LCK incurred default in its payment;
thus, making the obligation due and demandable. Several
demands were thereafter made by the respondent bank to
no avail.[9] On 13 October 1997, a final letter-demand was
sent by respondent bank to petitioner LCK asking for the
payment
of
its
obligation
in
the
amount
of P2,962,500.00.Such
final
demand
notwithstanding,
petitioner LCK failed or refused to pay its obligation.
Consequently, respondent bank caused the extrajudicial
foreclosure of the Baguio City property which was sold at the
public auction for P2,625,000.00 as shown in the Certificate
of Sale[10] dated 29 January 1998. Since the proceeds of the
foreclosed Baguio City property were not enough to satisfy
the entire loan obligation which amounted toP2,962,500.00,
respondent bank further caused the extrajudicial foreclosure
of the Quezon City property. As evidenced by the Certificate
of Sale[11] dated 18 March 1998, signed by Notary Public Atty.
Allene Anigan (Atty. Anigan), the foreclosed Quezon City
property was sold at a public auction for P2,231,416.67. The
respondent bank was the highest bidder on both occasions.
Prior to the auction sale of the Quezon City property on 18
March 1998, petitioners, on 12 March 1998, filed with the
RTC of Quezon City, Branch 81, an action for Annulment of
the Foreclosure of Mortgage and Auction Sale of the Quezon
258

City property with Restraining Order/Preliminary Injunction

and with Damages against respondent bank and Atty.
Anigan.[12] The case was docketed as Civil Case No. Q-9833835.
In
their
Complaint,[13] petitioners
alleged
that
respondent bank failed to comply with the posting and
publication requirements as well as with the filing of the
Petition for the Extrajudicial Foreclosure of the Real Estate
Mortgage with the Clerk of Court as required by Act No.
3135.[14] Petitioners prayed for the issuance of temporary
restraining order (TRO) in order to enjoin the respondent
bank from conducting the auction sale, and in the
alternative, to enjoin the Registry of Deeds of Quezon City
from transferring the ownership of the Quezon City property
to the purchaser at the auction sale.
In its Answer with the Opposition to the Prayer for the
Issuance of Temporary Restraining Order (TRO), respondent
bank averred that it had fully observed the posting and
publication requirements of Act No. 3135. It insisted that the
filing of the Petition for Extrajudicial Foreclosure of the
Mortgage Property with the Notary Public was sanctioned by
the same statute. Respondent bank thus prayed for the
dismissal of petitioners complaint for lack of merit. [15]
For failure of the counsels for both petitioners and
respondent bank to appear in the scheduled hearing for the
issuance of temporary restraining order, the RTC, in an Order
dated 15 May 1998, deemed the prayer for TRO abandoned.
[16]

Thereafter, the RTC conducted a pre-trial conference. In

the Pre-Trial Order[17] dated 8 September 2000, the parties
made the following admissions and stipulations:

259

(1) the real estate mortgage executed by the plaintiffs

in favor of the defendant bank covers the loan obligation in
the total amount of P3,000,000.00;
(2) there were two promissory notes executed by the
plaintiffs:
one
for P2,700,000.00
and
another
for P300,000.00;
(3) a demand letter dated 13 October 1997 was sent to
petitioner LCK by respondent bank stating that the
remaining balance of petitioner LCKs loan obligation
wasP2,962,500.00 as of 13 October 1997;
(4) a Notice of Auction Sale by Notary Public was made
by the respondent bank in foreclosing the Baguio City
property, and in the Certificate of Sale issued by the Notary
Public, the respondent bank bid P2,625,000.00 for the
property;
(5) the respondent bank also foreclosed the real estate
mortgage over the petitioners Quezon City property on 18
March 1998 and said defendant bank bid P2,231,416.67 for
the property;
(6) the foreclosure of petitioners Quezon City property
was made by a notary public;
(7) the petition for foreclosure was not included in the
raffle of judicial notice;
(8) the petitioners failed to fully pay their loan
obligation as of 13 October 1997 in the amount
of P962,500.00; and
(9) despite the demands, petitioners failed to pay their
due obligations.
260

The court further defined the issues as follows:

(1) whether or not the petition was filed with the Office
of the Clerk of Court;
(2) whether or not the extra-judicial foreclosure of real
estate mortgage by defendant bank was made in
accordance with the provisions of Act 3135, as amended;
and
(3) whether or not the parties are entitled to their
respective claims for attorneys fees and damages. [18]
The parties were given 15 days from receipt of the PreTrial Order to make amendments or corrections thereon.
On 18 April 2001, the parties agreed to submit the case for
the decision of the RTC based on the stipulations and
admissions made at the pre-trial conference. The parties
further manifested that they were waiving their respective
claims for attorneys fees. On the same day, the RTC required
the parties to submit their respective memoranda. [19]
In their Memorandum,[20] petitioners, aside from reiterating
issues previously raised in their Complaint, further claimed
that there was an overpayment of the loan obligation
byP1,856,416.67. As shown in the letter-demand dated 13
October 1997 received by petitioner LCK, its outstanding
loan obligation amounted to P2,962,500.00. The Baguio City
property was purchased by respondent bank at the public
auction for P2,625,000.00, while the Quezon City property
was purchased for P2,231,416.67.
For its part, respondent bank maintained in its
Memorandum[21] that the complaint filed by petitioners is
261

devoid of merit. It further asseverated that petitioners claim

for overpayment was not among the issues submitted for the
resolution of the RTC. It is clear from the Pre-Trial Order that
the issues to be resolved are limited to whether the petition
for the foreclosure of the real estate mortgage was filed
before the Clerk of Court and whether or not the extrajudicial
foreclosure of real estate mortgage was made by the
respondent bank in accordance with the provisions of Act No.
3135. For failure of petitioners to promptly raise the alleged
overpayment, the RTC is now barred from adjudicating this
issue.
On
3
September
2001,
the
RTC
rendered
its
[22]
Decision
declaring the foreclosure and the auction sale of
the Quezon City property legal and valid, but ordered
respondent bank to return the overpayment made by
petitioners in the amount of P1,856,416.67. The dispositive
portion of the RTC Decision reads:
WHEREFORE, premises considered, judgment is
hereby rendered as follows:
1. Declaring the extra-judicial foreclosure and
auction sale of the Quezon City property of
plaintiffs LCK Industries, Inc., Chiko Lim and
Elizabeth Lim subject of this case legal and
valid;
2. Ordering defendant Planters Development Bank
to
pay
to
plaintiffs
the
amount
of P1,856,416.67 representing overpayment;
3. Dismissing plaintiffs claim for attorneys fees and
other litigation expenses;
4. Dismissing the case against defendant Atty. Allene
M. Anigan; and

262

5. Dismissing the counterclaims of defendants

Planters Development Bank and Atty. Arlene M.
Anigan.[23]

For lack of merit, the Motion for Reconsideration filed by the

respondent bank was denied by the RTC in its Order dated 3
December 2001.[24]
Aggrieved, respondent bank elevated the matter to the
Court of Appeals by assailing the portion of the RTC Decision
ordering it to pay petitioners the amount of P1,856,416.67
representing the alleged overpayment. The respondent
banks appeal was docketed as CA-G.R. CV No. 73944. [25]
On 1 April 2005, the Court of Appeals granted the appeal of
the respondent bank and partially reversed the RTC Decision
insofar as it ordered respondent bank to pay the overpaid
amount of P1,856,416.67 to petitioners. In deleting the
award of overpayment, the appellate court emphasized that
the primary purpose of pre-trial is to make certain that all
issues necessary for the disposition of the case are properly
raised in order to prevent the element of surprise. Since the
alleged overpayment was only raised by the petitioners long
after the pre-trial conference, the court a quo cannot dispose
of such issue without depriving the respondent bank of its
right to due process.[26]
The Motion for Reconsideration filed by petitioners was
denied by the Court of Appeals in its Resolution [27] dated 29
November 2005.
Petitioners are now before this Court via a Petition for Review
on Certiorari,[28] under Rule 45 of the Revised Rules of Court,
assailing the Court of Appeals Decision and raising the
following issues as grounds:

263

I.
WHETHER
OR
NOT
THE
EXCESS
AMOUNT
OF P1,893,916.67 WHICH THE RESPONDENT BANK
ACQUIRED FROM THE AUCTION SALE OF THE
PETITIONERS PROPERTIES SHALL BE RETURNED TO
THEM.
II.
WHETHER OR NOT THE ISSUE OF OVERPAYMENT
WAS RAISED BY THE PARTIES AND INCLUDED IN THE
PRE-TRIAL ORDER.[29]

The petition centers on the claim propounded by petitioners

that there was an overpayment of the loan obligation in the
amount of P1,856,416.67. Petitioners insist they are entitled
to the reimbursement of the overpaid amount invoking the
elementary principle of in rem verso[30] in human relations
and the rule on the disposition of the proceeds of the sale
providing that the balance or the residue after deducting the
cost of the sale and the payment of the mortgage debt due,
shall be paid to the junior encumbrancers, and in the
absence of junior encumbrancers, to the mortgagor or his
duly authorized representative.[31]
On the other hand, respondent bank counters that the
question of overpayment, not being included in the issues
stipulated in Pre-Trial Order dated 8 September 2000, and
totally unrelated therein, cannot be considered by the
RTC. The belated ventilation of the alleged overpayment
precluded the RTC from ruling on the matter in consonance
with the primordial purpose of the pre-trial conference which
is to delineate the issues necessary for the disposition of the
case. [32]
The conduct of pre-trial in civil actions has been mandatory
as early as 1 January 1964 upon the effectivity of the
264

Revised Rules of Court.[33] Pre-trial is a procedural device

intended to clarify and limit the basic issues between the
parties[34] and to take the trial of cases out of the realm of
surprise and maneuvering.[35]
Pre-trial is an answer to the clarion call for the speedy
disposition of cases. Hailed as the most important procedural
innovation in Anglo-Saxon justice in the nineteenth century,
[36]
pre-trial is a device intended to clarify and limit the basic
issues between the parties.[37] It thus paves the way for a
less cluttered trial and resolution of the case. [38]Pre-trial
seeks to achieve the following:
(a) The possibility of an amicable settlement or of a
submission to alternative modes of dispute
resolution;
(b) The simplification of the issues;
(c) The necessity or desirability of amendments to
the pleadings;
(d) The possibility of obtaining stipulations or
admissions of facts and of documents to avoid
unnecessary proof;
(e) The limitation of the number of witnesses;
(f) The advisability of a preliminary reference of
issues to a commissioner;
(g) The propriety of rendering judgment on the
pleadings, or summary judgment, or of dismissing
the action should a valid ground therefor be found to
exist;
(h) The advisability or necessity of suspending the
proceedings; and

265

(i) Such other matters as may aid in the prompt

disposition of the action.[39]

The purpose of entering into a stipulation of facts is to

expedite trial and to relieve the parties and the court as well
of the costs of proving facts which will not be disputed on
trial and the truth of which can be ascertained by reasonable
inquiry. Its main objective is to simplify, abbreviate and
expedite the trial, or totally dispense with it. [40]
The parties themselves or their representative with
written authority from them are required to attend in order
to arrive at a possible amicable settlement, to submit to
alternative modes of dispute resolution, and to enter into
stipulations or admissions of facts and documents. All of the
matters taken up during the pre-trial, including the
stipulation of facts and the admissions made by the parties,
are required to be recorded in a pre-trial order. [41]
Thus, Section 7, Rule 18 of the Revised Rules of Court
provides:
SEC. 7. Record of pre-trial. The proceedings in
the pre-trial shall be recorded. Upon the termination
thereof, the court shall issue an order which shall
recite in detail the matters taken up in the
conference, the action taken thereon, the
amendments allowed to the pleadings, and the
agreements or admissions made by the parties as to
any of the matters considered. Should the action
proceed to trial, the order shall explicitly define and
limit the issues to be tried. The contents of the order
shall control the subsequent course of the action,
unless modified before trial to prevent manifest
injustice.

266

In the Pre-Trial Order dated 8 September 2000, the RTC

defined the issues as follows: (1) whether or not the petition
was filed with the Office of the Clerk of Court; (2) whether or
not the extrajudicial foreclosure of real estate mortgage by
defendant bank was made in accordance with the provisions
of Act No. 3135; and (3) whether or not the parties are
entitled to their respective claims for attorneys fees and
damages.
Based on the admissions and stipulations during the
pre-trial conference and the issues defined by the court a
quo as embodied in the Pre-Trial Order, the parties agreed to
submit the case for the resolution of the RTC. Both
petitioners and respondent also manifested that they would
forego their respective claims for attorneys fees, leaving
solely the issue of the validity of the foreclosure of mortgage
and auction sale for the RTCs disposition. However, in
petitioners Memorandum filed after the case was submitted
for
resolution, petitioners
raised
the
question
of
overpayment, a new issue that was included neither in their
Complaint nor in the issues defined in the Pre-Trial Order
issued by the RTC.
Generally, pre-trial is primarily intended to make certain
that all issues necessary to the disposition of a case are
properly raised. Thus, to obviate the element of surprise,
parties are expected to disclose at the pre-trial conference
all issues of law and fact they intend to raise at the trial.
[42]
However, in cases in which the issue may involve
privileged or impeaching matters,[43] or if the issues are
impliedly included therein or may be inferable therefrom by
necessary implication to be integral parts of the pre-trial
order as much as those that are expressly stipulated, the
general rule will not apply. [44] Thus, in Velasco v. Apostol,
[45]
this Court highlighted the aforesaid exception and ruled in
this wise:

267

A pre-trial order is not meant to be a detailed

catalogue of each and every issue that is to be or
may be taken up during the trial. Issues that
are impliedly included therein or may be
inferable
therefrom
by
necessary
implication are as much integral parts of the
pre-trial order as those that are expressly
stipulated.
In fact, it would be absurd and inexplicable for
the respondent company to knowingly disregard or
deliberately abandon the issue of non-payment of
the premium on the policy considering that it is the
very core of its defense. Correspondingly, We cannot
but perceive here an undesirable resort to
technicalities to evade an issue determinative of a
defense duly averred. (Emphasis supplied).

The case at bar falls under this particular exception. Upon

scrupulous examination of the Pre-Trial Order dated 8
September 2000, it can be deduced that the parties
stipulated that the remaining sum of petitioner LCKs
obligation as of 13 October 1997 was P2,962,500.00. In the
same Pre-Trial Order, the parties likewise stipulated that the
Baguio City property was sold at the public auction
for P2,625,000.00
and
the
Quezon
City
property
for P2,231,416.67. On both occasions, respondent bank
emerged as the highest bidder. By applying simple
mathematical operation, the mortgaged properties were
purchased by the respondent at the public auctions
for P4,856,416.67; thus, after deducting therefrom the
balance of petitioner LCKs obligation in the amount
of P2,962,500.00, an excess in the sum of P1,893,916.67
remains.
Needless to say, the fact of overpayment, though not
expressly included in the issues raised in the Pre-Trial Order
268

dated 8 September 2000, can be evidently inferred from the

stipulations and admissions made by the parties
therein. Even only upon plain reading of the said Pre-Trial
Order, it can be readily discerned that there was an
overpayment.
The pertinent provisions of the Revised Rules of Court
on extrajudicial foreclosure sale provide:
Rule 39. SEC. 21. Judgment obligee as
purchaser. When the purchaser is the judgment
obligee, and no third-party claim has been filed, he
need not pay the amount of the bid if it does
not exceed the amount of the judgment. If it
does, he shall pay only the excess.
Rule 68. SEC. 4. Disposition of proceeds of
sale.- The amount realized from the foreclosure sale
of the mortgaged property shall, after deducting the
costs of the sale, be paid to the person foreclosing
the mortgage, and when there shall be any balance
or residue, after paying off the mortgage debt due,
the same shall be paid to junior encumbrancers in
the order of their priority, to be ascertained by the
court, or if there be no such encumbrancers or
there be a balance or residue after payment to
them, then to the mortgagor or his duly
authorized agent, or to the person entitled to
it. (Emphasis supplied.)

The renowned jurist Florenz Regalado, in Sulit v. Court of

Appeals,[46] underscored the obligation of the mortgagee
with respect to the surplus money resulting from a
foreclosure sale of the mortgaged property:
The application of the proceeds from the sale
of the mortgaged property to the mortgagors
obligation is an act of payment, not payment by
269

dation; hence, it is the mortgagees duty to return

any surplus in the selling price to the
mortgagor. Perforce,
a
mortgagee
who
exercises the power of sale contained in a
mortgage is considered a custodian of the
fund, and, being bound to apply it properly, is
liable to the persons entitled thereto if he fails
to do so. And even though the mortgagee is not
strictly considered a trustee in a purely equitable
sense, but as far as concerns the unconsumed
balance, the mortgagee is deemed a trustee for the
mortgagor or owner of the equity of redemption.
Commenting on the theory that a mortgagee,
when he sells under a power, cannot be considered
otherwise than as a trustee, the vice-chancellor
in Robertson v. Norris (1 Giff. 421)observed: That
expression is to be understood in this sense: that
with the power being given to enable him to recover
the mortgage money, the court requires that he
shall exercise the power of sale in a provident
way, with a due regard to the rights and
interests of the mortgagor in the surplus
money to be produced by the sale. (Emphasis
supplied.)

Petitioner LCKs obligation with the respondent bank was

already fully satisfied after the mortgaged properties were
sold at the public auction for more than the amount of
petitioner LCKs remaining debt with the respondent bank. As
the custodian of the proceeds from the foreclosure sale,
respondent bank has no legal right whatsoever to retain the
excess of the bid price in the sum of P1,893,916.67, and is
under clear obligation to return the same to petitioners.
In any case, this Court would not allow respondent bank to
hide behind the cloak of procedural technicalities in order to
evade its obligation to return the excess of the bid price, for
270

such an act constitutes a violation of the elementary

principle of unjust enrichment in human relations.
Under the principle of unjust enrichment - nemo cum alterius
detrimento locupletari potest - no person shall be allowed to
enrich himself unjustly at the expense of others. [47]This
principle of equity has been enshrined in our Civil Code,
Article 22 of which provides:
Art. 22. Every person who through an act of
performance by another, or any other means,
acquires or comes into possession of something at
the expense of the latter without just or legal
ground, shall return the same to him.

We have held that there is unjust enrichment when a person

unjustly retains a benefit to the loss of another, or when a
person retains the money or property of another against the
fundamental principles of justice, equity and good
conscience.[48]
Equity, as the complement of legal jurisdiction, seeks to
reach and complete justice where courts of law, through the
inflexibility of their rules and want of power to adapt their
judgments to the special circumstances of cases, are
incompetent to do so. Equity regards the spirit and not the
letter, the intent and not the form, the substance rather than
the circumstance, as it is variously expressed by different
courts.[49]
It is the policy of the Court to afford party-litigants the
amplest opportunity to enable them to have their cases
justly
determined,
free
from
constraints
of
technicalities.Since the rules of procedures are mere tools
designed to facilitate the attainment of justice, it is well

271

recognized that this Court is empowered to suspend its

operation, or except a particular case from its operation,
when the rigid application thereof tends to frustrate rather
promote the ends of justice.[50]
Court litigations are primarily for search of truth, and a
liberal interpretation of the rules by which both parties are
given the fullest opportunity to adduce proofs is the best
way to ferret such truth. The dispensation of justice and
vindication of legitimate grievances should not be barred by
technicalities.[51]
Given the foregoing discussion, this Court finds the
respondent bank liable not only for retaining the excess of
the bid price or the surplus money in the sum
ofP1,893,916.67, but also for paying the interest thereon at
the rate of 6% per annum from the time of the filing of the
complaint until finality of judgment. Once the judgment
becomes final and executory, the interest of 12% per
annum, should be imposed, to be computed from the time
the judgment becomes final and executory until fully
satisfied.[52]
WHEREFORE, premises considered, the instant Petition
is GRANTED. The Court of Appeals Decision dated 1 April
2005 and its Resolution dated 29 November 2005 in CA-G.R.
CV No. 73944 are hereby REVERSED. Respondent Planters
Development Bank is ORDERED to return to the petitioners
LCK Industries Inc., Chiko Lim and Elizabeth Lim, the sum
of P1,893,916.67 with interest computed at 6% per
annum from the time of the filing of the complaint until its
full payment before finality of judgment.Thereafter, if the
amount adjudged remains unpaid, the interest rate shall be
12% per annum computed from the time the judgment
became final and executory until fully satisfied. Costs against
respondent Planters Development Bank.
272

SO ORDERED.

Calalang vs. CA, 217 SCRA 462 (1993)

SECOND DIVISION
G.R. No. 103185 January 22, 1993
CONRADO CALALANG, Petitioner, vs. THE COURT OF
APPEALS and FILIPINAS MANUFACTURERS
BANK, Respondents.
Fernando C. Conjuanco for petitioner.

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Crisostomo J. Danguila for private respondent.

CAMPOS, JR., J.:
This is a petition for review on certiorari seeking to annul the
decision ** of the Court of Appeals which set aside the order
of dismissal issued by the lower court, *** in Civil Case No.
36907 entitled "Filipinas Manufacturers Bank, plaintiff, versus
Hugo Arca, Conrado Calalang, Rio Arturo R. Salceda and
Acropolis Trading Corporation, defendants".
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The antecedent facts, as culled from the records, are as

follows:
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On April 29, 1980, respondent Filipinas Manufacturers Bank

filed a complaint for collection of a sum of money 1 against
petitioner Conrado Calalang and 3 other defendants namely,
Hugo M. Arca, Rio Arturo Salceda and the Acropolis Trading
Corporation with the Court of First Instance of Rizal, 7th
Judicial District, Branch 36, Makati under Judge Segundo M.
Zosa.
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Petitioner, after having been served with summons on May 19,

1980, filed a Motion to Dismiss on June 2, 1980. The other

273

summoned defendant, Hugo M. Arca, filed a Motion for Bill of

Particulars on June 5, 1980. The two other defendants namely,
the Acropolis Trading Corporation and Rio Arturo Salceda were
also summoned but only a clerk-employee of the Acropolis
Trading Corporation received the summons while Arturo R.
Salceda was no longer residing at his given address.
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Over a year after, the Motion for Bill of Particulars was granted
on August 24, 1981 by Judge Zosa. Meanwhile, the Motion to
Dismiss filed by petitioner Calalang was left unresolved. The
last pleading filed regarding the Motion to Dismiss was the
reply of petitioner Calalang to the opposition to the motion to
dismiss by respondent bank which was filed on August 5,
1980.
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On August 10, 1981, Batas Pambansa Blg. 129 (The Judiciary

Reorganization Act) was passed by the Batasang Pambansa
and subsequently approved by then President Marcos on
August 14, 1981.
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On November 27, 1981, defendant Arca filed a Motion to

Dismiss which necessitated the filing of various pleadings in
relation thereto by respondent bank herein, and defendant
Arca.
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On May 25, 1983, a hearing was scheduled under Judge

Florentino Dela Pea of the Makati Regional Trial Court, Branch
134. But then, the case was transferred to the Makati Regional
Trial Court, Branch 150, presided over by Judge Benigno M.
Puno who, on August 8, 1985, issued an Order to wit:
After a careful and thorough study of the defendant
Calalang's(petitioner herein) motion to dismiss, dated May 31,
1980 and the Counter Manifestation and motion to dismiss
dated November 25, 1981, filed by defendant Arca, together
with the plaintiff's opposition, defendant movants' replies or
rejoinder, the Court finds that the matters relied upon by said
movants for the dismissal of the Complaint are evidentiary in
character, the truth or veracity of which are better determined

274

at the hearing on the merits and, therefore, said motions are

DENIED for lack of merit.
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WHEREFORE, defendants are hereby ordered to file their

answers to the Complaint within the reglementary period.
SO ORDERED. 2

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On October 3, 1986, Gella Reyes Vergara Alcala and Associates

entered its appearance as counsel for respondent bank.
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On October 30, 1985, defendant Arca filed his answer with

compulsory counterclaim to the complaint which was received
by respondent bank 's former counsel, Emerito M. Salva and
Associates on November 4, 1985.
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It appears that this case has been set several times for pretrial (November 29, 1985, January 29, 1986, May 12,1986,
November 19, 1986, January 14, 1987 and February 27,
1987). For the first two scheduled hearings, respondent bank's
counsel failed to appear causing the dismissal without
prejudice of the case which was nevertheless set aside upon
respondent bank's motion for reconsideration of the dismissal.
The November 19, 1986 hearing was transferred to January
14, 1987 upon agreement by both counsels. For the last two
scheduled dates counsel for the defendant Hugo Arca failed to
appear.
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Judge Benigno M. Puno was replaced by Judge Federico Y.

Alikpala, Jr. as the presiding judge of the Makati Regional Trial
Court, Branch 150 who, on March 6, 1987, issued an Order,
quoted hereunder as follows:
The records of this case show that among the defendants
herein are: (a) Rio Arturo R. Salceda; and (b) Acropolis
Trading Corporation. The Sheriff's Return, dated June 4, 1980
(Records Page 33) show the following report on the service of
summons thereto:

275

As to defendant Acropolis Trading Corporation: "Served upon

the defendant thru Miss BETH REYES, Clerk-employee,
employed thereat, who signed for the receipt thereof.
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As to defendant Rio Arturo Salceda: "Not serve (sic),

defendant is not residing at the given address, occupant is
Leonito Acuron.
The Court hereby informs the plaintiff that it shall not consider
defendant Acropolis Trading Corporation as having been
properly brought under the jurisdiction of this Court in view of
the improper service of summons on said corporation (Sec. 13
of Rule 14, Revised Rules of Court).
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In view of the foregoing, plaintiff is hereby directed to inform

the Court, within ten (10) days from its receipt hereof, what
steps plaintiff intends to take with respect to the said two
defendants so that the Court will know whether plaintiff is still
interested in the prosecution and/or outcome of this case.

chanroblesvirtualawlibrarychanroble s virtual law library

With respect to defendants Conrado T. Calalang, the latter had

filed a motion to dismiss which, however, was denied by the
Court per Order dated August 8, 1985. The records of this case
do not, however, show whether a copy of the said Order was
transmitted to, or received by, counsel for the said defendant.
In any event, said defendant had not filed any motion for the
reconsideration of the said Order, nor had said defendant filed
his answer in this case. Let, therefore, a copy of the Order
dated August 8, 1985 be sent to the defendant Conrado T.
Calalang, through his counsel of record, Attys. N.J. Quisumbing
& Associates of the Lawyers' Inn.
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Inasmuch as it would appear that the setting of this case for

pre-trial was premature, since issues herein do not appear to
have been really joined, the pre-trial conference scheduled in
this case for April 8, 1987 is cancelled until further assignment
or until any of the parties herein shall make the appropriate
steps in connection therewith.
xxx xxx xxx 3

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276

The above Order was received by petitioner's counsel on March

13, 1987.4
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On March 17, 1987, respondent bank, in response to the Order

dated March 6, 1987, filed a manifestation stating that:
1. It is very much interested in prosecuting the complaint
against the defendants Acropolis Trading and Salceda;
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2. Pursuant to this, counsel has requested the Credit

Investigation Department of plaintiff to verify the correct
address of said defendants including all necessary facts for the
proper service of summons on them;
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3. Upon verification, plaintiff will then move for the issuance of

Alias Summons on the said defendants. 5
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Thereafter, on March 24, 1987, petitioner Calalang moved to

dismiss the complaint on the ground that respondent bank
failed to prosecute the case for an unreasonable length of
time. 6
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On April 3, 1987, the trial court issued another Order, to wit:

Before this Court is plaintiff's "Manifestation" filed on March
18, 1987 stating that plaintiff is interested in prosecuting its
complaint against defendants Acropolis Trading and Rio Arturo
R. Salceda; this manifestation was made as a consequence of
the directives set out in the second paragraph of the Order
dated March 6, 1987.
chanroblesvirtualawlibrarychanroble s virtual law library

Since the Court cannot let an unreasonable period pass for

plaintiff to cause service of alias summons on the aforesaid
defendants, the Court hereby resolves that if plaintiff shall still
be unable to cause service of alias summons on the said
defendants within thirty (30) days from plaintiff's receipts
hereof, then this Court will dismiss the complaint as against
said defendants and proceedings herein shall be limited to the
defendants on whom summons had been served as of the
lapse of said 30-days' period. 7
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277

Thereafter, on May 8, 1987, respondent bank moved for the

issuance of alias summons on defendant Acropolis Trading
Corporation through its President/Director Conrado T. Calalang
or through its director Hugo M. Arca. 8
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Judge Zosimo Z. Angeles of the Makati Regional Trial Court,

Branch 58, to whom the case was assigned after Judge
Federico Y. Alikpala, Jr., then issued an Order, dated July 16,
1987, denying the Motion to Dismiss filed by petitioner for lack
of merit. The motion for alias summons was granted. Entry of
appearance of Atty. Crisostomo J. Danguilan as counsel for
respondent bank was noted in the same order. 9
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Petitioner then filed his answer only on November 10, 1987. 10

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virtual law library

On November 16, 1987, the trial court issued an Order setting

the
pre-trial of the case for January 7, 1988 at 8:30 a.m. 11
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At the pre-trial conference, respondent bank's counsel arrived

15 minutes late or at 8:45 a.m.. However, the case had
already been dismissed. Thus, in the Order of January 7, 1988,
the court declared:
For failure of plaintiff's counsel to appear inspite of notice and
considering that this case has been pending for seven (7)
years, without plaintiff having taken positive steps to
prosecute the same, it is hereby DISMISSED pursuant to
Section 3, Rule 17, Rules of Court. Defendants' counterclaim is
likewise dismissed.12
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On January 12, 1988, counsel for the respondent bank filed a

Motion for Reconsideration of the order of dismissal citing as
reason for his late arrival "the unusually heavy traffic he
encountered along Kamias Road in Quezon City, which was
caused by a stalled jeepney along the main
thoroughfare." 13 The motion was denied on January 26, 1988.
The respondent bank appealed the dismissal to the respondent
Court. On October 25, 1991, the respondent Court

278

promulgated the assailed decision, the dispositive portion of

which is quoted hereunder:
WHEREFORE, the Order of the court a quo dated January 9,
1988 dismissing this case and its Order dated January 26,
1988 denying reconsideration of the first order are hereby SET
ASIDE, and this case is ordered remanded to the court of
origin for further proceedings.
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No pronouncement as to costs.

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SO ORDERED. 14

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The petitioner's Motion for Reconsideration having been denied

by the Court of Appeals, he filed this instant petition with this
Court alleging that the respondent Court erred in:
1.) absolving respondent bank for the delay in the pursuit of
the case;
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2.) declaring the January 7, 1988 pre-trial as premature;

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3.) holding that respondent bank "did not entirely fail to

appear;
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4.) invoking the liberal application of the rules of procedure in

favor of the respondent bank;
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5.) not having found abuse in the dismissal by the lower court
of the case at bar, there is no basis for the respondent court to
reverse the order of dismissal.
The pre-trial conference scheduled for January 8, 1987 was
not premature. A pre-trial cannot validly be held until the last
pleading has been filed, which last pleading may be the
plaintiff's reply, except where the period to file the last
pleading has lapsed. 15 The period to appear and file the
necessary pleading having expired on the Acropolis Trading
Corporation, the lower court can direct that a pre-trial
conference be held among the answering defendants.

279

However, though it is within the discretion of the trial court to

declare a party non-suited for non-appearance in the pre-trial
conference, such discretion must not be abused. The
precipitate haste of the lower court in declaring the respondent
bank non-suited was uncalled for and deserved a second look.
Considering the fact that the counsel for the
plaintiff/respondent bank did arrive for the pre-trial
conference, though a bit late and that counsel for the
defendant was himself also late, the trial court should have
called the case again. An admonition to both counsels to be
more prompt in appearing before the Court as scheduled would
have sufficed, instead of having dismissed the complaint
outright.
chanroblesvirtualawlibrarychanroble s virtual law library

Unless a party's conduct is so negligent, irresponsible,

contumacious, or dilatory as to provide substantial grounds for
dismissal for non-appearance, the courts should consider
lesser sanctions which would still amount into achieving the
desired end. 16
Inconsiderate dismissals, even if without prejudice, do not
constitute a panacea nor a solution to the congestion of court
dockets; while they lend a deceptive aura of efficiency to
records of individual judges, they merely postpone the
ultimate reckoning between the parties. In the absence of
clear lack of merit or intention to delay, justice is better served
by a brief continuance, trial on the merits, and final disposition
of the cases before the court. 17
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And there is authority that an order dismissing a plaintiff's

complaint without prejudice for failure of his counsel to appear
at a pre-trial conference must be reversed as too severe a
sanction to visit on a litigant where the record is devoid of
evidence reflecting the litigant's willful or flagrant disregard for
the Court's authority. 18
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Petitioner's contention that the respondent Court erred in

absolving respondent bank for the delay in the resolution of
this case, maintaining that "the case was dismissed out of its
inordinate refusal to heed the warnings of the court", is not
280

borne out by the records of this case. The seven-year delay is

not attributable to the respondent bank alone but to
circumstances beyond its control. The respondent Court found
that:
While it is true that the case had been pending for that length
of time we find that the delay is not to be attributed entirely to
the plaintiff in this case. The records show that various
incidents were raised by the defendants Calalang and Arca who
filed separate pleadings and were represented by different
counsels.
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Calalang filed a motion for the dismissal of the case on the

ground that the plaintiff had no cause of action against him.
This necessitated the filing of an opposition from the plaintiff, a
reply to said opposition from the defendant Calalang, and a
rejoinder to the said reply. The defendant Arca, on the other
hand, initially sought an extension of time to file a responsive
pleading, then filed a motion for a bill of particulars, then later
also a motion to dismiss the case. After his motion to dismiss
was denied Arca filed a motion for reconsideration. In all these
incidents pleadings and counter-pleadings were filed and
hearings held on the motions, which resulted in the case
dragging on for a considerable time.
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The case was set for pre-trial several times when, as

aforestated, the issues were not yet joined for only Arca had
initially filed his answer to the complaint. The case was
ordered dismissed at least two (2) times when the plaintiff's
counsel failed to appear at these pre-trials but the dismissals
were reconsidered and the class set anew.
chanroblesvirtualawlibrarychanroble s virtual law library

Another factor that contributed to the confusion in the

proceedings and the delay in the case is the fact that the case
was assigned from one judge to another due probably to the
judicial reorganization that took place. The records show that
there were no less than four (4) judges who handled the case Judges Segundo Zosa, Benigno M. Puno, Federico Alikpala, Jr.,
and Zosimo Angeles.
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281

The answer of defendant Arca to the complaint was filed only

on October 30, 1985 while that of defendant Calalang was filed
only on November 10, 1987. 19
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Again, petitioner's contention that the fact that respondent

bank had not caused service of summons on the two other
defendants, the Acropolis Trading Corporation and Rio Arturo
Salceda, for almost seven years after the complaint was filed
on April 29, 1980 indicated "abuse of judicial leniency and
tolerance" is bereft of merit. Summons is issued by the clerk of
court upon the filing of the complaint. When it was informed
later on by Judge Alikpala, Jr. in his Order dated March 6, 1987
that there was an improper service on defendants Acropolis
Trading Corporation and Rio Arturo Salceda, respondent bank,
in compliance therewith, filed a motion for alias summons, as
permitted by the law.
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Considering the judicial reorganization which took place during

the pendency of this case and the numerous instances raised
by both petitioner and respondent bank as contributing to the
delay, petitioner cannot now claim that respondent bank's
"abuse of judicial leniency and tolerance is the single greatest
component of this delay". 20
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The acts of the respondent bank do not manifest lack of

interest to prosecute, in the absence of proof that it indeed
abandoned or intended to
abandon its case against petitioner and the other defendants.
Admittedly there was delay in this case, but such delay, We
hold, is not the delay warranting dismissal. To be a sufficient
ground for dismissal, delay must not only be lengthy but also
unnecessary and dilatory resulting in the trifling of judicial
processes.
chanroblesvirtualawlibrarychanroble s virtual law library

In Marahay vs. Melicor, 21 the Court set forth the test for
dismissal of a case due to failure to prosecute, to wit:
While a court can dismiss a case on the ground of non
prosequitur, the real test for the exercise of such power is
whether, under the circumstances, plaintiff is chargeable with
282

want of due diligence in failing to proceed with reasonable

promptitude. In the absence of a pattern or scheme to delay
the disposition of the case or a wanton failure to observe the
mandatory requirement of the rules on the part of the plaintiff,
as in the case at bar, courts should decide to dispense with
rather than wield their authority to dismiss.
Dismissal of a case for failure to prosecute is a matter
addressed to the sound discretion of the court. That discretion,
however, must not be abused. Thus, courts may not enter a
dismissal which is not warranted by the circumstances of the
case. 22 The availability of this recourse must be determined
according to each case's procedural history, situation at the
time of the dismissal and whether, and under the
circumstances of the particular case, the plaintiff is chargeable
with want of due diligence in failing to proceed with reasonable
promptitude. 23
. . . The desideratum of a speedy disposition of cases should
not, if at all possible, result in the precipitate loss of a party's
right to present evidence and either in plaintiff's being nonsuited or the defendant's being pronounced liable under an exparte judgment.
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. . (T)rial courts have . . the duty to dispose of controversies

after trial on the merits whenever possible. It is deemed an
abuse of discretion for them, on their own motion, "to enter a
dismissal which is not warranted by the circumstances of the
case" (Municipality of Dingras v. Bonoan, 85 Phil. 458-59
[1950]). While it is true that the dismissal of an action on
grounds specified under Section 3, Rule 17 of the Revised
Rules of Court is addressed to their discretion (Flores v. Phil.
Alien Property Administrator, 107 Phil. 778 [1960];
Montelibano v. Benares, 103 Phil. 110 [1958]; Adorable v.
Bonifacio, 105 Phil. 1269 [1959]; Inter-Island Gas Service,
Inc. v. De la Gerna, L-17631, October 19, 1966, 18 SCRA
390), such discretion must be exercised soundly with a view to
the circumstances surrounding each particular case (VernusSanciangco v. Sanciangco,

283

L-12619, April 28, 1962, 4 SCRA 1209). If facts obtain that

serve as mitigating circumstances for the delay, the same
should be considered and dismissal denied or set aside (Rudd
v. Rogerson, 15 ALR 2d 672; Cervi v. Greenwood, 147 Colo
190, 362 P. 2d 1050 [1961]), especially where the suit appears
to be meritorious and the plaintiff was not culpably negligent
and no injury results to defendant (27 C.J.S. 235-36, 15 ALR
3rd 680)." (Abinales vs. Court of First Instance of Zamboanga
City, Br. I, 70 SCRA 590, 595).
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It is true that the allowance or denial of petitions for

postponement and the setting aside of orders previously
issued, rest principally upon the sound discretion of the judge
to whom they are addressed, but always predicated on the
consideration that more than the mere convenience of the
courts or of the parties of the case, the ends of justice and
fairness would be served thereby (Camara Vda. de Zubiri v.
Zubiri, et al., L-16745, December 17, 1966). . . . . 24
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IN VIEW OF THE FOREGOING, the petition is DISMISSED. The

decision of the Court of Appeals dated October 25, 1991 and
its Resolution of December 12, 1991 are both AFFIRMED. Costs
against petitioner.
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SO ORDERED.
Citibank N.A. vs. Chua, 220 SCRA 75 (1993)
G.R. No. 102300. March 17, 1993.
CITIBANK, N.A., petitioner, vs. HON. SEGUNDINO G. CHUA, SANTIAGO M. KAPUNAN
and LUIS L. VICTOR, ASSOCIATE JUSTICES OF THE HON. COURT OF APPEALS, THIRD
DIVISION, MANILA, HON. LEONARDO B. CANARES, Judge of Regional, Trial Court of
Cebu, Branch 10, and SPOUSES CRESENCIO AND ZENAIDA VELEZ, respondents.
SYLLABUS
1. COMMERCIAL LAW; PRIVATE CORPORATIONS; LEVELS OF CONTROL IN
CORPORATE HIERARCHY; BOARD OF DIRECTORS MAY VALIDLY DELEGATE SOME
FUNCTIONS TO INDIVIDUAL OFFICERS OR AGENTS. In the corporate hierarchy, there
are three levels of control: (1) the board of directors, which is responsible for corporate
policies and the general management of the business affairs of the corporation; (2) the

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officers, who in theory execute the policies laid down by the board, but in practice often have
wide latitude in determining the course of business operations; and (3) the stockholders who
have the residual power over fundamental corporate changes, like amendments of the
articles of incorporation. However, just as a natural person may authorize another to do
certain acts in his behalf, so may the board of directors of a corporation validly delegate
some of its functions to individual officers or agents appointed by it.
2. ID.; ID.; HOW CORPORATE POWERS CONFERRED UPON CORPORATE OFFICERS
OR AGENTS; EXERCISE OF POWERS INCIDENTAL TO EXPRESS POWERS
CONFERRED. Corporate powers may be directly conferred upon corporate officers or
agents by statute, the articles of incorporation, the by-laws or by resolution or other act of the
board of directors. In addition, an officer who is not a director may also appoint other agents
when so authorized by the by-laws or by the board of directors. Such are referred to as
express powers. There are also powers incidental to express powers conferred. It is a
fundamental principle in the law of agency that every delegation of authority, whether general
or special, carries with it, unless the contrary be expressed, implied authority to do all of
those acts, naturally and ordinarily done in such cases, which are reasonably necessary and
proper to be done in order to carry into effect the main authority conferred. Since the by-laws
are a source of authority for corporate officers and agents of the corporation, a resolution of
the Board of Directors of Citibank appointing an attorney in fact to represent and bind it
during the pre-trial conference of the case at bar is not necessary because its by-laws allow
its officers, the Executing Officer and the Secretary Pro-Tem, to execute a power of attorney
to a designated bank officer, William W. Ferguson in this case, clothing him with authority to
direct and manage corporate affairs.
3. ID.; ID.; ADOPTION OF BY-LAWS; PROVISION OF SECTION 46 OF CORPORATION
CODE REFERRING TO EFFECTIVITY OF CORPORATE BY-LAWS APPLICABLE ONLY TO
DOMESTIC CORPORATIONS. A corporation can submit its by-laws, prior to
incorporation, or within one month after receipt of official notice of the issuance of its
certificate of incorporation by the SEC. When the third paragraph of the above provision
mentions "in all cases", it can only refer to these two options; i.e., whether adopted prior to
incorporation or within one month after incorporation, the by-laws shall be effective only upon
the approval of the SEC. But even more important, said provision starts with the phrase
"Every corporation formed under this Code", which can only refer to corporations
incorporated in the Philippines. Hence, Section 46, in so far as it refers to the effectivity of
corporate by-laws, applies only to domestic corporations and not to foreign corporations.
4. ID.; FOREIGN CORPORATIONS; ISSUANCE OF LICENSE TO TRANSACT BUSINESS
IN THE PHILIPPINES; REQUISITES; GRANT OF LICENSE IN EFFECT APPROVAL BY
SEC OF FOREIGN CORPORATION'S BY-LAWS. Section 125 of the same Code requires
that a foreign corporation applying for a license to transact business in the Philippines must
submit, among other documents, to the SEC, a copy of its articles of incorporation and bylaws, certified in accordance with law. Unless these documents are submitted, the
application cannot be acted upon by the SEC. In the following section, the Code specifies
when the SEC can grant the license applied for. Section 126 provides in part: "SEC. 126.
Issuance of a license. If the Securities and Exchange Commission is satisfied that the
applicant has complied with all the requirements of this Code and other special laws, rules
and regulations, the Commission shall issue a license to the applicant to transact business in
the Philippines for the purpose or purposes specified in such license . . ." Since the SEC will
grant a license only when the foreign corporation has complied with all the requirements of
law, it follows that when it decides to issue such license, it is satisfied that the applicant's bylaws, among the other documents, meet the legal requirements. This, in effect, is an
approval of the foreign corporations by-laws. It may not have been made in express terms,

285

still it is clearly an approval. Therefore, petitioner bank's by-laws, though originating from a
foreign jurisdiction, are valid and effective in the Philippines.
5. CIVIL LAW; AGENCY; SPECIAL POWER OF ATTORNEY; WHEN POWER OF
ATTORNEY COMPREHENSIVE ENOUGH TO INCLUDE AUTHORITY TO APPEAR AT
PRE-TRIAL CONFERENCE. It is also error on the part of the Court of Appeals to state
that the power of attorney given to the four (4) Citibank employees is not a special power of
attorney as required in paragraph 3, Article 1878 of the Civil Code and Section 1 (a), Rule 20
of the Rules of Court. In the case of Tropical Homes, Inc. vs. Villaluz, the special power of
attorney executed by petitioner bank therein contained the following pertinent terms "to
appear for and in its behalf in the above-entitled case in all circumstances where its
appearance is required and to bind it in all said instances". The court ruled that: "Although
the power of attorney in question does not specifically mention the authority of petitioner's
counsel to appear and bind the petitioner at the pre-trial conference, the terms of said power
of attorney are comprehensive enough as to include the authority to appear for the petitioner
at the pre-trial conference."
6. ID.; ID.; ID.; LEGAL COUNSEL APPOINTED TO REPRESENT BANK IN COURT
PURSUANT TO BY-LAW PROVISION CONSIDERED AN EMPLOYEE FOR A SPECIAL
PURPOSE. Attorney was sufficient under the by-law provision authorizing Ferguson to
delegate any of his functions to any one or more employees of the petitioner bank. A
reasonable interpretation of this provision would include an appointment of a legal counsel to
represent the bank in court, for, under the circumstances, such legal counsel can be
considered, and in fact was considered by the petitioner bank, an employee for a special
purpose. Furthermore, Ferguson, who heads the Philippine office thousands of miles away
from its main office in the United States, must be understood to have sufficient powers to act
promptly in order to protect the interests of his principal.
7. REMEDIAL LAW; CIVIL PROCEDURE; PRECIPITATE ORDERS OF DEFAULT
FROWNED UPON BY SUPREME COURT; REASON THEREFOR; WHEN PARTY MAY BE
PROPERLY DEFAULTED. We reiterate the previous admonitions of this Court against
"precipitate orders of default as these have the effect of denying the litigant the chance to be
heard. While there are instances, to be sure, when a party may be properly defaulted, these
should be the exceptions rather than the rule and should be allowed only in clear cases of an
obstinate refusal or inordinate neglect to comply with the orders of the court. Absent such a
showing, the party must be given every reasonable opportunity to present his side and to
refute the evidence of the adverse party in deference to due process of law".
8. LEGAL ETHICS; AUTHORITY OF ATTORNEYS TO BIND CLIENTS. Under Rule 138,
Section 23 of the Rules of Court, an attorney has authority to bind his client in any case by
an agreement in relation thereto made in writing, and this authority would include taking
appeals and all matters of ordinary judicial procedure. But he cannot, without special
authority, compromise his client's litigation or receive anything in discharge of a client's claim
but the full amount in cash. The special powers of attorney separately executed by Florencia
Tarriela and William W. Ferguson granted to J.P. Garcia & Associates are very explicit in their
terms as to the counsel's authority in the case at bar.
DECISION
CAMPOS, JR., J p:

286

Petitioner is a foreign commercial banking corporation duly licensed to do business in the

Philippines. Private respondents, spouses Cresencio and Zenaida Velez, were good clients
of petitioner bank's branch in Cebu until March 14, 1986 when they filed a complaint for
specific performance and damages against it in Civil Case No. CEB-4751 before the
Regional Trial Court of Cebu, Branch 10.
Private respondents alleged in their complaint that the petitioner bank extended to them
credit lines sufficiently secured with real estate and chattel mortgages on equipment. They
claim that petitioner offered them special additional accommodation of Five Million Pesos
(P5,000,000.00) to be availed of in the following manner:
"a. Defendant would and did purchase check or checks from the plaintiffs by exchanging it
with defendant's manager's check on a regular daily basis as reflected in the defendant's
own ledger furnished to plaintiffs;
b. It was further agreed that on the following day, defendant CITIBANK would again
purchase from the plaintiffs, check or checks, by exchanging the same with defendant's
manager's check, which check, however, will be deposited by the plaintiffs with their other
banks to cover the check or checks previously issued by the plaintiffs mentioned above;
c. The same regular and agreed activity would be undertaken by the plaintiffs and defendant
CITIBANK herein every banking day thereafter;" 1
This arrangement started on September 4, 1985 until March 11, 1986, when private
respondents tried to exchange with petitioner bank six checks amounting to P3,095,000.00
but petitioner bank allegedly refused to continue with the arrangement even after repeated
demands. Instead, petitioner bank suggested to private respondents that the total amount
covered by the "arrangement be restructured to thirty (30) months with prevailing interest
rate on the diminishing balance". 2 Private respondents agreed to such a proposal. Then as
a sign of good faith, they issued and delivered a check for P75,000.00 in favor of petitioner
bank which was refused by the latter demanding instead full payment of the entire amount.
For the failure of petitioner bank to comply with this restructuring agreement private
respondents sued for specific performance and damages.
Petitioner bank has a different version of the business relationship that existed between it
and private respondents. Thus:
". . . starting sometime on September 4 of 1985, he (private respondent Crescencio Velez)
deposited his unfunded personal checks with his current account with the petitioner. But prior
to depositing said checks, he would present his personal checks to a bank officer asking the
latter to have his personal checks immediately credited as if it were a cash deposit and at the
same time assuring the bank officer that his personal checks were fully funded. Having
already gained the trust and confidence of the officers of the bank because of his past
transactions, the bank's officer would always accommodate his request. After his requests
are granted which is done by way of the bank officer affixing his signature on the personal
checks, private respondent Cresencio Velez would then deposit his priorly approved
personal checks to his current account and at the same time withdraw sums of money from
said current account by way of petitioner bank's manager's check. Private respondent would
then deposit petitioner bank's manager's check to his various current accounts in other
commercial banks to cover his previously deposited unfunded personal checks with
petitioner bank. Naturally, petitioner bank and its officers never discovered that his personal

287

check deposits were unfunded. On the contrary, it gave the petitioner bank the false
impression that private respondent's construction business was doing very well and that he
was one big client who could be trusted. This deceptive and criminal scheme he did every
banking day without fail from September 4, 1985 up to March 11, 1986. The amounts that he
was depositing and withdrawing during this period (September 4, 1985 to March 11, 1986)
progressively became bigger. It started at P46,000.00 on September 4, 1985 and on March
11, 1986 the amount of deposit and withdrawal already reached over P3,000,000.00. At this
point in time (March 11, 1986), the private respondent Cresencio Velez presumably already
feeling that sooner or later he would be caught and that he already wanted to cash in on his
evil scheme, decided to run away with petitioner's money. On March 11, 1986, he deposited
various unfunded personal checks totalling P3,095,000.00 and requested a bank officer that
the same be credited as cash and after securing the approval of said bank officer, deposited
his various personal checks in the amount of P3,095,000.00 with his current account and at
the same time withdrew the sum of P3,244,000.00 in the form of petitioner's manager's
check. Instead of using the proceeds of his withdrawals to cover his unfunded personal
checks, he ran away with petitioner bank's money. Thus, private respondent Cresencio
Velez's personal checks deposited with petitioner bank on March 11, 1986 in the total
aggregate amount of P3,095,000.00 bounced. The checks bounced after said personal
checks were made the substantial basis of his withdrawing the sum of P3,244,000.00 from
his current account with petitioner bank." 3
Subsequently, on August 19, 1986, petitioner bank filed a criminal complaint against private
respondents for violation of Batas Pambansa Blg. 22 (Bouncing Checks Law) and estafa (six
counts) under Article 315 par. 2(d) of the Revised Penal Code. On April 28, 1988, the
investigating fiscal recommended the filing of an information against private respondents for
violations of the mentioned laws.
On June 13, 1989, petitioner bank submitted its answer to the complaint filed by private
respondents. In the Order dated February 20, 1990, the case was set for pre-trial on March
30, 1990 and petitioner bank was directed to submit its pre-trial brief at least 3 days before
the pre-trial conference. Petitioner bank only filed its pre-trial brief on March 30, 1990.
On March 30, 1990, the date of the pre-trial conference, counsel for petitioner bank
appeared, presenting a special power of attorney executed by Citibank officer Florencia
Tarriela in favor of petitioner bank's counsel, the J.P. Garcia & Associates, to represent and
bind petitioner bank at the pre-trial conference of the case at bar.
Inspite of this special power of attorney, counsel for private respondents orally moved to
declare petitioner bank as in default on the ground that the special power of attorney was not
executed by the Board of Directors of Citibank. Petitioner bank was then required to file a
written opposition to this oral motion to declare it as in default. In said opposition petitioner
bank attached another special power of attorney made by William W. Ferguson, Vice
President and highest ranking officer of Citibank, Philippines, constituting and appointing the
J.P. Garcia & Associates to represent and bind the BANK at the pre-trial conference and/or
trial of the case of "Cresencio Velez, et al. vs. Citibank, N.A.". 4 In an Order dated April 23,
1990, respondent judge denied private respondents' oral motion to declare petitioner bank as
in default and set the continuation of the pre-trial conference for May 2, 1990.
On the scheduled pre-trial conference, private respondents reiterated, by way of asking for
reconsideration, their oral motion to declare petitioner bank as in default for its failure to
appear through an authorized agent and that the documents presented are not in

288

accordance with the requirements of the law. Petitioner bank again filed on May 14, 1990 its
opposition thereto, stating as follows:
". . . While it has been the practice of Citibank to appoint its counsels as its attorney-in-fact in
civil cases because it considers said counsels equivalent to a Citibank employee, yet, in
order to avoid further arguments on the matter, the defendant Citibank will secure another
power of attorney from Mr. William W. Ferguson in favor of its employee/s who will represent
the defendant Citibank in the pre-trial conferences of this case. As soon as the said special
power of attorney is secured, the defendant will present it before this Honorable Court and in
pursuance therewith, the defendant hereby makes a reservation to present such document
as soon as available." 5
In compliance with the above promise, petitioner bank filed a manifestation, dated May 23,
1990, attaching therewith a special power of attorney executed by William W. Ferguson in
favor of Citibank employees to represent and bind Citibank on the pre-trial conference of the
case at bar. 6
On August 15, 1990, respondent judge issued an order declaring petitioner bank as in
default. This order, received by petitioner bank on September 27, 1990, cited the following as
reason for the declaration of default:
"Defendant-bank, although a foreign corporation, is bound by Philippine laws when doing
and conducting business in the Philippines (Sec. 129, B.P. Blg. 68), and its corporate powers
could only be exercised by its Board of Directors (Sec. 23, B.P. Blg. 68). The exercise by the
Board of Directors of such power could only be valid if it bears the approval of the majority of
the Board (Sec. 25, par. 2, Corporation Code). The records does not show the requisite
document. The alleged authority (Special Power of Attorney, Annex "A") executed by Mr.
William W. Ferguson in favor of the alleged Citibank employees, assuming the same to be a
delegable authority, to represent the defendant in the pre-trial conference, made no mention
of J.P. Garcia & Associates as one of the employees of the defendant.
It stands to reason therefore, that the defendant-bank has no proper representation during
the pre-trial conference on May 2, 1990 for purposes of Sec. 2, Rule 20 of the Rules of
Court." 7
On October 1, 1990, petitioner bank filed a motion for reconsideration of the above order but
it was denied on December 10, 1990.
Petitioner bank then filed a petition for certiorari, prohibition and mandamus with preliminary
injunction and/or temporary restraining order with the Court of Appeals. On June 26, 1991,
the Court of Appeals dismissed the petition on the following grounds:
". . . In the first place, petitioner admitted that it did not and could not present a Board
resolution from the bank's Board of Directors appointing its counsel, Atty. Julius Z. Neri, as its
attorney-in-fact to represent and bind it during the pre-trial conference of this case. This
admission is contained on pages 12 and 13 of the instant petition.
In the second place, the "By-Laws" of petitioner which on its face authorizes (sic) the
appointment of an attorney-in-fact to represent it in any litigation, has not been approved by
the Securities and Exchange Commission, as required by Section 46 of the Corporation
Code of the Philippines. Apparently, the "By-Laws" in question was (sic) approved under the
laws of the United States, but there is no showing that the same was given the required

289

imprimatur by the Securities and Exchange Commission. Since petitioner is a foreign

corporation doing business in the Philippines, it is bound by all laws, rules and regulations
applicable to domestic corporations (Sec. 129, Corporation Code).
In the third place, no special power of attorney was presented authorizing petitioner's
counsel of record, Atty. Julius Neri and/or J.P. Garcia Associates, to appear for and in behalf
of petitioner during the pre-trial.
What petitioner exhibited to the court a quo was a general power of attorney given to one
William W. Ferguson who in turn executed a power of attorney in favor of five (5) (sic)
Citibank employees to act as attorney-in-fact in Civil Case No. CEB-4751. Yet, during the
pre-trial not one of said employees appeared, except counsel who is not even a bank
employee.
Furthermore, even assuming the validity of the power of attorney issued by petitioner in favor
of Ferguson as well as the power of attorney he issued to five (5) (sic) Citibank employees,
said power of attorney has not been shown to be a Special Power of Attorney precisely
intended not only to represent the bank at the pre-trial of the case on a certain date but also
to enter into any compromise as required in paragraph 3, Article 1878 of the Civil Code and
Section 1 (a), Rule 20, Rules of Court." 8
Hence, this instant petition.
Petitioner bank contends that no board resolution was necessary for its legal counsel, Atty.
Julius Z. Neri, or Citibank employees to act as its attorney-in-fact in the case at bar because
petitioner bank's by-laws grant to its Executing Officer and Secretary Pro-Tem the power to
delegate to a Citibank officer, in this case William W. Ferguson, the authority to represent
and defend the bank and its interests.
Furthermore, it contends that the Court of Appeals erred in holding that the by-laws of
petitioner bank cannot be given effect because it did not have the imprimatur of the
Securities and Exchange Commission (SEC) as required by Section 46 of the Corporation
Code of the Philippines.
Private respondents refute both contentions. They assail the authority of petitioner bank's
legal counsel to appear at the pre-trial conference on two grounds, namely: first, that the
authority did not come from the Board of Directors which has the exclusive right to exercise
corporate powers; and second, that the authority granted to the Executing Officer in the bylaws was ineffective because the same were not submitted to, nor approved by, the SEC.
There are thus two issues in this case. First, whether a resolution of the board of directors of
a corporation is always necessary for granting authority to an agent to represent the
corporation in court cases. And second, whether the by-laws of the petitioner foreign
corporation which has previously been granted a license to do business in the Philippines,
are effective in this jurisdiction. If the by-laws are valid and a board resolution is not
necessary as petitioner bank claims, then the declaration of default would have no basis.
In the corporate hierarchy, there are three levels of control: (1) the board of directors, which
is responsible for corporate policies and the general management of the business affairs of
the corporation; (2) the officers, who in theory execute the policies laid down by the board,
but in practice often have wide latitude in determining the course of business operations; and
(3) the stockholders who have the residual power over fundamental corporate changes, like

290

amendments of the articles of incorporation. However, just as a natural person may

authorize another to do certain acts in his behalf, so may the board of directors of a
corporation validly delegate some of its functions to individual officers or agents appointed by
it.
Section 23 of the Corporation Code of the Philippines in part provides:
"SEC. 23. The board of directors or trustees. Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of directors
or trustees to be elected from among the holders of stocks, or where there is no stock, from
among the members of the corporation, who shall hold office for one (1) year and until their
successors are elected and qualified.
xxx xxx xxx" (Emphasis supplied).
Thus, although as a general rule, all corporate powers are to be exercised by the board of
directors, exceptions are made where the Code provides otherwise.
Section 25 of said Code provides that the directors of the corporation shall elect its corporate
officers, and further provides as follows:
"SEC. 25. Corporate officers; quorum. . . . The directors or trustees and officers to be
elected shall perform the duties enjoined on them by law and by the by-laws of the
corporation . . ."
Furthermore, Section 47 of the same Code enumerates what may be contained in the bylaws, among which is a provision for the "qualifications, duties and compensation of directors
or trustees, officers and employees". (Emphasis supplied.)
Taking all the above provisions of law together, it is clear that corporate powers may be
directly conferred upon corporate officers or agents by statute, the articles of incorporation,
the by-laws or by resolution or other act of the board of directors. In addition, an officer who
is not a director may also appoint other agents when so authorized by the by-laws or by the
board of directors. Such are referred to as express powers. 9 There are also powers
incidental to express powers conferred. It is a fundamental principle in the law of agency that
every delegation of authority, whether general or special, carries with it, unless the contrary
be expressed, implied authority to do all of those acts, naturally and ordinarily done in such
cases, which are reasonably necessary and proper to be done in order to carry into effect the
main authority conferred. 10
Since the by-laws are a source of authority for corporate officers and agents of the
corporation, a resolution of the Board of Directors of Citibank appointing an attorney in fact to
represent and bind it during the pre-trial conference of the case at bar is not necessary
because its by-laws allow its officers, the Executing Officer and the Secretary Pro-Tem, ** to
execute a power of attorney to a designated bank officer, William W. Ferguson in this case,
clothing him with authority to direct and manage corporate affairs. The relevant provision in
the general power of attorney granted to him are as follows:
"A. That the Executing Officer and the Secretary Pro-Tem are of full age, competent to act in
the premises, to me personally known, and that they are authorized to execute this

291

instrument by virtue of the powers granted to them pursuant to the By-Laws of the Bank and
the laws of the United States of America, and that the Executing Officer said that he, on the
one hand, hereby revokes and cancels any instrument of power of attorney previously
executed on behalf of the Bank for use in the PHILIPPINES, in favor of WILLIAM W.
FERGUSON (hereinafter referred to as the "Attorney-in-fact"), of legal age, a Banker, and
now residing in the PHILIPPINES, and that he (the Executing Officer), on the other hand,
does hereby authorize and empower the Attorney-in-fact, acting in the name or on behalf of
the Bank, or any of its Branches, or any interest it or they may have or represent, said
revocation and authorization to be effective as of this date as follows:
xxx xxx xxx
XVII. To represent and defend the Bank and its interest before any and all judges and courts,
of all classes and jurisdictions, in any action, suit or proceeding in which the Bank may be a
party or may be interested in administrative, civil, criminal, contentious or contentiousadministrative matters, and in all kinds of lawsuits, recourses or proceedings of any kind or
nature, with complete and absolute representation of the Bank, whether as plaintiff or
defendant, or as an interested party for any reason whatsoever . . .
xxx xxx xxx
XXI. To substitute or delegate this Power of Attorney in whole or in part in favor of such one
or more employees of the Bank, as he may deem advisable, but without divesting himself of
any of the powers granted to him by this Power of Attorney; and to grant and execute in favor
of any one or more such employees, powers of attorney containing all or such
authorizations, as he may deem advisable. . . " 11
Since paragraph XXI above specifically allows Ferguson to delegate his powers in whole or
in part, there can be no doubt that the special power of attorney in favor, first, of J.P. Garcia
& Associates and later, of the bank's employees, constitutes a valid delegation of Ferguson's
express power (under paragraph XVII above) to represent petitioner bank in the pre-trial
conference in the lower court.
This brings us to the second query: whether petitioner bank's by-laws, which constitute the
basis for Ferguson's special power of attorney in favor of petitioner bank's legal counsel are
effective, considering that petitioner bank has been previously granted a license to do
business in the Philippines.
The Court of Appeals relied on Section 46 of the Corporation Code to support its conclusion
that the by-laws in question are without effect because they were not approved by the SEC.
Said section reads as follows:
"SEC. 46. Adoption of by-laws. Every corporation formed under this Code must, within
one (1) month after receipt of official notice of the issuance of its certificate of incorporation
by the Securities and Exchange Commission, adopt a code of by-laws for its government not
inconsistent with this Code. For the adoption of by-laws by the corporation, the affirmative
vote of the stockholders representing at least a majority of the outstanding capital stock, or of
at least a majority of the members in the case of non-stock corporations, shall be necessary.
The by-laws shall be signed by the stockholders or members voting for them and shall be
kept in the principal office of the corporation, subject to the inspection of the stockholders or
members during office hours; and a copy thereof, duly certified to by a majority of the
directors or trustees and countersigned by the secretary of the corporation, shall be filed with

292

the Securities and Exchange Commission which shall be attached to the original articles of
incorporation.
Notwithstanding the provisions of the preceding paragraph, by-laws may be adopted and
filed prior to incorporation; in such case, such by-laws shall be approved and signed by all
the incorporators and submitted to the Securities and Exchange Commission, together with
the articles of incorporation.
In all cases, by-laws shall be effective only upon the issuance by the Securities and
Exchange Commission of a certification that the by-laws are not inconsistent with this Code."
A careful reading of the above provision would show that a corporation can submit its bylaws, prior to incorporation, or within one month after receipt of official notice of the issuance
of its certificate of incorporation by the SEC. When the third paragraph of the above
provision mentions "in all cases", it can only refer to these two options; i.e., whether adopted
prior to incorporation or within one month after incorporation, the by-laws shall be effective
only upon the approval of the SEC. But even more important, said provision starts with the
phrase "Every corporation formed under this Code", which can only refer to corporations
incorporated in the Philippines. Hence, Section 46, in so far as it refers to the effectivity of
corporate by-laws, applies only to domestic corporations and not to foreign corporations.
On the other hand, Section 125 of the same Code requires that a foreign corporation
applying for a license to transact business in the Philippines must submit, among other
documents, to the SEC, a copy of its articles of incorporation and by-laws, certified in
accordance with law. Unless these documents are submitted, the application cannot be
acted upon by the SEC. In the following section, the Code specifies when the SEC can grant
the license applied for. Section 126 provides in part:
"SEC. 126. Issuance of a license. If the Securities and Exchange Commission is satisfied
that the applicant has complied with all the requirements of this Code and other special laws,
rules and regulations, the Commission shall issue a license to the applicant to transact
business in the Philippines for the purpose or purposes specified in such license . . ."
Since the SEC will grant a license only when the foreign corporation has complied with all
the requirements of law, it follows that when it decides to issue such license, it is satisfied
that the applicant's by-laws, among the other documents, meet the legal requirements. This,
in effect, is an approval of the foreign corporations by-laws. It may not have been made in
express terms, still it is clearly an approval. Therefore, petitioner bank's by-laws, though
originating from a foreign jurisdiction, are valid and effective in the Philippines.
In pursuance of the authority granted to him by petitioner bank's by-laws, its Executing
Officer appointed William W. Ferguson, a resident of the Philippines, as its Attorney-in-Fact
empowering the latter, among other things, to represent petitioner bank in court cases. In
turn, William W. Ferguson executed a power of attorney in favor of J.P. Garcia & Associates
(petitioner bank's counsel) to represent petitioner bank in the pre-trial conference before the
lower court. This act of delegation is explicity authorized by paragraph XXI of his own
appointment, which we have previously cited.
It is also error for the Court of Appeals to insist that the special power of attorney, presented
by petitioner bank authorizing its counsel, Atty. Julius Neri and/or J.P. Garcia & Associates, to
appear for and in behalf of petitioner bank during the pre-trial, is not valid. The records do not

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sustain this finding. We quote with approval the contention of petitioner bank as it is borne by
the records, to wit:
". . . The records of this case would show that at the start, the petitioner, thru counsel,
presented a special power of attorney executed by then Citibank Officer Florencio (sic) J.
Tarriela which was marked as Exhibit "1" in the pre-trial of this case . . . This is precisely the
reason why the court denied, in an Order dated April 23, 1990 . . . the private respondent's
oral motion to declare the defendant in fault. The said special power of attorney executed by
Florencio (sic) J. Tarriela was granted by Mr. Rafael B. Buenaventura, who was then the
Senior Vice-President of Citibank and the highest ranking office of Citibank in the Philippines.
Considering that at the time of the presentation of the said special power of attorney Rafael
B. Buenaventura was no longer connected with Citibank, the petitioner again presented
another special power of attorney executed by William W. Ferguson in favor of J.P. Garcia &
Associates, . . .
Finding that the authority of William W. Ferguson to delegate his authority to act for and in
behalf of the bank in any civil suit is limited to individuals who are employees of the bank the
petitioner again on May 23, 1990 presented another special power of attorney dated May 16,
1990 wherein William W. Ferguson appointed as attorney-in-fact the following employees of
petitioner, namely: Roberto Reyes, Nemesio Solomon, Aimee Yu and Tomas Yap. The said
special power of attorney was filed and presented by the petitioner through its Manifestation
filed in the Trial Court on May 23, 1990, . . ." 12
Under Rule 138, Section 23 of the Rules of Court, an attorney has authority to bind his client
in any case by an agreement in relation thereto made in writing, and this authority would
include taking appeals and all matters of ordinary judicial procedure. But he cannot, without
special authority, compromise his client's litigation or receive anything in discharge of a
client's claim but the full amount in cash. The special powers of attorney separately executed
by Florencia Tarriela and William W. Ferguson granted to J.P. Garcia & Associates are very
explicit in their terms as to the counsel's authority in the case at bar. We quote the relevant
provisions of the special powers of attorney showing sufficient compliance with the
requirements of Section 23, Rule 138, to wit:
"That the BANK further authorized the said J.P. GARCIA & ASSOCIATES to enter into an
amicable settlement, stipulation of facts and/or compromise agreement with the party or
parties involved under such terms and conditions which the said J.P. GARCIA &
ASSOCIATES may deem reasonable (under parameters previously defined by the principal)
and execute and sign said documents as may be appropriate.
HEREBY GIVING AND GRANTING unto J.P. GARCIA & ASSOCIATES full power and
authority whatsoever requisite necessary or proper to be done in or about the premises, as
fully to all intents and purposes as the BANK might or could lawfully do or cause to be done
under and by virtue of these presents." 13
It is also error on the part of the Court of Appeals to state that the power of attorney given to
the four (4) Citibank employees is not a special power of attorney as required in paragraph 3,
Article 1878 of the Civil Code and Section 1 (a), Rule 20 of the Rules of Court. In the case of
Tropical Homes, Inc. vs. Villaluz, 14 the special power of attorney executed by petitioner
bank therein contained the following pertinent terms "to appear for and in its behalf in the
above-entitled case in all circumstances where its appearance is required and to bind it in all
said instances". The court ruled that:

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"Although the power of attorney in question does not specifically mention the authority of
petitioner's counsel to appear and bind the petitioner at the pre-trial conference, the terms of
said power of attorney are comprehensive enough as to include the authority to appear for
the petitioner at the pre-trial conference."
In the same manner, the power of attorney granted to petitioner bank's employees should be
considered a special power of attorney. The relevant portion reads:
"WHEREAS, the Bank is the Defendant in Civil Case No. CEB-4751, entitled "Cresencio
Velez, et al. vs. Citibank, N.A.," pending before the Regional Trial Court of Cebu City, Branch
X;
NOW, THEREFORE, under and by virtue of Article XXI of the Power of Attorney executed by
the Bank in favor of the Attorney-in-Fact (Annex "A"), which provision is quoted above, the
Attorney-in-Fact has nominated, designated and appointed, as by these presents he
nominates, designates and appoints, as his substitutes and delegates, with respect to the
said Power of Attorney, ROBERTO REYES, Vice President and/or NEMESIO SOLOMON,
JR., Manager, AIMEE YU, Assistant Vice President and/or TOMAS YAP, Assistant Manager
(hereinafter referred to as the "DELEGATES"), all of legal age, citizens of the Republic of the
Philippines and with business address at Citibank Center, Paseo de Roxas, Makati, Metro
Manila, Philippines, the Attorney-in-Fact hereby granting, conferring and delegating such
authorities and binding the Bank in the Pre-Trial Conference and/or Trial of the
abovementioned case, pursuant to Rule 20 of the Revised Rules of Court, to the
DELEGATES. The attorney-in-Fact furthermore hereby ratifying and confirming all that the
DELEGATES shall lawfully do or cause to be done under and by virtue of these presents."
15
From the outset, petitioner bank showed a willingness, if not zeal, in pursuing and defending
this case. It even acceded to private respondent's insistence on the question of proper
representation during the pre-trial by presenting not just one, but three, special powers of
attorney. Initially, the special power of attorney was executed by Florencia Tarriela in favor of
J.P. Garcia & Associates, petitioner bank's counsel. Private respondents insisted that this
was not proper authority required by law. To avoid further argument, a second special power
of attorney was presented by petitioner bank, executed by William W. Fersugon, the highest
ranking officer of Citibank in the Philippines, in favor of its counsel J.P. Garcia & Associates.
But since the authority to delegate of William A. Fersugon in favor of an agent is limited to
bank employees, another special power of attorney from Wiliam W. Fersugon in favor of the
Citibank employees was presented. But the respondent trial court judge disregarded all
these and issued the assailed default order. There is nothing to show that petitioner bank
"miserably failed to oblige"; on the contrary, three special powers of attorney manifest
prudence and diligence on petitioner bank's part.
In fact, there was no need for the third power of attorney because we believe that the second
power of attorney was sufficient under the by-law provision authorizing Fersugon to delegate
any of his functions to any one or more employees of the petitioner bank. A reasonable
interpretation of this provision would include an appointment of a legal counsel to represent
the bank in court, for, under the circumstances, such legal counsel can be considered, and in
fact was considered by the petitioner bank, an employee for a special purpose. Furthermore,
Fersugon, who heads the Philippine office thousands of miles away from its main office in
the United States, must be understood to have sufficient powers to act promptly in order to
protect the interests of his principal.

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We reiterate the previous admonitions of this Court against "precipitate orders of default as
these have the effect of denying the litigant the chance to be heard. While there are
instances, to be sure, when a party may be properly defaulted, these should be the
exceptions rather than the rule and should be allowed only in clear cases of an obstinate
refusal or inordinate neglect to comply with the orders of the court. Absent such a showing,
the party must be given every reasonable opportunity to present his side and to refute the
evidence of the adverse party in deference to due process of law". 16
Considering further that petitioner bank has a meritorious defense and that the amount in
contest is substantial, the litigants should be allowed to settle their claims on the arena of the
court based on a trial on the merits rather than on mere technicalities.
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The decision of
the Court of Appeals dated June 26, 1991 and its resolution denying the motion for
reconsideration of petitioner bank dated September 26, 1991 are both REVERSED and SET
ASIDE. The order of default issued on August 15, 1990 in Civil Case CEB-4751 of the
Regional Trial Court of Cebu is ANNULLED and SET ASIDE and the case is hereby
REMANDED to the court of origin for further proceedings.
SO ORDERED.

Paredes vs. Verano, 504 SCRA 264

G.R. No. 164375

October 12, 2006

RODOLFO PAREDES, TITO ALAGO AND AGRIPINO BAYBAY, SR., petitioners,

vs.
ERNESTO VERANO and COSME HINUNANGAN, respondent.

DECISION

TINGA, J.:
The central issue in this case is whether the absence of the counsel for defendants at the
pre-trial, with all defendants themselves present, is a ground to declare defendants in default
and to authorize plaintiffs to present evidence ex parte.
The relevant facts are uncomplicated.
The protracted legal battle between the parties began with a complaint for the establishment
of a right of way filed by petitioners herein as plaintiffs against respondents as
defendants.1 The complaint, docketed as Civil Case No. 2767 of the Regional Trial Court
(RTC) of Maasin City, Southern Leyte, Branch 24, culminated in a judgment by compromise
dated 26 April 1994.2 In the Compromise Agreement, respondent Cosme Hinunangan
granted a two (2) meter-wide right of way in favor of petitioners in consideration of the
amount of P6,000.00 which petitioners agreed to pay.3

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Alleging that petitioners had blocked the passage way in violation of the Compromise
Agreement, on 28 September 1999, respondents filed a complaint for specific performance
with damages against petitioners. It was docketed as Civil Case No. R-3111 also of the RTC
of Maasin City, Southern Leyte, Branch 24.4
In their answer, petitioners denied having violated the Compromise Agreement. They alleged
that like them, respondents were not actual residents of Barangay Tagnipa where the "road
right of way" was established and that respondent Cosme Hinunangan had already sold his
only remaining lot in the vicinity to petitioner Rodolfo Paderes.5
Subsequent to the answer, petitioners filed a motion to dismiss on the ground of lack of
cause of action.6 The trial court, presided by Judge Bethany G. Kapili, denied the motion to
dismiss.7 Petitioners elevated the order of denial to the Court of Appeals and thereafter to
this Court, both to no avail.8
Petitioners asked Judge Kapili to inhibit himself from the case. The judge denied the motion. 9
Pre-trial was initially set for 24 April 2003, but this was reset to 3 June 2003 on motion of
respondents' counsel. But the pre-trial set on 3 June 2003 did not push through either
because none of the parties appeared.
So, pre-trial was reset to 11 November 2003. Petitioner Baybay's counsel moved to reset it
to another date on account of a conflicting hearing. However, petitioner Baybay, who is the
father of the counsel for petitioners, was present in court along with the other defendants,
when the case was called on 11 November 2003. The RTC was informed then of a proposed
settlement between the parties, although respondent Baybay qualified his reaction by telling
the court
that he would first have to inform his lawyer and the co-defendants of the said proposal. The
RTC then commented unfavorably on the absence of petitioners' counsel, expressing
disappointment towards his attitude, even making note of the fact that not once had the
counsel appeared before the RTC, even though the case had already reached the Supreme
Court over the denial of the motion to dismiss.10 At the same time, the RTC acceded and
reset the pre-trial for 23 January 2004.11
Shortly before the new pre-trial date, counsel for petitioners filed a Manifestation of
Willingness to Settle With Request for Cancellation dated 5 January 2004. 12 Apart from
manifesting his willingness to settle the complaint, petitioners' counsel through the
Manifestation suggested to the opposing counsel that he be informed of the terms of the
proposed settlement. Correspondingly, petitioners' counsel requested the cancellation of the
23 January 2004 hearing.
However, the hearing did push through on 23 January 2004. The private respondents and
their counsel were present. So were petitioners Baybay and Paderes, and co-defendant
Alago, but not their counsel.
An order of even date formalized what had transpired during the hearing. The RTC allowed
respondents to present their evidence ex parte, "for failure of the defendants['] counsel to
appear before [the RTC]".13 Petitioners filed a motion for reconsideration, but this was denied
by the RTC.14

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Thus, petitioners filed a petition for certiorari with the Court of Appeals, assailing the orders
of the RTC. However, on 28 April 2004, the Court of Appeals dismissed the petition
outright,15 for failure to attach duplicate original copies of the annexes to the petition other
than the RTC Orders dated 23 January 2004 and 17 February 2004 (attaching photocopies
instead), as well as for failure to submit such other pleadings relevant and pertinent to the
petition. Petitioners filed a Motion for Reconsideration with Motion to Admit Additional
Exhibits, adverting to the documents previously missing from the petition but attached to the
motion.
On 13 July 2004, the Court of Appeals issued a Resolution denying the motion for
reconsideration. In doing so, the Court of Appeals resolved the petition on its merits, as it
ruled that "even with the submission by petitioners of the required pleadings and documents,
the instant petition must nevertheless fail."16 The appellate court quoted extensively from the
transcripts of the hearings of 11 November 2003 and 23 January 2004. It conceded that
under Section 5, Rule 18 of the 1997 Rules of Civil Procedure, it is the failure of the
defendant, and not defendant's counsel, to appear at the pre-trial that would serve cause to
allow plaintiff to present evidence ex parte. Nevertheless, the Court of Appeals noted that
petitioner Baybay had made it clear that he would never enter into any amicable settlement
without the advice of his counsel. Thus, the Court of Appeals concluded that Judge Kapili's
"hands were tied," explaining, thus: "He was held hostage by the blatant display of arrogance
exhibited by petitioner's counsel in assiduously failing to appear before the trial court. Were
he to close his eyes to the reprehensible scheme of Atty. Baybay in delaying the disposition
of the main case, the resulting impass would only strain further the meager resources of the
court and prejudice the rights of private respondents." 17
The Court of Appeals then cited Sps. Ampeloquio, Sr. v. Court of Appeals,18 wherein the
Court held that if every error committed by the trial court were to be a proper object of review
by certiorari, then trial would never come to an end and the appellate court dockets would be
clogged with petitions challenging every interlocutory order of the trial court. It concluded that
the acts of Judge Kapili did not constitute grave abuse of discretion equivalent to lack of
jurisdiction.
Finally, the trial court admonished petitioners' counsel to "bear in mind that as an officer of
the court, he is tasked to observe the rules of procedure, not to unduly delay a case and
defeat the ends of justice but to promote respect for the law and legal processes." 19
We reverse the trial court and the Court of Appeals.
A preliminary observation. The Court of Appeals had initially dismissed the petition lodged by
petitioners on account of their failure to attach several relevant pleadings, citing Section 3,
Rule 46 of the 1997 Rules of Civil Procedure. Before this Court, petitioners devote some
effort in arguing that the Court of Appeals erred in dismissing the petition on that procedural
ground, while respondents in their comment similarly undertook to defend the appellate
court's action on that point. We do not doubt that under Section 3, Rule 46 of the 1997 Rules
of Civil Procedure, the Court of Appeals has sufficient discretion to dismiss the petition for
failure of petitioner to comply with the requirements enumerated in the section, including
"such material portions of the record as are referred to [in the petition], and other documents
relevant or pertinent thereto."20 At the same time, "[d]ismissal of appeals purely on technical
grounds is frowned upon and the rules of procedure ought not to be applied in a very rigid,
technical sense, for they are adopted to help secure, not override, substantial justice, and
thereby defeat their very aims."21 Thus, the Court has not hesitated to view Section 3 of Rule

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46 with a liberal outlook, ruling for example that it was not necessary to attach certified true
copies of such material portions of the record as referred to therein.22
The situation in this case bears similarity to that which transpired in Cortez-Estrada v. Heirs
of Samut.23 Therein, the petitioner had failed to attach material documents to her petition
before the Court of Appeals. The Court of Appeals held the petition was dismissible for such
procedural infirmities, yet it nonetheless proceeded to rule against the petitioner on the
merits. The Supreme Court agreed with the appellate court that the petition was procedurally
infirm, yet found partial merit in its arguments and consequently granted partial relief in favor
of the petitioner. In this case, the Court of Appeals, in resolving the motion for
reconsideration, proceeded to make a judgment on the merits. Similarly, this Court finds
ample basis to review the decision of the trial court as affirmed by the appellate court,
notwithstanding the procedural flaw that originally accompanied the petitiona flaw which
petitioners did seek to remedy when they belatedly attached the relevant documents to their
motion for reconsideration.
Ultimately, there are important reasons to consider the case on the merits. This case affords
the Court the opportunity to clarify the authority granted to a trial judge in relation to pre-trial
proceedings.
The order of the RTC allowing respondents to present evidence ex parte was undoubtedly to
the detriment of petitioners. Since the RTC would only consider the evidence presented by
respondents, and not that of petitioners, the order strikes at the heart of the case, disallowing
as it does any meaningful defense petitioners could have posed. A judgment of default
against a defendant who failed to attend pre-trial, or even any defendant who failed to file an
answer, implies a waiver only of their right to be heard and to present evidence to support
their allegations but not all their other rights.24
The Constitution guarantees that no person shall be deprived of property without due
process of law. One manner by which due process is assured is through the faithful
adherence to the procedural rules that govern the behavior of the party-litigants. The Rules
of Court do sanction, on several instances, penalties for violation of the Rules that causes
the termination of an action without a ruling on the merits, or bars one party from litigating
the same while permitting the other to do so. We noted earlier that Section 3, Rule 46
authorizes the dismissal of an original petition before the Court of Appeals for failure to
append material portions of the record. Pursuant to Section 5, Rule 17, the failure of the
plaintiff to appear on the date of the presentation of his/her evidence in chief on the
complaint is ground for the court to dismiss the complaint, without prejudice to the right of the
defendant to prosecute the counterclaim in the same or in a separate action. And under
Section 5, Rule 18, the failure of the plaintiff or defendant to appear during pre-trial
authorizes the court to either dismiss the complaint, if the plaintiff were absent; or to allow
the plaintiff to present evidence ex parte, if the defendant were absent.
The operation of the above-cited provisions may defeat the cause of action or the defense of
the party who violated the procedural rule. Yet it could not be said that any resultant adverse
judgment would contravene the due process clause, as the parties are presumed to have
known the governing rules and the consequences for the violation of such rules. In contrast,
the same presumption could not attach if a party were condemned to the same outcome
even if the party did not violate a prescribed rule of procedure. Any ruling that disposes of an
action or precludes a party from presenting evidence in support or against thereof must have
basis in law,25 and any ruling so intentioned without legal basis is deemed as issued with

299

grave abuse of discretion.26 In the end, a person who is condemned to suffer loss of property
without justifying legal basis is denied due process of law.
Simply put, nothing in the Rules of Court authorizes a trial judge to allow the plaintiff to
present evidence ex parteon account of the absence during pre-trial of the counsel for
defendant.
Sections 4 and 5 of Rule 18 warrant examination:
SEC. 4. Appearance of Parties. It shall be the duty of the parties and their counsel
to appear at the pre-trial. The non-appearance of a party may be excused only if a
valid cause is shown therefor or if a representative shall appear in his behalf fully
authorized in writing 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.
SEC. 5. Effect of failure to appear. The failure of the plaintiff to appear when so
required pursuant to the next preceding section shall be cause for dismissal of the
action. The dismissal shall be with prejudice, unless otherwise ordered by the court.
A similar failure on the part of the defendant shall be cause to allow the plaintiff to
present his evidence ex parte and the court to render judgment on the basis thereof.
Section 4 imposes the duty on litigating parties and their respective counsel during pre-trial.
The provision also provides for the instances where the non-appearance of a party may be
excused. Nothing, however, in Section 4 provides for a sanction should the parties or their
respective counsel be absent during pre-trial. Instead, the penalty is provided for in Section
5. Notably, what Section 5 penalizes is the failure to appear of either the plaintiff or the
defendant, and not their respective counsel.
Indeed, the Court has not hesitated to affirm the dismissals of complaints or the allowance of
plaintiffs to present evidence ex parte on account of the absence of a party during pre-trial.
In United Coconut Planters Bank v. Magpayo,27 the complaint was dismissed because
although the counsel for complainant was present during the pre-trial hearing, the Court
affirmed such dismissal on account of said counsel's failure to present any special power of
attorney authorizing him to represent the complainant during pre-trial. 28 In Jonathan Landoil
International Co. v. Mangudadatu,29 the defendant and its counsel failed to appear during
pre-trial, and the complainants were allowed to present evidence ex parte. After an adverse
decision was rendered against the defendant, it filed a motion for new trial in which it cited
the illness of defendant's counsel as the reason for his non-appearance during pre-trial.
While the Court acknowledged that such argument was not a proper ground for a motion for
new trial, it also noted that the appearance of the defendant during pre-trial was also
mandatory, and that the defendant failed to justify its own absence during pre-trial. 30
There are two cases which, at first blush, may seem to affirm the action of the RTC. In the
disbarment case ofMiwa v. Medina,31 a lawyer was suspended from the practice for one (1)
month for, among others, failing to appear during pre-trial, thus leading to the declaration of
his client, the defendant, in default. At the same time, the Court in Miwa did take the
defendant herself to task for also failing to appear during pre-trial, observing that "the failure
of a party to appear at pre-trial, given its mandatory character, may cause her to be nonsuited or considered as in default."32

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In Social Security System v. Chaves,33 the Social Security System (SSS) itself was named as
the defendant in a complaint filed with the RTC of Cagayan de Oro City. The pre-trial brief
was filed by the acting assistant branch manager of the SSS in Cagayan de Oro City, who
happened to be a lawyer and who also entered his appearance as counsel for the SSS.
However, said lawyer was not present during pre-trial, and the SSS was declared in default
and the complainants allowed to present their evidence ex parte. The Court affirmed such
order of default, noting other procedural violations on the part of SSS, such as the fact that
the motion for reconsideration to lift the order of default lacked verification, notice of hearing
and affidavit of merit.
Notwithstanding, the Court is not convinced that SSS is ample precedent to affirm an order
of default where even though the defendant was present during pre-trial, defendant's counsel
failed to appear for the same hearing. The Court in SSS did not make any categorical
declaration to this effect. Moreover, it can be observed that inSSS, the counsel himself, the
acting assistant branch manager of the SSS, would have been in addition, the representative
of the SSS itself, a juridical person which can only make an appearance during pre-trial
through a natural person as its duly authorized representative. The Court of Appeals decision
upheld in SSS, cited extensively in our decision therein, expressly affirmed the order of
default on the ground that "it is the discretion of the trial judge to declare a party-defendant
as in default for failure to appear at a pre-trial conference." However, in SSS, neither the
Court of Appeals nor this Court expressly laid relevance to the fact that the counsel himself,
as opposed to the defendant, had not attended the pre-trial.
Upon the other hand, Africa v. Intermediate Appellate Court34 illuminates the proper standard
within which to view the instant petition. It appeared therein that on the day of the pre-trial,
counsel for the defendant (therein petitioner) had arrived ten minutes after the case was
called. Within that ten-minute span, the trial court had issued an order in open court
declaring the defendant in default and authorizing the plaintiff to present its evidence ex
parte. A mere two days later, the trial court rendered judgment in favor of plaintiff. The Court
reversed the trial court, holding that the order of default was issued with grave abuse of
discretion. The reasoning of the Court was grounded primarily on the doctrinal rule that
frowned against "the injudicious and often impetuous issuance of default orders," 35 which led
in that case to "a deni[al of the defendant's] basic right to be heard, even after his counsel
had promptly explained the reason for his tardiness at the pre-trial." 36
Still, it would not be proper to consider Africa as the governing precedent herein, influential
as it may be to our disposition. It was not clear from the narration in Africa whether the
defendant himself was absent during the pre-trial, a circumstance which is determinative to
this petition. Moreover, the Court's tone in Africa indicated that it was animated by a liberal
philosophy towards the procedural rule, implying that the trial court's reversed action was
nonetheless adherent to the strict letter of the rule. Whether or not the trial court
in Africa acted conformably with the rules depends upon the presence or absence of the
defendant therein during pre-trial. It can no longer be discerned whether the Court so ruled
in Africa notwithstanding the presence or absence of the defendant therein. It would be
disingenuous though to assume, as a means of applying that case as precedent herein, that
the defendant was actually present during the pre-trial in Africa.
Hence, we pronounce that the absence of counsel for defendants at pre-trial does not ipso
facto authorize the judge to declare the defendant as in default and order the presentation of
evidence ex parte. It bears stressing that nothing in the Rules of Court sanctions the
presentation of evidence ex parte upon instances when counsel for defendant is absent

301

during pre-trial. The Rules do not countenance stringent construction at the expense of
justice and equity.37 As the Court has previously enunciated:
We cannot look with favor on a course of action which would place the administration
of justice in a straightjacket for then the result would be a poor kind of justice if there
would be justice at all. Verily, judicial orders, such as the one subject of this petition,
are issued to be obeyed, nonetheless a non-compliance is to be dealt with as the
circumstances attending the case may warrant. What should guide judicial action
is the principle that a party-litigant is to be given the fullest opportunity to
establish the merits of his complaint or defense rather than for him to lose life,
liberty or properties on technicalities.38
Due process dictates that petitioners be deprived of their right to be heard and to present
evidence to support their allegations if, and only if, there exists sufficient basis in fact and in
law to do so.39 There being a manifest lack of such basis in this case, petitioners would be
unjustly denied of the opportunity to fully defend themselves should the Court affirm the
questioned orders which were evidently issued by the RTC with grave abuse of discretion.
The better and certainly more prudent course of action in every judicial proceeding is to hear
both sides and decide on the merits rather than dispose of a case on technicalities. 40
While counsel is somewhat to blame for his non-attendance at pre-trial, incidentally the
operative act which gave birth to the controversy at bar, it would be most unfair to penalize
petitioners for what may be the deficiency of their lawyer when the consequent penalty has
no basis in law. Particularly mitigating in the instant case is the fact that the counsel for
private respondents intimated, at an earlier hearing, a possibility of an amicable settlement to
the case. Then, counsel for petitioners submitted a manifestation 41 requesting therein that the
parties be given ample time to respectively discuss their proposals and counter-proposals
and that the hearing for 23 January 2004 be moved to a later date as may be agreed upon
by the parties for submission of their possible compromise agreement. It may well have been
that counsel for petitioners labored under the false understanding that a compromise
agreement was an imminent possibility. The Court nonetheless notes that counsel was
remiss in assuming that his motion to reset the scheduled hearing would necessarily be
granted by the court a quo.
Be that as it may, there is no clear demonstration that the acts of the counsel of petitioners
were intended to perpetuate delay in the litigation of the case. Assuming arguendo that the
trial court correctly construed the actions of the counsel of petitioners to be dilatory, it cannot
be said that the court was powerless and virtually without recourse but to order the ex
parte presentation of evidence by therein plaintiffs. We are in some sympathy with the judge
who was obviously aggrieved that the case was dragging on for an undue length of time. But
even so, there were other remedies available to the court.
Among the inherent powers of the courts expressly recognized by the Rules include the
authority to enforce order in proceedings before it,42 to compel obedience to its judgments,
orders and processes,43 and to amend and control its process and orders so as to make
them conformable to law and justice.44 Moreover, the Code of Judicial Conduct empowers the
courts to judiciously take or initiate disciplinary measures against lawyers for unprofessional
conduct.45 A show cause order to counsel would have been the more cautious and
reasonable course of action to take under the circumstances then prevailing. In failing to do
so, the trial court impetuously deprived petitioners of the opportunity to meaningfully present
an effective defense and to adequately adduce evidence in support of their contentions.

302

WHEREFORE, the instant petition is hereby GRANTED and the resolutions of the Court of
Appeals affirming the Orders of the Regional Trial Court in Civil Case No. R-3111 dated 23
January 2004 and 17 February 2004 are REVERSED. No costs.
SO ORDERED.

8. Intervention (Rule 19)

Mactan Cebu International vs. Heirs of Minoza, February 2, 2011

MACTAN-CEBU INTERNATIONA G.R. No. 186045

L AIRPORT AUTHORITY,
Present:
Petitioner,
CARPIO, J., Chairperson,
- versus NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.
HEIRS of
ESTANISLAO MIOZA,
namely: The HEIRS of FILOMENO
T.MIOZA,
represented
by
LAUREANO
M. MIOZA;
The HEIRS of PEDRO T.MIOZA;
and The HEIRS of FLORENCIA Promulgated:
T. MIOZA,
represented
by
ANTONIO M. URBIZTONDO,
February 2, 2011
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION

PERALTA, J.:
This is a petition for review on certiorari seeking to reverse and set
aside the Decision[1] dated March 25, 2008 of the Court of Appeals (CA) in

303

CA-G.R. CV No. 70429, and the Resolution[2] dated January 8, 2009

denying petitioners motion for reconsideration.
The procedural and factual antecedents, as found by the CA, are as
follows:
On July 6, 1998, a Complaint[3] for Reconveyance, Cancellation of
Defendants Title, Issuance of New Title to Plaintiffs and Damages was filed
by Leila M. Hermosisima (Leila) for herself and on behalf of the other heirs
of the late Estanislao Mioza. The complaint alleged that Leilas late great
grandfather, Estanislao Mioza, was the registered owner of Cadastral Lot
Nos. 986 and 991-A, located at Banilad Estate, Cebu City, per TCT Nos. RT6101 (T-10534) and RT-6102 (T10026). It was, likewise, alleged that the late
Estanislao Mioza had three children, namely, Adriana, Patricio, and
Santiago, all surnamed Mioza. In the late 1940s, the National Airports
Corporation (NAC) embarked in an expansion project of the Lahug Airport.
For said purpose, the NAC acquired several properties which surrounded the
airport either through negotiated sale or through expropriation. Among the
properties that were acquired by the NAC through a negotiated sale were Lot
Nos. 986 and 991-A.[4]
Leila claimed that their predecessors-in-interest, specifically, Adriana,
Patricio, and Santiago executed a Deed of Sale on February 15, 1950
conveying the subject lots to the NAC on the assurance made by the latter
that they (Leilas predecessors-in-interest) can buy the properties back if the
lots are no longer needed. Consequently, they sold Lot No. 986 to the NAC
for only P157.20 and Lot No. 991-A for P105.40. However, the expansion
project did not push through. More than forty years after the sale, plaintiffs
informed the NACs successor-in-interest, the Mactan-Cebu International
Airport Authority (MCIAA), that they were exercising the buy-back option

304

of the agreement, but the MCIAA refused to allow the repurchase on the
ground that the sale was in fact unconditional.
The MCIAA, through the Office of the Solicitor General (OSG), filed
an Answer with Counterclaim.
After the parties filed their respective pleadings, trial ensued.
On November 16, 1999, before the MCIAA could present evidence in
support of its case, a Motion for Intervention,[5] with an attached
Complainant-in-Intervention, was filed before the Regional Trial Court
(RTC) of Cebu City, Branch 22, by the heirs of Filomeno T. Mioza,
represented by Laureano M. Mioza; the heirs of Pedro T, Mioza, represented
by Leoncio J. Mioza; and the Heirs of Florencia T. Mioza, represented by
Antonio M. Urbiztondo (Intervenors), who claimed to be the true, legal, and
legitimate heirs of the late Estanislao Mioza. The intervenors alleged in their
complaint (1) that the plaintiffs in the main case are not related to the late
spouses Estanislao Mioza and Inocencia Togono whose true and legitimate
children were: Filomeno, Pedro, and Florencia, all surnamed Mioza; (2) that,
on January 21, 1958, Adriana, Patricio, and Santiago, executed, in fraud of
the intervenors, an Extrajudicial Settlement of the Estate of the late spouses
Estanislao Mioza and Inocencia Togono and adjudicated unto themselves the
estate of the deceased spouses; and (3) that, on February 15, 1958, the same
Adriana, Patricio, and Santiago, fraudulently, deceitfully, and in bad faith,
sold Lot Nos. 986 and 991-A to the NAC. The intervenors thus prayed for
the following reliefs:
a. Declaring herein intervenors as the true, legal and legitimate heirs of the
late spouses Estanislao Mioza and Inocencia Togono;
b. Declaring herein intervenors as the true, rightful and registered owners
of Lots 986 and 991-A of the Banilad Friar Lands Estate;
c. Declaring the Extrajudicial Settlement executed on January 21, 1958 by
the late Adriana Mioza and the late Patricio Mioza and the late Santiago
Mioza that they are the only heirs of the late spouses Estanislao Mioza and
Inocencia Togono, who died intestate and without any debts or obligations
305

and adjudicating among themselves the estate of the deceased x x x as

void ab initio;
d. Declaring the sale of Lots 986 and 991-A of the Banilad Friar Lands
Estate executed by the late Adriana Mioza, the late Patricio Mioza and the
late Santiago Mioza in favor of the National Airport Corporation on
February 15, 1958 x x x as void ab initio;
e. Ordering the cancellation of Transfer Certificate of Title Nos. 120370
and 120372 for Lots 986 and 991-A in the name of the Mactan-Cebu
International Airport Authority and restoring Transfer Certificate of Title
Nos. RT-6101 (T-10534) and RT-6102 (T-10026) to be the true and valid
torrens titles to Lots 986 and 991-[A].
f. Condemning plaintiffs Leila M. Hermosisima and Constancio Mioza to
pay intervenors, who are the true, lawful and legitimate heirs of the late
Spouses Estanislao Mioza and Inocencia Togono, the amounts
of P300,000.00 and P100,000.00 as moral and exemplary damages
respectively;
g. Condemning plaintiffs to pay the cost of suit.[6]

On February 18, 2000, the RTC of Cebu City, Branch 22, issued an
Order[7] denying the Motion for Intervention.
In denying the motion, the trial court opined that the ownership of the
subject lots was merely a collateral issue in the action. The principal issue to
be resolved was whether or not the heirs of the late Estanislao Mioza
whoever they may be have a right to repurchase the said lots from the
MCIAA. Consequently, the rights being claimed by the intervenors should
be asserted in and would be fully protected by a separate
proceeding. Moreover, if the motion was granted, it would unduly delay the
proceedings in the instant case. Finally, the complaint-in-intervention was
flawed, considering that it was not verified and does not contain the requisite
certification of non-forum shopping.
The intervenors filed a Motion for Reconsideration, [8] to which was
attached a Complaint-in-Intervention with the required Verification and
306

Certificate of Non-Forum Shopping.[9] However, the RTC denied the motion

in its Order dated July 25, 2000.
Aggrieved, the intervenors sought recourse before the CA, docketed
as CA-G.R. CV No. 70429, on the following assignment of errors:
I.
THE COURT A QUO IN ITS ORDER DATED FEBRUARY 18, 2000
GRAVELY ERRED IN DISMISSING THE ABOVE CAPTIONED
COMPLAINT BASED ON THE GROUND THAT:1). THE RIGHTS
CLAIMED BY MOVANTS-INTERVERNORS (NOW INTERVENORSAPPELLANTS) WOULD MORE APPROPRIATELY BE ASSERTED IN,
AND WOULD BE FULLY PROTECTED BY, A SEPARATE
PROCEEDING; 2). IT (THE COMPLAINT-IN-INTERVENTION) WILL
DELAY THE PROCEEDINGS OF THE INSTANT CASE; AND 3).
THAT THE COMPLAINT-IN-INTERVENTION IS NOT VERIFIED
AND DOES NOT CONTAIN THE REQUISITE CERTIFICATION OF
NON-FORUM SHOPPING.
II.
THE COURT A QUO IN ITS ORDER DATED JULY 25, 2000
GRAVELY ERRED WHEN IT DENIED MOVANTS-INTERVENORS
(NOW
INTERVENORS-APPELLANTS)
MOTION
FOR
RECONSIDERATION DATED MARCH 20, 2000, AGAIN ON THE
GROUND THAT TO ALLOW THE INTERVENORS TO INTERVENE
IN THIS CASE WHICH IS ALREADY SUBMITTED FOR DECISION
WOULD ONLY DELAY THE DISPOSAL OF THIS CASE AND THAT
ANYWAY, THE INTERVERNORS HAVE NOTHING TO FEAR
BECAUSE THEIR CLAIMS, IF THERE IS ANY, CAN BE WELL
THRESHED OUT IN ANOTHER PROCEEDING.[10]

On March 25, 2008, the CA rendered the assailed Decision, the

decretal portion of which provides:
WHEREFORE, the appealed Orders dated February 18, 2000 and
July 25, 2000 of the RTC of Cebu City, in Civil Case No. 22290,
are REVERSED and SET ASIDE. The RTC of Cebu City is directed to
resolve with deliberate dispatch Civil Case No. 22290 and to admit the
complaint-in-intervention filed by the intervenors-appellants.

307

SO ORDERED.[11]

In ruling for the intervenors, the CA ratiocinated that contrary to the

findings of the trial court, the determination of the true heirs of the late
Estanislao Mioza is not only a collateral, but the focal issue of the case, for
if the intervenors can prove that they are indeed the true heirs of Estanislao
Mioza, there would be no more need to determine whether the right to buy
back the subject lots exists or not as the MCIAA would not have acquired
rights to the subject lots in the first place. In addition, to grant the motion for
intervention would avoid multiplicity of suits. As to the lack of verification
and certification on non-forum shopping, the CA opined that the filing of the
motion for reconsideration with an appended complaint-in-intervention
containing the required verification and certificate of non-forum shopping
amounted to substantial compliance of the Rules.
Petitioner then filed a motion for reconsideration, but it was denied in
the Resolution dated January 8, 2009.
Hence, the petition assigning the lone error that:
THE COURT OF APPEALS (CEBU CITY) GRAVELY ERRED IN
ALLOWING RESPONDENTS TO INTERVENE IN CIVIL CASE NO.
CEB-22290.[12]

Petitioner argues that to allow the intervenors to intervene in the

proceedings before the trial court would not only unduly prolong and delay
the resolution of the case, it would make the proceedings unnecessarily
complicated and change the nature of the proceedings. Furthermore, contrary
to the requirements for the allowance of a motion for intervention, their legal
interest in the subject properties appear to be merely contingent or expectant

308

and not of direct or immediate character. Petitioner also posits that the
intervenors rights can be better protected in another proceeding.
Anent the lack of verification and certification on non-forum
shopping, petitioner maintains that the trial court was correct in denying the
motion on this ground. In addition, even if the complaint-in-intervention
with the required verification and certificate of non-forum shopping was
appended to the intervenors motion for reconsideration, the complaint-inintervention was not verified by all the interested parties or all the heirs of
Filomeno Mioza, which still warrants its dismissal.
The petition is meritorious.
At the outset, on the procedural aspect, contrary to petitioners
contention, the initial lack of the complaint-in-intervention of the requisite
verification and certification on non-forum shopping was cured when the
intervenors, in their motion for reconsideration of the order denying the
motion to intervene, appended a complaint-in-intervention containing the
required verification and certificate of non-forum shopping.
In the case of Altres v. Empleo,[13] this Court clarified, among other
things, that as to verification, non-compliance therewith or a defect therein
does not necessarily render the pleading fatally defective. The court may
order its submission or correction, or act on the pleading if the attending
circumstances are such that strict compliance with the Rule may be
dispensed with in order that the ends of justice may be served
thereby. Further, a verification is deemed substantially complied with when
one who has ample knowledge to swear to the truth of the allegations in the
complaint or petition signs the verification, and when matters alleged in the
petition have been made in good faith or are true and correct.[14]

309

Moreover, as to the certification against forum shopping, noncompliance therewith or a defect therein, unlike in verification, is generally
not curable by its subsequent submission or correction thereof, unless there
is a need to relax the Rules on the ground of substantial compliance or
presence of special circumstances or compelling reasons. Also, the
certification against forum shopping must be signed by all the plaintiffs or
petitioners in a case; otherwise, those who did not sign will be dropped as
parties to the case.Under reasonable or justifiable circumstances, however,
as when all the plaintiffs or petitioners share a common interest and invoke a
common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the Rule.[15]
Thus, considering that the intervenors in their motion for
reconsideration, appended a complaint-in-intervention with the required
verification and certificate of non-forum shopping, the requirement of the
Rule was substantially complied with.
Notwithstanding the intervenors compliance with the procedural
requirements, their attempt to intervene is doomed to fail.
Intervention is a remedy by which a third party, not originally
impleaded in the proceedings, becomes a litigant therein to enable him, her
or it to protect or preserve a right or interest which may be affected by such
proceedings.[16] It 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

310

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.[17]
Section 1, Rule 19 of the Rules of Court states:
SECTION 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 intervenors 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.[18]Moreover, the court must take
into consideration whether or not the intervention will unduly delay or
prejudice the adjudication of the rights of the original parties, and whether or
not the intervenors right or interest can be adequately pursued and protected
in a separate proceeding.
In the case at bar, the intervenors are claiming that they are the
legitimate heirs of Estanislao Mioza and Inocencia Togono and not the
original plaintiffs represented by Leila Hermosisima. True, if their
allegations were later proven to be valid claims, the intervenors would surely
have a legal interest in the matter in litigation. Nonetheless, this Court has
ruled that the interest contemplated by law must be actual, substantial,
material, direct and immediate, and not simply contingent or expectant. It

311

must be of such direct and immediate character that the intervenor will either
gain or lose by the direct legal operation and effect of the judgment.
[19]
Otherwise, if persons not parties to the action were allowed to intervene,
proceedings would become unnecessarily complicated, expensive and
interminable.[20]
Moreover, the intervenors contentions that Leilas predecessors-ininterest executed, in fraud of the intervenors, an extra judicial settlement of
the estate of the late spouses Estanislao Mioza and Inocencia Togono and
adjudicated unto themselves the estate of the deceased spouses, and that
subsequently, her predecessors-in-interest fraudulently and deceitfully sold
the subject lots to the NAC, would unnecessarily complicate and change the
nature of the proceedings.
In addition to resolving who the true and legitimate heirs of Estanislao
Mioza and Inocencia Togono are, the parties would also present additional
evidence in support of this new allegation of fraud, deceit, and bad faith and
resolve issues of conflicting claims of ownership, authenticity of certificates
of titles, and regularity in their acquisition.Verily, this would definitely cause
unjust delay in the adjudication of the rights claimed by the original parties,
which primarily hinges only on the issue of whether or not the heirs
represented by Leila have a right to repurchase the subject properties from
the MCIAA.
Verily, the allegation of fraud and deceit is an independent
controversy between the original parties and the intervenors. In general, an
independent controversy cannot be injected into a suit by intervention,
hence, such intervention will not be allowed where it would enlarge the
issues in the action and expand the scope of the remedies. It is not proper
where there are certain facts giving the intervenors case an aspect peculiar to

312

himself and differentiating it clearly from that of the original parties; the
proper course is for the would-be intervenor to litigate his claim in a separate
suit.[21] Intervention is not intended to change the nature and character of the
action itself, or to stop or delay the placid operation of the machinery of the
trial. The remedy of intervention is not proper where it will have the effect
of retarding the principal suit or delaying the trial of the action.[22]
To be sure, not only will the intervenors rights be fully protected in a
separate proceeding, it would best determine the rights of the parties in
relation to the subject properties and the issue of who the legitimate heirs of
Estanislao Mioza and Inocencia Togono, would be laid to rest.
Furthermore, the allowance or disallowance of a motion for
intervention rests on the sound discretion of the court after consideration of
the appropriate circumstances.[23]It is not an absolute right. The statutory
rules or conditions for the right of intervention must be shown. The
procedure to secure the right to intervene is to a great extent fixed by the
statute or rule, and intervention can, as a rule, be secured only in accordance
with the terms of the applicable provision.[24]
Consequently, the denial of the motion to intervene by the RTC was
but just and proper. The conclusion of the RTC is not bereft of rational
bases. It denied the motion to intervene in the exercise of its sound
discretion and after taking into consideration the particular circumstances of
the case.
WHEREFORE, subject to the above disquisition, the petition
is GRANTED. The Decision dated March 25, 2008 and the Resolution
dated January 8, 2009, of the Court of Appeals in CA-G.R. CV No. 70429,
are REVERSED and SET ASIDE. The Orders of the Regional Trial Court

313

of Cebu City, Branch 22, dated February 18, 2000 and July 25, 2000,
are REINSTATED.
SO ORDERED.
Big Country Ranch Corp vs. CA, 227 SCRA 161
G.R. No. 102927 October 12, 1993
BIG COUNTRY RANCH CORPORATION, petitioner,
vs.
COURT OF APPEALS, MAX B. PALARCA and GOLDEN FLAME SAWMILL
CORPORATION, respondents.
Domingo G. Lalaguit for petitioner.
Abbas & Associates for respondents.
Horacio R. Viola for GFS Corporation.

REGALADO, J.:
The instant petition stems from the order issued on July 16, 1991 by the Regional Trial Court
of Manila, Branch 3, in Civil Case No. 91-57097, entitled "Max B. Palarca vs. Capt., Arturo Y.
Capada, PN," denying petitioner's motion for leave to intervene therein. 1
The said case was initiated by private respondent Palarca in a complaint filed on May 9,
1991 for the recovery of two barges named "Bangsi" and "Dangsol" from the possession of
the First Coast Guard District, Philippine Coast Guard, and seeking the issuance of a writ of
replevin for that purpose.
On May 21, 1991, the lower court, after the filing by said private respondent of the requisite
bond of P600,000.00, executed in favor of therein defendant and private respondent Golden
Flame Sawmill Corporation, as defendant-intervenor, issued a writ of replevin for the seizure
of the two barges.
Thereafter, the implementing sheriff submitted a report to the trial court, dated May 27, 1991,
to the effect that the barges in the custody of the Philippine Coast Guard were " BCRC I "
and "BCRC II", allegedly with descriptions different from "Bangsi" and "Dangsol." In order to
properly determine the correct identities of the two barges in the custody of the Philippine
Coast Guard, the trial court ordered the re-admeasurement thereof by the Marine Surveyor
of the Philippine Coast Guard in the presence of the representatives of both parties.
Meanwhile, private respondent Golden Flame Sawmill Corporation filed an urgent motion for
intervention, claiming ownership over the two barges which it allegedly acquired from herein

314

petitioner in a public auction sale, as evidenced a certificate of sale thereof. On May 30,
1991, the trial court issued an order allowing respondent Golden Flame Sawmill to intervene
in said case.
On July 8, 1991, herein petitioner also filed a motion in the trial court seeking leave to
likewise intervene in the case on the ground that it is the owner of the two barges in question
on the strength of xerox copies of certain documents issued by the Philippine Coast Guard
consequent to its purchase of four barges from Mahogany Products (Phil.) Inc. on May 30,
1979. Respondent Golden Flame Sawmill Corporation filed an opposition thereto.
As earlier stated, on July 16, 1991 the trial court issued an order denying petitioner's motion
for leave to intervene and ordering the release of the two barges, whether identified as
"Bangsi' and "Dangsol" or "BCRC I" and "BCRC II", to respondent Palarca upon the security
of the replevin bond of P600,000.00 that he had filed. The pertinent part of the order reads:
. . . it appearing that the said movant (petitioner) has not alleged any legal
interest over the matter in litigation, which are the two barges involved, or in
the success of either of the plaintiff, defendant or defendant-intervenor, or
legal interest against; all of them, or that said movant is so situated as to be
adversely affected by a distribution or disposition of the said property (2
barges) now in the custody of the Court; and considering the claim of
defendant-intervenor that the two barges were already sold at public auction
sometime in April, 1989, due to the failure of the said movant to pay a loan,
for which the said barges were pledged, thereby divesting movant of any
right over said barges, and finally, considering that the said motion will not
only unduly delay this case or prejudice the adjudication of the rights of the
original parties, but also the said movant may protect its rights, if it has any
rights at all, in a separate proceedings (sic), the Court is constrained to deny
the motion for lack of merit. 2
Not satisfied therewith, petitioner filed a petition for certiorari before respondent Court of
Appeals which, however, dismissed said petition on August 30, 1991 in CA-G.R. SP No.
25474. 3 Hence this appeal, wherein petitioner impugns the correctness of the judgment of
respondent court and, for good measure albeit improperly, contends that the Court of Appeals
gravely abused its discretion affirming the order of the court a quo which denied petitioner's
motion for leave to intervene.
We do not agree, in the light of settled principles on which we shall essay a restatement.
The right to intervene is not an absolute right. The statutory rules or conditions for the right of
intervention must be shown. 4 The procedure to secure the right to intervene is to a great extent
fixed by the statute or rule, and intervention can, as a rule, be secured only in accordance with
the terms of the applicable provision. 5 Under our rules on intervention, the allowance or
disallowance of a motion to intervene is addressed to the sound discretion of the court. 6
Section 2(a), Rule 12 of the Rules of Court provides that "(a) person may, before or during a
trial, be permitted by the court, in its discretion, to intervene in an action, if he has legal
interest, in the matter in litigation, or in the success of either of the parties, or an interest
against both, or when he 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."

315

The permissive tenor of the provision on intervention shows the intention of the rules to give
to the court the full measure of discretion in permitting or disallowing the same. 7 The
discretion of the court, once exercised, cannot be reviewed by certiorari nor controlled
by mandamus save in instances where such discretion has been so exercised in an arbitrary or
capricious manner. 8 As a general guide in determining whether a party may intervene, 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. 9
In the present case, there is no showing of grave abuse of discretion on the part of the trial
court. It denied petitioner's motion for intervention by reason of its findings, which were
affirmed by respondent Court of Appeals, that the intervention would only unduly delay the
case and prejudice the adjudication of the rights of the original parties; that herein petitioner
has no legal interest in the matter in litigation; and that at any rate, his rights, if any, can be
ventilated and protected in a separate action.
The said findings of the trial court are not without rational bases. It is admitted by petitioner
that the two barges which are the subject of the litigation have already been sold to
defendant-intervenor, herein respondent Golden Flame Sawmill Corporation, in a public
auction held on April 17, 1989. 10 In fact, the corresponding certificates of sale therefor have
been issued in the name of said respondent corporation. These certificates of sale constituted the
very reason why it was allowed to intervene in the main case.
Petitioner's claim that the public sale was attended by some irregularities and was, therefore,
invalid could evidently be better threshed out in an independent proceeding. To allow
petitioner to intervene in the replevin suit, which is primarily on the issue of possession,
would only make the proceedings therein unnecessarily complicated. New and unrelated
issues on conflicting claims of ownership, authenticity of documents of title and regularity in
the mode of acquisition thereof could expectedly be raised and inevitably cause delay in the
adjudication of the rights claimed by the original parties. This is not the policy of our
procedural law on the matter.
It is firmly settled in this jurisdiction that intervention will not be allowed when it will unduly
delay or prejudice the adjudication of the rights of the principal parties, especially if
intervenor's rights may be fully protected in a separate proceeding. 11 Intervention is not
intended to change the nature and character of the action itself, 12 or to stop or delay the placid
operation of the machinery of the trial. 13 The remedy of intervention is not proper where it will
have the effect of retarding the principal, suit or delaying the trial of the
action. 14
Also, in general, an independent controversy cannot be injected into a suit by
intervention, 15 hence such intervention will not be allowed where it would enlarge the issues in
the action and expand the scope of the remedies. 16 It is not proper where there are certain facts
giving intervenor's case an aspect peculiar to himself and differentiating it clearly from that of the
original parties; the proper course is for the would-be intervenor to litigate his claim in a separate
suit. 17
Coming back to the petition at bar, it is to be noted that, at this point, there is no pending
principal action wherein petitioner may intervene. A decision was already rendered therein by
the trial court and no appeal having been taken therefrom, the judgment in that main case is
now final and executory. 18 Intervention is legally possible only "before or during a trial," hence a
motion for intervention filed after trial and, a fortiori, when the case has already been

316

submitted, when judgment has been rendered, or worse, when judgment is already final and
executory should be denied.19

Petitioner would do well to reflect on the doctrinal rule that an intervention is merely collateral
or accessory or ancillary to the principal action, and not an independent proceeding; it, is an
interlocutory proceeding dependent on or subsidiary to the case between the original parties.
Where the main action ceases to exist, there is no pending proceeding wherein the
intervention may be based. 20
Also, in taking its grievance to the Court of Appeals through a petition for certiorari, it
apparently ignored the sine qua non for such recourse that there should be no other
adequate remedies available to it. Indeed, as pithily observed by respondent court, petitioner
could very well have sought reconsideration of the challenged order by pointing out and
proving that, the barges "BCRC I" and "BCRC II" are different from its barges "Bangsi" and
"Dangsol"; or it could have filed a third-party claim over the barges under Section "7 of Rule
60; or, of course, it could have instituted the proper action to vindicate its claim to said
barges aforecited rule.
ACCORDINGLY, the petition at bar is hereby DENIED and the assailed judgment of
respondent Court of Appeals is AFFIRMED, with costs against petitioners.
SO ORDERED.

Looyuko vs. CA, G.R. No. 102696, July 12, 2001

[G.R. No. 102696*. July 12, 2001]

ALBERTO LOOYUKO, JUAN C. UY and ATTY. VICTORIA

CUYOS, petitioner,
vs. COURT
OF
APPEALS,
F.G.U.
INSURANCE CORPORATION and ANTONIO GUTANG,
HEIRS and SUCCESSORS-IN-INTEREST, respondents.

[G.R No. 102716*. July 12, 2001]

FGU

INSURANCE CORPORATION, petitioner, vs. COURT OF

APPEALS, ANTONIO J. GUTANG, JOSE V. GUTANG,
ALBERTO
LOOYUKO,
JUAN
C.
UY, VICTORIA
ALCANTARA CUYOS
and
JUDGE
WILLIAM
H.
BAYHON, respondent.
317

[G.R. No. 108257*. July 12, 2001]

SCHUBERT TANUNLIONG, petitioner, vs. COURT OF APEALS,

ANTONIA GUTANG, DAVID GUTANG, ELIZABETH
GUTANG-LEDESMA, ATTY. RAMON A. GONZALES, ATTY.
VICTORIA S. ALCANTARA CUYOS and JUDGE RICARDO
MOLINA, respondents.

[G.R. No. 120954*. July 12, 2001]

SCHUBERT TANUNLIONG, petitioner, vs. COURT OF APPEALS, and

ANTONIA J. GUTANG, respondents.
DECISION
KAPUNAN, J.:

Disputed in these consolidated cases is a house and lot located in

Mandaluyong, Rizal (now Mandaluyong City), formerly covered by Transfer
Certificate of Title (TCT) No. 1702, and previously owned by the Spouses
Tomas and Linda Mendoza. Bitterly contesting the property are the spouses
various creditors as well as the creditors alleged assignee.
One set of creditors includes Albert Looyuko and Jose Uy. Their lawyer,
Atty. Victoria Cuyos, has also annotated her attorneys lien over the
property. Antonia Gutang and her children David and Elizabeth, who have
substituted their father,[1] comprise another set. Both sets of creditors rest their
claim upon separate levies on execution and their supposed purchase of the
property at public auction.
A more detailed background that gave rise to Looyuko et al.s and the
Gutangs claims over the property is set forth below. Thereafter, a recital of the
antecedents that gave rise to the consolidated petitions, including the claims of
another creditor, FGU Insurance Corporation, as well as Schubert Tanuliong,
who purports to be Looyuko et al.s and the Gutangs assignee, follows.
Civil Case No. 82-5792, RTC Manila
(Looyuko and Uy vs. Spouses Mendoza)[2]

318

On April 22, 1977, Albert Looyuko and Jose Uy, through their counsel,
Atty. Victoria Cuyos, filed a complaint against the Spouses Mendoza before the
Regional Trial Court (RTC) of Manila. The Manila RTC issued a writ of
preliminary attachment over the property and a notice of levy on attachment
bearing the date April 22, 1977 was annotated at the back of the TCT No. 1702.
Evidently, Looyuko and Uy prevailed in that action. On February 12, 1986,
the Manila RTC issued a writ of execution and the property was sold at public
auction with Looyuko and Uy as the highest bidders.
On June 30, 1995, the Register of Deeds of Mandaluyong issued a new
TCT over the property, TCT No. 10107, in the name of Looyuko and Uy. The
TCT bears the date February 6, 1992, the date of inscription of the final deed of
sale in favor of Looyuko and Uy.
Civil Case No. 13122, RTC Iloilo
(Antonia Gutang vs. Tomas Mendoza)
LRC Case No. R-3613, RTC Rizal
Antonia Gutang filed a complaint for a sum of money with damages against
Tomas Mendoza with the RTC of Iloilo (Civil Case No. 13122). Judgment was
rendered in favor of Antonia Gutang and the decision later became final and
executory. On July 1, 1981, Antonia Gutang caused to be annotated on the same
TCT No. 1702 a notice of levy on execution. On June 8, 1984, the property was
sold at public auction to Antonia Gutang. The Deputy Sheriff executed a final
deed of sale on November 5, 1985.
Antonia Gutang, by virtue of the certificate of sale, filed with the RTC of
Rizal a petition for the cancellation of TCT No. 1702 and the issuance of a new
title in her name. The case was docketed as LRC Case No. R-3613. On June 15,
1987, the Rizal RTC issued an order granting the petition. Consequently, TCT
No. 1702 was cancelled and TCT No. 242 in the name of Antonia Gutang,
married to Jose Gutang, was issued on December 23, 1987. The issuance of
TCT No. 242, as will be seen later, spawned other cases.
Civil Case No. 82-9760, RTC Manila
(FGU vs. Spouses Mendoza)
CA-G.R. No. 23849, 7 Division, Court of Appeals
th

(FGU vs. Judge Bayhon and Spouses Gutang)

G.R. No. 102696, Supreme Court
(Looyuko et al. vs. Court of Appeals, FGU, et al.)
G.R. No. 102716, Supreme Court
319

(FGU vs. Court of Appeals, Spouses Gutang, et al.)

On December 2, 1976, spouses Tomas and Linda Mendoza executed a
mortgage over the subject property in favor of FGU Insurance Corporation. The
mortgage was registered with the Register of Deeds of Pasig, Rizal on
December 3, 1976.
As the spouses failed to satisfy the obligation secured by the mortgage,
FGU on June 1, 1982 filed an action (Civil Case No. 82-9760) with the RTC of
Manila against said spouses. The latter filed an Answer but failed to appear
during the pre-trial. Consequently, the Spouses Mendoza were declared as in
default and evidence were received ex-parte.
On January 22, 1988, the Manila RTC rendered a decision in favor of FGU,
thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendants, ordering the latter, jointly and severally, to pay the plaintiff the
following:
1. The amount of P368,785.80 with interest at 12% per annum compounded
monthly from May 5, 1982 until the same is fully paid;
2. The amount of P22,501.60 with interest at 12% per annum compounded
monthly from December 7, 1977 until the same is fully paid;
3. P5,000.00 as attorneys fees;
4. The costs of suit.
SO ORDERED.[3]
FGU filed a motion for partial reconsideration, pointing out that the action
was not for a sum of money but for foreclosure of mortgage. It prayed that in
accordance with Section 2, Rule 68 of the Rules of Court, the decision be
amended by ordering the sale of the property mortgaged in case defendant
should not satisfy the judgment in favor of plaintiff within ninety (90) days
from notice of decision.
On May 19, 1988, the RTC issued an Order granting FGUs motion:
Acting on the partial motion for reconsideration of the Decision rendered by the
Court on January 22, 1988 and finding the same to be meritorious, the same is
hereby granted.

320

Accordingly, the first paragraph and the dispositive portion of said Decision are
hereby ordered amended to read as follows:
This is an action for foreclosure of real estate mortgage filed by plaintiff, FGU
Insurance Corporation against Spouses Tomas Mendoza and Linda A.
Mendoza, filed way back on June 1, 1982.
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
the defendants, ordering the latter, jointly and severally, to pay the plaintiff the
following: 1. The amount of P368,785.80 with interest at 12% per annum
compounded monthly from May 5, 1982 until the same is fully paid; 2. The
amount of P22,501.60 with interest at 12% per annum compounded monthly
from December 7, 1977 until the same is fully paid; 3. P5,000.00 as attorneys
fees; 4. the costs of suit. Should defendants fail to pay said amounts within 90
days from receipt of the Decision dated Jan. 22, 1988, the mortgaged property
described in par. 6 of the complaint shall be sold in the manner and under the
regulations governing sales of real estate under execution. The proceeds of the
sale, after deducting the cost of the sale shall be applied to the judgment and
any balance shall be turned over to the defendants or their agent.
SO ORDERED.[4]
No appeal was taken from the above Order and the same subsequently
became final and executory.
On September 14, 1988, the Manila RTC issued a writ of execution. On
November 24, 1988, the deputy sheriff in a public bidding sold the parcel of
land covered by TCT 1702 to FGU, the highest bidder. A certificate of sale was
thereafter issued in FGUs favor, which was confirmed by the RTC on March 2,
1989. On August 23, 1989, the RTC issued an order for the cancellation of TCT
No. 242 and the issuance of a new TCT in FGUs name.
Before the new TCT could be issued, however, the Spouses Gutang filed a
motion for intervention and to set aside the judgment of the RTC, alleging that
they are the new registered owners of the property. In an Order dated February
9, 1990, the RTC allowed the motion for intervention, holding that the failure
of FGU to implead the Spouses in the action for foreclosure deprived the latter
of due process. The RTC thus set aside its Decision and all orders issued
subsequent and related thereto.
WHEREFORE, the motion to intervene filed by the Spouses Gutang is granted
and the decision on May 19, 1988 is reconsidered set aside together with all
orders subsequent and related thereto.[5]
321

On October 11, 1990, Looyuko et al. filed a motion for intervention, which
the RTC granted in its Order dated October 18, 1990.
In an Order dated November 16, 1990, the RTC denied FGUs motion for
the reconsideration of the order setting aside its decision.
FGU filed a petition for certiorari, prohibition and mandamus in the Court
of Appeals, arguing that the trial court committed grave abuse of discretion in
granting the Spouses Gutangs motion for intervention since the RTC decision,
as amended, was already final and executory.
On March 13, 1991, the Court of Appeals received an Urgent Motion by
Juan Uy, Alberto Looyuko and their counsel, Atty. Cuyos, praying for leave to
file a motion for intervention. They alleged that they were attachment creditors
of the spouses Tomas and Linda Mendoza whose property covered by TCT No.
1702 was attached as per entry No. 11728 duly inscribed on April 22, 1977 and
subsequently carried over to TCT No. 242 in the name of the Spouses
Gutang. On April 26, 1991, the court issued a resolution allowing Looyuko et
al.s motion for intervention.
In a Decision dated August 12, 1991, the Court of Appeals rendered its
Decision, the dispositive portion of which reads:
WHEREFORE, the petition for certiorari, mandamus and prohibition is hereby
(1) GRANTED insofar as that portion of the Order of February 9, 1990 is
concerned reconsidering and setting aside the money judgment is concerned,
which judgment [is] final and executory, and in the process of satisfaction,
should be maintained and remains as such; and (2) DISMISSING insofar as
that portion of the same Order allowing the private respondents to intervene is
concerned.
SO ORDERED.[6]
The Court of Appeals ruled that the action before the RTC was not actually
an action for foreclosure but one for collection of a sum of money. The court
also affirmed the order of the RTC allowing intervention, thus:
The Court, both from the factual, procedural and substantive points, finds that
respondent court had just and valid reasons to allow the private respondents to
intervene in the case. Had it denied the intervention, the execution in
satisfaction of the money judgment against the judgment debtors, would be
violative of section 15 of Rule 30, that should be on all the property, real and
personal, x x x of the judgment debtor x x x. when, in the case, the ownership
of the parcel of land, covered by TCT 45066 is claimed by private respondents
322

as well as movants-intervenors. Finally, even if it is considered, as petitioner

claims, petitioner should have impleaded in its action all persons having or
claiming an interest in the (mortgage) premises subordinate in right to that of
the holder of the mortgage, all of whom shal be made defendants in the
action (sec. 1, Rule 68, Rules of Court) and without their inclusion there can be
no final determination in the action. Petitioner did not include private
respondents as well as movants-intervenors, both of whom hold liens on the
same property. Even under this aspect, respondent court should not be faulted
for allowing private respondents to intervene, considering its reason that what
(is) sought to be safeguarded (is) x x x the provision of Rule 68 of the Rules of
Court. And while the time to intervene, under section 2, of Rule 12, is before or
during a trial, x x x, in its discretion x x x, or even on the day when the case is
submitted for decision (Falcasantos vs. Falcasantos, L-4627, May 13, 1952),
or at any time before the rendition of final judgment (Lichauco vs. C.A., ET
AL., L-23642, Mar. 13, 1975), in Director of Lands vs. C.A., et al. (L-45168,
Sept. 25, 1979), intervention was permitted pending appeal in order to avoid
injustice which must have impelled the respondent court to allow the
intervention.
Be that as it may, insofar as the default judgment dated January 27, 1988,
ordering the defendants spouses Mendoza, jointly and severally, to pay
petitioner the judgment debt, interest, attorneys fees and costs, and which
money judgment was restated in the Order dated may 19, 1988, since that
judgment had already become final and executory and in the process of
execution, what cropped up in the interim on the question of whether or not the
money judgment can be enforced against the parcel of land covered by TCT
450666, it appearing that petitioner, private respondents and herein movantsintervenors are all having and claiming interest in that property, a question
which has no relevance and would not affect the correctness of the money
judgment, the respondent court had no reason to reconsider and set aside the
judgment which had already become final and executory, can no longer be
altered, amended, reconsidered, set aside. Nothing more can be done
therewith. The court which rendered it has no more authority to modify or
revoke it, except for its execution, otherwise, there would be not end to the
litigation. Hence, the money judgment should be maintained and set at rest as
and all that remains to be done in connection therewith is to have the same
properly executed against the judgment debtors. [7]
On August 16, 1991, the Court of Appeals noted a motion for leave to
intervene by Schubert Tanunliong.

323

Subsequently, FGU and Looyuko et al. filed their respective motions for
reconsideration. On October 31, 1991 the Court of Appeals issued a resolution
denying both motions for reconsideration.
Looyuko et al. thus filed a petition for certiorari, prohibition and mandamus
before this Court, contending in the main that the failure of FGU to implead
them as defendants in Civil Case No. 82-9760 deprived them of due
process. Consequently, the entire proceedings conducted before the RTC should
have been declared void. The case was docketed herein as G.R. No. 102696.
FGU, for its part, filed a petition for review on certiorari with this Court,
which was docketed as G.R. No. 102716. FGU contends that the Court of
Appeals erred in characterizing Civil Case No. 82-9760 as an action for a sum
of money, and not one for foreclosure of mortgage, and in allowing the
intervention of the Spouses Gutang and Looyuko et al. in the proceedings
before the trial court.
LRC Case No. R-4212, RTC Rizal
(Gutang vs. Register of Deeds, et al.)
LRC Case No. R-4643, RTC Rizal
(Gutang et al. vs. Looyuko et al.)
CA-G.R. SP No. 36825, 9 Division, Court of Appeals
(Gutang vs. Judge Trampe, Tanunliong)
th

G.R. No. 120954, Supreme Court

(Tanunliong vs. Court of Appeals, Gutang)
On November 28, 1989, Antonia Gutang filed with the RTC of Rizal an
Amended Petition under Section 108 of Presidential Decree No. 1539 for the
cancellation of TCT No. 242 in the name of the Spouses Gutang and the
issuance of a new one in the name of Antonia Gutang and her children David
and Elizabeth. The cancellation of the TCT was sought on the grounds that the
husband, Jose Gutang, had already died, and that the property covered by the
TCT was paraphernal. The case was entitled Antonia Gutang versus Register of
Deed, Galvanizers Marketing, Inc., Victoria Alcantara Cuyos, Alberto Looyuko
and Juan Uy, LRC Case No. R-4212.
On August 29, 1991, Schubert Tanunliong, the alleged assignee of FGU
and Looyuko et al., filed a motion for leave to intervene, attaching his
opposition to the amended petition.
On June 1, 1992, Antonia Gutang and her children filed another petition
with the Rizal RTC against Cuyos, Looyuko and Uy praying for the

324

cancellation of certain entries annotated in TCT No. 242. The case was
docketed as LRC Case No. 4643.
On July 12, 1993, the RTC ordered the setting of the cases for hearing and
for compliance with jurisdictional requirements. On October 11, 1993, the court
issued an order allowing the intervention of Tanunliong. The Gutangs moved
for a reconsideration of both orders. On July 19, 1994, the court issued an
Omnibus Order in LRC Case Nos. 4214 and 4643, the dispositive portion of
which reads:
WHEREFORE, in view of all the foregoing, the Petitioners two (2) Motions for
reconsideration dated August 30, 1993 and October 27, 1993; and Respondents
Motion for Reconsideration dated November 3, 1993 and the Opposition and
Motion to Dismiss dated June 23, 1991, are all DENIED for lack of merit.
On the other hand, movant Intervenors Motion for Leave to Intervene with
Opposition dated August 29, 1991 is Granted.
In the meantime, let a notice of hearing be issued setting these cases for hearing
in accordance with the provisions of P.D. 1529.
Let copies of the same be furnished the parties in this case, thru their counsels,
the Register of Deeds of Mandaluyong, Metro Manila; the Office of the
Solicitor General; and Intervenor Schubert Tanunliong, thru his counsel Atty.
Nelson Ng.[8]
On March 6, 1995, the court issued another order in both LRC cases, thus:
Accordingly, let the questioned Omnibus Order dated July 19, 1994 stand, and
the Branch Clerk of Court is directed to issue the notice of initial hearing in
[this] case with notice to the Office of Solicitor General, the Registry of Deed
of the City of Mandaluyong, herein respondents and intervenor Ng, pursuant to
Section 108 of the Presidential Decree No. 1529. [9]
Yet another order was subsequently issued by the RTC in LRC Case No.
4212, the dispositive portion of which reads:
FURTHERMORE, let a copy of this order and the petition be furnished the
Solicitor General, Makati, Metro Manila.[10]
Antonia Gutang went to the Court of Appeals and questioned, among
others, the allowance of the intervention by Tanunliong (CA-G.R. SP No.
36825). In a Decision dated June 30, 1995, the Court of Appeals, through the
325

Special Ninth Division, set aside and declared void the Orders of the Land
Registration Court insofar as they allowed the intervention of Tanunliong.
Tanunliong now challenges the decision of the Court of Appeals in G. R.
No. 120954. He submits that the decision in LRC Case No. R-3613, which
issued TCT No. 242 in the name of the Spouses Gutang is void, citing specific
grounds therefor. Accordingly, intervention should have been allowed on the
principle that a void judgment can be attacked either directly or collaterally.
Civil Case No. 61209, Pasig RTC
(Tanunliong vs. Gutang et al.)
CA-G.R. SP NO. 27972, 4th Division, Court of Appeals
(Gutang et al. vs. Judge Molina and Tanunliong)
G.R. No. 108257, Supreme Court
(Tanunliong vs. Court of Appeals, Gutang et al.)
Schubert Tanunliong claims that on December 19, 1985, the Spouses
Mendoza sold the subject house and lot to him. Subsequently, on January 9,
1986, Alberto Looyuko and John Uy, the plaintiffs in Civil Case No. 82-5792,
allegedly assigned to Tanunliong their rights and interests over the
property. The validity of the assignment, however, is refuted by Looyuko, et al.
[11]

On January 29, 1987, FGU, the plaintiff in Civil Case No. 82-9760 likewise
assigned all its rights and interest over said property to Tanunliong. The
assignment is not denied by FGU. On August 23, 1991, Tanunliong filed before
the RTC of Pasig a complaint for the cancellation of title, accounting and
issuance of a writ of preliminary injunction against Antonia Gutang, David
Gutang, Elizabeth Gutang Ledesma, Atty. Ramon Gonzales (the counsel for the
Gutangs), and Atty. Victoria Cuyos. The case was docketed as Civil Case No.
61209. Tanunliong alleged, among others, that Antonia Gutang obtained the
Order in LRC Case No. R-3613, canceling TCT No. 1702 and ordering the
issuance of TCT No. 242 in favor of the Gutangs, through fraud and
misrepresentation and without notice to FGU. Consequently, said Order was
void.
The defendants filed a motion to dismiss Tanunliongs complaint on the
ground that the RTC had no jurisdiction over the case, the complaint in reality
being an action for the annulment of the Order of the Pasig RTC in LRC Case
No. R-3613. The RTC denied said motion but the Court of Appeals, upon a
petition for certiorari and prohibition by the Gutangs and Gonzales, ruled
otherwise. The appellate court held that Tanunliongs action, though
denominated as one for cancellation of title, accounting and for issuance of
326

preliminary injunction is, in truth, a case for annulment of judgment. The

dispositive portion of the Decision, dated December 16, 1992, reads:
WHEREFORE, the Petition for Certiorari and Prohibition, with Temporary
Restraining Order, is hereby GRANTED. The Order of the RTC-Pasig, Branch
152, dated May 14, 1992, in Civi9l Case No. 61209, is SET ASIDE, for
being null and void. The RTC-Pasig, Branch 152, is ENJOINED from
proceeding with Civil Case No. 61209 and is ORDERED to dismiss said case,
for lack of jurisidiction.
IT IS SO ORDERED.[12]
Tanunliong thus assails the ruling of the Court of Appeals in G.R. No.
108257, maintaining, in essence, that the action for cancellation of title,
accounting and issuance of a writ of preliminary injunction is proper.
The Court finds the principal issue raised in G.R. Nos. 102696 and 102716
dispositive of the consolidated petitions. Was the motion for intervention filed
by the Spouses Gutang and Looyuko et al. in Civil Case No. 82-9760 proper
considering that the case was already final and executory?
We do not deem it necessary to address the issue of whether the complaint
filed by FGU against the Spouses Mendoza was an action for foreclosure of
mortgage or one for a sum of money. Clearly, if it were the latter, the Gutangs
and Looyuko et al. would have no right to intervene therein since the action for
sum of money, i.e., damages, would have arisen from the contract secured by
mortgage, to which they are not parties. Then Section 2, Rule 12 of the Rules of
Court, the law prevailing at the time, read as follows:
Intervention. A person may, before or during a trial be permitted by the court,
in its discretion, to intervene in an action, if he has legal interest in the matter in
litigation, or in the success of either of the parties, or an interest against both, or
when he 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. [Underscoring supplied.]
None of the grounds underscored above are present to warrant their
intervention. Accordingly, we assume for purposes of discussion that the action
was indeed for the foreclosure of the mortgage over the subject property.
The rule stated above also requires that a motion for intervention should be
made before or during a trial. Because of varying interpretations of the phrase,

327

the present Rules have clarified that the motion should be filed any time before
rendition of judgment.[13]
1. The former rule as to when intervention may be allowed was expressed in
Sec. 2, Rule 12 as before or during a trial, and this ambiguity also gave rise to
indecisive doctrines. Thus, inceptively it was held that a motion for leave to
intervene may be filed before or during a trial even on the day when the case is
submitted for decision (Falcasantos vs. Falcasantos, L-4627, May 13, 1952) as
long as it will not unduly delay the disposition of the case. The term trial was
used in its restricted sense, i.e., the period for the introduction for intervention
was filed after the case had already been submitted for decision, the denial
threof is proper (Vigan Electric Light Co., Inc. vs. Arciaga, L-29207 and L29222, July 31, 1974). However, it has also been held that intervention may be
allowed at any time before the rendition of final judgment (Lichauco vs. CA, et
al., L-23842, Mar. 13, 1975). Further, in the exceptional case of Director of
Lands vs. CA, et al. (L-45168, Sept. 25, 1979), the Supreme Court permitted
intervention in a case pending before it on appeal in order to avoid injustice and
in consideration of the number of parties who may be affected by the dispute
involving overlapping of numerous land titles.
2. The uncertainty in these ruling has been eliminated by the present Sec. 2 of
this amended Rule which permits the filing of the motion to intervene at any
time before the rendition of the judgment in the case, in line with the doctrine
in Lichauco above cited. The justification advanced for this is that before
judgment is rendered, the court, for god cause shown, may still allow the
introduction of additional evidence and that is still within a liberal
interpretation of the period for trial. Also, since no judgment has yet been
rendered, the matter subject of the intervention may still be readily resolved
and integrated in the judgment disposing of all claims in the case, and would
not require an overall reassessment of said claims as would be the case if the
judgment had already been rendered.[14]
In the present case, the motions for intervention were filed after judgment
had already been rendered, indeed when the case was already final and
executory. Certainly, intervention can no longer be allowed in a case already
terminated by final judgment.[15]
Intervention is merely collateral or accessory or ancillary to the principal
action, and not an independent proceeding; it is an interlocutory proceeding
dependent on or subsidiary to the case between the original parties. [16] Where the
main action ceases to exist, there is no pending proceeding wherein the

328

intervention may be based.[17] Here, there is no more pending principal action

wherein the Spouses Gutang and Looyuko et al. may intervene.
A decision was already rendered therein and no appeal having been taken
therefrom, the judgment in that main case is now final and
executory. Intervention is legally possible only before or during a trial, hence a
motion for intervention filed after trialand, a fortiori, when the case has already
been submitted, when judgment has been rendered, or worse, when judgment is
already final and executoryshould be denied. [18]
In exceptional cases, the Court has allowed intervention notwithstanding
the rendition of judgment by the trial court. In Director of Lands vs. Court of
Appeals,[19] intervention was allowed even when the petition for review of the
assailed judgment was already submitted for decision in the Supreme Court.
Recently in Mago vs. Court of Appeals,[20] the Court granted intervention despite
the case having become final and executory.
Admittedly, petitioners motion for intervention was filed on 2 August 1988
after the amended order of 30 March 1988 had already become final.
xxx
It must be noted however that petitioners were unaware of the proceedings in
Civil Case No. Q-52319. Aside from the obvious fact that they were never
impleaded, they were also lulled into believing that all was well. After all, there
was a previous agreement or Kasunduan ng Paghahati ng Lote which private
respondent Asis executed in ther favor on 23 May 1980 or before the disputed
lot was awarded to Asis by the NHA. In that agreement private respondent
voluntarily agreed to divide the awarded lot into two (2)-on-half (1/2) to be
retained by him, and the other one-half (1/2) to belong to petitioners. It can be
seen from this that private respondent acted in bad faith when he accepted the
award erroneously made to him by NHA knowing fully well that a perfected
agreement had been forged earlier between him and petitioners. As a matter of
record, the NHA even acknowledged its mistake.
xxx
These matters should have been taken into account by the courts a quo for
being of utmost importance in ruling on petitioners motion for
intervention. The permissive tenor of the provision on intervention shows the
intention of the Rules to give to the court the full measure of discretion in
permitting or disallowing the same. But needless to say, this discretion should

329

be exercised judiciously and only after consideration of all the circumstances

obtaining in the case.
But it is apparent that the courts a quo only considered the technicalities of the
rules on the intervention and of the petition for relief from judgment. The
denial of their motion to intervene arising from the strict application of the rule
was an injustice to petitioners whose substantial interest in the subject property
cannot be disputed. It must be stressed that the trial court granted private
respondents petition for prohibition with injunction without petitioners being
impleaded, in total disregard of their right to be heard, when on the face of the
resolution of the Community Relations and Information Office (CRIO) sought
to be enjoined, petitioners were the ones directly to be affected. We need not
belabor the point that petitioners are indeed indispensable parties with such an
interest in the controversy or subject matter that a final adjudication cannot be
made in their absence without affecting, nay injuring, such interest.
In Director of Lands v. Court of Appeals where the motions for intervention
were filed when the case had already reached this Court, it was declared:
It is quite clear and patent that the motions for intervention filed by the movants
at this stage of the proceedings where trial had already been concluded x x x
and on appeal x x x the same was affirmed by the Court of Appeals and the
instant petition for certiorari to review said judgment is already submitted for
decision by the Supreme Court, are obviously and manifestly late, beyond the
period prescribed under x x x Section 2, Rule 12 of the Rules of Court.
But Rule 12 of the Rules of Court, like all other Rules therein promulgated, is
simply a rule of procedure, the whole purpose and object of which is to make
the powers of the Court fully and completely available for justice. The purpose
of procedure is not to thwart justice. Its proper aim is to facilitate the
application of justice to the rival claims of contending parties. It was created
not to hinder and delay but to facilitate and promote the administration of
justice. It does not constitute the thing itself which courts are always striving to
secure to litigants. It is designed as the means best adopted to obtain that
thing. In other words, it is a means to an end.
In Tahanan Development Corp. v. Court of Appeals this Court allowed
intervention almost at the end of the proceedings. Accordingly, there should be
no quibbling, much less hesitation or circumvention, on the part of subordinate
and inferior courts to abide and conform to the rule enunciated by the Supreme
Court.

330

It must be noted, however, that in both these cases, the intervenors

were indispensable parties.[21] This is not so in the case at bar.
Section 1, Rule 68 of the Rules of Court requires all persons having or
claiming an interest in the premises subordinate in right to that of the holder of
the mortgage be made defendants in the action for foreclosure. The requirement
for joinder of the person claiming an interest subordinate to the mortgage
sought to be foreclosed, however, is not mandatory in character but merely
directory, in the sense that failure to comply therewith will not invalidate the
foreclosure proceedings.[22]
A subordinate lien holder is a proper, even a necessary, but not an
indispensable, party to a foreclosure proceeding. Appropriate relief could be
granted by the court to the mortgagee in the foreclosure proceeding, without
affecting the rights of the subordinate lien holders. The effect of the failure on
the part of the mortgagee to make the subordinate lien holder a defendant is that
the decree entered in the foreclosure proceeding would not deprive the
subordinate lien holder of his right of redemption. A decree of foreclosure in a
suit to which the holders of a second lien are not parties leaves the equity of
redemption in favor of such lien holders unforeclosed and unaffected. [23]
The Spouses Gutang make a lot of needless hair-splitting by arguing that
cases applying the above principles are not on all fours with the one at
bar. They persistently cling to the notion that as purchasers in the execution
sale, they stepped into the shoes of the Spouses Gutang and have become, in
legal contemplation, the mortgagors of the property. Consequently, their
intervention should be allowed.
This contention is utterly devoid of merit. Subordinate lien holders like the
Spouses Gutang and Looyuko et al. acquire only a lien upon the equity of
redemption vested in the mortgagor, and their rights are strictly subordinate to
the superior lien of the mortgagee.[24] This principle is reiterated in Top Rate
International Services, Inc. vs. Intermediate Appellate Court,[25] where the Court
cited a host of precedents in support of its decision:
As we have ruled in Northern Motors, Inc. v. Coquia, (66 SCRA 415, 420):
To levy upon the mortgagors incorporeal right or equity of redemption, it was
not necessary for the sheriff to have taken physical possession of the mortgaged
taxicabs. x x x Levying upon the property itself is distinguishable from levying
on the judgment debtors interest in it (McCullough & Co. v. Taylor, 25 Phil.
110, 115).

331

Likewise, in the case of Blouse Potenciano v. Mariano, (96 SCRA 463, 469),
we ruled:
Quirinos interest in the mortgaged lots is merely an equity of redemption, an
intangible or incorporeal right (Sun Life Assurance Co. of Canada v. Gonzales
Diez, 52 Phil. 271; Santiago v. Dionisio, 92 Phil. 495; Northern Motors Inc. v.
Coquia, 66 SCRA 415).
That interest could be levied upon by means of writ of execution issued by the
Manila Court as had been done in the case of property encumbered by a chattel
mortgage (Levy Hermanos, Inc. v. Ramirez and Casimiro, 60 Phil. 978, 982;
McCullough & Co. v. Taylor, 25 Phil. 110).[]
It is, therefore, error on the part of the petitioner to say that since private
respondents lien is only a total of P343,227.40. they cannot be entitled to the
equity of redemption because the exercise of such right would require the
payment of an amount which cannot be less than P40,000,000.00.
When herein private respondents prayed for the attachment of the properties to
secure their respective claims against Consolidated Mines, Inc., the properties
had already been mortgaged to the consortium of twelve banks to secure an
obligation of US$62,062,720.66. Thus, like subsequent mortgagees, the
respondents liens on such properties became inferior to that of the banks, which
claims in the event of foreclosure proceedings, must first be satisfied. The
appellate court, therefore, was correct in holding that in reality, what was
attached by the respondents was merely Consolidated Mines right or equity of
redemption. Thus, in the case of Alpha Insurance and Surety Co., Inc. v.
Reyes (106 SCRA 274, 278), we ruled:
Deciding the legal question before Us, even if the DBP were just an ordinary
first mortgagee without any preferential liens under Republic Act No. 85 or
Commonwealth Act 459, the statutes mentioned in the Associated Insurance
case relied upon by the trial court, it would be unquestionable that nothing may
be done to favor plaintiff-appellant, a mere second mortgage, until after the
obligations of the debtors-appellees with the first mortgagee have been
fulfilled, satisfied and settled. In law, strictly speaking, what was mortgaged by
the Reyeses to Alpha was no more than their equity of redemption.
We, therefore, hold that the appellate court did not commit any error in ruling
that there was no over-levy on the disputed properties. What was actually
attached by respondents was Consolidated Mines right or equity of redemption,
an incorporeal or intangible right, the value of which can neither be quantified
332

nor equated with the actual value of the properties upon which it may be
exercised. [Underscoring supplied.]
Accordingly, an execution creditor who levies his execution upon property that
the judgment debtor has mortgaged to another can sell at most only the equity
of redemption belonging to the mortgagor.[26] As it is the equity of
redemption that the subordinate lien holders had acquired by the levy on
execution and that was sold in the public auction, this equity, not the property
itself, was what the purchasers, who incidentally are the subordinate lien
holders themselves, bought at the execution sale.
The failure of the mortgagee to join the subordinate lien holders as
defendants in the foreclosure suit, therefore, did not have the effect of
nullifying the foreclosure proceeding, but kept alive the equity of redemption
acquired by the purchasers in their respective execution sales. [27] If there be any
more quibbling on the rights of Looyuko et al. and the Gutangs over the
property and their right to intervene in the proceedings, Limpin vs. Intermediate
Appellate Court sums up all the principles enunciated above and should lay the
matter to rest:
Section 2, Rule 68 provides that
x x If upon the trial x x the court shall find the facts set forth in the complaint to
be true, it shall ascertain the amount due to the plaintiff upon the mortgage debt
or obligation, including interest and costs, and shall render judgment to be paid
into court within a period of not less than ninety (90) days from the date of the
service of such order, and that in default of such payment the property be sold
to realize the mortgage debt and costs.
This is the mortgagors equity (not right) of redemption which, as above stated,
may be exercised by him even beyond the 90-day period from the date of
service of the order, and even after the foreclosure sale itself, provided it be
before the order of confirmation of the sale. After such order of confirmation,
no redemption can be effected any longer.
It is this same equity of redemption that is conferred by law on the mortgagors
successors-in-interest, or third persons acquiring right over the mortgaged
property subsequent, and therefore subordinate to the mortgagees lien [e.g., by
second mortgage or subsequent attachment or judgment]. If these subsequent or
junior lien-holders be not joined in the foreclosure action, the judgment in the
mortgagors favor is ineffective as to them, of course. In that case, they retain
what is known as the unforeclosed equity of redemption, and a separate
foreclosure proceeding should be brought to require them to redeem from the
333

first mortgagee, or the party acquiring title to the mortgaged property at the
foreclosure sale, within 90 days, [the period fixed in Section 2, Rule 68 for the
mortgagor himself to redeem], under penalty of losing that prerogative to
redeem. x x x. [Underscoring supplied.]
Such equity of redemption does not constitute a bar to the registration of
the property in the name of the mortgagee. Registration may be granted in the
name of the mortgagee but subject to the subordinate lien holders equity of
redemption, which should be exercised within ninety (90) days from the date
the decision becomes final.[28] This registration is merely a necessary
consequence of the execution of the final deed of sale in the foreclosure
proceedings. Consequently, there is no merit in Looyuko et al.s contention that
the Manila RTC, which was not acting as a land jurisdiction court, had no
authority to order the cancellation of TCT No. 242. For the same reason,
neither does the submission of the Gutangs that the foreclosure proceedings
was a collateral attack on their TCT deserve any credence.
Accordingly, the petition for review (G.R. No. 102716) of the mortgagee
FGU, who was the first to register its encumbrance, must be
granted. Conversely, the petition for certiorari, prohibition and mandamus
(G.R. No. 102696) filed by Looyuko et al. must be dismissed.
In view of the foregoing ruling, the resolution of G.R. Nos. 108257 and
120954 is no longer necessary. G.R. No. 108257 stems from a complaint by
Tanunliong for, among others, the cancellation of TCT No. 242 in the name of
the Spouses Gutang. G.R. No. 120954 involves the propriety of Tanunliongs
intervention in the land registration cases instituted by Antonia Gutang for the
cancellation of TCT No. 242 and certain annotations in said TCT. The above
ruling has rendered moot the proceedings from which these cases (G.R. Nos.
108257 and 120954) arose.
WHEREFORE:
(1) The petition in G.R. No. 102696 is DISMISSED.
(2) The petition in G.R. No. 102716 is GRANTED.
(3) The petition in G.R. No. 108257 is DENIED.
(4) The petition in G.R. No. 120954 is DENIED.

The Register of Deeds is ordered to cancel TCT No. 10107 in the names of
Jose Looyuko and John Uy and to issue a new one in the name of FGU
Insurance Corporation, subject to the equity of redemption of Jose Looyuko
and John Uy, and Antonia Gutang, respectively. The equity of redemption of

334

Jose Looyuko and John Uy should be exercised within ninety (90) days from
the date this decision becomes final.
SO ORDERED.

9. Calendar of Cases/Subpoena/ Computation of Time (Rules 20, 21

and 22)
People vs. Montejo, 21 SCRA 722
G.R. No. L-24154

October 31, 1967

PEOPLE OF THE PHILIPPINES, petitioner,

vs.
HON. GREGORIO D. MONTEJO, Judge of the Court of First Instance of Zamboanga
City, and FELIX WEE SIT, respondentst.
Pascual S. Atilano for petitioner.
City Fiscal of Zamboanga City for respondents.
In this petition for certiorari and mandamus with preliminary injunction, the novel question
presented is whether respondent Judge, in denying a motion for the arrest of a material
witness, in a criminal case, or in the alternative, to cite him for contempt, relying on Section 9
of Rule 23 of the Rules of Court to the effect that a witness is not bound to attend as such
before any court, judge or other officer out of the province in which he resides unless the
distance be less than 50 kilometers from his place of residence to the place of trial by the
usual course, acted with grave abuse of discretion.
In a petition dated February 4, 1965, it was alleged by the City Fiscal of Zamboanga, as
counsel for the People of the Philippines, that on September 23, 1963, Criminal Case No.
3225 was filed in the Court of First Instance of Zamboanga City against a certain Felix Wee
Sit for double homicide and serious physical injuries thru reckless imprudence, the trial of the
case having commenced on November 7, 1963, and thereafter continued
subsequently.1 After which, it was stated that a certain Ernesto Uaje y Salvador, "a
permanent resident of Montalban, Rizal," then a patrolman in the Montalban Police
Department, "is a material and important witness in the case" his affidavit having served as
the basis for filing the information as he "happened to be an eye-witness during the traffic
incident wherein a Private Jeep bearing Plate No. J-6172 driven recklessly by the accused
Felix Wee Sit on August 15, 1963, turned turtle in the public highway in Zamboanga City
causing the death of two (2) prominent young girls and serious physical injuries to four (4)
equally prominent young girls, who are all students of a local religious institution." 2
It was then alleged that at the time the case against the accused was called for trial in the
Court of First Instance of Zamboanga City, then presided by respondent Judge, the witness
had returned to Montalban, Rizal; that pursuant to a formal request of the City Fiscal,
respondent Judge issued a subpoena to patrolman Uaje addressed at his known address at
Montalban, Rizal, for him to appear at the trial of the case set for continuation on February 1,
1965; that such subpoena was served on Uaje the return showing that he had received it on
January 19, 1965, at Montalban, Rizal; that when the case was called for continuation on

335

February 1, 1965, he did not appear "and forthwith the undersigned City Fiscal formally
moved for an order of arrest" or in the alternative "to cite him for contempt for willful failure to
appear at the trial of the case as a material witness. . . ." 3Such a motion was formally
presented on February 3, 1965 and denied on the same day by the respondent Judge in the
Order sought to be annulled in this petition. Then came a motion for reconsideration which
was likewise denied for not being "well-founded". In addition to the plea to declare void such
order refusing to have the witness either arrested or cited for contempt, there was the further
prayer that respondent Judge be required to grant the aforesaid motion.
The petition was given due course, with preliminary injunction issued. Respondent Judge
and the other respondent, the accused in Criminal Case No. 3225, were required to answer.
In their answer filed on March 4, 1965, there was a denial of the allegation that Uaje was "a
material, much less an important, witness," such denial being based on the very affidavit
executed by him which as noted in the answer admitted "that the said witness did not see
how the accident had occurred and was, therefore, not an eye-witness. . . . "There was an
admission that respondent Judge was "poised to order the immediate continuation of the trial
of the case upon the insistence of the accused who relies upon his constitutional right to a
speedy trial but denied that the prosecution is entitled to compulsory process" for under the
Rules of Court it is the defendant, not the prosecution, that is conferred such a right, alleging
further that the issuance of compulsory process is, under the Constitution, a right granted to
the accused "only and exclusively", no corresponding provision being made for the
prosecution. As a First and Special Affirmative Defense, they relied on the aforesaid Section
9 of Rule 23 contending that if a witness was not bound by a subpoena since his residence
was admittedly not less than 50 kilometers from the place of trial, the failure to obey the
same or to comply with it could not in any manner whatsoever constitute contempt of court.
Respondent Judge therefore did not commit any error; nor did he abuse his discretion in
refusing to issue an order of arrest or to cite said witness for contempt. There are other
special and affirmative defenses but they are not decisive of the question presented. The
prayer was for the lifting of the preliminary injunction and the denial of the petition.
Thus was the issue joined. Instead of relying on an oral argument, the parties preferred to
file memoranda, and the petition was submitted for decision.
That the question is novel admits of no doubt. It is true in two (2) cases, Cruz v.
Sison,4 and Cruz v. Rabanera,5decided jointly, one of the errors assigned was that the lower
court erred in holding that the above provision of the Rules of Court applies to both civil and
criminal cases. This Court, however, speaking through Justice Makalintal, did not deem it
necessary to pass on the above question as "the petitions for contempt were prematurely
filed and hence their dismissal was in order." Moreover, this Court further noted "that the
subpoenas were issued so that they could give evidence in Criminal Case No. 47152,
'People of the Philippines v. Secretary of Jaime Hernandez,' which was then already pending
trial before a branch of the Court of First Instance of Manila. The power of the City Fiscal of
Manila to issue subpoenas extends to cases pending investigation before him, but not where
the complaint or information has been filed in court, in which case it is the court that should
issue the necessary processes (Concepcion v. Gonzales, L-15638, April 26, 1962)."
How did petitioner sustain its stand that respondent Judge was called upon to compel the
attendance of a witness living in Montalban, Rizal, to testify at a trial in Zamboanga City, or in
the alternative to cite him for contempt? Its counsel, the City Fiscal of Zamboanga City, cited,
without incorporating the terms thereof, the following legal provisions: Section 1687 of the
Revised Administrative Code and Republic Act No. 1799, Section 19 (g) of Commonwealth

336

Act 39, the City Charter of Zamboanga, and Section 3, Rule 135 of the Rules of Court. A
perusal of each of the above legal prescriptions yields no support for petitioner's theory.
Section 1687 of the Revised Administrative Code as amended by Republic Act No.
1799,6 which was approved and took effect on June 21, 1957, speaks of the authority of a
Provincial Fiscal and Assistant Fiscal and Special Counsel to conduct investigation in
criminal matters. All that the City Charter of Zamboanga7 provides is that its Fiscal "may
conduct investigations in respect to crimes, misdemeanors, and violations of ordinances by
taking oral evidence of reputable witnesses, and for this purpose may, by subpoena,
summon witnesses to appear and testify under oath before him, and the attendance of an
absent or recalcitrant witness may be enforced by application to the Municipal Court or the
Court of First Instance of the Province of Zamboanga." The particular rule cited provides
process issued from a superior court "in which a case is pending to bring in a defendant, or
for the arrest of any accused person, or to execute any order or judgment of the court, may
be enforced in any part of the Philippines."8 It is obvious then that the argument of counsel
for the City of Zamboanga based on the above legal provision is, to put it at its mildest, far
from persuasive.
Counsel for respondent, Atty. Rosauro Alvarez, did, in his thorough and exhaustive
memorandum, stress anew that the first and decisive question is whether a Court of First
Instance possesses authority in a criminal case "to compel by subpoena the attendance of
the witness who, as in this case, resides hundreds of miles away from the place of trial."
According to him, "an examination of the placement on Section 9 of Rule 23 discloses to us
that it is found under the topic Procedure in Courts of First Instance which unquestionably
would include both criminal and civil cases. It will be noted further that the provision of
Section 9, Rule 23 above quoted makes no distinction between a criminal or civil case and it
is a fundamental rule or statutory construction that where the law makes no distinction it is
not proper for the interpreter to make any such distinction." After which counsel invoked the
Constitution as well as the Rules of Court,9 particularly the provisions contained therein
granting to the accused in a criminal case the right to have compulsory process issued to
secure the attendance of witnesses in his behalf, which right was not conferred on the
prosecution. Thus, he would sustain the actuations of respondent Judge not only as free
from error but as correct and proper.
While not lacking in plausibility, this contention of respondents failed to enlist the assent of a
majority of the Court. It is loathe to clip what undoubtedly is the inherent power of the Court
to compel the attendance of persons to testify in a case pending therein. 10 Section 9 of Rule
23 is thus interpreted to apply solely to civil cases. A recognition of such power in a court of
first instance conducting the trial of an accused may be gleaned from principle that justifies it
when satisfied "by proof or oath, that there is reason to believe that a material witness for the
prosecution will not appear and testify when required," to order that he "give bail in sum as
[it] may deem proper for such appearance. Upon refusal to give bail, the court must commit
him to prison until he complies or is legally discharged."11
Under the circumstances, in view of the serious handicap to which the prosecution would
thus be subjected in proving its case, the order of respondent judge denying the motion for
an order of arrest or a citation for contempt in the alternative, based on a clear
misapprehension of the Rules of Court, could be viewed as amounting to grave abuse of
discretion. It would follow then that respondent Judge should decide said motion without
taking into consideration Section 9 of Rule 23.

337

WHEREFORE, the preliminary injunction is lifted, the orders of February 3, 1961 set aside,
and respondent Judge ordered to pass upon the aforesaid motion of petitioner. Without
costs.

Commissioner of Internal Revenue vs. Primetown Property, 531

SCRA 436

COMMISSIONER OF INTERNAL G.R. No. 162155

REVENUE and ARTURO V.
PARCERO in his official
capacity as Revenue District
Officer of Revenue District
No. 049 (Makati),
Petitioners, Present:
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ.
PRIMETOWN PROPERTY
GROUP, INC.,
Respondent. Promulgated:
August 28, 2007
x-----------------------------------------x
DECISION
CORONA, J.:

This petition for review on certiorari [1] seeks to set aside the August 1, 2003
decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 64782 and its
February 9, 2004 resolution denying reconsideration.[3]
338

On March 11, 1999, Gilbert Yap, vice chair of respondent Primetown

Property Group, Inc., applied for the refund or credit of income tax
respondent paid in 1997. In Yap's letter to petitioner revenue district officer
Arturo V. Parcero of Revenue District No. 049 (Makati) of the Bureau of
Internal Revenue (BIR),[4] he explained that the increase in the cost of labor
and materials and difficulty in obtaining financing for projects and collecting
receivables caused the real estate industry to slowdown.[5] As a consequence,
while business was good during the first quarter of 1997, respondent
suffered losses amounting to P71,879,228 that year.[6]
According to Yap, because respondent suffered losses, it was not liable for
income taxes.[7] Nevertheless, respondent paid its quarterly corporate income
tax and remitted creditable withholding tax from real estate sales to the BIR
in the total amount of P26,318,398.32.[8] Therefore, respondent was entitled
to tax refund or tax credit.[9]
On May 13, 1999, revenue officer Elizabeth Y. Santos required respondent
to submit additional documents to support its claim.[10] Respondent complied
but its claim was not acted upon. Thus, on April 14, 2000, it filed a petition
for review[11] in the Court of Tax Appeals (CTA).
On December 15, 2000, the CTA dismissed the petition as it was filed
beyond the two-year prescriptive period for filing a judicial claim for tax
refund or tax credit.[12] It invoked Section 229 of the National Internal
Revenue Code (NIRC):
Sec. 229. Recovery of Taxes Erroneously or Illegally Collected.
-- No suit or proceeding shall be maintained in any court for the
339

recovery of any national internal revenue tax hereafter alleged to

have been erroneously or illegally assessed or collected, or of
any penalty claimed to have been collected without authority, or
of any sum alleged to have been excessively or in any manner
wrongfully collected, until a claim for refund or credit has been
duly filed with the Commissioner; but such suit or proceeding
may be maintained, whether or not such tax, penalty, or sum has
been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the
expiration of two (2) years from the date of payment of the
tax or penalty regardless of any supervening cause that may
arise
after
payment: Provided,
however, That
the
Commissioner may, even without a claim therefor, refund or
credit any tax, where on the face of the return upon which
payment was made, such payment appears clearly to have been
erroneously paid. (emphasis supplied)

The CTA found that respondent filed its final adjusted return on April 14,
1998. Thus, its right to claim a refund or credit commenced on that date.[13]
The tax court applied Article 13 of the Civil Code which states:
Art. 13. When the law speaks of years, months, days or nights, it
shall be understood that years are of three hundred sixty-five
days each; months, of thirty days; days, of twenty-four hours, and
nights from sunset to sunrise.
If the months are designated by their name, they shall be
computed by the number of days which they respectively have.
In computing a period, the first day shall be excluded, and the last
included. (emphasis supplied)

Thus, according to the CTA, the two-year prescriptive period under Section
229 of the NIRC for the filing of judicial claims was equivalent to 730 days.
340

Because the year 2000 was a leap year, respondent's petition, which was
filed 731 days[14] after respondent filed its final adjusted return, was filed
beyond the reglementary period.[15]
Respondent moved for reconsideration but it was denied. [16] Hence, it filed
an appeal in the CA.[17]
On August 1, 2003, the CA reversed and set aside the decision of the CTA.
[18]

It ruled that Article 13 of the Civil Code did not distinguish between a

regular year and a leap year. According to the CA:

The rule that a year has 365 days applies, notwithstanding the fact
that a particular year is a leap year.[19]

In other words, even if the year 2000 was a leap year, the periods covered by
April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000 should
still be counted as 365 days each or a total of 730 days. A statute which is
clear and explicit shall be neither interpreted nor construed.[20]
Petitioners moved for reconsideration but it was denied.[21] Thus, this appeal.
Petitioners contend that tax refunds, being in the nature of an exemption,
should be strictly construed against claimants.[22] Section 229 of the NIRC
should be strictly appliedagainst respondent inasmuch as it has been
consistently held that the prescriptive period (for the filing of tax refunds
and tax credits) begins to run on the day claimants file their final adjusted
returns.[23] Hence, the claim should have been filed on or before April 13,
2000 or within 730 days, reckoned from the time respondent filed its final
adjusted return.
341

The conclusion of the CA that respondent filed its petition for review in the
CTA within the two-year prescriptive period provided in Section 229 of the
NIRC is correct. Its basis, however, is not.
The rule is that the two-year prescriptive period is reckoned from the filing
of the final adjusted return.[24] But how should the two-year prescriptive
period be computed?
As already quoted, Article 13 of the Civil Code provides that when the law
speaks of a year, it is understood to be equivalent to 365 days. In National
Marketing Corporation v. Tecson,[25] we ruled that a year is equivalent to 365
days regardless of whether it is a regular year or a leap year.[26]
However, in 1987, EO[27] 292 or the Administrative Code of 1987 was
enacted. Section 31, Chapter VIII, Book I thereof provides:
Sec. 31. Legal Periods. Year shall be understood to be twelve
calendar months; month of thirty days, unless it refers to a
specific calendar month in which case it shall be computed
according to the number of days the specific month contains; day,
to a day of twenty-four hours and; night from sunrise to sunset.
(emphasis supplied)

A calendar month is a month designated in the calendar without regard to the

number of days it may contain.[28] It is the period of time running from the
beginning of a certain numbered day up to, but not including, the
corresponding numbered day of the next month, and if there is not a
sufficient number of days in the next month, then up to and including the last
day of that month.[29] To illustrate, one calendar month from December 31,
342

2007 will be from January 1, 2008 to January 31, 2008; one calendar month
from January 31, 2008 will be from February 1, 2008 until February 29,
2008.[30]
A law may be repealed expressly (by a categorical declaration that the law is
revoked and abrogated by another) or impliedly (when the provisions of a
more recent law cannot be reasonably reconciled with the previous one).
[31]

Section 27, Book VII (Final Provisions) of the Administrative Code of

1987 states:
Sec. 27. Repealing clause. All laws, decrees, orders, rules and
regulation, or portions thereof, inconsistent with this Code are
hereby repealed or modified accordingly.

A repealing clause like Sec. 27 above is not an express repealing clause

because it fails to identify or designate the laws to be abolished. [32] Thus, the
provision above onlyimpliedly repealed all laws inconsistent with the
Administrative Code of 1987.
Implied repeals, however, are not favored. An implied repeal must have been
clearly and unmistakably intended by the legislature. The test is whether the
subsequent law encompasses entirely the subject matter of the former law
and they cannot be logically or reasonably reconciled.[33]
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of
the Administrative Code of 1987 deal with the same subject matter the
computation of legal periods. Under the Civil Code, a year is equivalent to
343

365 days whether it be a regular year or a leap year. Under the

Administrative Code of 1987, however, a year is composed of 12 calendar
months. Needless to state, under the Administrative Code of 1987, the
number of days is irrelevant.
There obviously exists a manifest incompatibility in the manner of
computing legal periods under the Civil Code and the Administrative Code
of 1987. For this reason, we hold that Section 31, Chapter VIII, Book I of
the Administrative Code of 1987, being the more recent law, governs the
computation of legal periods. Lex posteriori derogat priori.
Applying Section 31, Chapter VIII, Book I of the Administrative Code of
1987 to this case, the two-year prescriptive period (reckoned from the time
respondent filed its final adjusted return[34] on April 14, 1998) consisted of
24 calendar months, computed as follows:
Year 1 1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th
11th
12th
Year 2 13th
14th
15th
16th
17th
18th
19th
20th
21st
22nd
23rd
24th

calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month
calendar month

April 15, 1998

May 15, 1998
June 15, 1998
July 15, 1998
August 15, 1998
September 15, 1998
October 15, 1998
November 15, 1998
December 15, 1998
January 15, 1999
February 15, 1999
March 15, 1999
April 15, 1999
May 15, 1999
June 15, 1999
July 15, 1999
August 15, 1999
September 15, 1999
October 15, 1999
November 15, 1999
December 15, 1999
January 15, 2000
February 15, 2000
March 15, 2000

to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to
to

May 14, 1998

June 14, 1998
July 14, 1998
August 14, 1998
September 14, 1998
October 14, 1998
November 14, 1998
December 14, 1998
January 14, 1999
February 14, 1999
March 14, 1999
April 14, 1999
May 14, 1999
June 14, 1999
July 14, 1999
August 14, 1999
September 14, 1999
October 14, 1999
November 14, 1999
December 14, 1999
January 14, 2000
February 14, 2000
March 14, 2000
April 14, 2000

344

We therefore hold that respondent's petition (filed on April 14, 2000) was
filed on the last day of the 24th calendar month from the day respondent filed
its final adjusted return. Hence, it was filed within the reglementary period.
Accordingly, the petition is hereby DENIED. The case is REMANDED to
the Court of Tax Appeals which is ordered to expeditiously proceed to hear
C.T.A. Case No. 6113 entitled Primetown Property Group, Inc. v.
Commissioner of Internal Revenue and Arturo V. Parcero.
No costs.
SO ORDERED.

345